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RELATED PARTY TRANSACTIONS

12 Months Ended

Dec. 31, 2020

Related Party Transactions [Abstract]

RELATED PARTY TRANSACTIONS

26. RELATED PARTY TRANSACTIONS

a.

The Company and AVLP entered into a Loan and Security Agreement (“AVLP Loan Agreement”) with an effective date of August 21, 2017. At December 31, 2020, the Company has provided loans to AVLP in the principal amount $11,269,136 and, in addition to the 12% convertible promissory notes, AVLP has issued to the Company warrants to purchase 22,537,871 shares of AVLP common stock. Under the terms of the AVLP Loan Agreement, any notes issued by AVLP are secured by the assets of AVLP. As of December 31, 2020, the Company recorded contractual interest receivable attributed to the AVLP Loan Agreement of $2,025,475, and a provision for loan loss of $3,423,608.

During the years ended December 31, 2020 and 2019, the Company also acquired in the open market 5,000 shares of AVLP common stock for $1,274 and 91,000 shares of AVLP common stock for $53,032, respectively. At December 31, 2020, the Company’s investment in AVLP common stock had an unrealized loss of $248,248.

Philou is AVLP’s controlling shareholder. Mr. Ault is Chairman of AVLP’s Board of Directors and the Executive Chairman of the Company. Mr. Horne is the Chief Financial Officer and a director of AVLP and Chief Executive Officer and the Vice Chairman of the Company. Mr. Nisser is General Counsel of AVLP and President, General Counsel and a director of the Company.

In March 2017, the Company was awarded a $50 million purchase order by MTIX to manufacture, install and service the Multiplex Laser Surface Enhancement (“MLSE”) plasma-laser system. On April 12, 2019, the Company received payment of $2,676,219 for manufacturing services performed on the first MLSE system. At December 31, 2020, the Company had recorded a receivable from MTIX of $1,196,379.

b.

At December 31, 2020, the Company has provided Alzamend a short-term advance of $750,000 and invested $50,000 in an 8% convertible promissory note. In conjunction with the issuance of the 8% convertible promissory note, Alzamend issued to the Company warrants to purchase 16,667 shares of Alzamend common stock at an exercise price of $3.00 per share for a period of five years. The Company computed the fair value of the warrants using the Black-Scholes option pricing model and, as a result of this calculation, recorded discount in the amount of $11,872 based on the estimated fair value of the warrants. During the year ended December 31, 2020, the Company recorded $8,002 of interest income for the discount accretion and $1,337 of interest income from the contractual 8% rate provided for by the convertible promissory notes. At December 31, 2020, the Company recorded a cumulative unrealized loss on its investment in warrants of Alzamend of $453, representing the difference between the cost basis and the estimated fair value of the warrants in the Company’s net loss from continuing operations on the Company’s consolidated statements of operations and comprehensive loss.

During the years ended December 31, 2020 and 2019, the Company also acquired 55,263 shares of Alzamend common stock for $44,210 and 372,625 shares of Alzamend common stock for $208,100, respectively. At December 31, 2020, the unrealized gain of $38,684 estimated fair value of Alzamend’s common stock was $1.50. The Company has determined that its investment in Alzamend marketable equity securities should be accounted for in accordance with ASC No. 820, Fair Value Measurements and Disclosures and based upon the estimated fair value of Alzamend common stock at December 31, 2020, the Company’s investment in AVLP common stock had an unrealized gain of $389,522.

Mr. Ault is Executive Chairman of Alzamend’s Board of Directors and the Executive Chairman of the Company. Mr. Horne is a director of Alzamend and Chief Executive Officer and the Vice Chairman of the Company. Mr. Nisser is General Counsel and a director of Alzamend and President, General Counsel and a director of the Company. Kenneth S. Cragun is Chief Financial Officer of Alzamend and the Company.

c.

During the year ended December 31, 2020, Ault & Company has provided $256,507 in short-term advances, of which $256,507 was repaid and the balance as of December 31, 2020, was zero. Ault and Company is the Manager of Philou which presently owns 125,000 shares of the Company’s Series B Preferred Stock. Mr. Ault and Mr. Horne serve as the Chief Executive Officer and Chief Financial Officer, respectively, of Ault & Company.

d.

On December 22, 2019, the Company entered into a securities purchase agreement with Ault & Company. Pursuant to the terms of the agreement, Ault & Company purchased an aggregate of 660,667 shares of the Common Stock for a total purchase price of $739,948, at a purchase price per share of $1.12, subject to the approval of the NYSE American. The NYSE American approved the purchase on January 15, 2020.

e.

On February 5, 2020, the Company issued an 8% convertible promissory note in the principal amount of $1,000,000 and a maturity date of August 5, 2020 to Ault & Company (see Note 20). On August 20, 2020, the Company issued 413,793 shares of Common Stock upon the conversion of $600,000 in principal on the Ault & Company Convertible Note.

f.

On June 18, 2019, Ault & Company guaranteed the prompt and complete payment and performance of a 10% senior secured promissory note with a principal face amount of $2,900,000.


	g.	During January 2020, Milton C. Ault, III, the Company’s Executive Chairman of the Board and MCKEA guaranteed the Company’s obligation to repay a 12% short-term promissory note in the principal amount of $235,796. MCKEA is the majority member of Philou and Kristine L. Ault, the wife of Mr. Ault III, is the manager and owner of MCKEA.