SOURCE: Arch Therapeutics, Inc.

Arch Therapeutics, Inc.

August 06, 2014 07:29 ET

Arch Therapeutics Announces Third Quarter 2014 Results

WELLESLEY, MA--(Marketwired - Aug 6, 2014) -  Arch Therapeutics, Inc. (OTCQB: ARTH) ("Arch" or the "Company"), a life sciences company and developer of the AC5 Surgical Hemostatic Device™, a novel product aimed at controlling bleeding and fluid loss in order to provide faster and safer surgical and interventional care, today announced financial results for the three and nine months ended June 30, 2014.

FINANCIAL RESULTS

Third Quarter ended June 30

Operating loss was approximately $1.1 million for the three months ended June 30, 2014, compared to an operating loss of approximately $500,000 for the three months ended June 30, 2013. There were no revenues for the three months ended June 30, 2014 or June 30, 2013.

General and administrative expenses were approximately $826,000 for the three months ended June 30, 2014, compared to approximately $451,000 for the three months ended June 30, 2013. This increase in general and administrative expenses was primarily a result of increased legal and accounting fees, investor relations expenses related to becoming a publicly traded company as well as increased compensation related expenses in connection with attracting and retaining key employees.

Research and development expenses were approximately $320,000 for the three months ended June 30, 2014, compared to approximately $44,000 for the three months ended June 30, 2013. This increase in research and development expenses was primarily a result of increased pre-clinical development, additional headcount and outside consultants.

For the three months ended June 30, 2014, Arch reported net income of approximately $411,000 compared to a net loss of approximately $514,000 for the three months ended June 30, 2013. The net income in 2014 was primarily the result of a non-cash accounting adjustment of the derivative liabilities to fair market value, in an amount of approximately $1.6 million, related to our outstanding warrants issued as part of our private placement financing that was completed in February 2014.

Nine months ended June 30

Operating loss was approximately $3.2 million for the nine months ended June 30, 2014, compared to an operating loss of approximately $800,000 for the nine months ended June 30, 2013. There were no revenues for the nine months ended June 30, 2014 or June 30, 2013.

General and administrative expenses were approximately $2.3 million for the nine months ended June 30, 2014, compared to approximately $700,000 for the nine months ended June 30, 2013. Research and development expenses were approximately $1.0 million for the nine months ended June 30, 2014, compared to approximately $62,000 for the nine months ended June 30, 2013. This increase in both general and administrative expenses and in research and development expenses was primarily a result of increased legal and accounting fees, investor relations expenses related to becoming a publicly traded company, additional investments in pre-clinical development for our novel hemostatic technology, and increased compensation related expenses in connection with attracting and retaining key employees.

For the nine months ended June 30, 2014, Arch reported a net loss of approximately $8.8 million compared to a net loss of approximately $900,000 for the nine months ended June 30, 2013. The increase in net loss in 2014 was primarily the result of a non-cash loss on the fair value of derivatives liabilities in excess of proceeds on the issuance of warrants of approximately $7.5 million, partially offset by a gain in the fair market value of the derivative liabilities of approximately $2.1 million.

At June 30, 2014, we had approximately $1.8 million in cash on hand, as compared to approximately $600,000 at September 30, 2013. During the first nine months of 2014, we received approximately $3.6 million in net proceeds from the issuance of common stock and warrants in our private placement financing that was completed in February 2014 and borrowings under our loan agreement with the Massachusetts Life Sciences Center. We have used much of the net proceeds for general corporate purposes, including attracting and retaining key employees and for product development. As we have previously disclosed in our SEC filings, we intend to raise additional funding to support further product development, necessary clinical trials and for general corporate expenses.

"While the first nine months of fiscal 2014 have provided both anticipated and unanticipated challenges, we are encouraged by the progress that we have been able to achieve to date, and we remain excited about this opportunity," said Terrence W. Norchi, MD, President and Chief Executive Officer of Arch Therapeutics. "We have filled key positions within our organization to lead our research and development, quality and financial departments. We advanced the product development, manufacturing, and biocompatibility programs. We also selected a Notified Body, which is a critical regulatory step on the road to European commercialization of the AC5 Surgical Hemostatic Device™, and advanced our intellectual property portfolio. On July 2, 2014, the Securities and Exchange Commission declared our resale registration statement effective," Dr. Norchi added.

About Arch Therapeutics, Inc.
Arch Therapeutics, Inc. is a medical device company developing a novel approach to stop bleeding (hemostasis) and control leaking (sealant) during surgery and trauma care. Arch is developing products based on an innovative self-assembling peptide technology platform to make surgery and interventional care faster and safer for patients. Arch's flagship development stage product candidate, known as the AC5 Surgical Hemostatic Device™, is being designed to achieve hemostasis in minimally invasive and open surgical procedures.

Find out more at www.archtherapeutics.com.

Notice Regarding Forward-Looking Statements
This news release contains "forward-looking statements" as that term is defined in Section 27(a) of the Securities Act of 1933, as amended, and Section 21(e) of the Securities Exchange Act of 1934, as amended. Statements in this press release that are not purely historical are forward-looking statements and include any statements regarding beliefs, plans, expectations or intentions regarding the future. Such forward-looking statements include, among other things, references to novel technologies and methods, our business and product development plans and projections, or market information. Actual results could differ from those projected in any forward-looking statements due to numerous factors. Such factors include, among others, the inherent uncertainties associated with developing new products or technologies and operating as a development stage company, our ability to retain important members of our management team and attract other qualified personnel, our ability to raise the additional funding we will need to continue to pursue our business and product development plans, our ability to develop and commercialize products based on our technology platform, and market conditions. These forward-looking statements are made as of the date of this news release, and we assume no obligation to update the forward-looking statements, or to update the reasons why actual results could differ from those projected in the forward-looking statements. Although we believe that any beliefs, plans, expectations and intentions contained in this press release are reasonable, there can be no assurance that any such beliefs, plans, expectations or intentions will prove to be accurate. Investors should consult all of the information set forth herein and should also refer to the risk factors disclosure outlined in the reports and other documents we file with the SEC, available at www.sec.gov.

On Behalf of the Board,
Terrence W. Norchi, MD
Arch Therapeutics, Inc.

                       
Arch Therapeutics, Inc.  
(A Development Stage Company)  
Consolidated Statements of Operations (Unaudited)  
For the three and nine months ended June 30, 2014 and 2013  
Period from Inception (March 6, 2006) through June 30, 2014  
                       
                       
                       
                       
    Three Months ended June 30, 2014   Three Months ended June 30, 2013   Nine
Months
ended June 30, 2014
  Nine
Months ended June 30, 2013
  Period from Inception (March 6, 2006) through June 30, 2014  
                                 
                                 
Other Revenues   $ -   $ -   $ -   $ -   $ 431,461  
                                 
Operating expenses:                                
  General and administrative expenses     825,951     451,046     2,271,443     721,565     5,819,918  
  Research and development expenses     320,345     43,750     951,101     62,356     1,931,341  
    Total operating expenses     1,146,296     494,796     3,222,544     783,921     7,751,259  
                                 
    Operating loss     (1,146,296 )   (494,796 )   (3,222,544 )   (783,921 )   (7,319,798 )
                                 
Other (expense) income:                                
  Interest expense     (27,763 )   (19,596 )   (83,293 )   (108,384 )   (671,887 )
  Loss on issuance of warrants     -     -     (7,541,693 )   -     (7,541,693 )
  Adjustment to fair value of derivative     1,584,818     -     2,069,693     -     2,069,693  
  Other income     -     32     -     51     53,977  
    Total other expense     1,557,055     (19,564 )   (5,555,293 )   (108,333 )   (6,089,910 )
                                 
    Net Income (Loss)   $ 410,759   $ (514,360 ) $ (8,777,837 ) $ (892,254 ) $ (13,409,708 )
                                 
                                 
Basic earnings per share                                
  Net Income (loss)   $ 0.01   $ (0.06 ) $ (0.13 ) $ (0.13 )      
  Weighted Common Shares - Basic     71,949,564     8,549,322     65,933,378     6,613,249        
                                 
Diluted Eanings per share                                
  Net Income (loss)   $ 0.01   $ (0.06 ) $ (0.13 ) $ (0.13 )      
  Weighted Common Shares - Diluted     72,084,748     8,549,322     65,933,378     6,613,249        
                                 
             
             
             
Arch Therapeutics, Inc.       
(A Development Stage Company)       
Consolidated Balance Sheets       
June 30, 2014 (unaudited) and September 30, 2013       
             
             
ASSETS   June 30, 2014 (unaudited)     September 30, 2013  
Current assets:                
  Cash and cash equivalents   $ 1,802,524     $ 557,319  
  Promissory note receivable     -       1,000,000  
  Prepaid expenses and other current assets     32,206       19,629  
      Total current assets     1,834,730       1,576,948  
                 
Long-term assets:                
  Property and equipment, net     -       322  
      Other Assets     -       10,062  
      Total long-term assets     -       10,384  
                 
      Total assets   $ 1,834,730     $ 1,587,332  
                 
LIABILITIES AND STOCKHOLDERS' (DEFICIT)/EQUITY                
Current liabilities:                
  Accounts payable   $ 166,011     $ 314,769  
  Accrued expenses and other liabilities     216,110       140,840  
  Current derivative liabilities     3,078,000       -  
      Total current liabilities     3,460,121       455,609  
                 
Long-term liabilities:                
  Note payable     953,002       944,707  
  Accrued interest, net of current portion     75,000       -  
  Derivative liabilities, net of current portion     5,244,000       -  
      Total long-term liabilities     6,272,002       944,707  
                 
Total liabilities     9,732,123       1,400,316  
                 
Commitments and contingencies                
                 
Stockholders' (deficit) equity:                
                 
    Common stock, $0.001 par value, 300,000,000 shares authorized, 72,076,487 and 60,145,237 shares issued and outstanding as of June 30, 2014 and September 30, 2013, respectively     72,001       60,145  
    Additional paid in capital     5,440,314       4,758,742  
  Deficit accumulated during the development stage     (13,409,708 )     (4,631,871 )
      Total stockholders' (deficit) equity     (7,897,393 )     187,016  
                 
      Total liabilities and stockholders' (deficit) equity   $ 1,834,730     $ 1,587,332  
                 

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