Part I

Respiratory and Durable Medical Equipment and Related Products

     We operate durable medical equipment businesses providing oxygen and other respiratory therapy services and home medical equipment in 11 states through our 25 locations. The Company’s equipment and supplies for these businesses are readily available in the marketplace and the Company is not dependent on a single supplier. Reimbursement and payor sources include Medicare, Medicaid, insurance companies, managed care groups, HMO’s, PPO’s and private pay (payments from patients).

Mail Order Pharmacy and Related Products

     Arcadia Rx is a full-service mail-order pharmacy based in Kentucky. Arcadia Rx offers a full-line of services and products including the dispensing of pills and other medications including multi-dose strip medication packages, respiratory supplies and medications, diabetic care management, drug interaction monitoring, and special assisted living medication packaging. Arcadia Rx ships medications and supplies directly to the customer’s residence. Arcadia Rx submits billing claims on the patient’s behalf to Medicare, some state Medicaid programs, and most private insurances. Multi-dose strip medication is packaged to facilitate patient compliance with physician’s orders and to improve accuracy for patients and their caregivers, leading to a greater efficacy of the prescribed drug therapy.

Retail Distribution

     In March of 2005, Arcadia Health Care Solutions, Inc., a subsidiary of Arcadia Resources, Inc., and Sears, Roebuck and Co. executed a multi-year licensing agreement under which Arcadia Health Care Solutions will sell merchandise and services within selected Sears stores in designated territories. Arcadia Health Care Solutions will operate this business under the name “Sears Home Healthcare.” The license agreement commenced in May 2005. Initial product and service offerings will include ambulatory and mobility products, respiratory products, daily living aids and bathroom safety products, and bathroom and home modifications. We also operate a home health-oriented products catalog and related website to sell similar and additional products to serve our patients, along with persons on our directed mailing list compiled over many years and the general public through the website.

ORGANIZATION

OPERATIONS

Arcadia’s 108 operating locations are split into the Divisions described above and further into regions to enable seasoned managers to oversee the operations in their regions and evaluate each location individually for performance and profitability. Each location manager is responsible for the sales and delivery of services to the local market. Strategic development, financial control and operating policies are administered at the corporate level. Reporting mechanisms are in place at the operating center level to monitor performance and to ensure accountability at the location level.

MANAGEMENT

We have a decentralized management approach which we believe allows the local management to more effectively deal with the challenges and opportunities presented by their local marketplace. The delivery of health care services and products is conceptually the same but can be significantly different between markets due to a variety of local factors such as the availability and quality of services at hospitals and other facilities. These differences often create opportunities that only a local manager would be able to discern and capitalize on in a timely manner.

SALES AND MARKETING

Arcadia’s referral sources recognize our reputation for providing high-quality services through our employee base. The sales function is carried out by our full-time sales representatives at each location with assistance and guidance from a regional manager. Our principal referral sources are physicians, case managers, medical social workers and hospital discharge planners and existing patients or their caregivers. No single referral source accounts for more than one percent of our revenues. Arcadia has more than 25,000 patients and the loss of any particular referral source would not significantly impact our business.

INFORMATION SYSTEMS

Arcadia Services has developed a proprietary management information system for the home care and staffing services portion of our business that we believe is one of our competitive advantages in obtaining and retaining customers. The system allows a flexibility and customization in billing our services that is attractive to our customers and provides management with the necessary information to timely measure its performance. A new accounts receivable system purchased from a highly-regarded software company for the pharmacy, respiratory and medical equipment claims was recently put in place to standardize the billing and reporting for those claims. All information is aggregated at the location level and locations’ performance and profitability are managed individually. The Company expects to expend resources during the next two years to continue to enhance our ability to obtain better and more timely information with which to manage the business.

ACCOUNTS RECEIVABLE MANAGEMENT

We perform the accounts receivable management at two national billing centers, one for home care and staffing services claims and one for pharmacy, respiratory and medical equipment claims, staffed with experienced reimbursement personnel, supported by strong information systems. Third-party reimbursement is a detailed and complicated process that involves knowledge of and compliance with regulatory and billing processing issues. Success in billing and collections is vital to our business plan, which drives our continued focus on investment in improving these capabilities.

COMPLIANCE

Arcadia has a dedicated credentialing and compliance group that manages our licensure, contracting and related processes to ensure compliance with regulatory matters. Compliance with billing related matters is performed continually by the billing center personnel, managed by seasoned personnel in their respective areas of expertise including quality control.

ACCREDITATION AND EDUCATION

The Company’s locations are not accredited by independent accreditation agencies. We continuously consider the need for obtaining accreditation, primarily to be eligible for those contractual awards that require such credentials. We continue to standardize our operations to facilitate future accreditation. We offer computer-based continuing professional education to our health care professionals to recruit and retain employees and to ensure their ease in obtaining the required education for the maintenance of their respective licenses.

COMPETITION AND MARKET CONDITIONS

Competition for the medical staffing, non-medical staffing and home care industries is based upon the quality of the employee, the availability of the employee, the cost of the employee and the geography. Staffing and home care industries include national, international, regional and local firms that compete with each other to attract employees and to obtain and maintain customers. A local presence is essential to establish the name/brand recognition as a provider of qualified staff and home care aides that must meet specific job requirements, while suppliers of longer term employees must have the reputation and reach to meet the needs of customers across the country.

The segment of the health care market in which our respiratory and durable medical equipment and related businesses operate is fragmented and highly competitive. There are a limited number of national providers and numerous regional and local providers operating in each of our product and service line markets.

According to an industry report, consolidation activity in the home care industry has increased and is expected to continue to increase due to both the projected increased demand for skilled employees and the projected staffing shortage, especially in nursing, as well as to obtain the necessary infrastructure to comply with new health care regulations.

SUPPLIERS

We purchase equipment and supplies from various vendors and manufacturers. We are not dependent upon any single supplier and believe that our product needs can be met by an adequate number of various manufacturers.

GOVERNMENT REGULATION

Our health care-related businesses (e.g., durable medical equipment, pharmacy, oxygen, home health care, etc.) are subject to extensive government regulation, including numerous laws directed at preventing fraud and abuse and laws regulating reimbursement under various governmental programs. The federal government and all states in which we currently operate and intend to operate regulate various aspects of our health care related businesses. In particular, our operating branches are subject to federal laws covering the repackaging of drugs (including oxygen) and regulating interstate motor-carrier transportation. Our locations also will be subject to state laws governing, among other things, pharmacies, nursing services, distribution of medical equipment and certain types of home health care activities. Certain of our employees are subject to state laws and regulations governing the ethics and professional practice of respiratory therapy and nursing and in the future, pharmacy.

As a health care supplier, we are subject to extensive government regulation, including numerous laws directed at preventing fraud and abuse and laws regulating reimbursement under various government programs. The marketing, billing, documentation and other practices of health care companies are all subject to government scrutiny. To ensure compliance with Medicare and other regulations, regional carriers often conduct audits and request patient records and other documents to support claims submitted by our company for payment of services rendered to patients. Similarly, government agencies periodically open investigations and obtain information from health care providers pursuant to the legal process. Violations of federal and state regulations can result in severe criminal, civil and administrative penalties and sanctions, including disqualification from Medicare and other reimbursement programs.

Health care is an area of rapid regulatory change. Changes in law and regulations, as well as new interpretations of existing laws and regulations may affect permissible activities, the relative costs associated with doing business, and reimbursement amounts paid by federal, state and other third party payors. We can not predict the future of federal, state and local regulation or legislation, including Medicare and Medicaid statutes and regulations, or possible changes in national health care policies, each of which could have a material adverse impact on our company.

Material laws and regulations that affect our operations include, but are not necessarily limited to, Medicare and Medicaid reimbursement laws; laws permitting Medicare, Medicaid and other payors to audit claims and seek repayment when claims have been over paid; laws such as the Health Insurance Portability and Accountability Act regulating the privacy of individually identifiable health information; laws prohibiting kickbacks and the exchange of remuneration as an inducement for the provision of reimbursable services or products; laws regulating physician self-referral relationships; and laws prohibiting the submission of false claims.

EMPLOYEES

As of March 31, 2006, we had over 14,000 employees, the majority of which were part-time temporary field employees. We have no unionized employees, and do not have any collective bargaining agreements. We believe our relationship with our employees is good.

ENVIRONMENTAL MATTERS

We believe that we are currently in compliance, in all material respects, with applicable federal, state and local statutes and ordinances regulating the discharge of hazardous materials into the environment. We believe that our Company will not be required to expend any material amounts in order to remain in compliance with these laws and regulations or that such compliance will materially affect its capital expenditures, earnings or competitive position.

AVAILABLE INFORMATION

We file annual, quarterly and special reports, proxy statements and other information with the SEC. Our SEC filings are available to the public over the SEC’s website at http://www.sec.gov . You may also read and copy any document we file at the SEC’s Public Reference Room at:

Public Reference Section
Securities and Exchange Commission
100 F. Street, N.E., Washington, D.C. 20549
Attention: Secretary

Please call the SEC at (800) SEC-0330 for further information on the operating rules and procedures for the public reference room. Our SEC filings are available to the public at no cost over the Internet at www.ArcadiaResourcesInc.com . Amendments to these filings will be posted to our website as soon as reasonably practicable after filing with the SEC.

Item 1A. RISK FACTORS

Our business faces significant risks. You should carefully consider and evaluate the risks and uncertainties listed below, as well as the other information set forth in this Form 10-K.

We recently became a public company and have a limited operating history as a public company upon which you can base an investment decision.

The shares of our Common Stock have been quoted on the OTC Bulletin Board since August 2, 2002. We acquired Arcadia Services and Arcadia Rx on May 10, 2004. We have a limited operating history as a public company upon which you can make an investment decision, or upon which we can accurately forecast future sales. You should, therefore, consider us subject to all of the business risks associated with a new business. The likelihood of our success must be considered in light of the expenses, difficulties and delays frequently encountered in connection with the formation and initial operations of a new and unproven business.

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.

We incurred substantial debt to finance RKDA’s acquisition of Arcadia Services and our post-merger acquisitions, which has been significantly reduced through capital infusions. As of March 31, 2006, the current portion of our interest-bearing debt totals approximately $4.4 million, while the long-term portion of our debt totals approximately $15.5 million, for a total of approximately $19.9 million. This level of debt could have consequences to you as a holder of shares. Below are some of the material potential consequences resulting from this amount of debt:

	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.

Under certain circumstances, we may be able to incur additional indebtedness in the future. If we add new debt, the related risks that we now face could intensify. In order to repay our debt obligations timely and as discussed below, we must maintain adequate cash flow from operations or raise additional capital from equity investment. Cash which we must use to repay these obligations will reduce cash available for purposes, such as payment of operating expenses, investment in new products and services offered by the Company, self-financing of acquisitions to grow the Company’s business, or distribution to our shareholders as a return on investment.

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.

On May 7, 2004, Arcadia Services and three of its wholly-owned subsidiaries entered into a credit agreement with Comerica Bank. The credit agreement provides the borrowers with a revolving credit facility of up to $12 million. The initial advance on May 7, 2004 was $11 million, which was immediately distributed to RKDA to fund a portion of the purchase price of the capital stock of Arcadia Services by RKDA. All other advances under the credit facility shall be used primarily for working capital or acquisition purposes. On July 29, 2004, the revolving credit commitment amount was increased to $14.4 million and increased again to $16 million on November 23, 2004. The credit agreement provides that advances to the Company will not exceed the lesser of the revolving credit commitment amount or the aggregate principal amount of indebtedness permitted under the advance formula amount at any one time. The advance formula base is 85% of the eligible accounts receivable, plus the lesser of 85% of eligible unbilled accounts or $2.5 million. On August 15, 2005, the credit agreement was amended to extend the maturity date to July 7, 2006. The credit agreement was further amended on August 30, 2005 to include a fourth wholly-owned subsidiary of Arcadia Services, to increase the credit commitment amount to $19 million and to extend the maturity date to September 1, 2007. Amounts outstanding under this agreement totaled $13.9 million at March 31, 2006.

RKDA granted Comerica Bank a first priority security interest in all of the issued and outstanding capital stock of Arcadia Services. Arcadia Services granted Comerica Bank a first priority security interest in all of its assets. The subsidiaries of Arcadia Services granted the bank security interests in all of their assets. RKDA is restricted from paying dividends to Arcadia Resources, Inc. RKDA executed a guaranty to Comerica Bank for all indebtedness of Arcadia Services and its subsidiaries.

Advances under the credit facility bear interest at the prime-based rate (as defined) or the Eurodollar based rate (as defined), at the election of borrowers. Currently the Company has elected the prime-based rate, effectively 7.75% at March 31, 2006. Arcadia Services agreed to various financial covenant ratios, to have any person who acquires Arcadia Services’ capital stock to pledge such stock to Comerica Bank, and to customary negative covenants. As of March 31, 2006, the Company was in compliance with all financial covenants.

On February 18, 2005, Trinity Healthcare of Winston-Salem, Inc. (“Trinity Healthcare”), a wholly-owned subsidiary, entered into a separate credit agreement with Comerica Bank which provides Trinity Healthcare with a revolving credit facility of up to $2,000,000 payable upon demand of Comerica Bank, bearing interest at prime + 1/2%, effectively 8.25% at March 31, 2006. The credit agreement provides that advances to Trinity Healthcare will not exceed the lesser of the revolving credit commitment amount or the aggregate principal amount of indebtedness permitted under the advance formula amount at any one time. The advance formula base is 80% of the eligible accounts receivable, subject to Comerica Bank’s adjustment to account for dilution of accounts receivable caused by customer credits, returns, setoffs, etc., plus 30% of eligible inventory. If an event of default occurs, Comerica Bank may, at its option, accelerate the maturity of the debt and exercise its right to foreclose on the issued and outstanding capital stock of Trinity Healthcare and on all of the assets of Trinity Healthcare and its subsidiaries. Any such default and resulting foreclosure would have a material adverse effect on our financial condition. There was $2.0 million outstanding under this agreement at March 31, 2006. The Company was in compliance with all covenants at March 31, 2006.

On May 31, 2005, the Company purchased the membership interests in Rite at Home, LLC, which had an outstanding line of credit agreement with Fifth Third Bank. The Company obtained a new line of credit of up to $750,000, which matures on June 1, 2007. The Company used $436,000 to repay the assumed line of credit and $300,000 was used to fund the acquisition. The outstanding balance under this agreement totaled $600,000 at March 31, 2006 and $5,000 at March 31, 2005, bearing interest at prime +1/2%, effectively 8.25%.

On February 17, 2004, SSAC, LLC, a wholly-owned subsidiary, established a revolving line of credit with US Bank with a credit limit of $250,000, bearing interest at prime +1% which was paid in full and extinguished with proceeds from the Company’s September 2005 warrant offering. The borrowings under this agreement were $250,000 at March 31, 2005. The line of credit was cancelled upon payment in full.

There is always the risk that Comerica Bank or other sources of credit may decline to increase the amount we are permitted to draw on the revolving credit facility or to lend additional funds for working capital or acquisition purposes. This development could result in various consequences to the Company, ranging from implementation of cost reductions which could impact our product and service offerings, to the modification or abandonment of our present business strategy.

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

RKDA granted Comerica Bank a first priority security interest in all of the issued and outstanding capital stock of Arcadia Services. Arcadia Services and its subsidiaries granted the bank security interests in all of their assets. The credit agreement provides that the debt will mature on September 1, 2007. If an event of default occurs, Comerica Bank may, at its option, accelerate the maturity of the debt and exercise its right to foreclose on the issued and outstanding capital stock of Arcadia Services and on all of the assets of Arcadia Services and its subsidiaries. Any such default and resulting foreclosure would have a material adverse effect on our financial condition.

SSAC, LLC, the sole-shareholder of Trinity Healthcare, granted Comerica Bank a first priority security interest in all of the issued and outstanding capital stock of Trinity Healthcare. Trinity Healthcare granted the bank a security interest in all of its assets. The master revolving demand note provides that the debt will mature and is payable upon the demand of Comerica Bank. If an event of default occurs, Comerica Bank may, at its option, accelerate the maturity of the debt and exercise its right to foreclose on the issued and outstanding capital stock of and on all of the assets of Trinity Healthcare. Any such default and resulting foreclosure would have a material adverse effect on our financial condition.

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.

During calendar year 2006, the Company presently intends to raise a minimum of up to $20 million, preferably from the equity markets, to retire short term debt and to finance acquisitions and expansion. In the short term, the Company anticipates raising a minimum of approximately $8 million in debt or equity to satisfy short term debt obligations, with additional funds to be raised from the equity or debt markets to fund selected acquisitions. Further, because of our potential capital requirements needed to pursue our business plan of growth through acquisition, we may access the public or private equity markets whenever conditions appear to us to be favorable, even if we do not have an immediate need for additional capital at that time. The Company also plans to expand into certain new start-up locations related to retail DME and walk-in medical clinics, as well as to continue to expand product and service offerings in its existing sites. Cash flow from operations is expected to fund these efforts, the scope of which may be determined by the Company’s ability to generate cash flow or to secure additional new funding. To the extent we access the equity markets, the price at which we sell shares may be lower than the current market prices for our Common Stock. If we obtain financing through the sale of additional equity or convertible debt securities, this could result in dilution to our stockholders by increasing the number of shares of outstanding stock. We cannot predict the effect this dilution may have on the price of our Common Stock.

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.

To the extent that we do not successfully raise funds from the equity markets to satisfy short term debt obligations or to finance new acquisitions, we will need to seek debt financing. In this event, we may need to modify or abandon our strategy to grow through acquisition or may need to eliminate certain product or service offerings, because debt financing is generally at a higher cost than financing through equity investment. Higher financing costs, modification or abandonment of our growth strategy, or the elimination of product or service offerings could negatively impact our profitability and financial position, which in turn could negatively impact the price of our Common Stock and your investment in our Company. Given the Company’s net proceeds from financing activities during the year ended March 31, 2006, the changes in the Company’s operational and financial position that have occurred during this period, and assuming no material decline in our revenues, management does not presently anticipate that the Company will be unsuccessful in its efforts to raise funds from the equity markets, although there is no guarantee that the Company will in fact successfully raise such funds from equity.

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.

The Voting Agreement assures Messrs. Elliott and Kuhnert that during its term, a majority of our Board of Directors will consist of individuals nominated and elected by them. This assures Messrs. Elliott and Kuhnert that a majority of the Board will consist of directors who likely share their strategic vision for the Company, and who are likely supportive of the business strategies they propose, as well as their management of the Company. This gives them significant influence over the selection and the removal of the Company’s officers and senior management by the Board, including the management positions they each hold. They could influence a majority of the Board to retain their offices and senior management positions with the Company or to renegotiate their terms of employment and compensation, notwithstanding the Company’s financial performance. Absent the Voting Agreement, they may not have the ability to exert such influence, because although they are collectively the owners of 21,300,000 of the Company’s

outstanding Common Stock and have 1,000,000 Class A Warrants to purchase 1,000,000 shares of the Company’s Common Stock at $0.50 per share within seven years, they collectively own less than a majority of the outstanding stock. They may also exert significant influence over a majority of the Board relative to the submission of issues to the Company’s shareholders at annual and special meetings other than for the election of directors, such as the amendment of the Company’s Articles of Incorporation, the approval of a merger or consolidation of the Company with another company, and the approval of the sale of all or substantially all of the assets of the Company.

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.

The success of the Company is dependent on its ability to attract and retain qualified and experienced management and personnel. The Company anticipates the continued receipt of the services of John E. Elliott, II, Chairman and Chief Executive Officer; Larry Kuhnert, President and Chief Operating Officer; Rebecca R. Irish, Chief Financial Officer and Secretary/Treasurer; James E. Haifley, Executive Vice President; and Cathy Sparling, Vice President of Administration. The loss of the services or advice of any of these persons could have a material adverse effect on the business and prospects of the Company. We do not presently maintain key person life insurance for any of our personnel. There can be no assurance that the Company will be able to attract and retain key personnel in the future, and the Company’s inability to do so could have a material adverse effect on us.

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.

We believe the staffing industry, including both medical and non-medical staffing, is a large and growing market. The growth in medical staffing is being driven by the shrinkage in the number of healthcare professionals at the same time as the demand for their services is increasing. Healthcare providers are increasingly using temporary staffing to manage fluctuations in demand for their services. Growth in non-medical staffing is driven by companies seeking to control personnel costs by increasingly using temporary employees to meet fluctuating personnel needs.

Our business strategy is premised on the continued and consistent growth of the staffing and home care industries. A decline in the rate of growth of the staffing and home care industries, or negative growth, could adversely affect us by reducing sales, resulting in lower cash collections. Even if we were to pursue cost reductions in this event, there is a risk that less cash would be available to us to pay operating expenses, in which case we may have to contract our existing businesses by abandoning selected product or service offerings or geographic markets served, as well as to modify or abandon our present business strategy. We could have less cash available to pay our short and long-term debt obligations as they become due, in which event we could default on our obligations. Even if none of these events occurred following a negative change in the growth of the staffing and home care industries, the market for our shares of Common Stock could react negatively to a decline in growth or negative growth of these industries, potentially resulting in the diminished value of our Company’s Common Stock and your investment in the Company.

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.

We have a number of contractual arrangements with governmental programs and private insurers, although no individual arrangement accounted for more than 10% of our net revenues for the fiscal years ended March 31, 2006, 2005 or 2004. Nevertheless, 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. Certain of our competitors may have or may obtain significantly greater financial and marketing resources than us. In addition, relatively few barriers to entry exist in local healthcare markets. As a result, we would encounter increased competition in the future that may increase pricing pressure and limit our ability to maintain or increase our market share for our durable medical equipment, mail order pharmacy and related businesses.

In the U.S., healthcare providers and consumers who purchase durable medical equipment, prescription drug products and related products generally rely on third party payers to reimburse all or part of the cost of the healthcare product. Such third party payers include Medicare, Medicaid and other health insurance and managed care plans. Reimbursement by third party payers may depend on a number of factors, including the payer’s determination that the use of our products is clinically useful and cost-effective, medically necessary and not experimental or investigational. Also, third party payers are increasingly challenging the prices charged for medical products and services. Since reimbursement approval is required from each payer individually, seeking such approvals can be a time consuming and costly process. In the future, this could require us to provide supporting scientific, clinical and cost-effectiveness data for the use of our products to each payer separately. Significant uncertainty exists as to the reimbursement status of newly approved

healthcare products. Third party payers are increasingly attempting to contain the costs of healthcare products and services by limiting both coverage and the level of reimbursement for new and existing products and services. There can be no assurance that third party reimbursement coverage will be available or adequate for any products or services that we develop.

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.

Certain of the healthcare-related products and services offered by the Company are subject to stringent laws and regulations at both the federal and state levels, requiring compliance with burdensome and complex billing, substantiation and record-keeping requirements. Financial relationships between our Company and physicians and other referral sources are subject to governmental regulation. Government officials and the public will continue to debate healthcare reform and regulation. Changes in healthcare law, new interpretations of existing laws, or changes in payment methodology may have a material impact on our business and results of operations.

The markets in which the Company operates are highly competitive and the Company may be unable to compete successfully against competitors with greater resources.

The Company competes in markets that are constantly changing, intensely competitive (given low barriers to entry), highly fragmented and subject to dynamic economic conditions. Increased competition is likely to result in price reductions, reduced gross margins, loss of customers, and loss of market share, any of which could harm our net revenue and results of operations.

Many of the Company’s competitors and potential competitors relative to the Company’s products and services in the areas of durable medical equipment, and oxygen and respiratory services, have more capital, substantial marketing, and technical resources and expertise in specialized financial services than does the Company. These competitors include: on-line marketers, national wholesalers, and national and regional distributors. Further, the Company may face a significant competitive challenge from alliances entered into between and among its competitors, major HMOs or chain drugstores, as well as from larger competitors created through industry consolidation. These potential competitors may be able to respond more quickly than the Company to emerging market changes or changes in customer needs.

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 successful integration of an acquired business is dependent on various factors including the size of the acquired business, the assets and liabilities of the acquired business, the complexity of system conversions, the scheduling of multiple acquisitions in a given geographic area and management’s execution of the integration plan. Our business plan is premised on increasing our revenues by leveraging the strengths of our staffing and home care network to cross sell our other products and services. Our business plan is also premised on avoiding duplication of cost among our existing and acquired businesses where possible. If we fail to successfully integrate in these key areas, our Company’s financial results and profitability will be adversely affected, due to the failure to capitalize on the economies of scale presented by spreading our cost structure over a wider revenue base.

The failure to implement the Company’s business strategy may result in our inability to be profitable and adversely impact your investment in our Company.

We anticipate that the Company will pursue an aggressive growth strategy, which will depend, in large part, upon our ability to develop and expand the Company’s businesses. We anticipate pursuing growth by various means, including the acquisition of existing businesses. Acquisitions involve a number of risks, including the diversion of management’s attention, issues related to the assimilation of the operations and personnel of the acquired businesses, and potential adverse effects on operating results, unforeseen liabilities and increased administrative expenses. We believe that the failure to implement an aggressive growth strategy, as well as a failure to successfully integrate acquired businesses, may result in our inability to be profitable, because our business plan is premised on, among other things, capitalizing on the economies of scale presented by spreading our cost structure over a wider revenue base. Our inability to achieve profitability could adversely impact your investment in our Company.

We cannot predict the impact that the registration of the shares may have on the price of the Company’s shares of Common Stock and the value of your investment in our Company.

We cannot predict the effect, if any, that sales of, or the availability for sale of, our Common Stock pursuant to our pending Registration Statement and prospectus or otherwise will have on the market price of our securities prevailing from time to time. The possibility that substantial amounts of our Common Stock might enter the public market could adversely affect the prevailing market price of our Common Stock and could impair our ability fund acquisitions or to raise capital in the future through the sales of securities. Sales of substantial amounts of our securities, including shares issued upon the exercise of options or warrants, or the perception that such sales could occur, could adversely effect prevailing market prices for our securities.

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.

There are five shareholders of the Company after elimination of duplication due to attribution resulting from application of the beneficial ownership provisions of the Securities Exchange Act of 1934, as amended, including John E. Elliott II and Lawrence R. Kuhnert, who are beneficial owners of 5% or more of the Company’s shares of Common Stock outstanding as of June 26, 2006. These shareholders collectively own 53.23% of our shares of Common Stock outstanding as of June 26, 2006.

This concentrated ownership of our Common Stock gives a few stockholders the ability to control our Company and the direction of our business as to matters requiring shareholder approval, such as mergers, certain acquisitions, asset sales and other significant corporation transactions. This concentrated ownership, as well as the Voting Agreement to which some of these shareholders are a party, will prevent other shareholders from influencing the election of directors and other significant corporate decisions, to the extent that these five shareholders vote their shares of Common Stock together.

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.

The market price of our Common Stock, like that of the securities of many other companies with limited operating history and public float, has fluctuated over a wide range and it is likely that the price of our Common Stock will fluctuate in the future. From August 2, 2002 through the period ended September 30, 2005, the closing price of our Common Stock, as quoted by the OTC Bulletin Board, has fluctuated from a low of $0.10 during the six months ended March 31, 2003 to a high of $4.20 during the nine months transitional period ended September 30, 2002. During the year ended March 31, 2005, which period includes the May 10, 2004 effective date of the RKDA Merger, the closing price of our Common Stock, as quoted by the OTC Bulletin Board, has fluctuated from a low of $0.39 to a high of $2.00. During the year ended March 31, 2006, the closing price of our Common Stock, as quoted by the OTC Bulletin Board, has fluctuated from a low of $1.74 to a high of $3.53. On June 26, 2006, the average of the last reported bid and ask prices of our Common Stock was $2.89 per share. See Dividend Policy and Market Information at page 21.

Due to the volatility of the price our Common Stock, you may be unable to resell your shares of our Common Stock at or above the price you paid for them, thereby exposing you to the risk that you may not recoup your investment in our Company or earn a return on your investment. In the past, securities class action litigation has been brought against companies following periods of volatility in the market price of their securities. If we are the target of similar litigation in the future, our Company would be exposed to incurring significant litigation costs. This would also divert management’s attention and resources, all of which could substantially harm our business and results of operations.

Because our Common Stock is quoted on the OTC Bulletin Board, there may be difficulty in trading and obtaining quotations for our Common Stock, and you should consider our Common Stock to be illiquid.

The Company’s Common Stock is currently quoted on the OTC Bulletin Board under the symbol ACDI. The bid and asked prices for our Common Stock have fluctuated significantly. As a result, an investor may find it difficult to dispose of, or to obtain accurate quotations of the price of, the company’s securities. This severely limits the liquidity of the Common Stock and would likely have a material adverse effect on the market price of the Common Stock and on our ability to raise additional capital. You should consider our Common Stock to be illiquid.

On June 22, 2006, the American Stock Exchange (Amex®) approved the Company’s application for listing its common shares on the Amex. Arcadia Resources anticipates to commence trading on the Amex on Monday, July 3, 2006. The Company will notify

shareholders of its new trading symbol as soon as it becomes available. This approval is contingent upon the Company being in compliance with all applicable listing standards on the date it begins trading on the Exchange, and may be rescinded if the Company is not in compliance with such standards.

Because there is no established market for our classes of Warrants (Classes A, B-1 and B-2) and we do not expect our Warrants to be quoted on the OTC Bulletin Board, there may be difficulty in trading and obtaining quotations for our Warrants and you should consider our Warrants to be illiquid.

There is no established market for our Warrants (Classes A, B-1 and B-2). The Company Warrants are not quoted on the OTC Bulletin Board, nor are they listed on any exchange. We do not expect our Warrants to be quoted on the OTC Bulletin Board, or listed on any exchange. As a result, an investor may find it difficult to trade, dispose of, or to obtain accurate quotations of the price of, our Warrants. 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.

Under the securities laws of some states, shares of common stock and warrants can be sold in such states only through registered or licensed brokers or dealers. In addition, in some states, warrants and shares of common stock may not be sold unless these shares have been registered or qualified for sale in the state or an exemption from registration or qualification is available and is complied with. The requirement of a seller to comply with the requirements of state blue sky laws may lead to delay or inability of a holder of our securities to dispose of such securities, thereby causing an adverse effect on the resale 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 Company is authorized to issue 5,000,000 shares of serial preferred stock, par value $0.001. Shares of preferred stock may be issued from time to time in one or more series as may be determined by the Company’s Board of Directors. Except as otherwise provided in the Company’s Articles of Incorporation, the Board of Directors has authority to fix by resolution adopted before the issuance of any shares of each particular series of preferred stock, the designation, powers, preferences, and relative participating, optional and other rights, and the qualifications, limitations, and restrictions.

The issuance of our preferred stock could materially impact the price of Common Stock and the rights of holders of our Common Stock, including voting rights. The issuance of preferred stock could decrease the amount of earnings and assets available for distribution to holders of Common Stock, and may have the effect of delaying, deferring or preventing a change in control of our Company, despite such change of control being in the best interest of the holders of our shares of Common Stock. The existence of authorized but unissued preferred stock may enable the Board of Directors to render more difficult or to discourage an attempt to obtain control of us by means of a merger, tender offer, proxy contest or otherwise.

The exercise of common stock warrants may depress our stock price and may result in dilution to our Common Stockholders.

A total of approximately 25.3 million warrants to purchase approximately 25.3 million shares of our Common Stock are issued and outstanding as of June 26, 2006. The 104.5 million shares of Common Stock offered by the security holders under the Company’s pending prospectus, as filed on Form S-1, include the shares of Common Stock issuable upon the exercise of warrants by the selling security holders. The market price of our Common Stock is above the exercise price of the outstanding warrants, therefore, holders of those securities are likely to exercise their warrants and sell the Common Stock acquired upon exercise of such warrants in the open market. Sales of a substantial number of shares of our Common Stock in the public market by holders of warrants may depress the prevailing market price for our Common Stock and could impair our ability to raise capital through the future sale of our equity securities. Additionally, if the holders of outstanding warrants exercise those warrants, our common stockholders will incur dilution. The majority of the warrants are subject to the Voting Agreement described herein. The exercise price of all common stock warrants, including Classes A, B-1 and B-2 Warrants, is subject to adjustment upon stock dividends, splits and combinations, as well as certain anti-dilution adjustments as set forth in the respective common stock warrants.

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.

As of June 26, 2006, options to purchase approximately 9.5 million shares of our Common Stock were issued and outstanding. The 104.5 million shares of Common Stock offered by the security holders under the Company’s pending prospectus, as filed on Form S-1, include the shares of Common Stock issuable upon the exercise of options by the selling security holders. The market price of our Common Stock is above the exercise price of outstanding options, therefore, holders of those securities are likely to exercise their options and sell the Common Stock acquired upon exercise of such options in the open market. Sales of a substantial number of shares of our Common Stock in the public market by holders of options may depress the prevailing market price for our Common Stock and could impair our ability to raise capital through the future sale of our equity securities. Additionally, if the holders of outstanding

options exercise those options, our common stockholders will incur dilution. The exercise price of all common stock options is subject to adjustment upon stock dividends, splits and combinations, as well as anti-dilution adjustments as set forth in the option agreement.

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.

We largely rely upon our affiliated agencies to sell our staffing and home care services and on our internal sales force to sell our durable medical equipment and pharmacy products. Arcadia Services’ affiliated agencies are owner-operated businesses. The office locations maintained by our affiliated agencies are listed on our Company’s website. The primary responsibilities of Arcadia Services’ affiliated agencies include the recruitment and training of field staff employed by Arcadia Services and generating and maintaining sales to Arcadia Services’ customers. The arrangements with affiliated agencies are formalized through a standard contractual agreement, which state performance requirements of the affiliated agencies. Our affiliated agencies and internal salesforce operate in particular defined geographic regions. Our employees provide the services to our customers and the affiliated agents and internal sales force are restricted by non-competition agreements. In the event of loss of our affiliated agents or internal sales force personnel, we would recruit new sales and marketing personnel and/or affiliated agents which could cause our operating costs to increase and our sales to fall in the interim.

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.

We are not subject to the listing requirements of any national securities exchange or quotation system. The listing standards of the national securities exchanges and automated quotation systems require that the Board of Directors consist of a majority of directors who are independent as defined by the Sarbanes-Oxley Act of 2002 and as defined by listing standards, and that the audit committee of the Board of Directors must consist of at least three members, all of whom are independent. Similarly, the compensation and nominating committees of the Board of Directors must consist of independent directors. On June 16, 2006, the Company’s Board of Directors appointed Peter Anthony Brusca, M.D., and Anna Maria Nekoranec to the Board of Directors effective July 1, 2006, to fill vacant director positions. The Board appointed Dr. Brusca and Ms. Nekoranec as members of the Board’s Audit Committee, commencing July 1, 2006. The Board determined that Dr. Brusca and Ms. Nekoranec each are independent within the meaning of the Sarbanes-Oxley Act of 2002, its implementing regulations, and the Charter of the Board’s Audit Committee. Director and Audit Committee Chairman John T. Thornton, whom the Board previously determined qualifies as independent, will continue as Chairman of the Audit Committee. So that the Company’s Audit Committee will consist solely of three independent directors, Director and Audit Committee member Lawrence R. Kuhnert, who is also the Company’s President and Chief Operating Officer, will conclude his term of service as a member of the Audit Committee as of June 30, 2006.

On June 22, 2006, the American Stock Exchange (Amex®) approved the Company’s application for listing its common shares on the Amex. Arcadia Resources anticipates to commence trading on the Amex on Monday, July 3, 2006. The Company will notify shareholders of its new trading symbol as soon as it becomes available. This approval is contingent upon the Company being in compliance with all applicable listing standards on the date it begins trading on the Exchange, and may be rescinded if the Company is not in compliance with such standards. Listing standards of the Amex include the same requirements as to independent directors and audit committee members described above. Under Section 801 of the Amex Rules, a company in which more than 50% of the voting power is held by an individual, a group or another company is a “controlled company” which is not required to comply with Sections 802(a), 804 and 805 of the Rules. Section 802(a) provides that at least a majority of the directors on the board of directors of each listed company must be independent directors as defined in Section 121A of the Rules. Section 804 provides generally that board of director nominations must be either selected, or recommended for the board’s selection, by either a nominating committee comprised solely of independent directors or by a majority of the independent directors. Section 805 provides generally that the compensation of the chief executive officer and all other officers of a listed company must be determined, or recommended to the board for determination, either by a compensation committee comprised of independent directors or by a majority of the independent directors on its board of directors, and that the chief executive officer may not be present during voting or deliberations. The Company qualifies as a “controlled company” on the basis of the Voting Agreement which ensures that the Company’s Chairman/Chief Executive Officer and President/Chief Operating Officer control votes sufficient to elect a majority of the Company’s Board of Directors during the duration of the Voting Agreement, which the Company expects to continue for the foreseeable future. The Company presently intends to rely on the controlled company exceptions which Section 802(a) provides from the requirements of Sections 804 and 805, for the remainder of the fiscal year ending March 31, 2007.

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.

A compensation committee consisting of independent directors is a safeguard against self-dealing by company executives. Our Board of Directors acts as a compensation committee and determines the compensation and benefits of our executive officers, administers our employee stock and benefit plans, and reviews policies relating to the compensation and benefits of our employees. Our five member Board of Directors presently includes two executive officers of our Company. These officers (i.e., Messrs. Elliott and Kuhnert) presently own approximately 21% of our outstanding Common Stock and control the election of a majority of the Board of Directors through the Voting Agreement. Although all Board members have fiduciary obligations in connection with compensation matters, our lack of an independent compensation committee presents the risk that our executive officers on the Board may influence the entire Board to set their personal compensation and benefits at levels that are not commensurate with the Company’s financial performance.

Several anti-takeover measures under Nevada law could delay or prevent a change of our control, despite such change of control being in the best interest of the holders of our shares of Common Stock.

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. This could make it more difficult or discourage an attempt to obtain control of us by means of a merger, tender offer, proxy contest or otherwise. This could negatively impact the value of your investment in our Company, by discouraging a potential suitor who may otherwise be willing to offer a premium for your shares of the Company’s common stock.

The Nevada Business Corporation Law, N.R.S. §78.378 et seq. , governs the acquisition of a controlling interest. This law provides generally that any person or entity that acquires twenty (20%) percent or more of the outstanding voting shares of a Nevada issuing corporation obtains voting rights in the acquired shares as conferred by a resolution of the stockholders of the corporation, approved at a special or annual meeting of the stockholders. The articles of incorporation or bylaws of a corporation, however, may provide that the these provisions do not apply to the corporation or to an acquisition of a controlling interest. On May 4, 2004, our Board of Directors adopted an amendment to our Bylaws providing that the provisions of Nevada Revised Statutes Sections 78.378 et seq. do not apply to an acquisition of a controlling interest of shares owned, directly or indirectly, whether of record or not, now or at any time in the future, by John E. Elliott, II, Lawrence R. Kuhnert or any of the persons subject to the Voting Agreement. All other persons or entities, however, remain subject to N.R.S. §78.378 et seq. to the extent applicable, unless our articles of incorporation or bylaws are amended to exempt such persons or entities from these statutory anti-takeover provisions.

The Nevada Business Corporation Law, N.R.S. §78.411 et seq., governs combinations with interested stockholders. These provisions may have an effect of delaying or making it more difficult to effect a change in control of the Company. These provisions preclude an interested stockholder (i.e., the beneficial owner, directly or indirectly, of 10% or more of the voting power of the outstanding voting shares of a corporation, or an affiliate or association thereof) and a resident, domestic Nevada corporation from entering into a combination (e.g., a merger, sale, lease, exchange, etc.) unless certain conditions are met. The provisions generally preclude a resident, domestic corporation from engaging in any combination with an interested stockholder for three years after the date that the person first became an interested stockholder unless the combination or the transaction by which the person first became an interested stockholder is approved by the board of directors before the person first became an interested stockholder. If approval is not obtained, then after the expiration of the three-year period the business combination may be consummated with the approval of the board of directors or a majority of the voting power held by the disinterested stockholders, or if the consideration to be paid by the interested stockholder exceeds certain thresholds set forth in the statute. We are subject to N.R.S. §78.411 et seq. of the Nevada Business Corporation Law.

Item 2. Description of Property.

     We do not own any real estate or improvements. Our corporate offices are in Southfield, Michigan and Naples, Florida. The Company and its subsidiaries presently occupy leased space including the locations listed in the following table:

Street Address		City		State		Zip Code
200 Technology Court, Ste. 300		Smyrna		Georgia		30082
7700 Brush Hill, Suite 240		Burr Ridge		Illinois		60527
111 Erick Street		Crystal Lake		Illinois		60014
1126 Wall Street		Jacksonville		Illinois		62650
1665 Quincy Ave., Unit 111		Naperville		Illinois		60540
2201 West Townline, Suite F		Peoria		Illinois		61615
381 Kairns Drive		Crown Point		Indiana		46307
1600 Kepner Dr.		Lafayette		Indiana		47905
868 Hwy. 15 South		Jackson		Kentucky		41339
3524 Park Plaza Road		Paducah		Kentucky		42001
3840 E. Packard , Suite 160		Ann Arbor		Michigan		48108
1532 Opdyke Road, Ste. 400		Auburn Hills		Michigan		48326
5350 E. Beckley Road		Battle Creek		Michigan		49015
7990 Grand River, Suite C		Brighton		Michigan		48114
92 W. Chicago Street		Coldwater		Michigan		49036
414 N. Jackson Street, Complex 8718		Jackson		Michigan		49201
950 W. Monroe St., Ste. G-400		Jackson		Michigan		49202
5413 S. Westnedge Ave., Ste. A		Kalamazoo		Michigan		49002
535 N. Clipper, Suite 2		Lansing		Michigan		48912
6540 Millenium Drive, Ste. 160		Lansing		Michigan		48917
1787 W. Genessee, Suite A		Lapeer		Michigan		48446
26431 Southfield Rd.		Lathrup Village		Michigan		48076
2100 Southfield		Lincoln Park		Michigan		48146
18320 Middlebelt Road		Livonia		Michigan		48152
29500 West 7 Mile Road		Livonia		Michigan		48152
27600 Novi Road		Novi		Michigan		48377
3123 Gratiot Ave.		Roseville		Michigan		48066
18706 Eureka Road		Southgate		Michigan		48195
728 Pleasant Street, Ste. 4		St. Joseph		Michigan		49085
34869 Mound Road		Sterling Heights		Michigan		48310
14100 Lakeside Circle		Sterling Heights		Michigan		48313
300 W. 14 Mile Road		Troy		Michigan		48083
762 Summa Avenue		Westbury		New York		11590
417 Biltmore Avenue, Doctor’s Park, Bldg. 2, Ste. 2-E		Asheville		North Carolina		28801
9801 West Kincey Ave., Ste 170		Huntersville		North Carolina		28078
101 North Third Street		Mebane		North Carolina		27302
6320 Angus Drive, Ste. D		Raleigh		North Carolina		27617
1033 Randolph Street, Suite 21		Thomasville		North Carolina		27360
3918 West Point Boulevard		Winston Salem		North Carolina		27103
105 Mall Boulevard, Suite 283W		Monroeville		Pennsylvania		15146
416A Robertson Blvd.		Waterboro		South Carolina		29488
762 Independence Blvd., Suite 798		Virginia Beach		Virginia		23455