Arch Therapeutics Announces Third Quarter 2014 Results
WELLESLEY, MA--(Marketwired - August 06, 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
----------------------------------------------------------
Period from
Inception
Three Three Nine Nine (March 6,
Months Months Months Months 2006)
ended June ended June ended June ended June through June
30, 2014 30, 2013 30, 2014 30, 2013 30, 2014
----------- ---------- ----------- ---------- ------------
Other Revenues $ - $ - $ - $ - $ 431,461
----------- ---------- ----------- ---------- ------------
Operating
expenses:
General and
administrativ
e 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
------------------------------
June 30, 2014 September 30,
ASSETS (unaudited) 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
============== ==============
Contact:
ARTH Investor Relations
Toll Free: +1-855-340-ARTH (2784) (US and Canada)
Email: investors@archtherapeutics.com
Website: www.archtherapeutics.com
or
Richard Davis
Chief Financial Officer
Arch Therapeutics, Inc.
Phone: 617-431-2308
Email: rdavis@archtherapeutics.com
Website: www.archtherapeutics.com
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