Arch Therapeutics Inc. (OTCBB:ARTH) Regains Some Ground
Arch Therapeutics Inc. (OTCBB:ARTH) investors seemed to be in good spirits on Friday, as the company managed to add 16.67% to its market value in that session without any apparent cause.
Two weeks ago, ARTH announced that it intends to raise almost $3.2 million through a private placement made by 19 accredited investors. Five days later, the company’s filings documented that it had done just that – and investors were pleased with the development. The process of rising the funds did increase ARTH‘s outstanding shares all the way to 92.5 million, but that fact was mostly overlooked because the deal brought a substantial amount of funds in. But was that a oversight?
True, more funds is something ARTH desperately needs, as its latest financial report announced that at the end of Q1 2015 it had just:
- Cash – $573 thousand
- total current assets – $606 thousand
- total current liabilities – $1.39 million
- No revenues
- Net Loss – $833 thousand
Although the figures in the report certainly aren’t the worst that can be found in the OTC Market’s pharmaceutical sector, they certainly aren’t the best, either. However, said numbers aren’t what’s really distressing in the report.
The 10-Q 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. That money has to come from somewhere, and that source will most probably cause more dilution.
Some simple math shows that it has taken raising a fourth of the capital needed to even try to break through has increased the company’s shares outstanding by almost 20%.
Investors would do well to consider that fact and factor the probability of more heavy dilution in their plans before making plans to commit to ARTH stock.
