##### Table of Contents



As
filed with the Securities and Exchange Commission on July 7, 2006
 
 Registration No. 333-118557
   UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, DC 20549
 
 AMENDMENT
NO. 5
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
    
    
    

101,894,606
    (1)
    
    
    $
    2.745
    
    
    
    $

279,700,693.47
    
    
    
    $
    0
    (2)Class A Warrants
    
    
    
    6,629,905
    (1)
    
    
    $
    2.745
    (3)
    
    
    $

18,199,089.23
    (3)
    
    
    $
    0
    (2)Class B-1 Warrants
    
    
    
    13,777,777
    (1)
    
    
    $
    2.745
    (3)
    
    
    $

37,819,997.87
    (3)
    
    
    $
    0
    (2)Class B-2 Warrants
    
    
    
    4,711,110
    (1)
    
    
    $
    2.745
    (3)
    
    
    $

13,096,696.95
    (3)
    
    
    $
    0
    (2)




---



##### Table of Contents



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 July 7, 2006
 
 PROSPECTUS
 
 101,894,606 Shares of Common Stock
25,118,792 Classes A, B-1 and B-2 Warrants to purchase 25,118,792 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 11.
  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




---



##### 



TABLE OF CONTENTS
 
 About This Prospectus
    
    
    4Statements Regarding Forward-Looking Information
    
    
    4Prospectus Summary
    
    
    5Risk Factors
    
    
    11Use of Proceeds
    
    
    20Dividend Policy and Market Information
    
    
    20Selected Consolidated Financial Data
    
    
    22Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    24Our Business
    
    
    37Management
    
    
    58Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
    
    
    66Selling Security Holders
    
    
    71Description of Capital Stock
    
    
    86Plan of Distribution
    
    
    90Legal Matters
    
    
    92Experts
    
    
    92Where You Can Find More Information
    
    
    93Consolidated
Financial Statements of Arcadia Resources, Inc. and Subsidiaries for
the years ended March 31, 2006, March 31, 2005 and March 31, 2004
    
    
    F-99Unaudited
Pro Forma Condensed Combined Financial Statements as of
March 31, 2004
    
    
    F-130Consolidated Financial Statements of Critical Home Care, Inc. as of and for the periods ended March 31, 2004, September 30, 2003 and September
30, 2002
    
    
    F-139Opinion Regarding LegalityConsent of BDO Seidman, LLPConsent of Marcum & Kliegman, LLPConsent of Grassi & Co., CPA's
 
  3




---



##### Table of Contents



ABOUT THIS PROSPECTUS
 
  
 
 STATEMENTS REGARDING FORWARD-LOOKING INFORMATION
   4




---



##### Table of Contents



PROSPECTUS SUMMARY
  Our Company
 
  
 
  
   RKDA Merger
   
  
 
  
 5




---



##### 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. During the year ended March 31, 2006, we completed
fifteen
acquisitions. We completed one acquisition during the quarter ended
June 30, 2006.
    
    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.
 Companys Financial Position Following RKDA Merger
 
  
 
 
 6




---



##### Table of Contents



Segment Information
 
 
 
 
  
 
  
  
  
 
 Year EndedMarch 31, 2006
    
    
    March 31, 2005
    
    

March 31, 2004Net Revenues:Services
    
    $
    110,152
    
    
    $
    97,218
    
    
    $
    78,359ProductsRentals
    
    
    10,425
    
    
    
    4,948
    
    
    
    Sales
    
    
    6,689
    
    
    
    3,175
    
    
    
    Retail
    
    
    3,663
    
    
    
    0
    
    
    
    Total Revenue
    
    
    130,929
    
    
    
    105,341
    
    
    
    78,359Operating
Income (Loss):Services
    
    
    4,376
    
    
    
    3,860
    
    
    
    3,730Products
    
    
    (356
    )
    
    
    (2,367
    )
    
    
    Retail
    
    
    (1,211
    )
    
    
    0
    
    
    
    Unallocated Corporate Overhead
    
    
    (4,944
    )
    
    
    (6,655
    )
    
    
    Total
Operating Income (Loss)
    
    
    (2,135
    )
    
    
    (5,162
    )
    
    
    3,730Interest
Expense (Income)
    
    
    1,524
    
    
    
    859
    
    
    
    (2
    )Amortization of Debt Discount
    
    
    933
    
    
    
    1,228
    
    
    
    Net Income (Loss) before Income Tax Expense
    
    
    (4,592
    )
    
    
    (7,249
    )
    
    
    3,732Income Tax Expense
    
    
    119
    
    
    
    185
    
    
    
    Net Income (Loss)
    
    $
    (4,711
    )
    
    $
    (7,434
    )
    
    $
    3,732Assets:Services
    
    $
    48,337
    
    
    $
    43,159
    
    
    $
    17,203Products
    
    
    31,644
    
    
    
    10,467
    
    
    
    Retail
    
    
    2,160
    
    
    
    0
    
    
    
    Unallocated Corporate Assets
    
    
    3,010
    
    
    
    1,967
    
    
    
    Total Assets
    
    $
    85,151
    
    
    $
    55,593
    
    
    $
    17,203
 
 7




---



##### Table of Contents



THE OFFERING
 Common stock to be offered by the selling security holders
    
    Up to
101,894,606 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
July 6, 2006
    
    97,901,604 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 timeAmerican
Stock Exchange (AMEX) symbol
    
    KAD
 
 Class of Warrants
    
    A
    
    B-1
    
    B-2Number of Warrants to be
offered by the selling
security holders
    
    Up to 6,629,905 Class A
Warrants to purchase up
to 6,629,905 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 4,711,110 Class B-2
Warrants to purchase up to
4,711,110 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.
 
 8




---



##### Table of Contents



9




---



##### Table of Contents



Consolidated
Statements of Operations Data:
(Results shown in thousands, except per share data)
    
    Successor


    
    
    PredecessorYear Ended
    
    
    Period from
    
    
    Period from
    
    
    Year Ended
    
    
    Year Ended
    
    
    Year EndedMarch 31,
    
    
    May 10, 2004 to
    
    
    April 1, 2004 to
    
    
    March 31,
    
    
    March 31,
    
    
    March 31,2006
    
    
    March 31, 2005
    
    
    May 9, 2004
    
    
    2004
    
    
    2003
    
    
    2002Net Sales
    
    $
    130,929
    
    
    $
    95,855
    
    
    $
    9,487
    
    
    $
    78,359
    
    
    $
    76,276
    
    
    $
    75,848Cost of Sales
    
    
    87,564
    
    
    
    67,050
    
    
    
    6,906
    
    
    
    56,205
    
    
    
    53,822
    
    
    
    53,134Gross Profit
    
    
    43,365
    
    
    
    28,805
    
    
    
    2,581
    
    
    
    22,154
    
    
    
    22,454
    
    
    
    22,714General and Administrative Expenses
    
    
    43,174
    
    
    
    32,264
    
    
    
    2,102
    
    
    
    18,424
    
    
    
    18,172
    
    
    
    18,824Impairment of Goodwill
    
    
    
    
    
    
    707
    
    
    
    16
    
    
    
    
    
    
    
    
    
    
    
    Depreciation and Amortization
    
    
    2,326
    
    
    
    1,458
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Operating Income (Loss)
    
    
    (2,135
    )
    
    
    (5,624
    )
    
    
    463
    
    
    
    3,730
    
    
    
    4,282
    
    
    
    3,890Other Expenses Other (Income)
    
    
    
    
    
    
    (87
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Interest Expense (Income), Net
    
    
    1,524
    
    
    
    946
    
    
    
    
    
    
    
    (2
    )
    
    
    (1
    )
    
    
    (4
    )Amortization of Debt Discount
    
    
    933
    
    
    
    1,228
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total Other Expenses (Income)
    
    
    2,457
    
    
    
    2,087
    
    
    
    
    
    
    
    (2
    )
    
    
    (1
    )
    
    
    (4
    )Net Income
(Loss) Before Income Tax Expense
    
    
    (4,592
    )
    
    
    (7,711
    )
    
    
    463
    
    
    
    3,732
    
    
    
    4,283
    
    
    
    3,894Income Tax Expense
    
    
    119
    
    
    
    186
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net Income (Loss)
    
    $
    (4,711
    )
    
    $
    (7,897
    )
    
    $
    463
    
    
    $
    3,732
    
    
    $
    4,283
    
    
    $
    3,894Pro Forma Income Tax expense from
tax status change
    
    
    
    
    
    
    
    
    
    
    158
    
    
    
    1,269
    
    
    
    1,456
    
    
    
    1,324Pro Forma Income after Income Tax
from tax status change
    
    
    
    
    
    
    
    
    
    $
    305
    
    
    $
    2,463
    
    
    $
    2,827
    
    
    $
    2,570Income (Loss) per Share:Basic
    
    $
    (0.06
    )
    
    $
    (0.11
    )
    
    $
    0.49
    
    
    $
    3.94
    
    
    $
    4.52
    
    
    $
    4.11Fully diluted
    
    $
    (0.06
    )
    
    $
    (0.11
    )
    
    $
    0.49
    
    
    $
    3.94
    
    
    $
    4.52
    
    
    $
    4.11Pro Forma Income (Loss) per Share:Basic
    
    
    
    
    
    
    
    
    
    $
    0.32
    
    
    $
    2.60
    
    
    $
    2.98
    
    
    $
    2.71Fully diluted
    
    
    
    
    
    
    
    
    
    $
    0.32
    
    
    $
    2.60
    
    
    $
    2.98
    
    
    $
    2.71Weighted average number of shares
(in thousands):Basic
    
    
    83,834
    
    
    
    72,456
    
    
    
    948
    
    
    
    948
    
    
    
    948
    
    
    
    948Fully diluted
    
    
    83,834
    
    
    
    72,456
    
    
    
    948
    
    
    
    948
    
    
    
    948
    
    
    
    948
 Successor
    
    PredecessorMarch 31,
    
    March 31,
    
    March 31,
    
    March 31,
    
    March 31,2006
    
    2005
    
    2004
    
    2003
    
    2002(In thousands)Balance Sheet Data:Total Current Assets
    
    $
    32,322
    
    
    $
    24,536
    
    
    $
    13,612
    
    
    $
    12,325
    
    
    $
    12,498Working Capital
    
    $
    19,734
    
    
    $
    10,032
    
    
    $
    9,069
    
    
    $
    8,874
    
    
    $
    8,254Total Assets
    
    $
    85,151
    
    
    $
    55,593
    
    
    $
    17,203
    
    
    $
    14,999
    
    
    $
    15,094Total Long-Term Debt, including current maturities
    
    $
    19,772
    
    
    $
    22,825
    
    
    $
    430
    
    
    $
    2
    
    
    $
    113Total Liabilities
    
    $
    28,107
    
    
    $
    30,071
    
    
    $
    4,973
    
    
    $
    3,453
    
    
    $
    4,357Total Stockholders Equity
    
    $
    57,044
    
    
    $
    25,522
    
    
    $
    12,230
    
    
    $
    11,546
    
    
    $
    10,737
 
 10




---



##### 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.
  
 11




---



##### Table of Contents



12




---



##### Table of Contents



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




---



##### Table of Contents



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.
  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.
   
 14




---



##### 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.
  
 15




---



##### Table of Contents



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.
  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 was quoted on the OTC Bulletin Board until
June 30, 2006, there may be vagaries in trading activity caused
by  the movement of our Common Stock to a new method of trading on
the American Stock Exchange.
   
 16




---



##### Table of Contents



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 listed on the AMEX or quoted by any
quotation service, there may be difficulty in
trading and obtaining quotations for our Warrants and you should consider our Warrants to be
illiquid.
  Your resale of any securities you acquire 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.
  
 17




---



##### 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.
  Although we recently added two independent directors on our Board of Directors, our ability to
recruit and retain a majority of independent directors may affect our ability to be listed on a
national securities exchange or quotation system.
   Our Board of Directors, which with two recent appointments will consist of a majority of
independent directors, may continue to act 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.
  
 18




---



##### Table of Contents



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. et seq. et seq.
 et seq., et seq.
 
 19




---



##### Table of Contents



USE OF PROCEEDS
  
 DIVIDEND POLICY AND MARKET INFORMATION
 
  
 
 Bid PricePeriod
    
    High
    
    LowFiscal Year
Ending 3/31/2007
    
    First Quarter ended 6/30/06 (1)
    
    $
    3.29
    
    
    $
    2.14Fiscal 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
    
    $
    2.00
    
    
    $
    1.11Third Quarter ended 12/31/04
    
    $
    1.28
    
    
    $
    0.64Second 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 (2)
    
    $
    4.20
    *
    
    $
    2.03
    **Quarter ended 6/30/02 (3)
    
    
    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
 
 20




---



##### Table of Contents



(1)
    
    The Companys Common Stock began trading on the American
Stock Exchange (AMEX) on July 3, 2006 under the ticker symbol
KAD. See (2) for history of the Companys Common
Stock on the OTC Bulletin Board. Amounts shown for this period are per the quotes on the OTC Bulletin
Board.(2)
    
    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.(3)
    
    Before August 2, 2002, the Companys Common Stock was not quoted
the OTC Bulletin Board or listed on 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. 
  
 
  
  21




---



##### Table of Contents



SELECTED CONSOLIDATED FINANCIAL DATA
 
   
 22




---



##### Table of Contents



Consolidated
Statements of Operations Data:
(Results shown in thousands, except per share data)
    
    Successor


    
    
    PredecessorYear Ended
    
    
    Period from
    
    
    Period from
    
    
    Year Ended
    
    
    Year Ended
    
    
    Year EndedMarch 31,
    
    
    May 10, 2004 to
    
    
    April 1, 2004 to
    
    
    March 31,
    
    
    March 31,
    
    
    March 31,2006
    
    
    March 31, 2005
    
    
    May 9, 2004
    
    
    2004
    
    
    2003
    
    
    2002Net Sales
    
    $
    130,929
    
    
    $
    95,855
    
    
    $
    9,487
    
    
    $
    78,359
    
    
    $
    76,276
    
    
    $
    75,848Cost of Sales
    
    
    87,564
    
    
    
    67,050
    
    
    
    6,906
    
    
    
    56,205
    
    
    
    53,822
    
    
    
    53,134Gross Profit
    
    
    43,365
    
    
    
    28,805
    
    
    
    2,581
    
    
    
    22,154
    
    
    
    22,454
    
    
    
    22,714General and Administrative Expenses
    
    
    43,174
    
    
    
    32,264
    
    
    
    2,102
    
    
    
    18,424
    
    
    
    18,172
    
    
    
    18,824Impairment of Goodwill
    
    
    
    
    
    
    707
    
    
    
    16
    
    
    
    
    
    
    
    
    
    
    
    Depreciation and Amortization
    
    
    2,326
    
    
    
    1,458
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Operating Income (Loss)
    
    
    (2,135
    )
    
    
    (5,624
    )
    
    
    463
    
    
    
    3,730
    
    
    
    4,282
    
    
    
    3,890Other Expenses Other (Income)
    
    
    
    
    
    
    (87
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Interest Expense (Income), Net
    
    
    1,524
    
    
    
    946
    
    
    
    
    
    
    
    (2
    )
    
    
    (1
    )
    
    
    (4
    )Amortization of Debt Discount
    
    
    933
    
    
    
    1,228
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total Other Expenses (Income)
    
    
    2,457
    
    
    
    2,087
    
    
    
    
    
    
    
    (2
    )
    
    
    (1
    )
    
    
    (4
    )Net Income
(Loss) Before Income Tax Expense
    
    
    (4,592
    )
    
    
    (7,711
    )
    
    
    463
    
    
    
    3,732
    
    
    
    4,283
    
    
    
    3,894Income Tax Expense
    
    
    119
    
    
    
    186
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net Income (Loss)
    
    $
    (4,711
    )
    
    $
    (7,897
    )
    
    $
    463
    
    
    $
    3,732
    
    
    $
    4,283
    
    
    $
    3,894Pro Forma Income Tax expense from
tax status change
    
    
    
    
    
    
    
    
    
    
    158
    
    
    
    1,269
    
    
    
    1,456
    
    
    
    1,324Pro Forma Income after Income Tax
from tax status change
    
    
    
    
    
    
    
    
    
    $
    305
    
    
    $
    2,463
    
    
    $
    2,827
    
    
    $
    2,570Income (Loss) per Share:Basic
    
    $
    (0.06
    )
    
    $
    (0.11
    )
    
    $
    0.49
    
    
    $
    3.94
    
    
    $
    4.52
    
    
    $
    4.11Fully diluted
    
    $
    (0.06
    )
    
    $
    (0.11
    )
    
    $
    0.49
    
    
    $
    3.94
    
    
    $
    4.52
    
    
    $
    4.11Pro Forma Income (Loss) per Share:Basic
    
    
    
    
    
    
    
    
    
    $
    0.32
    
    
    $
    2.60
    
    
    $
    2.98
    
    
    $
    2.71Fully diluted
    
    
    
    
    
    
    
    
    
    $
    0.32
    
    
    $
    2.60
    
    
    $
    2.98
    
    
    $
    2.71Weighted average number of shares
(in thousands):Basic
    
    
    83,834
    
    
    
    72,456
    
    
    
    948
    
    
    
    948
    
    
    
    948
    
    
    
    948Fully diluted
    
    
    83,834
    
    
    
    72,456
    
    
    
    948
    
    
    
    948
    
    
    
    948
    
    
    
    948
 
 
 Successor
    
    PredecessorMarch 31,
    
    March 31,
    
    March 31,
    
    March 31,
    
    March 31,2006
    
    2005
    
    2004
    
    2003
    
    2002(In thousands)Balance Sheet Data:Total Current Assets
    
    $
    32,322
    
    
    $
    24,536
    
    
    $
    13,612
    
    
    $
    12,325
    
    
    $
    12,498Working Capital
    
    $
    19,734
    
    
    $
    10,032
    
    
    $
    9,069
    
    
    $
    8,874
    
    
    $
    8,254Total Assets
    
    $
    85,151
    
    
    $
    55,593
    
    
    $
    17,203
    
    
    $
    14,999
    
    
    $
    15,094Total Long-Term Debt, including current maturities
    
    $
    19,772
    
    
    $
    22,825
    
    
    $
    430
    
    
    $
    2
    
    
    $
    113Total Liabilities
    
    $
    28,107
    
    
    $
    30,071
    
    
    $
    4,973
    
    
    $
    3,453
    
    
    $
    4,357Total Stockholders Equity
    
    $
    57,044
    
    
    $
    25,522
    
    
    $
    12,230
    
    
    $
    11,546
    
    
    $
    10,737
 
 23




---



##### Table of Contents






MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
    Overview
    
 Accounting Acquirer. The consolidated financial statements of Arcadia Services,
Inc. became the historical financial statements of the Company as a
result of the RKDA reverse merger. For accounting purposes, RKDA is
the accounting acquirer of the Company, based on the application of
the criteria specified in Statement of Financial Accounting Standards
No. 141. Application of the criteria of SFAS No. 141 to the facts and
circumstances of the RKDA reverse merger demonstrate that RKDA is the
accounting acquirer of the Company for the following principal
reasons:
    
    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
allowed 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.In the consolidated financial statements accompanying
this prospectus, the Predecessor entity is Arcadia Services, Inc. and
its subsidiaries presented on a consolidated basis and the Successor
entity is the combined Company resulting from the RKDA merger,
presented on a consolidated basis. 24




---



##### 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
    %Fourth quarter ended March 31, 2006
    
    
    34.2
    
    
    
    2.7
    %
    
    
    19.6
    %
 
 *
    
    Includes results from the Predecessor entity Growth Strategy. Results of Operations
   (in thousands)Description of assets and (liabilities) purchased:Current  Assets
    
    $
    1,889Property and
Equipment
    
    
    1,972Intangibles
    
    
    5,390Liabilities
    
    
    (5,154
    )Goodwill
    
    
    13,312Total assets and liabilities acquired
    
    $
    17,409
  Critical Accounting Policies
  
 25




---



##### Table of Contents






Revenue Recognition
  Allowance for Doubtful Accounts
  Goodwill
   .
  
 26




---



##### Table of Contents






Income Taxes
     Results of Operations
 Year Ended March 31, 2006 Compared to Year Ended March 31, 2005
  Arcadia Resources, Inc.
Consolidated Statements of Income
(In thousands)
 Successor
    
    
    Successor
    
    
    PredecessorPeriod from
    
    
    Period FromYear
    
    
    May 10, 2004
    
    
    April 1, 2004Ended
    
    
    To
    
    
    ToMarch 31, 2006
    
    
    March 31, 2005
    
    
    May 9, 2004Net Sales
    
    $
    130,929
    
    
    $
    95,855
    
    
    $
    9,487Cost of Sales
    
    
    87,564
    
    
    
    67,050
    
    
    
    6,906Gross Profit
    
    
    43,365
    
    
    
    28,805
    
    
    
    2,581General and Administrative Expenses
    
    
    43,174
    
    
    
    32,264
    
    
    
    2,102
 
 27




---



##### Table of Contents






Successor
    
    
    Successor
    
    
    PredecessorPeriod from
    
    
    Period FromYear
    
    
    May 10, 2004
    
    
    April 1, 2004Ended
    
    
    To
    
    
    ToMarch 31, 2006
    
    
    March 31, 2005
    
    
    May 9, 2004Impairment of Goodwill
    
    
    
    
    
    
    707
    
    
    
    16Depreciation and Amortization
    
    
    2,326
    
    
    
    1,458
    
    
    
    Operating Income (Loss)
    
    
    (2,135
    )
    
    
    (5,624
    )
    
    
    463Other ExpensesOther Income
    
    
    
    
    
    
    (87
    )
    
    
    Interest Expense, Net
    
    
    1,524
    
    
    
    946
    
    
    
    Amortization of Debt Discount
    
    
    933
    
    
    
    1,228
    
    
    
    Total Other Expenses
    
    
    2,457
    
    
    
    2,087
    
    
    
    Net Income (Loss) Before Income Tax Expense
    
    
    (4,592
    )
    
    
    (7,711
    )
    
    
    463Income Tax Expense
    
    
    119
    
    
    
    186
    
    
    
    Net Income (Loss)
    
    $
    (4,711
    )
    
    $
    (7,897
    )
    
    $
    463
   (in millions)Internal growth from operations of entities owned as of March 31, 2005
    
    $
    10.8Two Services Division entities acquired during the year ended March 31, 2006
    
    
    7.9Eleven home respiratory care and DME operations acquired during the year ended March 31, 2006
    
    
    3.6Internal growth from Retail Division start up and one acquisition during the year ended March 31, 2006
    
    
    3.3Total
increase in sales for the year ended March 31, 2006*
    
    $
    25.6
 
 *
    
    Includes results from the Predecessor entity    
 28




---



##### 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 two entities 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 
 29




---



##### Table of Contents






30




---



##### Table of Contents






31




---



##### Table of Contents



Year Ended March 31, 2004 Compared to Year Ended March 31, 2003
      Year Ended March 31, 2003 Compared to Year Ended March 31, 2002
     32




---



##### Table of Contents



Liquidity and Capital Resources
 
 
  
 
 Successor
    
    Successor
    
    PredecessorYear
    
    Period from May 10,
    
    Period from April 1,SUMMARY CONSOLIDATED
    
    Ended
    
    2004 to March 31,
    
    2004 to May 9,STATEMENTS OF CASH FLOWS (in millions)
    

March 31,
2006
    
    2005
    
    2004Net income (loss)
    
    $
    (4.7
    )
    
    $
    (7.9
    )
    
    $
    0.5Net cash (used in) operating activities
    
    $
    (7.4
    )
    
    $
    (0.5
    )
    
    $
    (0.5
    )Net cash (used in) investing activities
    
    $
    (16.7
    )
    
    $
    (0.2
    )
    
    $
    (0.2
    )Net cash provided by financing activities
    
    $
    23.2
    
    
    $
    0.7
    
    
    $
    0.7Net increase (decrease) in cash and cash equivalents
    
    $
    (0.9
    )
    
    $
    1.4
    
    
    $
    Cash and cash equivalents at the end of the period
    
    $
    0.5
    
    
    $
    1.4
    
    
    $
    
 
 
  
 
 
 
  
 
  
 
  
 
  
 
  
 
 Government-funded
    
    
    24
    %Institutions
    
    
    45
    %Commercial Insurance
    
    
    15
    %Private Pay
    
    
    16
    %


33



---



##### Table of Contents



Financing Transactions
 
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 34




---



##### Table of Contents



35




---



##### Table of Contents



Contractual Obligations and Commercial Commitments
  Payments due by March 31,Total
    
    
    2007
    
    
    2008
    
    
    2009
    
    
    2010
    
    
    2011Operating Leases
    
    $
    2,701
    
    
    $
    1,425
    
    
    $
    963
    
    
    $
    215
    
    
    $
    58
    
    
    $
    40Debt
Maturities*
    
    
    22,772
    
    
    
    2,406
    
    
    
    19,992
    
    
    
    242
    
    
    
    75
    
    
    
    57Employment Agreements
    
    
    1,257
    
    
    
    867
    
    
    
    390
    
    
    
    
    
    
    
    
    
    
    
    Interest
Expense*
    
    
    4,219
    
    
    
    2,158
    
    
    
    2,031
    
    
    
    30
    
    
    
    
    
    
    
    Total
    
    $
    30,949
    
    
    $
    6,856
    
    
    $
    23,376
    
    
    $
    487
    
    
    $
    133
    
    
    $
    97
 
 
  
 
 Quantitative and Qualitative Disclosures About Market Risk.
 
 
  
 36




---



##### Table of Contents



OUR BUSINESS
 Overview
 
    
 
  
 
  
 
 STRATEGY
 Brand our name and concept.
 Focus on internal growth.
 Complete strategic acquisitions.
 Improve organizational support
 Obtain capital support
 PRODUCTS AND SERVICES
 Home Care (Skilled and Personal Care) and Staffing (Medical and Non-Medical)
  Respiratory and Durable Medical Equipment and Related Products
  Mail Order Pharmacy and Related Products
  Retail Distribution
  ORGANIZATION
 OPERATIONS
  MANAGEMENT
  SALES AND MARKETING
  
 37




---



##### Table of Contents



INFORMATION SYSTEMS
  ACCOUNTS RECEIVABLE MANAGEMENT
  COMPLIANCE
  ACCREDITATION AND EDUCATION
  COMPETITION AND MARKET CONDITIONS
    SUPPLIERS
  GOVERNMENT REGULATION
     EMPLOYEES
  ENVIRONMENTAL MATTERS
  
 Historical Development of the Company and Businesses Acquired
  The Company Becomes Critical Home Care, Inc.
    38




---



##### Table of Contents



Arcadia and Arcadia Rx Acquisitions
        39




---



##### Table of Contents



Change in Control of the Board of Directors
      
  
 New
Listing on American Stock Exchange
 
  
 Escrow of Arcadia Resources, Inc. Common Stock
   40




---



##### Table of Contents



Preemptive Rights
  Employment Agreements and Stock Options
 
        
 41




---



##### Table of Contents



Accounting Treatment of the RKDA Merger
  The PIPE: Regulation D Private Placement Offering
   42




---



##### Table of Contents



Registration Rights Agreements
   
 Bank Credit Agreements and Promissory Note
 
 
  
   1 2
     (in thousands)Year ended:2007
    
    $
    332008
    
    $
    6,190
 
  
  
 
  
 43




---



##### Table of Contents



Change of the Companys Principal Executive Offices and Fiscal Year End
    New Identity
  Recent Acquisitions
 
 TRANSACTIONS COMPLETED DURING THE YEAR ENDED MARCH 31, 2005
     (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
 
 44




---



##### Table of Contents



SERVICES DIVISION  2005 Post Merger Acquisitions
    PRODUCTS DIVISION  2005 Post-Merger Acquisitions
    
 45




---



##### Table of Contents



(in thousands)Description of assets and liabilities purchased:Current and other assets
    
    $
    4,215Fixed assets
    
    
    954Goodwill
    
    
    6,336Liabilities
    
    
    (1,837
    )Total assets and liabilities purchased post-reverse acquisition
    
    $
    9,668
   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
 TRANSACTIONS COMPLETED DURING THE YEAR ENDED MARCH 31, 2006
  SERVICES DIVISION  YEAR ENDED MARCH 31 ,2006
    PRODUCTS DIVISION  YEAR ENDED MARCH 31 ,2006
       
 46




---



##### Table of Contents



RETAIL DIVISION  YEAR ENDED MARCH 31 ,2006
    (in thousands)Current Assets
    
    $
    1,889Property and Equipment
    
    
    1,972Intangibles
    
    
    5,390Liabilities
    
    
    (5,154
    )Goodwill
    
    
    13,312Total Consideration
    
    $
    17,409
   Year Ended
    
    
    Two Years EndedMarch 31, 2006
    
    
    March 31, 2006Pro forma revenue
    
    $
    138,725
    
    
    $
    124,951Pro forma net loss
    
    $
    (3,972
    )
    
    $
    (6,600
    )Pro forma losses per shareBasic
    
    $
    (0.05
    )
    
    $
    (0.09
    )Diluted
    
    $
    (0.05
    )
    
    $
    (0.09
    )Pro forma weighted average common shares (in thousands)Basic
    
    
    84,260
    
    
    
    73,365Diluted
    
    
    84,260
    
    
    
    73,365
 
 Risk Factors
 
 PRODUCTS
DIVISION  YEAR ENDING MARCH 31, 2007
 
 
 see Risk Factors
 47




---



##### Table of Contents



Our Services and Products
 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
  48




---



##### Table of Contents



Competition
   Government Regulation
 
  
    Employees
 
  
 Properties
 49




---



##### Table of Contents



Description
of Property.
 
  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
    
    3280361 West Main Street
    
    Rossville
    
    Indiana
    
    460653306 Clays Mill Road, Suite 104 D3 & D4
    
    Lexington
    
    Kentucky
    
    405031810 Decatur Highway, Ste. 124
    
    Fultondale
    
    Alabama
    
    35068531 5th Street, Unit B
    
    San Fernando
    
    California
    
    91340955 E. 58th Ave., Unit O
    
    Denver
    
    Colorado
    
    8021613850 Treeline Avenue South
    
    Ft. Myers
    
    Florida
    
    339134350 Fowler Street #1B
    
    Ft. Myers
    
    Florida
    
    33901105 N. Lakeshore Way
    
    Lake Alfred
    
    Florida
    
    3385015121 Tamiami Trail
    
    North Port
    
    Florida
    
    342873314 Harbor Blvd.
    
    Port Charlotte
    
    Florida
    
    339525935 US 27 N., Suite 105
    
    Sebring
    
    Florida
    
    33870221A Pat Haralson Memorial Drive
    
    Blairsville
    
    Georgia
    
    30512590 Historic Hwy. 441N
    
    Demorest
    
    Georgia
    
    305351651 Thompson Vr Rd. NW
    
    Gainesville
    
    Georgia
    
    30501310 E. 41st Street
    
    Savannah
    
    Georgia
    
    31401200 Technology Court, Ste. 300
    
    Smyrna
    
    Georgia
    
    300827700 Brush Hill, Suite 240
    
    Burr Ridge
    
    Illinois
    
    60527111 Erick Street
    
    Crystal Lake
    
    Illinois
    
    600141126 Wall Street
    
    Jacksonville
    
    Illinois
    
    626501665 Quincy Ave., Unit 111
    
    Naperville
    
    Illinois
    
    605402201 West Townline, Suite F
    
    Peoria
    
    Illinois
    
    61615381 Kairns Drive
    
    Crown Point
    
    Indiana
    
    463071600 Kepner Dr.
    
    Lafayette
    
    Indiana
    
    47905868 Hwy. 15 South
    
    Jackson
    
    Kentucky
    
    413393524 Park Plaza Road
    
    Paducah
    
    Kentucky
    
    420013840 E. Packard , Suite 160
    
    Ann Arbor
    
    Michigan
    
    481081532 Opdyke Road, Ste. 400
    
    Auburn Hills
    
    Michigan
    
    483265350 E. Beckley Road
    
    Battle Creek
    
    Michigan
    
    490157990 Grand River, Suite C
    
    Brighton
    
    Michigan
    
    4811492 W. Chicago Street
    
    Coldwater
    
    Michigan
    
    49036414 N. Jackson Street, Complex 8718
    
    Jackson
    
    Michigan
    
    49201950 W. Monroe St., Ste. G-400
    
    Jackson
    
    Michigan
    
    492025413 S. Westnedge Ave., Ste. A
    
    Kalamazoo
    
    Michigan
    
    49002535 N. Clipper, Suite 2
    
    Lansing
    
    Michigan
    
    489126540 Millenium Drive, Ste. 160
    
    Lansing
    
    Michigan
    
    489171787 W. Genessee, Suite A
    
    Lapeer
    
    Michigan
    
    4844626431 Southfield Rd.
    
    Lathrup Village
    
    Michigan
    
    480762100 Southfield
    
    Lincoln Park
    
    Michigan
    
    4814618320 Middlebelt Road
    
    Livonia
    
    Michigan
    
    4815229500 West 7 Mile Road
    
    Livonia
    
    Michigan
    
    4815227600 Novi Road
    
    Novi
    
    Michigan
    
    483773123 Gratiot Ave.
    
    Roseville
    
    Michigan
    
    4806618706 Eureka Road
    
    Southgate
    
    Michigan
    
    48195728 Pleasant Street, Ste. 4
    
    St. Joseph
    
    Michigan
    
    4908534869 Mound Road
    
    Sterling Heights
    
    Michigan
    
    4831014100 Lakeside Circle
    
    Sterling Heights
    
    Michigan
    
    48313300 W. 14 Mile Road
    
    Troy
    
    Michigan
    
    48083762 Summa Avenue
    
    Westbury
    
    New York
    
    11590417 Biltmore Avenue, Doctors Park, Bldg. 2, Ste. 2-E
    
    Asheville
    
    North Carolina
    
    288019801 West Kincey Ave., Ste 170
    
    Huntersville
    
    North Carolina
    
    28078101 North Third Street
    
    Mebane
    
    North Carolina
    
    273026320 Angus Drive, Ste. D
    
    Raleigh
    
    North Carolina
    
    276171033 Randolph Street, Suite 21
    
    Thomasville
    
    North Carolina
    
    273603918 West Point Boulevard
    
    Winston Salem
    
    North Carolina
    
    27103105 Mall Boulevard, Suite 283W
    
    Monroeville
    
    Pennsylvania
    
    15146416A Robertson Blvd.
    
    Waterboro
    
    South Carolina
    
    29488762 Independence Blvd., Suite 798
    
    Virginia Beach
    
    Virginia
    
    23455
 
 Legal Proceedings
  Environmental Matters
  50




---



##### Table of Contents



DESCRIPTION OF SERVICES DIVISION
 Overview
 
  
   Description of Staffing and Home Care Industries
 Staffing Industry
  Healthcare Staffing
   Non-Medical Staffing
 51




---



##### Table of Contents



Home Care Industry
  Competitive Environment
  Arcadia History
      Arcadia Home Care and Staffing Services
 
  
 Medical Staffing
 52




---



##### Table of Contents



Non-Medical Staffing
  Home Care Services
    Growth Strategy
  Derive Greater Penetration Within Current Markets
 53




---



##### Table of Contents



Continue Expanding Number of Locations
  Expand Service Offerings
  54




---



##### Table of Contents



Complete Selective Acquisitions
  Affiliated Agency Model
 
  
    Customers, Sales and Marketing
 
  
   55




---



##### Table of Contents



Operations
 Office Locations
 
  
 Office Space Leased by Arcadia Resources, Inc.
 
 Properties
 
 Arcadia Services Field Employees
 
  
 
 
 
  
 
  
 56




---



##### Table of Contents



57




---



##### Table of Contents



MANAGEMENT
 Directors, Executive Officers, Promoters and Control Persons; Compliance With Section
16(a) of the Exchange Act.
  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, 2004Rebecca R. Irish
    
    
    44
    
    
    Chief Financial Officer, Secretary and Treasurer
    
    Not applicableJohn T. Thornton
    
    
    68
    
    
    Director
    
    June 15, 2004Peter A. Brusca, M.D.
    
    
    65
    
    
    Director
    
    *Anna Maria Nekoranec
    
    
    42
    
    
    Director
    
    *James E. Haifley
    
    
    49
    
    
    Executive Vice President
    
    Not applicableCathy Sparling
    
    
    51
    
    
    Vice President of Administration
    
    Not applicable
 
 *
    
    Appointed on June 16, 2006, effective July 1, 2006. Dr. Brusca and Ms. Nekoranec have each
consented to their appointments as directors of the Company. Other than as reported in this
section, there are no arrangements or understandings between Dr. Brusca and Ms. Nekoranec, respectively,
and any other persons pursuant to which Dr. Brusca and Ms. Nekoranec were appointed as directors. 
 58




---



##### Table of Contents



John E. Elliott, II.
 Lawrence R. Kuhnert.
 Rebecca R. Irish.
 John T. Thornton.
 Peter M. Brusca, M.D.
 Anna Maria Nekoranec.
 James E. Haifley .
 
 59




---



##### Table of Contents



Cathy Sparling .
 Board Committees
    Director Compensation
     
 60




---



##### Table of Contents



Indemnification of Directors and Officers
  Code of Ethics
   Section 16(a) Beneficial Ownership Reporting Compliance
  
 61




---



##### Table of Contents



Executive Compensation
  
 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,
    
    
    2006
    
    
    $
    196,992
    
    
    
    
    
    
    
    
    
    
    
    Chairman and Chief Executive
    
    
    2005
    
    
    $
    132,692
    
    
    
    
    
    
    
    
    
    
    
    4,000,000Officer(1)
    
    
    2004
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2003
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Lawrence R. Kuhnert
    
    
    2006
    
    
    $
    196,992
    
    
    
    
    
    
    
    
    
    
    
    President and Chief Operating
    
    
    2005
    
    
    $
    132,692
    
    
    
    
    
    
    
    
    
    
    
    4,000,000Officer(1)
    
    
    2004
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2003
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Rebecca R. Irish,
    
    
    2006
    
    
    $
    149,085
    
    
    $
    72,000
    
    
    
    47,063
    
    
    
    Chief Financial Officer,
    
    
    2005
    
    
    $
    31,252
    
    
    $
    21,563
    
    
    
    25,125
    
    
    
    150,000Secretary and Treasurer(1)
    
    
    2004
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2003
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    James E. Haifley,
    
    
    2006
    
    
    $
    132,662
    
    
    
    
    
    
    
    47,831
    
    
    
    100,000Executive Vice
    
    
    2005
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    President(2)
    
    
    2004
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2003
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Cathy Sparling, Vice President of
    
    
    2006
    
    
    $
    147,877
    
    
    $
    38,963
    
    
    
    
    
    
    
    Administration(3)
    
    
    2005
    
    
    $
    141,927
    
    
    $
    352,572
    
    
    
    
    
    
    
    100,000Eric S. Yonenson,
    
    
    2006
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Former Chief Financial
    
    
    2005
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Officer(4)
    
    
    2004
    
    
    $
    57,942
    
    
    
    
    
    
    
    
    
    
    
    2003
    
    
    $
    65,019
    
    
    
    
    
    
    
    
    
    
    
    250,000David Bensol,
    
    
    2006
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Former Chairman
    
    
    2005
    
    
    $
    115,385
    
    
    
    
    
    
    
    
    
    
    
    And Chief Executive Officer(4)
    
    
    2004
    
    
    $
    75,557
    
    
    
    
    
    
    
    
    
    
    
    2003
    
    
    $
    113,654
    
    
    
    
    
    
    
    
    
    
    
    100,000Bradley Smith, Former
    
    
    2006
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Director and
    
    
    2005
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Officer(4)
    
    
    2004
    
    
    $
    62,981
    
    
    
    
    
    
    
    
    
    
    
    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.In connection the with the RKDA Merger, the Company issued to John E. Elliott, II, 12,780,000
shares of Company Common Stock and seven-year 600,000 Class A warrants to purchase 600,000
shares of Common Stock exercisable at $0.50 per share and issued to Lawrence R. Kuhnert
8,520,000 shares of Company Common Stock and seven-year 400,000 Class A warrants to purchase
400,000 shares of Common Stock exercisable at $0.50 per share. Also in connection the RKDA
Merger, the Messrs. Elliott and Kuhnert were each granted stock options to purchase 4 million
shares of Common Stock exercisable at $0.25 per share. The options vest in six tranches,
provided certain adjusted EBITDA milestones are met through fiscal 2008, subject to acceleration
upon certain events occurring. The options, to the extent vested, may be exercised by Messrs.
Elliot and Kuhnert as long as they are employed by the Company and for one year from termination
of employment for any reason. The milestones for adjusted EBITDA and vesting for each party are
as follows: fiscal 2006 EBITDA of $10.7 million will vest 500,000 options, if $11.0 million, an
additional 500,000 options will vest; fiscal 2007 EBITDA of $13.5 million will vest 500,000
options, if $14.0 million, an additional 500,000 options will vest; fiscal 2008 EBITDA of $17.5
million will vest 1 million options, if $18.5 million, an additional 1 million options will
vest. Mr. Bensol did not receive any compensation from the Company in connection with the RKDA
Merger. 
 62




---



##### 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
contingent upon continued employment at vesting dates. 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)
    
    Effective May 30, 2006, Cathy Sparling was named Vice President of Administration. Prior to
that, she served as Chief Operating Officer of Arcadia Services, Inc., 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 resigned his
employment effective June 12, 2006 and had previously 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
    
    
    
    
    
    
    $
    11,560,000Lawrence R. Kuhnert
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,000,000
    
    
    
    
    
    
    $
    11,560,000Rebecca R. Irish
    
    
    
    
    
    
    
    
    
    
    150,000
    
    
    
    
    
    
    $
    298,000
    
    
    
    James E. Haifley
    
    
    
    
    
    
    
    
    
    
    100,000
    
    
    
    
    
    
    $
    169,000
    
    
    
    Cathy Sparling
    
    
    
    
    
    
    
    
    
    
    100,000
    
    
    
    
    
    
    $
    169,000
    
    
    
    David Bensol
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
 
 *
    
    Value is calculated by subtracting the exercise price per share from the last reported market
price on March 31, 2006 of $3.14 per share and multiplying the result by the number of shares
subject to the option. Executive Officer Employment Contracts
  
 63




---



##### Table of Contents



64




---



##### Table of Contents



65




---



##### Table of Contents



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)
    
    
    13.07
    %26777 Central Park  Blvd., Suite 200Southfield, MI 48076Common Stock
    
    Lawrence Kuhnert
    
    
    8,920,000
    (2)
    
    
    8.72
    %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
    
    
    386,365
    (4)
    
    
    *26777 Central Park Blvd., Suite 200Southfield, MI 48076Common Stock
    
    Cathy Sparling
    
    
    350,000
    (5)
    
    
    *26777 Central Park Blvd., Suite 200Southfield, MI 48076Common Stock
    
    James E. Haifley
    
    
    321,200
    (6)
    
    
    *26777 Central Park Blvd., Suite 200Southfield, MI 48076Common Stock
    
    Anna Maria Nekoranec **
    
    
    
    
    
    
    *26777 Central Park Blvd., Suite 200Southfield, MI  48076Common Stock
    
    Peter M. Brusca, M.D. **
    
    
    
    
    
    
    *26777 Central Park Blvd., Suite 200Southfield, MI  48076Common Stock
    
    JANA Master Fund, Ltd.
    
    
    16,807,396
    (7)
    
    
    16.42
    %200 Park Ave., Ste. 3900New York, NY 10166Common Stock
    
    SDS Capital Group SPC, Ltd.
    
    
    8,482,967
    (8)
    
    
    8.29
    %53 Forest Ave., Suite 203Old Greenwich, CT 06870Common Stock
    
    Steven Derby
    
    
    8,482,967
    (9)
    
    
    8.29
    %53 Forest Ave., Suite 202Old Greenwich, CT 06870Common Stock
    
    North Sound Capital, LLC
    
    
    6,886,985
    (10)
    
    
    6.73
    %53 Forest Ave., Ste. 202Old Greenwich, CT 06870Common Stock
    
    Thomas McAuley
    
    
    6,886,985
    (11)
    
    
    6.73
    %53 Forest Ave., Ste. 202Old Greenwich, CT 06870
 
 *
    
    Represents less than 1% of the outstanding stock.**
    
    Appointed on June 16, 2006, effective July 1, 2006.  Dr. Brusca and Ms. Nekoranec have each consented to their appointments as directors of the Company. 
 66




---



##### Table of Contents



(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 option 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 and
125,000 shares issuable pursuant to a restricted
stock award.(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. Includes
50,000 shares issuable pursuant to a restricted stock award on June
22, 2006.(6)
    
    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, 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, and 50,000 shares issuable pursuant to an additional restricted stock award on June 22, 2006.(7)
    
    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 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.(8)
    
    Includes 566,071 shares of common stock issuable upon 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 
 67




---



##### Table of Contents



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)
    
    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.(10)
    
    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 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.(11)
    
    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.   
 
  
 68




---



##### Table of Contents



Plan Category
    
    (a)
    
    (b)
    
    (c)Number of securitiesremaining available forWeighted-average
    
    future issuance underNumber of securities to be
    
    exercise
    
    equity compensationissued upon exercise of
    
    price of outstanding
    
    plansoutstanding options,
    
    options, warrants and
    
    (excluding securitieswarrants and rights
    
    rights
    
    reflected in column (a))Equity compensation plans approved by security holders
    
    NoneEquity compensation
    
    9,536,540 common shares
    
    $
    0.36
    
    
    N/ATotal
    
    9,536,540 common shares
    
    $
    0.36
    
    
    N/A
 
 69




---



##### Table of Contents



CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS
 
 
  
 
 
 70




---



##### Table of Contents



SELLING SECURITY HOLDERS
  Table of Selling Security Holders Holding Shares of Common Stock
  71




---



##### 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
    
    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.
    
    
    684,800
    (8)
    
    
    684,800
    
    
    
    0
    
    
    
    0Edwin R. Bindseil IRA
    
    
    221,200
    (9)
    
    
    221,200
    
    
    
    0
    
    
    
    0Marcus, Fredric
    
    
    244,800
    (10)
    
    
    244,800
    
    
    
    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.
    
    
    12,720
    (13)
    
    
    12,720
    
    
    
    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
    
    
    663,600
    (21)
    
    
    663,600
    
    
    
    0
    
    
    
    0Garchick, Stephen J.
    
    
    222,222
    
    
    
    222,222
    
    
    
    0
    
    
    
    0Turk, Dale J.
    
    
    21,200
    (22)
    
    
    21,200
    
    
    
    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, Vice President of Administration
    
    
    350,000
    (26)
    
    
    350,000
    
    
    
    0
    
    
    
    0Lakshumanan, Sundaram
    
    
    308,000
    (27)
    
    
    308,000
    
    
    
    0
    
    
    
    0Gay, Barbara
    
    
    300,000
    (28)
    
    
    300,000
    
    
    
    0
    
    
    
    0Pheeney, Phyllis
    
    
    339,700
    (29)
    
    
    339,700
    
    
    
    0
    
    
    
    0Lerner, David
    
    
    1,015,277
    (30)
    
    
    1,015,277
    
    
    
    0
    
    
    
    0Katz, Alan A.
    
    
    11,880
    (31)
    
    
    11,880
    
    
    
    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.
    
    
    100,000
    (35)
    
    
    100,000
    
    
    
    0
    
    
    
    0Bodie, Jonathon
    
    
    62,000
    
    
    
    62,000
    
    
    
    0
    
    
    
    0Hathcock, Roy
    
    
    100,000
    
    
    
    100,000
    
    
    
    0
    
    
    
    0Benzine, Dale
    
    
    160,422
    
    
    
    160,422
    
    
    
    0
    
    
    
    0Norman, Chris
    
    
    174,607
    
    
    
    174,607
    
    
    
    0
    
    
    
    0Leonard, Marc
    
    
    175,056
    
    
    
    175,056
    
    
    
    0
    
    
    
    0Iroquois, LP
    
    
    107,222
    (35.1)
    
    
    107,222
    
    
    
    0
    
    
    
    0Abraham Sabbagh Revocable Trust
    
    
    15,300
    (58)
    
    
    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
    (57)
    
    
    1,000
    
    
    
    0
    
    
    
    0Royal Professional Services, Inc.
    
    
    250
    (59)
    
    
    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
    (60)
    
    
    200
    
    
    
    0
    
    
    
    0
 
 72




---



##### 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.
    
    
    18,500
    (56)
    
    
    18,500
    
    
    
    0
    
    
    
    0Irish, Rebecca, Chief Financial
Officer, Secretary and Treasurer
    
    
    423,865
    (36)
    
    
    423,865
    
    
    
    0
    
    
    
    0Thornton, John, Director
    
    
    84,278
    (37)
    
    
    84,278
    
    
    
    0
    
    
    
    0Nathan Company, L.L.C.
    
    
    192,500
    (37.1)
    
    
    192,500
    
    
    
    0
    
    
    
    0C & A Healthcare Services, Inc.
    
    
    20,000
    (64.1)
    
    
    20,000
    
    
    
    0
    
    
    
    0Steven Richards and Associates
    
    
    60,000
    (65)
    
    
    60,000
    
    
    
    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
    
    
    300,000
    (38)
    
    
    300,000
    
    
    
    0
    
    
    
    0Horack, Todd
    
    
    130,000
    (39)
    
    
    100,000
    
    
    
    0
    
    
    
    0Mounce, Sherri
    
    
    130,000
    (40)
    
    
    100,000
    
    
    
    0
    
    
    
    0Slayton, Patricia
    
    
    494,753
    
    
    
    494,753
    
    
    
    0
    
    
    
    0Unger, Thomas
    
    
    503,118
    
    
    
    503,118
    
    
    
    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
    (64)
    
    
    42,000
    
    
    
    0
    
    
    
    0Fitzgerald, Mark
    
    
    3,923,232
    (41)
    
    
    3,923,232
    
    
    
    0
    
    
    
    0Royal Bank of Canada, by its agent RBC
Capital Markets Corporation
    
    
    13,381,476
    (42)
    
    
    13,381,476
    
    
    
    0
    
    
    
    0DiSalvo, Ken
    
    
    50
    
    
    
    50
    
    
    
    0
    
    
    
    0Lowcountry Home Medical Equipment
Company
    
    
    191,571
    (62)
    
    
    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
    
    
    210,000
    (45)
    
    
    210,000
    
    
    
    0
    
    
    
    0Hunter, Patricia
    
    
    29,351
    (46)
    
    
    29,351
    
    
    
    0
    
    
    
    0Schieber, Shari
    
    
    25,000
    (47)
    
    
    25,000
    
    
    
    0
    
    
    
    0Remedy Therapeutics, LLC
    
    
    192,901
    (63)
    
    
    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
    
    
    
    0Chinchar, Nancy F.
    
    
    180,000
    (54)
    
    
    180,000Larkey, Dean
    
    
    496
    (55)
    
    
    496Duke, Terry
    
    
    54,034
    
    
    
    54,034Verbitsky, Michael
    
    
    370,082
    
    
    
    370,082Wasserstrom,
Weinreb & Wealcatch, PL
    
    
    19,478
    (61)
    
    
    19,478Lock, Eric
J. and Paige N.
    
    
    4,000
    
    
    
    4,000TOTAL
    
    
    
    
    
    
    101,894,606
 
 73




---



##### 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.
James E. Haiftey and Todd Horack have investment and voting control over the securities held.(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.
BayStar Capital II, L.P. is managed by BayStar Capital Management, LLC, the managing partners of which are Lawrence Goldfarb, James Peet and Bob Rice who have investment and voting control over the securities held.(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.
Edwin Bindseil has investment and voting control over the securities held.(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. 74




---



##### 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. The principals of Jana Partners, LLC (the investment advisor to Jana Master Fund) are Barry Rosenstein and Gary Claar who have investment and voting control over the securities held.(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. North Sound Capital LLC manages North Sound Legacy Fund LLC, North
Sound Legacy Institutional Fund LLC , and North Sound Legacy International Fund Ltd.
The ultimate managing member of North Sound Capital LLC is Thomas McAuley,
who in such capacity has investment and voting control over the securities held.(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. North Sound Capital LLC manages North Sound Legacy Fund LLC, North Sound
Legacy Institutional Fund LLC , and North Sound Legacy International Fund Ltd.  The ultimate
managing member of North Sound Capital LLC is Thomas McAuley,
who in such capacity has investment and voting control over the securities held.(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. North Sound Capital LLC manages North Sound Legacy Fund LLC, North Sound
Legacy Institutional Fund LLC , and North Sound Legacy International Fund Ltd.  The ultimate
managing member of North Sound Capital LLC is Thomas McAuley,
who in such capacity has investment and voting control over the securities held.(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. Steven Derby has investment and voting control over the securities
held in his capacity as managing member of SDS Management, LLC, the investment manager of 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.(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. Stanley Scholsohn has investment and voting control over the securities held.(21)
    
    Includes 160,000 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. Warren Muller has investment and voting control over the securities held. 75




---



##### Table of Contents



(25)
    
    Includes 123,680 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. Jack Howard, chairman of Web Financial Corp., has investment and voting control over the securities held.(26)
    
    Includes 100,000 shares of Common stock issuable upon the exercise of options to purchase
Common Stock and 50,000 shares issuable per a restricted stock
award.(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 232,388 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.
Securities issued to employee/affiliate of Sandgrain Securities, Inc. a registered broker dealer who, with
respect to the securities he or she may sell pursuant to this
prospectus, may be deemed to be an underwriter within the meaning of the  Securities Act of 1933, as amended.(31)
    
    Includes 11,880 shares of Common Stock issuable upon exercise
of Late Registration Warrants. Securities issued to employee/affiliate of
Sandgrain Securities, Inc. a registered broker dealer who, with respect to the securities he or
she may sell pursuant to this prospectus, may be deemed to be an
underwriter within the meaning of the  Securities Act of 1933, as amended.(32)
    
    Includes 1,485 shares of Common Stock issuable upon exercise
of Late Registration Warrants. Securities issued to employee/affiliate of
Sandgrain Securities, Inc. a registered broker dealer who, with respect to the securities he or
she may sell pursuant to this prospectus, may be deemed to be an
underwriter within the meaning of the  Securities Act of 1933, as amended.(33)
    
    Securities issued to employee/affiliate of Sandgrain
Securities, Inc. a registered broker dealer who, with respect to the
securities he or she may sell pursuant to this prospectus, may be
deemed to be an underwriter within the meaning of the Securities
Act of 1933, as amended.(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 400,000 shares pursuant to
Rule 144. Alejandro Lugo Vribe has investment and voting control over the securities held.(35.1)
    
    Joshua Silvehhman has investment and voting control over the
securities held.(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 and 125,000 shares issuable per a restricted stock
award.(37)
    
    Includes 73,343 shares of Common Stock issuable upon the exercise of options to purchase
Common Stock.(37.1)
    
    Investment and voting control held by Ken Nathan and Robert
Nathan.(38)
    
    Includes 100,000 shares of Common Stock issuable upon the exercise of options to purchase
Common Stock. Includes 200,000 shares issuable per restricted stock
awards.(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. 76




---



##### Table of Contents



(44)
    
    Includes 25,000 shares of Common Stock issuable upon the exercise of Class A Warrants.(45)
    
    Includes 210,000 shares of Common Stock issuable upon the
exercise of Class A Warrants. Securities issued to employee/affiliate of
Sandgrain Securities, Inc. a registered broker dealer who, with respect to the securities he or
she may sell pursuant to this prospectus, may be deemed to be an
underwriter within the meaning of the  Securities Act of 1933, as amended.(46)
    
    Includes 29,351 shares of Common Stock issuable upon the
exercise of Class A Warrants. Securities issued to employee/affiliate of Sandgrain
Securities, Inc. a registered broker dealer who, with respect to the
securities he or she may sell pursuant to this prospectus, may be
deemed to be an underwriter within the meaning of the Securities
Act of 1933, as amended.(47)
    
    Includes 25,000 shares of Common Stock issuable upon the exercise of Class A Warrants.(48)
    
    [intentionally omitted].(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. Securities issued to employee/affiliate of Sandgrain
Securities, Inc. a registered broker dealer who, with respect to the
securities he or she may sell pursuant to this prospectus, may be
deemed to be an underwriter within the meaning of the Securities
Act of 1933, as amended.(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. Securities issued to employee/affiliate of Sandgrain
Securities, Inc. a registered broker dealer who, with respect to the
securities he or she may sell pursuant to this prospectus, may be
deemed to be an underwriter within the meaning of the Securities
Act of 1933, as amended.(55)
    
    Includes 496 shares of Common Stock issuable upon the exercise of Late Registration
Warrants.(56)
    
    Investment/voting controlled by Charles Symes.(57)
    
    Investment/voting controlled by Julie Nye.(58)
    
    Investment/voting controlled by Abraham Sabbagh.(59)
    
    Investment/voting controlled by Joseph Waklatski.(60)
    
    Investment/voting controlled by Tom Masi and Patricia Fatone.(61)
    
    Investment/voting controlled by Keith Wasserstrom.(62)
    
    Investment/voting controlled by Matthew Shelbourne & Mark Baty.(63)
    
    Investment/voting controlled by Michael Burke.(64)
    
    Investment/voting controlled by Jeffrey S. Place.(64.1)
    
    Investment and voting control is held by Nicholas Atkins.(65)
    
    Investment/voting controlled by Richard Glass. assuming the sale of all of the shares of the Common Stock offered by each selling
stockholder
   77




---



##### Table of Contents



Table of Selling Security Holders Holding Warrants
  
 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
    
    
    163,600
    
    
    
    163,600
    
    
    
    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.
    
    
    147,680
    
    
    
    147,680
    
    
    
    0
    
    
    
    0Lerner, David
    
    
    307,531
    
    
    
    307,531
    
    
    
    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
    
    
    210,000
    
    
    
    210,000
    
    
    
    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
    
    
    
    
    
    
    6,629,905
    
    
    
    0
    
    
    
    0
 
  78




---



##### 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
  79




---



##### Table of Contents



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
    
    
    
    
    
    
    4,711,110
    
    
    
    0
    
    
    
    0
 
 assuming the
sale of all of the Warrants offered by each selling stockholder
     
  
  
  
 
  
 80




---



##### Table of Contents



81




---



##### Table of Contents



82




---



##### Table of Contents



83




---



##### Table of Contents



84




---



##### Table of Contents



85




---



##### Table of Contents



DESCRIPTION OF CAPITAL STOCK
  
  
 Common Stock
 Voting
 86




---



##### 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
 87




---



##### Table of Contents




    
    6,629,905 Class A Warrants to purchase
6,629,905 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.
 88




---



##### Table of Contents




    
    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.
    
    4,711,110 Class B-2 Warrants to purchase 4,711,110 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
 89




---



##### Table of Contents



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;
 90




---



##### Table of Contents



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.
       91




---



##### Table of Contents



LEGAL MATTERS
  
 EXPERTS
 Companys Independent Auditors
    Changes In and Disagreements With Accountants on Accounting and Financial Disclosure.
    
 
 92




---



##### Table of Contents



WHERE YOU CAN FIND MORE INFORMATION
  
    
 93




---



##### Table of Contents



ARCADIA RESOURCES, INC. AND SUBSIDIARIES
 INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE
 Report of Independent Registered Public Accounting Firm
    
    
    F-102Consolidated Balance Sheets as March 31, 2006 and 2005
    
    
    F-103Consolidated Statements of Operations for the periods ended March 31, 2006, 2005 and 2004
    
    
    F-104Consolidated Statements of Stockholders Equity for the periods ended of March 31, 2006, 2005 and 2004
    
    
    F-105Consolidated Statements of Cash Flows for the periods ended March 31, 2006, 2005 and 2004
    
    
    F-106Notes to Consolidated Financial Statements
    
    
    F-111Schedule II  Valuation and Qualifying Accounts
    
    
    F-129
 
 F-99




---



##### Table of Contents



Consolidated Financial Statements
Years Ended March 31, 2006, 2005 and 2004
 
 F-100




---



##### Table of Contents



Report of Independent Registered Public Accounting Firm
    
    
    F-102Consolidated Financial StatementsBalance Sheets
    
    
    F-103Statements of Operations
    
    
    F-104Statements of Stockholders Equity
    
    
    F-105Statements of Cash Flows
    
    
    F-106Summary of Accounting Policies
    
    
    F-107Notes to Consolidated Financial Statements
    
    
    F-111Schedule II  Valuation and Qualifying Accounts
    
    
    F-129
 
 F-101




---



##### Table of Contents



Report of Independent Registered Public Accounting Firm
 
    /s/ BDO Seidman, LLPBDO Seidman, LLPKalamazoo, Michigan
June 28, 2006
 
 F-102




---



##### Table of Contents



Arcadia Resources, Inc.
 
 Consolidated Balance Sheets
 March 31,
    
    
    March 31,2006
    
    
    2005Assets (Note 7)Current AssetsCash
    
    $
    530,344
    
    
    $
    1,412,268Accounts receivable, net of allowance of $1,891,000 and $1,692,000, respectively
    
    
    27,109,601
    
    
    
    21,453,424Inventory, net of allowance of $80,000
    
    
    1,502,276
    
    
    
    664,269Prepaid expenses and other current assets
    
    
    3,140,764
    
    
    
    876,523Income taxes receivable
    
    
    39,238
    
    
    
    130,000Total Current Assets
    
    
    32,322,223
    
    
    
    24,536,484Fixed Assets (Notes 2 and 8)Equipment
    
    
    5,883,779
    
    
    
    2,033,919Software
    
    
    564,419
    
    
    
    251,446Furniture and fixtures
    
    
    810,053
    
    
    
    376,095Vehicles
    
    
    799,793
    
    
    
    205,080Leasehold improvements
    
    
    391,588
    
    
    
    196,3378,449,632
    
    
    
    3,062,877Accumulated depreciation and amortization
    
    
    (2,224,589
    )
    
    
    (787,899
    )Net Fixed Assets
    
    
    6,225,043
    
    
    
    2,274,978Other Assets (Notes 4 and 5)Goodwill
    
    
    28,263,208
    
    
    
    15,704,743Trade name, net of accumulated amortization of $511,000 and $244,000, respectively
    
    
    7,488,889
    
    
    
    7,755,556Customer
relationships, net of accumulated amortization of $1,128,000 and $306,000, respectively
    
    
    9,854,012
    
    
    
    4,694,444Non-competition agreements, net of accumulated amortization of $152,000 and $0, respectively
    
    
    708,386
    
    
    
    Technology, net of accumulated amortization of $486,000 and $232,000, respectively
    
    
    274,445
    
    
    
    527,778Deferred financing costs, net of accumulated amortization of $80,000 and $231,000, respectively
    
    
    14,940
    
    
    
    99,099Total Other Assets
    
    
    46,603,880
    
    
    
    28,781,620$
    85,151,146
    
    
    $
    55,593,082Liabilities and Stockholders EquityCurrent LiabilitiesLine of credit, current portion (Note 7)
    
    $
    2,000,000
    
    
    $
    1,150,186Accounts payable and checks issued against future deposits
    
    
    1,912,860
    
    
    
    1,649,551Accrued expenses:Compensation and related taxes
    
    
    2,417,832
    
    
    
    1,959,964Commissions
    
    
    279,262
    
    
    
    551,873Other
    
    
    1,266,598
    
    
    
    592,188Accrued Interest
    
    
    141,463
    
    
    
    263,787Payable to affiliated agencies, current portion (Note 6)
    
    
    2,163,954
    
    
    
    1,612,715Long-term debt, current portion (Note 8)
    
    
    2,405,866
    
    
    
    6,723,830Total Current Liabilities
    
    
    12,587,835
    
    
    
    14,504,094Payable to affiliate, less current portion (Note 6)
    
    
    152,750
    
    
    
    615,544Long-term debt, less current portion (Note 8)
    
    
    878,501
    
    
    
    546,572Line of credit, less current portion (Note 7)
    
    
    14,487,967
    
    
    
    14,404,404Total Liabilities
    
    
    28,107,053
    
    
    
    30,070,614Commitments and Contingencies (Notes 6, 7, 8, 9 and 13)Stockholders Equity (Note 9)Common stock $.001 par value, 150,000,000 shares authorized, 97,262,333 shares and
90,413,662 shares issued
    
    
    97,263
    
    
    
    90,414Additional paid-in capital
    
    
    72,215,658
    
    
    
    33,516,506Treasury stock, 859,297 shares and 112,109 shares, respectively
    
    
    (2,660,840
    )
    
    
    (187,375
    )Accumulated deficit
    
    
    (12,607,988
    )
    
    
    (7,897,077
    )Preferred stock, $.001 par value, 5,000,000 shares authorized, none issued
    
    
    
    
    
    
    Total Stockholders Equity
    
    
    57,044,093
    
    
    
    25,522,468$
    85,151,146
    
    
    $
    55,593,082
 See accompanying summary of accounting policies and notes to consolidated financial statements.
 
 F-103




---



##### Table of Contents



Consolidated Statements of Operations
 Successor
    
    
    Successor
    
    
    PredecessorPeriod From
    
    
    Period FromYear
    
    
    May 10, 2004
    
    
    April 1, 2004
    
    
    YearEnded
    
    
    To
    
    
    to
    
    
    EndedMarch 31, 2006
    
    
    March 31, 2005
    
    
    May 9, 2005
    
    
    March 31, 2004Net Sales
    
    $
    130,928,641
    
    
    $
    95,854,671
    
    
    $
    9,486,601
    
    
    $
    78,359,328Cost of Sales
    
    
    87,563,329
    
    
    
    67,049,756
    
    
    
    6,905,998
    
    
    
    56,204,880Gross Profit
    
    
    43,365,312
    
    
    
    28,804,915
    
    
    
    2,580,603
    
    
    
    22,154,448General and Administrative Expenses
    
    
    43,174,514
    
    
    
    32,264,457
    
    
    
    2,101,381
    
    
    
    18,424,484Impairment of Goodwill
    
    
    
    
    
    
    707,044
    
    
    
    16,055
    
    
    
    Depreciation and Amortization
    
    
    2,326,119
    
    
    
    1,457,936
    
    
    
    
    
    
    
    Operating Income (Loss)
    
    
    (2,135,321
    )
    
    
    (5,624,522
    )
    
    
    463,167
    
    
    
    3,729,964Other Expenses (Income)Other (income)
    
    
    
    
    
    
    (87,152
    )
    
    
    
    
    
    
    Interest expense (income) , net
    
    
    1,523,614
    
    
    
    946,235
    
    
    
    
    
    
    
    (1,989
    )Amortization of debt discount (Note 8)
    
    
    933,185
    
    
    
    1,227,972
    
    
    
    
    
    
    
    Total Other Expenses (Income)
    
    
    2,456,799
    
    
    
    2,087,055
    
    
    
    
    
    
    
    (1,989
    )Net Income (Loss) Before Income Tax Expense
    
    
    (4,592,120
    )
    
    
    (7,711,577
    )
    
    
    463,167
    
    
    
    3,731,953Income Tax Expense (Note 11)
    
    
    118,791
    
    
    
    185,500
    
    
    
    
    
    
    
    Net Income (Loss)
    
    $
    (4,710,911
    )
    
    $
    (7,897,077
    )
    
    $
    463,167
    
    
    $
    3,731,953Unaudited pro forma amounts to reflect pro forma Income
Taxes from tax status change
    
    
    
    
    
    
    
    
    
    
    158,000
    
    
    
    1,268,864Pro Forma Income After Income Tax from tax status change
    
    
    
    
    
    
    
    
    
    $
    305,167
    
    
    $
    2,463,089Income (Loss) Per Share:Basic
    
    $
    (0.06
    )
    
    $
    (0.11
    )
    
    $
    0.49
    
    
    $
    3.94Diluted
    
    $
    (0.06
    )
    
    $
    (0.11
    )
    
    $
    0.49
    
    
    $
    3.94Proforma Income Per Share:Basic
    
    
    
    
    
    
    
    
    
    $
    0.32
    
    
    $
    2.60Diluted
    
    
    
    
    
    
    
    
    
    $
    0.32
    
    
    $
    2.60Weighted average number of shares (in thousands):Basic
    
    
    83,834
    
    
    
    72,456
    
    
    
    948
    
    
    
    948Diluted
    
    
    83,834
    
    
    
    72,456
    
    
    
    948
    
    
    
    948
 See accompanying summary of accounting policies and notes to consolidated financial statements.
 
 F-104




---



##### Table of Contents



Arcadia Resources, Inc.
 
 Consolidated Statements of Stockholders Equity
 RetainedAdditional
    
    
    Earnings
    
    
    Due
    
    
    TotalCommon Stock
    
    
    Treasury Stock
    
    
    Paid-In
    
    
    (Accumulated
    
    
    From
    
    
    StockholdersShares
    
    
    Amount
    
    
    Shares
    
    
    Amount
    
    
    Capital
    
    
    Deficit)
    
    
    Stockholder
    
    
    EquityPredecessor:Balance, April 1, 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
    )
    
    $
    
    
    
    $
    25,522,468Sale of warrants to investors
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    31,000,000
    
    
    
    
    
    
    
    
    
    
    
    31,000,000Sale of shares to investors
    
    
    1,212,121
    
    
    
    1,212
    
    
    
    
    
    
    
    
    
    
    
    1,998,788
    
    
    
    
    
    
    
    
    
    
    
    2,000,000Cashless warrant exercises
    
    
    3,111,318
    
    
    
    3,111
    
    
    
    (747,188
    )
    
    
    (2,473,465
    )
    
    
    2,470,354
    
    
    
    
    
    
    
    
    
    
    
    Conversion of debt
    
    
    48,865
    
    
    
    49
    
    
    
    
    
    
    
    
    
    
    
    119,183
    
    
    
    
    
    
    
    
    
    
    
    119,232Payment for acquisitions
    
    
    1,795,173
    
    
    
    1,795
    
    
    
    
    
    
    
    
    
    
    
    3,775,930
    
    
    
    
    
    
    
    
    
    
    
    3,777,725Payment for services
    
    
    108,545
    
    
    
    109
    
    
    
    
    
    
    
    
    
    
    
    371,638
    
    
    
    
    
    
    
    
    
    
    
    371,747Conversion rights
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    618,323
    
    
    
    
    
    
    
    
    
    
    
    618,323Warrant exercises
    
    
    534,883
    
    
    
    535
    
    
    
    
    
    
    
    
    
    
    
    267,407
    
    
    
    
    
    
    
    
    
    
    
    267,942Option exercises
    
    
    37,766
    
    
    
    38
    
    
    
    
    
    
    
    
    
    
    
    37,529
    
    
    
    
    
    
    
    
    
    
    
    37,567Brokers fees related to share and
warrant sales
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,960,000
    )
    
    
    
    
    
    
    
    
    
    
    (1,960,000
    )Net loss for the period
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,710,911
    )
    
    
    
    
    
    
    (4,710,911
    )Balance,March 31, 2006
    
    
    97,262,333
    
    
    $
    97,263
    
    
    
    (859,297
    )
    
    $
    (2,660,840
    )
    
    $
    72,215,658
    
    
    $
    (12,607,988
    )
    
    $
    
    
    
    $
    57,044,093
 See accompanying summary of accounting policies and notes to consolidated financial statements.
 
 F-105




---



##### Table of Contents



Arcadia Resources, Inc.
 
 Consolidated Statements of Cash Flows
 Successor*
    
    
    Successor*
    
    
    Predecessor *
    
    
    Predecessor*Period from
    
    
    Period fromYear
    
    
    May 10, 2004
    
    
    April 1, 2004
    
    
    YearEnded
    
    
    To
    
    
    to
    
    
    EndedMarch 31, 2006
    
    
    March 31, 2005
    
    
    May 9, 2004
    
    
    March 31, 2004CASH FLOWS FROM OPERATING ACTIVITIESNet Income (Loss)
    
    $
    (4,710,911
    )
    
    $
    (7,897,077
    )
    
    $
    463,167
    
    
    $
    3,731,953Adjustments to reconcile net income (loss) to net cash provided by (used in)
operating activities net of impact of acquisitions:Provision for bad debts
    
    
    879,802
    
    
    
    930,799
    
    
    
    42,192
    
    
    
    26,784Loss on disposition of asset
    
    
    
    
    
    
    89,810
    
    
    
    
    
    
    
    Depreciation and amortization
    
    
    1,834,534
    
    
    
    449,586
    
    
    
    77
    
    
    
    17,333Amortization of debt discount and deferred financing costs
    
    
    1,032,284
    
    
    
    1,432,464
    
    
    
    
    
    
    
    Issuance of stock for services
    
    
    371,747
    
    
    
    585,521
    
    
    
    
    
    
    
    Amortization of intangibles
    
    
    1,544,594
    
    
    
    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
    
    
    (5,141,709
    )
    
    
    (5,031,949
    )
    
    
    (692,193
    )
    
    
    (1,321,682
    )Inventory
    
    
    (583,802
    )
    
    
    (230,232
    )
    
    
    
    
    
    
    Prepaid expenses and other current assets
    
    
    (2,023,755
    )
    
    
    (514,761
    )
    
    
    27,903
    
    
    
    7,523Income taxes receivable
    
    
    90,762
    
    
    
    (130,000
    )
    
    
    
    
    
    
    Accounts
payable and checks issued against future deposits
    
    
    (219,259
    )
    
    
    (405,051
    )
    
    
    (271,202
    )
    
    
    872,039Accrued expenses and other current liabilities
    
    
    78,132
    
    
    
    (299,674
    )
    
    
    (301,999
    )
    
    
    219,242Due to affiliated agencies
    
    
    (537,535
    )
    
    
    (308,682
    )
    
    
    170,915
    
    
    
    (145,614
    )NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES
    
    
    (7,385,116
    )
    
    
    (7,074,967
    )
    
    
    (545,085
    )
    
    
    3,407,578CASH FLOWS FROM INVESTING ACTIVITIESPurchases of businesses
    
    
    (12,931,124
    )
    
    
    (4,642,944
    )
    
    
    (157,500
    )
    
    
    (359,154
    )Purchases of property and equipment
    
    
    (3,812,324
    )
    
    
    (1,005,476
    )
    
    
    
    
    
    
    (473
    )Proceeds from sale of asset
    
    
    
    
    
    
    1,779
    
    
    
    
    
    
    
    NET CASH USED IN INVESTING ACTIVITIES
    
    
    (16,743,448
    )
    
    
    (5,646,641
    )
    
    
    (157,500
    )
    
    
    (359,627
    )CASH FLOWS FROM FINANCING ACTIVITIESProceeds from issuance of common stock
    
    
    1,860,000
    
    
    
    4,301,250
    
    
    
    
    
    
    
    Proceeds from issuance of Class B Warrants
    
    
    29,180,000Net drawings on line of credit
    
    
    933,378
    
    
    
    3,795,709
    
    
    
    
    
    
    
    Payment on long-term debt
    
    
    (9,032,246
    )
    
    
    (1,783,191
    )
    
    
    
    
    
    
    Increase in notes payable
    
    
    
    
    
    
    283,928
    
    
    
    
    
    
    
    Cash from
exercise of warrants and options
    
    
    305,508
    
    
    
    
    
    
    
    
    
    
    
    Cash acquired with reverse merger
    
    
    
    
    
    
    7,536,180
    
    
    
    
    
    
    
    Advances (dividends) from stockholder
    
    
    
    
    
    
    
    
    
    
    702,585
    
    
    
    (3,047,951
    )NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES
    
    
    23,246,640
    
    
    
    14,133,876
    
    
    
    702,585
    
    
    
    (3,047,951
    )NET INCREASE (DECREASE) IN CASH AND EQUIVALENTS
    
    $
    (881,924
    )
    
    
    1,412,268
    
    
    
    
    
    
    
    CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD
    
    $
    1,412,268
    
    
    
    
    
    
    
    
    
    
    
    CASH AND CASH EQUIVALENTS, END OF PERIOD
    
    $
    530,344
    
    
    $
    1,412,268
    
    
    $
    
    
    
    $
    *End of period cash resulted from recapitalization of stock and reverse mergerSupplementary information:Cash paid during the period for:Interest paid (received)
    
    $
    1,430,718
    
    
    $
    1,195,704
    
    
    
    
    
    
    $
    (4,214
    )Income taxes
    
    $
    189,472
    
    
    $
    302,514
    
    
    
    
    
    
    
    Non cash investing activities:Issuance of common stock for the purchases of
Businesses
    
    $
    3,777,725
    
    
    $
    1,449,750
    
    
    
    
    
    
    
    Non cash financing activities:Debt issue discount
    
    $
    314,862
    
    
    $
    1,507,600
    
    
    
    
    
    
    
    Forgiveness of note payable
    
    
    
    
    
    $
    554,000
    
    
    
    
    
    
    
    Conversion rights
    
    $
    618,323
    
    
    
    
    
    
    
    
    
    
    
    Payment of note installment with common stock
    
    $
    119,232
    
    
    $
    1,864,185
    
    
    
    
    
    
    
    Exercise of cashless warrants
    
    $
    2,473,465
    
    
    $
    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-106




---



##### Table of Contents



Arcadia Resources, Inc. and Subsidiaries
 Summary of Accounting Policies
        See accompanying notes to consolidated financial statements.
 
 F-107




---



##### Table of Contents



F-108




---



##### Table of Contents



Reclassifications
  Recent Accounting Pronouncements
    
 F-109




---



##### Table of Contents



See accompanying notes to consolidated financial statements.
 
 F-110




---



##### Table of Contents



Arcadia Resources, Inc. and Subsidiaries
 
 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
  
 F-111




---



##### Table of Contents



NOTE 2  LEASES
  Capital
    
    
    OperatingLeases
    
    
    LeasesYear ending March 31:2007
    
    $
    468,000
    
    
    $
    1,425,0002008
    
    
    416,000
    
    
    
    963,0002009
    
    
    166,000
    
    
    
    215,0002010
    
    
    8,000
    
    
    
    58,0002011
    
    
    
    
    
    
    40,000Total
    
    $
    1,058,000
    
    
    $
    2,701,000Interest
    
    
    96,000Capital
Lease Obligation Payable
    
    $
    962,000
  
 F-112




---



##### Table of Contents



NOTE 3  EMPLOYEE BENEFIT PLANS
  NOTE 4  MERGER TRANSACTION AND ACQUISITIONS
 TRANSACTIONS COMPLETED DURING THE YEAR ENDED MARCH 31, 2005
     (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
 
 F-113




---



##### Table of Contents



SERVICES DIVISION  2005 Post Merger Acquisitions
    PRODUCTS DIVISION  2005 Post-Merger Acquisitions
    
 F-114




---



##### Table of Contents



(in thousands)Description of assets and liabilities purchased:Current and other assets
    
    $
    4,215Fixed assets
    
    
    954Goodwill
    
    
    6,336Liabilities
    
    
    (1,837
    )Total assets and liabilities purchased post-reverse acquisition
    
    $
    9,668
   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
 TRANSACTIONS COMPLETED DURING THE YEAR ENDED MARCH 31, 2006
  SERVICES DIVISION  YEAR ENDED MARCH 31 ,2006
    PRODUCTS DIVISION  YEAR ENDED MARCH 31 ,2006
  
 F-115




---



##### Table of Contents



RETAIL DIVISION  YEAR ENDED MARCH 31 ,2006
    (in thousands)Current Assets
    
    $
    1,889Property and Equipment
    
    
    1,972Intangibles
    
    
    5,390Liabilities
    
    
    (5,154
    )Goodwill
    
    
    13,312Total Consideration
    
    $
    17,409
 
 F-116




---



##### Table of Contents



Year Ended
    
    
    Two Years EndedMarch 31, 2006
    
    
    March 31, 2006Pro forma revenue
    
    $
    138,725
    
    
    $
    124,951Pro forma net loss
    
    $
    (3,972
    )
    
    $
    (6,600
    )Pro forma losses per shareBasic
    
    $
    (0.05
    )
    
    $
    (0.09
    )Diluted
    
    $
    (0.05
    )
    
    $
    (0.09
    )Pro forma weighted average common shares (in thousands)Basic
    
    
    84,260
    
    
    
    73,365Diluted
    
    
    84,260
    
    
    
    73,365
 NOTE 5  GOODWILL AND OTHER INTANGIBLE ASSETS
     2006
    
    
    2005Services
    
    $
    13,953
    
    
    $
    10,929Products
    
    
    13,160
    
    
    
    4,776Retail
    
    
    1,150
    
    
    
    TOTAL GOODWILL
    
    $
    28,263
    
    
    $
    15,705
  
 F-117




---



##### Table of Contents



(in thousands)Year ended:2007
    
    $
    1,4242008
    
    
    1,1772009
    
    
    1,1562010
    
    
    1,1562011
    
    
    1,004
 NOTE 6  AFFILIATED AGENCIES PAYABLE
   NOTE 7  LINES OF CREDIT
    1 2
 
 F-118




---



##### Table of Contents



(in thousands)Year ended:2007
    
    $
    2,0002008
    
    
    14,488
  NOTE 8  LONG-TERM OBLIGATIONS
  2006
    
    
    2005Purchase 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.
    
    $
    294,422
    
    
    $
    660,740Purchase price payable to Remedy Therapeutics dated January 27, 2006,
bearing simple interest of 8% per year payable in equal quarterly payments
of principal and interest beginning April 27, 2006 with final payment due
on January 27, 2009.
    
    
    800,000
    
    
    
    Notes and purchase price payables paid during the year ended March 31, 2006
    
    
    
    
    
    
    5,760,139Other purchase price payables (non-interest bearing) to be paid over time
to the selling stockholders or selling entities of various acquired
entities, due dates ranging from April 2006 to March 2007
    
    
    711,126
    
    
    
    273,246Capital lease obligations due through 2012
    
    
    961,609
    
    
    
    Other
interest-bearing obligations with interest charged at various rates
ranging from 4% to 18% to be paid over time based on
respective terms, due dates ranging from April 2006 to 2011
    
    
    517,210
    
    
    
    576,277Total long term obligations
    
    
    3,284,367
    
    
    
    7,270,402Less  Current portion of long-term obligations
    
    
    (2,405,866
    )
    
    
    (6,723,830
    )LONG-TERM DEBT OBLIGATIONS
    
    $
    878,501
    
    
    $
    546,572
 
 F-119




---



##### Table of Contents



(in thousands)Year ended:2007
    
    $
    2,4062008
    
    
    5042009
    
    
    2422010
    
    
    762011
    
    
    56
   
 F-120




---



##### Table of Contents



NOTE 9  STOCKHOLDERS EQUITY
        
 F-121




---



##### Table of Contents






WARRANTSFISCAL 2006 ACTIVITY & ROLLFORWARD
    
    
    RANGE OF3/31/2005
    
    
    
    
    

    
    
    
    
    
    3/31/2006
    
    
    PRICE
    
    
    EXPIRATIONDESCRIPTION
    
    OUTSTANDING
    
    
    ISSUES
    
    
    EXERCISES
    
    
    OUTSTANDING
    
    
    PER SHARE
    
    
    DATESClass A Warrants
    
    
    10,285,791
    
    
    
    210,315
    
    
    
    3,646,201
    
    
    
    6,849,905
    
    
    $
    0.25 to $1.28
    
    
    
    2009-2011Class B- 1 Warrants
    
    
    
    
    
    
    13,777,777
    
    
    
    
    
    
    
    13,777,777
    
    
    $
    0.001
    
    
    
    2012Class B- 2 Warrants
    
    
    
    
    
    
    4,711,110
    
    
    
    
    
    
    
    4,711,110
    
    
    $
    2.25
    
    
    
    2012Total
    
    
    10,285,791
    
    
    
    18,699,202
    
    
    
    3,646,201
    
    
    
    25,338,792
  WARRANTSFISCAL 2005 ACTIVITY & ROLLFORWARD
    
    
    RANGE OF5/10/2004
    
    
    
    

    
    
    
    
    
    
    3/31/2005
    
    
    PRICE
    
    
    EXPIRATIONDESCRIPTION
    
    OUTSTANDING
    
    
    ISSUES
    
    
    EXERCISES
    
    
    OUTSTANDING
    
    
    PER SHARE
    
    
    DATESClass A Warrants
    
    
    7,876,000
    
    
    
    2,807,541
    
    
    
    424,750
    
    
    
    10,258,791
    
    
    $
    0.25 to $1.28
    
    
    
    2009-2011
  NOTE 10  STOCK-BASED COMPENSATION
  
 F-122




---



##### Table of Contents






SuccessorFor the Period
    
    
    
    
    
    PredecessorEnded
    
    
    For the Year Ended
    
    
    For the Year EndedMarch 31, 2006
    
    
    March 31, 2005
    
    

March 31, 2004Net income (loss) as reported
    
    $
    (4,710,911
    )
    
    $
    (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)
    
    $
    (4,710,911
    )
    
    $
    (8,661,244
    )
    
    $
    3,731,953Net income (loss) per share:Basic and diluted income (loss) per share as reported
    
    $
    (0.06
    )
    
    $
    (0.11
    )
    
    $
    3.94Pro Forma basic and diluted income
(loss) per share
    
    $
    (0.06
    )
    
    $
    (0.12
    )
    
    $
    3.94
      OPTIONSFISCAL 2006 ACTIVITY & ROLLFORWARD
    
    
    
    
    
    
    RANGE OF
    
    
    RANGE OF3/31/2005
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3/31/2006
    
    
    PRICE
    
    
    EXPIRATION
    
    
    VESTINGOUTSTANDING
    
    
    GRANTS
    
    
    FORFEITURES
    
    
    EXERCISES
    
    
    OUTSTANDING
    
    
    PER SHARE
    
    
    DATES
    
    
    DATESIssued to officers
    
    
    8,299,040
    
    
    
    24,303
    
    
    
    0
    
    
    
    0
    
    
    
    8,323,343
    
    
    $
    0.25 to $2.20
    
    
    
    2012
    
    
    
    2005-2008Issued to other
management
    
    
    700,000
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    700,000
    
    
    $
    1.45
    
    
    
    2011
    
    
    
    2005From prior entity
    
    
    537,500
    
    
    
    0
    
    
    
    0
    
    
    
    37,500
    
    
    
    500,000
    
    
    $
    0.25
    
    
    
    2014
    
    
    
    2004Total
    
    
    9,536,540
    
    
    
    24,303
    
    
    
    0
    
    
    
    37,500
    
    
    
    9,523,343
 As of March 31,
    
    2004
    
    
    2005
    
    
    2006
    
    
    2007
    
    
    2008Cumulative Vested Options
    
    
    500,000
    
    
    
    1,499,040
    
    
    
    1,523,343
    
    
    
    5,523,343
    
    
    
    9,523,343
 
 F-123




---



##### Table of Contents






2006
    
    2005Expected volatility
    

    45
    %

    45%Weighted-average volatility
    

    45
    %

    45%Expected dividends
    

    0
    %

    0%Expected terms (in years)
    

    7
    

    3 - 7Risk-free rate
    

    3.92
    %

    3.19% - 4.18%
  Weighted Average
    
    
    AggregateWeighted Average
    
    
    Remaining
    
    
    IntrinsicOptions
    
    Shares
    
    
    Exercise Price
    
    
    Contractual Term
    
    
    ValueOutstanding at March 31, 2005
    
    
    9,536,540
    
    
    $
    0.37Granted
    
    
    24,303
    
    
    $
    2.20Exercised
    
    
    (37,500
    )
    
    $
    1.00Forfeited or expired
    
    
    0
    
    
    $
    0.00Outstanding at March 31, 2006
    
    
    9,523,343
    
    
    $
    0.37
    
    
    
    5.9
    
    
    $
    26,339,367Exercisable at March 31, 2006
    
    
    1,523,343
    
    
    $
    1.03
    
    
    
    5.9
    
    
    $
    3,219,367
  
 F-124




---



##### Table of Contents






WEIGHTED AVERAGENON-VESTED SHARES
    
    SHARES
    
    
    GRANT-DATE FAIR VALUEOutstanding at March 31, 2005
    
    
    8,150,000
    
    
    $
    0.27Granted
    
    
    24,303
    
    
    
    2.20Vested
    
    
    (174,303
    )
    
    
    1.30Forfeited
    
    
    0
    
    
    
    0.00Non-vested at March 31, 2006
    
    
    8,000,000
    
    
    $
    0.25
   NOTE 11  INCOME TAXES
    March
31,2006
    

2005CurrentFederal
    
    $
    -0-
    
    $
    -0-State and local
    
    
    119,000
    
    
    186,000DeferredFederal
    
    
    -0-
    
    
    -0-State and local
    
    
    -0-
    
    
    -0-Total
    
    $
    119,000
    
    $
    186,000
 
 F-125




---



##### Table of Contents



March
31,2006
    
2005Income tax
benefit at 34%
    
    
    (34.0
    %)
    
    
    (34.0
    %)State and local income taxes
    
    
    2.6
    
    
    
    3.0Non-deductible
compensation expense from release of escrowed shares
    
    
    
    
    
    
    12.5Goodwill
amortization/impairment
    
    
    (9.1
    )
    
    
    3.4Non-deductible amortization of beneficial conversion feature
    
    
    10.6
    
    
    
    5.8Non-qualified
stock option exercise
    
    
    
    
    
    
    (3.0
    )Non-deductible other items
    
    
    0.5
    
    
    
    0.2Valuation
allowance
    
    
    32.0
    
    
    
    15.1Effective
tax rate
    
    
    2.6
    %
    
    
    3.0
    %
  September 30, 2022
    
    $
    58September 30, 2023
    
    
    1,066September 30, 2024
    
    
    794March 31, 2025
    
    
    1,952March 31, 2026
    
    
    3,283$
    7,153
  March
31,2006
    
    
    2005Net operating loss
    
    $
    2,647
    
    
    $
    1,349Allowance for doubtful accounts
    
    
    699
    
    
    
    677Depreciation
and amortization
    
    
    920
    
    
    
    811Other
temporary differences
    
    
    696
    
    
    
    (176
    )Total
    
    
    4,962
    
    
    
    2,661Valuation allowance
    
    
    (4,962
    )
    
    
    (2,661
    )Net deferred taxes
    
    $
    0
    
    
    $
    0
   NOTE 12  RELATED PARTY TRANSACTIONS
  
 F-126




---



##### Table of Contents



NOTE 13  SUBSEQUENT EVENTS
      NOTE
14  COMMITMENTS AND CONTINGENCIES
   NOTE 15  SUMMARY OF QUARTERLY FINANCIAL DATA
 Selected Quarterly Financial Data
 QuarterFirst *
    
    Second
    
    Third
    
    Fourth **(in thousands, except per Share data)2006Net sales
    
    $
    30,739
    
    
    $
    32,665
    
    
    $
    33,299
    
    
    $
    34,226Gross profit
    
    
    9,896
    
    
    
    10,701
    
    
    
    11,313
    
    
    
    11,455Operating loss
    
    
    (292
    )
    
    
    (375
    )
    
    
    (628
    )
    
    
    (840
    )Net loss
    
    
    (1,251
    )
    
    
    (1,479
    )
    
    
    (813
    )
    
    
    (1,168
    )Basic loss per common share
    
    $
    (0.02
    )
    
    $
    (0.02
    )
    
    $
    (0.01
    )
    
    $
    (0.01
    )Diluted loss per common share
    
    $
    (0.02
    )
    
    $
    (0.02
    )
    
    $
    (0.01
    )
    
    $
    (0.01
    )2005Net sales
    
    $
    23,108
    
    
    $
    25,512
    
    
    $
    28,091
    
    
    $
    28,631Gross profit
    
    
    6,503
    
    
    
    7,322
    
    
    
    8,677
    
    
    
    8,884Operating income (loss)
    
    
    566
    
    
    
    181
    
    
    
    201
    
    
    
    (6,109
    )Net income (loss)
    
    
    347
    
    
    
    (161
    )
    
    
    (718
    )
    
    
    (6,902
    )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
    )
 
 *
    
    The first quarter of 2005 includes the results of the predecessor entity. The results for 2006
are of the successor 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-127




---



##### Table of Contents



Year EndedMarch 31, 2006
    
    
    March 31, 2005
    
    

March 31, 2004Net Revenues:Services
    
    $
    110,152
    
    
    $
    97,218
    
    
    $
    78,359ProductsRentals
    
    
    10,425
    
    
    
    4,948
    
    
    
    Sales
    
    
    6,689
    
    
    
    3,175
    
    
    
    Retail
    
    
    3,663
    
    
    
    0
    
    
    
    Total Revenue
    
    
    130,929
    
    
    
    105,341
    
    
    
    78,359Operating
Income (Loss):Services
    
    
    4,376
    
    
    
    3,860
    
    
    
    3,730Products
    
    
    (356
    )
    
    
    (2,367
    )
    
    
    Retail
    
    
    (1,211
    )
    
    
    0
    
    
    
    Unallocated Corporate Overhead
    
    
    (4,944
    )
    
    
    (6,655
    )
    
    
    Total
Operating Income (Loss)
    
    
    (2,135
    )
    
    
    (5,162
    )
    
    
    3,730Interest
Expense (Income)
    
    
    1,524
    
    
    
    859
    
    
    
    (2
    )Amortization of Debt Discount
    
    
    933
    
    
    
    1,228
    
    
    
    Net Income (Loss) before Income Tax Expense
    
    
    (4,592
    )
    
    
    (7,249
    )
    
    
    3,732Income Tax Expense (Benefit)
    
    
    119
    
    
    
    185
    
    
    
    Net Income (Loss)
    
    $
    (4,711
    )
    
    $
    (7,434
    )
    
    $
    3,732Assets:Services
    
    $
    48,337
    
    
    $
    43,159
    
    
    $
    17,203Products
    
    
    31,644
    
    
    
    10,467
    
    
    
    Retail
    
    
    2,160
    
    
    
    0
    
    
    
    Unallocated Corporate Assets
    
    
    3,010
    
    
    
    1,967
    
    
    
    Total Assets
    
    $
    85,151
    
    
    $
    55,593
    
    
    $
    17,203
 
 F-128




---



##### Table of Contents



ARCADIA RESOURCES, INC. AND SUBSIDIARIES
 
  Balance at
    
    Charged to
    
    Charged to
    
    
    
    
    
    Balance atBeginning
    
    Costs and
    
    Other
    
    
    
    
    
    Endof Period
    
    Expenses
    
    Accounts
    
    Deductions
    
    of PeriodYear ended March 31, 2006Deducted from asset accounts:Allowance for doubtful accounts
    
    $
    1,692,000
    
    
    $
    880,000
    
    
    
    
    
    
    $
    (892,000
    )
    
    $
    1,891,000Addition
from acquired entities
    
    
    
    
    
    
    
    
    
    $ 211,000Allowance for inventory obsolescence
    
    $
    80,000
    
    
    $
    
    
    
    
    
    
    
    $
    
    
    
    $
    80,000Period from May 10, 2004 to March 31, 2005Deducted from asset accounts:Allowance for doubtful accounts
    
    $
    832,000
    
    
    $
    931,000
    
    
    
    
    
    
    $
    (877,000
    )
    
    $
    1,692,000Addition
from acquired entities
    
    
    
    
    
    
    
    
    
    $ 806,000Allowance 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). 
 F-129




---



##### 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.
   F-130




---



##### 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
 F-131




---



##### 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
 F-132




---



##### 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
    )
 F-133




---



##### 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
 F-134




---



##### 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
     F-135




---



##### 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
 F-136




---



##### 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
  F-137




---



##### Table of Contents



Note 16
 Impairment of Goodwill
  Note 17
 Pro Forma Balance Sheet Presentation
  F-138




---



##### Table of Contents



Report of Independent Registered Public Accounting Firm
 
    /s/ BDO Seidman, LLPCertified Public AccountantsKalamazoo, Michigan
  F-139




---



##### Table of Contents



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
 
 
 
  
 
  
 
  
  /s/
Marcum & Kliegman LLP
 
 
 F-140




---



##### 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
 F-141




---



##### 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 (Note 12)
    
    
    
    
    
    
    1,857,000OTHER
INTANGIBLES (Note 12)
    
    
    
    
    
    
    80,000OTHER
    
    
    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
 
  F-142




---



##### Table of Contents



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
  F-143




---



##### Table of Contents



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
    
    
    $
    
  F-144




---



##### 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
    )
  F-145




---



##### Table of Contents



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.
  F-146




---



##### Table of Contents



NOTE 3  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
         F-147




---



##### 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
    )
 F-148




---



##### Table of Contents



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
    %
     F-149




---



##### Table of Contents



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
  F-150




---



##### Table of Contents



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
 F-151




---



##### 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
 F-152




---



##### 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
   F-153




---



##### 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.
    %
 F-154




---



##### 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
    F-155




---



##### 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
 
  
 F-156




---



##### 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
 F-157




---



##### Table of Contents



NOTE 15  SUBSEQUENT EVENTS
 RKDA MERGER, CHANGE IN CONTROL OF THE BOARD OF DIRECTORS AND PRIVATE PLACEMENT
  F-158




---



##### Table of Contents



COMERICA BANK CREDIT AGREEMENT
   EMPLOYMENT AGREEMENTS
   F-159




---



##### Table of Contents



SETTLEMENT OF CERTAIN LIABILITIES
     EMPLOYEE STOCK PURCHASES
  F-160




---



##### 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
    
    $
    40,000Printing expenses
    

    $
    20,000Miscellaneous expenses
    
    $
    25,000Total
    
    $
    129,532
 
  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
 II-1




---



##### Table of Contents



Item 16. Exhibit Index
  II-2




---



##### 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)
 II-3




---



##### 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)
 II-4




---



##### 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)
 II-5




---



##### 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)10.62
    
    Form of Director Compensation
Agreement (24)10.63
    
    Form of Director Stock Option
Agreement (24)10.64
    
    Form of Stock Grant Agreement dated
June 22, 2006 (24)10.65
    
    $15 Million Promissory Note dated
June 29, 2006. (25)14.1
    
    Code of Ethics (24)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)99.3
    
    Charter of the Audit Committee of
the Board of Directors, as Amended and Restated on June 22, 2006
(24)
 II-6




---



##### 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) and reprinted and incorporated herein without change
except to reflect the Companys name change which occurred on
November 16, 2004.(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. II-7




---



##### 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.(24)
    
    Previously filed with the Securities and Exchange Commission
as an Exhibit to the Annual Report on Form 10-K filed on
June 29, 2006 and incorporated herein by reference (File
No. 000-31249).(25)
    
    Previously filed with the Securities and Exchange Commission
as an Exhibit to Form 8-K, filed July 6, 2006 and
incorporated herein by reference (File No. 000-31249). II-8




---



##### Table of Contents



Item 17. Undertakings
      
 Provided however
 
 
  
 A.
    
    Paragraphs (a)(1)(i) and (a)(1)(ii) of this section do not apply if the
registration statement is on Form S-8, and the information required to be included in a
post-effective amendment by those paragraphs is contained in reports filed with or
furnished to the Commission by the registrant pursuant to section 13 or section 15(d)
of the Securities Exchange Act of 1934 that are incorporated by reference in the
registration statement; and
    B.
    
    Paragraphs (a)(1)(i), (a)(1)(ii) and (a)(1)(iii) of this section do not apply
if the registration statement is on Form S-3 or Form F-3 and the information required
to be included in a post-effective amendment by those paragraphs is contained in
reports filed with or furnished to the Commission by the registrant pursuant to section
13 or section 15(d) of the Securities Exchange Act of 1934 that are incorporated by
reference in the registration statement, or is contained in a form of prospectus filed
pursuant to Rule 424(b) that is part of the registration statement.
   
 
  
 
  
 i.
    
    If the registrant is relying on Rule 430B (230.430B of this chapter):
 A.
    
    Each prospectus filed by the registrant pursuant to Rule
424(b)(3) shall be deemed to be part of the registration statement as of the
date the filed prospectus was deemed part of and included in the registration
statement; and
    B.
    
    Each prospectus required to be filed pursuant to Rule
424(b)(2), (b)(5), or (b)(7) as part of a registration statement in reliance on
Rule 430B relating to an offering made pursuant to Rule 415(a)(1)(i), (vii), or
(x) for the purpose of providing the information required by section 10(a) of
the Securities Act of 1933 shall be deemed to be part of and included in the
registration statement as of the earlier of the date such form of prospectus
is first used after effectiveness or the date of the first contract of sale
of securities in the offering described in the prospectus. As provided in
Rule 430B, for liability purposes of the issuer and any person that is at
that date an underwriter, such date shall be deemed to be a new effective
date of the registration statement relating to the securities in the
registration statement to which that prospectus relates, and the offering of
such securities at that time shall be deemed to be the initial bona fide
offering thereof. Provided, however, that no statement made in a
registration statement or prospectus that is part of the registration
statement or made in a document incorporated or deemed incorporated by
reference into the registration statement or prospectus that is part of the
registration statement will, as to a purchaser with a time of contract of
sale prior to such effective date, supersede or modify any statement that
was made in the registration statement or prospectus that was part of the
registration statement or made in any such document immediately prior to
such effective date; or
 ii.
    
    If the registrant is subject to Rule 430C, each prospectus filed pursuant to
Rule 424(b) as part of a registration statement relating to an offering, other than
registration statements relying on Rule 430B or other than prospectuses filed in
reliance on Rule 430A, shall be deemed to be part of and included in the registration
statement as of the date it is first used after effectiveness. Provided, however, that
no statement made in a registration statement or prospectus that is part of the
registration statement or made in a document incorporated or deemed incorporated by
reference into the registration statement or prospectus that is part of the
registration statement will, as to a purchaser with a time of contract of sale prior to
such first use, supersede or modify any statement that was made in the registration
statement or prospectus that was part of the registration statement or made in any such
document immediately prior to such date of first use.
 6.
    
    That, for the purpose of determining liability of the registrant under the Securities Act of
1933 to any purchaser in the initial distribution of the securities: The undersigned
registrant undertakes that in a primary offering of securities of the undersigned registrant
pursuant to this registration statement, regardless of the underwriting method used to sell
the securities to the purchaser, if the securities are offered or sold to such purchaser by
means of any of the following communications, the undersigned registrant will be a seller to
the purchaser and will be considered to offer or sell such securities to such purchaser:
 i.
    
    Any preliminary prospectus or prospectus of the undersigned registrant
relating to the offering required to be filed pursuant to Rule 424;ii.
    
    Any free writing prospectus relating to the offering prepared by or on
behalf of the undersigned registrant or used or referred to by the undersigned
registrant;iii.
    
    The portion of any other free writing prospectus relating to the
offering containing material information about the undersigned registrant or its
securities provided by or on behalf of the undersigned registrant; andiv.
    
    Any other communication that is an offer in the offering made by the
undersigned registrant to the purchaser.
   II-9




---



##### 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
    

July 6, 2006/s/ LAWRENCE R. KUHNERT

Lawrence R. Kuhnert
    
    Director, President
and Chief Operating Officer
    

July 6, 2006/s/ REBECCA R. IRISH

Rebecca R. Irish
    
    Secretary, Treasurer and Chief
Financial Officer
(Principal Financial and
Accounting Officer)
    

July 6, 2006/s/ JOHN T. THORNTON*

John T. Thornton
    
    Director
    

July 6, 2006
 By:
    * /s/ JOHN E. ELLIOTTJohn E. ElliottAttorney-in-Fact 
 II-10