Last Friday, ARCADIA RESOURCES (PINK:KADR) broke up the up move and the progressive fall began. Yesterday, the stock 
crashed down 70%, while its traded volume exceeded 19 million shares. But what’s wrong with KADR is still to be seen.
These days there is no news on the company apart from its financial report dated yesterday. The 10-Q was filed with a delay, though the official press release of KADR hurried to encourage investors. According to it, the company has finally completed the previously announced sale of its Pharmacy segment and had future plans for its business.
The positive news should have pumped up KADR stock price, though it sank down instead.
In fact, the most reasonable explanation on the price fall turns out to be namely the company’s latest 10-Q. According to it, as of December 31, 2011 cash and cash equivalents of KADR have completely disappeared, and its liabilities flew up.
Along with the increased liabilities, the stockholders’ deficit and the accumulated deficit also got higher as compared to the previous period, while the revenues decreased.
As a result of the recent sale of its Pharmacy segment, Arcadia received no cash proceeds from the transaction and the management is afraid that it is likely to have negative cash flow in the near term with no immediate access to additional equity or debt funding.[BANNER]
In addition, Arcadia has approximately $40 million in debt that matures April 1, 2012, which as of December 31, 2011 included approximately $9.5 million due to Comerica Bank under the line of credit agreement that funds the operations of the Services segment and approximately $30.5 million in unsecured promissory notes of Arcadia Resources, Inc.
However, KADR does not anticipate that it will be able to repay or refinance the ARI Debt at maturity and, therefore, the holders of the ARI Debt may declare the debt to be in default.
Apart from these facts, the company’s financial report is full of risk factors and Arcadia would need to significantly improve its cash flow to implement its operations.
Due to all the above-mentioned, investors are strongly discouraged from trading in KADR common stock because it is highly unlikely that there is any equity value related to the common shares.
