July 13, 2019

Ms. Minnie Baylor-Henry

Director at PolarityTE (PTE)
c/o Ms. Maggie Dalton
Stoel Rives LLC

Re: PolarityTE and SkinTE™

By email

Dear Ms. Baylor-Henry,

Here are more of my observations and opinions regarding PolartityTE and its SkinTE™
product.

The mission of the Federal Trade Commission (FTC) is:

"Protecting consumers and competition by preventing anticompetitive,

deceptive, and unfair business practices through law enforcement, advocacy, and
education without unduly burdening legitimate business activity."
https://www.ftc.gov/about-ftc

"The Federal Trade Commission Act is the primary statute of the

Commission. Under this Act, as amended, the Commission is empowered, among
other things, to (a) prevent unfair methods of competition and unfair or deceptive
acts or practices in or affecting commerce; (b) seek monetary redress and other
relief for conduct injurious to consumers; (c) prescribe rules defining with
specificity acts or practices that are unfair or deceptive, and establishing
requirements designed to prevent such acts or practices; (d) gather and compile
information and conduct investigations relating to the organization, business,
practices, and management of entities engaged in commerce; and (e) make reports
and legislative recommendations to Congress and the public. A number of other
statutes listed here are enforced under the FTC Act."
https://www.ftc.gov/enforcement/statutes/federal-trade-commission-act

According to the FTC website,

"People spend billions of dollars a year on health-related products and

treatments that not only are unproven and often useless, but also sometimes are
dangerous. The products promise quick cures and easy solutions for a variety of
problems, from obesity and arthritis to cancer and AIDS. But the "cures" don't
deliver, and people who buy them are cheated out of their money, their time, and
even their health. That's why it's important to learn how to evaluate claims for
products related to your health."

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 https://www.consumer.ftc.gov/articles/0167-miracle-health-claims

The following press release by the Federal Trade Commission (FTC) may be of interest
to you and others at PolarityTE (PTE).
https://www.ftc.gov/news-events/press-releases/2018/10/ftc-stops-deceptive-health-claims-stem-
cell-therapy-clinic

The above-linked press release relates to FTC action regarding unproven medical claims
made by a regenerative medicine company. The FTC press release says in part:

"The settlement prohibits the defendants from making these and other
health claims in the future unless the claims are true and supported by competent
and reliable scientific evidence. The settlement also imposes a partially suspended
$3.31 million judgment and requires the defendants to notify current and former
patients about the order within 30 days."

“Clinics must have solid evidence to back up their claims before

advertising that stem cell therapy can treat serious medical issues, particularly
those affecting children and older adults,” said Andrew Smith, Director of the
FTC’s Bureau of Consumer Protection."

As you know, Ms. Baylor-Henry, PTE has not proven that SkinTE is either safe or
effective. As you also know, anecdotal evidence is not the same as proof of safety and efficacy.
And yet, the following examples show that PTE is making, directly and indirectly, unproven
medical claims about SkinTE.

1. Here are six screen shots from the polarityte.com website (taken July 12):

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3
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2. This is a quote from a seekingalpha.com article promoting PTE: "PolarityTE has developed a
regenerative medical technology that is already showing outstanding results in the clinic."
https://seekingalpha.com/article/4266069-polarityte-nothing

3. Here is a screenshot from the PTE website linking to an article about SkinTE:

Here is an excerpt from the linked article:

"A Tampa woman who suffered burns over most of her body in a January
2018 house fire is alive and recovering thanks to a cutting edge treatment at
Tampa General Hospital that she credits with saving her life."
https://www.baynews9.com/fl/tampa/news/2019/05/01/tampa-burn-victim-
natasha-williams-skinte#

4. Here is a screenshot from the PTE website linking to another article about SkinTE:

Here is an excerpt from the linked article:

"Made by Utah-based company PolarityTE, the product claims to be the

first able to regenerate full-thickness skin.
Founder and CEO Dr Denver Lough, who left his plastic surgeon
residency at Johns Hopkins Hospital in Baltimore to start the company, said the
product [SkinTE] can essentially replace a traditional skin graft."

This last excerpt is worth repeating. Lough said that "[SkinTE] can essentially replace a
traditional skin graft." There is no scientific proof to support Lough's claim, and PTE is using
Lough's message through its website to promote and sell SkinTE.

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 Not only is PTE making unsupported medical claims for SkinTE, PTE is also
encouraging physicians and patients to seek reimbursement for SkinTE. Here is a screenshot
from the PTE website:

This information in this letter illustrates that PolarityTE has serious issues about the
promotion and use of SkinTE, PTE has disclosed that the SEC subpoena to PTE specifically
requested documents about these issues.

This letter also shows that PTE has potentially serious issues relating to insurance and
Medicare reimbursement, including possible fraud.

PolarityTE also has serious issues concerning its disclosures about the patent status and
regulatory status of SkinTE, as outlined in my letter to Maggie Dalton dated June 16, 2019. To
summarize this matter briefly using excerpts from the letter:

"18. COOL / PTE has promoted and sold its stock based on the mutually
inconsistent representations that (a) SkinTE is patentable; and that (b) SkinTE is
eligible for the 361 regulatory pathway.
25. SkinTE cannot be both patentable and 361 eligible.
26. Either the Frost gang made up the 361 pathway story in order to pump up the
stock price, or PTE paid Lough the equivalent of $100 million for a patent that
does not protect SkinTE in order to pump up the stock price."

Patents require inventiveness above and beyond the ordinary state of the art. The 361
pathway requires that there is nothing extraordinary about the product. Therefore, PTE's story is

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obviously false. However, PTE has done nothing to publicly correct the misinformation they
have put out regarding this central component of their P&D securities fraud.

PolarityTE has also serious issues about its disclosures regarding product failures of
SkinTE, as outlined in my letter to you dated January 13, 2019. In that letter, I presented you
with publicly available evidence of two young people treated with SkinTE. Using excerpts from
the letter to summarize this point:

"1. Both victims come from financially vulnerable families.

2. Both were treated with SkinTE.
3. Both have FaceBook pages related to their story.
4. Both of their stories attracted attention from the news media.
5. Both have possibly been exploited to promote SkinTE.
6. For both of them, their SkinTE treatments apparently failed."

Ms. Baylor-Henry, by now it may be dawning on you that PolarityTE is a complete fraud.
There is a simple reason for this. The company was not designed to be a profitable operating
company. Instead, the company was designed as a vehicle for a pump and dump securities fraud
by Phillip Frost, Barry Honig, and the rest of the Frost gang. According to a Twitter post by a
business writer who has been tracking the Frost gang for years:

The Frost gang P&D method is described in both Pederson v Frost I, which is available
online at https://www.scribd.com/document/374185521/Pederson-v-Frost-amended-complaint-
filed-February-14-2018, and the amended complaint in SEC v Honig, which is available online at
https://www.sec.gov/litigation/complaints/2019/comp24431.pdf.

A reading list with articles describing numerous Frost gang P&D securities frauds at
various companies can be seen in the complaint for Pederson v Frost II, which is available
through the PACER system (D.Minn.: 0:19-cv-01777).

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 It took many years for the Bernie Madoff Ponzi scheme to collapse, and it also took many
years for the frauds at Enron to unravel. The Frost gang has been running its pump and dump
schemes for most of the decade, and now time is finally running out for Phillip Frost and his
gang of fraudsters.

The SEC press release for the initial filing of SEC v Honig cited an ongoing investigation
that named nine SEC agents. Additional investigators from the US Attorney's Office and the
FBI are also investigating the Frost gang. FINRA investigators may also be involved.

At least three Frost gang companies are dealing with unresolved SEC investigations
(PTE, RIOT, AWSM).

It was disclosed in a May 15 federal court hearing for SEC v Honig that there is a
cooperating witness, there are tolling agreements, and that "there may be a criminal case coming
down the pike reasonably shortly" against members and/or associates of the Frost gang,
according to Gregory Morvillo, attorney for Frost gang member / defendant John O'Rourke.
SEC attorney Nancy Brown then told the Judge, "I hoped that one of the defendants would offer
to the Court that there is a parallel criminal investigation. It's not a dual investigation, it's a
parallel investigation."
https://www.scribd.com/document/411279656/May-15-2019-SEC-v-Honig-Discovery-Hearing

The following letter from the FDA dated May 28, 2019 apparently indicates that the FDA
has and is withholding from public disclosure "information compiled for law enforcement
purposes" related to PTE.

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 The fate of a Frost gang P&D includes the inevitable collapse of the share price. The
following table was prepared by White Diamond Research and published on October 25, 2017.
https://seekingalpha.com/article/4115851-polarityte-comprehensive-look-bull-vs-bear-cases

Sometimes Frost gang companies fade into relative oblivion after a P&D. Sometimes the
Frost gang changes the name of the shell, and the succeeding company is used for another P&D.
With larger frauds like PTE, the company needs to be propped up with financings in an effort to
project an image of a legitimate company. The Frost gang is very creative in changing the
corporate story when problems with the old fraudulent story start to become apparent.
Unfortunately, with PTE this has led to a situation where PTE is promoting and selling an
unapproved medical product for use on unsuspecting patients as part of the cover-up of a P&D
securities fraud.

Frost gang members and associates and other persons associated with PTE are lucky that
no one has died yet after being treated with SkinTE.

It is abundantly clear that:

(a) COOL/PTE was created and used by the Frost gang as a vehicle for a P&D fraud, and the
current problems at PTE are a legacy of that initial fraud.
(b) The DOJ has been investigating the Frost gang since 2012.
(c) It is only a matter of time before civil, and probably criminal, charges are brought against
individuals associated with the COOL/PTE P&D fraud.

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 My guess is that the main targets for criminal charges will be Phillip Frost, Barry Honig,
Michael Brauser and Harvey Kesner, though others may also be charged under 18 U.S.C. 1348
(securities fraud) and/or 18 U.S.C. 371 (conspiracy to commit securities fraud). RICO
(racketeering) charges may also be a possibility. Given that the securities fraud at PTE is
ongoing, there are many people who are and have been involved in the conspiracy.

PTE's lack of an adequate response to the issues discussed above and PTE's actions in
continuing to promote and market SkinTE pose a serious risk to consumers, as well as
constituting a continuing fraud on investors. Removing Denver Lough as CEO was a necessary
first step by the BOD. However, other active participants in the initial P&D are still employees
and directors at PTE. Housecleaning at PTE is not over yet, whether it is done by the BOD or
the SEC and DOJ. Procrastination and covering up by the BOD may not be your best option.

Ms. Baylor-Henry, I hope that you find this information to be useful as you carry out
your duties as a director at PTE.

This letter will be posted on scribd.com with a link from Twitter.

Regards,
Lee Pederson

Cc:
SEC OIG
Joe Dixon (attorney for Phillip Frost)

Bcc:
Federal law enforcement agents
Journalists and business writers
Other interested parties

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