INVESTMENTS – RELATED PARTIES

12 Months Ended

Dec. 31, 2022

Investments Related Parties

INVESTMENTS – RELATED PARTIES

13. INVESTMENTS – RELATED PARTIES

Investments in Ault & Company, Inc. (“Ault & Company”) at December 31, 2022 and 2021, were comprised of the following:

	Interest	Due	December 31,		December 31,
	Rate	Date	2022		2021
Promissory note, related party	8%	Dec. 31, 2023	$	2,500,000	$	2,500,000
Accrued interest receivable, related party				368,000		170,000
Other				-		172,000
Total investment in promissory notes and other, related parties – gross			$	2,868,000	$	2,842,000

The Company recorded related party interest income of $0.2 million for each of the years ended December 31, 2022 and 2021 in interest income.

Investment in Common Stock, Related Parties

	December 31,		December 31,
	2022		2021
Total investment in common stock of Alzamend	$	6,449,000	$	13,230,000

The following table summarizes the changes in the Company’s investments in Alzamend during the years ended December 31, 2022 and 2021:

	Investment in common stock of Alzamend			Investment in promissory notes and advances of Alzamend
Balance at January 1, 2021	$	653,000		$	796,000
Alzamend note and advances converted into common stock		-			(800,000	)
Investment in common stock of Alzamend		18,181,000			-
Unrealized loss in common stock of Alzamend		(5,604,000	)		-
Accretion of discount		-			4,000
Balance at December 31, 2021		13,230,000			-
Investment in common stock of Alzamend		4,901,000			-
Alzamend stock received for marketing services		989,000			-
Unrealized loss in common stock of Alzamend		(12,671,000	)		-
Balance at December 31, 2022	$	6,449,000		$	-

Investments in Alzamend Common Stock

The following table summarizes the changes in the Company’s investments in Alzamend common stock during the year ended December 31, 2021:

	Shares of		Per Share		Investment in
	Common Stock		Price		Common Stock
Balance at January 1, 2021		428,000	$	1.50	$	642,000
Purchase of shares from an Alzamend shareholder		62,000	$	0.81		50,000
March 9, 2021 securities purchase agreement*		4,000,000	$	1.50		6,000,000
Investment in Alzamend initial public offering		2,000,000	$	5.00		10,000,000
Open market purchases after initial public offering		457,000	$	4.67		2,132,000
Unrealized loss in common stock of Alzamend						(5,625,000	)
Investment in Alzamend common stock		6,947,000	$	1.90		13,199,000
Investment in Alzamend options						31,000
Balance at December 31, 2021					$	13,230,000

The following table summarizes the changes in the Company’s investments in Alzamend common stock during the year ended December 31, 2022:

	Shares of		Per Share		Investment in
	Common Stock		Price		Common Stock
Balance at January 1, 2022		6,947,000	$	1.90	$	13,230,000
March 9, 2021 securities purchase agreement*		2,667,000	$	1.50		4,000,000
Alzamend stock received for marketing services		933,000	$	1.06		989,000
Open market purchases after initial public offering		868,000	$	1.04		901,000
Unrealized loss in common stock of Alzamend						(12,671,000	)
Investment in Alzamend common stock		11,415,000	$	0.56	$	6,449,000

* Pursuant to the March 9, 2021 securities purchase agreement, in aggregate, Alzamend agreed to sell up to 6,666,667 shares of its common stock to Ault Lending for $10.0 million, or $1.50 per share, and issue to Ault Lending warrants to acquire 3,333,334 shares of Alzamend common stock with an exercise price of $3.00 per share. As of December 31, 2022, Ault Lending had funded the full $10.0 million. 

Alzamend Marketing and Brand Development Services Agreement

On November 1, 2022, the Company entered into a contract with Alzamend, a related party, to provide marketing and brand development services. The contract is effective as of August 1, 2022, for a period of one year. The parties to the contract approved the contract on November 1, 2022, which is considered contract inception.

Alzamend issued 933,334 shares of its common stock to satisfy payment under the contract.

As the transaction consideration received by the Company is non-cash consideration in the form of shares of Alzamend common stock, changes in the fair value of the non-cash consideration due to form of the consideration (changes in the market price of Alzamend stock) are not included in the transaction price and therefore, are not included in revenue.

The Company will recognize revenue of approximately $1.0 million over the period from contract inception to the end of the contract term based on the number of shares received and the trading price of Alzamend stock at contract inception. As of December 31, 2022, the Company has recognized approximately $0.2 million in related party revenue and recorded $0.8 million as a contract liability related to this agreement.