Arch Therapeutics Inc (OTCBB:ARTH) Falls After Private Placement
On July 1 Arch Therapeutics Inc (OTCBB:ARTH) announced a new private placement. The company expects to raise a total of $3,166,000 with the net proceeds amounting to $3 million. In order to get the money ARTH plans to sell a total of 14,390,913 Units priced at $0.22 each to 19 accredited investors. Each unit consists of 1 common shares and 1 Series D warrant for the purchase of 1 common share with an exercise price of $0.25.
The announcement had an immediate impact on the movement of the stock as investors did not view the placement favorably. On the day of the PR ARTH dropped from an opening price of $0.278 to a close at $0.26 and they continued to lose positions during yesterday’s trading closing at $0.232 for a loss of nearly11%. It remains to be seen if the ticker will fall all the way down to $0.22 per share, the price of the Units.
It is true that the private placement will cause the outstanding shares to increase from 78 million to close to 92.5 million but ARTH needed to find a new source of funds. The company finished the first quarter of 2015 in a rather depressing state with:
• $573 thousand cash
• $606 thousand total current assets
• $1.39 million total current liabilities
• ZERO revenues
• $833 thousand net loss
The quarterly report stated that between $12 million and $17 million will be needed if ARTH want to pursue approval for their products in Europe and the U.S. With the newly raised capital the company plans to support the launch of a human clinical trial for their AC5 Surgical Hemostatic Device that should be initiated in the third quarter of the year.
ARTH’s stock could remain rather volatile in the coming days. The ticker, however, might be able to recover its losses if the clinical trial is launched according to plan. Arch Therapeutics remain a pennystock venture though and the risks associated with trading their stock should not be underestimated.
