Arcadia Resources Announces Improved Fiscal 2011 Second Quarter Results

INDIANAPOLIS, Nov. 9, 2010 /PRNewswire-FirstCall/ — Arcadia Resources, Inc.

(NYSE Amex: KAD), a leading provider of innovative consumer health care services
under the Arcadia HealthCare(SM) brand, today announced fiscal 2011 second
quarter net revenues of $25.8 million and a net loss of $2.9 million, or $0.02
per share, which compares to net revenue of $25.1 million and a net loss of $4.1
million, or $0.03 per share, for the same period in fiscal 2010.

“During our second quarter we continued to make substantial progress on a number
of fronts,” said Marvin R. Richardson, President and Chief Executive Officer of
Arcadia. “Importantly, we executed a new three year agreement with WellPoint’s
State Sponsored Business which aligns our interests with WellPoint’s and ensures
that DailyMed will continue to be a cornerstone of WellPoint’s programs to
improve their members’ health and well-being. Importantly, under our agreement
with WellPoint, for the first time in our history, we recognized revenue
attributable to our patient care services we provide as part of our DailyMed
patient care program. We believe this validates our core value proposition and
looking forward our focus in our Pharmacy segment will be to continue to scale
this business model with WellPoint and additional healthcare payors. Our new
agreement with Touchstone Health further validates the growing acceptance among
payers regarding the value of our DailyMed program, and we look forward to our
market introduction to Touchstone’s members beginning in January.”

“From an operational stand point, our Pharmacy gross margins improved by 250
basis points compared to the first quarter, benefiting from our prime vendor
agreement with H.D. Smith and our continued focus on reducing our drug cost. We
made significant Pharmacy operational improvements that will streamline our
enrollment process, increase efficiency and reduce costs. We increased our
active patient count by 6%, but more importantly we exited the second quarter
with good momentum in our DailyMed business and entered our fiscal third quarter
with a solid pipeline of enrollees. Our announcement yesterday that we have
started the launch our WellPoint program in Kansas continues that momentum.”

“In our Services segment, we had another solid quarter with increased sales and
continued improvement in the operating contribution. We also continue to
identify opportunities to reduce our SG&A expenses in all areas of our
business,” Richardson continued.

Fiscal 2011 Second-Quarter Results

Arcadia reported $25.8 million in revenue from continuing operations during the
quarter, up slightly from $25.1 million during the same period a year ago. The
Company’s gross margin from continuing operations was 27.3% during the second
quarter, a decline of 1.3% from the same period a year ago. The reduction in
gross margin was driven by a shift in mix towards Pharmacy revenue, which has
lower margins than the Company’s Services segment.

Arcadia reduced its net loss from continuing operations to $3.1 million, or
$0.02 per share, in the second quarter of fiscal 2011, compared to a net loss
from continuing operations of $4.1 million, or $0.03 per share, in the same
period in fiscal 2010. The consolidated net loss, including discontinued
operations, was $2.9 million, or $0.02, in the fiscal second quarter in 2011
compared to a net loss of $4.1 million, or $0.03 in the fiscal second quarter in
2010.

Segment highlights:

Pharmacy: Pharmacy segment revenues increased to $4.9 million for the second
quarter of fiscal 2011, compared to $3.4 million in revenues for the first
quarter of fiscal 2010, an increase of 44.1%. Pharmacy gross margin increased to
15.6% in the second quarter of fiscal 2011 from 15.1% in the second quarter of
fiscal 2010 and 13.1% during the first quarter of fiscal 2011. Total
prescriptions filled during the quarter were 96,800, a 62% increase over the
same period last year. The Company’s DailyMed(TM) Pharmacy had 5,100 active
patients at the end of the second quarter, compared to 4,800 active patients at
the end of the first quarter of fiscal 2011, an increase of 6%. Second quarter
revenue was impacted by the implementation of a new Pharmacy software system in
July, which included a change from 30-day to 28-day fill cycles, a reduction in
the average number of prescriptions filled per patient, and an increase in
generics dispensed as a percentage of total prescriptions filled. The Pharmacy
segment operating contribution improved by 12.4%, or $0.2 million, to negative
$1.5 compared to the first quarter of fiscal 2011.

Services: The Company’s Services segment, which includes Arcadia’s home care and
medical staffing business, reported net revenues of $20.9 million in the second
quarter of fiscal 2011 compared to net revenues of $21.7 million for the first
quarter a year ago. Within the Services segment, home care revenues decreased by
$464,000, or 2.7%, to $16.7 million from $17.3 million in the same period last
year. Medical staffing and travel staffing declined $314,000 to $4.1 million in
the second quarter of fiscal 2011 compared to $4.5 million in the same period
last year. Compared to the first quarter of fiscal 2011, second quarter revenues
increased 2.8% from $20.4 million to $20.9 million with increases in both home
care and medical staffing. Gross margin within the Services segment was 30.0% in
the second quarter of fiscal 2011 compared to 30.8% in the same period last
year. The Services segment operating contribution improved by 30.0%, or $0.3
million, to $1.4 million compared to the first quarter of fiscal 2011. Second
quarter operating contribution in the Services segment was its highest since the
second quarter of fiscal 2010.

The Company sold its former Catalog segment during the quarter and this segment
is being reported as a discontinued operation for the fiscal year second
quarter.

Capital Resources and Liquidity

Cash flow from operations during the second fiscal quarter improved by $1.5
million to negative $3.4 million compared to negative $4.9 million in the first
fiscal quarter of 2011, inclusive of changes in operating assets and liabilities
in each quarter of negative $1.1 million and negative $2.4 million,
respectively.

At September 30, 2010, the Company had total cash plus line-of-credit available
of $2.5 million. On November 2, 2010, the Company finalized a $5.0 million
equity financing transaction whereby it sold 15,624,000 shares of common stock
at $0.32 per share. The Company expects to receive net proceeds after fees of
approximately $4.5 million. The additional cash will be used to fund and grow
the DailyMed operations.

The Company previously announced that it had entered into a new credit facility
with Comerica Bank covering its Services segment. The new agreement extends the
maturity of the facility to 2012.

“With our existing cash availability, the additional cash raised through our
equity financing, the extension of our Comerica facility, on-going operating
contribution improvements, particularly in our Pharmacy segment, and additional
cash proceeds from prior asset sales, we believe we have adequate cash resources
to support the business until we achieve our plan to become cash flow positive,”
said Matt Middendorf, Chief Financial Officer.

Conference Call Information

Arcadia will conduct a conference call and simultaneous Internet webcast to
review these financial results on Tuesday, November 9, at 11:00 a.m. Eastern
Time.

To access the webcast, visit the Company’s website at www.arcadiahealthcare.com,
5-10 minutes prior to the start time and click on the webcast link. The
Company’s press release, which contains financial information to be discussed in
the presentation, will also be available on Arcadia’s website.

To participate in the live conference call, please dial 1-877-407-8031 (for
U.S.-based callers) or 1-201-689-8031 (for international callers). The call can
also be accessed (listen-only mode) via the Company’s web site at
www.arcadiahealthcare.com through the “Investors” page.

A replay of the webcast will be available approximately one hour after the
completion of the call and will be accessible at www.arcadiahealthcare.com until
August 27, 2010. A telephone replay will be available by dialing 1-877-660-6853
(for US-based callers) or 1-201-612-7415 (for international callers). For
telephone replay, callers must use Account number 286 and Conference ID number
359345.

Use of Non-GAAP Financial Information

In addition to reporting financial results in accordance with generally accepted
accounting principles, or GAAP, Arcadia reports non-GAAP financial results.
Arcadia’s management believes these non-GAAP measures are useful to investors
because they provide supplemental information that facilitates comparisons to
prior periods. Management uses these non-GAAP measures to evaluate its financial
results, develop budgets and manage expenditures. The method Arcadia uses to
produce non-GAAP results is likely to differ from the methods used by other
companies and should not be regarded as a replacement for corresponding GAAP
measures. Investors are encouraged to review the reconciliation of these
non-GAAP financial measures to the comparable GAAP results, which are attached
to this release.

About Arcadia HealthCare

Arcadia HealthCare is a service mark of Arcadia Resources, Inc. (NYSE Amex:
KAD), and is a leading provider of home care, medical staffing and pharmacy
services under its proprietary DailyMed program. The Company, headquartered in
Indianapolis, Indiana, has 65 locations in 18 states. Arcadia HealthCare’s
comprehensive solutions and business strategies support the Company’s vision of
“Keeping People at Home and Healthier Longer.”

DailyMed(TM) Pharmacy dispenses a monthly cycle of a patient’s prescriptions,
over-the-counter medications and vitamins, and organizes them into pre-sorted
packets clearly marked with the date and time the medications should be taken.
In the dispensing process, a DailyMed pharmacist reviews each patient’s
medication profile and utilizes state-of-the-art medication therapy management
tools in order to improve the safety and efficacy of the medications being
dispensed. A DailyMed pharmacist provides routine communication with the
patient, the primary care physician, caregivers and payers in order to maximize
the pharmaceutical care administered. The DailyMed program improves patient care
and drug utilization while reducing drug and hospitalization costs for private
and government payers.

Forward Looking Statements

Any statements contained in this release that are not historical facts are
forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933, as amended, and Section 21A of the Securities Exchange Act of 1934,
as amended and otherwise within the meaning of court opinions construing such
forward-looking statements. The Company claims all safe harbor and other legal
protections provided to it by law for all of its forward-looking statements.
Forward-looking statements are not guarantees of future performance and involve
known and unknown risks, estimates, uncertainties and other factors, which could
cause actual financial or operating results, performances or achievements
expressed or implied by such forward-looking statements not to occur or be
realized, including our estimates of consumer demand for our services and
products, required capital investment, competition, and other factors. Actual
events and results may differ materially from those expressed, implied or
forecasted in forward-looking statements due to a number of factors. Important
factors that could cause actual results, developments and business decisions to
differ materially from forward-looking statements are described in the Company’s
filings with the Securities and Exchange Commission from time to time, including
the section entitled “Risk Factors” and elsewhere in the Company’s most recent
Annual Report on Form 10-K and subsequent periodic reports. Among the factors
that could cause future results to differ materially from those provided in our
press release are: (i) we cannot be certain or our ability to generate
sufficient cash flow to meet our obligations on a timely basis; (ii) we may be
required to make significant business investments that do not produce offsetting
increases in revenue; (iii) we may be unable to execute and implement our growth
strategy; (iv) we may be unable to achieve our targeted performance goals for
our business segments; and (v) other unforeseen events may impact our business.
The forward-looking statements speak only as of the date hereof. The Company
disclaims any obligation to update or alter its forward-looking statements,
except as may be required by law.

Contact:
Matthew Middendorf
Chief Financial Officer
mmiddendorf@arcadiahealthcare.com
317.569.8234

Bill Bunting
In-Site Communications, Inc.
(212) 759-3929 / (415) 517-7013
bbunting@insitecony.com

FINANCIAL TABLES FOLLOW

ARCADIA RESOURCES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

September
30, March 31,
2010 2010
—- —-
ASSETS (unaudited)

Current assets:
Cash and cash equivalents $1,704 $5,444
Accounts receivable, net of allowance
of $2,309 and $2,623, respectively 12,184 12,290
Inventories, net 1,357 917
Prepaid expenses and other current
assets 1,995 1,551
Current assets of discontinued
operations 155 174
Total current assets 17,395 20,376
Property and equipment, net 1,801 1,738
Goodwill 2,500 2,500
Acquired intangible assets, net 7,384 7,670
Other assets 426 412
Restricted cash 500 500
Total assets $30,006 $33,196
======= =======

LIABILITIES AND STOCKHOLDERS’ DEFICIT
Current liabilities:
Accounts payable $1,836 $2,859
Accrued expenses:
Compensation and related taxes 2,629 3,184
Interest 38 82
Health insurance 507 463
Other 1,539 1,507
Fair value of warrant liability 1,635 1,499
Payable to affiliated agencies 502 1,076
Long-term obligations, current
portion 189 939
Capital lease obligations, current
portion 43 69
Current liabilities of discontinued
operations 117 308
Total current liabilities 9,035 11,986
Lines of credit 12,186 7,774
Long-term obligations, less current
portion 26,471 25,192
Capital lease obligations, less
current portion 12 19
Total liabilities 47,704 44,971
—— ——

Commitments and contingencies

STOCKHOLDERS’ DEFICIT
Preferred stock, $.001 par value,
5,000,000 shares authorized, none
outstanding – -
Common stock, $.001 par value,
300,000,000 shares authorized;
177,428,044 shares and 177,918,044
shares issued, respectively 177 178
Additional paid-in capital 146,396 145,381
Accumulated deficit (164,271) (157,334)
——– ——–
Total stockholders’ deficit (17,698) (11,775)
Total liabilities and stockholders’
deficit $30,006 $33,196
======= =======

ARCADIA RESOURCES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

Three Month Period Six Month Period
Ended Ended
—————— —————-
September 30, September 30,
————- ————-

(Unaudited) (Unaudited)
2010 2009 2010 2009
—- —- —- —-

Services $20,931 $21,709 $41,295 $44,389
Pharmacy 4,911 3,408 9,965 6,625
Revenues, net 25,842 25,117 51,260 51,014
Cost of revenues 18,797 17,923 37,453 36,549
—— —— —— ——
Gross profit 7,045 7,194 13,807 14,465

Selling, general and
administrative 9,581 9,878 19,315 19,329
Depreciation and
amortization 326 531 634 942
— — — —
Total operating
expenses 9,907 10,409 19,949 20,271

Operating loss (2,862) (3,215) (6,142) (5,806)

Other expenses:
Interest expense, net 980 846 1,823 1,684
Change in fair value
of warrant liability (779) – (137) -
Other – (6) – 30
Total other expenses 201 840 1,686 1,714
— — —– —–

Loss from continuing
operations before
income taxes (3,063) (4,055) (7,828) (7,520)

Income tax expense 40 7 73 100
— — — —
Loss from continuing
operations (3,103) (4,062) (7,901) (7,620)

Discontinued
operations:
Loss from discontinued
operations (52) (248) (82) (1,477)
Net gain on disposal 259 163 1,046 379
207 (85) 964 (1,098)
— — — ——

NET LOSS $(2,896) $(4,147) $(6,937) $(8,718)
======= ======= ======= =======

Weighted average
number of common
shares outstanding 177,295 161,201 177,267 160,709

Basic and diluted net
loss per share:
Loss from continuing
operations $(0.02) $(0.03) $(0.04) $(0.05)
Income (loss) from
discontinued
operations – – – -
— — — —
Net loss per share $(0.02) $(0.03) $(0.04) $(0.05)
====== ====== ====== ======

ARCADIA RESOURCES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)

Six-Month Period
Ended
September 30,
(Unaudited)
2010 2009
—- —-
Operating activities
Net loss for the period $(6,937) $(8,718)
Adjustments to reconcile net loss to
net cash used in operating
activities:
Provision for doubtful accounts 351 1,155
Depreciation of property and
equipment 348 912
Amortization of intangible assets 286 405
Gain on business disposals (1,046) (379)
Non-cash interest expense 1,392 1,224
Amortization of deferred financing
costs and debt discounts 190 121
Stock-based compensation expense 753 551
Change in fair value of warrant
liability (137) -
Changes in operating assets and
liabilities, net of acquisitions:
Accounts receivable (260) 2,440
Inventories (437) 904
Other assets (413) 821
Accounts payable (1,274) (1,449)
Accrued expenses (536) (957)
Due to affiliated agencies (564) (277)
Net cash used in operating
activities (8,284) (3,247)
—— ——

Investing activities
Business acquisitions, net of cash
acquired (106) (196)
Proceeds from business disposal 1,046 9,320
Increase in restricted cash – (500)
Purchases of property and equipment (411) (96)
—- —
Net cash provided by investing
activities 529 8,528
— —–

Financing activities
Lines of credit, net activity 4,798 (4,610)
Proceeds from note payable, net of
fees – 2,141
Payments on notes payable and
capital lease obligations (784) (4,334)
Proceeds from exercise of stock
options 1 -
Net cash provided by (used in)
financing activities 4,015 (6,803)
—– ——

Net change in cash and cash
equivalents (3,740) (1,522)
Cash and cash equivalents, beginning
of period 5,444 1,522
—– —–
Cash and cash equivalents, end of
period $1,704 $-
====== ===

SOURCE Arcadia Resources, Inc.