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PART
III
ITEM
10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
As
of April 21, 2022, the number of members of our Board of Directors of the Company (the “Board”) is fixed at four. The members
of our Board as of such date are as follows:
| Name |
|
Age |
|
Position |
|
Director
Since |
| Andrew
Kucharchuk |
|
41 |
|
Chief
Executive Officer and Chairman of the Board |
|
July
2020 |
| Charles
Rice |
|
56 |
|
Director |
|
July
2020 |
| Trond
Waerness |
|
54 |
|
Director |
|
April
2021 |
| Zahed
Subhan |
|
64 |
|
Director |
|
November
2021 |
The
biographies of each director below contain information regarding the person’s service as a director, business experience, director
positions held currently or at any time during the last five years, and information regarding involvement in certain legal or administrative
proceedings, if applicable.
Andrew
Kucharchuk – Mr. Kucharchuk has served as the Chariman of our Board and Chief Executive Officer since July 7, 2020. He has
also served on the Board of Directors of Theralink Technologies, Inc. (“Theralink”) since 2020 after previously serving
in such role from September 2015 to March 2017. Previously, he served as President and Chief Financial Officer of Theralink from
February 2016 until June 2020, as Chief Executive Officer of Theralink from November 2019 until June 2020, and as Chief Financial Officer
of Theralink from 2009 to September 2015. Mr. Kucharchuk has also served as Acting Chief Financial Officer of Theralink from June 2020
to September 2020.
We
believe that Mr. Kucharchuk’s prior executive experience in the pharmaceutical industry, as well as his financial background, make
him a valuable asset to our Board.
Charles
L. Rice – Mr. Rice has served as a director since July 10, 2020. He also served as a member of the Board of Directors of Theralink
from November 2015 until June 2020. He is also the President of Entergy New Orleans, Inc. (“Entergy”), an electric and gas
utility company, where he has served since 2010.
We
believe that Mr. Rice’s prior management and governance experience makes him a valuable asset to our Board.
Trond
K. Waerness – Mr. Waerness has served as a director of the Company since April 2021. Since 2016, Mr. Waerness has either founded
or co-founded three successful and profitable pharmaceutical services companies including Atna Consulting Services where he currently
serves as Chief Executive Officer. We believe that Mr. Waerness’ experience in various roles of pharmaceutical commercialization
makes him a valuable asset to our Board.
Zahed
Subhan – Mr. Subhan has served as a director of the Company since November 2021. He has served as the Chief Executive Officer
and director of Aestas Pharma Inc. since 2015. Mr. Subhan has also been a director of Eppin Pharma Inc. (“Eppin”) since 2013,
and the Chief Executive Officer of Eppin from 2013 to 2018.
We
believe that Mr. Subhan’s extensive experience in the pharmaceutical and biotechnology industries makes him a valuable asset to
our Board.
Executive
Officers of Our Company
Biographical
information concerning Andrew Kucharchuk, our Chief Executive Officer, who also serves as Chairman of the Board, is set forth above.
No other executive officers are employed or are contracted by the Company.
Family
Relationships
There
are no familial relationships between any of our executive officers and directors.
Audit
Committee
Due
to our financial and operational condition, and the size of our Board, the entire Board functions as the audit committee. The Board authorized
and approved the engagement of the independent registered public accounting firm, reviewed the results and scope of the audit and other
services provided by the independent registered public accounting firm, reviewed our financial statements, reviewed and evaluated our
internal control functions, approved or established pre-approval policies and procedures for all professional audit and permissible non-audit
services provided by the independent registered public accounting firm and reviewed and approved any proposed related party transactions.
The
Board has determined that the Company does not have an audit committee financial expert, as that term is defined in Item 407(d) of Regulation
S-K, due to its lack of a separate audit committee, small size and limited resources.
Code
of Ethics
We
have adopted a Code of Business Conduct and Ethics that applies to all of our employees, including our executive officers, and to members
of our Board. Our Code of Business Conduct and Ethics is filed as Exhibit 10.18 to this Amendment. Printed copies are available upon
request without charge by contacting us at our corporate headquarters at 8000 Innovation Parkway, Baton Rouge, LA 70820 Attention:
Corporate Secretary. Any amendment to or waiver of the Code of Business Conduct and Ethics will be disclosed on our website promptly
following the date of such amendment or waiver.
Delinquent
Section 16(a) Reports
Section
16(a) of the Exchange Act requires our directors, executive officers, and persons who beneficially own more than 10% of our common stock
to file initial reports of ownership and changes in ownership of our common stock and other equity securities with the SEC. These individuals
are required by the regulations of the SEC to furnish us with copies of all Section 16(a) forms they file. Based solely on a review of
the copies of the forms furnished to us, and written representations from reporting persons, we believe that all filing requirements
applicable to our officers, directors and 10% beneficial owners were complied with during the year ended December 31, 2021, except the
Form 3 for Zahed Subhan, director, the Form 3 for Charles Rice, director, and the Form 3 for Trond Waerness, director, which were not
timely filed. None of our directors are owners of our common stock or other equity securities.
ITEM
11. EXECUTIVE COMPENSATION
Summary
Compensation Table
The
following table sets forth information regarding compensation paid, distributed or accrued by us during for the years ended December
31, 2021 and 2020 by our principal executive officer our only highly compensated executive officer who served during 2021 (“Named
Executive Officers”).
Name and Principal
Position (a) | |
Year (b) | |
Salary ($)) | |
Total ($) |
| | |
| |
| |
|
| Andrew Kucharchuk(1) | |
| 2021 | | |
| 186,000 | | |
| 186,000 | |
| Chief Executive Officer | |
| 2020 | | |
| 60,000 | | |
| 60,000 | |
| |
(1) |
Mr.
Kucharchuk has served as our Chief Executive Officer since July 7, 2020. |
Andrew
Kucharchuk’s Employment Agreement
On
July 7, 2021, Mr. Kucharchuk entered into an Employment Agreement, pursuant to which we agreed to pay to Mr. Kucharchuk, a base salary
of $250,000 per year for his services as Chief Executive Officer. Under his Employment Agreement Mr. Kucharchuk is also eligible to receive
an annual bonus during the term of the agreement with a target amount of up to 20% of his base salary, or up to $50,000, based on performance
criteria mutually determined in good faith by the Board and Mr. Kucharchuk. The Employment Agreement is for an initial term of two years,
subject to an automatic renewal for successive one-year terms unless prior notice of non-renewal is given by either party.
Under
his Employment Agreement, Mr. Kucharchuk is entitled to severance payments if his employment terminated under certain circumstances.
In
the event of termination by the Company without “cause,” or resignation for “good reason,” Mr. Kucharchuk is
entitled to receive six months base salary and continued benefits for six months.
Generally,
“good reason” is defined as (i) a material diminution in Mr. Kucharchuk’s authority, duties or responsibilities due
to no fault of his own, or any other action or inaction that constitutes a material breach by the Company under the Employment Agreement;
or (ii) generally a relocation of the principal place of employment to a location outside of a 50-mile radius of the Company’s
current headquarters in Baton Rouge, Louisiana.
Under
the terms of the Employment Agreements, Mr. Kucharchuk is subject to non-competition and non-solicitation covenants during the term of
his employment and for one year following termination of employment with the Company. His Employment Agreement also contains customary
confidentiality and non-disparagement covenants.
Outstanding
Equity Awards at Fiscal Year-end Table
There
were no outstanding equity awards held by our Named Executive Officer as of December 31, 2021.
Director
Compensation
The
following table sets forth information concerning compensation for services rendered by our independent directors for the year ended
December 31, 2021. However, for information about the compensation paid to those of our directors who are also Named Executive Officers
(Mr. Kucharchuk), see the Summary Compensation Table above.
| Name | |
Fees Earned or
Paid in Cash ($) | |
Total
($) |
| Charles Rice | |
$ | 24,000 | | |
$ | 24,000 | |
| Trond Waerness | |
| 16,000 | | |
| 16,000 | |
| Zahed Subhan (1) | |
| 8,334 | | |
| 8,334 | |
| | |
| | | |
| | |
| Total: | |
$ | 48,334 | | |
$ | 48,334 | |
| |
(1) |
Mr.
Zahed Subhan’s fees earned for 2021 were pursuant to an agreement dated November 1, 2021, between Mr. Subhan and the Company
which provides for payment of $4,167 per month for services rendered as a member of our Board of Directors and for
scientific consulting. |
Director
Compensation Program
Our
director compensation program generally entails paying our non-employee directors cash fees for their services. With the exception of
Mr. Subhan, who pursuant to an agreement with the Company is entitled to receive monthly payments of $4,167, or $50,000 per year for
services rendered as a member of the Board and for scientific consulting, our compensation program for directors for 2021 consisted of
an annual cash payment of $24,000 per year, payable quarterly.
ITEM
12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The
following table sets forth certain information regarding the ownership of our common stock as of April 26, 2022 beneficially owned by:
(i) each current director of our company; (ii) our Named Executive Officer; (iii) all current executive officers and directors of our
company as a group; and (iv) all those known by us to be beneficial owners of more than 5% of our common stock.
To
our knowledge, except as indicated in the footnotes to the following table, and subject to state community property laws where applicable,
all beneficial owners named in the following table have sole voting and investment power with respect to all shares shown as beneficially
owned by them. Unless otherwise indicated, the business address of each person in the table below is c/o Adhera Therapeutics, Inc., 8000
Innovation Parkway, Baton Rouge, LA 70820.
| Name | |
Number of
Shares | |
Percent of
Shares
Outstanding
(%) |
| Officers and Directors: | |
| | | |
| | |
| Andrew Kucharchuk | |
| - | | |
| - | |
| Charles Rice | |
| - | | |
| - | |
| Trond Waerness | |
| - | | |
| - | |
| Zahed Subhan | |
| - | | |
| - | |
| 5% Stockholders: | |
| | | |
| | |
| Vuong Trieu, Ph.D. | |
| 3,533,564 | (2) | |
| 20.20 | % |
| Autotelic LLC | |
| 2,312,356 | (3) | |
| 13.22 | % |
| Autotelic Inc. | |
| 1,727,594 | (4) | |
| 9.88 | % |
* Beneficial ownership of less than 1% is omitted.
| (1) |
Applicable
percentages are based on 17,493,237 of common stock outstanding as of the April 26, 2022, including shares not yet issued which are
issuable and excluding securities held by or for the account of the Company. Beneficial ownership is determined under the rules of
the SEC and generally includes voting or investment power with respect to securities. A person is deemed to be the beneficial owner
of securities that can be acquired by such person within 60 days after the date of determination, whether upon the exercise of options,
warrants or conversion of notes. Unless otherwise indicated in the footnotes to this table, we believe that each of the stockholders
named in the table has sole voting and investment power with respect to the shares of common stock indicated as beneficially owned
by them. |
| (2) |
Dr.
Trieu previously served as an executive officer and as a director of our company. Includes 2,312,356 shares held by Autotelic LLC,
entity of which Dr. Trieu serves as an executive officer, 86,207 shares held by LipoMedics Inc., an entity of which Dr. Trieu serves
as Chairman of the Board and as an executive officer, and 525,536 shares of common stock held by Autotelic Inc., an entity of which
Dr. Trieu serves as Chairman of the Board. Information based on a Schedule 13D/A filed with the SEC on April 27, 2018. |
| (3) |
Address
is 17870 Castleton Street, Suite 250, Rowland Heights, CA 91748. Dr. Vuong Trieu is the Chief Executive Officer of the entity. |
| (4) |
Address
is 940 South Coast Drive, Suite 100, Costa Mesa, CA 92626. Represents 525,536 shares of common stock and warrants to purchase common
stock which are subject to a 9.99% beneficial ownership limitation. Dr. Vuong Trieu is the Chief Executive Officer of the entity. |
Equity
Compensation Plan Information
The
following table provides aggregate information as of the end of the year ended December 31, 2021 with respect to all of the compensation
plans under which our common stock is authorized for issuance, including our 2014 Long-Term Incentive Plan and our 2018 Long-Term Incentive
Plan:
| | |
Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights (a) | |
Weighted- Average Exercise Price of Outstanding Options, Warrants, and Rights (b) | |
Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in Column(a)) (c) |
| Equity compensation plans approved by security holders (1) | |
| 4,050 | | |
$ | 1.79 | | |
| 8,925,950 | |
| Equity compensation plans not approved by security holders (2) | |
| 380,000 | | |
$ | 0.98 | | |
| - | |
| Total | |
| 384,050 | | |
$ | .0.99 | | |
| 8,925,950 | |
| |
(1) |
Consists
of 4,050 shares of common stock underlying awards made pursuant to our 2014 Stock Incentive Plan. |
| |
(2) |
Consists
of stock options grant to non-employees during the year ended 2018. |
ITEM
13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
Approval
for Related Party Transactions
It
is our practice and policy to comply with all applicable laws, rules and regulations regarding related-person transactions. Our Code
of Business Conduct and Ethics requires that all employees, including officers and directors, disclose to the CEO the nature of any company
business that is conducted with any related party of such employee, officer or director (including any immediate family member of such
employee, officer or director, and any entity owned or controlled by such persons). If the transaction involves an officer or director
of our company, the CEO must bring the transaction to the attention of the Board, which must review and approve the transaction in writing
in advance. In reviewing such transactions the Board considers the relevant available facts and circumstances.
Related
Party Transactions
Set
forth below is a brief description of the transactions since January 1, 2020 in which the Company was a participant and in which any
director or executive officer of the Company, any known 5% or greater stockholder of the Company or any immediate family member of any
of the foregoing persons, had a direct or indirect material interest as defined in Item 404(a) of Regulation S-K. As permitted by the
SEC rules, discussion of employment relationships or transactions involving the Company’s executive officers and directors, and
compensation solely resulting from such employment relationships or transactions, or service as a director of the Company, as the case
may be, has been omitted to the extent disclosed in the Executive Compensation or the Director Compensation section of this Amendment,
as applicable.
Transactions
with BioMauris, LLC / Erik Emerson
During
the year ended December 31, 2019, the company paid a total of approximately $32,000 for services provided by BioMauris, LLC, of which
Erik Emerson, our former Chief Commercial Officer and former director of Adhera, is Executive Chairman.
In
July 2019, Mr. Emerson, became the owner of an equity interest of approximately 22% in Pharma Hub Network, our third-party network manager.
During the third quarter of 2019, we terminated the relationship with Pharma Hub Network. For the year ended December 31, 2019,
we recorded approximately $62,000 of related party expense for services provided by Pharma Hub Network.
Director
Independence
The
Board utilizes the Nasdaq’s standards for determining the independence of its members. In applying these standards, the Board considers
commercial, industrial, banking, consulting, legal, accounting, charitable and familial relationships, among others, in assessing the
independence of directors, and must disclose any basis for determining that a relationship is not material. The Board has determined
that with the exception of Mr. Kucharchuk, each of our directors is independent directors within the meaning of the Nasdaq independence
standards. In making this independence determination, the Board did not exclude from consideration as immaterial any relationship potentially
compromising the independence of any of the above directors.
ITEM
14. PRINCIPAL ACCOUNTING FEES AND SERVICES
On
April 28, 2021, the Board of Directors of the Company approved the dismissal of Baker Tilly USA, LLP (“Baker Tilly”) as the
Company’s independent registered public accounting firm and approved the appointment of Salberg & Company (“Salberg”)
as the Company’s new independent registered public accounting firm to perform independent audit and attestation services for the
year ended December 31, 2021. As of December 31, 2021, the Company owed Baker Tilly USA, LLP approximately $26,000 for audit fees incurred
prior to the dismissal.
The
following table sets forth the fees billed to the Company for professional services rendered by Salbergfor the years ended December 31,
2021 and 2020:
| Services | |
2021($)* | |
2020($)* |
| Audit Fees (1) | |
$ | 65,000 | | |
$ | - | |
| Audit-Related fees (2) | |
| - | | |
| - | |
| Tax fees (3) | |
| - | | |
| - | |
| Total fees | |
$ | 65,000 | | |
$ | - | |
*Does
not include amounts billed to us by Baker Tilly, LLP, our former principal accountant, during the applicable period.
| (1) |
Audit
Fees – These consisted of the aggregate fees for professional services rendered in connection with (i) the audit of
our annual financial statements, (ii) the review of the financial statements included in our Quarterly Reports on Form 10-Q for the
quarters ended March 31, June 30 and September 30, 2021 and (iv) services provided in connection with statutory and regulatory filings
or engagements. |
| (2) |
Audit-Related
Fees – These consisted principally of the aggregate fees related to audits that are not included Audit Fees. |
| |
|
| (3) |
Tax
Fees – These consist of professional services rendered in connection with tax compliance, tax planning and federal and state
tax returns for the years ended December 31, 2021 and December 31, 2020. |
Pre-Approval
Policies and Procedures
The
Board has the authority to appoint or replace our independent registered public accounting firm (subject, if applicable, to stockholder
ratification). The Board is also responsible for the compensation and oversight of the work of the independent registered public accounting
firm (including resolution of disagreements between management and the independent registered public accounting firm regarding financial
reporting) for the purpose of preparing or issuing an audit report or related work. The independent registered public accounting firm
was engaged by, and reports directly to, the Board.
The
Board pre-approves all audit services and permitted non-audit services (including the fees and terms thereof) to be performed for us
by our independent registered public accounting firm, subject to the de minimis exceptions for non-audit services described in Section
10A(i)(1)(B) of the Exchange Act and Rule 2-01(c)(7)(i)(C) of Regulation S-X, provided that all such excepted services are subsequently
approved prior to the completion of the audit. We have complied with the procedures set forth above, and the Board has otherwise complied
with the provisions of its charter.