PROPERTY AND EQUIPMENT, NET

9 Months Ended

Sep. 30, 2022

Property, Plant and Equipment [Abstract]

PROPERTY AND EQUIPMENT, NET

7. PROPERTY AND EQUIPMENT, NET

At September 30, 2022 and December 31, 2021, property and equipment consisted of:

	September 30, 2022			December 31, 2021
Cryptocurrency machines and related equipment	$	131,141,000		$	10,763,000
Computer, software and related equipment		20,315,000			8,884,000
Office furniture and equipment		2,750,000			702,000
Oil and natural gas properties, unproved properties		972,000			-
Land		25,646,000			25,696,000
Building and improvements		76,012,000			68,959,000
		256,836,000			115,004,000
Accumulated depreciation and amortization		(14,180,000	)		(5,096,000	)
Property and equipment placed in service, net		242,656,000			109,908,000
Deposits on cryptocurrency machines		11,328,000			64,117,000
Property and equipment, net	$	253,984,000		$	174,025,000

Summary of depreciation expense:

	For the Three Months Ended				For the Nine Months Ended
	September 30,				September 30,
	2022		2021		2022		2021
Depreciation expense	$	3,942,000	$	265,000	$	10,229,000	$	711,000

Ault Energy Oil and Gas Properties

On July 11, 2022, the Company announced the formation of Ault Energy, LLC (“Ault Energy”), as an indirect wholly-owned subsidiary of the Company through Ault Alliance. Ault Energy is partnering with White River Holdings Corp. (“White River”), a wholly owned subsidiary of Ecoark Holdings, Inc. (“Ecoark”), on drilling projects across 30,000 acres in Texas, Louisiana and Mississippi. Ault Energy, as the designee of Ault Lending, LLC (“Ault Lending”), has the right to purchase up to 25%, or such higher percentages at the discretion of White River, in various drilling projects of White River. In August 2022, Ault Energy purchased a 40% working interest of the Harry O’Neal 20-9 No.1 drilling project in Mississippi for $972,000 included in property and equipment. The Company has not recorded any depletion as the Harry O’Neal 20-9 No.1 drilling project was considered an unproved property as of September 30, 2022.

Compute North Bankruptcy 

On September 22, 2022, Compute North Holdings, Inc. (along with its affiliated debtors, collectively, “Compute North”), filed for chapter 11 bankruptcy protection in the U.S. Bankruptcy Court for the Southern District of Texas under Chapter 11 of the U.S. Bankruptcy Code (11 U.S. Code section 101 et seq.). At the time of Compute North’s bankruptcy filing, BitNile had 6,572 Bitcoin miners with a carrying amount of $38.0 million, classified within property and equipment on the consolidated balance sheet, with Compute North at the Wolf Hollow hosting facility in Texas. Additionally, the Company has a deposit of approximately $2.0 million with Compute North for services yet to be performed by Compute North. The ultimate outcome of the bankruptcy process, and its impact on the deposit held by the Company, remains to be determined. The Company assessed this financial exposure and recorded an impairment of the deposit totaling $2 million during the three months ended September 30, 2022. The Company has inspected the Bitcoin miners that are installed at the hosting facility in Texas. No impairment on the mining equipment was recorded as of September 30, 2022. The Company has retained counsel to assist in this matter.