PTE PolarityTE Inc

Item 1.01 Entry into a Material Definitive Agreement.

PolarityTE, Inc. (the “Company”, “we” or “us”) entered into an Equity Purchase Agreement on December 5, 2019 (the “Purchase Agreement”) with Keystone Capital Partners, LLC (“Keystone”). Pursuant to the terms of the Purchase Agreement, Keystone has agreed to purchase from us up to $25,000,000 of shares of our common stock (the “Purchase Shares”), subject to certain limitations, at our direction from time to time during the 36-month term of the Purchase Agreement. Concurrently with entering into the Purchase Agreement, we also entered into a registration rights agreement with Keystone (the “Registration Rights Agreement”), pursuant to which we agreed to register the sale of the shares of our common stock that we issue to Keystone pursuant to the Purchase Agreement under our existing shelf registration statement on Form S-3 (File No. 333-229584) or a new registration statement.

Beginning ten business days after the date of the Purchase Agreement, we have the right, in our sole discretion, to present Keystone with an initial purchase notice for an aggregate amount of Purchase Shares not to exceed $250,000. Thereafter, we may present Keystone with purchase notices, each directing Keystone to purchase up to $2,500,000 of shares of our common stock. Any purchase notice must be received by Keystone no less than five calendar days after any previous purchase notice. Keystone may not assign or transfer its rights and obligations under the Purchase Agreement.

The purchase price per share is based on the market price of our common stock as computed under the Purchase Agreement, subject to a floor price. The purchase price per share for each purchase will be equal to the greater of 90% of the volume weighted average price of our common stock during the five trading days prior to the purchase notice date, and the floor price of $2.00 per share.

Under applicable Nasdaq rules, the aggregate number of shares that we can sell to Keystone under the Purchase Agreement may in no case exceed 19.99% of the common stock outstanding immediately before the execution of the Purchase Agreement (the “Exchange Cap”), unless we obtain stockholder approval to issue Purchase Shares above the Exchange Cap, in which case the Exchange Cap will no longer apply. In any event, the Purchase Agreement specifically provides that we may not issue any shares of our common stock under the Purchase Agreement if such issuance would breach any applicable rules or regulations of The Nasdaq Capital Market.

The Purchase Agreement also provides that we may not issue or sell, and Keystone may not purchase or acquire, any shares of our common stock under the Purchase Agreement if those shares, when aggregated with all other shares of our common stock then beneficially owned by Keystone, would result in Keystone and its affiliates exceeding the beneficial ownership limitation, which is 9.99% of our then issued and outstanding common stock.

As consideration for Keystone’s commitment to purchase shares of common stock pursuant to the Purchase Agreement, we will pay to Keystone a cash fee of $250,000 on the date of the Purchase Agreement and $50,000 every six months following the date of the initial purchase notice during the term of the Purchase Agreement.

The Purchase Agreement contains customary representations, warranties, covenants and indemnification provisions. Keystone has covenanted not to in any manner whatsoever enter into or effect, directly or indirectly, any short sale of the common stock or any hedging transaction, which establishes a net short position with respect to the common stock. We may terminate the Purchase Agreement at any time, at our sole discretion, without any cost or penalty. There are no limitations on use of proceeds, financial or business covenants, restrictions on future financings, rights of first refusal, participation rights, penalties or liquidated damages in the Purchase Agreement. We may deliver Purchase Notices to Keystone under the Purchase Agreement in light of our capital needs from time to time, subject to market conditions and the limitations contained in the Purchase Agreement. We expect to use any proceeds that we receive under the Purchase Agreement for working capital and general corporate purposes. We may also use a portion of the net proceeds to invest in or acquire businesses or products that we believe are complementary to our own, although we currently have no plans, commitments or agreements with respect to any such acquisitions. The number of shares of common stock and the per share prices of common stock issuable under the Purchase Agreement are subject to adjustment for any reorganization, recapitalization, non-cash dividend, stock split, reverse stock split or other similar transaction.

The provisions of the Purchase Agreement and Registration Rights Agreement, including any representations and warranties contained in them, are not for the benefit of any party other than the parties to such agreements and are not intended as documents for investors and the public to obtain factual information about the current state of affairs of the parties. Rather, for information about us, investors and the public should look to disclosures contained in our annual, quarterly and current reports we file with the SEC.

The foregoing descriptions of the terms and conditions of the Purchase Agreement and the Registration Rights Agreement do not purport to be complete and are qualified in their entirety by the full text of the Purchase Agreement and the Registration Rights Agreement, which are attached to this Report as Exhibit 10.1 and Exhibit 4.1, respectively, and incorporated into this Report by reference. We issued a press release regarding the Purchase Agreement on the date of this Report. The full text of the press release is furnished as Exhibit 99.1 to this Report.

The information contained in this Current Report on Form 8-K shall not constitute an offer to sell or the solicitation of an offer to buy the shares of our common stock discussed in this Report, nor shall there be any offer, solicitation, or sale of the shares in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction.