Frmo Corp

Good afternoon, everyone. This is Therese Byers speaking, and I'm the Corporate Secretary of FRMO Corp. Thank you for joining us on this call. The statements made on this call apply only as of today. The information on this call should not be construed to be a recommendation to purchase or sell any particular security or investment fund. The opinions referenced on this call today are not intended to be a forecast of future events or a guarantee of future results. It should not be assumed that any of the security transactions referenced today have been or will prove to be profitable, or that future investment decisions will be profitable or will equal or exceed the past performance of the investments. For additional information, you may visit the FRMO Corp. website at www.frmocorp.com. Today's discussion will be led by Murray Stahl, Chairman and Chief Executive Officer, and Stephen Bregman, President and Chief Financial Officer. They will review key points related to the 2023 third quarter earnings. A replay of this call will be available on the FOMO website. until the summary transcript is posted. And now I'll turn the discussion over to Mr. Song.

Okay, thanks, Therese. Thanks, everybody, for joining us today. So what I'm going to do is I'm just going to touch on a couple of key points, and then I'm going to address the questions. You know where I was yesterday. I just got back today. So enough said on that subject. In deference to some requests we had, I normally would read to you how much Bitcoin we have and how much Bitcoin Investment Trust we have, et cetera, et cetera, et cetera. And it's now all on our website, and you can see what the tables look like. It's all there for you, so I won't read it. However, with regard to Bitcoin, I'm going to give a little further explanation about and a highlight that I don't see on this table. So if you look at the table, the one thing that I would have liked to have been on here, but I didn't make it, so I'll give you one further number. You'll, of course, recall that we own roughly 31% of Winland. And Winland is, among other things, a mining company. And Winland loans, in round numbers, 63 bitcoins. The actual number is slightly different by decimal points. So forgive me for giving you the wrong number, but it's roughly 63 Bitcoin. And we own 31% of that. So if you take roughly a third of that, you'd add that in. So I just want to make that little comment. I also want to add that it's worthwhile, now that I made that little comment, I don't really talk about Winland lots. So I'm going to take this occasion and talk about something I normally don't talk about. Now we'll get into crypto. And now I'll go to your questions. So, Winland started out as an electronics company, and it still has that business, basically makes a variety of sensors. It's not a huge business, but it's a fine business. There was no reason to disturb that at all. And we made it a crypto mining business. However, one of the interesting things about the business is that we didn't invest huge amounts of capital in the machines. So it's important to state that the way we look at this is when we buy a machine, it's worthwhile noting we pay for it in Bitcoin. So we're buying mining equipment, we disperse X Bitcoin, and the logic of the disbursement is that the X Bitcoin becomes, in the fullness of time, X plus an increment of Bitcoin. So the idea is the process of mining as a business, the idea is to turn it into more Bitcoin. So you're transforming Bitcoin into more Bitcoin. It's almost like Bitcoin with interest, if you like, except it's not an interest because it's an at-risk investment. There's no guarantee of success. And specifically, it's very close to about three years ago, we did the first of the Winland transactions. You'll recall at that time, So FRMO with Bitcoin, of course, what's the machines? They were then state-of-the-art machines. We then swapped them to Winland in exchange for stock in Winland. That's the primary way we were able to increase our Winland position. Anyway, the number of Bitcoin that Winland has, which is all derived from mining incidentally, um, is available, uh, for you. So if you simply took the current price of Bitcoin and you multiplied by in round number 63, you'd see what that number is. So that number is much greater. If you look back to the, the, the, the original cost basis of the machines. So what do we do now? When I said you're investing X Bitcoin in the enterprise of mining and, um, this is a good time to talk about it because those machines in about three or so weeks are going to be fully depreciate. So when we bought the machines, the idea was the last for about three years. So you can look back and see, you look back at the price of what Bitcoin was that day. You'll see how much we can just look at the, the, the dollar value of a transaction. You can see how much money we invested and the Bitcoin we have. is worth more than that. Now, incidentally, that 63 Bitcoin didn't come entirely from those original machines. We bought some more machines, but that first transaction was an important transaction for us. So we didn't transform the first investment in 63 Bitcoins. We transformed all our investments into 63 Bitcoins. So it's important to note that so it's obvious to everybody. In any event, that's a very profitable endeavor. So that's the way that I believe one should measure a Bitcoin investment. It sort of leads one to a bizarre conclusion when people pose the question in the following manner. What is the cost to mine a Bitcoin? Because the problem is, even if you have a high profit margin, you have to factor in the ultimate obsolescence of the equipment. Now, incidentally and interestingly, even though this equipment, the first equipment, is almost fully depreciated. They were shortly after a second tranche of equipment that's not fully depreciated, but almost fully depreciated. So basically, that fully depreciated equipment, we're still running, and we're still making Bitcoin on it. So what's going to happen in about three weeks, assuming the price of Bitcoin remains where it is or goes higher, the equipment that will have no book value is going to be generating more Bitcoin. That was the logic of the investment, that with our expertise from our other investment, Hashmaster, we're able to maintain the machines, repair the machines we need to repair them. We can get a lot more out of the machines than we put into them. That's the nature of the Bitcoin mining business. Now, it has a further implication. What's the further implication? Well, there's all this talk about Bitcoin and cryptocurrency ETFs. It's all well and good, but it has a problem that Winland is designed to solve. What's the problem? Well, if you had a cryptocurrency ETF as opposed to a customer ETF, the singular distinction is that a customer ETF that owns stocks and bonds, the expenses, whatever they happen to be, are paid for by the interest income or dividend income to securities in the fund. In the case of a Bitcoin ETF, there is no income. So the only way you could manage a cryptocurrency ETF is every time there was expenses, you'd have to sell a certain number of coins. Now let's create an imaginary cryptocurrency ETF. It has X Bitcoin in it. Let's assume, just for ease of computation in this format, this fund is in steady-state mode. What does that mean? That means that no new money is coming in to buy more Bitcoin. No money is going out to pay shareholders for redemptions, and therefore we're not selling any Bitcoins. What would happen, steady state mode is, because there will always be expenses, the number of Bitcoin per share would be declining. You know, compare that to the figures I just gave you in Winland. Number of shares, you know what they are. And we're actually increasing the number of shares when we did this Winland transaction. But the critical variable is the number of Bitcoin And remember, Bitcoin per share, I invite you to do the calculation, is rising. So you have two different paradigms for investment in crypto. One, a simplistic holding model. By its very nature, I would submit to you, would involve reducing, in the fullness of time, the number of, if it were Bitcoin, this example, Bitcoin per share. The other, which we're using within this example, the increased number of Bitcoin per share. And I'd like you to consider which one is better. So a lot of work has been done to make this possible. So it's not just me. There are a lot of people behind the scenes. And I just want to say it's not myself personally. And that's another thing about how FMO is, is, Evolving is a company. There are other businesses that we hope to turn into true operating businesses in one day. And we're doing it in our customary, gradual, risk-averse manner. So we're making some pretty profound changes. We're just making it in very small steps because the entire field of cryptocurrency, it's new for everyone. And every day is a learning day. So I gave you a highlight today. what's going on in FOMO in this case with regard to crypto. All the other investments are in steady-state mode, and you've heard about them perhaps too much in the last several weeks. So I won't go into it unless somebody needs some precise answer to a question. I'll invite Therese to read me the questions, and I'll be more than delighted to answer whatever is on people's minds. So maybe Therese with that. You can read me some questions and I will answer them.

I'd be glad to. Okay. The first one is during the January 17, 2023 call, Murray said or implied that we can see in the financial statements what revenue SRMO receives from its, quote, ownership interest in HK LLC revenue streams, end quote. But I don't see where that information is available. and Murray did not provide a quantification on the call. So would it be possible to provide this information in a time series for the past three to five years, or perhaps you guys figure – or perhaps what you guys figure is the sustainable revenue without performance fees or one-time items? It sounds like whatever – Okay, well – It sounds like whatever revenue is received is a straight flow through, so we can basically capitalize this revenue stream as the value to FRMO. Perhaps a 15 times multiple or a 20 times multiple would be appropriate. That's the end of the question.