INVESTMENTS AND NOTES RECEIVABLES

12 Months Ended

Aug. 31, 2024

Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract]

INVESTMENTS AND NOTES RECEIVABLES

NOTE 5 – INVESTMENTS AND NOTES RECEIVABLES

Policy on Doubtful Accounts

We evaluate notes receivable for impairment under the guidelines of ASC 310-10-35-41. We establish an allowance for doubtful accounts when we determine that collectability of the note is in question.

Investment in Joint Venture

In October 2022, we entered into a joint venture arrangement with ROC Digital Mining to jointly develop and operate a bitcoin mining operation in Pecos, Texas. Under the joint venture, we contributed one immersion container, six transformers and cash with a value of $987,429 as a capital contribution to ROC Digital Mining I, LLC (the “ROC Digital”). In return, we received 240 Class B Units of ROC Digital pursuant to an ongoing offering of a total of 1,000 Class B Units at $4,400 per unit. We simultaneously sold ROC Digital four immersion containers for $1,200,000, which is payable pursuant to a promissory note the bears interest at 5% per annum, and is payable pursuant to monthly payments of $31,204 per month commencing on December 30, 2022, with any remaining principal and interest payable in full on May 31, 2026. The note is secured by the equipment that was sold. We also obtained the right to locate one container at the location that we would be able to use for self-mining.

ROC Digital is managed by ROC Digital Mining Manager LLC (“ROC Manager”), which owns all of the Class A Units of ROC Digital. The Class A Units have the sole right to vote on any matter that requires a vote of members, including in the selection of the manager. We own 33 1/3% of ROC Manager. ROC Manager has no financial activity and has no impact on our financial statements. ROC Manager is managed by from one to three managers selected by a vote of the members. We do not currently have a representative or designee serving as manager of ROC Manager. However, the operating agreement for ROC Manager provides that ROC Manager may not take a number of actions in relation to ROC Digital without the unanimous consent of its members, such as incurring more than $50,000 of indebtedness, approval of operating budget, filing for bankruptcy, making any material change in ROC Digital’s business, merging, consolidating or combining ROC Digital with another entity, selling off a substantial part of ROC Digital’s assets, amending the operating agreement of ROC Digital, or causing ROC Digital to enter into any agreement with a related party.

Day to day management of the operations of ROC Digital is provided by ROC Digital Mining LLC (“ROC Mining”), an affiliate of ROC Manager in which we do not have an interest. ROC Mining is entitled to a monthly management fee equal to 3% of ROC Digital’s gross revenue, subject to a monthly minimum of $10,000 and a monthly maximum of $15,000. In additional ROC Mining is entitled to an acquisition fee of 1% of the cost of any assets acquired by ROC Digital. A principal of ROC Mining serves on our board of directors.

As of August 31, 2024 the joint venture arrangement was classified as a long term asset on the Company’s balance sheet with a value of $667,707. The site became electrified in June 2023. The reduction in the value of the investment of $311,313 during the year ending August 31, 2024 represents the Company’s approximate 30.3% portion of the ROC Digital’s operating losses during the year. This loss was recorded as “loss on investment” on the Company’s Statements of Operations for the year ended August 31, 2024. During the year ended August 31, 2024, the Company received an in-kind distribution of .01992 bitcoin, valued at $8,408, as a return of capital from the joint venture.

Notes Receivable

Notes receivable consist of notes received as partial consideration for the sale of mining equipment, and are collateralized by the mining equipment that was the subject of the sale. As of August 31, 2024 and August 31, 2023, notes receivable consist of the following:

	As of August 31, 2024			As of August 31, 2023
Note receivable with an amended principal amount of $731,472, bearing interest at 5.0% per annum payable monthly. Principal due in one payment on August 31, 2024. Borrower has right to prepay principal with a 10% discount.	$	–		$	731,472
Note receivable-related party in original principal amount of $1,200,000, bearing interest at 5.0% per annum, payable in 41 equal monthly payments of $31,204 commencing December 30, 2022		655,277			1,029,721
Total		655,277			1,761,193
Less: Non-current portion		(280,834	)		(1,386,749	)
Notes receivable – short-term	$	374,444		$	374,444

As of August 31, 2024 and August 31, 2023 the balance of notes receivable was $655,277 and $1,761,193, respectively. During the years ended August 31, 2024 and 2023, the Company recorded $54,617 and $28,720, respectively, in interest income on these notes.

During the year ending August 31, 2024, the Company declared a default under the $731,472 note and foreclosed on the collateral securing the note. As a result of the foreclosure, the Company recovered equipment valued at $530,805 at the location. Net of the write-off of the $731,472 note receivable, and reversal of $236,046 in deferred revenue associated with this note, the Company recorded a gain of $35,379 due to the foreclosure.