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Cash-strapped Arcadia seeks DailyMed buyer

November 15, 2011

Arcadia Resources Inc. is searching for a buyer for its once-promising DailyMed pharmacy service as the struggling Indianapolis-based health care company's financial condition continues to worsen.

Arcadia said late Monday that it lost $2.7 million, or 2 cents per share, from continuing operations in the quarter ended Sept. 30, compared with a loss of $1.5 million, or 1 cent per share, in the year-ago period.

Revenue dipped 2.4 percent in the quarter, to $20.4 million.

Rising debt and slower-than-expected growth have put the company in a precarious position.

Arcadia, which had been planning a huge expansion in Indianapolis, is running low on cash, in part because the ramp-up of its DailyMed pharmacy service has been far slower than expected. DailyMed is a service that places patients’ medications into packets marked by the time of day or the meal at which they are to be taken. The service has major contracts with Indiana Medicaid and Indianapolis-based WellPoint Inc.

The company said it has $30 million of unsecured debt that comes due in April that likely won’t be satisfied by the sale of either or both of its business units. In June, Arcadia announced that its auditor issued a going-concern warning about the company because of the debt. The company delisted its stock from the NYSE Amex Equities Exchange in August and now sells it over the counter.

Acadia had intended to shift its focus exclusively to DailyMed since it launched the service in January 2008. It sold its home health equipment and industrial staffing businesses in 2009 to help fund DailyMed’s expansion.

Earlier this year, Arcadia said it also would try to sell its services segment, but it has yet to find a buyer. It now says it may retain the segment, which brought in revenue of $20.4 million in the latest quarter, down from $20.9 million a year ago.

The DailyMed pharmacy unit is growing, but not fast enough to satisfy growing debt. The unit saw revenue rise 17.6 percent in the latest quarter, to $4.6 million. Arcadia did not include DailyMed's results in its overall quarterly results because it said it considered the unit a "discontinued operation" due to the planned sale.

In May 2010, Arcadia announced that it expected to add 930 jobs in Indiana by 2013 because of the DailyMed unit. But, according to the company’s annual report released in June, administrative staff at the company's headquarters numbered 229.

Arcadia said it doubts the proceeds from a DailyMed sale will be sufficient to satisfy the $5 million debt owed to the Springfield, Ill.-based H.D. Smith Wholesale Drug Co. But H.D. Smith has agreed to accept a sale amount of no less than $2 million.

If DailyMed is not sold, Arcadia said it will wind down the business.

Arcadia had negative cash flow of $3 million for the six months ended Sept. 30, but the company said it still has $1.4 million in cash and a line of credit to work with. That’s down from $2.5 million in the year-ago period.

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