Q4 2021 Earnings Call Transcript

Published: 21 Oct 2021

[Operator:]

Good day and welcome to the FRMO Corp quarterly conference call. As a reminder, today's call is being recorded. At this time, I would like to turn the conference over to Thérèse Byars. Ma'am, please go ahead.

[Thérèse Byars:]

Thank you, Chelsey. Good afternoon, everyone. This is Thérèse Byars speaking. And I am 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 Steven Bregman, President and Chief Financial Officer. They will review key points related to the 2022 first quarter earnings. A summary transcript of this call will be posted on the FRMO website in the coming weeks. A replay of this call will be available for one month, beginning at 7

[Murray Stahl:]

Okay. Thanks, Thérèse. Thanks everybody for joining us today. We actually have a fairly large number of things going on in FRMO. So normally I go through the balance sheet. Then do that in cursory fashion, leave time, because there is interesting stuff going on as you can see from the balance sheet, just to start the cash is where we're trying to keep it at around $35 million or so, we're trying to keep it that way, we're not really spending a lot of cash as you can see what happens in the quarter. Basically, our two large holdings TPL went down, Bitcoin went up and the consequence of that arithmetically it's actually very intriguing because if you look at the income statement, you see all these figures of net losses and so that has to do with the investment portfolio. But some of those losses is referred to HK Hard Assets. The Bitcoin is somewhere else. So, when you do all this accounting, it ends up being a $960,000 profit. And it ends up being record shareholders’ equity of a little bit more than $179 million. And so, I can think it's fair to say we've come a very long way in a very short period of time. And that seems interesting, but there's a lot going on that is interesting. So, I'll just cover it in some reasonable fashion. One of the things that have been happening year-to-date that you really can't see from the financial statements is in Horizon itself. Horizon actually had an investment management success. Horizon on January 12 of this year, 2021, started the Horizon Kinetics Inflation Beneficiaries ETF. And as of a day or so ago, it had assets under management of well over $800 million. So that's a big success fund also as in my humble opinion, pretty good performance. And the idea of the fund obviously is to protect people against the ravages inflation as that accelerates, which I personally think it's going to happen. Another thing, I think, it's a success that you really can't see in financial statements is what's going on with our investment in MYX. Basically, we're carrying our investment in MYX at the valuation that was established for the shares we got exchanging our ownership in the Minneapolis Grain Exchange for MYX Minneapolis Grain Exchange is now a holy subsidiary of MYX. So, I can't say enough wonderful things about MYX if you are interested, if you just go on the Minneapolis Grain Exchange website and you look at volume, I think, you'll be a done interested how well everything is going. Putting together a great technology and great licenses, which is what Minneapolis had, I think, is a perfect combination. Same thing has to be said, you may have recalled from previous conference calls that our ownership and being a stock exchange was traded for MYX shares. That's why we have a fairly large position in MYX. And the same thing, great licenses, excellent regulatory environment and it all coming together in really great ways. Still a private company, but you'll see just marvelous things. You can tell a lot about the profitability exchange by how much the volume is going up. Basically, what happens in exchange is the marginal cost of handling additional increments of volume are really very small. The marginal revenue for the most part goes to the bottom line. That's why it's so extraordinary profitable. I might say the same thing for our investment in what we call the Canadian Security Exchange, which on the financial statements in the appropriate section, it's called CNSX. So, the idea behind the Canadian Security Exchange was to set up a small cap market for raising capital for Canadian natural resources companies. And this could be small gold companies, small oil and gas companies because obviously in natural resources is so important to Canada. We did and that, that happened a number of years ago, we invested in it and then came a number of years of just horrendous bear market in commodities. I personally think that's turning around right now, but CNSX actually sailed through it. All sorts of interesting things are happening not least, which is the in my opinion, the renaissance of commodities markets in general, that we've lived in the world of commodities probably 12 years within my view a deficiency of investment capital. That's got to be remedied and there is no way it can be remedied without taking years to do it. And it might not be remedied anyway. And the reason is a lot of big institutional firms are divesting commodities, particularly energy, but not just energy. And the theory is that it's a passé industry and it creates – it emits various forms of greenhouse gases. And that might be true, but it doesn't mean we still need commodities. And these are unbelievably capital-intensive industries, probably the most capital-intensive industries you're going to see where everything is listed. So, it requires investment that's continual and it's massive. It's not being made sooner or later you get shortages and that's what happens there. Another thing that we're doing that, I think, is interesting you'll note in our financial statements is in note, I think, it's Note 4, you'll see, we have these investments in the various cryptocurrency mining companies. And I'm pleased to report that we are bringing those investment, we're consolidating those LLCs and we're bringing it public. So, there's going to be a public listing and direct listing for what we call or what we will call consensus mining, which is going to be a publicly traded mining company and it's going own a fair amount of cryptocurrency, largely a Bitcoin, but not exclusively a Bitcoin. And handily, we'll get to our holdings in a little by while I haven't forgotten that we want the data, but I just wanted to cover the use points first. We're taking advantage of direct listing to actually raise some capital. So, when this comes public, it's going to be a fairly well capitalized company, I dare say. And a lot is possible in terms of expanding the mining business. Another thing that you shouldn't forget about, and I'm trying to make sure you don't forget about is our investment in Digital Currency Group, which we carry at a value of $76,000, that some people remarked is probably worth more money. And all you need to do is look at the assets under management there and we own it's 353 shares out of a total of roughly 700 odd thousand. Maybe it's a little bit more than 700,000. So now, you know what percent of the company we have, and I leave it to your sure analysis to figure out what Digital Currency Group is worth. And then you can figure out if this value of $76,000 is appropriate or not. With regard to Winland, we're now up to 29% ownership of Winland. During the most recent time period we bought some Winland shares in the open market. We actually did another deal with Winland for mining equipment. What that means is we bought some mining equipment. We basically turned it over to Winland for shares, and Winland thereby expanding Winland's mining group. And when we come to it, I'll give you the ownerships of what we have in crypto in Winland. It's actually been only about since we did the first mining deal, it's been only about, I guess, 14 months or so. And Winland has actually accumulated a reasonable amount of crypto. I also want to call attention to the fact that Winland owns some Mt. Gox bankruptcy claims. And the Japanese bankruptcy corps have more or less finalized distributions. So, the Winland investment in Mt. Gox claims recall Mt. Gox was a brokerage firm that did trade some crypto, and it got hacked and some of the Bitcoin was stolen and as a consequence the company went bankrupt and the bankruptcy judgment was to socialize the losses, meaning the losses weren't held to the accounts that got hacked, but were basically distributed evenly among old people who were there. And the banks fee process in Japan is necessarily slow. So, some people didn't want to wait for a bankruptcy resolution. So, the bankruptcy claim, that's the claim they had with the bankruptcy court, they're willing to sell it and Winland bought those claims. And now we're – it's finally adjudicated and will get paid I hope in short order. And that's another positive there. Also call your attention to our investment in HM Tech, which – it's actually a 7.1% ownership of HM Tech. And HM Tech is in the process, can't be sure it's going to be completed, but it's actually in the process of raising some equity capital and the valuation chosen for the company, this is its valuation for purposes of doing a deal is $6 million valuation. So, we own 7.1% of that, and can't guarantee it'll close, but pretty confident it's going to close, and that business is flourishing as well. So, in addition to the hosting business, it also repairs equipment that strategically is very important to us. Number one, we host equipment there. The idea was in our cryptocurrency mining ventures, you always wanted to be in a position where you could go somewhere, which you're hosting if you needed it, and it was important at that point. And then secondarily, you're buying these servers and sometimes they have mechanical problems or I should say electronic problems, they require repair, and we needed a place to go to. And we also wanted to learn about the machinery itself and how it gets repaired and how valuable it really is and how to build them. We wanted to learn everything we possibly could. There was no way to do it other than just doing it. We did that. Wasn't without its learning curve, wasn't without its difficulties, but it worked out reasonably well. So, I'll cover two more things and then I'll give you these numbers and then we'll go to questions and answers. I think they're exciting things. One, we made an investment it's so small, it's not even – they need to put it on the financial statements, but we made an investment, I want to call your attention to, its small. A company called Diamond Standard and what they're literally doing is they're standardizing diamonds. So, diamonds are a heterogeneous investment. Every diamond is unique. So, it's not a commodity like gold or silver or platinum, but what can be done and what is being done in diamond standard is you can take groupings of diamonds and based on the aggregate characteristics of that grouping, meaning the aggregate clarity, the number of carrots, the color and so forth. You can create packets of diamonds that have the equivalent valuations that statistically are all the same in terms of valuation, even though geologically or from a crystallography point of view, these are actually different structures. So, the company actually decided they wanted to take these packets of diamonds and make coins at them. Coins to be listed on various cryptocurrency exchanges, example of which is Binance. So, the first offering occurred in late January, early February. The idea was to do a $25 million offering. It exceeded that by a lot. It was very successful and the company is interested in doing other offerings. We ourselves are interested in creating a trust, whole diamonds now that you know it can be held as homogeneous packets, not heterogeneous individual instances of diamonds. That this would be a grant or trust, not that different from the Bitcoin investment trust GBTC with the salient difference in whole diamonds and not Bitcoin, an actual hard asset. And I personally think there's a lot of demand for it and we hope to be partnered with them and moving forward with that project. So, I hope, and I think you'll find that interesting. And last but not least, we're in the process of doing a rights offering to the RENN Fund. I should also tell you that the RENN Fund if you look, you'll see the RENN Fund owns an investment in Diamond Standard. And it's one of the reasons that we went into RENN Fund, it's a close end fund. Occasionally we counter something very interesting. You can't put it into an ETF, obviously, it's a private investment, and you can't put it into an open-end mutual fund, but you can put it into a closed end fund. That's what was done with Diamond Standard. So, at a very low valuation, these things can really grow into enormous investments. In any event, we're doing a rights offering. It's a little bit unusual rights offering because it's a $3 million rights offering, but you are permitted under terms of this rights offering to contribute securities instead of cash. If you have a mind to and of course you're welcome to consume cash as well. We'd like to get a bigger management this fund. We are our, our various entities are backstopping the offering and we are not small owners of RENN Fund. So, we're obviously going to participate in the rights. And it's all very exciting, and SEC gave us clearance to move forward, so we're going to move forward on that. So, one other now for the numbers, so I'll read these in the order they were given to me. This is becoming a tradition in every conference call. So, apologize for the length of this exposition, but we own a lot of different things. So, start with these, the first category I'm going to read is the cryptocurrency investments that are owned by our investment funds or through our ownership in other words. So, we have 576,388 shares, indirect ownership of the Bitcoin Investment Trust and 5,847 shares of the Bitcoin tracker. And we have 93 Bitcoin SV, the actual coins. We have 4,119 of the Grayscale Ethereum Classic Trust, symbol ETCG. We have some restricted shares in the Grayscale Bitcoin Cash Trust that equals 24,761 shares. Then we have some unrestricted shares and the same thing, Bitcoin Cash Trust, the symbol is BCHG for those are interested. It equals 100,375 shares. Then we own some also restricted shares in the Grayscale Litecoin Trust that's 5,744 shares and some equally restricted shares in the Grayscale Zcash Trust's 590 shares to be exact. Then we own 220 shares or 220 coins of Bitcoin gold. And you can look those up and you can get the market value of those. So, you can value those. And here's what we own directly without being the funds. We own 110.4 Bitcoin real Bitcoin; it comes from our mining ownership. Basically, we're always mining, so we're always increasing that. We own 7,644 GBTC with the Grayscale Bitcoin Trust Shares. We own 18 Grayscale Ethereum Classic Shares, that's ETCG. We have mind and we continue to hold 1,060 Litecoin. We have mind and continue to hold 35 Ethereum, and we have mind that continue to hold 661.7 Ethereum Classic. And we have mind and continue to hold 58.9 Zcash. And we also own directly and indirectly I'll give you figures, Texas Pacific Land Trust largely owned through our investment in HK Hard Assets. But anyway, directly we own 7,307 explicitly interest shares, and indirectly this is implied through our share ownership. We own 49,893 shares. Obviously, we have to add those numbers together. And then Winland Holdings; so, we own, we mind this quantity 39.1 Bitcoin itself. And then there's a separate we acquired through and that through buying up a partnership, we acquired 7.4 Bitcoin, that's why there's sanction there. So, you have to add together 39.1 and 7.4 to get our whole Bitcoin exposure. We owned 14.9 shares of liter coins I should say of Litecoin. We own 53.5 coins of Zcash. We own 1 Bitcoin cash coin. We own 8.7 Bitcoin gold coins, and we own 9.4 Ethereum Classic Funds. And as I said there is to Mt. Gox claims that are being adjudicated, and I think we're going to get a payment short and we get that payment, we'll release what the value is. So those are our holdings. That's what we're up to. I hope you find it interesting. There's a lot going on and I know there are questions and I'm going to actually normally it’s rare to meet some questions. I'm going to – I normally don't even look at the questions, but there was one question I anticipated. So, I'm going to just, without reading it, I'm just going to tell you what I thought the question was going to be. And I know someone's interested in this. So, if you turn in our financial statements to Note 1, you'll see where it talks about Horizon Kinetics Hard Assets LLC, that at the end of the time period, we held a 21.98% interest in it. And at the beginning of time period, we held a 22.02% interest, and I knew someone's going to wonder why it went down a little bit from what it was. Did we actually redeem or sell in HK Hard Assets? The answer is no. We didn't, we actually – during the quarter, we actually bought more HK Hard Assets. It just, the proportionate ownership drops because someone contributed money to HK Hard Assets would actually more of it than FRMO did. Who is that contributor? Who is that investor? That is yours truly speaker at the moment. So, I just happened to buy proportionally more of HK Hard Assets and FRMO bought, and therefore my ownership rose proportionately over FROM's ownership. And that's my FRMO ownership drops because of some of the parts must equal the whole, and that's how that works. So, I hope that's a good answer. And for the rest of the questions; Thérèse, if you would be so kind as to read them, I will endeavor to answer every one of them.

[A - Thérèse Byars:]

Okay. I did have one clarification; maybe, I have a question, when you were reading the crypto that Winland owns the numbers you gave us were how much Winland owns in total, but not the implied quantity for FRMO itself?

[Steven Bregman:]

Yes. Well, I did – yes, I didn't read the implied quantities. This is with, I just read, I just read what Winland owns itself.

[Thérèse Byars:]

Right. Okay.

[Steven Bregman:]

I didn't really the implied quantity.

[Thérèse Byars:]

Okay. So, it's 20...

[Steven Bregman:]

But all you have to do, if you want that's right, all you have to do is take every number, multiply by 0.29 and you'll get the implied quantity. So, I thought – I thought what we actually owned was a more intriguing number.

[Thérèse Byars:]

I agree. All right. So, here's your first question. It's a little bit lengthy, but here we go. On Monday, October 18th Bitcoin closed up about 3% to $61,350. At the same time, GBTC closed down over 3%. Can you explain the discrepancy or what you feel happened to the pricing of GBTC on that day? That's – there's several parts, but I'll let you go and answer the questions?

[Steven Bregman:]

Okay. Do you want me to just do it part by part or so should I do it part by part, do that part first and go back?

[Thérèse Byars:]

Well, maybe I should continue in that way you can just...

[Steven Bregman:]

Okay.

[Thérèse Byars:]

It is a mystery, why the performance of GBTC has drafted underperformed the price of Bitcoin in the past number of years. It appears that in approximately two years, GBTC quadrupled and Bitcoin is up almost 8 times. We realized that GBTC as a trust sells at either a premium or discount to net NAV, net asset value, but that doesn't account for the large difference. Can you explain please? And the last part is what do you see happening with the price of GBTC in the event, it gets approved to become an ETF, will the discount close up and will there be any tax issues?

[Steven Bregman:]

Okay. So, to begin with on that given day the discount widen meaning it's a bigger discount to NAV than it was the day before. There's nothing in GBTC, other than Bitcoin. There's not – it's just, it's Bitcoin Investment Trust, totally transparent, that's all it's there. So, there can't be no other explanation than just what the discount is, what a premium now at the start, the time period related to in the question, GBTC was at a considerable premium and asked value and it went to a discount for the simple reason that even though we don't yet have a Bitcoin ETF, we're moving towards a Bitcoin ETF. So, we're moving towards a Bitcoin ETF, that's going to trade at an asset value, and it's going to be able to take money and redeem money during the day. So that's basically competition through the Bitcoin Investment Trust. The Bitcoin Investment Trust has a big implied gain hit. So, if it actually ends up converting as many people believe it will to an ETF, if that also ends up happening well what's going to end up happening is, it's going to incur probably some taxable event. And there's always a danger depending on how one configures the Bitcoin Investment Trust in ETF incarnation, there's always a danger to some tax liability can be passed out. We don't know what form it would take. No one knows what form that would take or even no one knows if it even actually will ultimately happen. No one even knows to be perfectly frank, that the SEC will even eventually license a Bitcoin ETF, although most people think it's bound to happen. But any event there's always the danger of a tax liability coming out in one form another and that's the reason for the discount. And that's the reason for performance differential. Going forward, it's actually an interesting security because the discount more or less accounts for whatever tax liability you're going to get anyway. So, if it were to convert to an ETF, it's going to trade at exactly NAV. Why will it trade at exactly NAV because every ETF has a market maker? It arbitrages it minute by minute. And if you look at the 2000 or so ETFs that exist and look at their premium discount and then asset value, it's always very, very close to net asset value. And it could the Bitcoin Investment Trust would it be ETF? I totally suspect that's going to happen as well. Murray?

[Murray Stahl:]

Yes. Steven, I may just had had something. I had occasion to answer a similar question recently and I just decided to take the premium to NAV at which GBTC sold. And at June 30th of each of the last four or five just to see what it was. So, if we go back to June 30th of 2017 when GBTC was about $4 a share, FRMO well ahead earlier than that. FRMO might have paid $1 a share for it. But at that time, the premium was 69% and the next year, June of 2018 is 45%, and the next year June 19th is 36%, then June 20th it was 9% because by that point you had other Bitcoin funds of various sorts of becoming available and had lowered fees. And then on October 19th 17% discount; but the price during those periods went up from 40% to 48% or 49%. So, it's up – it's up a 1000% just about exactly. And so yes, in a strange sense, you lost 86% in your investment through the premium. On the other hand, you made 10 times your money, and 11 times your money, and I know we got – we used to get lots and lots of question. Why would you pay a 50% premium, 60% premium or something? Well, you're paying for the access for the ease of access for the custody, for the trading liquidity and for the time that you could buy then. Anyhow we actually did buy...

[Steven Bregman:]

I was going to comment on your comment so about, you may recall this about five or six years ago in our very offices. The first day I personally decided I was going to buy GBTC. This was before we even figured out how to even custody of Bitcoin. I just wanted to buy it. So, I wanted to buy the Bitcoin Investment Trust. On that day more than half a decade ago, the Bitcoin investment trust traded at a 36% premium to net asset value. And someone asked me the same question, but phrased it differently. Why would you ever buy a fund that trades at a 36% premium than asset value? And I, you should wait till it's a discount. So, I thought, well, I just thought it was extraordinary. Had a way until obviously had I arithmetically, had a way until, is it discount. I would've got a discount, but would've missed a lot of performance. But that's neither you nor or there, the basic idea was at that time, whatever I was putting into it, I was risking 100% of capital investment, because the possibility, and it might still happen, that Bitcoin might be worthless. So, it's going to be worthless, at the end of the day what difference does it make if I pay a premium or a discount. Undertaking the risk of complete evisceration of the capital I put into it, but is expected a very high rate of return. And that higher rate of return would the theory was, and it turned out it was right would overwhelm whatever negative consequences of going from a premium to a discount in asset value that was a theory approved to be correct. So, I just thought the fact that it traded discount at a time was just not pertinent to what I was interested in accomplishing. So that's the way I handle it at that time.

[Murray Stahl:]

Yes. It's interesting. You could tell somebody that if people aren't necessarily – we're not accustomed in our ordinary lives to thinking of proportionality in terms of, so thing that could be an entirely new asset class, but it's not yet could be orders of magnitude. So, you'd say that it's a large premium 69%, but you could also say it was actually de minimis because did we invested what was actually de minimis amount. You could lose 69% of de minimis amount on your case of 36%.

[Steven Bregman:]

Right. But that was really frankly the start of the whole inflation thesis, because there were – we weren't the first people to see it. We just observed that if you looked at the money creation and our fiat currencies, when I say our fiat currencies, meaning United States dollar. United States dollar is one of many. I mean our fiat currencies globally; all of them are in the process of being debased. And it just wasn't a good alternative to fiat currency. It was nothing in the world of bonds. It was nothing in the world of currencies that was going to be you much better than the United States dollar. They were all more or less the same. They were all more or less the same because the central banks were following more or less the same policy. Bitcoin was the only thing that believed in fixed issuance. So that had to be the investment. Now the theory at the time was if that proves to be viable operationally, and it gets some network effect. And the protocol – the original protocol is here to, theory which we keep repeating is it's going to be some extraordinarily large investment because it can't be worth a lower amount of money, a lesser amount of money than the sum of all the money it's out there in a world, which is a very big number and it's increasing enormously by the day. And I think the rate of money creation has even been accelerated, but that's neither here nor there, just an opinion. Anyway, maybe more answered than you wanted, but that's the answer

[Thérèse Byars:]

Ready for the next question?

[Murray Stahl:]

Yes, I am.

[Thérèse Byars:]

Okay. Could you comment about the recently approved Bitcoin ETF and any implications? Do you have any insights on a spot Bitcoin ETF?

[Murray Stahl:]

Well, I'll just tell you this. If I were the SEC, I would have done something very similar to what they did. They didn't approve a Bitcoin ETF. They approved the Bitcoin futures ETFs. So why did they do that? Because for ETF purposes there really is no regulated market that trades Bitcoin per se, so when companies call themselves exchanges, they might use that word because outside of the United States jurisdiction, but within SEC parlance exchange has a certain precise meaning. It means self-regulatory organization. So, it's an organization that has certain amount of enforcement and regulatory power that these various exchanges clearly do not have. And even in jurisdictions where you have a number of exchanges, they operate under uniformity of regulation, which clearly doesn't exist in the Bitcoin exchanges. So, things like spoofing, things like not standing behind bidding offers, wash sales, where people two people just trade the same instrumentality back and forth and establish a price that's called painting the tape. There's no organized mechanism to a) detected, and b) punished those people who are doing it. So, you can see it from the SEC point of view, but in the world of futures, you're going to have a cash settled future like you have in the Chicago Mercantile Exchange and that's a regulated environment. So, the ETF that actually got approval was the ProShares Bitcoin Futures ETF, symbol BITO that I believe is up to $1 billion in assets under management right now. So that's a lot of money raised and I think a couple of days in operation. So, it gives an idea that this is the beginning to institutionalizing it. Now once you have enough futures trade and you can have a regulated, observable reference price, you're probably going to get Bitcoin ETFs as well. But until the regulators are satisfied that we have that certainly at a time in my view is going to relapse. So that's where we stand on that front.

[Thérèse Byars:]

Okay. The next one is what revenue account contains the dividends received from Texas Pacific Land Trust Stock?

[Murray Stahl:]

Okay. Well, we have something – we have a revenue account called dividends and that's where it is.

[Thérèse Byars:]

Okay. The next question you answered, which was about HK Hard Assets and why it dropped from 22.02% to 21.98% asked and answered. Okay. Next one, RENN Fund has upcoming rights offering, will FRMO purchase its allotment and any additional shares?

[Murray Stahl:]

The answer is simply is yes, FRMO will purchase its allotment. And if there are additional shares, I'm subscribed all of us together this includes myself personally. We're going to take up the excise rights.

[Thérèse Byars:]

Okay. Now the next questions have to do with win-win and its Mt. Gox trade claims says in September, well, no, the first part is something you mentioned in your remarks. In September FROM sold Winland Holdings 32 minors and received shares increasing its total number of shares owned to 4,600,783 and its ownership percentage of Winland to 29%. In the 2020 FRMO shareholder letter, you stated it mean Winland managed to purchase Mt. Gox trade claims during the Bitcoin bear market, it will be recalled that Mt. Gox, once the world's largest Bitcoin exchange is a bankrupt entity. The trade claims are claims to restore the too creditors Bitcoin that is now held with the Japanese bankruptcy trustee. The value of Winland's Mt. Gox trade claims is currently about $600,000 on a conservative basis. That's the end of the quote. As Bitcoin traded at $489 on the day that Mt. Gox filed for bankruptcy was that valuation based upon the number of Bitcoin that Winland had claimed to. Can you discuss the approximate amount the Mt. Gox claims might be valued to Winland and what the see-through amount would be owed to FRMO? Can you discuss where in the process the bankruptcy proceedings are currently?

[Murray Stahl:]

Okay. So, let's start the easy part. Yes. We're at the end of them. So, we're going to get an amount shortly. What is shortly, it's not a long period of time, but I don't know how many weeks or even months it's going to be. We're at the end of the process. Everything is being finalized. Now when we bought these claims Winland so I can tell you this, some of them are just the bankruptcy claims. So, you can look through, and you can say this bankruptcy claim will have a proportionate interest in this Bitcoin, but there are coming out of that are the expenses of the bankruptcy trust, which is not great, but there are expenses. So, we have to account for that. And then secondarily, some of the claims, when we – it seemed like such a good deal. We couldn't get everybody. We couldn't get very many people to agree to sell us the claims. So, some people said, I will sell you the claim, but on a contingent basis, I want some proportion, however, small of the upside potential. So, in some of the bankruptcy claims, we agreed to share the reward if there was a profit, if there ever was a profit with the original owner of the claim. So that's why I just don't have those numbers in front of me. It's – I can tell you, we're going to get a nice amount of money, and generally speaking, we got the appreciation that Bitcoin got. In some cases, we did a little bit better, in some cases the reasons I just mentioned, because we had a share in the upside. We did a little worse, but basically that's what's happening. So, within the expenses of the trust and deals we made, it's not easy to figure out exactly to the penny, what we got when the process of evaluating it. And when we have a number, we're definitely going to share with everybody. But when you hear the number, everyone's going to be very happy. We just don't know to the penny yet for the reasons I mentioned.

[Thérèse Byars:]

The next question also has to do with Winland and Mt. Gox. So, I'll just read all of it and you can take it. All right. In previous calls, mentioned – you mentioned at some point Winland could pay dividends. What needs to happen before they would think about that, since there were...

[Steven Bregman:]

You have more, okay, I will wait.

[Thérèse Byars:]

No, no.

[Steven Bregman:]

No, no. No, go ahead and read the whole thing.

[Thérèse Byars:]

Okay. Since there was Mt. Gox news yesterday, what would the Mt. Gox claims be worth at 60,000 Bitcoin price process of receiving the liquidation? What will be the composition of the payout recent Winland equipment purchased from FRMO different from the previous types of equipment, curious if the FRMO team has a view on mining equipment? Is there any of this has to, okay, is there any reason why the RENN Fund can't acquire Winland shares? That's a lot of different questions.

[Steven Bregman:]

There's a lot of questions. Okay. So, let's try to – you have to remind me if I miss any parts, let's do the last part first because it's easier. So, for RENN to acquire Winland shares, many people would say there's an inherent conflict of interest there. And I don't think we're going to be acquiring any Winland shares and RENN. I think a lot of people would find that apparent, so I don't think we can do that, so that's out. With regard to the payment as I said earlier, we're in the process of calculating that amount. We don't have exactly for the reasons I mentioned, but we're at the end of the bankruptcy process, we're definitely getting it paid. One of the things that the Mt. Gox bankruptcy trustee is doing is it actually is going to sell the Bitcoin and give everybody cash, that's just the way they do it in Japan. So, I personally would rather get the Bitcoin, but operationally I'm sure you can appreciate the point of view of the Japanese bankruptcy trustees. They don't want to be trading – not trading, they don't want to be sending Bitcoin over the world to people who have these claims just easier for them to operate in cash, so that's what's going to happen. With regard to the equipment, so two points there to make; number one, we buy equipment opportunistically. Buy opportunistically, there's two dimensions to opportunistic. One is just sometimes there is some equipment that somebody needs to sell for liquidity reasons and there is just a great price for buying that equipment that may not have been the equipment that we would have bought had it been brand new equipment, but in some cases, we're actually buying slightly used equipment. And the other thing to understand is sometimes we'll have these deals where the equipment is at a hosting facility, or even at our own hosting facility. So, the equipment is at a hosting facility, we know that hosting facility, it might be our facility, it might be somebody else's facility, but there are people that we know and therefore we can get operating statistics on that equipment, how that equipment is performing. So, what's happening is we'll buy it and that's because the price is good because the equipment is on site, it doesn't have to be shipped, so there is no shipping cost. There is no relocation costs and there's no downtime from plugging it, sending it across the country to another facility, reinstalling it and there's a lot to be said for that. So, those that are factors, or at least some of the factors that we go ahead and we buy equipment. In some cases, the equipment was leased equipment. In some cases, it was leased equipment that was leased from either manufacturer or a and the people leasing it, whatever their reason is, they didn't want to pay the lease rate or maybe they couldn't pay the lease rate. And the recourses that the manufacturer or the lessor takes back the equipment and they won’t own the equipment, they actually just want to lease it. We really had no interest in leasing it, but we would buy it and the price was good. And we had all the operating statistics on the equipment. And opportunistically, we have all the operating systems. We know we're buying good equipment. Sometimes, and I think I said to some prior calls, sometimes we'll buy brand new equipment and we have issues with it. And it's brand new right out of the box. Sometimes we buy used equipment. We have all the operating metrics for several months. We know it's operating very, very well. We'll buy that equipment. Sometimes when you buy new equipment, now this is my personal theory, so take it as such, it's what I believe to be true, but I cannot demonstrate to be true. I personally believe that a lot of times when you buy brand new equipment, it's not new. It only looks new. That the manufacturer has been using it for a certain period of time. And it comes sometimes in imperfections because of that. So, you think you are buying new equipment and it says new equipment on a box, it just is new equipment. So, we, over in the fullness of time, we frankly gotten better deals when we bought used equipment. And that's why you'll see these kind of equipment deals happening. We buy it, if it's good we'll know very quickly if it's good or not, we'll make a deal with Winland in those instances where we made a deal with Winland because where we were interested in increasing our ownership. So, I hope that takes care of all the elements. Did I miss anything Thérèse?

[Thérèse Byars:]

I think you've covered it all. And then the next question has to do with energy, with coal being an ostracized commodity asset due to climate change and ESG concerns does FRMO see investment opportunities, similar to other royalty type investments or securities?

[Murray Stahl:]

Okay. So, I think the question is, are there investment opportunities in the world of coal? Well, coal is so ostracized that there is almost nothing left it's publicly traded in coal. This really not a lot to choose from coal. My own personal view of coal is I don't think it's going away. What went away we went bankrupt or coal companies that had legacy liabilities, black lung disease, pension liabilities, post retirement, health care liabilities, that sort of thing. Those companies went away, but demand for coal globally, as you can probably tell is exceedingly robust. And there's a lot of prophetical coal companies, unfortunately they're not publicly traded. It's not easy to find ways to invest in coal, but we are looking.

[Thérèse Byars:]

Okay. The next question is about inflation. Would you clarify the relationship between inflation and interest rates both short-term and long-term rates? FROM has long predicted a rise in inflation, which is now prevalent and the market expects interest rates to rise. However, Murray has quantified that the economy cannot withstand a 1% to 2% interest rate rise. It appears that the market expects interest rates and inflation to rise hand in hand. Does this correlation breakdown due to the overall debt load? And is it possible that long-term rates increase and the Fed maintains the short-term rates at current levels?

[Murray Stahl:]

Well, my own view is I don't think rates are going up anything other than maybe a nominal amount. And I think the central banks will do literally everything in their power to prevent rates from rising. If they rose by anything other than really nominal rounding error amounts, it would be calamitous to global economy given the degree of leverage, which by the way increases literally every single day. I just can't – it's inconceivable to me, I just can't see it happening. And so far, if you go back six years or so you may recall when the Fed talked about tapering the liquidity programs, which still go on to this very day. And there was a much do about that for a month or so. And I didn't take it seriously because I just didn't think it was possible to really disengage from those programs other than for several weeks. So, I think the central bankers around the world have satisfied themselves, that there really is no possibility of raising rates. Historically, what would happen is we had credit cycles because the federal reserve would lower rates and the federal reserve would raise rates. Same is true with central banks around the world. And this time, which really means this last quarter century we really haven't done it the last time we tried it as a global community was prior to the 2008 calamity. And I don't think anybody wants to repeat that. And I just don't think it's going to happen. So, we might have a world where the rates don't go up, the inflation is manifest for everybody to see and the central banks are going to have to buy a lot of bonds. And central banks buy a lot of bonds that's putting a lot of money into the marketplace and it's going to be even worse inflation, which is why, I think, the inflation that's coming is going to be the worst inflation we've seen as a global society in maybe 200 years. That's an extreme statement to make. But I keep making it and I don't see any reason to walk away from it. I'll tell you, furthermore, I really hope I'm wrong. I really do, because it's not going to be pleasant for the planet, right. To be a lot better for the planet if I'm very, very wrong. I just went every passing day I reevaluate I don't think I'm wrong, but we'll see what happens.

[Thérèse Byars:]

Okay. Does FRMO generate any revenues from the ETF INFL management fees? And are there any updates on new ETF products following the success of INFL?

[Murray Stahl:]

Okay, well our revenue, the revenue we get from INFL comes through the revenue share that you'll see in the balance sheet. So, we get a little bit less than 5% of Horizon’s revenue of whatever products we also own a little bit less than 5% of Horizon itself. But anyway, the revenue, we get that and to the extent there is a lot of revenue in INFL, then we get 5% of it. But we get 5% of everything. So, in terms of new products, I mentioned obviously the inflation ETF, and I mentioned the Diamond Trust we want to do. I got an idea that, I think, is pretty good in the world of crypto, but I don't want to discuss it in public because you got to get SEC approval and people might copy it. So, I don't want to spell out what it is other than say, I think, I got a pretty good idea of something to do in crypto that's interesting. And we have one or two other things in the works, but if everything goes, well, there will be follow on ETFs. I wish I could give you the exact specifications. But then there aren't that many great ideas in the world of ETF, and there are companies with much greater resources that we have, and I hate to announce it and have someone beat us to the regulatory table before we get there. So, I'm going to stop it there if it's okay with everybody.

[Thérèse Byars:]

Okay. The next question is in the 2012 annual meeting, Mr. Stahl stated “for me the ultimate destiny of FRMO is that I don’t intend to sell my stock. I intend to build up the market value and place either all my shares or close to my demise; hopefully I won’t do it on the day of my demise; hopefully I’ll prepare my demise a little bit. I want to set up a family foundation, and I want my kids to basically run the family foundation and give money to charity, because I want them to think that their home and their world is not a place that you just eat and sleep in, that you do things with it.” That's a very thoughtful comment, and I'm pleased to be a shareholder. You have been extremely successful in creating value. Stockholder equity on the 2021 annual report was just under $300 million and five years ago, it was just under $100 million. You have added three directors to help grow the company. My question is that FRMO currently has a market cap of around $400 million making it among the most valuable U.S. companies traded on the Pink Sheets. The stock is not very liquid with around 6,000 shares trading daily out of 44 million shares, which is roughly $60,000 daily trading volume. Last year, the stock traded around $6 per share at this time and no significant share repurchases were made, likely in part because repurchase would just further reduce the liquidity. In prior conference calls, you have been asked about uplisting, but that won't solve the liquidity restraints. So, wouldn't this be a difficult stock for institutional buyers and ETFs to purchase with such a small float? That's one part of the question. The question for Mr. Stahl and Mr. Bregman is, do you feel that uplisting would remove and impediment further growing the FRMO market cap, or would having a small float remain a significant impediment other than a potential uplisting and continuing to grow the company without uplisting? What are the potential strategies for increasing the market cap?

[Murray Stahl:]

Okay, well lot of questions here. So, let me just tell you this. So, when the window is open, you just truly buy small numbers of shares. I actually, bought some FROM today. I found a lot because not very liquid and I don't want to be accused of moving the price, but I actually bought some. And so, I guess you can say to the extent I bought some, I made it, I made it even less liquid. I don't think liquidity is going to be a problem ultimately. And I think uplisting is going to do a lot of good for FRMO when we get around and do it by just by uplisting, we would've done it already. It's just that we got so much going on. So, you want to blame somebody. You really should blame me because this is so much going to take so many hours in a day and we just didn't get to it. So, mea culpa is all I can say, and we'll try to get to it and try to get that done for everybody. If you look at the Russell 2000 ETF, it’s obviously 2000 companies or very close to 2,000 companies. You go to the bottom holdings, let's say the smallest tenders, smaller 20, you'll be amazed at how illiquid they are, how smaller companies are much smaller than FRMO. If you go to the microcap ETF, believe it or not, there's a microcap ETF, you’ll be amazed at how much money is in the microcap ETF. There's a lot of microcap, liquid companies in the microcap ETF. So, the way the ETF world is evolving companies with macro capitalizations or micro liquidity, they are part of the stock market. The original idea of indexation is right about this. So, forgive me for repeating it, you got perverted along the way. So, the original idea was there is going to be one index let’s call the S&P 500. Everybody is going to buy that. And it wasn't market capitalization weighted, float, adjusted, it was just market capitalization weighted. And the reason for that is because there are some companies that they are just not liquid. And if you buy or sell them to liquidity, that's part of the risk you take that it as liquid as you would like it to be. That was the idea. So, because indexation became a business, not nearly indexation, it got weighted towards the most liquid names. Okay, but now that's done there are whole series of not very liquid names. And I would say trade, and I'm sure people would agree with this in a very idiosyncratic manner. And we could use the word idiosyncratic manner, but to somebody else to a mathematician, they would say low correlation and therefore covariance. There is a movement to bring in the less liquid companies into the institutional indexation family. And I believe that's how it's going to go. And that's why, I think, uplisting is going to help. And I just got to get to it. So, you're going to have to blame somebody. So, I would suggest you just blame me. I'll get to it eventually, but forgive me for being busy with other things.

[Thérèse Byars:]

What about increasing the float? Is there any way to do that without diluting people?

[Murray Stahl:]

Yes, there is a way to do it because – so there were certain foundational holders of FRMO meaning they were there at the – they were present at the creation, so to speak. And from time to time, they have some liquidity needs. And for them every now and then they sell some stock in the open market and eventually you'll see more of it. They are going to be owners of FROM that can give the money to charity, and the charity is going to need the money and they're going to sell some shares. So, I think in the fullness of time, you will see more liquidity in FRMO. It's going to happen inevitably as to what day it's going to happen. I don't ask people what their plans are. I don't know if it's proper. I don't inquire. But in general terms, I'm aware that they are going to need some liquidity for their planning purposes. You'll see shares come out, but I don't think you are going to see any shares by yours truly, I think, you're going to see the opposite of yours truly. But we'll see how that goes.

[Thérèse Byars:]

Okay. Thank you. Then the last question FRMO has so many activities going on and so much hidden values, it's appreciated that FRMO is run on a shoestring budget. Isn't it time to start spending more on promoting its value by hiring PR, or investor relation companies, or personnel to make investors aware of FROM’s activities and value, which in turn will show results in its shares, value increase, benefiting the shareholders?

[Murray Stahl:]

Well, I obviously haven't done that yet. I’m personally, kind of disinclined to do a thing like that. It's not the money. We have plenty of money that's not the issue. And my personal experience is when you hire people to promote the shares, they get a little carried away and take things to extremes. Basically, you are hiring people to say good things about you. So, there's also the issue of modesty. We're just not that kind of people, but in a more substantive sense, they come up with all sorts of reasons why people should buy your shares and they say all sorts of good things. And it's very hard. Once people start talking about it, to control it, and I wouldn't want it to trade at some huge premium to its net asset value and people wouldn't realize that. So, it puts extra burdens on the management that maybe better if we didn't have that burden. So that's the best answer I can give you at the moment.

[Thérèse Byars:]

I think there might also in that question, which was not articulated, but be some concern that you are so busy that there hasn't been time to consider, deeply consider uplisting and other things that why can't we relieve some of that burden for you by – why wouldn't you relieve some of that by hiring people? And just on some questions.

[Murray Stahl:]

Well, it’s a good question. So, we just put three people on the Board and I can assure you that's one of the things we're going to be discussing. So, believe me, I wouldn't mind a little time off. I got other interests. I'm sorry to say I really do. And if there are people who can and will help me, I welcome it all to the better. I don’t want to work…

[Steven Bregman:]

I would just add if like I can hardly imagine that the people on this call having done so. But if you would actually read the curricula vitae of the three people who joined the Board, they are really pretty impressive. They have got a lot of experience and a lot of skills. I have no doubt they will be of great assistance.

[Thérèse Byars:]

Well, those are all the questions that we have. I’ll turn it to you if you have anything you would like to add.

[Steven Bregman:]

No, I think I hope anyway, we gave you a thorough overview of everything we're doing, and we try to be as transparent as possible. And thanks for the questions. They were really great questions. If there are things that we didn't address, and you want them to addressed don't hesitate to send us a message and we'll get some information. If there is things that you want us to address in future conference calls or conduct this meeting in different ways, we're open to that. So, thank you for attending today's call. And we will reprise this of course in 90 days, approximately. And thanks so much for your support. And we're going to sign off now and we'll join you again shortly. Thanks everybody.

[Operator:]

Thank you, ladies and gentlemen, this concludes today's teleconference. Please enjoy the rest of your afternoon.