Arcadia Resources Reports Fiscal 2007 Fourth Quarter and Year-End Results

Net revenues for fiscal 2007 increased 21% to $158.4 million, compared to $130.9 million for fiscal 2006. The revenue increase partially reflected organic growth of more than 10% year-over year in the Services segment, which now comprises approximately 77% of net revenues, as well as acquisitions made in other categories during fiscal 2007 to position the Company for emerging opportunities in the health care market.   

In line with previously reported preliminary results, Arcadia incurred a fiscal 2007 net loss of $43.8 million, or $0.48 per share, of which approximately $37 million consisted of non-cash charges.  Non-cash charges included: $22.9 million in goodwill and intangible asset impairment, primarily related to the Durable Medical Equipment business; $4.2 million in charges to increase the reserve for uncollectible accounts receivable; $3.0 million for stock-based compensation expense; and $7.1 million of depreciation and amortization.  The fiscal 2007 results also reflected $5.6 million in operating losses incurred by the new clinics business, expenses related to first-year Sarbanes-Oxley Section 404 compliance, and costs associated with restructuring operations.  The comparable fiscal 2006 net loss was $4.7 million, or $0.06 per share.

For the fourth quarter of fiscal 2007, net revenues were $38.4 million, compared to $34.2 million for the same period of the prior year.  Net loss for the fiscal 2007 fourth quarter, including non-cash charges and other restructuring-related expenses, was $39.2 million, or $0.42 per share.  This compared to a net loss of $1.2 million, or $0.01 per share, for the year-ago fourth quarter.

Management Strategies Being Implemented

The Company noted that subsequent to the end of fiscal 2007, its management team had begun to implement a series of previously announced strategic initiatives to improve Arcadia Resources’ financial performance, strengthen its capital base, and position its businesses to capture growth opportunities in the healthcare marketplace.  Among the key strategic initiatives are the following:

• Restructuring/Cost Reduction.  Management has begun implementing previously announced restructuring initiatives, including closing some unprofitable facilities; consolidating corporate accounting and support functions; centralizing pharmacy operations; and eliminating duplicate functions due to acquisitions.  These efforts are expected to reduce costs by approximately $5 million on an annualized basis, beginning in the fiscal 2008 second quarter.
  
  
• Equity Financing.  The Company strengthened its capital base in May 2007 through the issuance of approximately $13 million in equity to a group of new and existing Arcadia Resources investors.  The proceeds will be used primarily to repay debt borrowings and other corporate expenditures.
  
  
• Debt Restructuring.  The Company and Jana Master Fund, Ltd. have restructured a promissory note with a principal balance of $17 million. The terms of the restructuring include extending the maturity date to June 30, 2008 and, effective July 1, 2007, changing the interest rate to the one year LIBOR rate (as published in the Wall Street Journal) plus 8%.  Additionally, 50% of the accrued interest is deferred until the maturity date.    

In addition to these measures, the Company continues to actively pursue agreements with substantial customers, as well as such initiatives as the possible divestiture of non-strategic assets, further restructuring of debt, financing of Durable Medical Equipment receivables, and restructuring current clinic agreements.  Management will also explore additional measures to achieve further cost savings and efficiencies.

10-K Filing

The Company’s annual report on Form 10-K was filed today, within the extension period permitted by the SEC under rule 12b-25.

The Form 10-K contains an unqualified opinion on the financial statements from the Company’s auditors, BDO Seidman, LLP.  The independent auditor’s report contains an explanatory paragraph regarding the Company’s ability to continue as a going concern as of March 31, 2007.  As previously reported, management identified material weaknesses that existed in the Company’s internal controls over financial reporting at March 31, 2007, in the assessment of the Company’s first year of compliance with Section 404 of the Sarbanes-Oxley Act. 

Management Comments

Marvin R. Richardson, President and Chief Executive Officer, said, “While fiscal 2007 was a challenging year, we have confidence in our plans for improving the Company’s financial performance during fiscal 2008.  It is important to note that a significant portion of the recent year’s loss consisted of non-recurring and/or non-cash items related to our initiatives to position Arcadia Resources for long-term growth.”

“Since fiscal year-end, we have made progress in reshaping our management team, restructuring operations, and strengthening our capital base.  Further initiatives are under way to enhance our financial resources, business performance and profitability.  We believe that the financial results of fiscal 2007 do not reflect our true potential, and our team is fully committed to – and sharply focused on – driving cost-efficiency, achieving profitable growth and enhancing shareholder value,” Mr. Richardson added.

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 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 retail store health clinic services, required capital investment, build-out schedules, competition, and other factors. Actual results may differ materially from those anticipated or implied in the forward-looking statements, which speak only as of the date hereof. Additional information that could materially affect the Company may be found in the Company's filings with the Securities and Exchange Commission. The Company disclaims any obligation to update or alter its forward-looking statements, except as may be required by law.

Some of these risks and uncertainties are discussed in the Company's Quarterly Report on Form 10-Q for the quarter ended December 31, 2006 under Risk Factors. Important factors that could cause actual results to differ materially include, but are not limited to (1) our ability to compete with our competitors; (2) our ability to obtain additional debt or equity financing and/or to restructure existing indebtedness, which may be difficult due to our history of operating losses and negative cash flows; although management believes that the Company's short-term cash needs can be adequately sourced, we cannot assure that such additional sources of financing will be available on acceptable terms, if at all, and an inability to raise sufficient capital to fund our operations would have a material adverse affect on our business and would raise doubts about our ability to continue as a going concern; (3) the ability of our affiliated agencies to effectively market and sell our services and products; (4) our ability to procure product inventory for resale; (5) our ability to recruit and retain temporary workers for placement with our customers; (6) the timely collection of our accounts receivable; (7) our ability to attract and retain key management employees; (8) our ability to timely develop new services and products and enhance existing services and products; (9) our ability to execute and implement our growth strategy; (10) the impact of governmental regulations; (11) marketing risks; (12) our ability to adapt to economic, political and regulatory conditions affecting the health care industry; (13) other unforeseen events that may impact our business; and (14) the ability of our new management team to successfully pursue its business plan and the risk that the Company may be required to enact restructuring measures in addition to those announced on March 30, 2007. Actual results may differ materially from those anticipated or implied in the forward-looking statements, which speak only as of the date hereof. Additional information that could materially affect the Company may be found in the Company's filings with the Securities and Exchange Commission. The Company disclaims any obligation to update or alter its forward-looking statements, except as may be required by law.

ARCADIA RESOURCES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS

ARCADIA RESOURCES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS

ARCADIA RESOURCES, INC.
CONSOLIDATED BALANCE SHEETS

See notes to consolidated financial statements.

SUPPLEMENTAL INFORMATION:
Fourth Quarter and Full-Year EBITDA Comparisons
The Company’s EBITDA for the fiscal 2007 and 2006 periods is presented below.

The presentation above bridges from Net Loss to EBITDA and is presented as a supplemental performance measure and is not intended as an alternative to net income or any other measure calculated in accordance with generally accepted accounting principles. Further, EBITDA may not be comparable to similarly titled measures used by other companies. Management has chosen to present the tables above to enable the reader to more readily understand the Company's EBITDA measurement due to the requirement to classify the depreciation and amortization related to certain revenue-producing fixed assets as a component of cost of goods sold, while presenting the remainder of depreciation and amortization on the corresponding line of the income statement.