Citron Exposes History Of FRAUD Behind PolarityTE… That is right… We Said It – FRAUDGuest Post
The SEC should halt this stock immediately before insiders are allowed to enrich themselves even more as the company continues to deceive investors.
This is part 1 of a 2 part series. Citron will not discuss the science behind PolarityTE in this report because it is irrelevant. Once an SEC investigation commences, we expect all the “figureheads” who have prostituted their names for S-8 stock to immediately lawyer up and scatter like cockroaches.
For those of you unfamiliar with the story here is the pitch in two lines: PolarityTe is a development stage company that has developed revolutionary wound care treatments through the intellectual property of a group of John Hopkins doctors. This intellectual property was acquired by a group of serial stock promoters and comes in the form of a patent application. Think of Mimedx with no sales.
Premeditated Securities Fraud?
Here at a quick timeline:
On December 1, 2016, Majesco Entertainment whole owned by notorious investor Barry Honig entered into an agreement to acquire the assets of PolarityTe.
Polarity is the brainchild of Johns Hopkins doctor Denver Lough through his patent application #14/954,335. As described in correspondence to the SEC regarding the nature of the acquisition- IT IS ALL ABOUT THE PATENT.
“There was never any intent to acquire an ongoing business and no ongoing business was acquired. The asset is preserved in a stand-alone entity merely as a vehicle to provide the Company a seamless means to acquire the asset (a patent application) without undue cost, expense and time. Polarity NV has never had employees and therefore no employees will be acquired for the transaction.” 10Q Jan 31, 2017
On Apr 7, 2017, COOL announced the closing of the transaction where Majesco gave Dr. Lough over $104 million in stock for the patent.
Just one week beforehand, on March 31, 2017, Dr Lough received a notice of non-final REJECTION of the patent and the actual letter from the USPTO was put in the mail on the same date the transaction closed April 7. All without being disclosed to shareholders.
Below is the timeline cut and pasted from the USPTO website patent # 14/954,335
The SEC, like they had a crystal ball, sent a letter to Polarity the next week that read:
Yet, the company continued to promote themselves and raise money as if the rejection never occurred.
There was no 8-k, risk disclosure, or press release as the coveted patent entered the stock world dead on arrival.
PolarityTE would continue to correspond with the SEC for the next year and file registration statements, prospectus, and annual reports without EVER disclosing the rejection of the patent. Instead, they would use boilerplate language such as:
"Intellectual property risk: As a minimally manipulated therapy, SkinTE is developed through a series of trade secrets and pending patents that prevent full replication of the process."
Meanwhile, the hubris of the stock promoters and management didn't stop, as press releases and interviews continued to refer to this alleged “patented” invention. For those who want to see it just got to 1:55 of this interview https://www.youtube.com/watch?v=iPduIQ8gips
Citron will make a dossier of the misrepresentations and turn them over to the SEC and the class action attorneys once they get subpoenaed.
Now you have read the nice part – but it only gets worse.
It gets worse!!
If the company and its promoters had to defend themselves they might say, ‘It was only a preliminary rejection and we thought we could win on appeal’ (despite the odds being in the low single digits).
On May 29, 2018 the company filed an S-8 registration, which would allow management and promoters to sell hundreds of millions of dollars in stock.
Note that former COOL CFO John Stetson was the CFO of the same “gang's” last patent stock $MARA…which now trades at $1, despite it once trading at $39 a share with the winds of a strong promotion.
In only four working days after the S-8 was filed, on June 4, 2018, the USPTO gave a final rejection for “the patent”. Citron believes that Dr. Lough was very aware of the likelihood of the upcoming rejection and rushed to submit the S-8 filing. Below is the timeline from the USPTO:
Article by Citron Research
See the full PDF below.