##### Table of Contents



As filed with the Securities and Exchange Commission on May 4, 2006
 
 Registration No. 333-118557
   UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, DC 20549
 
 AMENDMENT NO. 4
TO
FORM S-1
 
 REGISTRATION STATEMENT
Under the Securities Act of 1933
 
 ARCADIA RESOURCES, INC.
 (Exact Name of Registrant as Specified in its Charter)
 
 Nevada
    
    8082
    
    88-0331369(State or Other Jurisdiction of
Incorporation or Organization)
    
    (Primary Standard Industrial
Classification Code Number)
    
    (I.R.S. Employer
Identification Number)
 
 
 26777 Central Park Blvd., Suite 200
Southfield, Michigan 48076
(248) 352-7530
 (Address, Including Zip Code, and Telephone Number,
Including Area Code, of Registrants Principal Executive Offices)
 
 Patrick J. Haddad, Esq.
500 Woodward Avenue, Suite 2500
Detroit, Michigan 48226-3427
(313) 961-0200
 
 (Name, Address Including Zip Code, and Telephone Number, Including
Area Code, of Agent For Service)
  
 þ
 
 
  ̈
 
 
  ̈
 
 
  ̈
 
 
  ̈
 
 CALCULATION OF REGISTRATION FEE
 
 Title of Class ofSecurities to be
    
    
    Number of
    
    
    Fluctuating Market
    
    
    Aggregate Fluctuating
    
    
    Amount ofRegistered
    
    
    Securities
    
    
    Price Per Security
    
    
    Market Price
    
    
    Registration FeeCommon Stock,
$0.001 Par Value
    
    
    
    104,499,551
    (1)
    
    
    $
    2.805
    
    
    
    $
    292,980,990.56
    
    
    
    $
    6,606.12
    (2)Class A Warrants
    
    
    
    6,699,905
    (1)
    
    
    $
    2.805
    (3)
    
    
    $
    18,793,233.53
    (3)
    
    
    $
    200.76
    (2)Class B-1 Warrants
    
    
    
    13,777,777
    (1)
    
    
    $
    2.805
    (3)
    
    
    $
    38,646,664.49
    (3)
    
    
    $
    4,135.19
    (2)Class B-2 Warrants
    
    
    
    4,771,110
    (1)
    
    
    $
    2.805
    (3)
    
    
    $
    13,382,963.55
    (3)
    
    
    $
    1,431.98
    (2)




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The information in this prospectus is not complete and may be changed. The
selling security holders may not sell these securities until the registration
statement filed with the Securities and Exchange Commission is effective. This
prospectus is not an offer to sell these securities and it is not soliciting an
offer to buy these securities in any state where the offer or sale is not
permitted. 
 
 Subject To Completion, Dated May 4, 2006
 
 PROSPECTUS
 
 104,499,551 Shares of Common Stock
25,248,792 Classes A, B-1 and B-2 Warrants to purchase 25,248,792 Shares of Common Stock
 
 
 
 Use
of Proceeds
 
 
  
 
  
 
 Investing in Arcadia Resources, Inc.
Common Stock, Class A Warrants, Class B-1 Warrants and Class B-2 Warrants involves risks. See Risk
Factors beginning on page 12.
 
  
 
 
 No dealer, salesperson or other person has been authorized to give any
information or to make any representations other than those contained in this
prospectus, and if given or made, such information or representations must not
be relied upon as having been authorized by us, the selling shareholders or any
underwriter. You should rely only on the information contained in this
prospectus. This prospectus does not constitute an offer to sell or the
solicitation of an offer to buy any security other than the Common Stock, Class
A Warrants, Class B-1 Warrants and Class B-2 Warrants offered by this
prospectus, or an offer to sell or a solicitation of an offer to buy any
security by any person in any jurisdiction in which such offer or solicitation
would be unlawful. Neither the delivery of this prospectus nor any sale made
hereunder shall, under any circumstances, imply that the information in this
prospectus is correct as of any time subsequent to the date of this prospectus. 
 
  
 2




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##### 



TABLE OF CONTENTS
 
 About This Prospectus
    
    
    4Statements Regarding Forward-Looking Information
    
    
    4Prospectus Summary
    
    
    5Risk Factors
    
    
    12Use of Proceeds
    
    
    21Dividend Policy and Market Information
    
    
    21Selected Consolidated Financial Data
    
    
    23Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    26Our Business
    
    
    44Description of Arcadia Services, Inc.
    
    
    57Management
    
    
    63Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
    
    
    70Certain Relationships and Related Transactions
    
    
    74Selling Security Holders
    
    
    76Description of Capital Stock
    
    
    91Plan of Distribution
    
    
    95Legal Matters
    
    
    97Experts
    
    
    97Where You Can Find More Information
    
    
    98Consolidated Financial Statements of Arcadia Resources, Inc. and Subsidiaries for the years ended March 31, 2005, March 31, 2004 and March 31, 2003
    
    
    F100Unaudited Interim Consolidated Financial Statements as of and for the one and three quarters ended December 31, 2005 and December 31, 2004
    
    
    F122Unaudited Pro Forma Condensed Combined Financial Statements as of March 31, 2004 and for the twelve months and the nine months ended December 31, 2005 and
2004
    
    
    F139Consolidated Financial Statements of Critical Home Care, Inc. as of and for the periods ended March 31, 2004, September 30, 2003 and September
30, 2002
    
    
    F148Consent of BDO Seidman, LLPConsent of Marcum & Kliegman LLPConsent of Grassi & Co., CPAsOpinion Regarding LegalityConsent of BDO Seidman, LLPConsent of Marcum & Kliegman, LLPConsent of Grassi & Co., CPA's
 
  3




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ABOUT THIS PROSPECTUS
  
 STATEMENTS REGARDING FORWARD-LOOKING INFORMATION
   4




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##### Table of Contents



PROSPECTUS SUMMARY
  Our Company
 
  
 
  
   RKDA Merger
  
  
  
  
 5




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##### Table of Contents



Our Business and Strategy Following RKDA Merger
  
    
    The integration of our acquired businesses, and growth
through additional acquisitions and start up locations. From
May 10, 2004 to March 31, 2005, we completed six acquisitions
resulting in an annual increase of approximately $18 million
in revenue and $2.4 million in operating income. From April
1, 2005 to December 31, 2005, we completed eleven
acquisitions resulting in an annual increase of approximately
$20 million in revenue and $2 million in operating income.
    
    For our staffing and home care services businesses, our
strategy is to obtain greater penetration within existing
markets, continue expanding the number of locations, expand
service offerings, continue implementation of our traveling
nursing program, and pursue selective acquisitions.
    
    The growth of our durable medical equipment operations
will be through additional marketing efforts to referral
sources and healthcare delivery decision-makers in
established markets and through the acquisition of selected
businesses that complement our demographic strategy as well
as aid in the retention of home care patients by offering
such other products and services.
    
    We intend to grow our mail-order pharmaceutical business
and our health care-oriented products catalog revenues
through marketing to Arcadias affiliated agencies patients,
to the patients of our durable medical equipment operations,
and to independent patients housed in assisted living or
nursing facilities.
    
    Our strategy for our New York business involving the
sale of surgical supplies and orthotic and prosthetic
products is to reduce costs and to expand the business.
Since the RKDA merger, we have implemented substantial cost
reductions to our New York based business by reducing its
payroll by approximately $1 million annually and closing one
retail store location, additionally saving approximately
$500,000 annually.
 
 
 Companys Financial Position Following RKDA Merger
 
  
 
  
 
  
 
  
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##### Table of Contents



Year ended
    
    
    Year ended
    
    
    Year ended(in thousands)
    
    March 31, 2005
    
    
    March 31, 2004
    
    
    March 31, 2003Net Revenues:Services
    
    $
    97,218
    
    
    $
    78,359
    
    
    $
    76,276Products
    
    
    8,123
    
    
    
    
    
    
    
    Total Revenues
    
    $
    105,341
    
    
    $
    78,359
    
    
    $
    76,276Operating Income (Loss) and Net Income(Loss):Services
    
    $
    3,860
    
    
    $
    3,730
    
    
    $
    4,282Products
    
    
    (2,367
    )
    
    
    
    
    
    
    Unallocated Corporate Overhead
    
    
    (6,654
    )
    
    
    
    
    
    
    Total Operating Income (Loss)
    
    
    (5,161
    )
    
    
    3,730
    
    
    
    4,282Interest Expense
    
    
    859
    
    
    
    (2
    )
    
    
    (1
    )Amortization of Debt Discount
    
    
    1,228
    
    
    
    
    
    
    
    Net Income (Loss) before Income Tax Expense
    
    
    (7,248
    )
    
    
    3,732
    
    
    
    4,283Income Tax Expense
    
    
    186
    
    
    
    
    
    
    
    Net Income (Loss)
    
    $
    (7,434
    )
    
    $
    3,732
    
    
    $
    4,283
 
 
 March 31, 2005
    
    
    March 312004
    
    
    March 31, 2003Assets:Services
    
    $
    43,159
    
    
    $
    17,203
    
    
    $
    14,999Products
    
    
    10,467
    
    
    
    
    
    
    
    Unallocated Corporate Assets
    
    
    1,967
    
    
    
    
    
    
    
    Total Assets
    
    $
    55,593
    
    
    $
    17,203
    
    
    $
    14,999
 
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##### Table of Contents



THE OFFERING
 Common stock to be offered by the selling security holders
    
    Up to 104,499,551 shares of Common Stock, including shares
issuable upon the exercise of Classes A, B-1 and B-2 Warrants
(See table below for details).Shares of Common stock outstanding as of May 2, 2006
    
    98,738,874 shares of Common Stock.Dividend Policy
    
    We have never paid any cash dividends on our shares of
Common Stock, and we do not anticipate that we will pay any
dividends with respect to those securities in the foreseeable
future. Our current business plan is to retain any future earnings
to help finance the expansion and development of our business.
Any future determination to pay cash dividends will be at
the discretion of our Board of Directors, and will be dependent
upon our financial condition, results of operations, capital
requirements and other factors as our Board may deem relevant at
that timeOTC Bulletin Board symbol
    
    ACDI
 
 Class of Warrants
    
    A
    
    B-1
    
    B-2Number of Warrants to be
offered by the selling
security holders
    
    Up to 7,158,295 Class A
Warrants to purchase up
to 7,158,295 shares of
Common Stock.
    
    Up to 13,777,777 Class B-1
Warrants to purchase up to
13,777,777 shares of Common
Stock.
    
    Up to 4,771,110 Class B-2
Warrants to purchase up to
4,771,110 shares of Common
Stock.Exercise Price
    
    Each Class A Warrant entitles
the holder to purchase one
share of our Common Stock at
an exercise price of $0.50 per
share.
    
    Each Class B-1 Warrant entitles
the holder to purchase one share
of our Common Stock at an
exercise price of $0.001 per
share.
    
    Each Class B-2 Warrant
entitles the holder to purchase
one share of our Common
Stock at an exercise price of
$2.25 per share.Exercise Period
    
    Any time within seven years
from the date of issuance to the
original holder. Class A
Warrants not exercised by then
shall expire.
    
    Any time within seven years
from the date of issuance to the
original holder. Class B-1
Warrants not exercised by then
shall expire.
    
    Any time within seven years
from the date of issuance to
the
original holder. Class B-2
Warrants not exercised by then shall expire.
 
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##### Table of Contents



SUMMARY CONSOLIDATED FINANCIAL DATA
 
  
 
  
 
  
 Arcadia Resources, Inc.
Consolidated Statements of Income
(Unaudited)
 Successor
    
    
    Successor
    
    
    PredecessorPeriod fromThree Quarters
    
    
    May 10, 2004
    
    
    Period FromEnded
    
    
    To
    
    
    April 1, 2004December 31,
    
    
    December 31,
    
    
    To2005
    
    
    2004
    
    
    May 9, 2004Net Sales
    
    $
    96,702,889
    
    
    $
    67,223,593
    
    
    $
    9,486,601Cost of Sales
    
    
    64,792,459
    
    
    
    47,302,269
    
    
    
    6,905,998Gross Profit
    
    
    31,910,430
    
    
    
    19,921,324
    
    
    
    2,580,603General and Administrative Expenses
    
    
    31,423,622
    
    
    
    19,214,686
    
    
    
    2,101,381Depreciation and Amortization
    
    
    1,781,815
    
    
    
    221,328
    
    
    
    Operating Income
    
    
    (1,295,007
    )
    
    
    485,310
    
    
    
    479,222Other ExpensesImpairment of Goodwill
    
    
    
    
    
    
    
    
    
    
    16,055Other Income
    
    
    
    
    
    
    (16,625
    )Interest Expense, Net
    
    
    1,198,103
    
    
    
    712,279
    
    
    
    Amortization of Debt Discount
    
    
    933,185
    
    
    
    682,593
    
    
    
    Total Other Expenses
    
    
    2,131,288
    
    
    
    1,378,247
    
    
    
    16,055Net Income (Loss) Before Income Tax Expense (Benefit)
    
    
    (3,426,295
    )
    
    
    (892,937
    )
    
    
    463,167Income Tax Expense
    
    
    116,778
    
    
    
    102,253
    
    
    
    Net Income (Loss)
    
    $
    (3,543,073
    )
    
    $
    (995,190
    )
    
    $
    463,167
 9




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Successor
    
    
    Successor
    
    
    PredecessorPeriod fromThree Quarters
    
    
    May 10, 2004
    
    
    Period FromEnded
    
    
    To
    
    
    April 1, 2004December 31,
    
    
    December 31,
    
    
    To2005
    
    
    2004
    
    
    May 9, 2004Unaudited Pro Forma Amounts to Reflect Pro FormaIncome Taxes
From Tax Status Change
    
    
    
    
    
    
    
    
    
    
    158,000Pro Forma Income After Income TaxFrom Tax Status Change
    
    
    
    
    
    
    
    
    
    $
    305,167Income (Loss) Per Share:Basic
    
    $
    (0.04
    )
    
    $
    (0.01
    )
    
    $
    0.49Diluted
    
    $
    (0.04
    )
    
    $
    (0.01
    )
    
    $
    0.49Pro Forma Income Per Share:Basic
    
    
    
    
    
    
    
    
    
    $
    0.32Diluted
    
    
    
    
    
    
    
    
    
    $
    0.32Weighted Average Number of Shares (In Thousands):Basic
    
    
    83,506
    
    
    
    68,460
    
    
    
    948Diluted
    
    
    83,506
    
    
    
    68,460
    
    
    
    948
 Successor
    
    PredecessorYear Ended March 31,2005
    
    2004
    
    2003
    
    2002
    
    2001(unaudited)(In thousands, except per share data)Consolidated Statement of
Operations Data:Revenue
    
    $
    105,342
    
    
    $
    78,359
    
    
    $
    76,276
    
    
    $
    75,848
    
    
    $
    73,705Cost of Sales
    
    
    73,956
    
    
    
    56,205
    
    
    
    53,822
    
    
    
    64,514
    
    
    
    62,688Gross Profit
    
    
    31,386
    
    
    
    22,154
    
    
    
    22,454
    
    
    
    11,334
    
    
    
    11,017General and Administrative Expenses
    
    
    36,547
    
    
    
    18,424
    
    
    
    18,172
    
    
    
    7,444
    
    
    
    9,587Operating Income (Loss)
    
    
    (5,161
    )
    
    
    3,730
    
    
    
    4,282
    
    
    
    3,890
    
    
    
    1,430Interest (expense)income, net
    
    
    (946
    )
    
    
    2
    
    
    
    1
    
    
    
    4
    
    
    
    0Amortization of debt discount
    
    
    (1,228
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Other income
    
    
    87
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net Income (Loss) Before Taxes
    
    
    (7,248
    )
    
    
    3,732
    
    
    
    4,283
    
    
    
    3,894
    
    
    
    1,430Income Tax expense
    
    
    (186
    )Net Income (Loss)
    
    $
    (7,434
    )
    
    $
    3,732
    
    
    $
    4,283
    
    
    $
    3,894
    
    
    $
    1,430Net Income (Loss) Per Share-Basic and Diluted
    
    $
    (0.11
    )
    
    $
    3.94
    
    
    $
    4.52
    
    
    $
    4.11
    
    
    $
    1.51Weighted Average
Number of Shares
(in thousands)Basic and Diluted
    
    
    72,456
    
    
    
    948
    
    
    
    948
    
    
    
    948
    
    
    
    948
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Successor
    

    PredecessorDecember 31,
    
    
    
    
    
    
    
    
    
    March 31,2005
    
    2005
    
    2004
    
    2003
    
    2002
    
    2001(unaudited)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (unaudited)(In thousands)Balance Sheet Data:Total Current Assets
    
    $
    34,526
    
    
    $
    24,536
    
    
    $
    13,612
    
    
    $
    12,325
    
    
    $
    12,498
    
    
    $
    13,855Working Capital
    
    $
    24,213
    
    
    $
    10,032
    
    
    $
    9,069
    
    
    $
    8,874
    
    
    $
    8,254
    
    
    $
    9,340Total Assets
    
    $
    79,469
    
    
    $
    55,593
    
    
    $
    17,203
    
    
    $
    14,999
    
    
    $
    15,094
    
    
    $
    16,785Total Long-Term Debt
    
    $
    11,579
    
    
    $
    15,567
    
    
    $
    430
    
    
    $
    2
    
    
    $
    113
    
    
    $
    225Total Liabilities
    
    $
    21,892
    
    
    $
    30,071
    
    
    $
    4,973
    
    
    $
    3,453
    
    
    $
    4,357
    
    
    $
    4,740Total Stockholders
Equity
    
    $
    57,577
    
    
    $
    25,522
    
    
    $
    12,230
    
    
    $
    11,546
    
    
    $
    10,737
    
    
    $
    12,045
 11




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##### Table of Contents



RISK FACTORS
  We recently became a public company and have a limited operating history as a public company upon
which you can base an investment decision.
  To finance RKDAs acquisition of Arcadia Services and our subsequent acquisitions, the Company
incurred significant debt which must be repaid. Our debt level could adversely affect our
financial health and affect our ability to run our business, as well as your investment in our
Company.
 
  
 o
    
    We may be unable to obtain additional financing for working capital, capital
expenditures, acquisitions and general corporate purposes.o
    
    Our ability to adapt to changing market conditions may be hampered. We may be more
vulnerable in a volatile market and at a competitive disadvantage to our competitors that
have less debt.o
    
    Our operating flexibility is more limited due to financial and other restrictive
covenants, including restrictions on incurring additional debt, creating liens on our
properties, making acquisitions and paying dividends.o
    
    We are subject to the risks that interest rates and our interest expense will increase.o
    
    Our ability to plan for, or react to, changes in our business is more limited.
  
 Due to our debt level, we may not be able to increase the amount we can draw on our revolving
credit facility with Comerica Bank, or to obtain credit from other sources, to fund our future
needs for working capital or acquisitions.
 
 
  
 12




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1 2
 
 
 
   The terms of our Credit Agreements with Comerica Bank subject us to the risk of foreclosure on
certain property.
 
  
  13




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In order to repay our short term debt obligations, as well as to pursue our strategy of growth
through acquisitions, we intend to obtain equity financing, which could result in dilution to our
stockholders.
 
  
 To the extent we do not successfully raise funds from the equity markets to satisfy short term debt
obligations or to finance new acquisitions, we would need to seek debt financing or modify or
abandon our growth strategy or product and service offerings.
 
  
 Due to the Voting Agreement, the Companys principal officers may significantly influence the Board
of Directors to retain their offices and senior management positions and for the Company to pursue
their business strategies, notwithstanding the Companys financial performance.
  Because the Company is dependent on key management and advisors, the loss of the services or
advice of any of these persons could have a material adverse effect on our business and prospects.
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##### Table of Contents



A decline in the rate of growth of the staffing and home care industries, or negative growth, could
adversely affect us by reducing sales, thereby resulting in less cash being available for the
payment of operating expenses, debt obligations and to pursue our strategic plans.
 
  
  Sales of certain of our services and products are largely dependent upon payments from governmental
programs and private insurance, and cost containment initiatives may reduce our revenues, thereby
harming our performance.
 
  
 
  
 
 
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##### Table of Contents



We could be subject to severe fines and possible exclusion from participation in federal and state
healthcare programs if we fail to comply with the laws and regulations applicable to our business
or if those laws and regulations change.
  The markets in which the Company operates are highly competitive and the Company may be unable to
compete successfully against competitors with greater resources.
  
 
  We may not be able to successfully integrate acquired businesses, which could result in our failure
to increase revenues or to avoid duplication of costs among acquired businesses, thereby adversely
affecting our financial results and profitability.
  The failure to implement the Companys business strategy may result in our inability to be
profitable and adversely impact your investment in our Company.
  We cannot predict the impact that the registration of the shares may have on the price of the
Companys shares of Common Stock and the value of your investment in our Company.
 16




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Ownership of our stock is concentrated in a small group of stockholders who may exercise
substantial control over our actions to the detriment of our other stockholders.
 
  
  The price of our Common Stock has been, and will likely continue to be, volatile, which could
diminish your ability to recoup your investment, or to earn a return on your investment, in our
Company.
 
  
 
  
 Because our Common Stock is quoted on the OTC Bulletin Board, there may be difficulty in trading
and obtaining quotations for our Common Stock, and you should consider our Common Stock to be
illiquid.
  
 Because there is no established market for our classes of Warrants (Classes A, B-1 and B-2) and we
do not expect our Warrants to be quoted on the OTC Bulletin Board, there may be difficulty in
trading and obtaining quotations for our Warrants and you should consider our Warrants to be
illiquid.
 
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Your resale of any securities you acquire under this prospectus may be limited and affected by
state blue-sky laws, which could adversely affect the price of our securities and your investment
in our Company.
  
 
 The issuance of our preferred stock could materially impact the price of Common Stock and the
rights of holders of our Common Stock.
   The exercise of common stock warrants may depress our stock price and may result in dilution to our
Common Stockholders.
 
  
 
 We have granted stock options to certain management employees and directors as compensation which
may depress our stock price and result in dilution to our common stockholders.
 
 
  
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##### Table of Contents



We are dependent on our affiliated agencies and our internal sales force to sell our services and
products, the loss of which could adversely affect our business.
 
 
  
 The lack of a majority of independent directors on our Board of Directors may affect our ability to
be listed on a national securities exchange or quotation system.
 
  
 Our Board of Directors, which is not fully independent, acts as the compensation committee, which
presents the risk that compensation and benefits paid to two of our executive officers who are
Board members and significant shareholders may not be commensurate with the Companys financial
performance.
 
  
 Several anti-takeover measures under Nevada law could delay or prevent a change of our control,
despite such change of control being in the best interest of the holders of our shares of Common
Stock.
  
 et seq.
 
 19




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et seq. et seq.
 
 et seq., et seq.
 20




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USE OF PROCEEDS
 
  
 
 DIVIDEND POLICY AND MARKET INFORMATION
 
  
 
 Bid PricePeriod
    
    High
    
    LowFiscal Year Ended 3/31/2006
    
    Fourth Quarter ended 3/31/06
    
    $
    3.53
    
    
    $
    2.36Third Quarter ended 12/31/05
    
    $
    2.90
    
    
    $
    2.48Second Quarter ended 9/30/05
    
    $
    2.80
    
    
    $
    2.06First Quarter ended 6/30/05
    
    $
    2.46
    
    
    $
    1.74Fiscal Year Ended 3/31/2005
    
    Fourth Quarter ended 3/31/05
    
    $
    2.07
    
    
    $
    1.11Third Quarter ended 12/31/04
    
    $
    1.27
    
    
    $
    0.58Second Quarter ended 9/30/04
    
    $
    1.08
    
    
    $
    0.60First Quarter ended 6/30/04
    
    $
    1.08
    
    
    $
    0.39Transition Period Ended 3/31/2004
    
    Quarter ended 3/31/04
    
    $
    0.49
    
    
    $
    0.16Quarter ended 12/31/03
    
    $
    0.25
    
    
    $
    0.11Fiscal Year Ended 9/30/2003
    
    Fourth Quarter ended 9/30/03
    
    $
    0.43
    
    
    $
    0.15Third Quarter ended 6/30/03
    
    $
    0.45
    
    
    $
    0.19Second Quarter ended 3/31/03
    
    $
    2.50
    
    
    $
    0.10First Quarter ended 12/31/02
    
    $
    3.40
    
    
    $
    2.46Transition Period Ended 9/30/2002
    
    Quarter ended 9/30/02 (1)
    
    $
    4.20
    *
    
    $
    2.00
    **Quarter ended 6/30/02 (2)
    
    
    n/a
    
    
    
    n/aQuarter ended 3/31/02
    
    
    n/a
    
    
    
    n/aFiscal Year Ended 12/31/ 2001
    
    Fourth Quarter Ended 12/31/01
    
    
    n/a
    
    
    
    n/aThird Quarter ended 9/30/01
    
    
    n/a
    
    
    
    n/aSecond Quarter ended 6/30/01
    
    
    n/a
    
    
    
    n/aFirst Quarter ended 3/31/01
    
    
    n/a
    
    
    
    n/a
 
 
 
 21




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##### Table of Contents



(1)
    
    The Company commenced public trading with the ticker symbol
MJVS on August 2, 2002. During the quarterly period between
July 1 and September 2002, the Company changed its ticker symbol
twice. On August 29, 2002 the ticker symbol was changed to
NYMD. On September 30, 2002, the Companys ticker symbol was
changed to CCLH. On November 16, 2004, the Companys ticker
symbol change to ACDI.(2)
    
    Before August 2, 2002, the Companys Common Stock was not quoted
the OTC Bulletin Board or listed any exchange.*
    
    High bid price from August 29, 2002, when the Companys ticker symbol was NYMD.**
    
    Low bid price from August 14, 2002, when the Companys ticker symbol was MJVS. 
  
 
  
  22




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##### Table of Contents



SELECTED CONSOLIDATED FINANCIAL DATA
 
  
 
  
 
  
 Arcadia Resources, Inc.
Consolidated Statements of Income
(Unaudited)
 
 Successor
    
    
    Successor
    
    
    PredecessorPeriod from
    
    
    Period FromThree Quarters
    
    
    May 10, 2004
    
    
    April 1, 2004Ended
    
    
    To
    
    
    ToDecember 31, 2005
    
    
    December 31, 2004
    
    
    May 9, 2004Net Sales
    
    $
    96,702,889
    
    
    $
    67,223,593
    
    
    $
    9,486,601Cost of Sales
    
    
    64,792,459
    
    
    
    47,302,268
    
    
    
    6,905,998Gross Profit
    
    
    31,910,430
    
    
    
    19,921,325
    
    
    
    2,580,603General and Administrative Expenses
    
    
    31,423,622
    
    
    
    19,214,687
    
    
    
    2,101,381Depreciation and Amortization
    
    
    1,781,815
    
    
    
    221,328
    
    
    
    Operating Income (Loss)
    
    
    (1,295,007
    )
    
    
    485,310
    
    
    
    479,222Other ExpensesImpairment of Goodwill
    
    
    
    
    
    
    
    
    
    
    16,055Other Income
    
    
    
    
    
    
    (16,625
    )Interest Expense, Net
    
    
    1,198,103
    
    
    
    712,279
    
    
    
    Amortization of Debt Discount
    
    
    933,185
    
    
    
    682,593
    
    
    
    Total Other Expenses
    
    
    2,131,288
    
    
    
    1,378,247
    
    
    
    16,055Net Income (Loss) Before Income Tax Expense
    
    
    (3,426,295
    )
    
    
    (892,937
    )
    
    
    463,167Income Tax Expense
    
    
    116,778
    
    
    
    102,253
    
    
    
    Net Income (Loss)
    
    $
    (3,543,073
    )
    
    $
    (995,190
    )
    
    $
    463,167
 
 23




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##### Table of Contents



Successor
    
    
    Successor
    
    
    PredecessorPeriod from
    
    
    Period FromThree Quarters
    
    
    May 10, 2004
    
    
    April 1, 2004Ended
    
    
    To
    
    
    ToDecember 31, 2005
    
    
    December 31, 2004
    
    
    May 9, 2004Unaudited Pro Forma Amounts to Reflect Pro FormaIncome Taxes From
Tax Status Change
    
    
    
    
    
    
    
    
    
    
    158,000Pro Forma Income After Income TaxFrom Tax Status Change
    
    
    
    
    
    
    
    
    
    $
    305,167Income (Loss) Per Share:Basic
    
    $
    (0.04
    )
    
    $
    (0.01
    )
    
    $
    0.49Diluted
    
    $
    (0.04
    )
    
    $
    (0.01
    )
    
    $
    0.49Pro Forma Income Per Share:Basic
    
    
    
    
    
    
    
    
    
    $
    0.32Diluted
    
    
    
    
    
    
    
    
    
    $
    0.32Weighted Average Number of Shares (In Thousands):Basic
    
    
    83,506
    
    
    
    68,460
    
    
    
    948Diluted
    
    
    83,506
    
    
    
    68,460
    
    
    
    948
 
 
 Successor
    
    PredecessorYear Ended March 31,2005
    
    2004
    
    2003
    
    2002
    
    2001(unaudited)(In thousands, except per share data)Consolidated Statement of
Operations Data:Revenue
    
    $
    105,342
    
    
    $
    78,359
    
    
    $
    76,276
    
    
    $
    75,848
    
    
    $
    73,705Cost of Sales
    
    
    73,956
    
    
    
    56,205
    
    
    
    53,822
    
    
    
    64,514
    
    
    
    62,688Gross Profit
    
    
    31,386
    
    
    
    22,154
    
    
    
    22,454
    
    
    
    11,334
    
    
    
    11,017General and Administrative Expenses
    
    
    36,547
    
    
    
    18,424
    
    
    
    18,172
    
    
    
    7,444
    
    
    
    9,587Operating Income (Loss)
    
    
    (5,161
    )
    
    
    3,730
    
    
    
    4,282
    
    
    
    3,890
    
    
    
    1,430Interest (expense)income, net
    
    
    (946
    )
    
    
    2
    
    
    
    1
    
    
    
    4
    
    
    
    0Amortization of debt discount
    
    
    (1,228
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Other income
    
    
    87
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net Income (Loss) Before Taxes
    
    
    (7,248
    )
    
    
    3,732
    
    
    
    4,283
    
    
    
    3,894
    
    
    
    1,430Income Tax expense
    
    
    (186
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net Income (Loss)
    
    $
    (7,434
    )
    
    $
    3,732
    
    
    $
    4,283
    
    
    $
    3,894
    
    
    $
    1,430Net Income (Loss) Per Share-Basic and Diluted
    
    $
    (0.11
    )
    
    $
    3.94
    
    
    $
    4.52
    
    
    $
    4.11
    
    
    $
    1.51Weighted Average
Number of Shares
(in thousands)Basic and Diluted
    
    
    72,456
    
    
    
    948
    
    
    
    948
    
    
    
    948
    
    
    
    948
 
 24




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##### Table of Contents



Successor
    
    PredecessorDecember 31,
    
    March 31,2005
    
    2005
    
    2004
    
    2003
    
    2002
    
    2001(unaudited)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (unaudited)(In thousands)Balance Sheet Data:Total Current Assets
    
    $
    34,526
    
    
    $
    24,536
    
    
    $
    13,612
    
    
    $
    12,325
    
    
    $
    12,498
    
    
    $
    13,855Working Capital
    
    $
    24,213
    
    
    $
    10,032
    
    
    $
    9,069
    
    
    $
    8,874
    
    
    $
    8,254
    
    
    $
    9,340Total Assets
    
    $
    79,469
    
    
    $
    55,593
    
    
    $
    17,203
    
    
    $
    14,999
    
    
    $
    15,094
    
    
    $
    16,785Total Long-Term Debt
    
    $
    11,579
    
    
    $
    15,567
    
    
    $
    430
    
    
    $
    2
    
    
    $
    113
    
    
    $
    225Total Liabilities
    
    $
    21,892
    
    
    $
    30,071
    
    
    $
    4,973
    
    
    $
    3,453
    
    
    $
    4,357
    
    
    $
    4,740Total Stockholders Equity
    
    $
    57,577
    
    
    $
    25,522
    
    
    $
    12,230
    
    
    $
    11,546
    
    
    $
    10,737
    
    
    $
    12,045
 
 25




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##### Table of Contents



MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 
  
 
  
 
  
 Overview
 
  
 
  
 
  
 26




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##### Table of Contents



Results of
Operations Liquidity and Capital Resources
 
 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
    %Third quarter ended December 31, 2005
    
    
    33.3
    
    
    
    1.8
    %
    
    
    18.5
    %
 
 
 
 *
    
    Includes results from the Predecessor entity 
 
 Growth Strategy . Results of
Operations
 
 
  
 
  
 
 Description of individual transactions completed post-merger in fiscal 2005:
 
 
  
 
  
 
 (in thousands)Current and other assets
    
    $
    4,215Fixed assets
    
    
    954Goodwill
    
    
    6,336Liabilities
    
    
    (1,837
    )Total assets and liabilities purchased post-merger in fiscal 2005
    
    $
    9,668
 
 
 
    
    On July 30, 2004, we acquired substantially all of the assets of The Staffing Source,
Inc., of St. Petersburg, Florida. The Staffing Source, Inc. provides temporary personnel
for healthcare facilities and other businesses. It reported sales of approximately $3.3
million for its 2003 fiscal year. The purchase price to be paid out over a three year
period is computed
 
 27




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##### Table of Contents



per a specified formula based on the annualized revenue, with a minimum total payment of
$480,000 and a maximum total payment of $600,000. The Company financed the payment of
$300,000 of the purchase price paid in cash at closing by drawing on its line of credit.
Because the balance of the purchase price payable is computed per a specified formula based
on annualized revenue, the Company does not anticipate that it will incur debt to finance
payment of the balance of the purchase price, but will fund the obligation from the
profitable operations of The Staffing Source.
    
    On August 20, 2004, we acquired the stock of American Oxygen, Inc. of Peoria, Illinois
for 200,000 shares of Common Stock valued at $186,000. American Oxygen, Inc., operating
from two locations in Illinois, sells and rents durable medical equipment, including
respiratory/oxygen equipment. Because the purchase price was paid in Company stock, the
Company did not incur debt in order to finance this transaction. American Oxygen is a
relatively small, new entity and is not expected to be profitable until our 2006 fiscal
year.
    
    On August 30, 2004, we purchased selected assets of Merit Staffing Resources, Inc.
Merit provides temporary personnel for healthcare facilities and other businesses from five
locations in Massachusetts. It reported 2003 sales of $4.7 million. The purchase price is
(a)cash equal to a specified percentage of the sellers accounts receivable under 120 days
outstanding as of closing, plus $200,000, subject to a total maximum cash payment at final
closing of $1.6 million. Forty-eight monthly payments will be made computed per a
specified formula based on gross margin with a minimum total payment of $864,000 and a
maximum total payment of $1.6 million. The Company financed the payment of $200,000 of the
purchase price paid in cash at closing by drawing on its line of credit. Because the
balance of the purchase price payable is computed per a specified formula based on gross
margin, the Company does not anticipate that it will incur debt to finance payment of the
balance of the purchase price, but will fund the obligation from the profitable operations
of Merit.
    
    On September 23, 2004, we acquired the stock of Trinity Healthcare of Winston-Salem,
Inc. for $5.4 million. Trinity provides oxygen and other respiratory services, as well as
home intravenous therapy services. Trinity has locations in Winston-Salem and
Huntersville, North Carolina, and Marietta and Demorest, Georgia. Two of Trinitys selling
shareholders were paid a combination of cash, shares of the Companys Common Stock, and
delivery of a promissory note. Trinitys two other selling shareholders will be paid the
balance of the purchase price in cash and our Common Stock by January 15, 2005. The
Company also issued 150,000 shares of its common stock, with an aggregate value of
$127,800, to certain Trinity employees. The Company utilized proceeds from notes payable
and sales of stock of approximately $3.8 million to finance payment of the cash portion of
the purchase price paid at closing. Remaining purchase price obligations will be funded
from the profitable operations of Trinity.
    
    On December 17, 2004, we purchased substantially all of the assets of BK Tool, Inc., a
light industrial staffing business located in Sterling Heights, Michigan, with
approximately $2,000,000 in annual revenues. The total purchase price of $468,000 included
payment of $175,000 plus 85% of accounts receivables no greater than 60 days outstanding.
At closing, the seller was paid $393,000 in cash, drawn on the line of credit, and the
remaining $75,000 derived from operations was paid to the seller in January 2005. BK Tools
was combined with an existing Arcadia Services local operation to enhance the profitability
of both entities.
    
    On December 22, 2004, we agreed to purchase all of the outstanding shares of common
stock of Beacon Respiratory Services, Inc., Beacon Respiratory Services of Alabama, Inc.,
Beacon Respiratory Services of Colorado, Inc., and Beacon Respiratory Services of Georgia,
Inc. (collectively Beacon). Beacon provides respiratory services in Florida, Alabama,
Colorado, and Georgia and collectively had annual revenues of approximately $1,900,000.
The purchase was effective on January 1, 2005. The purchase price was $1,500,000, including
the payment of certain liabilities. The purchase price is subject to increase by up to an
additional $400,000 based on expected pricing changes for certain of the Companys products
and services for calendar year 2005, with any additional amounts owed being payable to the
sellers by January 1, 2006. In 2005, the Company paid $983,428 in cash to Beacons
shareholders, less $150,000 to be held by the Company to offset valid indemnification and
other claims of the Company. The Companys counsel will hold 16.33% of the Beacon shares
purchased until the $150,000 (including accrued interest less any amounts disputed) is paid
to sellers by January 1, 2006. On January 15, 2005, one of Beacons selling shareholders
was issued a promissory note for $150,000, with a one-year term at 8% annual interest
secured by 33% of the shares of Beacon. Principal and interest are to be paid quarterly.
The Company financed the payment of $833,428 of the purchase price paid in cash at closing
by utilizing proceeds from a note payable to a third party. The remaining purchase price
obligations will be funded from the profitable operations of Beacon.
 
 Description of individual transactions in fiscal 2006 through December 31, 2005:
 
 28




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##### Table of Contents



(in thousands)Description of assets and (liabilities) purchased:Current and other assets
    
    $
    1,424Fixed assets
    
    
    1,346Intangibles and goodwill
    
    
    11,996Liabilities
    
    
    (4,337
    )Total assets and liabilities acquired
    
    $
    10,429
 
 
    
    On April 7, 2005, we acquired the net assets of United Health Care Services
(United) and of two related smaller companies. United is a home respiratory and
durable medical equipment company located in Ft. Myers and Port Charlotte, Florida.
The purchase price was $1,588,000 as follows: cash of $1,200,000 drawn on the
Companys line of credit, the delivery of an unsecured subordinated promissory note
in the principal amount of $100,000, with interest at five (5%) percent per annum,
payable in two equal installments due at six months and twelve months from the
closing date, and the issuance of an aggregate of 147,500 shares of the Companys
common stock having an aggregate value of $288,000.
    
    On April 29, 2005, we purchased the outstanding capital stock of Home Health
Professionals, Inc. and certain assets of Home Health Professionals Staffing, LLC.
The acquisition was effective May 1, 2005. Home Health Professionals operates a home
care services business headquartered in Battle Creek, Michigan. The purchase price
for the acquired stock was a cash payment of $2,500,000, plus 1,058,201 shares of
the Companys common stock valued at $2,000,000, plus the payment of amounts to be
determined per an earnout formula over the twelve month period following the
closing. At closing, the cash consideration and shares of the Companys common stock
were paid, less amounts escrowed to satisfy potential indemnification and other
claims of the purchaser. The Company utilized proceeds from a convertible promissory
note issued to a third party to pay the cash portion of the purchase price (see Note
6). Because the balance of the purchase price payable is computed per a specified
earnout formula based on operations, the Company does not anticipate that it will
incur debt to finance payment of the balance of the purchase price payments.
    
    On May 13, 2005, we acquired the net assets of HealthLink, a home respiratory and
durable medical equipment company located in Crown Point, Indiana. The purchase
price was a note to the seller of $160,000 plus 15,000 shares of the Companys
common stock valued at $30,300. The non-interest bearing purchase price payable is
due in 12 equal monthly installments of $6,700 plus a final payment of $80,000 one
year from the closing date. We expect to fund the acquisition with cash from
operations of this and other durable medical equipment locations.
    
    On May 31, 2005, we acquired the membership interests in Rite at Home Health
Care, LLC, a health care product-oriented catalog company located in Illinois. The
purchase price of $1.34 million included 88,000 shares of the Companys common stock
valued at $189,000, $325,000 cash plus assumption of the outstanding liabilities of
$829,000. The line of credit in place for Rite at Home Health Care, LLC provided
$750,000 toward the funding of the transaction.
    
    On June 27, 2005, we issued 42,000 shares of our common stock valued at $79,800
to a limited liability company for intellectual property it developed and the
related rights to pursue a licensing agreement for providing durable medical
equipment through a retailers store locations.
    
    On July 18, 2005, we acquired certain assets of Alternative Home Health Care of
Lee County with a cash payment of $100,000, generated from operations.
    
    On August 12, 2005, we acquired certain assets of Summit Healthcare with a cash
payment of $100,000 funded from operations and a note payable of $500,000 which was
paid in full as of September 30, 2005 with proceeds from our Class B Warrant
Offering. An additional $50,000 is being held in escrow for one year pending
resolution of certain items.
 29




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##### Table of Contents




    
    On September 27, 2005, we acquired certain assets of Low Country Home Medical
Equipment Company, Inc. with a cash payment of $1.5 million funded with proceeds
from our Class B Warrant Offering. The Company also issued of 191,571 shares of its
common stock valued at $500,000 to escrow, to be distributed to the sellers one year
after the original purchase date.
    
    On October 17, 2005, we acquired certain assets of Madrid Medical Equipment with
cash payments totaling $170,000 and assumption of debts totaling $72,000. We funded
this acquisition with cash flow from operations.
    
    On October 21, 2005, we acquired certain assets of Sparrow Private Duty Services
with a cash payment of $90,000 generated from operations.
    
    On November 3, 2005, we acquired the outstanding stock of O2 Plus. The purchase
price of $1.9 million included $1.1 million cash funded with proceeds from our Class
B Warrant Offering; plus assumption of the outstanding liabilities of $739,000; and
$100,000 pending the satisfaction of certain post-closing requirements. In the
event that certain future growth goals are met, an additional purchase price of up
to $1 million could be paid over two years to the sellers in shares of the Companys
common stock.
 
 Liquidity and Capital Resources
 
 
  
 
 Cost Reductions .
 
 30




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##### Table of Contents



Accounting Acquirer .
 
    
    RKDAs two former shareholders and the PIPE investors acquired a majority voting
interest in the Company. RKDAs two former shareholders received 21,300,000 shares of the
Companys Common Stock constituting 27.9% of the Companys 76,393,351 shares of Common
Stock outstanding as of May 10, 2004. The shareholders from the PIPE transaction, by which
the Company raised the $5 million it loaned RKDA to finance the Arcadia Services
acquisition, acquired a 43.2% shareholding position. The old Critical shareholders were
diluted to a 28.9% shareholding position.
    
    RKDAs two former shareholders acquired control of the Board of Directors by entering
into a voting agreement with certain other shareholders permitting them to elect a majority
of the Board, until they either (a) own less than 10% of the Company, (b) are no longer
executive officers of the Company or (c) the maximum period lowed by law for the agreement
to exist. The Company believes that the criteria above will not be met (and thus the RKDA
shareholders will control the Board of Directors) for the foreseeable future.
    
    RKDAs two former shareholders became the Companys Chairman and Chief Executive Officer
and the President, Chief Operating Officer and Treasurer. Additionally, the Chief Operating
Officer of Arcadia retained that position.
    
    RKDA initiated the combination and RKDAs (i.e., Arcadias) assets, revenues and
earnings significantly exceed the assets, revenues and earnings of Old Critical.
  Liquidity and Capital Resources
  
 
 
 Successor
    
    Successor
    
    PredecessorThree Quarters
    
    Period from May 10,
    
    Period from April 1,SUMMARY CONSOLIDATED
    
    ended
    
    2004 to December 31,
    
    2004 to May 9,STATEMENTS OF CASH FLOWS (in millions)
    
    December 31, 2005
    
    2004
    
    2004Net income (loss)
    
    $
    (3.5
    )
    
    $
    (1.0
    )
    
    $
    0.5Net cash (used in) operating activities
    
    $
    (8.2
    )
    
    $
    (6.5
    )
    
    $
    (0.5
    )Net cash (used in) investing activities
    
    $
    (7.9
    )
    
    $
    (3.8
    )
    
    $
    (0.2
    )Net cash provided by financing activities
    
    $
    17.2
    
    
    $
    10.9
    
    
    $
    0.7Net increase in cash and cash equivalents
    
    $
    1.1
    
    
    $
    0.6
    
    
    $
    Cash and cash equivalents at the end of the period
    
    $
    2.5
    
    
    $
    0.6
    
    
    $
    
 
 
  
 
  
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Government-funded
    
    
    28
    %Institutions
    
    
    43
    %Commercial Insurance
    
    
    12
    %Private Pay
    
    
    17
    %
 
 
 Financing Transactions
 
 
  
 
  
 
  
 
  
 
  
 32




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##### Table of Contents



Critical Accounting Policies
   Revenue Recognition
 
  
 Reclassifications
 33




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Allowance for Doubtful Accounts
 
  
 Goodwill
  
 .
 
 
 .
 
   Income Taxes
  34




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35




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##### Table of Contents



Results of Operations
 
 Three Quarters Ended December 31, 2005 Compared to Three Quarters Ended December 31, 2004
 
 
  
 Arcadia Resources, Inc.
Consolidated Statements of Income
(Unaudited)
 
 Successor
    
    
    Successor
    
    
    PredecessorPeriod from
    
    
    Period FromThree Quarters
    
    
    May 10, 2004
    
    
    April 1, 2004Ended
    
    
    To
    
    
    ToDecember 31, 2005
    
    
    December 31, 2004
    
    
    May 9, 2004Net Sales
    
    $
    96,702,889
    
    
    $
    67,223,593
    
    
    $
    9,486,601Cost of Sales
    
    
    64,792,459
    
    
    
    47,302,269
    
    
    
    6,905,998Gross Profit
    
    
    31,910,430
    
    
    
    19,921,324
    
    
    
    2,580,603General and Administrative Expenses
    
    
    31,423,622
    
    
    
    19,214,686
    
    
    
    2,101,381Depreciation and Amortization
    
    
    1,781,815
    
    
    
    221,328
    
    
    
    Operating Income (Loss)
    
    
    (1,295,007
    )
    
    
    485,310
    
    
    
    479,222Other ExpensesImpairment of Goodwill
    
    
    
    
    
    
    
    
    
    
    16,055Other Income
    
    
    
    
    
    
    (16,625
    )Interest Expense, Net
    
    
    1,198,103
    
    
    
    712,279
    
    
    
    Amortization of Debt Discount
    
    
    933,185
    
    
    
    682,593
    
    
    
    Total Other Expenses
    
    
    2,131,288
    
    
    
    1,378,247
    
    
    
    16,055Net Income (Loss) Before Income Tax Expense
    
    
    (3,426,295
    )
    
    
    (892,937
    )
    
    
    463,167Income Tax Expense
    
    
    116,778
    
    
    
    102,253
    
    
    
    Net Income (Loss)
    
    $
    (3,543,073
    )
    
    $
    (995,190
    )
    
    $
    463,167
 
 
  
 
 
 
  
 36




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##### Table of Contents



Three Quarters
    
    
    Three QuartersEnded
    
    
    EndedDecember 31, 2005
    
    
    December 31, 2004Operating Income (Loss)
    
    $
    (1,295
    )
    
    $
    965Depreciation and Amortization
    
    
    2,192
    
    
    
    221EBITDA
    
    $
    897
    
    
    $
    1,186
 
  
 
  
 37




---



##### Table of Contents



Year Ended March 31, 2005 Compared to Year Ended March 31, 2004
 
 
  
 (in millions)Operations of entities acquired in the reverse acquisition on May 10
    
    $
    3.4Two staffing entities acquired between January 1, 2004 and June 30, 2004
    
    
    4.4Three staffing operations and one entity acquired between July 1, 2004 and March 31, 2005
    
    
    4.2Home respiratory care and DME operations acquired during the period ended March 31, 2005
    
    
    4.7Internal growth from existing operations
    
    
    10.3Total increase in sales for the year ended March 31, 2005*
    
    $
    27.0
 
 
 *
    
    Includes results from the Predecessor entity 
 
 
 
  
 
  
 
  
 38




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##### Table of Contents



Year Ended March 31, 2004 Compared to Year Ended March 31, 2003
 
  
 
  
 39




---



##### Table of Contents



Year Ended March 31, 2003 Compared to Year Ended March 31, 2002
 
  
 
  
 
  
 
  
 Liquidity and Capital Resources
  
 
 Successor
    
    Successor
    
    PredecessorThree Quarters
    
    Period from May 10,
    
    Period from April 1,SUMMARY CONSOLIDATED
    
    ended
    
    2004 to December 31,
    
    2004 to May 9,STATEMENTS OF CASH FLOWS (in millions)
    
    December 31, 2005
    
    2004
    
    2004Net income (loss)
    
    $
    (3.5
    )
    
    $
    (1.0
    )
    
    $
    0.5Net cash (used in) operating activities
    
    $
    (8.2
    )
    
    $
    (6.5
    )
    
    $
    (0.5
    )Net cash (used in) investing activities
    
    $
    (7.9
    )
    
    $
    (3.8
    )
    
    $
    (0.2
    )Net cash provided by financing activities
    
    $
    17.2
    
    
    $
    10.9
    
    
    $
    0.7Net increase in cash and cash equivalents
    
    $
    1.1
    
    
    $
    0.6
    
    
    $
    Cash and cash equivalents at the end of the period
    
    $
    2.5
    
    
    $
    0.6
    
    
    $
    
 40




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##### Table of Contents



Government-funded
    
    
    28
    %Institutions
    
    
    43
    %Commercial Insurance
    
    
    12
    %Private Pay
    
    
    17
    %
 
  
 
 
 
  
 
  
 41




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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
    
    
    444,792
    
    
    
    394,765
    
    
    
    42,342
    
    
    
    4,762
    
    
    
    2,051
    
    
    
    872Total
    
    $
    8,674,523
    
    
    $
    2,503,147
    
    
    $
    5,330,817
    
    
    $
    714,524
    
    
    $
    116,448
    
    
    $
    9,587
 42




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##### Table of Contents



Qualitative and Quantitative Disclosures About Market Risk
  43




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##### Table of Contents



OUR BUSINESS
 
 Overview
 
  
 
 
 
  
 
  
 
 
 
  
 
  
 
 
 44




---



##### Table of Contents



Historical Development of the Company and Businesses Acquired
  The Company Becomes Critical Home Care, Inc.
 
  
   45




---



##### Table of Contents



Arcadia and Arcadia Rx Acquisitions
 
  
 
  
      46




---



##### Table of Contents



Change in Control of the Board of Directors
   
  
   
 Escrow of Arcadia Resources, Inc. Common Stock
 
  
  
 47




---



##### Table of Contents



Preemptive Rights
  
 Employment Agreements and Stock Options
 
 
  
 
 
 
  
 
  
 
  
 48




---



##### Table of Contents



Accounting Treatment of the RKDA Merger
  The PIPE: Regulation D Private Placement Offering
   49




---



##### Table of Contents



Registration Rights Agreements
   
 Bank Credit Agreements
 
 
  
 
  
 
  
 50




---



##### Table of Contents



Change of the Companys Principal Executive Offices and Fiscal Year End
    New Identity
  Recent Acquisitions
 
 
 
    
    On July 30, 2004, we acquired substantially all of the assets of The Staffing Source,
Inc., of St. Petersburg, Florida. The Staffing Source, Inc. provides temporary personnel
for healthcare facilities and other businesses. It reported sales of approximately $3.3
million for its 2003 fiscal year. The purchase price to be paid out over a three year
period is computed per a specified formula based on the annualized revenue, with a minimum
total payment of $480,000 and a maximum total payment of $600,000. The Company financed
the payment of $300,000 of the purchase price paid in cash at closing by drawing on its
line of credit. Because the balance of the purchase price payable is computed per a
specified formula based on annualized revenue, the Company does not anticipate that it will
incur debt to finance payment of the balance of the purchase price, but will fund the
obligation from the profitable operations of The Staffing Source.
    
    On August 20, 2004, we acquired the stock of American Oxygen, Inc. of Peoria, Illinois
for 200,000 shares of Common Stock valued at $186,000. American Oxygen, Inc., operating
from two locations in Illinois, sells and rents durable medical equipment, including
respiratory/oxygen equipment. Because the purchase price was paid in Company stock, the
Company did not incur debt in order to finance this transaction. American Oxygen is a
relatively small, new entity and is not expected to be profitable until our 2006 fiscal
year.
    
    On August 30, 2004, we purchased selected assets of Merit Staffing Resources, Inc.
Merit provides temporary personnel for healthcare facilities and other businesses from five
locations in Massachusetts. It reported 2003 sales of $4.7 million. The purchase price is
(a) cash equal to a specified percentage of the sellers accounts receivable under 120 days
outstanding as of
 51




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##### Table of Contents



closing, plus $200,000, subject to a total maximum cash payment at final closing of $1.6
million. Forty-eight monthly payments will be made computed per a specified formula based on
gross margin with a minimum total payment of $864,000 and a maximum total payment of $1.6
million. The Company financed the payment of $200,000 of the purchase price paid in cash at
closing by drawing on its line of credit. Because the balance of the purchase price payable
is computed per a specified formula based on gross margin, the Company does not anticipate
that it will incur debt to finance payment of the balance of the purchase price, but will
fund the obligation from the profitable operations of Merit.
    
    On September 23, 2004, we acquired the stock of Trinity Healthcare of Winston-Salem,
Inc. for $5.4 million. Trinity provides oxygen and other respiratory services, as well as
home intravenous therapy services. Trinity has locations in Winston-Salem and
Huntersville, North Carolina, and Marietta and Demorest, Georgia. Two of Trinitys selling
shareholders were paid a combination of cash, shares of the Companys Common Stock, and
delivery of a promissory note. Trinitys two other selling shareholders will be paid the
balance of the purchase price in cash and our Common Stock by January 15, 2005. The
Company also issued 150,000 shares of its common stock, with an aggregate value of
$127,800, to certain Trinity employees. The Company utilized proceeds from notes payable
and sales of stock of approximately $3.8 million to finance payment of the cash portion of
the purchase price paid at closing. Remaining purchase price obligations will be funded
from the profitable operations of Trinity.
    
    On December 17, 2004, we purchased substantially all of the assets of BK Tool, Inc., a
light industrial staffing business located in Sterling Heights, Michigan, with
approximately $2,000,000 in annual revenues. The total purchase price of $468,000 included
payment of $175,000 plus 85% of accounts receivables no greater than 60 days outstanding.
At closing, the seller was paid $393,000 in cash, drawn on the line of credit, and the
remaining $75,000 derived from operations was paid to the seller in January 2005. BK Tools
was combined with an existing Arcadia Services local operation to enhance the profitability
of both entities.
    
    On December 22, 2004, we agreed to purchase all of the outstanding shares of common
stock of Beacon Respiratory Services, Inc., Beacon Respiratory Services of Alabama, Inc.,
Beacon Respiratory Services of Colorado, Inc., and Beacon Respiratory Services of Georgia,
Inc. (collectively Beacon). Beacon provides respiratory services in Florida, Alabama,
Colorado, and Georgia and collectively had annual revenues of approximately $1,900,000.
The purchase was effective on January 1, 2005. The purchase price was $1,500,000, including
the payment of certain liabilities. The purchase price is subject to increase by up to an
additional $400,000 based on expected pricing changes for certain of the Companys products
and services for calendar year 2005, with any additional amounts owed being payable to the
sellers by January 1, 2006. In 2005, the Company paid $983,428 in cash to Beacons
shareholders, less $150,000 to be held by the Company to offset valid indemnification and
other claims of the Company. The Companys counsel will hold 16.33% of the Beacon shares
purchased until the $150,000 (including accrued interest less any amounts disputed) is paid
to sellers by January 1, 2006. On January 15, 2005, one of Beacons selling shareholders
was issued a promissory note for $150,000, with a one-year term at 8% annual interest
secured by 33% of the shares of Beacon. Principal and interest are to be paid quarterly.
The Company financed the payment of $833,428 of the purchase price paid in cash at closing
by utilizing proceeds from a note payable to a third party. The remaining purchase price
obligations will be funded from the profitable operations of Beacon.On April 7, 2005, we
acquired the net assets of United Health Care Services (United) and of two related
smaller companies. United is a home respiratory and durable medical equipment company
located in Ft. Myers and Port Charlotte, Florida. The purchase price was $1,588,000 as
follows: cash of $1,200,000 drawn on the Companys line of credit, the delivery of an
unsecured subordinated promissory note in the principal amount of $100,000, with interest
at five (5%) percent per annum, payable in two equal installments due at six months and
twelve months from the closing date, and the issuance of an aggregate of 147,500 shares of
the Companys common stock having an aggregate value of $288,000.
    
    On April 7, 2005, we acquired the net assets of United Health Care Services (United)
and of two related smaller companies. United is a home respiratory and durable medical
equipment company located in Ft. Myers and Port Charlotte, Florida. The purchase price was
$1,588,000 as follows: cash of $1,200,000 drawn on the Companys line of credit, the
delivery of an unsecured subordinated promissory note in the principal amount of $100,000,
with interest at five (5%) percent per annum, payable in two equal installments due at six
months and twelve months from the closing date, and the issuance of an aggregate of 147,500
shares of the Companys common stock having an aggregate value of $288,000.
    
    On April 29, 2005, we purchased the outstanding capital stock of Home Health
Professionals, Inc. and certain assets of Home Health Professionals Staffing, LLC. The
acquisition was effective May 1, 2005. Home Health Professionals operates a home care
services business headquartered in Battle Creek, Michigan. The purchase price for the
acquired stock was a cash payment of $2,500,000, plus 1,058,201 shares of the Companys
common stock valued at $2,000,000, plus the payment of amounts to be determined per an
earnout formula over the twelve month period following the closing. At closing, the cash
consideration and shares of the Companys common stock were paid, less amounts escrowed to
satisfy potential
 52




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##### Table of Contents



indemnification and other claims of the purchaser. The Company utilized proceeds from a
convertible promissory note issued to a third party to pay the cash portion of the purchase
price (see Note 6). Because the balance of the purchase price payable is computed per a
specified earnout formula based on operations, the Company does not anticipate that it will
incur debt to finance payment of the balance of the purchase price payments.
    
    On May 13, 2005, we acquired the net assets of HealthLink, a home respiratory and
durable medical equipment company located in Crown Point, Indiana. The purchase price was a
note to the seller of $160,000 plus 15,000 shares of the Companys common stock valued at
$30,300. The non-interest bearing purchase price payable is due in 12 equal monthly
installments of $6,700 plus a final payment of $80,000 one year from the closing date. We
expect to fund the acquisition with cash from operations of this and other durable medical
equipment locations.
    
    On May 31, 2005, we acquired the membership interests in Rite at Home Health Care, LLC,
a health care product-oriented catalog company located in Illinois. The purchase price of
$1.34 million included 88,000 shares of the Companys common stock valued at $189,000,
$325,000 cash plus assumption of the outstanding liabilities of $829,000. The line of
credit in place for Rite at Home Health Care, LLC provided $750,000 toward the funding of
the transaction.
    
    On June 27, 2005, we issued 42,000 shares of our common stock valued at $79,800 to a
limited liability company for intellectual property it developed and the related rights to
pursue a licensing agreement for providing durable medical equipment through a retailers
store locations.
    
    On July 18, 2005, we acquired certain assets of Alternative Home Health Care of Lee
County with a cash payment of $100,000, generated from operations.
    
    On August 12, 2005, we acquired certain assets of Summit Healthcare with a cash payment
of $100,000 funded from operations and a note payable of $500,000 which was paid in full as
of September 30, 2005 with proceeds from our Class B Warrant Offering. An additional
$50,000 is being held in escrow for one year pending resolution of certain items.
    
    On September 27, 2005, we acquired certain assets of Low Country Home Medical Equipment
Company, Inc. with a cash payment of $1.5 million funded with proceeds from our Class B
Warrant Offering. The Company also issued of 191,571 shares of its common stock valued at
$500,000 to escrow, to be distributed to the sellers one year after the original purchase
date.
    
    On October 17, 2005, we acquired certain assets of Madrid Medical Equipment with cash
payments totaling $170,000 and assumption of debts totaling $72,000. We funded this
acquisition with cash flow from operations.
    
    On October 21, 2005, we acquired certain assets of Sparrow Private Duty Services with a
cash payment of $90,000 generated from operations.
    
    On November 3, 2005, we acquired the outstanding stock of O2 Plus. The purchase price of
$1.9 million included $1.1 million cash funded with proceeds from our Class B Warrant
Offering; plus assumption of the outstanding liabilities of $739,000; and $100,000 pending
the satisfaction of certain post-closing requirements. In the event that certain future
growth goals are met, an additional purchase price of up to $1 million could be paid over
two years to the sellers in shares of the Companys common stock.
 
 Risk Factors
 
 
 
 see Risk Factors
 
 Our Services and Products
 
 
 
 53




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##### Table of Contents



Staffing (Medical and Non-Medical) and Home Care (Skilled and Personal Care)
 
  
 
 Durable Medical Equipment and Related Products
 
 
  
 Mail Order Pharmacy and Related Products
  Customers, Sales and Marketing
 
 Arcadia
Services, Inc.
 
 
  
 Our Business Strategy
  o
    
    The integration of our acquired businesses, and growth through additional acquisitions.o
    
    For our staffing and home care services businesses, our strategy is to obtain greater
penetration within existing markets, continue expanding the number of locations, expand
service offerings, continue implementation of our traveling nursing program, and pursue
selective acquisitions.o
    
    We intend to grow our Arcadia Rx mail order pharmaceutical business through Arcadias
affiliate network marketing efforts to assisted living facilities, in addition to mail
order pharmaceutical sales, Arcadias patient base and to the public.o
    
    We intend to acquire strategic targets and to organically grow our durable medical and respiratory equipment operations.o
    
    We intend to initiate retail sales sites within Sears stores in additional markets.
 Revenues attributable to the U.S. and Foreign Countries
  54




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##### Table of Contents



Competition
  
  
 
 
 Government Regulation
 
  
 
  
 
  
  Employees
 
  
 Properties
 55




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##### Table of Contents



Street Address
    
    City
    
    State
    
    Zip Code26777 Central Park Blvd., Ste. 200
    
    Southfield
    
    Michigan
    
    
    48076405 5th Avenue South, Ste. 6
    
    Naples
    
    Florida
    
    
    34102550 N. Bumby Avenue, Suite 215
    
    Orlando
    
    Florida
    
    
    32803762 Summa Avenue
    
    Westbury
    
    New York
    
    
    115901532 Opdyke Road, Ste. 400
    
    Auburn Hills
    
    Michigan
    
    
    4832679 Deer Park Avenue
    
    Babylon
    
    New York
    
    
    117022800 Marcus Avenue
    
    Lake Success
    
    New York
    
    
    110247990 Grand River, Suite C
    
    Brighton
    
    Michigan
    
    
    4811434869 Mound Road
    
    Sterling Heights
    
    Michigan
    
    
    48310414 N. Jackson Street, Complex 8718
    
    Jackson
    
    Michigan
    
    
    49201535 N. Clipper, Suite 2
    
    Lansing
    
    Michigan
    
    
    489121787 W. Genessee, Suite A
    
    Lapeer
    
    Michigan
    
    
    4844626431 Southfield Rd.
    
    Lathrup Village
    
    Michigan
    
    
    4807618320 Middlebelt Road
    
    Livonia
    
    Michigan
    
    
    4815218706 Eureka Road
    
    Southgate
    
    Michigan
    
    
    48195105 Mall Boulevard, Suite 283W
    
    Monroeville
    
    Pennsylvania
    
    
    15146762 Independence Blvd., Suite 798
    
    Virginia Beach
    
    Virginia
    
    
    234553918 West Point Boulevard
    
    Winston Salem
    
    North Carolina
    
    
    271039801 West Kincey Ave., Ste 170
    
    Huntersville
    
    North Carolina
    
    
    28078310 E. 41st Street
    
    Savannah
    
    Georgia
    
    
    31401200 Technology Court, Ste. 300
    
    Smyrna
    
    Georgia
    
    
    30082Habersham County Medical Center, PO Box 37
    
    Demorest
    
    Georgia
    
    
    305353524 Park Plaza Road
    
    Paducah
    
    Kentucky
    
    
    420011810 Decatur Highway, Ste. 124
    
    Fultondale
    
    Alabama
    
    
    35068955 E. 58th Ave., Unit O
    
    Denver
    
    Colorado
    
    
    8021613850 Treeline Avenue South
    
    Ft. Myers
    
    Florida
    
    
    339133318 Harbor Blvd.
    
    Port Charlotte
    
    Florida
    
    
    33952381 Kairns Drive
    
    Crown Point
    
    Indiana
    
    
    463071126 Wall Street
    
    Jacksonville
    
    Illinois
    
    
    626502201 West Townline, Suite F
    
    Peoria
    
    Illinois
    
    
    6161561 West Main Street
    
    Rossville
    
    Indiana
    
    
    46065868 Hwy. 15 South
    
    Jackson
    
    Kentucky
    
    
    41339
 
 Legal Proceedings
  Environmental Matters
  56




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##### Table of Contents



DESCRIPTION OF ARCADIA SERVICES, INC.
 Overview
 
  
 
  
 
  
 Description of Staffing and Home Care Industries
 Staffing Industry
 
  
 
 
 Healthcare Staffing
 
  
 
  
 
 
 Non-Medical Staffing
 57




---



##### Table of Contents



Home Care Industry
 
 
 
  
 
 
 Competitive Environment
 
  
 Arcadia History
 
  
  
  
 
  
 
  
 
 Arcadia Home Care and Staffing Services
 
 
  
 Medical Staffing
 58




---



##### Table of Contents



Non-Medical Staffing
 
  
 Home Care Services
 
  
 
  
 
  
 Growth Strategy
 
  
 Derive Greater Penetration Within Current Markets
 59




---



##### Table of Contents



Continue Expanding Number of Locations
 
  
 Expand Service Offerings
 
  
 60




---



##### Table of Contents



Complete Selective Acquisitions
 
  
 Affiliated Agency Model
 
  
 
  
 
  
 
  
 Customers, Sales and Marketing
 
  
 
  
 
  
 61




---



##### Table of Contents



Operations
 Office Locations
 
  
 Office Space Leased by Arcadia Resources, Inc.
 
 Properties
 
 Arcadia Services Field Employees
 
  
 
 
 
  
 
  
 Subsidiaries
 
  
 
  
 
  
 
  
  
  
 
  
  
 
  
 
 
  
 
  
 
  
  62




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##### Table of Contents



MANAGEMENT
 Directors and Executive Officers
  
 Name
    
    Age
    
    Position(s)
    
    Served as Director SinceJohn E. Elliott, II
    
    
    49
    
    
    Chairman ,Chief Executive Officer and Director
    
    May 10, 2004Lawrence R. Kuhnert
    
    
    54
    
    
    President, Chief Operating Officer, and Director
    
    May 10, 2004John T. Thornton
    
    
    68
    
    
    Director
    
    June 15, 2004James E. Haifley
    
    
    49
    
    
    Executive Vice President
    
    Not applicableCathy Sparling*
    
    
    51
    
    
    Assistant Secretary and Officer: Chief Operating Officer of
Arcadia Services, Inc., a wholly- owned subsidiary of the Company
    
    Not applicableRebecca R. Irish
    
    
    44
    
    
    Chief Financial Officer, Secretary and Treasurer
    
    Not applicable
 
 
 *
    
    Ms. Sparling is listed because she may be deemed an officer of the Company under the Commissions
imputed officer rules. 
 John E. Elliott, II.
 
 63




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##### Table of Contents



Lawrence R. Kuhnert.
 
 
 J ohn T. Thornton.
 
 
 James E. Haifley .
 
 
 Cathy Sparling .
 
 
 Rebecca R. Irish.
 
 Board Committees
 
  
  Director Compensation
 64




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##### Table of Contents



Indemnification of Directors and Officers
  Executive Compensation
 
  
 65




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##### Table of Contents



Summary Compensation Table
 
 Long-Term CompensationAwardsRestricted
    
    SecuritiesFiscal
    
    
    
    
    
    
    
    
    
    Stock
    
    UnderlyingName and
    
    Year
    
    Annual Compensation
    
    Award(s)
    
    Options/SARsPrincipal Position
    
    Ended
    
    Salary ($)
    
    Bonus ($)
    
    ($)
    
    (#)John E. Elliott, II,
    
    
    2005
    
    
    $
    132,692
    
    
    
    
    
    
    
    
    
    
    
    4,000,000Chairman and Chief Executive
    
    
    2004
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Officer1
    
    
    2003
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Lawrence R. Kuhnert
    
    
    2005
    
    
    $
    132,692
    
    
    
    
    
    
    
    
    
    
    
    4,000,000President and Chief Operating
    
    
    2004
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Officer1
    
    
    2003
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Rebecca R. Irish,
    
    
    2005
    
    
    $
    31,252
    
    
    $
    21,563
    
    
    
    
    
    
    
    150,000Chief Financial Officer,
    
    
    2004
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Secretary and Treasurer1
    
    
    2003
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    James E. Haifley,
    
    
    2005
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Executive Vice
    
    
    2004
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    President2
    
    
    2003
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Cathy Sparling3
    
    
    2005
    
    
    $
    141,927
    
    
    $
    352,572
    
    
    
    
    
    
    
    100,000Eric S. Yonenson,
    
    
    2005
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Former Chief Financial
    
    
    2004
    
    
    $
    57,942
    
    
    
    
    
    
    
    
    
    
    
    Officer4
    
    
    2003
    
    
    $
    65,019
    
    
    
    
    
    
    
    
    
    
    
    250,000David Bensol,
    
    
    2005
    
    
    $
    115,385
    
    
    
    
    
    
    
    
    
    
    
    Former Chairman
    
    
    2004
    
    
    
    75,557
    
    
    
    
    
    
    
    
    
    
    
    And Chief Executive Officer4
    
    
    2003
    
    
    
    113,654
    
    
    
    
    
    
    
    
    
    
    
    100,000Bradley Smith, Former
    
    
    2005
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Director and
    
    
    2004
    
    
    $
    62,981
    
    
    
    
    
    
    
    
    
    
    
    Officer4
    
    
    2003
    
    
    
    125,000
    
    
    
    
    
    
    
    
    
    
    
    
 
 
 
 1
    
    John E. Elliott, II and Lawrence R. Kuhnert took their respective
offices in May, 2004. As a result, neither individual received compensation from the Company for
the fiscal year ended March 31, 2004, or any prior fiscal years. As more fully described in this
prospectus, Messrs. Elliott and Kuhnert each entered into employment agreements with the Company
which provided for annual base compensation of $150,000. Ms. Irish took her office in January,
2005. As more fully described below, Ms. Irish entered into an employment agreement providing an
annual base salary of $125,000, subject to discretionary increase by the Companys Board of
Directors. In May 2005, annual base compensation was increased to $195,000 for Messrs. Elliott and
Kuhnert and to $145,000 for Ms. Irish. 
 
 
 
  
 66




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##### Table of Contents



2
    
    Mr. Haifley was not an officer of the Company during the fiscal year ended March
31, 2005, therefore, no amounts are shown in this table. On December 7, 2005, the Company
appointed James E. Haifley as its Executive Vice President. Mr. Haifleys duties include oversight
for the Companys staffing and durable medical equipment divisions. Mr. Haifleys employment
agreement provides for an annual base salary of $140,000, subject to discretionary increase by the
Companys Board of Directors. Employment is terminable at will. Should the Company end his
employment other than for specified cause, Mr. Haifley is entitled to severance compensation equal
to his base salary then in effect. In the event of a termination of employment in connection with a
change of control in defined circumstances, the Company will pay Mr. Haifley two and one-half times
his annual base salary then in effect. The employment agreement provides a covenant-not-to compete
and an award of 150,000 restricted shares of the Companys common stock to vest at the rate of
9,375 shares upon execution and per quarter thereafter. On February 16, 2005, Mr. Haifley, who
joined the Company in 2004 as Director of Business Development, was awarded non-qualified options
to purchase 100,000 shares of the Companys common stock at $1.45 per share, with exercise
contingent on vesting and execution of a non-compete agreement. The options vested on March 31,
2005 and are exercisable through March 31, 2010 or ninety (90) days following termination of
employment on any basis, whichever event occurs first.3
    
    Cathy Sparling is Chief Operating Officer of Arcadia Services,
Inc., a second-tier, wholly-owned subsidiary of the Company. Ms. Sparling is listed pursuant to
Rule 3b-7 of the Exchange Act, which states that an executive officer of a subsidiary may be
deemed an executive officer of the Company if he or she performs policy-making functions of the
Company. Please note, however, that the compensation information set forth in the above table
relates to the three fiscal years ending March 31, 2004, March 31, 2003 and March 31, 2002. These
fiscal years pre-date the effective date of the reverse merger in which Arcadia Services,
Inc. became a second-tier, wholly-owned subsidiary of the Company.4
    
    Mr. Bensol resigned as a director officer and employee
effective December 23, 2004. Mr. Yonensons employment with the Company ended September 21, 2004.
Mr. Smith is still employed by the Company but resigned as a director and officer in 2004. Option Grants to Executive Officers and Option Exercises
 
  
 Value of UnexercisedNumber of Securities
    
    in-the-MoneyNumber
    
    
    
    
    
    Underlying Unexercised
    
    Options atof Shares
    
    
    
    
    
    Options at
    
    End ofAcquired
    
    Value
    
    End of Fiscal Year (#)
    
    Fiscal Year ($)*on Exercise
    
    Realized
    
    Exercisable
    
    Unexercisable
    
    Exercisable
    
    UnexercisableJohn E. Elliott II
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,000,000
    
    
    
    
    
    
    $
    6,800,000Lawrence R. Kuhnert
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,000,000
    
    
    
    
    
    
    $
    6,800,000Rebecca R. Irish
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    150,000
    
    
    
    
    
    
    $
    118,500Cathy Sparling
    
    
    
    
    
    
    
    
    
    
    100,000
    
    
    
    
    
    
    $
    50,000
    
    
    
    David Bensol
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    James E. Haifley**
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
 
 *
    
    Value is calculated by subtracting the exercise price per share from the last reported market
price on March 31, 2005 and multiplying the result by the number of shares subject to the
option. 67




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##### Table of Contents



**
    
    Mr. Haifley was not an officer of the Company during the fiscal year ended March 31, 2005,
therefore, no amounts are shown in this table. Executive Officer Employment Contracts
 
  
 
  
  
  
 
  
 68




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69




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Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
 
 
  
 
    
    each person we know to beneficially own more than 5% of our voting stock,
    
    each director and nominee for director,
    
    each of our executive officers named in the Summary Compensation Table under Executive Compensation, and
    
    all of our directors, nominees for directors and executive officers as a group.
 
  
 
 Name and Address of
    
    Amount and Nature of
    
    PercentTitle of Class
    
    Beneficial Owner
    
    Beneficial Owner
    
    of ClassCommon Stock
    
    John E. Elliott, II
    
    
    13,380,000
    (1)
    
    
    12.80
    %26777 Central Park  Blvd., Suite 200Southfield, MI 48076Common Stock
    
    Lawrence Kuhnert
    
    
    8,920,000
    (2)
    
    
    8.53
    %26777 Central Park Blvd., Suite 200Southfield, MI 48076Common Stock
    
    John T. Thornton
    
    
    84,278
    (3)
    
    
    *26777 Central Park  Blvd., Suite 200Southfield, MI 48076Common Stock
    
    Rebecca R. Irish
    
    
    261,365
    (4)
    
    
    *26777 Central Park Blvd., Suite 200Southfield, MI 48076Common Stock
    
    Cathy Sparling
    
    
    300,000
    (5)
    
    
    *26777 Central Park Blvd., Suite 200Southfield, MI 48076Common Stock
    
    James E. Haifley
    
    
    271,200
    (5.1)
    
    
    *26777 Central Park Blvd., Suite 200Southfield, MI 48076Common Stock
    
    JANA Master Fund, Ltd.
    
    
    16,807,396
    (6)
    
    
    16.08
    %200 Park Ave., Ste. 3900New York, NY 10166
 
 70




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Name and Address of
    
    Amount and Nature of
    
    PercentTitle of Class
    
    Beneficial Owner
    
    Beneficial Owner
    
    of ClassCommon Stock
    
    SDS Capital Group SPC, Ltd.
    
    
    8,482,967
    (7)
    
    
    8.12
    %53 Forest Ave., Suite 203Old Greenwich, CT 06870Common Stock
    
    Steven Derby
    
    
    8,482,967
    (8)
    
    
    8.12
    %53 Forest Ave., Suite 202Old Greenwich, CT 06870Common Stock
    
    North Sound Capital, LLC
    
    
    6,886,985
    (9)
    
    
    6.59
    %53 Forest Ave., Ste. 202Old Greenwich, CT 06870Common Stock
    
    Thomas McAuley
    
    
    6,886,985
    (10)
    
    
    6.59
    %53 Forest Ave., Ste. 202Old Greenwich, CT 06870
 
 
 *
    
    Represents less than 1% of the outstanding stock.(1)
    
    Includes 600,000 shares of common stock issuable upon exercise of Class A Warrants and 4.8
million shares of Common Stock held in escrow, but excludes shares in which Mr. Elliott has voting
control with respect to the election of the Companys Board of Directors pursuant to the terms of a
Voting Agreement described below. All shares of Common Stock and all other voting securities, if
any, owned as of May 7, 2004, or subsequently acquired by Mr. Elliott during the term of the Voting
Agreement, are subject to the Voting Agreement. The Voting Agreement, during its term, is binding
upon any purchaser of Common Stock and other voting securities owned by or issuable to Mr. Elliott.
The Company believes that Voting Agreement will remain in effect for the foreseeable future.(2)
    
    Includes 400,000 shares of common stock issuable upon exercise of Class A Warrants and 3.2
million shares of Common Stock held in escrow, but excludes shares in which Mr. Kuhnert has voting
control with respect to the election of the Companys Board of Directors pursuant to the terms of a
Voting Agreement described below. All shares of Common Stock and all other voting securities, if
any, owned as of May 7, 2004, or subsequently acquired by Mr. Kuhnert during the term of the Voting
Agreement, are subject to the Voting Agreement. The Voting Agreement, during its term, is binding
upon any purchaser of Common Stock and other voting securities owned by or issuable to Mr. Kuhnert.
The Company believes that Voting Agreement will remain in effect for the foreseeable future.(3)
    
    Includes 10,936 shares of the Companys common stock and non-qualified options to purchase
49,040 shares of the Companys common stock at $1.08 per share and non-qualified options to
purchase 24,303 shares of common stock at $2.20 per the terms of Mr. Thorntons Director
Compensation Agreement for attendance at Board and Audit Committee meetings through February 28,
2006 and for his annual retainer as director and Audit Committee Chair through June 30, 2006.(4)
    
    Includes non-qualified options to purchase 150,000 shares of common stock at $1.15 per share,
per Ms. Irishs terms of employment with the Company.(5)
    
    Includes 200,000 shares of common stock and non-statutory options to purchase 100,000 shares of
the Companys common stock at an exercise price of $1.45, vested on March 31, 2005. Execution of a
non-compete agreement specified by the Company as condition precedent to exercise of the options
must be met. The options shall be fully exercisable through (a) March 31, 2010 or (b) ninety (90)
days following termination of employment on any basis (whether voluntarily or involuntarily, for
cause or without cause, etc.), whichever event occurs first.(5.1)
    
    Includes 100,000 shares of Common Stock issuable upon the exercise of non-qualified options
to purchase Common Stock at $1.45 per share, 150,000 shares issuable per a restricted stock award,
and 21,200 shares issuable on the exercise of options held indirectly and as to which the inclusion
of such shares is not deemed to be an admission of beneficial ownership per Exchange Act Rule 13d-4
except to the extent of pecuniary interest, voting authority and dispositive power.(6)
    
    Includes 1,200,000 shares of Common Stock issuable upon the exercise of Class A Warrants, and
72,000 shares of Common Stock issuable upon exercise of Late Registration Warrants, but ignores the
impact of Messrs. Elliott and Kuhnert having voting control of shares of the Common Stock owned by
Jana Master Fund Ltd., with respect to the election of the Companys Board of Directors 71




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pursuant to the terms of a Voting Agreement described below. All shares of Common Stock and all
other voting securities, if any, owned as of May 7, 2004, or subsequently acquired by Jana during
the term of the Voting Agreement, are subject to the Voting Agreement. The Voting Agreement, during
its term, is binding upon any purchaser of Common Stock and other voting securities owned by or
issuable to Jana. The Company believes that Voting Agreement will remain in effect for the
foreseeable future. Jana Master Fund, LTD is an account established by Jana Partners, LLC, which
has sole voting and investment control over the shares, subject to the Voting Agreement described
below. The principals of Jana Partners, LLC are Barry Rosenstein and Gary Claar. Jana is also the
beneficial owner of warrants (i) for 250,000 shares of Common Stock and (ii) for 50,000 shares of
Common Stock, (iii) B-1 Warrants to purchase 4,444,444 shares of Common Stock and (iv) B-2 warrants
to purchase 1,555,555 shares of Common Stock, the terms of which are subject to limitations such
that the warrants may not be exercised if doing so would result in Jana having aggregate beneficial
ownership of more than 4.99% of the total issued and outstanding shares of Common Stock. These
warrants were not taken into account in calculation of the beneficial ownership of Jana.(7)
    
    Includes 566,071 shares of Common Stock issuable upon the exercise of Class A Warrants, and
33,964 shares of Common Stock issuable upon exercise of Late Registration Warrants, but, ignores
the impact of Messrs. Elliott and Kuhnert having voting control of shares of the Common Stock owned
by SDS Capital Group SPC, Ltd., with respect to the election of the Companys Board of Directors
pursuant to the terms of a Voting Agreement described below. All shares of Common Stock and all
other voting securities, if any, owned as of May 7, 2004, or subsequently acquired by to SDS
Capital Group SPC, Ltd. during the term of the Voting Agreement, are subject to the Voting
Agreement. The Voting Agreement, during its term, is binding upon any purchaser of Common Stock and
other voting securities owned by or issuable to SDS Capital Group SPC, Ltd. The Company believes
that Voting Agreement will remain in effect for the foreseeable future.(8)
    
    Steven Derby shares dispositive power of 8,482,967 shares of Common Stock of the Company in his
capacity as managing member of SDS Management, LLC, the investment manager of SDS Capital Group
SPC, Ltd. The calculation of beneficial ownership for Mr. Derby ignores the impact of Messrs.
Elliott and Kuhnert having voting control of the shares of common stock owned by SDS Capital Group
SPC, Ltd. All shares of Common Stock and all other voting securities, if any, owned as of May 7,
2004, or subsequently acquired by to SDS Capital Group SPC, Ltd. during the term of the Voting
Agreement, are subject to the Voting Agreement. The Voting Agreement, during its term, is binding
upon any purchaser of Common Stock and other voting securities owned by or issuable to SDS Capital
Group SPC, Ltd. The Company believes that Voting Agreement will remain in effect for the
foreseeable future.(9)
    
    Includes 178,449 shares of common stock owned by North Sound Legacy Fund LLC, 2,505,668 shares
of common stock owned by North Sound Legacy Institutional Fund LLC and 4,202,868 shares of common
stock owned by North Sound Legacy International Fund Ltd.; all of which are managed by North Sound
Capital LLC. Ignores the impact of Messrs. Elliott and Kuhnert having voting control of the shares
of Common Stock owned by North Sound Legacy Fund LLC, North Sound Legacy Institutional Fund LLC and
North Sound Legacy International Ltd., with respect to the election of the Companys Board of
Directors pursuant to the terms of a Voting Agreement described below. All shares of Common Stock
and all other voting securities, if any, owned as of May 7, 2004, or subsequently acquired by North
Sound during the term of the Voting Agreement, are subject to the Voting Agreement. The Voting
Agreement, during its term, is binding upon any purchaser of Common Stock and other voting
securities owned by or issuable to North Sound. The Company believes that Voting Agreement will
remain in effect for the foreseeable future.(10)
    
    The ultimate managing member of North Sound Capital LLC is Thomas McAuley. Mr. McAuley may be
deemed the beneficial owner of the shares in its capacity as the managing member of North Sound
Legacy Fund LLC, North Sound Legacy Institutional Fund LLC and North Sound Legacy International
Ltd. (the Funds), whose holdings are described in footnote 9 above. As the managing member of the
Funds, Mr. McAuley has voting and investment control with respect to the shares of common stock
held by the Funds. All shares of Common Stock and all other voting securities, if any, owned as of
May 7, 2004, or subsequently acquired by North Sound during the term of the Voting Agreement, are
subject to the Voting Agreement. The Voting Agreement, during its term, is binding upon any
purchaser of Common Stock and other voting securities owned by or issuable to North Sound. The
Company believes that Voting Agreement will remain in effect for the foreseeable future.  72




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73




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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
 
  
 
  
 
  
 
  
 
  
 
  
 74




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75




---



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SELLING SECURITY HOLDERS
 
  
 Table of Selling Security Holders Holding Shares of Common Stock
  76




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Number of Shares Owned by SellingStockholder After the Offering,Name of Selling Stockholder,
    
    Number of Shares
    
    
    
    
    
    Assuming the sale of all Shares of thePosition, Office or Material
    
    Owned by Selling
    
    Shares of Common
    
    Common Stock OfferedRelationship
    
    Stockholder
    
    Stock to be Offered
    
    Number
    
    PercentElliott, II, John E., Chairman, CEO,
Director
    
    
    17,380,000
    (1)
    
    
    17,380,000
    
    
    
    0
    
    
    
    0Kuhnert, Lawrence R., President, COO,
Director
    
    
    12,920,000
    (2)
    
    
    12,920,000
    
    
    
    0
    
    
    
    0Bensol, David
    
    
    3,770,881
    (3)
    
    
    663,600
    
    
    
    3,770,881
    
    
    
    3.52
    %Ackley Property Management, Inc.
    
    
    21,200
    (4)
    
    
    21,200
    
    
    
    0
    
    
    
    0Bay Star Capital II, L.P.
    
    
    1,444,019
    (5)
    
    
    1,444,019
    
    
    
    0
    
    
    
    0Berchelmann, Judy Clark
    
    
    200,600
    (6)
    
    
    200,600
    
    
    
    0
    
    
    
    0Briceland, Robert J.
    
    
    221,200
    (7)
    
    
    221,200
    
    
    
    0
    
    
    
    0Bindseil, Edwin R.
    
    
    884,800
    (8)
    
    
    884,800
    
    
    
    0
    
    
    
    0Edwin R. Bindseil IRA
    
    
    221,200
    (9)
    
    
    221,200
    
    
    
    0
    
    
    
    0Marcus, Fredric
    
    
    84,800
    (10)
    
    
    84,800
    
    
    
    0
    
    
    
    0Hill, Sharon L.
    
    
    16,960
    (11)
    
    
    16,960
    
    
    
    0
    
    
    
    0JANA Master Fund, Ltd.
    
    
    22,807,395
    (12)
    
    
    22,807,395
    
    
    
    0
    
    
    
    0Kuhnert, Daniel P.
    
    
    112,720
    (13)
    
    
    112,720
    
    
    
    0
    
    
    
    0North Sound Legacy Fund, LLC
    
    
    178,449
    (14)
    
    
    178,449
    
    
    
    0
    
    
    
    0North Sound Legacy Institutional Fund,
LLC
    
    
    2,505,668
    (15)
    
    
    2,505,668
    
    
    
    0
    
    
    
    0North Sound Legacy International Fund,
Ltd.
    
    
    4,202,868
    (16)
    
    
    4,202,868
    
    
    
    0
    
    
    
    0Koreen, Roger and Amy
    
    
    10,600
    (17)
    
    
    10,600
    
    
    
    0
    
    
    
    0Cooper, Sandi R. and Ira G.
    
    
    35,600
    (18)
    
    
    35,600
    
    
    
    0
    
    
    
    0SDS Capital Group SPC, Ltd.
    
    
    8,482,967
    (19)
    
    
    8,482,967
    
    
    
    0
    
    
    
    0Stanley Scholson Family Partnership
    
    
    79,900
    (20)
    
    
    79,900
    
    
    
    0
    
    
    
    0Garchick, Stephen J., Trustee
    
    
    563,600
    (21)
    
    
    563,600
    
    
    
    0
    
    
    
    0Garchick, Stephen J.
    
    
    222,222
    
    
    
    222,222
    
    
    
    0
    
    
    
    0Turk, Dale J.
    
    
    221,200
    (22)
    
    
    221,200
    
    
    
    0
    
    
    
    0Romei, Vincent A.
    
    
    113,600
    (23)
    
    
    113,600
    
    
    
    0
    
    
    
    0Warren H. Muller Trust
    
    
    42,400
    (24)
    
    
    42,400
    
    
    
    0
    
    
    
    0Web Financial Corp.
    
    
    3,624,000
    (25)
    
    
    3,624,000
    
    
    
    0
    
    
    
    0Sparling, Cathy, Chief Operating
Officer of Acradia Services, Inc.
    
    
    300,000
    (26)
    
    
    300,000
    
    
    
    0
    
    
    
    0Lakshumanan, Sundaram
    
    
    308,000
    (27)
    
    
    308,000
    
    
    
    0
    
    
    
    0Gay, Barbara
    
    
    300,000
    (28)
    
    
    300,000
    
    
    
    0
    
    
    
    0Pheeney, Phyllis
    
    
    343,700
    (29)
    
    
    343,700
    
    
    
    0
    
    
    
    0Lerner, David
    
    
    1,115,277
    (30)
    
    
    1,115,277
    
    
    
    0
    
    
    
    0Katz, Alan A.
    
    
    28,840
    (31)
    
    
    28,840
    
    
    
    0
    
    
    
    0Silverstein, Leslie T.
    
    
    1,485
    (32)
    
    
    1,485
    
    
    
    0
    
    
    
    0Ninan Kiriyan
    
    
    15,105
    (33)
    
    
    15,105
    
    
    
    0
    
    
    
    0Sandgrain Securities, Inc.
    
    
    116,124
    (34)
    
    
    116,124
    
    
    
    0
    
    
    
    0Cleveland Overseas, Ltd.
    
    
    300,000
    (35)
    
    
    300,000
    
    
    
    0
    
    
    
    0Bodie, Jonathon
    
    
    62,000
    
    
    
    62,000
    
    
    
    0
    
    
    
    0Hathcock, Roy
    
    
    100,000
    
    
    
    100,000
    
    
    
    0
    
    
    
    0Benzine, Dale
    
    
    160,422
    
    
    
    160,422
    
    
    
    0
    
    
    
    0Norman, Chris
    
    
    206,810
    
    
    
    206,810
    
    
    
    0
    
    
    
    0Leonard, Marc
    
    
    175,056
    
    
    
    175,056
    
    
    
    0
    
    
    
    0Iroquois, LP
    
    
    333,333
    
    
    
    333,333
    
    
    
    0
    
    
    
    0Abraham Sabbagh Revocable Trust
    
    
    15,300
    
    
    
    15,300
    
    
    
    0
    
    
    
    0Cosand, Jane E.
    
    
    200
    
    
    
    200
    
    
    
    0
    
    
    
    0Bisbee, Charlotte
    
    
    1,000
    
    
    
    1,000
    
    
    
    0
    
    
    
    0Hess, Marjorie, J.
    
    
    1,600
    
    
    
    1,600
    
    
    
    0
    
    
    
    0Heritage TLG, Inc.
    
    
    1,000
    
    
    
    1,000
    
    
    
    0
    
    
    
    0Royal Professional Services, Inc.
    
    
    250
    
    
    
    250
    
    
    
    0
    
    
    
    0Cheek, Mary B.
    
    
    100
    
    
    
    100
    
    
    
    0
    
    
    
    0Wood, Margaret Braren
    
    
    1,000
    
    
    
    1,000
    
    
    
    0
    
    
    
    0Baxter, Tammy
    
    
    100
    
    
    
    100
    
    
    
    0
    
    
    
    0Woodridge Holdings, LTD
    
    
    200
    
    
    
    200
    
    
    
    0
    
    
    
    0
 
 77




---



##### Table of Contents



Number of Shares Owned by SellingStockholder After the Offering,Name of Selling Stockholder,
    
    Number of Shares
    
    
    
    
    
    Assuming the sale of all Shares of thePosition, Office or Material
    
    Owned by Selling
    
    Shares of Common
    
    Common Stock OfferedRelationship
    
    Stockholder
    
    Stock to be Offered
    
    Number
    
    PercentAraiza, Timothy, J.
    
    
    350
    
    
    
    350
    
    
    
    0
    
    
    
    0Cepure, Jan
    
    
    200
    
    
    
    200
    
    
    
    0
    
    
    
    0Cava, Javier Galito
    
    
    1,000
    
    
    
    1,000
    
    
    
    0
    
    
    
    0Piedmont Triad Staffing, Inc.
    
    
    400
    
    
    
    400
    
    
    
    0
    
    
    
    0Malkin, Roger
    
    
    300
    
    
    
    300
    
    
    
    0
    
    
    
    0Bigham, Shanton
    
    
    50
    
    
    
    50
    
    
    
    0
    
    
    
    0Bigham, Teressa
    
    
    50
    
    
    
    50
    
    
    
    0
    
    
    
    0Health Care Partners, Inc.
    
    
    3,500
    
    
    
    3,500
    
    
    
    0
    
    
    
    0Irish, Rebecca, Chief Financial
Officer, Secretary and Treasurer
    
    
    298,865
    (36)
    
    
    298,865
    
    
    
    0
    
    
    
    0Thornton, John, Director
    
    
    84,278
    (37)
    
    
    84,278
    
    
    
    0
    
    
    
    0Nathan Company, L.L.C.
    
    
    250,000
    
    
    
    250,000
    
    
    
    0
    
    
    
    0C & A Healthcare Services, Inc.
    
    
    20,000
    
    
    
    20,000
    
    
    
    0
    
    
    
    0Steven Richards and Associates
    
    
    135,000
    
    
    
    135,000
    
    
    
    0
    
    
    
    0Vetter, Larry
    
    
    62,500
    
    
    
    62,500
    
    
    
    0
    
    
    
    0Hines, Charles
    
    
    5,000
    
    
    
    5,000
    
    
    
    0
    
    
    
    0Hagan, Kevin
    
    
    5,000
    
    
    
    5,000
    
    
    
    0
    
    
    
    0Haifley, James, Executive Vice President
    
    
    250,000
    (38)
    
    
    250,000
    
    
    
    0
    
    
    
    0Horack, Todd
    
    
    130,000
    (39)
    
    
    100,000
    
    
    
    0
    
    
    
    0Mounce, Sherri
    
    
    130,000
    (40)
    
    
    100,000
    
    
    
    0
    
    
    
    0Slayton, Patricia
    
    
    476,190
    
    
    
    476,190
    
    
    
    0
    
    
    
    0Unger, Thomas
    
    
    476,190
    
    
    
    476,190
    
    
    
    0
    
    
    
    0Silverman, Gilbert
    
    
    105,821
    
    
    
    105,821
    
    
    
    0
    
    
    
    0Mannino, Joanne
    
    
    266
    
    
    
    266
    
    
    
    0
    
    
    
    0Nagel, Donna
    
    
    200
    
    
    
    200
    
    
    
    0
    
    
    
    0Wagenberg, Jill
    
    
    2,000
    
    
    
    2,000
    
    
    
    0
    
    
    
    0Burchi, Matthew
    
    
    2,200
    
    
    
    2,200
    
    
    
    0
    
    
    
    0Bulgarelli, Kathleen
    
    
    1,000
    
    
    
    1,000
    
    
    
    0
    
    
    
    0Infinity Group, LLC
    
    
    42,000
    
    
    
    42,000
    
    
    
    0
    
    
    
    0Fitzgerald, Mark
    
    
    3,923,232
    (41)
    
    
    3,923,232
    
    
    
    0
    
    
    
    0Royal Bank of Canada, by its agent RBC
Capital Markets Corporation
    
    
    13,506,476
    (42)
    
    
    13,506,476
    
    
    
    0
    
    
    
    0DiSalvo, Ken
    
    
    50
    
    
    
    50
    
    
    
    0
    
    
    
    0Gerlach & Co.
    
    
    1,111,111
    
    
    
    1,111,111
    
    
    
    0
    
    
    
    0SICAV, Placeuro, Company
    
    
    1,111,111
    
    
    
    1,111,111
    
    
    
    0
    
    
    
    0Lowcountry Home Medical Equipment
Company
    
    
    191,571
    
    
    
    191,571
    
    
    
    0
    
    
    
    0Hensley, Chad
    
    
    25,000
    (43)
    
    
    25,000
    
    
    
    0
    
    
    
    0Zeller, Chrystal
    
    
    20,000
    (52)
    
    
    20,000
    
    
    
    0
    
    
    
    0Chumsky, Lisa
    
    
    25,000
    (44)
    
    
    25,000Grassel, Peter
    
    
    180,000
    (45)
    
    
    180,000
    
    
    
    0
    
    
    
    0Hunter, Patricia
    
    
    29,351
    (46)
    
    
    29,351
    
    
    
    0
    
    
    
    0Schieber, Shari
    
    
    25,000
    (47)
    
    
    25,000
    
    
    
    0
    
    
    
    0Remedy Therapeutics, LLC
    
    
    192,901
    
    
    
    192,901
    
    
    
    0
    
    
    
    0Hymowitz, Jerry
    
    
    16,711
    (48)
    
    
    16,711
    
    
    
    0
    
    
    
    0White, Tom
    
    
    50,000
    (49)
    
    
    50,000
    
    
    
    0
    
    
    
    0Silva, Joseph
    
    
    40,000
    (53)
    
    
    40,000
    
    
    
    0
    
    
    
    0Frank, Brian
    
    
    99,677
    (50)
    
    
    99,677
    
    
    
    0
    
    
    
    0Place, Jeffrey S.
    
    
    132,000
    (51)
    
    
    132,000
    
    
    
    0
    
    
    
    0Health Care Partners, Inc.
    
    
    15,000
    
    
    
    15,000
    
    
    
    0
    
    
    
    0Chinchar, Nancy F.
    
    
    180,000
    (54)
    
    
    180,000Larkey, Dean
    
    
    496
    (55)
    
    
    496Duke, Terry
    
    
    54,034
    
    
    
    54,034TOTAL
    
    
    
    
    
    
    104,499,551
 
 78




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##### Table of Contents



(1)
    
    Includes 600,000 shares of Common Stock issuable upon the exercise of Class A Warrants and
4.8 million shares of Common Stock held in escrow. Includes 4,000,000 shares of Common Stock
issuable upon the exercise of options to purchase Common Stock. All shares of Common Stock
and all other voting securities, if any, owned as of May 7, 2004, or subsequently acquired by
the Selling Stockholder during the term of the Voting Agreement, are subject to the Voting
Agreement. The Voting Agreement, during its term, is binding upon any purchaser of Common
Stock and other voting securities owned by or issuable to the Selling Stockholder. The Company
believes that the Voting Agreement will remain in effect for the foreseeable future.(2)
    
    Includes 400,000 shares of Common Stock issuable upon the exercise of Class A Warrants and
3.2 million shares of Common Stock held in escrow. Includes 4,000,000 shares of Common Stock
issuable upon the exercise of options to purchase Common Stock. All shares of Common Stock
and all other voting securities, if any, owned as of May 7, 2004, or subsequently acquired by
the Selling Stockholder during the term of the Voting Agreement, are subject to the Voting
Agreement. The Voting Agreement, during its term, is binding upon any purchaser of Common
Stock and other voting securities owned by or issuable to the Selling Stockholder. The Company
believes that the Voting Agreement will remain in effect for the foreseeable future.(3)
    
    Includes 60,000 shares of Common Stock issuable upon the exercise of Class A Warrants, 3,600
shares of Common Stock issuable upon exercise of Late Registration Warrants, and 1.6 million
shares of Common Stock held in escrow. All shares of Common Stock and all other voting
securities, if any, owned as of May 7, 2004, or subsequently acquired by the Selling
Stockholder during the term of the Voting Agreement, are subject to the Voting Agreement. The
Voting Agreement, during its term, is binding upon any purchaser of Common Stock and other
voting securities owned by or issuable to the Selling Stockholder. The Company believes that
the Voting Agreement will remain in effect for the foreseeable future.(4)
    
    Includes 20,000 shares of Common Stock issuable upon the exercise of Class A Warrants and
1,200 shares of Common Stock issuable upon exercise of Late Registration Warrants.(5)
    
    Includes 1,068,764 shares of Common Stock issuable upon the exercise of Warrants, 33,929
shares of Common Stock issuable upon the exercise of Class A Warrants, and 2,036 shares of
Common Stock issuable upon exercise of Late Registration Warrants.(6)
    
    Includes 10,000 shares of Common Stock issuable upon the exercise of Class A Warrants, 600
shares of Common Stock issuable upon exercise of Late Registration Warrants, 100,000 shares of
Common Stock issuable upon the exercise of options to purchase Common Stock and 36,000 shares
issuable per restricted stock award.(7)
    
    Includes 20,000 shares of Common Stock issuable upon the exercise of Class A Warrants and
1,200 shares of Common Stock issuable upon exercise of Late Registration Warrants.(8)
    
    Includes 80,000 shares of Common Stock issuable upon the exercise of Class A Warrants and
4,800 shares of Common Stock issuable upon exercise of Late Registration Warrants.(9)
    
    Includes 20,000 shares of Common Stock issuable upon the exercise of Class A Warrants and
1,200 shares of Common Stock issuable upon exercise of Late Registration Warrants.(10)
    
    Includes 80,000 shares of Common Stock issuable upon the exercise of Class A Warrants and
4,800 shares of Common Stock issuable upon exercise of Late Registration Warrants.(11)
    
    Includes 16,000 shares of Common Stock issuable upon the exercise of Class A Warrants and 960
shares of Common Stock issuable upon exercise of Late Registration Warrants. 79




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##### Table of Contents



(12)
    
    Includes 1,200,000 shares of Common Stock issuable upon the exercise of Class A Warrants,
72,000 shares of Common Stock issuable upon exercise of Late Registration Warrants, and
300,000 shares issuable on the exercise of other warrants. Also includes 4,444,444 shares of
Common stock issuable upon the exercise of Class B-1 Warrants and 1,555,555 shares of Common
stock issuable upon the exercise of Class B-2 Warrants. All shares of Common Stock and all
other voting securities, if any, owned as of May 7, 2004, or subsequently acquired by the
Selling Stockholder during the term of the Voting Agreement, are subject to the Voting
Agreement. The Voting Agreement, during its term, is binding upon any purchaser of Common
Stock and other voting securities owned by or issuable to the Selling Stockholder. The Company
believes that the Voting Agreement will remain in effect for the foreseeable future.(13)
    
    Includes 12,000 shares of Common Stock issuable upon the exercise of Class A Warrants and 720
shares of Common Stock issuable upon exercise of Late Registration Warrants.(14)
    
    Includes 15,000 shares of Common Stock issuable upon the exercise of Class A Warrants and 900
shares of Common Stock issuable upon exercise of Late Registration Warrants. All shares of
Common Stock and all other voting securities, if any, owned as of May 7, 2004, or subsequently
acquired by the Selling Stockholder during the term of the Voting Agreement, are subject to
the Voting Agreement. The Voting Agreement, during its term, is binding upon any purchaser of
Common Stock and other voting securities owned by or issuable to the Selling Stockholder. The
Company believes that the Voting Agreement will remain in effect for the foreseeable future.(15)
    
    Includes 216,000 shares of Common Stock issuable upon the exercise of Class A Warrants and
12,960 shares of Common Stock issuable upon exercise of Late Registration Warrants. All shares
of Common Stock and all other voting securities, if any, owned as of May 7, 2004, or
subsequently acquired by the Selling Stockholder during the term of the Voting Agreement, are
subject to the Voting Agreement. The Voting Agreement, during its term, is binding upon any
purchaser of Common Stock and other voting securities owned by or issuable to the Selling
Stockholder. The Company believes that the Voting Agreement will remain in effect for the
foreseeable future.(16)
    
    Includes 369,000 shares of Common Stock issuable upon the exercise of Class A Warrants and
22,140 shares of Common Stock issuable upon exercise of Late Registration Warrants. All
shares of Common Stock and all other voting securities, if any, owned as of May 7, 2004, or
subsequently acquired by the Selling Stockholder during the term of the Voting Agreement, are
subject to the Voting Agreement. The Voting Agreement, during its term, is binding upon any
purchaser of Common Stock and other voting securities owned by or issuable to the Selling
Stockholder. The Company believes that the Voting Agreement will remain in effect for the
foreseeable future.(17)
    
    Includes 600 shares of Common Stock issuable upon exercise of Late Registration Warrants.(18)
    
    Includes 600 shares of Common Stock issuable upon exercise of Late Registration Warrants.(19)
    
    Includes 566,071 shares of Common Stock issuable upon the exercise of Class A Warrants and
33,964 shares of Common Stock issuable upon exercise of Late Registration Warrants.(20)
    
    Includes 40,000 shares of Common Stock issuable upon the exercise of Class A Warrants and
2,400 shares of Common Stock issuable upon exercise of Late Registration Warrants.(21)
    
    Includes 60,000 shares of Common Stock issuable upon the exercise of Class A Warrants, 3,600
shares of Common Stock issuable upon exercise of Late Registration Warrants, and 500,000
shares of Common Stock issuable upon exercise of options to purchase Common Stock.(22)
    
    Includes 20,000 shares of Common Stock issuable upon the exercise of Class A Warrants and
1,200 shares of Common Stock issuable upon exercise of Late Registration Warrants.(23)
    
    Includes 110,000 shares of Common Stock issuable upon the exercise of Class A Warrants and
3,600 shares of Common Stock issuable upon exercise of Late Registration Warrants.(24)
    
    Includes 2,400 shares of Common Stock issuable upon exercise of Late Registration Warrants. 80




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##### Table of Contents



(25)
    
    Includes 223,680 shares of Common Stock issuable upon the exercise of Class A Warrants 24,000
shares of Common Stock issuable upon exercise of Late Registration Warrants. All shares of
Common Stock and all other voting securities, if any, owned as of May 7, 2004, or subsequently
acquired by the Selling Stockholder during the term of the Voting Agreement, are subject to
the Voting Agreement. The Voting Agreement, during its term, is binding upon any purchaser of
Common Stock and other voting securities owned by or issuable to the Selling Stockholder. The
Company believes that the Voting Agreement will remain in effect for the foreseeable future.(26)
    
    Includes 100,000 shares of Common stock issuable upon the exercise of options to purchase
Common Stock.(27)
    
    Includes 100,000 shares of Common stock issuable upon the exercise of options to purchase
Common Stock.(28)
    
    Includes 100,000 shares of Common stock issuable upon the exercise of options to purchase
Common Stock.(29)
    
    Includes 100,000 shares of Common stock issuable upon the exercise of options to purchase
Common Stock.(30)
    
    Includes 332,388 shares of Common Stock issuable upon the exercise of Class A Warrants and
75,143 shares of Common Stock issuable upon exercise of Late Registration Warrants.(31)
    
    Includes 11,880 shares of Common Stock issuable upon exercise of Late Registration Warrants.(32)
    
    Includes 1,485 shares of Common Stock issuable upon exercise of Late Registration Warrants.(33)
    
    [Intentionally omitted](34)
    
    Includes 65,634 shares of Common Stock issuable upon the exercise of Class A Warrants and
30,490 shares of Common Stock issuable upon exercise of Late Registration Warrants.(35)
    
    Includes 100,000 shares of Common Stock issuable upon the exercise of Class A Warrants. Under
the terms of a Settlement Agreement with Cleveland Overseas Ltd (COL) dated June 16, 2004,
David Bensol, Robert Rubin, and Harbor View Fund, Inc., principal shareholders of the Company,
each agreed to transfer to COL 200,000 shares of Common Stock (collectively the Settlement
Shares), and COL agreed to accept such shares in full satisfaction of a certain $150,000
Promissory Note payable to COL. As of December 10, 2004, 200,000 of the Settlement Shares
remain to be transferred to COL, to the Companys knowledge. Subsequent to the transfer of the
400,000 Settlement Shares, COL has sold 150,000 shares pursuant to Rule 144.(36)
    
    Includes 150,000 shares of Common Stock issuable upon the exercise of options to purchase
Common Stock. Includes 37,500 shares of restricted Common Stock issuable per a compensation
agreement.(37)
    
    Includes 73,343 shares of Common Stock issuable upon the exercise of options to purchase
Common Stock.(38)
    
    Includes 100,000 shares of Common Stock issuable upon the exercise of options to purchase
Common Stock. Includes 150,000 shares issuable per restricted stock award.(39)
    
    Includes 100,000 shares of Common Stock issuable upon the exercise of options to purchase
Common Stock. Includes 30,000 shares issuable per restricted stock award.(40)
    
    Includes 100,000 shares of Common Stock issuable upon the exercise of options to purchase
Common Stock. Includes 30,000 shares issuable per restricted stock award.(41)
    
    Includes 444,444 shares of Common stock issuable upon the exercise of Class B-1 Warrants and
44,444 shares of Common stock issuable upon the exercise of Class B-2 Warrants.(42)
    
    Includes 8,888,889 shares of Common stock issuable upon the exercise of Class B-1 Warrants
and 3,111,111 shares of Common stock issuable upon the exercise of Class B-2 Warrants.(43)
    
    Includes 25,000 shares of Common Stock issuable per restricted stock award. 81




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##### Table of Contents



(44)
    
    Includes 25,000 shares of Common Stock issuable upon the exercise of Class A Warrants.(45)
    
    Includes 180,000 shares of Common Stock issuable upon the exercise of Class A Warrants.(46)
    
    Includes 29,351 shares of Common Stock issuable upon the exercise of Class A Warrants.(47)
    
    Includes 25,000 shares of Common Stock issuable upon the exercise of Class A Warrants.(48)
    
    Includes 16,711 shares of Common Stock issuable upon the exercise of Class A Warrants.(49)
    
    Includes 50,000 shares issuable per restricted stock award.(50)
    
    Includes 1,114 shares of Common Stock issuable upon the exercise of Class A Warrants.(51)
    
    Includes 44,000 shares of Common Stock issuable per restricted stock award.(52)
    
    Includes 20,000 shares of Common Stock issuable per restricted stock award.(53)
    
    Includes 40,000 shares of Common Stock issuable per restricted stock award.(54)
    
    Includes 180,000 shares of Common Stock issuable upon the exercise of Class A Warrants.(55)
    
    Includes 496 shares of Common Stock issuable upon the exercise of Late Registration
Warrants. 
 assuming the sale of all of the shares of the Common Stock offered by each selling
stockholder
 
   
 Table of Selling Security Holders Holding Warrants
 
  82




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##### Table of Contents



Number of Warrants Owned byNumber of Class A
    
    
    
    
    
    Selling Stockholder After theWarrants Owned by
    
    
    
    
    
    Offering, Assuming the Sale ofSelling Stockholder
    
    Class A Warrants
    
    all Class A Warrants OfferedName of Selling Stockholder
    
    Before the Offering
    
    to be Offered
    
    Number
    
    PercentAckley Property Management, Inc.
    
    
    21,200
    
    
    
    21,200
    
    
    
    0
    
    
    
    0Bay Star Capital II, L.P.
    
    
    1,104,729
    
    
    
    1,104,729
    
    
    
    0
    
    
    
    0Bensol, David
    
    
    63,600
    
    
    
    63,600
    
    
    
    0
    
    
    
    0Berchelmann, Judy Clark
    
    
    10,600
    
    
    
    10,600
    
    
    
    0
    
    
    
    0Briceland, Robert J
    
    
    21,200
    
    
    
    21,200
    
    
    
    0
    
    
    
    0Bindseil, Edwin R
    
    
    84,800
    
    
    
    84,800
    
    
    
    0
    
    
    
    0Edwin R. Bindseil IRA
    
    
    21,200
    
    
    
    21,200
    
    
    
    0
    
    
    
    0Marcus, Fredric
    
    
    84,800
    
    
    
    84,800
    
    
    
    0
    
    
    
    0Hill, Sharon L
    
    
    16,960
    
    
    
    16,960
    
    
    
    0
    
    
    
    0JANA Master Fund, Ltd.
    
    
    1,572,000
    
    
    
    1,572,000
    
    
    
    0
    
    
    
    0Kuhnert,
Daniel P
    
    
    12,720
    
    
    
    12,720
    
    
    
    0
    
    
    
    0North Sound Legacy Fund, LLC
    
    
    15,900
    
    
    
    15,900
    
    
    
    0
    
    
    
    0North Sound Legacy Institutional Fund, LLC
    
    
    228,960
    
    
    
    228,960
    
    
    
    0
    
    
    
    0North Sound Legacy International Ltd.
    
    
    391,140
    
    
    
    391,140
    
    
    
    0
    
    
    
    0Koreen, Roger and Amy
    
    
    600
    
    
    
    600
    
    
    
    0
    
    
    
    0Cooper, Sandi R. and Ira G
    
    
    600
    
    
    
    600
    
    
    
    0
    
    
    
    0SDS Capital Group SPC, Ltd.
    
    
    600,035
    
    
    
    600,035
    
    
    
    0
    
    
    
    0Stanley Scholson Family Partnership
    
    
    42,400
    
    
    
    42,400
    
    
    
    0
    
    
    
    0Garchick, Stephen J, Trustee
    
    
    63,600
    
    
    
    63,600
    
    
    
    0
    
    
    
    0Turk, Dale J
    
    
    21,200
    
    
    
    21,200
    
    
    
    0
    
    
    
    0Romei, Vincent A
    
    
    113,600
    
    
    
    113,600
    
    
    
    0
    
    
    
    0Warren H. Muller Trust
    
    
    2,400
    
    
    
    2,400
    
    
    
    0
    
    
    
    0Web Financial Corp.
    
    
    247,680
    
    
    
    247,680
    
    
    
    0
    
    
    
    0Lerner, David
    
    
    407,531
    
    
    
    407,531
    
    
    
    0
    
    
    
    0Katz, Alan A
    
    
    11,880
    
    
    
    11,880
    
    
    
    0
    
    
    
    0Silverstein, Leslie T
    
    
    1,485
    
    
    
    1,485
    
    
    
    0
    
    
    
    0Sandgrain Securities, Inc.
    
    
    96,124
    
    
    
    96,124
    
    
    
    0
    
    
    
    0Chumsky, Lisa
    
    
    25,000
    
    
    
    25,000
    
    
    
    0
    
    
    
    0Grassel, Peter
    
    
    180,0000
    
    
    
    180,0000
    
    
    
    0
    
    
    
    0Hunter, Patricia
    
    
    29,351
    
    
    
    29,351
    
    
    
    0
    
    
    
    0Schieber, Shari
    
    
    25,000
    
    
    
    25,000
    
    
    
    0
    
    
    
    0Chinchar, Nancy F.
    
    
    180,000
    
    
    
    180,000Frank, Brian
    
    
    1,114
    
    
    
    1,114Larkey, Dean
    
    
    496
    
    
    
    496Elliott, II, John E., Chairman, CEO, Director
    
    
    600,000
    
    
    
    600,000Kuhnert, Lawrence R., President, COO, Director
    
    
    400,000
    
    
    
    400,000TOTAL
    
    
    
    
    
    
    6,699,905
    
    
    
    0
    
    
    
    0
 
 
  
 83




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##### Table of Contents



Number of Warrants Owned byNumber of Class B-1
    
    
    
    
    
    Selling Stockholder After theWarrants Owned by
    
    
    
    
    
    Offering, Assuming the Sale ofSelling Stockholder
    
    Class B-1 Warrants
    
    all Class A Warrants OfferedName of Selling Stockholder
    
    Before the Offering
    
    to be Offered
    
    Number
    
    PercentMark Fitzgerald
    
    
    444,444
    
    
    
    444,444
    
    
    
    0
    
    
    
    0Jana Master Fund, Ltd.
    
    
    4,444,444
    
    
    
    4,444,444
    
    
    
    0
    
    
    
    0Royal Bank of Canada, by
its agent RBC Capital
Markets Corporation
    
    
    8,888,889
    
    
    
    8,888,889
    
    
    
    0
    
    
    
    0TOTAL
    
    
    
    
    
    
    13,777,777
    
    
    
    0
    
    
    
    0
 
 
  
 84




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Number of Warrants Owned byNumber of Class B-2
    
    
    
    
    
    Selling Stockholder After theWarrants Owned by
    
    
    
    
    
    Offering, Assuming the Sale ofSelling Stockholder
    
    Class B-2 Warrants
    
    all Class A Warrants OfferedName of Selling Stockholder
    
    Before the Offering
    
    to be Offered
    
    Number
    
    PercentMark Fitzgerald
    
    
    44,444
    
    
    
    44,444
    
    
    
    0
    
    
    
    0Jana Master Fund, Ltd.
    
    
    1,555,555
    
    
    
    1,555,555
    
    
    
    0
    
    
    
    0Royal Bank of Canada, by
its agent RBC Capital
Markets Corporation
    
    
    3,111,111
    
    
    
    3,111,111
    
    
    
    0
    
    
    
    0TOTAL
    
    
    
    
    
    
    4,771,110
    
    
    
    0
    
    
    
    0
 
 assuming the
sale of all of the Warrants offered by each selling stockholder
 
    
  
 
  
  
  
 
  
 85




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86




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87




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88




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89




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90




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DESCRIPTION OF CAPITAL STOCK
  
  
 Common Stock
 Voting
 91




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##### Table of Contents



Dividends.
 Dissolution, Liquidation or Winding Up
 Other Rights and Restrictions. et seq. Nevada Business Corporation Laws
 Transfer Agent and Registrar.
 Preemptive Rights
 
  
 
  
 Options and Warrants
 92




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##### Table of Contents




    
    6,699,905 Class A Warrants to purchase 6,699,905 shares of our Common Stock offered by
the selling security holders. Each Class A Warrant entitles the holder to purchase one
share of Common Stock at any time within seven years from the date of issuance at $0.50 per
share. Each Class A Warrant expires at the end of the seven-year period from the date of
issuance.
    
    320,974 Late Registration Warrants issuable as of April 30, 2005 to owners of Class A
Warrants who purchase such warrants in the May 2004 Regulation D Private Placement. These
Late Registration Warrants are being issued pursuant to that certain registration rights
agreement between the Company and such Regulation D investors. The Late Registration
Warrants terms are otherwise identical to the Class A Warrants.
    
    275,000 Class A. Warrants issued to Sandgrain Securities, Inc. and certain of its key
employees in August of 2004. Such August 2004 Class A Warrants entitle the holder to
purchase one share of Common Stock any time within seven years from the date of issuance at
$0.25 per share. Each August 2004 Class A Warrant expires at the end of the five-year
period from the date of issuance.
    
    1,000,000 Class A Warrants to purchase 1,000,000 shares of Common Stock held by John E.
Elliott, II and Lawrence R. Kuhnert. Each Class A Warrant entitles the holder to purchase
one share of Common Stock at any time within seven years from the date of issuance at $0.50
per share. Each Class A Warrant expires at the end of the seven-year period.
    
    A common stock warrant issued to Jana Master Fund, LTD (Jana) granting Jana the right
to purchase up to 250,000 shares of our Common Stock at an exercise price of $.50 per
share. The warrant is exercisable through March 11, 2011. The common stock warrant was
issued to Jana in connection with a $1,500,000 loan Jana made to the Company on March 16,
2004
    
    A common stock warrant was issued to Cleveland Overseas Ltd., in connection with a loan
in the principal amount of $150,000 evidenced by a promissory note dated February 28, 2003.
The warrant grants Cleveland Overseas with the right to purchase up to 100,000 shares of
our Common Stock at an exercise price equal to $0.50 per share through March 3, 2008.
    
    On September 21, 2004, entered into a Promissory Note and Warrant Purchase Agreement
with BayStar Capital, II, L.P. (BayStar), a shareholder of the Company. BayStar
contemporaneously purchased from the Company a Promissory Note and a Warrant to purchase
shares of the Companys common stock. The Promissory Note is in the principal amount of $5
million and bears interest at 6% per annum, compounded quarterly. The Promissory Note is
payable on or before June 21, 2005. The Company may extend the term of the Promissory Note
for an additional three months, in which case the interest rate increases to 12% per annum
during the three-month extension period. The Warrant permits BayStar to purchase up to
3,150,000 shares of the Companys common stock at $0.95 per share. The Warrant expires on
September 21, 2009. The shares issuable upon exercise of the Warrant carry certain
registration and other rights.
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
    
    A Common Stock Warrant issued to Jana granting Jana the right to purchase up to 50,000
shares of the Companys Common Stock at an exercise price of $1.28 per share. The Warrant
is exercisable any time within seven years from the date of issuance. The Common Stock
Warrant was issued to Jana in connection with a short term $1,500,000 loan made on January
18, 2005 and repaid on February 2, 2005.
    
    13,777,777 Class B-1 Warrants to purchase 13,777,777 shares of Common Stock were issued
to 3 holders in September 2005.
    
    4,771,110 Class B-2 Warrants to purchase 4,771,110 shares of Common Stock were issued to
3 holders in September 2005, attached to the Class B-1 Warrants.
 
  
 Preferred Stock
         Nevada Business Corporation Laws
 94




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et seq. et seq. et seq.to the extent
applicable
 
 et seq., et seq.
 
 PLAN OF DISTRIBUTION
 
  
 
  
 
  
 
  
 o
    
    A block trade in which the broker or dealer so engaged will attempt to sell the shares as
agent, but may position and resell a portion of the block as principal to facilitate the
transaction (including crosses in which the same broker acts as agent for both sides of the
transaction);o
    
    Purchases by a broker or dealer as principal and resale by the broker or dealer for its account pursuant to this prospectus;o
    
    Ordinary brokerage transactions and transactions in which the broker solicits purchasers;o
    
    Through options, swaps or derivatives;
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o
    
    Privately negotiated transactions;o
    
    In making short sales or in transactions to cover short sales;o
    
    In transactions on any national securities exchange or quotation service on which our
common stock may be listed or quoted at the time of sale;o
    
    Put or call option transactions relating to the securities;o
    
    Through other types of transactions; ando
    
    A combination of any of the above-listed methods of sale.
 
  
 
  
 
  
 
  
 
  
 
  
 
 
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LEGAL MATTERS
  
 EXPERTS
 Companys Independent Auditors
  
   
 Changes In and Disagreements With Accountants on Accounting and Financial Disclosure.
 
  
   
  
 97




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WHERE YOU CAN FIND MORE INFORMATION
  
 
 
    
 
 
 
 
 98




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Consolidated Financial Statements
Years Ended March 31, 2005, 2004 and 2003
 
 
 
  
 
 Report of Independent Registered Public Accounting Firm
    
    F-100Consolidated Financial StatementsBalance Sheets
    
    F-101Statements of Operations
    
    F-103Statements of Stockholders Equity
    
    F-104Statements of Cash Flows
    
    F-105Summary of Accounting Policies
    
    F-106Notes to Consolidated Financial Statements
    
    F-109
 
 99




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/s/ BDO Seidman, LLP
BDO Seidman, LLPKalamazoo, MichiganJune 28, 2005
 F-100




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##### Table of Contents



Arcadia Resources, Inc.
 
 Consolidated Balance Sheets
 
 
 Successor
    
    
    PredecessorMarch 31,
    
    
    March 31,2005
    
    
    2004Assets (Note 7)Current AssetsCash
    
    $
    1,412,268
    
    
    $
    Accounts receivable, net of allowance of $1,692,000 and
$780,000, respectively
    
    
    21,453,424
    
    
    
    13,478,381Inventory, net of allowance of $80,000
    
    
    664,269
    
    
    
    Prepaid expenses and other current assets
    
    
    876,523
    
    
    
    133,547Income taxes receivable (Note 11)
    
    
    130,000
    
    
    
    Total Current Assets
    
    
    24,536,484
    
    
    
    13,611,928Fixed Assets (Note 2)Equipment
    
    
    2,033,919
    
    
    
    Software
    
    
    251,446
    
    
    
    61,619Furniture and fixtures
    
    
    376,095
    
    
    
    6,251Vehicles
    
    
    205,080
    
    
    
    Leasehold improvements
    
    
    196,337
    
    
    
    7,2083,062,877
    
    
    
    75,078Accumulated depreciation and amortization
    
    
    (787,899
    )
    
    
    (73,067
    )Net Fixed Assets
    
    
    2,274,978
    
    
    
    2,011Other AssetsGoodwill (Note 4)
    
    
    15,704,743
    
    
    
    3,589,191Trade name, net of accumulated amortization of $244,000 (Note 4)
    
    
    7,755,556
    
    
    
    Customer relationships, net of accumulated amortization of
$306,000 (Note 4)
    
    
    4,694,444
    
    
    
    Technology, net of accumulated amortization of $232,000 (Note 4)
    
    
    527,778
    
    
    
    Deferred financing costs, net of accumulated amortization of
$231,000 (Note 4)
    
    
    99,099
    
    
    
    Total Other Assets
    
    
    28,781,620
    
    
    
    3,589,191$
    55,593,082
    
    
    $
    17,203,130Liabilities and Stockholders EquityCurrent LiabilitiesLine of credit, current portion (Note 7)
    
    $
    1,150,186
    
    
    $
    Accounts payable and checks issued against future deposits
    
    
    1,649,551
    
    
    
    1,116,143Accrued expenses:Compensation and related taxes
    
    
    1,959,964
    
    
    
    1,573,267Commissions
    
    
    551,873
    
    
    
    470,326Other
    
    
    592,188
    
    
    
    239,489Accrued Interest
    
    
    263,787
    
    
    
    Payable to affiliated agencies, current portion (Note 5)
    
    
    1,612,715
    
    
    
    1,143,804Long-term debt, current portion (Note 6)
    
    
    6,723,830
    
    
    
    Total Current Liabilities
    
    
    14,504,094
    
    
    
    4,543,029Payable to affiliate, less current portion (Note 5)
    
    
    615,544
    
    
    
    429,829Long-term debt, less current portion (Note 6)
    
    
    546,572
    
    
    
    Line of credit, less current portion (Note 7)
    
    
    14,404,404
    
    
    
    Total Liabilities
    
    
    30,070,614
    
    
    
    4,972,858Commitments and Contingencies (Notes 6, 7 and 14)
 
 F-101




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##### Table of Contents



Successor
    
    
    PredecessorMarch 31,
    
    
    March 31,2005
    
    
    2004Stockholders Equity (Note 8)Common stock $.001 par value, 150,000,000 shares authorized,
90,413,662 (Successor) and 947,636 (Predecessor) shares
issued and outstanding, respectively
    
    
    90,414
    
    
    
    948Additional paid-in capital
    
    
    33,516,506
    
    
    
    7,627,047Treasury stock, 112,109 shares
    
    
    (187,375
    )
    
    
    Retained earnings (accumulated deficit)
    
    
    (7,897,077
    )
    
    
    15,233,460Due from stockholder (Note 1)
    
    
    
    
    
    
    (10,631,183
    )Total Stockholders Equity
    
    
    25,522,468
    
    
    
    12,230,272$
    55,593,082
    
    
    $
    17,203,130
 
 See accompanying summary of accounting policies and notes to consolidated financial statements.
 F-102




---



##### Table of Contents



Arcadia Resources, Inc.
 
 Consolidated Statements of Operations
 
 
 Successor
    
    
    PredecessorPeriod from
    
    
    Period FromMay 10, 2004
    
    
    April 1, 2004
    
    
    Year
    
    
    YearTo
    
    
    To
    
    
    Ended
    
    
    EndedMarch 31, 2005
    
    
    May 9, 2004
    
    
    March 31, 2004
    
    
    March 31, 2003Net Sales
    
    $
    95,854,671
    
    
    $
    9,486,601
    
    
    $
    78,359,328
    
    
    $
    76,276,043Cost of Sales
    
    
    67,049,756
    
    
    
    6,905,998
    
    
    
    56,204,880
    
    
    
    53,822,198Gross Profit
    
    
    28,804,915
    
    
    
    2,580,603
    
    
    
    22,154,448
    
    
    
    22,453,845General and Administrative Expenses
    
    
    32,264,457
    
    
    
    2,101,381
    
    
    
    18,424,484
    
    
    
    18,171,739Impairment of goodwill
    
    
    707,044
    
    
    
    16,055
    
    
    
    
    
    
    
    Depreciation and Amortization
    
    
    1,457,936
    
    
    
    
    
    
    
    
    
    
    
    Operating Income (Loss)
    
    
    (5,624,522
    )
    
    
    463,167
    
    
    
    3,729,964
    
    
    
    4,282,106Other Expenses (Income)Other (income)
    
    
    (87,152
    )
    
    
    
    
    
    
    
    
    
    
    Interest expense (income) , net
    
    
    946,235
    
    
    
    
    
    
    
    (1,989
    )
    
    
    (1,412
    )Amortization of debt discount (Note 6)
    
    
    1,227,972
    
    
    
    
    
    
    
    
    
    
    
    Total Other Expenses (Income)
    
    
    2,087,055
    
    
    
    
    
    
    
    (1,989
    )
    
    
    (1,412
    )Net Income (Loss) Before Income Tax Expense
    
    
    (7,711,577
    )
    
    
    463,167
    
    
    
    3,731,953
    
    
    
    4,283,518Income Tax Expense (Note 11)
    
    
    185,500
    
    
    
    
    
    
    
    
    
    
    
    Net Income (Loss)
    
    $
    (7,897,077
    )
    
    $
    463,167
    
    
    $
    3,731,953
    
    
    $
    4,283,518Unaudited pro forma amounts to reflect pro forma
Income Taxes from tax status change
    
    
    
    
    
    
    158,000
    
    
    
    1,268,864
    
    
    
    1,456,396Pro Forma Income After Income Tax from tax
status change
    
    
    
    
    
    $
    305,167
    
    
    $
    2,463,089
    
    
    $
    2,827,122Income (Loss) Per Share (Note 9):Basic
    
    $
    (0.11
    )
    
    $
    0.49
    
    
    $
    3.94
    
    
    $
    4.52Diluted
    
    $
    (0.11
    )
    
    $
    0.49
    
    
    $
    3.94
    
    
    $
    4.52Proforma Income Per Share:Basic
    
    
    
    
    
    $
    0.32
    
    
    $
    2.60
    
    
    $
    2.98Diluted
    
    
    
    
    
    $
    0.32
    
    
    $
    2.60
    
    
    $
    2.98Weighted average number of shares (in thousands):Basic
    
    
    72,456
    
    
    
    948
    
    
    
    948
    
    
    
    948Diluted
    
    
    72,456
    
    
    
    948
    
    
    
    948
    
    
    
    948
 
 See accompanying summary of accounting policies and notes to consolidated financial statements.
 F-103




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##### Table of Contents



Arcadia
Resources, Inc.
 
 
 Consolidated Statements of Stockholders Equity
 
 
 Additional
    
    
    
    
    
    
    Due
    
    
    TotalCommon Stock
    
    
    Treasury Stock
    
    
    Paid-In
    
    
    Retained
    
    
    From
    
    
    StockholdersShares
    
    
    Amount
    
    
    Shares
    
    
    Amount
    
    
    Capital
    
    
    Earnings
    
    
    Stockholder
    
    
    EquityPredecessor:Balance, April 1, 2002
    
    
    947,636
    
    
    $
    948
    
    
    
    
    
    
    $
    
    
    
    $
    7,627,047
    
    
    $
    7,217,989
    
    
    $
    (4,108,673
    )
    
    $
    10,737,311Net advance during the year
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,474,559
    )
    
    
    (3,474,559
    )Net income for the year
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,283,518
    
    
    
    
    
    
    
    4,283,518Balance, March 31, 2003
    
    
    947,636
    
    
    
    948
    
    
    
    
    
    
    
    
    
    
    
    7,627,047
    
    
    
    11,501,507
    
    
    
    (7,583,232
    )
    
    
    11,546,270Net advance during the year
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,047,951
    )
    
    
    (3,047,951
    )Net income for the year
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,731,953
    
    
    
    
    
    
    
    3,731,953Balance, March 31, 2004
    
    
    947,636
    
    
    
    948
    
    
    
    
    
    
    
    
    
    
    
    7,627,047
    
    
    
    15,233,460
    
    
    
    (10,631,183
    )
    
    
    12,230,272Net income for the period
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    463,167
    
    
    
    
    
    
    
    463,167Predecessor balance May 10, 2004
    
    
    947,636
    
    
    
    948
    
    
    
    
    
    
    
    
    
    
    
    7,627,047
    
    
    
    15,696,627
    
    
    
    (10,631,183
    )
    
    
    12,693,439Successor:Capitalization of RKDA
    
    
    21,300,000
    
    
    $
    21,300
    
    
    
    
    
    
    
    
    
    
    $
    47,450
    
    
    
    
    
    
    
    
    
    
    $
    68,750Sale of shares to private investors
in CHC prior to reverse merger
    
    
    32,980,000
    
    
    
    32,980
    
    
    
    
    
    
    
    
    
    
    
    8,212,020
    
    
    
    
    
    
    
    
    
    
    
    8,245,000Sale of shares to investors in CHC
prior to reverse merger
    
    
    840,000
    
    
    
    840
    
    
    
    
    
    
    
    
    
    
    
    209,160
    
    
    
    
    
    
    
    
    
    
    
    210,000Payment for services (underwriters)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (885,000
    )
    
    
    
    
    
    
    
    
    
    
    (885,000
    )Deemed issuance of shares to CHC
shareholders in reverse acquisition
    
    
    23,903,351
    
    
    
    23,904
    
    
    
    
    
    
    
    
    
    
    
    13,077,072
    
    
    
    
    
    
    
    
    
    
    
    13,100,976Balance, May 10, 2004
    
    
    79,023,351
    
    
    
    79,024
    
    
    
    
    
    
    
    
    
    
    
    20,660,702
    
    
    
    
    
    
    
    
    
    
    
    20,739,726Sale of shares to investors
    
    
    5,000,000
    
    
    
    5,000
    
    
    
    
    
    
    
    
    
    
    
    4,495,000
    
    
    
    
    
    
    
    
    
    
    
    4,500,000Brokers fees related to share sales
    
    
    100,000
    
    
    
    100
    
    
    
    
    
    
    
    
    
    
    
    (225,100
    )
    
    
    
    
    
    
    
    
    
    
    (225,000
    )Conversion of debt
    
    
    3,235,396
    
    
    
    3,235
    
    
    
    
    
    
    
    
    
    
    
    3,676,063
    
    
    
    
    
    
    
    
    
    
    
    3,679,298Option exercises
    
    
    144,999
    
    
    
    145
    
    
    
    
    
    
    
    
    
    
    
    26,105
    
    
    
    
    
    
    
    
    
    
    
    26,250Cashless warrant exercises
    
    
    424,750
    
    
    
    425
    
    
    
    (112,109
    )
    
    
    (187,375
    )
    
    
    186,950
    
    
    
    
    
    
    
    
    
    
    
    Payment for acquisitions
    
    
    1,833,276
    
    
    
    1,833
    
    
    
    
    
    
    
    
    
    
    
    1,447,917
    
    
    
    
    
    
    
    
    
    
    
    1,449,750Payment for services
    
    
    651,890
    
    
    
    652
    
    
    
    
    
    
    
    
    
    
    
    584,869
    
    
    
    
    
    
    
    
    
    
    
    585,521Release of escrowed shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,664,000
    
    
    
    
    
    
    
    
    
    
    
    2,664,000Net loss for the period
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (7,897,077
    )
    
    
    
    
    
    
    (7,897,077
    )Balance, March 31, 2005
    
    
    90,413,662
    
    
    $
    90,414
    
    
    
    (112,109
    )
    
    $
    (187,375
    )
    
    $
    33,516,506
    
    
    $
    (7,897,077
    )
    
    $
    
    
    
    $
    25,522,468
 
 See accompanying summary of accounting policies and notes to consolidated financial statements.
 F-104




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##### Table of Contents



Arcadia
Resources, Inc.
 
 
 Consolidated Statements of Cash Flows
 
 
 Successor*
    
    
    Predecessor*Period From
    
    
    Period fromMay 10, 2004
    
    
    April 1, 2004
    
    
    Year
    
    
    YearTo
    
    
    To
    
    
    Ended
    
    
    EndedMarch 31, 2005
    
    
    May 9, 2004
    
    
    March 31, 2004
    
    
    March 31, 2003CASH FLOWS FROM OPERATING ACTIVITIESNet Income (Loss)
    
    $
    (7,897,077
    )
    
    $
    463,167
    
    
    $
    3,731,953
    
    
    $
    4,283,518Adjustments to reconcile net income (loss) to net cash provided by (used in)
operating activities net of impact of acquisitions:Provision for bad debts
    
    
    930,799
    
    
    
    42,192
    
    
    
    26,784
    
    
    
    238,840Loss on disposition of asset
    
    
    89,810
    
    
    
    
    
    
    
    
    
    
    
    Depreciation and amortization
    
    
    449,586
    
    
    
    77
    
    
    
    17,333
    
    
    
    22,380Amortization of debt discount and deferred financing costs
    
    
    1,432,464
    
    
    
    
    
    
    
    
    
    
    
    Issuance of stock for services
    
    
    585,521
    
    
    
    
    
    
    
    
    
    
    
    Amortization of intangibles
    
    
    782,222
    
    
    
    
    
    
    
    
    
    
    
    Impairment of goodwill
    
    
    707,044
    
    
    
    16,055
    
    
    
    
    
    
    
    Issuance of stock for interest
    
    
    101,013
    
    
    
    
    
    
    
    
    
    
    
    Issuance of stock from escrow
    
    
    2,664,000
    
    
    
    
    
    
    
    
    
    
    
    Changes in operating assets and liabilities:Accounts receivable
    
    
    (5,031,949
    )
    
    
    (692,193
    )
    
    
    (1,321,682
    )
    
    
    42,668Inventory
    
    
    (230,232
    )
    
    
    
    
    
    
    
    
    
    
    Prepaid expenses and other current assets
    
    
    (514,761
    )
    
    
    27,903
    
    
    
    7,523
    
    
    
    (107,692
    )Income taxes receivable
    
    
    (130,000
    )
    
    
    
    
    
    
    
    
    
    
    Checks issued against future deposits
    
    
    (850,125
    )
    
    
    (314,025
    )
    
    
    960,772
    
    
    
    (77,881
    )Accounts payable
    
    
    445,074
    
    
    
    42,823
    
    
    
    (88,733
    )
    
    
    23,574Accrued expenses and other current liabilities
    
    
    (299,674
    )
    
    
    (301,999
    )
    
    
    219,242
    
    
    
    (687,040
    )Due to affiliated agencies
    
    
    (308,682
    )
    
    
    170,915
    
    
    
    (145,614
    )
    
    
    (162,514
    )NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES
    
    
    (7,074,967
    )
    
    
    (545,085
    )
    
    
    3,407,578
    
    
    
    3,575,853CASH FLOWS FROM INVESTING ACTIVITIESPurchases of businesses
    
    
    (4,642,944
    )
    
    
    (157,500
    )
    
    
    (359,154
    )
    
    
    (97,827
    )Purchases of property and equipment
    
    
    (1,005,476
    )
    
    
    
    
    
    
    (473
    )
    
    
    (3,467
    )Proceeds from sale of asset
    
    
    1,779
    
    
    
    
    
    
    
    
    
    
    
    NET CASH USED IN INVESTING ACTIVITIES
    
    
    (5,646,641
    )
    
    
    (157,500
    )
    
    
    (359,627
    )
    
    
    (101,294
    )CASH FLOWS FROM FINANCING ACTIVITIESProceeds from issuance of common stock
    
    
    4,301,250
    
    
    
    
    
    
    
    
    
    
    
    Net drawings on line of credit
    
    
    3,795,709
    
    
    
    
    
    
    
    
    
    
    
    Payment of long-term debt
    
    
    (1,783,191
    )
    
    
    
    
    
    
    
    
    
    
    Increase in notes payable
    
    
    283,928
    
    
    
    
    
    
    
    
    
    
    
    Cash acquired with reverse merger
    
    
    7,536,180
    
    
    
    
    
    
    
    
    
    
    
    Advances (dividends) from stockholder
    
    
    
    
    
    
    702,585
    
    
    
    (3,047,951
    )
    
    
    (3,474,559
    )NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES
    
    
    14,133,876
    
    
    
    702,585
    
    
    
    (3,047,951
    )
    
    
    (3,474,559
    )NET INCREASE IN CASH AND EQUIVALENTS
    
    $
    1,412,268
    
    
    
    
    
    
    
    
    
    
    
    CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD
    
    $
    
    
    
    
    
    
    
    
    
    
    
    
    CASH AND CASH EQUIVALENTS, END OF PERIOD
    
    $
    1,412,268
    
    
    $
    
    
    
    $
    
    
    
    $
    *End of period cash resulted from recapitalization of stock and reverse merger
Supplementary information:Cash paid during the period for:Interest paid (received)
    
    $
    1,195,704
    
    
    
    
    
    
    $
    (4,214
    )
    
    $
    (1,418
    )Income taxes
    
    $
    302,514
    
    
    
    
    
    
    
    
    
    
    
    Non cash investing activities:Issuance of common stock for the purchase of
Trinity Healthcare, Inc. and American Oxygen, Inc.
    
    $
    1,449,750
    
    
    
    
    
    
    
    
    
    
    
    Non cash financing activities:Debt issue discount
    
    $
    1,507,600
    
    
    
    
    
    
    
    
    
    
    
    Forgiveness of note payable
    
    $
    554,000
    
    
    
    
    
    
    
    
    
    
    
    Payment of note installment with common stock
    
    $
    1,864,185
    
    
    
    
    
    
    
    
    
    
    
    Exercise of cashless warrants
    
    $
    187,375
    
    
    
    
    
    
    
    
    
    
    
    Related party payable recorded as part of the purchase price of an
acquired business
    
    
    
    
    
    
    
    
    
    $
    574,430
    
    
    
    
 
 See accompanying summary of accounting policies and notes to consolidated financial statements.
 F-105




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Summary of Accounting Policies
 
  
 
  
 
  
 
  
 
  
 
  
 
 
 
  
 
 See accompanying notes to consolidated financial statements.
 
 
 
 F-106




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See accompanying notes to consolidated financial statements.
 
 F-107




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See accompanying notes to consolidated financial statements.
 
 
 
 F-108




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Notes to Consolidated Financial Statements
 
 
 
 NOTE 1  BASIS OF PRESENTATION OF CONSOLIDATED FINANCIAL STATEMENTS AND DESCRIPTION OF
BUSINESS
 
 
  
 MERGER, RECAPITALIZATION AND CHANGE IN REGISTRANT NAME
 
  
 
  
 
 
 
 DESCRIPTION OF BUSINESS
 
 
  
 
 
 
 NOTE 2  OPERATING LEASES
 
 
  
 Year ending March 31:2006
    
    $
    810,0002007
    
    
    700,0002008
    
    
    597,0002009
    
    
    94,000Total
    
    $
    2,201,000
 
 F-109




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NOTE 3  EMPLOYEE BENEFIT PLANS
 
 
 
 
  
 
 
 
 NOTE 4  MERGER TRANSACTION, ACQUISITIONS AND RELATED INTANGIBLE
 
 
  
 
 
 
  
 
 
  
 (in thousands)Current Assets
    
    $
    13,905Property and Equipment
    
    
    151Other Assets
    
    
    1,789Intangibles
    
    
    13,760Liabilities
    
    
    (4,352
    )Goodwill
    
    
    7,461Total Consideration
    
    $
    32,714
 
 
  
 
 (in thousands)Current Assets
    
    $
    1,791Property and Equipment
    
    
    695Other Assets
    
    
    7,183Liabilities
    
    
    (830
    )Goodwill
    
    
    561Total Consideration
    
    $
    9,400
 
 
 
 
  
 
 Description of assets and liabilities purchased:
    
    (in thousands)Current and other assets
    
    $
    4,215Fixed assets
    
    
    954Goodwill
    
    
    6,336Liabilities
    
    
    (1,837
    )Total assets and liabilities purchased post-reverse acquisition
    
    $
    9,668
 
 
  
 
  
 F-110




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Year EndedMarch 31, 2005Pro forma revenue
    
    $
    115,318Pro forma net loss
    
    $
    (7,656
    )Pro forma losses per shareBasic
    
    $
    (0.11
    )Diluted
    
    $
    (0.11
    )Pro forma weighted average common shares (in thousands)Basic
    
    
    72,456Diluted
    
    
    72,456
 
 F-111




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Year ended:
    
    (in thousands)2006
    
    $
    8532007
    
    
    8532008
    
    
    6212009
    
    
    6002010
    
    
    600
 
 
 NOTE 5  AFFILIATED AGENCIES PAYABLE
 
  
  
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NOTE 6  LONG-TERM DEBT
 
 
  
 
 Note payable dated September 10, 2004 bearing interest at the rate of 6% per
year. The note is unsecured and is payable in full with interest by June 21,
2005. The Company can extend the payment date to September 21, 2005 at an
interest rate of 12% during the extension period. The lender also received
warrants to purchase up to 3,150,000 shares of common stock at $0.95 per share
which expire on September 21, 2009. The $5,000,000 note payable is shown net of
debt discount of $314,861. The note was extended to September 21, 2005.
    
    $
    4,685,139Purchase 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 accrues starting on January 15, 2005.
    
    
    660,740Note payable to the selling stockholders of Trinity dated January 15, 2005,
bearing simple interest of 8% per year with equal payments due quarterly
beginning April 15, 2005. This note payable is unsecured and is due January 15,
2006.
    
    
    273,246Subordinated note payable to the selling stockholder of Arcadia Services dated
May 7, 2004, bearing simple interest at 12% payable in one year. Per the terms
of the note payable, accrued interest was waived as the note was paid by the
maturity date.
    
    
    500,000Note payable due by July 1, 2005, bearing simple interest of 12%. This note
payable is unsecured and interest payments only are due monthly.
    
    
    275,000Note payable to the selling stockholders of Beacon Respiratory Services, Inc.
dated January 1, 2005, bearing simple interest of 8% per year with equal
payments due quarterly beginning April 1, 2005 due January 1, 2006 (See Notes 4
and 12). This note payable is secured by 33% of the outstanding shares of the
Beacon companies.
    
    
    150,000Purchase price escrowed to the selling stockholders of Beacon Respiratory
Services, Inc. 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.
    
    
    150,000Other interest-bearing obligations to be paid over time based on respective terms
    
    
    576,277Less  Current portion of long-term debt
    
    
    7,270,4026,723,830LONG-TERM DEBT
    
    $
    546,572
 
 
  
 
  
 
  
 Year ended:
    
    (in thousands)2006
    
    $
    7,0392007
    
    
    4702008
    
    
    482009
    
    
    212010
    
    
    9
 
 NOTE 7  LINES OF CREDIT
 
 
  
 F-113




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Year ended:
    
    (in thousands)2006
    
    $
    1,1502007
    
    $
    14,4042008
    
    
    2009
    
    
    2010
    
    
    
 F-114




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##### Table of Contents



NOTE 8  STOCKHOLDERS EQUITY
 
 
  
 
  
 
  
 
  
 
  
 
  
 
  
  
 
  
  
 
 
 
  
 
 
 F-115




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,
 
 
 ,
 
 
  
 
 WARRANTSFISCAL 2005 ACTIVITY & ROLLFORWARD
    
    
    
    
    
    
    RANGE OF5/10/2004
    
    
    
    
    
    
    
    
    
    
    3/31/2005
    
    
    PRICE
    
    
    EXPIRATIONDESCRIPTION
    
    OUTSTANDING
    
    
    ISSUES
    
    
    EXERCISES
    
    
    OUTSTANDING
    
    
    PER SHARE
    
    
    DATESAttached to Debt
Issued
    
    
    2,493,250
    
    
    
    3,825,000
    
    
    
    400,000
    
    
    
    5,918,250
    
    
    $
    0.25 to $1.28
    
    
    
    2009-2011Class A Warrants
    
    
    5,382,750
    
    
    
    
    
    
    
    24,750
    
    
    
    5,358,000
    
    
    $
    0.50
    
    
    
    2011Class A Late
Registration
Warrants
    
    
    
    
    
    
    129,541
    
    
    
    
    
    
    
    129,541
    
    
    $
    0.50
    
    
    
    2011Total
    
    
    7,876,000
    
    
    
    3,954,541
    
    
    
    424,750
    
    
    
    11,405,791
 
 
  
 
 SETTLEMENT OF CERTAIN LIABILITIES
 
 
  
 
 NOTE 9  EARNINGS (LOSSES) PER SHARE
 
 
  
 
 (in thousands)Shares Issued as of May 10, 2004
    
    
    79,024Shares Issued to complete Post-Merger Acquisitions
    
    
    1,499Shares Issued upon exercise of Stock Options and Warrants
    
    
    179Shares Issued upon debt repayment or election of debt conversion option
    
    
    541Shares Held in Escrow per RKDA Merger
    
    
    (9,600
    )Shares Issued in Private Placement of Common Stock
    
    
    748Shares Issued as payment for services
    
    
    65Shares Included in Calculation of Earnings (Losses) Per Share for the
year ended March 31, 2005
    
    
    72,456
 
 F-116




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NOTE 10  STOCK-BASED COMPENSATION
 
 
  
 
 SuccessorFor the Period
    
    
    PredecessorEnded
    
    
    For the Year EndedMarch 31, 2005
    
    
    March 31, 2004Net income (loss) as reported
    
    $
    (7,897,077
    )
    
    $
    3,731,953Add: Stock-based employee compensation expense
Included in income, net of related tax effects
    
    
    
    
    
    
    Less: Total stock-based employee compensation
expense determined under the fair value method, net
of related tax effects
    
    
    764,167
    
    
    
    Pro Forma net income (loss)
    
    $
    (8,661,244
    )
    
    $
    3,731,953Net income (loss) per share:Basic and diluted income (loss) per share as reported
    
    $
    (0.11
    )
    
    $
    3.94Pro Forma basic and diluted income
(loss) per share
    
    $
    
    
    
    $
    3.94
 
 
 OPTIONS
    
    
    
    
    
    
    
    
    
    
    RANGEFISCA L 2005 ACTIVITY & ROLLFORWARD
    
    
    
    
    
    
    RANGE OF
    
    
    OF5/10/2004
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3/31/2005
    
    
    PRICE
    
    
    EXPIRATION
    
    
    VESTINGOUTSTANDING
    
    
    GRANTS
    
    
    FORFEITURES
    
    
    EXERCISES
    
    
    OUTSTANDING
    
    
    PER SHARE
    
    
    DATES
    
    
    DATESIssued to officers
    
    
    0
    
    
    
    8,299,040
    
    
    
    0
    
    
    
    0
    
    
    
    8,299,040
    
    
    $
    0.25 to $1.45
    
    
    
    2009
    
    
    
    2005-2008Issued to other
management
    
    
    0
    
    
    
    700,000
    
    
    
    0
    
    
    
    0
    
    
    
    700,000
    
    
    
    \$1.45
    
    
    
    2011
    
    
    
    2005From prior entity
    
    
    971,033
    
    
    
    0
    
    
    
    288,534
    
    
    
    144,999
    
    
    
    537,500
    
    
    $
    0.25 to $1.00
    
    
    
    2011
    
    
    
    N/ATotal
    
    
    971,033
    
    
    
    8,999,040
    
    
    
    288,534
    
    
    
    144,999
    
    
    
    9,536,540
 
 
 As of March 31,
    
    2004
    
    2005
    
    2006
    
    2007
    
    2008Cumulative Vested
Options
    
    
    537,500
    
    
    
    1,386,540
    
    
    
    3,536,540
    
    
    
    5,536,540
    
    
    
    9,536,540
 
 
  
 
 NOTE 11  INCOME TAXES
 
 F-117




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2005CurrentFederal
    
    $
    -0-State and local
    
    
    185,500DeferredFederal
    
    
    -0-State and local
    
    
    -0-Total
    
    $
    185,500
 
 
  
 
 2005Income tax provision at 34%
    
    
    (34.0
    %)State and local income taxes net of federal benefit
    
    
    (3.0
    )Non-deductible compensation expense on release of
escrowed shares
    
    
    12.5Non-deductible goodwill impairment
    
    
    3.4Non-deductible amortization of beneficial
conversion feature
    
    
    5.8Non-deductible other items
    
    
    .2Non-qualified stock option exercise
    
    
    (3.0
    )Valuation allowance
    
    
    15.1
    %(3.0
    %)
 
 
  
 
 (inthousands)September 30, 2022
    
    $
    58September 30, 2023
    
    
    1,066September 30, 2024
    
    
    794March 31, 2025
    
    
    2,051$
    3,969
 
 
  
 
 March 31, 2005Allowance for doubtful accounts
    
    $
    677Accrued compensation items
    
    
    165Net operating loss
    
    
    1,349Capitalization of inventory acquisition costs
    
    
    276Other timing differences
    
    
    194Total
    
    
    2,661Valuation allowance
    
    
    (2,661
    )Net deferred taxes
    
    $
    0
 
 F-118




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##### Table of Contents



NOTE 12  RELATED PARTY TRANSACTIONS
 
 
  
 
  
 
  
 
 NOTE 13  SUBSEQUENT EVENTS
 
 
  
 
  
 
  
 
  
 
  
 
  
 F-119




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NOTE 14  CONTINGENCIES
 
 
  
 
 NOTE 15  SUMMARY OF QUARTERLY FINANCIAL DATA
 
 
 Selected Quarterly Financial Data
 
 
 QuarterFirst *
    
    Second
    
    Third
    
    Fourth **(in thousands, except per Share data)2005Net sales
    
    $
    23,108
    
    
    $
    25,512
    
    
    $
    28,091
    
    
    $
    28,631Gross profit
    
    
    5,235
    
    
    
    7,335
    
    
    
    8,656
    
    
    
    10,160Operating income (loss)
    
    
    582
    
    
    
    181
    
    
    
    201
    
    
    
    (6,588
    )Net income (loss)
    
    
    349
    
    
    
    (161
    )
    
    
    (718
    )
    
    
    (7,367
    )Basic income (loss) per common share
    
    $
    0.00
    
    
    $
    0.00
    
    
    $
    (0.01
    )
    
    $
    (0.10
    )Diluted income (loss) per common share
    
    $
    0.00
    
    
    $
    0.00
    
    
    $
    (0.01
    )
    
    $
    (0.10
    )2004 *Net sales
    
    $
    18,208
    
    
    $
    19,556
    
    
    $
    19,870
    
    
    $
    20,726Gross profit
    
    
    5,262
    
    
    
    5,603
    
    
    
    5,519
    
    
    
    5,770Operating income
    
    
    826
    
    
    
    959
    
    
    
    954
    
    
    
    991Net income
    
    
    826
    
    
    
    959
    
    
    
    954
    
    
    
    993Basic income per common share
    
    $
    0.87
    
    
    $
    1.01
    
    
    $
    1.01
    
    
    $
    1.05Diluted income per common share
    
    $
    0.87
    
    
    $
    1.01
    
    
    $
    1.01
    
    
    $
    1.05
 
 
 *
    
    The first quarter of 2005 includes the results of the Predecessor entity. The results for 2004
are of the Predecessor entity only.**
    
    During the fourth quarter of 2005, the following items were recorded that significantly
contributed to the difference in results for the fourth quarter compared to the other quarters
shows in 2005: release of escrowed shares for recorded compensation expense of $2.7 million;
impairment of goodwill recorded at $707,000 as a result of the annual evaluation of long-lived
assets; recording of $782,000 of intangible amortization resulting from completion of purchase
price allocation; and, approximately $1.5 million recorded as additional workers compensation cost
upon receipt of annual review from program underwriter. 
  
 F-120




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ARCADIA RESOURCES, INC. AND SUBSIDIARIES
 
 
 Balance at
    
    Charged to
    
    Charged to
    
    
    
    
    
    Balance atBeginning
    
    Costs and
    
    Other
    
    
    
    
    
    Endof Period
    
    Expenses
    
    Accounts
    
    Deductions
    
    of PeriodPeriod from May 10, 2004 to March 31, 2005Deducted from asset accounts:Allowance for doubtful accounts
    
    $
    832,000
    
    
    $
    931,000
    
    
    
    
    
    
    $
    (71,000
    )
    
    
    1,692,000Allowance for inventory obsolescence
    
    $
    200,000
    *
    
    
    
    
    
    
    
    
    
    
    (120,000
    )
    
    $
    80,000Period from April 1, 2004 to May 9, 2004Deducted from asset accounts:Allowance for doubtful accounts
    
    $
    780,000
    
    
    $
    52,000
    
    
    
    
    
    
    $
    
    
    
    $
    832,000Year ended March 31, 2004Deducted from asset accounts:Allowance for doubtful accounts
    
    $
    754,000
    
    
    $
    27,000
    
    
    
    
    
    
    $
    (1,000
    )
    
    $
    780,000Year ended March 31, 2003Deducted from asset accounts:Allowance for doubtful accounts
    
    $
    515,000
    
    
    $
    239,000
    
    
    
    
    
    
    $
    
    
    
    $
    754,000
 
 
 
 *
    
    Allowance established in conjunction with reverse merger (See Note 4 to financial statements). 
 121




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##### Table of Contents



Unaudited Interim Consolidated Financial Statements as of and for the
Three Quarters ended December 31, 2005 and December 31, 2004
 
 
  
 
  
 
  
 122




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##### Table of Contents



Arcadia Resources, Inc.
 
 
 Consolidated Balance Sheets
 
 
 December 31,
    
    
    March 31,2005
    
    
    2005(Unaudited)
    
    
    (Audited)Assets (Note 7)Current AssetsCash
    
    $
    2,496,547
    
    
    $
    1,412,268Accounts receivable, net of allowance of $1,843,000 and $1,692,000, respectively
    
    
    26,585,230
    
    
    
    21,453,424Inventory, net of allowance of $80,000
    
    
    884,861
    
    
    
    664,269Prepaid expenses and other current assets
    
    
    4,457,925
    
    
    
    876,523Income taxes receivable (Note 11)
    
    
    101,602
    
    
    
    130,000Total Current Assets
    
    
    34,526,165
    
    
    
    24,536,484Fixed AssetsEquipment
    
    
    4,337,726
    
    
    
    2,033,919Software
    
    
    267,160
    
    
    
    251,446Furniture and fixtures
    
    
    1,244,567
    
    
    
    376,095Vehicles
    
    
    492,460
    
    
    
    205,080Leasehold improvements
    
    
    360,997
    
    
    
    196,3376,702,910
    
    
    
    3,062,877Accumulated depreciation and amortization
    
    
    (1,653,783
    )
    
    
    (787,899
    )Net Fixed Assets
    
    
    5,049,127
    
    
    
    2,274,978Other Assets (Note 4)Goodwill
    
    
    26,431,386
    
    
    
    15,704,743Trade name, net of accumulated amortization of $444,000 and $244,000
    
    
    7,555,556
    
    
    
    7,755,556Customer relationships, net of accumulated amortization of $701,000 and $306,000
    
    
    5,384,243
    
    
    
    4,694,444Technology, net of accumulated amortization of $422,000 and $232,000
    
    
    337,778
    
    
    
    527,778Non-competition agreements, net of accumulated amortization of $26,000 and $0
    
    
    157,970
    
    
    
    Deferred financing costs, net of accumulated amortization of $68,000 and $231,000
    
    
    27,034
    
    
    
    99,099Total Other Assets
    
    
    39,893,967
    
    
    
    28,781,620$
    79,469,259
    
    
    $
    55,593,082Liabilities and Stockholders EquityCurrent LiabilitiesLine of credit, current portion (Note 7)
    
    $
    448,870
    
    
    $
    1,150,186Accounts payable and checks issued against future deposits
    
    
    1,862,808
    
    
    
    1,649,551Accrued expenses
    
    
    3,684,360
    
    
    
    3,367,812Payable to affiliated agencies, current portion (Note 5)
    
    
    2,782,690
    
    
    
    1,612,715Long-term debt, current portion (Note 6)
    
    
    1,534,024
    
    
    
    6,723,830Total Current Liabilities
    
    
    10,312,752
    
    
    
    14,504,094Payable to affiliate, less current portion (Note 5)
    
    
    318,094
    
    
    
    615,544Long-term debt, less current portion (Note 6)
    
    
    960,488
    
    
    
    546,572Line of credit, less current portion (Note 7)
    
    
    10,300,527
    
    
    
    14,404,404Total Liabilities
    
    
    21,891,861
    
    
    
    30,070,614Commitments and Contingencies (Notes 6, 7 and 14)Stockholders Equity (Note 8)Common stock $.001 par value, 150,000,000 shares authorized, 96,319,625 and
90,413,662 shares issued and outstanding, respectively
    
    
    96,320
    
    
    
    90,414Additional paid-in capital
    
    
    74,317,954
    
    
    
    33,516,506Treasury stock, 199,110 and 112,109 shares, respectively
    
    
    (396,725
    )
    
    
    (187,375
    )Stock subscription receivable
    
    
    (5,000,000
    )
    
    
    Accumulated deficit
    
    
    (11,440,151
    )
    
    
    (7,897,077
    )Total Stockholders Equity
    
    
    57,577,398
    
    
    
    25,522,468$
    79,469,259
    
    
    $
    55,593,082
 
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Arcadia Resources, Inc.
 
 
 Consolidated Statements of Operations
(Unaudited)
 
 
 SuccessorQuarter
    
    
    QuarterEnded
    
    
    EndedDecember 31, 2005
    
    
    December 31, 2004Net Sales (Note 15)
    
    $
    33,298,557
    
    
    $
    28,090,534Cost of Sales
    
    
    21,985,099
    
    
    
    19,413,068Gross Profit
    
    
    11,313,458
    
    
    
    8,677,466General and Administrative Expenses
    
    
    11,290,948
    
    
    
    8,342,918Depreciation and Amortization
    
    
    650,685
    
    
    
    133,883Operating Income (Loss)
    
    
    (628,175
    )
    
    
    200,665Other Expenses:Interest expense, net
    
    
    168,330
    
    
    
    298,642Amortization of debt discount (Note 6)
    
    
    
    
    
    
    525,141Total Other Expenses
    
    
    168,330
    
    
    
    823,783Net Loss Before Income Tax Expense
    
    
    (796,505
    )
    
    
    (623,118
    )Income Tax Expense (Note 11)
    
    
    16,778
    
    
    
    95,114Net Loss
    
    $
    (813,283
    )
    
    $
    (718,232
    )Loss Per Share (Note 8):Basic
    
    $
    (0.01
    )
    
    $
    (0.01
    )Diluted
    
    $
    (0.01
    )
    
    $
    (0.01
    )Weighted average number of shares (in thousands):Basic
    
    
    84,240
    
    
    
    68,494Diluted
    
    
    84,240
    
    
    
    68,494
 
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Arcadia Resources, Inc.
 
 
 Consolidated Statements of Operations
(Unaudited)
 
 
 Successor
    
    
    PredecessorThree Quarters
    
    
    Period From
    
    
    Period FromEnded
    
    
    May 10, 2004 to
    
    
    April 1, 2004 toDecember 31, 2005
    
    
    December 31, 2004
    
    
    May 9, 2004Net Sales (Note 15)
    
    $
    96,702,889
    
    
    $
    67,223,593
    
    
    $
    9,486,601Cost of Sales
    
    
    64,792,459
    
    
    
    47,302,269
    
    
    
    6,905,998Gross Profit
    
    
    31,910,430
    
    
    
    19,921,324
    
    
    
    2,580,603General and Administrative Expenses
    
    
    31,423,622
    
    
    
    19,214,686
    
    
    
    2,101,381Depreciation and Amortization
    
    
    1,781,815
    
    
    
    221,328
    
    
    
    Operating Income (Loss)
    
    
    (1,295,007
    )
    
    
    485,310
    
    
    
    479,222Other ExpensesImpairment of Goodwill
    
    
    
    
    
    
    
    
    
    
    16,055Interest expense, net
    
    
    1,198,103
    
    
    
    695,654
    
    
    
    Amortization of debt discount (Note 6)
    
    
    933,185
    
    
    
    682,593
    
    
    
    Total Other Expenses
    
    
    2,131,288
    
    
    
    1,378,247
    
    
    
    16,055Net Income (Loss) Before Income Tax Expense
    
    
    (3,426,295
    )
    
    
    (892,937
    )
    
    
    463,167Income Tax Expense (Note 11)
    
    
    116,778
    
    
    
    102,253
    
    
    
    Net Income (Loss)
    
    $
    (3,543,073
    )
    
    $
    (995,190
    )
    
    $
    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
    
    $
    (0.04
    )
    
    $
    (0.01
    )
    
    $
    0.49Diluted
    
    $
    (0.04
    )
    
    $
    (0.01
    )
    
    $
    0.49Proforma Income Per Share:Basic
    
    
    
    
    
    
    
    
    
    $
    0.32Diluted
    
    
    
    
    
    
    
    
    
    $
    0.32Weighted average number of shares (in thousands):Basic
    
    
    83,506
    
    
    
    68,460
    
    
    
    948Diluted
    
    
    83,506
    
    
    
    68,460
    
    
    
    948
 
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Arcadia Resources, Inc.
 
 
 Consolidated Statements of Cash Flows
(Unaudited)
 
 
 Three Quarters
    
    
    Period from
    
    
    Period fromEnded
    
    
    May 10, 2004 to
    
    
    April 1, 2004 toDecember 31, 2005
    
    
    December 31, 2004
    
    
    May 9, 2004CASH FLOWS FROM OPERATING ACTIVITIESNet Income (Loss)
    
    $
    (3,543,073
    )
    
    $
    (995,190
    )
    
    $
    463,167Adjustments to reconcile net income (loss) to net cash provided
by operating activities net of impact of acquisitions:Provision for bad debts
    
    
    572,576
    
    
    
    459,595
    
    
    
    42,192Depreciation and amortization
    
    
    1,245,473
    
    
    
    221,328
    
    
    
    77Amortization of debt discount and deferred financing costs
    
    
    1,370,250
    
    
    
    682,593
    
    
    
    Issuance of stock for services
    
    
    74,965
    
    
    
    
    
    
    
    Accrual of stock option expense
    
    
    87,612
    
    
    
    
    
    
    
    Amortization of intangibles
    
    
    811,764
    
    
    
    
    
    
    
    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
    
    
    (4,437,166
    )
    
    
    (3,675,988
    )
    
    
    (692,193
    )Inventory
    
    
    (87,791
    )
    
    
    (175,769
    )
    
    
    Prepaid expenses and other current assets
    
    
    (3,557,239
    )
    
    
    (2,202,874
    )
    
    
    27,903Income taxes receivable
    
    
    68,398
    
    
    
    
    
    
    
    Checks issued against future deposits
    
    
    
    
    
    
    (850,125
    )
    
    
    (314,025
    )Accounts payable
    
    
    (145,797
    )
    
    
    193,352
    
    
    
    42,823Accrued expenses and other current liabilities
    
    
    (746,311
    )
    
    
    166,523
    
    
    
    (301,999
    )Due to affiliated agencies
    
    
    (363,455
    )
    
    
    (377,952
    )
    
    
    170,915NET CASH (USED IN) OPERATING ACTIVITIES
    
    
    (8,239,794
    )
    
    
    (6,464,697
    )
    
    
    (545,085
    )CASH FLOWS FROM INVESTING ACTIVITIESPurchases of businesses
    
    
    (5,469,919
    )
    
    
    (3,745,697
    )
    
    
    (157,500
    )Purchases of property and equipment
    
    
    (2,422,394
    )
    
    
    (104,182
    )
    
    
    Proceeds from sale of assets
    
    
    
    
    
    
    1,779
    
    
    
    NET CASH (USED IN) INVESTING ACTIVITIES
    
    
    (7,892,313
    )
    
    
    (3,848,100
    )
    
    
    (157,500
    )CASH FLOWS FROM FINANCING ACTIVITIESProceeds from sale of common stock warrants
    
    
    31,040,065
    
    
    
    5,192,859
    
    
    
    Proceeds from issuance of convertible note payable
    
    
    
    
    
    
    
    
    
    
    Proceeds from issuance of common stock
    
    
    
    
    
    
    
    
    
    
    Proceeds from exercise of stock options/warrants
    
    
    166,782
    
    
    
    
    
    
    
    Net (payments) drawn on line of credit
    
    
    (6,741,356
    )
    
    
    4,503,480
    
    
    
    Payments on acquisition debt
    
    
    (1,611,323
    )
    
    
    (5,657,109
    )
    
    
    Payments on notes payable
    
    
    (5,637,782
    )
    
    
    (629,505
    )
    
    
    Cash acquired with reverse merger
    
    
    
    
    
    
    7,536,180
    
    
    
    Advances from stockholder
    
    
    
    
    
    
    
    
    
    
    702,585NET CASH PROVIDED BY FINANCING ACTIVITIES
    
    
    17,216,386
    
    
    
    10,945,905
    
    
    
    702,585NET INCREASE IN CASH AND EQUIVALENTS
    
    
    1,084,279
    
    
    
    633,108
    
    
    
    CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD
    
    
    1,412,268
    
    
    
    
    
    
    
    CASH AND CASH EQUIVALENTS, END OF PERIOD
    
    $
    2,496,547
    
    
    $
    633,108
    
    
    $
    Supplementary information:Cash paid during the period for:Interest paid
    
    $
    1,128,832
    
    
    $
    537,211
    
    
    
    Income taxes
    
    
    43,355
    
    
    
    190,014
    
    
    
    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
    
    
    209,350
    
    
    
    554,000
    
    
    
    Payment of note payable with issuance of common stock
    
    
    119,231
    
    
    
    266,685
    
    
    
    
 
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Arcadia Resources, Inc. and Subsidiaries
 
 
 Summary of Accounting Policies (Unaudited)
 
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 127




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Arcadia Resources, Inc. and Subsidiaries
 
 
 Notes to Consolidated Financial Statements (Unaudited)
 NOTE 1  BASIS OF PRESENTATION OF CONSOLIDATED FINANCIAL STATEMENTS AND DESCRIPTION OF
BUSINESS
 
 
  
 
  
 
 MERGER, RECAPITALIZATION AND CHANGE IN REGISTRANT NAME
 
 
  
 
  
 
  
 
 NOTE 2  DESCRIPTION OF BUSINESS
 
 
  
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##### Table of Contents



NOTE 3  EMPLOYEE BENEFIT PLANS
 
 
  
 
 NOTE 4  ACQUISITIONS AND RELATED INTANGIBLE
 
 
  
 
 (in thousands)Description of assets and (liabilities) purchased:Current and other assets
    
    $
    1,424Fixed assets
    
    
    1,346Intangibles and goodwill
    
    
    11,996Liabilities
    
    
    (4,337
    )Total assets and liabilities acquired
    
    $
    10,429
 
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 130




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##### Table of Contents



NOTE 5  AFFILIATED AGENCIES PAYABLE
 
 
  
 
  
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##### Table of Contents



NOTE 6  LONG-TERM DEBT
 
 
  
 
 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
    
    $
    377,567Unsecured note payable to the selling stockholders of Trinity dated January 15,
2005, bearing simple interest of 8% per year with final payment due and paid on
January 15, 2006
    
    
    104,496Purchase 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. The obligation was paid in full in February 2006
    
    
    150,000Purchase price payable to United Health Care Services, Inc., final semi-annual
payment due on April 7, 2006 bearing simple interest of 5%
    
    
    50,000Purchase 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
    
    
    107,200Purchase price payable (non-interest bearing) to the selling stockholders of O2
Plus, Inc. dated November 2, 2005 due May 2006
    
    
    100,000Other interest-bearing obligations to be paid over time based on respective terms
    
    
    1,605,249Less  Current portion of long-term debt
    
    
    (1,534,024
    )LONG-TERM DEBT
    
    $
    960,488
 
 
 NOTE 7  LINES OF CREDIT
 
 
  
 
  
 
  
 
  
 
  
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NOTE 8  STOCKHOLDERS EQUITY
 
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 133




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##### Table of Contents



NOTE 9  OPERATING LEASES
 
 
  
 Year ending March 31:2006
    
    $
    810,0002007
    
    
    700,0002008
    
    
    597,0002009
    
    
    94,000Total
    
    $
    2,201,000
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##### Table of Contents



NOTE 10  STOCK-BASED COMPENSATION
 
 
  
 
  
 
  
 
  
 
  
 
  
 
 OPTIONS
FISCAL 2005 ACTIVITY & ROLLFORWARD
 
 RANGE OF
    
    
    RANGE OF3/31/2005
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    12/31/2005
    
    
    PRICE
    
    
    EXPIRATION
    
    
    VESTINGOUTSTANDING
    
    
    GRANTS
    
    
    FORFEITURES
    
    
    EXERCISES
    
    
    OUTSTANDING
    
    
    PER SHARE
    
    
    DATES
    
    
    DATESIssued to officers
    
    
    8,299,040
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    8,299,040
    
    
    $0.25 to $1.45
    
    
    2009
    
    
    
    2005-2008Issued to other
management
    
    
    700,000
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    700,000
    
    
    $
    1.45

    
    
    2011
    
    
    
    2005From prior entity
    
    
    537,500
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    537,500
    
    
    $0.25 to $1.00
    
    
    2011
    
    
    
    N/ATotal
    
    
    9,536,540
    
    
    
    0
    
    
    
    4
    
    
    
    0
    
    
    
    9,536,540
 As of March 31,
    
    2005
    
    
    2006
    
    
    2007
    
    
    2008Cumulative Vested Options
    
    
    1,386,540
    
    
    
    3,536,540
    
    
    
    5,536,540
    
    
    
    9,536,540
 
  
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##### Table of Contents



Weighted Average GrantShares
    
    
    Date Fair ValueNon-vested at March 31, 2005
    
    
    8,150,000
    
    
    
    0Granted
    
    
    0
    
    
    
    0Vested
    
    
    150,000
    
    
    $
    81,000Forfeited
    
    
    0
    
    
    
    0Non-vested at December 31, 2005
    
    
    8,000,000
    
    
    
    0
 
 
  
 
 NOTE 11  INCOME TAXES
 
 
  
 
  
 
  
 
 NOTE 12  RELATED PARTY TRANSACTIONS
 
 
  
 
  
 
  
 
 NOTE 13  SUBSEQUENT EVENTS
 
 
  
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##### Table of Contents



NOTE 14  CONTINGENCIES
 
 
  
 
  
 
  
 
  
 
  
 
 Quarter ended
    
    
    Quarter ended(in thousands)
    
    December 31, 2005
    
    
    December 31, 2004Net Revenues:Services
    
    $
    27,867
    
    
    $
    25,181Products
    
    
    5,432
    
    
    
    2,910Total Revenues
    
    $
    33,299
    
    
    $
    28,091Operating Income (Loss) and Net Loss:Services
    
    $
    1,272
    
    
    $
    1,177Products
    
    
    (1,202
    )
    
    
    (212
    )Unallocated Corporate Overhead
    
    
    (698
    )
    
    
    (764
    )Total Operating Income (Loss)
    
    
    (628
    )
    
    
    201Interest Expense
    
    
    168
    
    
    
    299Amortization of Debt Discount
    
    
    
    
    
    
    525Net Loss before Income Tax Expense
    
    
    (796
    )
    
    
    (623
    )Income Tax Expense
    
    
    17
    
    
    
    95Net Loss
    
    $
    (813
    )
    
    $
    (718
    )
 
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##### Table of Contents



Three
    
    
    ThreeQuarters
    
    
    QuartersEnded
    
    
    EndedDecember 31,
    
    
    December 31,(in thousands)
    
    2005
    
    
    2004Net Revenues:Services
    
    $
    82,467
    
    
    $
    71,913Products
    
    
    14,236
    
    
    
    4,797Total Revenues
    
    $
    96,703
    
    
    $
    76,710Operating Income (Loss) and Net Income (Loss):Services
    
    $
    3,578
    
    
    $
    3,645Products
    
    
    (1,114
    )
    
    
    (1,120
    )
 
 
 Three
    
    
    ThreeQuarters
    
    
    QuartersEnded
    
    
    EndedDecember 31,
    
    
    December 31,(in thousands)
    
    2005
    
    
    2004Unallocated Corporate Overhead
    
    
    (3,759
    )
    
    
    (1,576
    )Total Operating Income (Loss)
    
    
    (1,295
    )
    
    
    949Interest Expense
    
    
    1,198
    
    
    
    696Amortization of Debt Discount
    
    
    933
    
    
    
    683Net Income (Loss) before Income Tax Expense
    
    
    (3,426
    )
    
    
    (430
    )Income Tax Expense
    
    
    117
    
    
    
    102Net Income (Loss)
    
    $
    (3,543
    )
    
    $
    (532
    )
 
 
 (in thousands)
    
    12/31/05
    
    
    3/31/05Assets:Services
    
    $
    47,348
    
    
    $
    43,159Products
    
    
    23,968
    
    
    
    10,467Unallocated Corporate Assets
    
    
    8,153
    
    
    
    1,967Total Assets
    
    $
    79,469
    
    
    $
    55,593
 
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##### Table of Contents



UNAUDITED PRO FORMA CONDENSED
 COMBINED FINANCIAL STATEMENTS
    
    
    RKDA and Arcadia Rx are as defined above.
    
    Arcadia is Arcadia Services, Inc. and subsidiaries and includes the operations
of The Staffing Source, Merit Staffing and BK Tool.
    
    Home is American Oxygen, Trinity Healthcare Services and Arcadia HOME.
   139




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##### Table of Contents



Unaudited Pro Forma Condensed Combined
Balance Sheets
March 31, 2004
 
 Assets
    
    RKDA
    
    
    Arcadia
    
    
    Arcadia Rx
    
    
    HomeCurrent AssetsCash (Note 2)
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    23,470Accounts Receivable
    
    
    
    
    
    
    13,478,381
    
    
    
    400,826
    
    
    
    1,570,043Inventory
    
    
    
    
    
    
    
    
    
    
    220,868
    
    
    
    203,945Deferred Income Tax (Note 3)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Prepaid Expenses and Other
Current Assets
    
    
    
    
    
    
    133,547
    
    
    
    12,333
    
    
    
    130,696Total Current Assets
    
    
    
    
    
    
    13,611,928
    
    
    
    634,027
    
    
    
    1,928,154Property and Equipment
    
    
    
    
    
    
    2,011
    
    
    
    102,129
    
    
    
    518,082Other AssetsGoodwill (Notes 1 & 4)
    
    
    
    
    
    
    3,589,191
    
    
    
    
    
    
    
    94,116Deferred Financing Fees
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Deferred Income Tax (Note 3)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total Other Assets
    
    
    
    
    
    
    3,589,191
    
    
    
    
    
    
    
    94,116Total Assets
    
    $
    
    
    
    $
    17,203,130
    
    
    $
    736,156
    
    
    $
    2,540,352Liabilities and Stockholders EquityCurrent LiabilitiesChecks Issued Against Future Deposits
    
    $
    
    
    
    $
    1,116,143
    
    
    $
    900
    
    
    $
    Accounts Payable (Note 5)
    
    
    
    
    
    
    
    
    
    
    47,933
    
    
    
    163,643Accrued ExpensesCompensation and Related
Taxes (Note 6)
    
    
    
    
    
    
    1,573,267
    
    
    
    30,577
    
    
    
    43,865Commissions
    
    
    
    
    
    
    470,326
    
    
    
    
    
    
    
    Other
    
    
    
    
    
    
    239,489
    
    
    
    3,880
    
    
    
    54,752Current Portion of Long-term debt
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    138,086Loan Payable  Bridge Loan
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Note Payable Asset Acquisition
(Note 7)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Note Payable Other, net of Discount
of $2,000 (Note 8)
    
    
    
    
    
    
    
    
    
    
    82,156
    
    
    
    21,396Note Payable Officer (Note 8)
    
    
    
    
    
    
    
    
    
    
    300,000
    
    
    
    Line of Credit  Bank (Note 9)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Note Payable
Acquisition (Note 1 and 10)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Due to Related Parties
    
    
    
    
    
    
    1,143,804
    
    
    
    
    
    
    
    Total Current Liabilities
    
    
    
    
    
    
    4,543,029
    
    
    
    465,446
    
    
    
    421,742Long-term LiabilitiesLong-term debt, Less Current
Portion (Note 8)
    
    
    
    
    
    
    
    
    
    
    329,330
    
    
    
    346,470Line of Credit  Bank (Note 9)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Due to Related Parties
    
    
    
    
    
    
    429,829
    
    
    
    
    
    
    
    Total Long-term Liabilities
    
    
    
    
    
    
    429,829
    
    
    
    329,330
    
    
    
    346,470Total Liabilities
    
    
    
    
    
    
    4,972,858
    
    
    
    794,776
    
    
    
    768,212Stockholders EquityCommon Stock (Note 11)
    
    
    
    
    
    
    948
    
    
    
    
    
    
    
    3,487Additional Paid in Capital (Note 12)
    
    
    
    
    
    
    7,627,047
    
    
    
    38,750
    
    
    
    1,277,390Retained Earnings (Deficit) (Note 12)
    
    
    
    
    
    
    15,233,460
    
    
    
    (97,370
    )
    
    
    491,263Due From Stockholder (Note 12)
    
    
    
    
    
    
    (10,631,183
    )
    
    
    Total Stockholders Equity
    
    
    
    
    
    
    12,230,272
    
    
    
    (58,620
    )
    
    
    1,772,140Total Liabilities and Stockholders Equity
    
    $
    
    
    
    $
    17,203,130
    
    
    $
    736,156
    
    
    $
    2,540,352
 
 140




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##### Table of Contents



Unaudited Pro Forma Condensed Combined
Balance Sheets
March 31, 2004
  
 Pro Forma
    
    
    Pro FormaAssets
    
    Critical
    
    
    Adjustments
    
    
    BalanceCurrent AssetsCash (Note 2)
    
    $
    
    
    
    $
    (1,837,443
    )
    
    $
    (1,813,973
    )Accounts Receivable
    
    
    855,000
    
    
    
    
    
    
    
    16,304,250Inventory
    
    
    262,000
    
    
    
    
    
    
    
    686,813Deferred Income Tax (Note 3)
    
    
    
    
    
    
    683,000
    
    
    
    683,000Prepaid Expenses and Other
Current Assets)
    
    
    401,000
    
    
    
    (285,803
    )
    
    
    391,773Total Current Assets
    
    
    1,518,000
    
    
    
    (1,440,246
    )
    
    
    16,251,863Property and Equipment
    
    
    604,000
    
    
    
    
    
    
    
    1,226,222Other AssetsGoodwill (Notes 1 & 4)
    
    
    
    
    
    
    24,220,297
    
    
    
    27,903,604Deferred Financing Fees
    
    
    
    
    
    
    80,387
    
    
    
    80,387Deferred Income Tax (Note 3)
    
    
    
    
    
    
    90,000
    
    
    
    90,000Total Other Assets
    
    
    
    
    
    
    24,390,684
    
    
    
    28,073,991Total Assets
    
    $
    2,122,000
    
    
    $
    22,950,438
    
    
    $
    45,552,076Liabilities and Stockholders EquityCurrent LiabilitiesChecks Issued Against Future Deposits
    
    $
    (75,000
    )
    
    $
    
    
    
    $
    1,042,043Accounts Payable (Note 5)
    
    
    637,000
    
    
    
    322,657
    
    
    
    1,171,233Accrued Expenses
    
    
    
    
    
    
    
    
    
    
    Compensation and Related
Taxes (Note 6)
    
    
    
    
    
    
    114,770
    
    
    
    1,762,479Commissions
    
    
    
    
    
    
    
    
    
    
    470,326Other
    
    
    231,000
    
    
    
    
    
    
    
    529,121Current Portion of Long-term debt
    
    
    8,000
    
    
    
    
    
    
    
    146,086Loan Payable  Bridge Loan
    
    
    1,500,000
    
    
    
    
    
    
    
    1,500,000Note Payable Asset Acquisition
(Note 7)
    
    
    233,000
    
    
    
    (233,000
    )
    
    
    Note Payable Other, net of Discount
of $2,000 (Note 8)
    
    
    223,000
    
    
    
    (82,156
    )
    
    
    244,396Note Payable Officer (Note 8)
    
    
    654,000
    
    
    
    (25,000
    )
    
    
    929,000Line of Credit  Bank (Note 9)
    
    
    
    
    
    
    1,000,000
    
    
    
    1,000,000Note Payable Acquisition (Note 1 and 10)
    
    
    
    
    
    
    3,586,000
    
    
    
    3,586,000Due to Related Parties
    
    
    
    
    
    
    543,000
    
    
    
    1,686,804Total Current Liabilities
    
    
    3,411,000
    
    
    
    5,226,271
    
    
    
    14,067,488Long-term LiabilitiesLong-term debt, Less Current
Portion (Note 8)
    
    
    65,000
    
    
    
    (167,844
    )
    
    
    572,956Line of Credit  Bank (Note 9)
    
    
    
    
    
    
    10,031,650
    
    
    
    10,031,650Due to Related Parties
    
    
    
    
    
    
    
    
    
    
    429,829Total Long-term Liabilities
    
    
    65,000
    
    
    
    9,863,806
    
    
    
    11,034,435Total Liabilities
    
    
    3,476,000
    
    
    
    15,090,077
    
    
    
    25,101,923Stockholders EquityCommon Stock (Note 11)
    
    
    6,151,000
    
    
    
    (6,079,042
    )
    
    
    76,393Additional Paid in Capital (Note 12)
    
    
    3,525,000
    
    
    
    8,043,146
    
    
    
    20,511,333Retained Earnings (Deficit) (Note 12)
    
    
    (11,030,000
    )
    
    
    (4,734,926
    )
    
    
    (137,573
    )Due From Stockholder (Note 12)
    
    
    
    
    
    
    10,631,183
    
    
    
    Total Stockholders Equity
    
    
    (1,354,000
    )
    
    
    7,860,361
    
    
    
    20,450,153Total Liabilities and Stockholders Equity
    
    $
    2,122,000
    
    
    $
    22,950,438
    
    
    $
    45,552,076
 
 141




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##### Table of Contents



Unaudited Pro Forma Condensed Combined
Statements of Income
For the Twelve Months Ended March 31, 2004
 
 RKDA
    
    
    Arcadia
    
    
    Arcadia Rx
    
    
    HOMENet Sales
    
    $
    
    
    
    $
    78,359,328
    
    
    $
    1,260,384
    
    
    $
    6,188,689Cost of Sales
    
    
    
    
    
    
    66,722,920
    
    
    
    889,348
    
    
    
    1,766,354Gross Profit
    
    
    
    
    
    
    11,636,408
    
    
    
    371,036
    
    
    
    4,422,335General and Administrative Expenses (Note 13)
    
    
    
    
    
    
    7,906,444
    
    
    
    449,489
    
    
    
    3,977,144Operating Income (Loss)
    
    
    
    
    
    
    3,729,964
    
    
    
    (78,453
    )
    
    
    445,191Other Expenses (Income)Impairment of Goodwill
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Other Income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Interest Expense (Income) (Note 14)
    
    
    
    
    
    
    (1,989
    )
    
    
    18,917
    
    
    
    31,262Amortization of Debt Discount
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Operating Income (Loss) Before Income Tax Expense
    
    
    
    
    
    
    3,731,953
    
    
    
    (97,370
    )
    
    
    413,929Income Tax Expense (Note 3)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    43,000Net Income (Loss)
    
    $
    
    
    
    $
    3,731,953
    
    
    $
    (97,370
    )
    
    $
    370,929
 
 
 Unaudited Pro Forma Condensed Combined
Statements of Income
For the Twelve Months Ended March 31, 2004
 
 
 (Continued)
 Pro Forma
    
    
    Pro FormaCritical
    
    
    Adjustments
    
    
    BalanceNet Sales
    
    $
    4,501,086
    
    
    $
    
    
    
    $
    90,309,487Cost of Sales
    
    
    1,426,806
    
    
    
    
    
    
    
    70,805,428Gross Profit
    
    
    3,074,280
    
    
    
    
    
    
    
    19,504,059General and Administrative Expenses (Note 13)
    
    
    4,489,456
    
    
    
    160,000
    
    
    
    16,982,533Operating Income (Loss)
    
    
    (1,415,176
    )
    
    
    (160,000
    )
    
    
    2,521,526Other Expenses (Income)Impairment of Goodwill
    
    
    3,357,430
    
    
    
    
    
    
    
    3,357,430Other Income
    
    
    (352
    )
    
    
    
    
    
    
    (352
    )Interest Expense (Income) (Note 14)
    
    
    201,830
    
    
    
    507,694
    
    
    
    757,714Amortization of Debt Discount
    
    
    268,651
    
    
    
    
    
    
    
    268,651Operating Income (Loss) Before Income Tax Expense
    
    
    (5,242,735
    )
    
    
    (667,694
    )
    
    
    (1,861,917
    )Income Tax Expense (Note 3)
    
    
    
    
    
    
    1,454,000
    
    
    
    1,497,000Net Income (Loss)
    
    $
    (5,242,735
    )
    
    $
    (2,121,694
    )
    
    $
    (3,358,917
    )
 
 142




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##### Table of Contents



Unaudited Pro Forma Consolidated Statements of Income
For The Nine Months Ended December 31, 2004
 
 Arcadia
    
    
    Arcadia Rx
    
    
    Arcadia HOME
    
    
    CriticalNet Sales
    
    $
    62,426,700
    
    
    $
    1,350,549
    
    
    $
    2,172,833
    
    
    $
    1,273,511Cost of Sales
    
    
    54,143,586
    
    
    
    1,033,106
    
    
    
    655,626
    
    
    
    364,248Gross Profit
    
    
    8,283,114
    
    
    
    317,443
    
    
    
    1,517,207
    
    
    
    909,263General and Administrative Expenses
    
    
    5,107,408
    
    
    
    508,136
    
    
    
    1,775,012
    
    
    
    3,151,161Operating Income (Loss)
    
    
    3,175,706
    
    
    
    (190,693
    )
    
    
    (257,805
    )
    
    
    (2,241,898
    )Other Expenses (Income)Impairment of Goodwill
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Other Income
    
    
    (710
    )
    
    
    
    
    
    
    (21,017
    )
    
    
    6,753Interest Expense (Income)
    
    
    417,820
    
    
    
    18,887
    
    
    
    763
    
    
    
    273,158Amortization of Debt Discount
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    682,593Operating Income (Loss) Before
Income Tax Expense
    
    
    2,758,596
    
    
    
    (209,580
    )
    
    
    (237,551
    )
    
    
    (3,204,402
    )Income Tax Expense
    
    
    101,000
    
    
    
    
    
    
    
    20,253
    
    
    
    (19,000
    )Net Income (Loss)
    
    $
    2,657,596
    
    
    $
    (209,580
    )
    
    $
    (257,804
    )
    
    $
    (3,185,402
    )
 
 Unaudited Pro Forma Consolidated Statements of Income
For The Nine Months Ended December 31, 2004
 (Continued)
 
 Pro Forma
    
    
    Pro FormaConsolidated
    
    
    Adjustments
    
    
    BalanceNet Sales
    
    $
    67,223,593
    
    
    
    18,027,848
    
    
    
    85,251,441Cost of Sales
    
    
    56,196,566
    
    
    
    13,156,992
    
    
    
    69,353,558Gross Profit
    
    
    11,027,027
    
    
    
    4,870,856
    
    
    
    15,897,883General and Administrative Expenses
    
    
    10,541,717
    
    
    
    4,688,854
    
    
    
    15,230,571Operating Income (Loss)
    
    
    485,310
    
    
    
    182,002
    
    
    
    667,312Other Expenses (Income)Impairment of Goodwill
    
    
    
    
    
    
    16,055
    
    
    
    16,055Other Income
    
    
    (14,974
    )
    
    
    (82,500
    )
    
    
    (97,474
    )Interest Expense (Income)
    
    
    710,628
    
    
    
    37,336
    
    
    
    747,964Amortization of Debt Discount
    
    
    682,593
    
    
    
    
    
    
    
    682,593Operating Income (Loss) Before Income Tax Expense
    
    
    (892,937
    )
    
    
    211,111
    
    
    
    (681,826
    )Income Tax Expense
    
    
    102,253
    
    
    
    99,913
    
    
    
    202,166Net Income (Loss)
    
    $
    (995,190
    )
    
    $
    111,198
    
    
    $
    (883,992
    )Income (Loss) per ShareBasic
    
    
    
    
    
    
    
    
    
    $
    (0.01
    )Diluted
    
    
    
    
    
    
    
    
    
    $
    (0.01
    )Weighted Average Common Shares (in thousands)Basic
    
    
    
    
    
    
    
    
    
    
    68,460Diluted
    
    
    
    
    
    
    
    
    
    
    68,460
 
 143




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##### Table of Contents



Note 1  Preliminary Purchase Price for Arcadia Services, Inc. Acquisition
  
 Deposit
    
    $
    100,000Cash at closing
    
    
    16,000,000Note Payable
    
    
    500,000Accounts Payable
    
    
    200,000Assumed liabilities and miscellaneous expenses
    
    
    646,000Total Consideration
    
    $
    17,446,000
 
  
 Current Assets
    
    $
    13,905,577Property and equipment
    
    
    251,934Other Assets
    
    
    90,000Liabilities
    
    
    (4,806,968
    )Goodwill
    
    
    8,005,457Total Consideration
    
    $
    17,446,000
 
 Preliminary Purchase Price for Post-Merger Acquisitions
 
  
    144




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##### Table of Contents



Note 2  Cash
 
  
 Note 3  Income Taxes
  Note 4  Goodwill
  Note 5  Accounts Payable
  Note 6  Compensation and Related Taxes
  Note 7  Note Payable Asset Acquisition
  Note 8  Note Payable Officers and Other
  Note 9  Note Payable and Line of Credit  Bank
 145




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##### Table of Contents



Note 10  Note Payable Acquisition
  Note 11  Common Stock
  Note 12  Additional Paid-in Capital and Retained Earnings
  Note 13  General and Administrative Expenses
  Note 14  Interest Expense
  
 Note 15
 Earnings Per Share
 
 
  
  Outstanding Shares Immediately Preceding RKDA Merger
    
    
    24,393,351Shares Issued in the Offering
    
    
    32,000,000Shares Issued per RKDA Merger
    
    
    21,300,000Shares Contributed to the Company per RKDA Merger
    
    
    (1,300,000
    )Shares Held in Escrow per RKDA Merger
    
    
    (12,000,000
    )Shares Included in Calculation of Earnings Per Share at March 31, 2004
    
    
    64,393,351Shares Issued to complete Post-merger Acquisitions
    
    
    1,275,410Shares Included in Calculation of Earnings Per Share at December 31, 2004
    
    
    65,668,761
  146




---



##### Table of Contents



Note 16
 Impairment of Goodwill
 
  
 Note 17
 Pro Forma Balance Sheet Presentation
 
  147




---



##### Table of Contents



Report of Independent Registered Public Accounting Firm
 
    
 /s/ BDO Seidman, LLPCertified Public AccountantsKalamazoo, Michigan
 
  148




---



##### Table of Contents



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
 
 
  
  
 
  
  
 /s/ Marcum & Kliegman
 
 
 
 149




---



##### Table of Contents



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
 
  
   
 /s/ Grassi & Co., CPAs, P.C.GRASSI & CO., CPAs, P.C.
 
 New York, New YorkFebruary 5, 2003
 150




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##### Table of Contents



CRITICAL HOME CARE, INC. AND SUBSIDIARIES
 CONSOLIDATED BALANCE SHEETS
 
 March 31,
    
    
    September 30,2004
    
    
    2003ASSETSCURRENT ASSETSCash and cash equivalents
    
    $
    75,000
    
    
    $
    2,000Accounts receivable, net of allowance for
doubtful accounts of $818,000 and $828,000
    
    
    855,000
    
    
    
    890,000Inventory for resale, net of $200,000 reserve for 2004 (Note 3)
    
    
    62,000
    
    
    
    266,000Prepaid expenses and other current assets
    
    
    364,000
    
    
    
    87,000TOTAL CURRENT ASSETS
    
    
    1,356,000
    
    
    
    1,245,000PROPERTY AND EQUIPMENT  NET(Note 4)
    
    
    604,000
    
    
    
    630,000GOODWILL AND OTHER INTANGIBLE(Note 12)
    
    
    
    
    
    
    1,937,000OTHER
    
    
    37,000
    
    
    
    30,000TOTAL ASSETS
    
    $
    1,997,000
    
    
    $
    3,842,000LIABILITIES AND STOCKHOLDERS (DEFICIT) EQUITYCURRENT LIABILITIESNote payable (Note 6)
    
    $
    1,500,000
    
    
    $
    Accounts payable
    
    
    637,000
    
    
    
    785,000Accrued expenses and other current liabilities
    
    
    231,000
    
    
    
    316,000Cash overdrafts
    
    
    
    
    
    
    39,000Current portion of long-term debt (Note 7)
    
    
    464,000
    
    
    
    619,000Current portion of Officer note payable (Note 8)
    
    
    704,000
    
    
    
    377,000TOTAL CURRENT LIABILITIES
    
    
    3,536,000
    
    
    
    2,136,000LONG-TERM DEBTOfficer note payable less current portion (Note 8)
    
    
    
    
    
    
    50,000Notes payable less current portion (Note 7)
    
    
    15,000
    
    
    
    237,000TOTAL LONG-TERM DEBT
    
    
    15,000
    
    
    
    287,000TOTAL LIABILITIES
    
    
    3,551,000
    
    
    
    2,423,000COMMITMENTS AND CONTINGENCIES(Note 14)STOCKHOLDERS (DEFICIT) EQUITY:Preferred stock, $0.25 par value, 5,000,000 shares authorized,
none issued and outstanding
    
    
    
    
    
    
    Common stock, $0.25 par value; 100,000,000 shares authorized;
24,603,000 and 24,393,000 shares issued and outstanding
for 2004 and 2003, respectively
    
    
    6,151,000
    
    
    
    6,098,000Additional paid-in capital
    
    
    3,525,000
    
    
    
    3,272,000Accumulated deficit
    
    
    (11,230,000
    )
    
    
    (7,951,000
    )TOTAL STOCKHOLDERS (DEFICIT) EQUITY
    
    
    (1,554,000
    )
    
    
    1,419,000TOTAL LIABILITIES AND STOCKHOLDERS (DEFICIT) EQUITY
    
    $
    1,997,000
    
    
    $
    3,842,000
 
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CRITICAL HOME CARE, INC. AND SUBSIDIARIES
 CONSOLIDATED STATEMENTS OF OPERATIONS
 
 FOR THEFOR THE
    
    
    FOR THE
    
    
    PERIODPERIOD
    
    
    YEAR ENDED
    
    
    ENDEDENDED
    
    
    SEPTEMBER
    
    
    SEPTEMBERMARCH 31,
    
    
    30,
    
    
    30,2004
    
    
    2003
    
    
    2002NET SALES
    
    $
    2,011,000
    
    
    $
    5,446,000
    
    
    $
    1,286,000COST OF GOODS SOLD
    
    
    843,000
    
    
    
    1,665,000
    
    
    
    384,000GROSS PROFIT
    
    
    1,168,000
    
    
    
    3,781,000
    
    
    
    902,000OPERATING EXPENSES:Selling, general and administrative
    
    
    2,093,000
    
    
    
    5,499,000
    
    
    
    1,065,000Depreciation and amortization
    
    
    43,000
    
    
    
    94,000
    
    
    
    12,000Impairment of goodwill (Note 12)
    
    
    1,857,000
    
    
    
    1,500,000
    
    
    
    Impairment of other intangibles
    
    
    70,000
    
    
    
    
    
    
    
    TOTAL OPERATING EXPENSES
    
    
    4,063,000
    
    
    
    7,093,000
    
    
    
    1,077,000LOSS FROM OPERATIONS
    
    
    (2,895,000
    )
    
    
    (3,312,000
    )
    
    
    (175,000
    )OTHER INCOME (EXPENSE):Other income
    
    
    
    
    
    
    138,000
    
    
    
    Interest expense
    
    
    (139,000
    )
    
    
    (142,000
    )
    
    
    (28,000
    )Amortization of debt discount and
deferred financing costs (Note 7)
    
    
    
    
    
    
    (666,000
    )
    
    
    Amortization of deferred debt discount,
notes payable  other (Note 7)
    
    
    (245,000
    )
    
    
    (30,000
    )
    
    
    Management and Billing Fee
    
    
    
    
    
    
    
    
    
    
    96,000(384,000
    )
    
    
    (700,000
    )
    
    
    68,000LOSS BEFORE PROVISION FOR INCOME TAXES
    
    
    (3,279,000
    )
    
    
    (4,012,000
    )
    
    
    (107,000
    )PROVISION FOR INCOME TAXES (Note 10)
    
    
    
    
    
    
    
    
    
    
    NET LOSS
    
    $
    (3,279,000
    )
    
    $
    (4,012,000
    )
    
    $
    (107,000
    )BASIC AND DILUTED LOSS PER SHARE
    
    $
    (0.13
    )
    
    $
    (0.17
    )
    
    $
    (0.00
    )BASIC AND DILUTED WEIGHTED AVERAGE
COMMON SHARES OUTSTANDING
    
    
    24,467,000
    
    
    
    24,308,027
    
    
    
    16,432,000
 
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CRITICAL HOME CARE, INC. AND SUBSIDIARIES
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 
 FOR THEPERIOD
    
    
    FOR THE
    
    
    FOR THEENDED
    
    
    YEAR ENDED
    
    
    PERIOD ENDEDMARCH 31,
    
    
    SEPTEMBER 30,
    
    
    SEPTEMBER 30,2004
    
    
    2003
    
    
    2002CASH FLOWS FROM OPERATING ACTIVITIESNet loss
    
    $
    (3,279,000
    )
    
    $
    (4,012,000
    )
    
    $
    (107,000
    )Adjustments to reconcile net loss to net
cash (used in) operating activities:Provision for bad debts
    
    
    125,000
    
    
    
    992,000
    
    
    
    91,000Depreciation and amortization
    
    
    96,000
    
    
    
    161,000
    
    
    
    12,000Interest paid with common stock
    
    
    84,000
    
    
    
    77,000
    
    
    
    25,000Stock option compensation
    
    
    
    
    
    
    228,000
    
    
    
    120,000Amortization of debt discount and
deferred financing costs
    
    
    
    
    
    
    666,000
    
    
    
    Amortization of deferred debt discount
notes payable  other loan
    
    
    245,000
    
    
    
    30,000
    
    
    
    Impairment of goodwill
    
    
    1,857,000
    
    
    
    1,500,000
    
    
    
    Impairment of other intangibles
    
    
    70,000
    
    
    
    
    
    
    
    Changes in operating assets and liabilitiesAccounts receivable
    
    
    (87,000
    )
    
    
    (787,000
    )
    
    
    (276,000
    )Inventory
    
    
    204,000
    
    
    
    19,000
    
    
    
    32,000Prepaid expenses and other current assets
    
    
    23,000
    
    
    
    (52,000
    )
    
    
    (18,000
    )Deposits
    
    
    (7,000
    )
    
    
    5,000
    
    
    
    (21,000
    )Accounts payable
    
    
    (148,000
    )
    
    
    328,000
    
    
    
    60,000Accrued expenses and other current liabilities
    
    
    (83,000
    )
    
    
    (35,000
    )
    
    
    91,000Total adjustments
    
    
    2,379,000
    
    
    
    3,132,000
    
    
    
    116,000NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES
    
    
    (900,000
    )
    
    
    (880,000
    )
    
    
    9,000CASH FLOWS USED IN INVESTING ACTIVITIESPurchases of property and equipment
    
    
    (75,000
    )
    
    
    (90,000
    )
    
    
    (385,000
    )Deposit on acquisition
    
    
    (300,000
    )
    
    
    
    
    
    
    (375,000
    )
    
    
    (90,000
    )
    
    
    (385,000
    )CASH FLOWS FROM FINANCING ACTIVITIESCash overdrafts
    
    
    (39,000
    )
    
    
    39,000
    
    
    
    Proceeds from insurance settlement
    
    
    11,000
    
    
    
    
    
    
    
    Proceeds from convertible promissory notes,
net of $98,000 of debt issue costs
    
    
    
    
    
    
    568,000
    
    
    
    Proceeds from notes payable  other
    
    
    274,000
    
    
    
    475,000
    
    
    
    501,000Proceeds from note payable
    
    
    1,500,000
    
    
    
    
    
    
    
    Proceeds from (repayment of) notes payable  officer
    
    
    277,000
    
    
    
    427,000
    
    
    
    (35,000
    )Payment of long-term debt
    
    
    (675,000
    )
    
    
    (591,000
    )
    
    
    (55,000
    )NET CASH PROVIDED BY FINANCING ACTIVITIES
    
    
    1,348,000
    
    
    
    918,000
    
    
    
    411,000NET INCREASE(DECREASE) IN CASH AND CASH EQUIVALENTS
    
    
    73,000
    
    
    
    (52,000
    )
    
    
    35,000CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD
    
    
    2,000
    
    
    
    54,000
    
    
    
    19,000CASH AND CASH EQUIVALENTS, END OF PERIOD
    
    $
    75,000
    
    
    $
    2,000
    
    
    $
    54,000Supplementary information:Cash paid during the period for:Interest
    
    $
    35,000
    
    
    $
    2,000
    
    
    $
    1,000NON-CASH INVESTING AND FINANCING ACTIVITIES:Issuance of stock for asset acquisition
    
    $
    
    
    
    $
    
    
    
    $
    3,500,000Issuance of stock in repayment of debt and interest
    
    $
    85,000
    
    
    $
    666,000
    
    
    $
    Deferred Debt Discount
    
    $
    
    
    
    $
    56,000
    
    
    $
    
 
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##### Table of Contents



CRITICAL HOME CARE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS (DEFICIT) EQUITY
FOR THE PERIOD ENDED SEPTEMBER 30, 2002,
FOR THE YEAR ENDED SEPTEMBER 30, 2003
AND FOR THE PERIOD ENDED MARCH 31, 2004
 
 AdditionalCommon Stock
    
    
    Paid-in
    
    
    AccumulatedShares
    
    
    Amount
    
    
    Capital
    
    
    Deficit
    
    
    TotalBalance, January 1, 2002
    
    
    15,896,000
    
    
    $
    3,974,000
    
    
    $
    
    
    
    $
    (3,832,000
    )
    
    $
    142,000Stock issued for
Settlement to Affiliate
    
    
    254,000
    
    
    
    63,000
    
    
    
    32,000
    
    
    
    
    
    
    
    95,000Interest
    
    
    100,000
    
    
    
    25,000
    
    
    
    75,000
    
    
    
    
    
    
    
    100,000Stock option Compensation
    
    
    
    
    
    
    
    
    
    
    120,000
    
    
    
    
    
    
    
    120,000Value of debt Cancellation
    
    
    
    
    
    
    
    
    
    
    61,000
    
    
    
    
    
    
    
    61,000Reverse Acquisition of NYMI
    
    
    5,725,000
    
    
    
    1,431,000
    
    
    
    (1,431,000
    )
    
    
    
    
    
    
    Acquisition of All Care
    
    
    1,750,000
    
    
    
    438,000
    
    
    
    3,062,000
    
    
    
    
    
    
    
    3,500,000Net Loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (107,000
    )
    
    
    (107,000
    )Balance, September 30, 2002
    
    
    23,725,000
    
    
    
    5,931,000
    
    
    
    1,919,000
    
    
    
    (3,939,000
    )
    
    
    3,911,000Common Stock issued for conversion
of convertible promissory
notes and interest
    
    
    668,000
    
    
    
    167,000
    
    
    
    501,000
    
    
    
    
    
    
    
    668,000Stock option Compensation
    
    
    
    
    
    
    
    
    
    
    228,000
    
    
    
    
    
    
    
    228,000Value of debt discount
    
    
    
    
    
    
    
    
    
    
    568,000
    
    
    
    
    
    
    
    568,000Deferred debt discount
    
    
    
    
    
    
    
    
    
    
    56,000
    
    
    
    
    
    
    
    56,000Net Loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,012,000
    )
    
    
    (4,012,000
    )Balance, September 30, 2003
    
    
    24,393,000
    
    
    
    6,098,000
    
    
    
    3,272,000
    
    
    
    (7,951,000
    )
    
    
    1,419,000Stock issued for conversion
of convertible promissory
note and interest
    
    
    210,000
    
    
    
    53,000
    
    
    
    32,000
    
    
    
    
    
    
    
    85,000Value of debt discount
    
    
    
    
    
    
    
    
    
    
    221,000
    
    
    
    
    
    
    
    221,000Net Loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,279,000
    )
    
    
    (3,279,000
    )Balance, March 31, 2004
    
    
    24,603,000
    
    
    $
    6,151,000
    
    
    $
    3,525,000
    
    
    $
    (11,230,000
    )
    
    $
    (1,554,000
    )
 
  154




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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
 NOTE 1  BASIS OF PRESENTATION OF CONSOLIDATED FINANCIAL STATEMENTS
 
  
 
 NOTE 2  DESCRIPTION OF BUSINESS
 
  
   
  
  
 
 (i)
    
    amend the par value and increase the number of authorized Shares of Common Stock to 150,000,000, $.001 par
value per share, from 100,000,000, $.25 par value per share;(ii)
    
    authorize the issuance of serial preferred stock consisting of 5,000,000 shares, $.001 par value per share; and(iii)
    
    eliminate preemptive rights.
 
  
 155




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NOTE 3  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
     
  
  
  
 
  
 156




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##### Table of Contents



Computer equipment
    
    
    3 to 5 yearsDelivery vehicles
    
    
    2 to 5 yearsOffice equipment and
furniture and fixtures
    
    
    3 to 5 yearsRental equipment
    
    
    3 to 5 yearsLeasehold improvements
    
    the shorter of economic life or lease term
 
 
  
 
  
     
  
  
 PreviouslyPreviously
    
    
    
    
    
    
    IssuedIssued
    
    
    
    
    
    
    Six months
    
    
    Six monthsThree months Ended
    
    
    Three Months Ended
    
    
    Ended
    
    
    EndedMarch 31, 2004
    
    
    March 31, 2004
    
    
    March 31, 2004
    
    
    March 31, 2004(Unaudited)
    
    
    (Adjusted Audited)
    
    
    (Unaudited)
    
    
    (Adjusted Audited)Inventory
    
    $
    262,000
    
    
    $
    62,000
    
    
    $
    262,000
    
    
    $
    62,000Stockholders Deficit
    
    
    (1,354,000
    )
    
    
    (1,554,000
    )
    
    
    (1,354,000
    )
    
    
    (1,554,000
    )Gross Profit
    
    $
    461,000
    
    
    
    261,000
    
    
    
    1,368,000
    
    
    
    1,168,000Net Loss
    
    
    (2,771,000
    )
    
    
    (2,971,000
    )
    
    
    (3,077,000
    )
    
    
    (3,279,000
    )Basic and Diluted
Earnings (loss) Per Share
    
    ($
    0.11
    )
    
    ($
    0.12
    )
    
    ($
    0.13
    )
    
    ($
    0.13
    )
 
 157




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STOCK BASED COMPENSATION
 
 
 
 
 For the
    
    
    For the
    
    
    For thePeriod Ended
    
    
    Year Ended
    
    
    Period EndedMarch 31, 2004
    
    
    September 30, 2003
    
    
    September 30, 2002Net loss as reported
    
    $
    (3,279,000
    )
    
    $
    (4,012,000
    )
    
    $
    (107,000
    )Stock based employee compensation expense
Under the intrinsic value method
    
    
    
    
    
    
    228,000
    
    
    
    Less: Total stock-based employee compensation expense
determined under the fair value method,
    
    
    (9,000
    )
    
    
    (441,000
    )
    
    
    Pro Forma net loss
    
    $
    (3,288,000
    )
    
    $
    (4,225,000
    )
    
    
    (107,000
    )Net loss per share:Basic and diluted loss per share as reported
    
    $
    (0.13
    )
    
    $
    (0.17
    )
    
    $
    (0.00
    )Pro Forma basic and diluted loss per share
    
    $
    (0.13
    )
    
    $
    (0.17
    )
    
    $
    (0.00
    )
 
  For the Year EndedSeptember 30, 2003Expected life (years)
    
    
    5Interest rate
    
    
    4-5
    %Annual rate of dividends
    
    
    0
    %Volatility
    
    
    210
    %
 
  
 
  
 
  
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CRITICAL HOME CARE, INC. AND SUBSIDIARIES
 (UNAUDITED) CONSOLIDATED STATEMENTS OF OPERATIONS
 
 For ThePeriod EndedMarch 31, 2003(unaudited)NET SALES
    
    $
    3,195,000COST OF GOODS SOLD
    
    
    982,000GROSS PROFIT
    
    
    2,213,000OPERATING EXPENSES:Selling, general and administrative
    
    
    2,680,000Depreciation and amortization
    
    
    48,000TOTAL OPERATING EXPENSES
    
    
    2,728,000LOSS FROM OPERATIONS
    
    
    (515,000
    )OTHER INCOME (EXPENSE):Other income
    
    
    138,000Interest expense
    
    
    (62,000
    )Amortization of debt discount
    
    
    (672,000
    )(596,000
    )NET LOSS
    
    $
    (1,111,000
    )BASIC AND DILUTED LOSS PER SHARE
    
    $
    (0.05
    )BASIC AND DILUTED WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING
    
    
    24,119,000
 
   
 For TheYear EndedSeptember 30, 2002(unaudited)NET SALES
    
    $
    1,585,000COST OF GOODS SOLD
    
    
    475,000GROSS PROFIT
    
    
    1,110,000OPERATING EXPENSES:Selling, general and administrative
    
    
    1,231,000Depreciation and amortization
    
    
    15,000TOTAL OPERATING EXPENSES
    
    
    1,246,000LOSS FROM OPERATIONS
    
    
    (136,000
    )OTHER INCOME (EXPENSE):Interest expense
    
    
    (28,000
    )Management and Billing fees
    
    
    96,00068,000NET LOSS
    
    $
    (68,000
    )BASIC AND DILUTED LOSS PER SHARE
    
    $
    (0.00
    )BASIC AND DILUTED WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING
    
    
    16,102,000
 
 
  
 159




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NOTE 4  PROPERTY AND EQUIPMENT
  
 Book ValueAccumulated
    
    
    March 31,Cost
    
    
    Depreciation
    
    
    2004Delivery Vehicle
    
    $
    63,000
    
    
    $
    30,000
    
    
    $
    33,000Furniture & Fixtures
    
    
    121,000
    
    
    
    41,000
    
    
    
    80,000Leasehold Improvement
    
    
    142,000
    
    
    
    43,000
    
    
    
    99,000Office Equipment
    
    
    49,000
    
    
    
    22,000
    
    
    
    27,000Rental Equipment
    
    
    486,000
    
    
    
    121,000
    
    
    
    365,000$
    861,000
    
    
    $
    257,000
    
    
    $
    604,000
 
 160




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##### Table of Contents



Book ValueAccumulated
    
    
    September 30,Cost
    
    
    Depreciation
    
    
    2003Delivery Vehicle
    
    $
    49,000
    
    
    $
    21,000
    
    
    $
    28,000Furniture & Fixtures
    
    
    121,000
    
    
    
    29,000
    
    
    
    92,000Leasehold Improvement
    
    
    142,000
    
    
    
    29,000
    
    
    
    113,000Office Equipment
    
    
    49,000
    
    
    
    17,000
    
    
    
    32,000Rental Equipment
    
    
    432,000
    
    
    
    67,000
    
    
    
    365,000$
    793,000
    
    
    $
    163,000
    
    
    $
    630,000
 
  
 NOTE 5  ISSUANCE OF SECURITIES
 
 
  
 
 
 
  
  
 NOTE 6  NOTE PAYABLE
 
  
 NOTE 7  LONG-TERM DEBT
 
 
 March 31
    
    
    September 30,2004
    
    
    2003Notes payable, issued between July 2002 and February 2003 pursuant
to working capital loans provided by three unrelated parties bearing interest
ranging from 5% to 12% per annum and dates of maturity through April 2004.
The notes were paid in full in April 2004 and May 2004. Balance
is reported net of discount of $2,000 and $26,000 at
March 31, 2004 and September 30, 2003, respectively.
(See Note 11)
    
    $
    223,000
    
    
    $
    612,000Note payable issued in September 2002 pursuant
to the All Care Asset Acquisition Agreement, unsecured,
originally due September 30, 2003, modified
on April 16, 2003, bearing interest at 7% per annum and payable
August 15, 2005. This debt was re-negotiated and paid in full
during May 2004.
    
    $
    233,000
    
    
    $
    233,000
 
 161




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##### Table of Contents



March 31
    
    
    September 30,2004
    
    
    2003Notes payable issued in during February 2004 for the purchase of
a delivery vehicle payable in monthly installments of $665 and $558 including
interest at 7.3% and 6.9% per annum maturing in March 2007 and April 2005
and secured by the delivery vehicle.
    
    $
    23,000
    
    
    $
    11,000$
    479,000
    
    
    $
    856,000Less: Current portion
    
    
    (464,000
    )
    
    $
    (619,000
    )Long-term debt, net of current maturities
    
    $
    15,000
    
    
    $
    237,000
 
 NOTE 8  Officer Note Payable
 March 31,
    
    
    September 30,2004
    
    
    2003Notes payable, officer, issued from January 2003 through December 2003
pursuant to working capital loans from the President of the Company
bearing interest at 8% per annum and due at dates from May 2004 through
October 2005. Of this amount, $150,000 was converted into equity
in May 13, 2004, at $0.25 per share. (See Note 5)
    
    $
    704,000
    
    
    $
    427,000
 Note 9  Acquisitions
 
  
  
 Alliance
    
    
    All CareCash
    
    $
    
    
    
    $
    78,000Accounts receivable
    
    
    
    
    
    
    557,000Inventory
    
    
    168,000
    
    
    
    433,000Fixed assets
    
    
    107,000
    
    
    
    206,000Security deposits
    
    
    
    
    
    
    14,000Goodwill
    
    
    
    
    
    
    3,357,000Accounts payable
    
    
    
    
    
    
    (230,000
    )Loan payable to stockholder
    
    
    
    
    
    
    (15,000
    )Accrued liabilities
    
    
    
    
    
    
    (245,000
    )$
    275,000
    
    
    $
    4,155,000
 
 
  
  162




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##### Table of Contents



For the NineMonths endedSeptember 30, 2002Sales
    
    $
    4,172,000Cost of sales
    
    
    1,353,000Gross profit
    
    
    2,819,000Operating expenses
    
    
    2,767,000Operating income
    
    
    52,000Other income
    
    
    3,000Income before taxes
    
    $
    55,000Pro-forma income taxes
    
    
    22,000Pro-forma net income
    
    $
    33,000Basic and diluted earnings per share
    
    $
    0.00Basic and diluted weighted common shares outstanding
    
    
    16,432,000
 
 NOTE 10  Income Taxes
   
 2004
    
    
    2003CurrentFederal
    
    $
    -0-
    
    
    $
    -0-State and local
    
    
    -0-
    
    
    
    -0-DeferredFederal
    
    $
    -0-
    
    
    $
    -0-State and local
    
    
    -0-
    
    
    
    -0-Total
    
    $
    -0-
    
    
    $
    -0-
 
 
 
 
 2004
    
    
    2003Income tax provision at 34%
    
    
    (34.0
    %)
    
    
    (34.0
    %)State and local income taxes net
of federal benefit
    
    
    (6.0
    %)
    
    
    (6.0
    %)Non deductible goodwill impairment
    
    
    23.2
    %
    
    
    14.9
    %Non deductible amortization of
beneficial conversion feature
    
    
    0.0
    %
    
    
    5.7
    %Net operating losses not utilized
    
    
    16.8
    %
    
    
    19.4
    %0.0
    %
    
    
    0.0.
    %
 
 163




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##### Table of Contents



March 31,2022
    
    $
    220,0002023
    
    
    1,191,0002024
    
    
    1,343,000$
    2,754,000
 
  
 March 31, 2004
    
    
    September 30, 2003Allowance for doubtful accounts
    
    $
    327,000
    
    
    $
    331,000Non-deductible expenses
    
    
    
    
    
    
    121,000Net operating loss
    
    
    1,102,000
    
    
    
    564,000Other
    
    
    
    
    
    
    (10,000
    )Total
    
    $
    1,429,000
    
    
    $
    1,006,000Valuation allowance
    
    
    (1,429,000
    )
    
    
    (1,006,000
    )Net deferred taxes
    
    $
    -0-
    
    
    $
    -0-
 
   NOTE 11  Stock Option Information
    164




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##### Table of Contents



March 31, 2004
    
    
    September 30, 2003
    
    
    September 30, 2002Weighted
    
    
    
    
    
    
    Weighted
    
    
    
    
    
    
    WeightedAverage
    
    
    
    
    
    
    Average
    
    
    
    
    
    
    AverageOutstanding
    
    
    Exercise
    
    
    Outstanding
    
    
    Exercise
    
    
    Outstanding
    
    
    ExerciseOptions
    
    
    Price
    
    
    Options
    
    
    Price
    
    
    Options
    
    
    PriceOutstanding at beginning of period
    
    
    1,013,100
    
    
    $
    0.68
    
    
    
    325,000
    
    
    $
    1.23
    
    
    
    
    
    
    
    Granted
    
    
    15,000
    
    
    
    0.25
    
    
    
    706,400
    
    
    
    0.43
    
    
    
    325,000
    
    
    $
    1.23Exercised
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Forfeited
    
    
    (62,100
    )
    
    
    0.25
    
    
    
    (18,300
    )
    
    
    0.25
    
    
    
    
    
    
    
    966,000
    
    
    $
    0.66
    
    
    
    1,013,100
    
    
    $
    .68
    
    
    
    325,000
    
    
    $
    1.23
 
  165




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##### Table of Contents



Exercise
    
    
    
    
    
    Remaining
    
    
    Average
    
    
    
    
    
    
    AveragePrice
    
    Outstanding
    
    
    Life
    
    
    Exercise
    
    
    Exercisable
    
    
    ExerciseRange
    
    Options
    
    
    (Years)
    
    
    Price
    
    
    Options
    
    
    Price$1.50
    
    
    150,000
    
    
    
    3.49
    
    
    $
    1.50
    
    
    
    150,000
    
    
    $
    1.50$  .23
    
    
    100,000
    
    
    
    4.49
    
    
    $
    .23
    
    
    
    100,000
    
    
    $
    .23$1.00
    
    
    175,000
    
    
    
    3.49
    
    
    $
    1.00
    
    
    
    175,000
    
    
    $
    1.00$  .25
    
    
    103,500
    
    
    
    4.08
    
    
    $
    .25
    
    
    
    38,400
    
    
    $
    0.25$  .17
    
    
    250,000
    
    
    
    4.00
    
    
    $
    .17
    
    
    
    133,333
    
    
    $
    0.17$1.00
    
    
    187,500
    
    
    
    3.67
    
    
    $
    1.00
    
    
    
    187,500
    
    
    $
    1.00966,000
    
    
    
    
    
    
    $
    .66
    
    
    
    784,233
    
    
    $
    0.66
 
  NOTE 12  IMPAIRMENT OF GOODWILL
  NOTE 13  LEGAL PROCEEDINGS
   NOTE 14  COMMITMENTS AND CONTINGENCIES
   
 Payments due by March 31,Total
    
    
    2005
    
    
    2006
    
    
    2007
    
    
    2008
    
    
    2009Operating Leases
    
    
    622,000
    
    
    
    166,000
    
    
    
    146,000
    
    
    
    152,000
    
    
    
    89,000
    
    
    
    69,000Employment Agreements
    
    
    300,000
    
    
    
    150,000
    
    
    
    150,000
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    $
    922,000
    
    
    $
    316,000
    
    
    $
    296,000
    
    
    $
    152,000
    
    
    $
    89,000
    
    
    $
    69,000
 
 166




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##### Table of Contents



NOTE 15  SUBSEQUENT EVENTS
 RKDA MERGER, CHANGE IN CONTROL OF THE BOARD OF DIRECTORS AND PRIVATE PLACEMENT
  167




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##### Table of Contents



COMERICA BANK CREDIT AGREEMENT
   EMPLOYMENT AGREEMENTS
   168




---



##### Table of Contents



SETTLEMENT OF CERTAIN LIABILITIES
     EMPLOYEE STOCK PURCHASES
  169




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##### Table of Contents



INFORMATION NOT REQUIRED IN PROSPECTUS
 Item 13. Other Expenses of Issuance and Distribution
  
 Filing feeSecurities and Exchange Commission
    
    $
    24,532Fees and expenses of legal counsel
    
    $
    20,000Accounting fees and expenses
    
    $
    25,000Printing expenses
    

    $
    20,000Miscellaneous expenses
    
    $
    25,000Total
    
    $
    114,532
 
 
 
  Item 14. Disclosure of Commission Position of Indemnification for Securities Act Liabilities.
   Item 15. Recent Sales of Unregistered Securities
 Selling Security holders, Unregistered Securities Transactions
 170




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##### Table of Contents



Item 16. Exhibit Index
 
  171




---



##### Table of Contents



Exhibit Index
 
  
 
 ExhibitNumber
    
    Description of Exhibit2.1
    
    Asset Purchase Agreement, dated September 13, 2002, between All Care Medical
Products Inc. and Critical Home Care, Incorporated (9)3.1
    
    Amended and Restated Articles of Incorporation (13)3.2
    
    Amended and Restated By-Laws (13)3.3
    
    Amendment to By-Laws, dated May 4, 2004 (8)3.4
    
    Amendment to By-Laws, dated June 11, 2004 (8)4.1
    
    Amended and Restated Articles of Incorporation Section Regarding Shares of
Common Stock (See Exhibit 3.1, Section 4)4.2
    
    Amended and Restated By-Laws Article Regarding Capital Stock (See Exhibit 3.2,
Article IV)4.3
    
    Form of Regulation D Class A Common Stock Purchase Warrant (1)4.4
    
    Class A Warrant issued to John E. Elliott, II (1)4.5
    
    Class A Warrant issued to Lawrence Kuhnert (1)4.6
    
    John E. Elliot, II and Lawrence Kuhnert Registration Rights Agreement, dated
May 7, 2004 (8)4.7
    
    Form Note Purchase Agreement (8)4.8
    
    Jana Warrants, dated March 11, 2004, to purchase 250,000 Shares (8)4.9
    
    Jana Registration Rights Agreement, dated March 11, 2004 (8)4.10
    
    Amended and Restated Subordinated Convertible Promissory Note, dated June 12,
2004 (8)4.11
    
    Cleveland Overseas Settlement Agreement, dated June 16, 2004 (8)4.12
    
    Cleveland Overseas Warrant for Purchase of 100,000 Shares of Common Stock (8)4.13
    
    Cleveland Overseas Registration Rights Agreement, dated February 28, 2003 (8)4.14
    
    Stephen Garchik Option to Acquire 500,000 Shares, dated February 3, 2004
2004, between Critical Home Care, Inc. and Jana Master Fund, Ltd. (8)4.15
    
    Stephen Garchik Registration Rights Agreement, dated February 3, 2004 (8)4.16
    
    Global Asset Management Settlement Agreement which includes provision regarding registration rights (to be filed by amendment) (8)
 
 172




---



##### Table of Contents



ExhibitNumber
    
    Description of Exhibit4.17
    
    Stanley Scholsohn Family Partnership Stock Option Agreement, dated February
22, 2003 (8)4.18
    
    Stanley Scholsohn Family Partnership Registration Rights Agreement, dated
February 22, 2004 (8)4.19
    
    Form of Regulation D Registration Rights Agreement (8)4.20
    
    Form of stock purchase agreement (7)4.21
    
    Jana Convertible Promissory Note dated April 27, 2005 (7)4.22
    
    Warrant Purchase and Registration Rights Agreement dated September 26, 2005 (10)4.23
    
    Warrant Purchase and Registration Rights Agreement dated September 28, 2005 (10)4.24
    
    Form of B-1 Warrant (10)4.25
    
    Form of B-2 Warrant (10)4.26
    
    Private Stock Purchase Agreement SICAV 1 dated November 28, 2005 (22)4.27
    
    Private Stock Purchase Agreement SICAV 2 dated November 28, 2005 (22)5.1
    
    Opinion Regarding Legality9.1
    
    Form of Voting Agreement (1)10.20
    
    Consulting Agreement, dated as of June 28, 2002, by and between Critical Home
Care, Inc., All Care Medical Products Corp., and Luigi Piccione (3)10.21
    
    Employment Agreement, dated as of September 26, 2002, by and between the
Company and Bradley Smith (3)10.22
    
    2002 Employee Stock Incentive Plan (2)10.23
    
    Employment Agreement, dated as of March 10, 2003, by and between the Company
and Eric Yonenson (4)10.24
    
    Premises lease by and between HomeCare Alliance, Inc. as tenant and Dawson
Holding Company as Landlord (4)10.25
    
    Sublease for premises by and between the Company as tenant and ProHealth Corp.
as landlord (5)10.26
    
    Agreement and Plan of Merger dated May 7, 2004 by and among RKDA, Inc., CHC
Sub, Inc., Critical Home Care, Inc., John E. Elliott, II, Lawrence Kuhnert and
David Bensol (1)10.27
    
    Stock Purchase Agreement dated as of May 7, 2004 by and among RKDA, Inc.,
Arcadia Services, Inc., Addus Healthcare, Inc. and W. Andrew Wright (1)10.28
    
    Employment Agreement dated May 7, 2004, by and between Critical Home Care, Inc.
and Lawrence Kuhnert. (1)10.29
    
    Employment Agreement dated May 7, 2004, by and between Critical Home Care, Inc.
and John E. Elliott, II. (1)10.30
    
    Employment Agreement dated May 7, 2004, by and between Critical Home Care, Inc.
and David Bensol (1)
 
 173




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##### Table of Contents



ExhibitNumber
    
    Description of Exhibit10.31
    
    Termination of Employment Agreement and Release dated May 7, 2004, by and
between Critical Home Care, Inc. and David Bensol. (1)10.32
    
    Escrow Agreement made as of May 7, 2004, by and among Critical Home Care, Inc.,
John E. Elliott, II, Lawrence Kuhnert and Nathan Neuman & Nathan P.C. (1)10.33
    
    Escrow Agreement made as of May 7, 2004, by and among Critical Home Care, Inc.,
David Bensol and Nathan Neuman & Nathan P.C. (1)10.34
    
    Stock Option Agreement dated May 7, 2004, between Critical Home Care, Inc. and
John E. Elliott, II. (1)10.35
    
    Stock Option Agreement dated May 7, 2004, between Critical Home Care, Inc. and
Lawrence Kuhnert (1)10.36
    
    Agreement of Modification (without exhibits) dated May 6, 2004, among Critical
Home Care, Inc. and David Bensol and All Care Medical Products Corp., Luigi
Piccione and S&L Realty, LLC. (1)10.37
    
    Credit Agreement dated as of May 7, 2004, by and among Arcadia Services, Inc.,
Arcadia Health Services, Inc. Grayrose, Inc. and Arcadia Health Services of
Michigan, Inc. (1)10.38
    
    Lease of City Center Office ParkSouth Building (8)10.39
    
    Promissory Note and Warrant Purchase Agreement by and among Critical Home Care,
Inc. and BayStar Capital II, L.P. dated September 21, 2004 (11)10.40
    
    Critical Home Care, Inc. Promissory Note in the principal amount of $5,000,000
bearing interest at 6%, compounded quarterly, dated September 21, 2004 (11)10.41
    
    Critical Home Care, Inc. Common Stock Purchase Warrant to Purchase up to
3,150,000 Shares of the Common Stock of Critical Home Care, Inc., dated
September 21, 2004 (11)10.42
    
    Investor Rights Agreement by and among Critical Home Care, Inc. and BayStar
Capital II, L.P. dated September 21, 2004 (11)10.43
    
    Stock Purchase Agreement by and among SSAC, LLC (Buyer), Trinity Healthcare
of Winston-Salem, Inc. (Company), and Roy Hathcock, Dale Benzine, Chris
Norman and Marc Leonard (Sellers), dated September 23, 2004 (11)10.44
    
    SSAC, LLC Promissory Note in the principal amount of $660,774 bearing interest
at 6%, compounded quarterly, dated September 23, 2004 (11)10.45
    
    Subordinated Security Agreement by and between Roy Hathcock and Dale Benzine
(the Secured Party) and SSAC, LLC (the Debtor), dated September 23, 2004
(11)10.46
    
    Guaranty dated September 23, 2004, given by Critical Home Care, Inc. in favor
of Roy Hathcock, Dale Benzine, Chris Norman and Marc Leonard (11)10.47
    
    Escrow Agreement made on September 23, 2004, by and among SSAC, LLC (the
Buyer), Chris Norman and Marc Leonard, and Kerr, Russell and Weber, PLC (11)10.48
    
    Asset Purchase Agreement dated August 30, 2004 by and between Arcadia Health
Services, Inc., Second Solutions, Inc., Merit Staffing Resources, Inc. and
Harriette Hunter (12)
 
 174




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##### Table of Contents



ExhibitNumber
    
    Description of Exhibit10.49
    
    Agreement and Plan of Merger between Critical Home Care, Inc. and Arcadia
Resources, Inc. (13)10.50
    
    Stock Purchase Agreement by and among Arcadia Resources, Inc. (Buyer), Beacon
Respiratory Services, Inc., Beacon Respiratory Services of Alabama, Inc.,
Beacon Respiratory Services of Colorado, Inc., and Beacon Respiratory Services
of Georgia, Inc. (Companies), and Rebecca Irish, Ryan Powers and Reid Wilburn
(Sellers), dated December 22, 2004 (14)10.51
    
    Employment Agreement effective January 1, 2005 by and between the Company and
Rebecca Irish (15)10.52
    
    Form Stock Purchase Agreement (16)10.53
    
    Form of Credit Facility Agreement between Comerica Bank and Trinity Healthcare
of Winston-Salem, Inc. dated February 18, 2005 (17)10.54
    
    Form of Master Revolving Note given by Trinity Healthcare of Winston-Salem,
Inc. to Comerica Bank dated February 18, 2005 (17)10.55
    
    Form of Advance Formula Agreement between Comerica Bank and Trinity Healthcare
of Winston-Salem, Inc. dated February 18, 2005 (18)10.56
    
    Director Compensation Agreement dated March 22, 2005 (19)10.57
    
    Stock Option Agreement dated March 22, 2005 (19)10.58
    
    Stock Purchase Agreement dated April 29, 2005, by and among Arcadia Health
Services of Michigan, Inc., Home Health Professionals, Inc., and the selling
shareholders (7)10.59
    
    Haifley Employment Agreement dated December 7, 2005. (22)10.60
    
    Haifley Non-Qualified Stock Option Agreement dated December 7, 2005. (22)10.61
    
    Haifley Restricted Stock Grant Agreement dated December 7, 2005. (22)14.1
    
    Code of Ethics (8)16.1
    
    Change in Critical Home Care, Inc.s Certifying Accountant (6)21.1
    
    Subsidiaries of Critical Home Care, Inc. (23)23.1
    
    Consent Counsel (included in Exhibit 5.1)23.2
    
    Consent of BDO Seidman, LLP23.3
    
    Consent of Marcum & Kliegman, LLP23.4
    
    Consent of Grassi & Co., CPAs99.1
    
    Arcadia Resources, Inc. news release dated April 11, 2005 (20)99.2
    
    Arcadia Resources, Inc. news release dated June 30, 2005 (21)
 
 175




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##### Table of Contents



(1)
    
    Previously filed with the Securities and Exchange Commission as an Exhibit to the Current
Report on 8-K filed on May 24, 2004 and incorporated herein by reference (File No. 000-31249).(2)
    
    Previously filed with the Securities and Exchange Commission as an Exhibit to the Annual
Report on Form 10 KSB filed on February 19, 2003 and incorporated herein by reference (File
No. 000-31249).(3)
    
    Previously filed with the Securities and Exchange Commission as an Exhibit to the Annul
Report on Form 10 QSB filed on November 19, 2002 and incorporated herein by reference (File
No. 000-31249).(4)
    
    Previously filed with the Securities and Exchange Commission as an Exhibit to the Annual
Report on Form 10 KSB filed on February 18, 2004 and incorporated herein by reference (File
No. 000-31249).(5)
    
    Previously filed with the Securities and Exchange Commission as an Exhibit to the Annual
Report on Form 10 QSB filed on March 9, 2004 and incorporated herein by reference (File No.
000-31249).(6)
    
    Previously filed with the Securities and Exchange Commission as an Exhibit to the Current
Report on 8-K/A filed on July 28, 2004 and incorporated herein by reference. (File No.
000-31249).(7)
    
    Previously filed with the Securities and Exchange Commission as an Exhibit to the Current
Report on 8-K/A filed on May 2, 2005 and incorporated herein by reference. (File No.
000-31249).(8)
    
    Previously filed with the Securities and Exchange Commission as an Exhibit to Form S-1/A,
Amendment No. 1, filed August 27, 2004 and incorporated herein by reference (File No.
000-31249).(9)
    
    Previously filed with the Securities and Exchange Commission as an Exhibit to the Annual
Report on Form 10 QSB filed on February 19, 2003 and incorporated herein by reference. (File
No. 000-31249).(10)
    
    Previously filed with the Securities and Exchange Commission as and Exhibit to the Current
Report on Form 8-K filed on September 30, 2005 and incorporated herein by reference. (File No.
000-31249).(11)
    
    Previously filed with the Securities and Exchange Commission as and Exhibit to the Current
Report on Form 8-K filed on September 30, 2005 and incorporated herein by reference. (File No.
000-31249).(12)
    
    Previously filed with the Securities and Exchange Commission as an Exhibit to the Companys
Current Report on Form 8-K filed on September 2, 2004 and incorporated herein by this
reference.(13)
    
    Previously filed with the Securities and Exchange Commission as an Exhibit to the Companys
Current Report on Form 8-K filed on November 16, 2004 and incorporated herein by this
reference.(14)
    
    Previously filed with the Securities and Exchange Commission as an Exhibit to the Companys
Current Report on Form 8-K filed on December 28, 2004 and incorporated herein by this
reference.(15)
    
    Previously filed with the Securities and Exchange Commission as an Exhibit to the Companys
Current Report on Form 8-K filed on January 12, 2005.(16)
    
    Previously filed with the Securities and Exchange Commission as an Exhibit to the Companys
Current Report on Form 8-K filed on February 8, 2005.(17)
    
    Previously filed with the Securities and Exchange Commission as an Exhibit to the Companys
Current Report on Form 8-K filed on February 23, 2005. 176




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##### Table of Contents



(18)
    
    Previously filed with the Securities and Exchange Commission as an Exhibit to the Companys
Current Report on Form 8-K filed on February 23, 2005.(19)
    
    Previously filed with the Securities and Exchange Commission as an Exhibit to the Companys
Current Report on Form 8-K on March 28, 2005(20)
    
    Previously filed with the Securities and Exchange Commission as an Exhibit to the Companys
Current Report on Form 8-K on April 20, 2005.(21)
    
    Previously filed with the Securities and Exchange Commission as an Exhibit to the Companys
Current Report on Form 8-K on June 30, 2005.(22)
    
    Previously filed with the Securities and Exchange Commission as an Exhibit to the Companys
Quarterly Report on Form 10-Q on February 14, 2006.(23)
    
    Previously filed with the Securities and Exchange Commission as an Exhibit to the Companys
Annual Report on Form 10-K on June 30, 2005. 
 177




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##### Table of Contents



Item 17. Undertakings
          178




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##### Table of Contents



SIGNATURES
  
 
 
 Arcadia Resources, Inc.By:
    /s/ JOHN E. ELLIOTTJohn E. ElliottChairman and Chief Executive Officer 
 POWER OF ATTORNEY
 
  
 
 
 
 /s/ JOHN E. ELLIOTT, II

John E. Elliott, II
    
    Director, Chairman and Chief
Executive Officer (Principal
Executive Officer
    
    May 4, 2006/s/ LAWRENCE R. KUHNERT

Lawrence R. Kuhnert
    
    Director, President
and Chief Operating Officer
    
    May 4, 2006/s/ REBECCA R. IRISH

Rebecca R. Irish
    
    Secretary, Treasurer and Chief
Financial Officer
(Principal Financial and
Accounting Officer)
    
    May 4, 2006/s/ JOHN T. THORNTON*

John T. Thornton
    
    Director
    
    May 4, 2006
 By:
    * /s/ JOHN E. ELLIOTTJohn E. ElliottAttorney-in-Fact 
 179