Arch Therapeutics Inc (OTCBB:ARTH) has announced that the company has successfully raised $3 million, through equity financing. The transaction involved 19-investors in private placements and the company expects to raise another $100,000, before completion of the private placements. Additionally, the company was also able to add some value to its stock, during the last week, after initiating the equity financing. However, due to the transaction, the company’s outstanding shares stood at 92.5 million. Even though this creates an issue of stock liquidation, investors seem more interested in the huge sum the company has been able to compile.

Having a look at ARTH’s most recent 10-Q, reveals that a shortage of funds was a major problem for the company. As per the filing the company had $573,000 in cash and $606,000 in assets, with no revenues and $1.39 million worth of liabilities. In conclusion, ARTH had a quarterly net loss of $833,000. Arch Therapeutics is the developer of the AC5 Surgical Hemostatic Device and the 10-Q stated that the company needs a further $12-$17 million in additional financing for getting approvals in the US and Europe.

Unfortunately, with finances as poor as ARTH’s, the company can either go for convertible debt or for stock dilution. Either way the company would end up losing some of its investor interest, leading to further losses if it misses deadlines. Although the recent transaction has successfully raised a quarter of the stated amount, the company’s outstanding shares are already up by 20%. At the end of the transaction, ARTH stated that it plans to use these funds for advancing its hemostasis development program and to further develop AC5.

This would be done through spending on clinical trials and general corporate matters. The company CEO, Dr. Terrence Norchi, expressed his delight at the proceedings. He also took the opportunity to thank the current and new investors of the company for their continued support.

Arch Therapeutics Inc (OTCBB:ARTH) finished trading on July 13 at a stock price of $0.263, after reporting a decline of 6.07% and trading 1.16 million shares.