Item 5.02 Departure of Directors or Certain Officers; Election of Directors;
Appointment of Certain Officers; Compensatory Arrangements of Certain
Officers
On September 9, 2022, the Board of Directors (the "Board") of PolarityTE, Inc.
(the "Company"), approved an amendment to the Company's 2020 Stock Option and
Incentive Plan, as amended (the "2020 Plan") to increase the number of shares
available for awards by adding 1,450,000 shares to the 2020 Plan. The increase
in shares is subject to stockholder approval at the next annual or special
meeting of stockholders. Generally, awards may be granted under the 2020 Plan to
directors, consultants, and employees, including the Company's principal
executive officer, principal financial officer, or named executive officers.
As a result of the reverse stock split effectuated in May 2022, the total number
of shares authorized for awards under the 2020 Plan decreased to 419,548 shares.
Of this number, at September 9, 2022, 157,882 shares have been issued under
previously granted awards, 79,648 shares are subject to granted awards that have
not vested, and 171,855 shares are available for granting additional awards.
Stock-based incentive awards can play an important role in the Company's success
by encouraging and enabling its employees, officers, non-employee directors, and
consultants upon whose judgment, initiative, and efforts the Company largely
depends for the successful conduct of its business to acquire a proprietary
interest in the Company, which provides such persons with a direct stake in the
Company to more closely identify the interests of such individuals with those of
the Company and its stockholders, thereby stimulating their efforts on the
Company's behalf and strengthening their desire to remain with the Company. In
addition, the Company is focused on conserving cash for operations, and to that
end the Company's preference is to use equity awards rather than cash to pay
compensation to directors, consultants, and employees. This is possible,
however, only if the Company has a sufficient number of shares available for
awards to implement an effective equity compensation program.
Specifically, the Board approved an amendment to Section 3(a) of the 2020 Plan
to increase the "Initial Limit" to 1,650,000 shares so that it reads as follows:
(a) Stock Issuable. The maximum number of shares of Stock reserved and available
for issuance under the Plan shall be 1,650,000 (the "Initial Limit"), subject to
adjustment as provided in Section 3(b), plus on January 1, 2021 and each January
1 thereafter, the number of shares of Stock reserved and available for issuance
under the Plan shall be cumulatively increased by the lesser of (i) four (4)
percent of the number of shares of Stock issued and outstanding on the
immediately preceding December 31 or (ii) such lesser number of shares as
determined by the Administrator (the "Annual Increase"). Subject to such overall
limitation, the maximum aggregate number of shares of Stock that may be issued
in the form of Incentive Stock Options shall not exceed the Initial Limit
cumulatively increased on January 1, 2021 and on each January 1 thereafter by
the lesser of the Annual Increase for such year or such lesser number of shares
as determined by the Administrator, subject in all cases to adjustment as
provided in Section 3(b). For purposes of this limitation, the shares of Stock
underlying any awards under the Plan that are forfeited, canceled, held back
upon exercise of an Option or settlement of an Award to cover the exercise price
or tax withholding, reacquired by the Company prior to vesting, satisfied
without the issuance of Stock or otherwise terminated (other than by exercise)
shall be added back to the shares of Stock available for issuance under the Plan
and, to the extent permitted under Section 422 of the Code and the regulations
promulgated thereunder, the shares of Stock that may be issued as Incentive
Stock Options. In the event the Company repurchases shares of Stock on the open
market, such shares shall not be added to the shares of Stock available for
issuance under the Plan. Subject to such overall limitations, shares of Stock
may be issued up to such maximum number pursuant to any type or types of Award.
The shares available for issuance under the Plan may be authorized but unissued
shares of Stock or shares of Stock reacquired by the Company.
The foregoing amendment is subject to stockholder approval, so none of the newly
authorized shares may be issued under stock awards until stockholder approval of
the amendment is obtained. Prior to stockholder approval the Company may issue
stock options using the newly authorized shares so long as the stock options
cannot be exercised unless and until stockholder approval of the amendment to
the 2020 Plan. No restricted shares or restricted stock units may be granted
until the amendment to the 2020 Plan is approved by stockholders.
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