Running low on cash, Indianapolis-based Arcadia Resources Inc. is trying to sell its largest division in a bid to pay off a pile of debt.

Arcadia’s auditor, BDO LLP, issued a “going-concern” warning Tuesday in the company’s annual report, casting doubt on Arcadia’s ability to stay in business in its current condition.

That’s because Arcadia continues to lose too much money—$14.4 million in its fiscal year ended March 31—and faces $34.9 million in debt that comes due in April 2012. Arcadia had only $2.1 million in cash remaining as of March 31, according to financial reports issued Tuesday night.

So Arcadia is seeking a buyer for its services business—home health care and medical staffing, which accounts for 83 percent of its revenue—in order to give it more capital to help grow its pharmacy business, which makes up the rest. The pharmacy business has major contracts with the Indiana Medicaid program and with Indianapolis-based WellPoint Inc., which recently extended its deal with Arcadia for two more years, to 2015.

In a statement, Arcadia said it expects to complete a sale of its services segment between July and September, but the company did not say that it has a buyer lined up.

“The sale of our services segment is a further step in the financial restructuring and strategic repositioning of Arcadia,” said Arcadia CEO Marvin Richardson in a prepared statement. “This will allow the company to focus its management and financial resources on expanding our growing DailyMed business.”

Arcadia’s DailyMed pharmacy business been growing fast, in contrast to flat revenue for the services business. But Arcadia has had to spend so much expanding DailyMed that it hasn’t made any money on that line of business. And its services profits have not been enough to offset those losses.

“They’re going to have to do something. Selling the services business is a good start,” said Jeffrey Cohen, an analyst at C.K. Cooper & Co., the lone stock analyst who covers Arcadia.

But it likely won’t be enough. Cohen estimates Arcadia could fetch between $20 million and $25 million for its services business, which posted revenue last year of $83.3 million. That still won’t pay off all the company's debt by April—let alone leave enough cash to invest in the DailyMed pharmacy business.

Arcadia’s managers admit as much in their annual report filed Tuesday.

“If completed, the divestiture of the Services segment will not provide sufficient cash to fund the operations of the Pharmacy segment and address the company’s remaining debt obligations," the report says. "Therefore, the company is also evaluating alternatives to obtain additional financing."

The report added: "Management expects to see improvement in the operating results in the Pharmacy segment through increased revenue, improved gross margins and lower expenses as a percentage of revenue, which it believes will position the company to obtain this financing.”

So far, Arcadia’s fast growth in DailyMed revenue—31 percent in the last year—hasn’t been fast enough. And it hasn’t been nearly as fast as Cohen expected when he started following the company a year ago. He expected the DailyMed to produce $6 million in the most recent quarter—33 percent more than the $4.5 million it actually brought in.

“I’m expecting that to really ramp, [but] I don’t see it,” Cohen said. He added, “They’re going to have to show some numbers.”

Clearly, Arcadia’s growth has been less than the company expected, too. In May 2010, Arcadia announced a huge expansion in Indianapolis—touted by Gov. Mitch Daniels and Mayor Greg Ballard—that it expected would add 930 jobs in Indiana by 2013.

But, according to the company’s annual report, its administrative staff has actually fallen slightly in the last year, to 229. Its field staff, most of whom are not in Indiana, has remained steady from a year ago.

For the year ended March 31, Arcadia had revenue of $100 million, up 2 percent from the year before. Its losses narrowed to $14.4 million, or 8 cents per share, compared with losses of $31.1 million, or 19 cents per share, during the previous fiscal year.

In Arcadia’s fiscal fourth quarter, also ending March 31, revenue rose 5.4 percent, to $25.4 million, compared with the same quarter the previous year. Fourth-quarter losses totaled $5.1 million, or 3 cents per share, compared with $19.2 million, or 12 cents per share, during the fourth quarter the prior year.

Cohen had been expecting slightly smaller fourth-quarter losses this year—2 cents per share—on more revenue, $27.9 million.

Arcadia’s stock price has lost 85 percent of its value in the past year. It closed at 9 cents per share on Tuesday, before Arcadia issued its year-end financial results. The stock lost another penny in morning trading Wednesday.

In April,  the NYSE Amex stock exchange threatened to delist Arcadia’s stock unless it engineers a reverse split to boost its stock price above 20 cents per share by Oct. 4.