XML 39 R29.htm IDEA: XBRL DOCUMENT

RELATED PARTY TRANSACTIONS

3 Months Ended

Mar. 31, 2021

Related Party Transactions [Abstract]

RELATED PARTY TRANSACTIONS

23. 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 March 31, 2021, the Company has provided loans to AVLP in the principal amount $13.9 million and, in addition to the 12% convertible promissory notes, AVLP has issued to the Company warrants to purchase 27.8 million 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 March 31, 2021, the Company recorded contractual interest receivable attributed to the AVLP Loan Agreement of $2.0 million, and a provision for loan loss of $3.4 million.

The Company owns 999,175 shares of AVLP common stock that it acquired in the open market. At March 31, 2021, the Company’s investment in AVLP common stock had an unrealized gain of $71,000.

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

In March 2017, the Company was awarded a $50.0 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 $2.7 million for manufacturing services performed on the first MLSE system. At December 31, 2020, the Company had recorded a receivable from MTIX of $1.2 million.

b.

On March 12, 2021, DP Lending, entered into a securities purchase agreement with Alzamend to invest $10.0 million in Alzamend common stock and warrants, subject to the achievement of certain milestones. DP Lending funded $4.0 million upon execution of the securities purchase agreement, which included the conversion of a short-term advance of $750,000 and a convertible promissory note of $50,000. The remaining $6.0 million will be funded upon Alzamend achieving certain milestones related to the U.S. Food and Drug Administration approval of Alzamend’s Investigational New Drug application and Phase 1a human clinical trials for Alzamend’s lithium based ionic cocrystal therapy, known as AL001. Under the securities purchase agreement, in aggregate, Alzamend has agreed to sell up to 6,666,667 shares of its common stock to DP Lending for $10.0 million, or $1.50 per share, and issue to DP Lending warrants to acquire up to 3,333,334 shares of Alzamend common stock with an exercise price of $3.00 per share. The transaction was approved by the Company’s independent directors after receiving a third-party valuation report of Alzamend.

In addition to the Alzamend common shares purchased on March 9, 2021, the Company also held 427,888 shares of Alzamend common stock that it had acquired during the years ended December 31, 2020 and 2019 for $252,000. At March 31, 2021, the estimated fair value of Alzamend’s common stock was $1.50. Based upon the estimated fair value of Alzamend common stock at March 31, 2021, the Company’s investment in Alzamend common stock had an unrealized gain of $236,000.

Mr. Ault is Executive Chairman of Alzamend’s Board of Directors and the Chairman of the Board. Mr. William B. Horne and Mr. Henry Nisser are directors of Alzamend and the Company. Mr. Kenneth S. Cragun is Chief Financial Officer of Alzamend and the Company.

c.

On February 25, 2021, Ault & Company, a related party, sold and issued an 8% Secured Promissory Note in the principal amount of $2.5 million to the Company. The principal amount of the Secured Promissory Note, plus any accrued and unpaid interest at a rate of 8% per annum, is due and payable on February 25, 2022, 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 February 23, 2021, as part of a relocation benefit for our Executive Chairman, Milton C. Ault, III, related to the Company moving its corporate headquarters from Newport Beach, CA to Las Vegas, NV, the Company agreed to purchase Mr. Ault’s California residence for $2.7 million. The transaction was structured such that upon the closing of the subsequent sale of the residence, the Company shall have not recognized a gain or a loss on the transaction. During April 2021, the Company entered into an agreement for the subsequent sale of the residence, which closed on April 19, 2021.