Arch Therapeutics, Inc announced a private placement of senior secured convertible promissory notes for gross proceeds of $3,500,000 on July 6, 2022. The aggregate principal amount of notes is $4,230,000, which includes an aggregate $705,000 original issue discount. The company entered into a securities purchase agreement with certain institutional and accredited individual investors.

The company also issued warrants to purchase up to an aggregate of 85,110,664 shares of common stock at an exercise price of $0.0497 per share, and 12,766,600 inducement shares. The notes will bear an interest rate of 10%, and default interest is 18% and will mature in 18 months on January 6, 2024, and are convertible into an aggregate of 107,872,668 shares of common stock at a conversion price of $0.0457 per share. Terrence Norchi, President and Chief Executive Officer; Michael Abrams, the Chief Financial Officer; and Laurence Hicks, a member of the board of directors, through Drake Partners, Llc, participated in the convertible notes offering for an aggregate of $80,000.

The company retained a placement agent in connection with the transaction of $2,400,000 of the notes to the institutional investors. The company will issue securities pursuant to exemption provided under Regulation D.