Quarterly report pursuant to Section 13 or 15(d)

Deposit, Property and Equipment and Intangible Assets

v3.20.2
Deposit, Property and Equipment and Intangible Assets
6 Months Ended
Jun. 30, 2020
Deposit Property And Equipment And Intangible Assets  
Deposit, Property and Equipment and Intangible Assets

NOTE 3 – DEPOSIT, PROPERTY AND EQUIPMENT AND INTANGIBLE ASSETS

 

On May 11, 2020, the Company signed a Contract Addendum with Compute North, to pause and suspend services under its Colocation Agreement. This will suspend all production of Bitcoin using our S-9 miners.

 

Halving – The bitcoin blockchain and the cryptocurrency reward for solving a block is subject to periodic incremental halving. Halving is a process designed to control the overall supply and reduce the risk of inflation in cryptocurrencies using a Proof-of-Work consensus algorithm. At a predetermined block, the mining reward is cut in half, hence the term “Halving”. The next halving for bitcoin occurred on May 12, 2020. Many factors influence the price of bitcoin and potential increases or decreases in prices in advance of or following a future halving is unknown.

 

On May 11, 2020, the Company purchased 700 new generation M305+ASIC Miners from MicroBT for approximately $1.3 million. The 700 miners produce 80/Th and will generate 56 PH/s (petahash) of hashing power, compared to the Company’s current S-9 production of 46 PH/s. These next generation MicroBT ASIC miners are markedly more energy efficient than our existing Bitmain models. These miners have been delivered to the Company’s Hosting Facility in June and are producing Bitcoins.

 

The Company purchased 660 latest generation Bitmain S19 Pro Miners on May 12, 2020, 500 units on May 18, 2020 and an additional 500 units on June 11, 2020. These miners produce 110 TH/s and will generate 73 PH/s (petahash) of hashing power, compared to the Company’s S-9 production of 46 PH/s. The Company made the payments of approximately $4.2 million in the second quarter of 2020 and expects 660 of the 1,660 units to take delivery at its Hosting Facility in mid-August, and its hosting partner, Compute North, expects to install them within 48 hours of their arrival. The 1,000 remaining S-19 Pro Miners due to arrive in the 4th quarter will produce an additional 110 PH/s, which when installed will give the Company an aggregate Hashpower of 294 PH/s.

 

As of June 30, 2020, approximately $4.2 million cash paid for Miners was recorded as deposit on the balance sheet.

 

The components of property, equipment and intangible assets as of June 30, 2020 and December 31, 2019 are:

 

    Useful life (Years)   June 30, 2020     December 31, 2019  
Website   7   $ 121,787     $ 121,787  
Mining equipment   2     7,989,335       7,120,505  
Mining patent   17     1,210,000       1,210,000  
Gross property, equipment and intangible assets         9,321,122       8,452,292  
Less: Accumulated depreciation and amortization         (4,669,603 )     (3,623,745 )
Property, equipment and intangible assets, net       $ 4,651,519     $ 4,828,547  

 

The Company’s depreciation expense for the three months ended June 30, 2020 and 2019 were $499,489 and $137,361, and amortization expense were $17,794 and $17,794 for the three months ended June 30, 2020 and 2019, respectively. The Company’s depreciation expense for the six months ended June 30, 2020 and 2019 were $1.0 million and $274,722, and amortization expense were $35,588 and $35,588 for the six months ended June 30, 2020 and 2019, respectively.