Arch Therapeutics Inc (OTCBB:ARTH) regained some of its lost glory as the stock of the company flashed green. Last week, the company had announced a private placement, through which it expected to raise a sum of $3,166,000. The company stated that it is mulling to sell nearly 14,390,913 units each at a rate of $0.22 to 19 investors.
Private placement seen unfavorable
The company noted that each of such unit comprises of 1 common share and 1 Series D warrant, which is exercisable at a price of $0.25. The news of the private placement irked investors, who reacted to it by selling the stock. However, the stock has been able to maintain a price above $0.22, which reflects the unit price. It is not surprising as to why investors were upset with the private placement, which will increase the share dilution of the company to 93.5 million from 78 million.
Despite such a proportion of share dilution, Arch Therapeutics Inc (OTCBB:ARTH) has fewer options left to raise funds for its operations. The financial condition of the company, according to its first-quarter report, is in bad shape. The company has just $573,000 in cash and maintains $606,000 as current assets. On the other hand, the company’s current liabilities are as steep as $1.39 million while it reported zero revenues during the period. At the same time, the net loss of the company sits at $833,000, a number quite frustrating for any investor.
As Arch Therapeutics Inc (OTCBB:ARTH) barely has any financial backup, it needs between $12 million to $17 million of funding to go ahead with the approval of its products in the U.S. and Europe. Thus, the company has set its hope on the recently announced private placement that will infuse it with the necessary funding to pursue a human clinical trial for its AC5 Surgical Hemostatic Device. In view of the challenges ahead, it can be predicted that the stock of the company may witness volatility in the coming days.
Arch Therapeutics Inc (OTCBB:ARTH) experienced a relatively better session yesterday as it share price increased by nearly 3.50% to $0.240 while the average volume on the day stood at 329,000.