Note 4. Property and equipment:

As of June 30, 2018, the Company’s property and equipment primarily consisted of its approximately 8,000 cryptocurrency machines. During the six months ended June 30, 2018, the Company determined that certain events occurred that were indicators of potential impairments to the miners. Based upon the significant decline in the price of bitcoins during the six months ended June 30, 2018 and the decline in projected cash flows over the life of the miners, the Company performed an undiscounted cash flow test to determine if the miners were impaired. The undiscounted cash flows were less than the carrying amount of the miners and when compared the discounted fair value of the miners to the carrying value of the miners, the Company determined that there were impairment charges of $15,378,000 and $26,858,000 during the three and six months ended June 30, 2018, respectively. The breakdown of the impairment charges are as follows:

		Three Months Ended June 30, 2018 (unaudited)				Six Months Ended June 30, 2018 (unaudited)
Prive miners		$	7,587,156			$	18,264,759
BMSS miners			5,389,527				5,796,179
Kairos miners			2,400,849				2,797,085
Total impairment charge		$	15,377,532			$	26,858,023

In the first quarter of 2018 the Company commenced the relocation of the servers acquired in the 2017 Kairos Global Technology, Inc., acquisition, to the newly leased facility in Oklahoma City Oklahoma. Kairos noted that due to storm water leakage into a previously utilized facility as of December 31, 2017, servers consisting of 90 AntMiner S9s and 29 AntMiner L3s had visible evidence of exposure to water. These servers were taken off line and Kairos investigated the extent of possible damage and functionality of the 119 servers. During the first quarter of 2018, the Company determined there was no damage to the 119 servers and they were relocated to the Company’s facility in Oklahoma City, Oklahoma during the second quarter of 2018.

 

Property and equipment consisted of the following:

 

		June 30, 2018 (unaudited)				December 31, 2017
Cryptocurrency machines, net of impairment			4,118,676			$	4,700,575
Leasehold improvements			1,994,472				-
Office and computer equipment			90,415				61,670
Total cost of property and equipment			6,203,563				4,762,245
Less accumulated depreciation			(783,301	)			(468,079	)
Property and equipment, net		$	5,420,262			$	4,294,166

 

Depreciation expense for the three months ended June 30, 2018 and 2017, totaled approximately $2,856,000 and $500, respectively.

 

Depreciation expense for the six months ended June 30, 2018 and 2017, totaled approximately $4,998,000 and $1,000, respectively.