FRMO Corporation (FRMO) CEO Murray Stahl On Q1 2022 Results – Earnings Call Transcript

FRMO Corporation (OTCPK:FRMO) Q1 2022 Earnings Conference Call January 1, 2021 4:15 PM ET

Company Participants

Therese Byars – Corporate Secretary

Murray Stahl – Chairman and Chief Executive Officer

Steven Bregman – President and Chief Financial Officer

Conference Call Participants

Disclaimer*: This transcript is designed to be used alongside the freely available audio recording on this page. Timestamps within the transcript are designed to help you navigate the audio should the corresponding text be unclear. The machine-assisted output provided is partly edited and is designed as a guide.

Operator

00:03 Good day, and welcome to the FRMO Quarterly Conference Call. As a reminder, today’s call is being recorded. And at this time, I would like to turn the conference over to Therese Byars. Please go ahead, ma’am.

Therese Byars

00:14 Thank you, Jenny. Good afternoon, everyone. This is Therese Byars speaking. And I am the Corporate Secretary of FRMO Corp. Thank you for joining us on this call.

00:23 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.

01:14 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 second quarter earnings. A replay of this call will be available for one month, beginning at 7:15 this evening. To listen to the replay, the toll-free domestic number is (888) 203-1112. The international toll number is 1 (719) 457-0820. When prompted, key in the passcode 6605367. These dial-in numbers are noted in the FRMO press release dated January 13, 2022, which may be found on the FRMO website by clicking the link called Information Statements & Announcements. The press release can also be viewed on the OTC market’s website by typing in the ticker symbol FRMO and clicking on the news link.

02:28 And now I’ll turn the discussion over to Mr. Stahl.

Murray Stahl

02:33 Okay. Thanks, Therese. And thanks everybody for joining us. I thought I’d commence by saying two things: number one, I have a little bit of a cough and I don’t have Coronavirus or anything, I have a little bit of cough. Reason I do it is, I do too much talking. So I’ll try to drink a lot of water and hopefully you won’t hear anything from me other than the actual analysis. That’s one; Number two, I going to start with an interesting fact by the FROM consolidated financial statements. So if you refer to our November 2021financials, and you’ll see something interesting. So you look at the line, loss income from operations before provision of taxes. It’s about $2.2 million loss, now that’s largely the Texas Pacific Land Trust declined by roughly 150 points from its prior quarter end number and maybe loss of point or so, but that’s okay.

03:34 And you can see the bottom line, because lot of that is the HK Hard Assets with which FRMO only owns some piece, not the entirety. But what’s really interesting is, if you look at stockholder equity attributable to company, $178 million. I mean, you really don’t see a tremendous decline in shareholder value at least as it’s competed and formalistically speaking, in GAAP accounting. You all know, to go back to the income statement the actual recorded loss is $350,000, but there is a lot of other things going on. And it kind of balances it out.

04:24 So when look at things that way, it’s a way of introducing that FROM has come, in my humble opinion, a very, very long way. There’s a lot going on. And I hope I’ll have occasion to touch on some more salient points of it. And then, I’m sure the question and answers get more of it.

04:48 So I’m sure there will be questions about Texas Pacific. So we’ll leave it aside and I want to go to cryptocurrency. So cryptocurrency for us is a real business. And it can develop in a lot of different ways. We’re still figuring out how it can develop, we do have and I’m going to read these numbers in a moment to you. We do have a fair amount of cryptocurrency holdings. We don’t want to be merely a cryptocurrency holding company. We want to be a cryptocurrency operating company. And there are variety of ways we can go and we’ll touch on each one of them.

05:31 And so in preparation of that, let me just read some numbers to you. We do this every quarter. The first set of numbers are, crypto in one form another form held through our private investment funds, there our interest in the private investment funds, since we implied share quantities of each of those, so just re-dose it. Bitcoin investment trust GBTC, 579,695. Bitcoin SV, it’s actually Bitcoin cash is SB. There is two kinds of bitcoin cash, this is bitcoin cash SV, which is actually a fork of bitcoin cash, 94 units.

06:25 Ethereum Classic Trust is the gray scale, so Ethereum Classic Trust, this will be shares, 4,148. Grayscale Bitcoin Cash Trust, we have some restricted shares, we actually subscribe to these, 9,897. Grayscale Bitcoin Cash Trust, the same thing, unrestricted, we can sell those tomorrow, not going to, but we could, 16,439. Litecoin — Grayscale Litecoin Trust restricted, 1,155. Grayscale Zcash Trust, 596. Grayscale Litecoin Trust unrestricted, 4,645. [indiscernible] Bitcoin Gold that we have, 222.

07:28 Now held directly, almost all of this, but not all of it. Shares that were units that we mined over the years. So we keep mining. So bitcoin, the largest quantity, 116.3 actual coins. Grayscale Bitcoin Trust Shares, we’ve actually bought some share over the years, 7,644, unrestricted. Same goes for Ethereum Classic Trust, 18 shares. Grayscale Bitcoin Cash Trust, 12 shares. Grayscale Litecoin Trust, 6 shares. Litecoin that we mined, can I have some more remarks about Litecoin just a minute, 1,194.5. Ethereum, 35. We actually mined Ethereum.

08:24 Ethereum Classic that we mined, 661.7 and Zcash, 59.9. By the way, should have said earlier, so I’ll say it now. The shares we own directly of Texas [indiscernible] Corporation, that we actually own not many funds, 7,340 shares we own indirectly, which is, that’s actually owned in various funds, not least, which is HK Hard Assets, 50,184 you can add two and that’s our ownership there.

09:04 Another thing that’s important to understand, Winland. We used to call it Winland Electronics, now we call Winland Holdings. We own 29% of Winland. Every quarter we buy a little bit of Winland. So we own over 1 million shares. I lease neglect to write down exactly how many shares we own at Winland. So if you pardon me, just look up Winland, multiply by 0.29, that’s approximately how many shares we have, next time I’ll be better prepared. I’ll write down the exact number of shares, at least to get that on the few shares we buy.

09:43 Anyway, it’s important to note the crypto that Winland has — Winland is mining, bitcoin. Winland has 45.3 bitcoin, so we have this month by 0.29 you get FRMO share. So I just won’t repeat that again. Bitcoin, we actually purchased some, 7.4. Litecoin, we actually purchased some in Winland, 14.5. Remember, this is what Winland owns to get with FRMO own indirectly, you need to multiply it by 0.29. Zcash, we purchased some Zcash, 53.5. Bitcoin Cash, 1. Bitcoin gold, 8.7. Ethereum Classic, 9.4. Those are our holdings.

10:39 You’ll note that as we embark upon our cryptocurrency activities, we stayed within the framework of those currencies that are following the bitcoin protocol. As you probably know, Bitcoin Cash, Litecoin, Zcash, etcetera, Ethereum is an exception. They follow the bitcoin protocol. So my theory, instantly I believe them and [indiscernible] in this theory. I believe ultimately that the coins that follow the bitcoin protocol will ultimately have a value similar to that of bitcoin.

11:24 Why do I believe it? Because there’s same monetary policy. The difference at the moment is, let’s use Litecoin as the example. Litecoin has mined proportionally less of a total of coins that are available to be mined. So its inflationary at the moment is therefore higher. But ultimately, all these numbers are going to converge. I believe ultimately, ultimately some years now, but nevertheless, ultimately there is going to be a convergence of these, because ultimately you are not going to see a lot of trading with bitcoins or litecoins or anything else, that will be kept to store value.

12:06 Why they are kept to store value? Because everybody is going to know what the policy is. Now, a lot of people say and there is some justification or saying is, I just don’t agree with it. How it is going to be a store of value? Look how volatile bitcoin is. Well, the reason that the cryptocurrencies are volatile is, and we’ve said this many times, and it’s worth repeating. The cryptocurrency is volatile, because the mining economics are constantly changing. The prices of machinery through the rigs to mine. The difficulty rating, which is number of rigs that are running and how many rigs you have to compete with to actually mine a coin. Those are actual factors.

12:52 In the case of Bitcoin, that difficulty rating changes, generally speaking, going up, it is changing every ten days on average. So when it changes it becomes…