Arch Therapeutics Inc (OTCMKTS:ARTH) Accelerates Its Climb
Yesterday the stock of Arch Therapeutics Inc (OTCMKTS:ARTH) gained even more momentum and as a result surged up the chart by more than 10%, climbing to a close at $0.474 per share. The increase in share price was accompanied by a sizable increase in interest – throughout the session investors shifted 1.6 million shares compared to a monthly average volume of 565 thousand.
The uptrend displayed by the stock, however, appears to lack a clear catalyst. The latest PR issued by ARTH came on June 9 when the company announced the completion of patient enrollment in the first clinical study to assess the safety and performance of ARTH‘s AC5 Surgical Hemostatic Device in humans. Investors could be showing increased enthusiasm due to the plans that ARTH have for the summer.
On several occasion ARTH have stated that they anticipate filing a CE mark application for AC5 during the summer as a step towards gaining regulatory approval in the EU. In the next months the results from the clinical study should also be announced after the completion of a 30-day patient follow-up assessments and subsequent statistical analysis.
Jumping into the stock without doing the necessary due diligence might be a risky choice, though. While ARTH finished the first quarter of the year in a better shape than many of the other pennystock companies their balance sheet still raises some concerns. As of March 31, 2016, the company had:
• $1.67 million cash
• $1.76 million total current assets
• $399 thousand total current liabilities
• ZERO revenues
• $1.25 million net loss
With the company planning to pursue regulatory approval in both the EU and the US it will need a substantial amount of capital. On May 27 ARTH were able raise approximately $3.4 million in additional funds but in order to do so they had to sell 9.5 million shares at a below-market price of $0.36 and Series E warrants for the purchase of 7.1 million shares at $0.438 per share.
In our articles we have often warned you that millions of underpriced shares are being issued by ARTH as an exercise of the company’s numerous series of warrants. Just a quick glance at the subsequent events section of the quarterly report reveals that between April 1 and April 27 2.6 million shares got printed at $0.20 as exercise of Series A and Series C warrants, 2.4 million shares were issued at $0.25 as exercise of Series D warrants while 727 thousand shares were issued on a cashless basis. With the stock now approaching 50 cents per share even the holders of the more expensive warrants could get tempted to turn them into shares.
The red flags around ARTH shouldn’t be underestimated even if you truly believe in the potential of the company. Do extensive research and adjust your trades accordingly.
