Arch Raises $1.4 Million with Convertible Note Issuance and Warrant Reprice

Financing with long-term shareholders provides flexibility during product roll-out

FRAMINGHAM, Mass., June 05, 2020 (GLOBE NEWSWIRE) -- Arch Therapeutics, Inc. (OTCQB: ARTH) ("Arch" or the "Company"), developer of novel wound care and biosurgical devices, announces that it has raised $1.4M from long-term shareholders.

As part of the capital raising, the Company has issued a Series 1 Unsecured Convertible Note (the “Note”) to several accredited current investors for the aggregate principal amount of $550,000. The Notes accrue simple interest on unpaid principal at a rate of ten percent per year. Features of the note allow for payment of principal plus accrued interest at any time up until maturity as well as conversion into common stock under certain conditions (to “Convert”) at a price of $0.27 per share (“Conversion Price”). Noteholders may Convert at any time. The Company may Convert upon raising $5M of equity capital at the Conversion Price or greater or after the stock trades above $0.32 per share for at least 15 days on a volume weighted basis. At maturity, remaining outstanding principal and accrued interest may be either repaid or multiplied by 135% and then Converted at the Conversion Price. The Convertible Notes contain customary events of default.

The Company has also entered into an agreement (the “Agreement”) with the holders of a majority (the “Majority Holders”) of the outstanding Series D Warrants (the “Warrant”) resulting in approximately $850,000 of proceeds as a result of the full exercise of their Warrants. The Agreement provides for the reduction of the Warrant exercise price from $0.25 to $0.18 per share, and the elimination of a provision that prevents the Warrant from being exercised if the holder’s beneficial ownership would exceed 4.9% as a result. Under the terms of the Agreement, in exchange for fully exercising their remaining Warrants for approximately 4.7 million shares of common stock, the Majority Holders were issued new warrants to purchase approximately 3.55 million shares of common stock at an exercise price of $0.25 cents over a 1 year term.

Further details on the above transactions may be found in the related current report on Form 8-K that will be filed with the Securities and Exchange Commission.

About Arch Therapeutics, Inc.
Arch Therapeutics, Inc. is a biotechnology company developing a novel approach to stop bleeding (hemostasis), control leaking (sealant) and manage wounds during surgery, trauma and interventional care. Arch is developing products based on an innovative self-assembling barrier technology platform with the goal of making care faster and safer for patients. Arch's development stage product candidates include AC5 Advanced Wound System, AC5 Topical Hemostat, AC5-G and AC5 Surgical Hemostat.^1,2