Item
1.01 Entry into a Material Definitive Agreement.
Exchange
Agreements
On
March 6, 2018, PolarityTE, Inc., a Delaware corporation (the “Company”) entered into separate exchange agreements
(the “Exchange Agreements”) with holders (each a “Holder”, and collectively the “Holders”)
of 100% of the Company’s outstanding 6% Series F Convertible Preferred Stock (the “Series F Preferred Stock”),
the Company’s warrants to purchase shares of the Company’s common stock, par value $0.001 per share (the “Common
Stock”) issued in connection with the Series F Preferred Stock (such “Warrants” and, together with the Series
F Preferred Stock, the “Exchange Securities”) and unpaid dividends on Series F Preferred Stock, for Common Stock (the
“Exchange”). The closing of the Exchange is contingent upon receipt by the Company of conversion notices from holders
of all of the outstanding shares of the Company’s Series A Convertible Preferred Stock (the “Series A Preferred Stock”),
Series B Convertible Preferred Stock (the “Series B Preferred Stock”) and Series E Convertible Preferred Stock (the
“Series E Preferred Stock”). The Series E Preferred Stock is held by Dr. Denver Lough, the Company’s Chief Executive
Officer.
Pursuant
to the Exchange Agreements, all Holders entered into Exchange Agreements with the Company on March 6, 2018. As part of the Exchange,
the Holders also relinquished any and all other rights related to the issuance of the Exchange Securities, the respective governing
agreements and certificates of designation, including any related dividends, registration rights, adjustment of conversion and
exercise price, and repayment option. Upon closing of the Exchange, the Company will file a Certificate of Elimination with the
Secretary of State of the State of Delaware terminating the Company’s Series A, Series B, Series C, Series D, Series E and
Series F Preferred Stock and thereafter no shares of Company preferred stock will remain outstanding and all rights under the
Series F Preferred Stock to price adjustment in the event of future issuances will be terminated.
The
Exchange will result in the following issuances: (A) all outstanding shares of Series F Preferred Stock will be converted into
shares of restricted Common Stock at an effective conversion price of $18.26 per share of Common Stock (the closing price of Common
Stock on the NASDAQ Capital Market on February 26, 2018); (B) the right to receive 6% dividends underlying Series F Preferred
Stock will be terminated and in exchange 31,324 shares of restricted Common Stock will be issued; (C) 322,727 Warrants to purchase
Common Stock will be exchanged for 151,872 shares of restricted Common Stock; and (D) the Holders of the Warrants will relinquish
any and all other rights pursuant to the Warrants, including exercise price adjustments.
In
connection with the Exchange GRQ Consultants, Inc. and several other parties to the Exchange Agreements granted
an irrevocable proxy to Dr. Denver Lough, the Company’s Chief Executive Officer, to vote 797,296 shares of Common Stock
at any time a vote of the stockholders of the Company is held. Prior to the Exchange, Dr. Denver Lough held 7,050,000 shares of
Series E Preferred Stock of the Company entitled to 2 votes per share. Following the Exchange Dr. Denver Lough will hold 7,050,000
shares of Common Stock exchanged for Series E Preferred Stock entitled to 1 vote per share. In addition to a total of 7.8 million
shares beneficially owned (as such term is defined under Rule 13d-3 under the Securities Exchange Act of 1934, as amended) by
Dr. Denver Lough, he will thereby have the right to vote following the Exchange a total of 8,592,296 shares of Common Stock on
any matter on which a vote of the stockholders of the Company is required, or approximately 50% of the issued and outstanding
shares of Common Stock.
No
commission or other payment was received by the Company in connection with the Exchange Agreements. Such exchanges were conducted
pursuant to the exemption provided by Section 3(a)(9) of the Securities Act of 1933, as amended (as amended, the “Securities
Act”), and the shares of Common Stock issuable pursuant to the Exchange Agreements have been, or will be, upon settlement,
issued in reliance on the exemption from registration contained in Section 3(a)(9) of the Securities Act. A copy of the form of
Exchange Agreement is filed as Exhibit 10.1 to this Current Report on Form 8-K, and the foregoing description of the Exchange
Agreements is subject to, and qualified in its entirety by, the full text of the form of Exchange Agreements which is incorporated
herein by reference.
Termination
of Subscription Agreements and Related Documents
As
disclosed in the Company’s Current Report on Form 8-K filed on September 20, 2017, the Company entered into separate subscription
agreements (the “Subscription Agreements”) on September 14, 2017 and September 18, 2017, with accredited investors
(the “Series F Purchasers”), pursuant to which the Company issued and sold the Exchange Securities to the Series F
Purchasers. The Series F Preferred Stock was issued pursuant to a Certificate of Designations, Preferences and Rights of the 6%
Series F Convertible Preferred Stock (the “Series F Certificate of Designation”) filed with the Secretary of State
of the State of Delaware on September 20, 2017. In connection with the Subscription Agreements, the Company also entered into
Registration Rights Agreements with the Series F Purchasers (the “Registration Rights Agreement”), pursuant to which
the Company agreed to file a registration statement with the Securities and Exchange Commission covering resales of shares of
the Company’s Common Stock issuable upon exercise of the Warrants and issuable upon conversion of the Series F Preferred
Stock. The full text of the Subscription Agreements, Registration Rights Agreements and Series F Certificate of Designations is
attached as Exhibit 10.1, Exhibit 10.2 and Exhibit 3.1, respectively, to the Company’s Current Report on Form 8-K filed
on September 20, 2017 and incorporated herein by reference.
Pursuant
to the terms of the Exchange Agreements, the Subscription Agreement, the Registration Rights Agreement, the Series F Certificate
of Designations (including the annual 6% dividend provided for therein) and the Warrants were terminated, and all rights covenants,
agreements and obligations contained therein, were waived and are of no further force or effect.
Registration
Rights Agreement
On
March 6, 2018, the Company entered into a new registration rights agreement (the “Lough Registration Rights Agreement”)
with Dr. Denver Lough, pursuant to which the Company agreed to file a registration statement to register the resale of 7,050,000
shares of Common Stock to be issued upon conversion of the Series E Preferred Stock within six months, to cause such registration
statement to be declared effective by the Securities and Exchange Commission as promptly as possible following its filing and,
with certain exceptions set forth in the Lough Registration Rights Agreement, to maintain the effectiveness of the registration
statement until all of such shares have been sold or are otherwise able to be sold pursuant to Rule 144 under the Securities Act
without restriction. Any sales of shares under the registration statement are subject to certain limitations as specified with
more particularity in the Lough Registration Rights Agreement.
A
copy of the Lough Registration Rights Agreement is filed as Exhibit 10.2 to this Current Report on Form 8-K, and the foregoing
description of the Lough Registration Rights Agreement is subject to, and qualified in its entirety by, the full text of the form
of Lough Registration Rights Agreement which is incorporated herein by reference.
Termination
of Stockholders Agreement
As
disclosed in the Company’s Current Report on Form 8-K filed on December 7, 2016, on December 1, 2016, the Company, Dr. Denver
Lough and Dr. Edward Swanson (together, the “Restricted Stockholders”), entered into a Stockholders Agreement (the
“Stockholders Agreement”) with Mr. Barry Honig, the former Co-Chairman and Chief Executive Officer of the Company
who resigned December 1, 2016, in connection with the appointment of the Restricted Stockholders to the positions of Chief
Executive Officer and Chief Operating Officer, respectively, of the Company, and the purchase from Dr. Denver Lough of PolarityTE,
Inc. a Nevada corporation, from Dr. Denver Lough. In connection with the Exchange, the Stockholders Agreement will terminate pursuant
to the terms of a Termination Agreement (the “Termination Agreement”) including various “come along” “tag
along” rights, and the right to purchase from the Restricted Stockholders all of their shares upon the occurrence of certain
events, including upon termination of employment by the Restricted Stockholders, at the fair market value thereof.
The
full text of the Stockholders Agreement is attached as Exhibit 10.4 to the Company’s Current Report on Form 8-K filed on
December 7, 2016 and incorporated herein by reference.
A
copy of the Termination Agreement is filed as Exhibit 10.3 to this Current Report on Form 8-K, and the foregoing description of
the Termination Agreement is subject to, and qualified in its entirety by, the full text of the form of Termination Agreement
which is incorporated herein by reference.