Earnings call: FRMO Corp reports record assets and crypto growth

FRMO Corp (FRMO) announced a record total asset value of $548 million during its fiscal Q1 2025 earnings call, led by Chairman and CEO Murray Stahl and CFO Steven Bregman. The company's cash balance reached approximately $42.4 million, potentially a recent high. Digital asset investments have surpassed $9.5 million, primarily from ongoing mining activities.

Despite operational challenges, FRMO is focused on increasing ownership and profitability in Winland, a cryptocurrency mining operation. The company is preparing for global currency debasement risks through its cryptocurrency investments and is transitioning into an operating company with increased ownership in Winland and the Bermuda Stock Exchange.

Key Takeaways

• FRMO reported a record asset value of $548 million and a cash balance of about $42.4 million.
• The company has a deferred tax liability over $42 million, benefiting their investment strategy.
• Digital asset investments exceed $9.5 million, mainly from mining activities.
• FRMO owns about 40% of the voting rights in Winland, a cryptocurrency mining operation.
• Operational challenges included uninsured equipment malfunctions due to viruses and lightning.
• The company is transitioning to an operating company, focusing on hard assets.
• CEO Murray Stahl emphasized the importance of hard assets and refuted claims that ETF trading has minimal market impact.
• Bitcoin pricing is influenced by factors like the halving event, equipment prices, and the hash rate.
• FRMO plans to improve operational transparency and is considering listing on a higher visibility exchange.
• The company holds a significant number of Texas Pacific Land Corporation (NYSE:TPL) shares and expects dividends from Horizon Kinetics Holding Corporation (HKHC).

Company Outlook

• FRMO is increasing its investment in hard assets and cryptocurrency mining.
• The company is considering consolidating its ownership in Winland if it exceeds 50%.
• Plans to list on a higher visibility exchange are underway to enhance transparency and investor engagement.
• Quarterly dividends and a potential extra dividend based on performance fees are expected.

Bearish Highlights

• FRMO faced operational setbacks due to equipment malfunctions, which were not insured.
• Concerns about Apex Medical's lack of positive returns since 2013 were raised.

Bullish Highlights

• FRMO's investments in the Ren fund and Apex Medical show potential, with a new marketing-focused CEO aiming to turn Apex around.
• The company's transition to a crypto mining business could lead to increased transparency and comparability with other public miners.
• HKHC's public listing and acquisition of Landbridge shares at $17 could result in significant revenue and profit growth for FRMO.

Misses

• There was no mention of misses or underperformance in the provided context.

Q&A Highlights

• FRMO clarified its share ownership in TPL and its financial impact.
• Management addressed the relationship between Bitcoin mining economics and pricing.
• Concerns about TPL's conference call format were discussed, with a commitment to transparency and shareholder engagement reaffirmed.

FRMO Corp is positioning itself to navigate the evolving landscape of digital assets and traditional investments, with a clear focus on growth and operational transparency. The company's strategic moves, including its investments in cryptocurrency and hard assets, reflect a forward-looking approach designed to mitigate global economic risks and capitalize on emerging opportunities in the cryptocurrency mining sector. As FRMO continues to adapt and expand its operations, the market will be watching closely to see how these initiatives translate into financial performance in the coming quarters.

InvestingPro Insights

FRMO Corp's recent financial performance and strategic positioning align closely with several key metrics and insights provided by InvestingPro. The company's record total asset value of $548 million and strong cash balance of $42.4 million are reflected in InvestingPro's data, which shows FRMO trading at a low earnings multiple with a P/E ratio of 5.21. This valuation suggests that the market may be undervaluing FRMO's current earnings potential.

The company's focus on increasing ownership and profitability in Winland, its cryptocurrency mining operation, is particularly noteworthy given the impressive revenue growth reported by InvestingPro. FRMO's revenue growth stands at an exceptional 638.11% over the last twelve months, with a quarterly growth of 24.73% in Q1 2025. This substantial growth underscores the potential of FRMO's strategic shift towards cryptocurrency mining and hard assets.

InvestingPro Tips highlight that FRMO's liquid assets exceed its short-term obligations, which supports the company's strong financial position mentioned in the earnings call. Additionally, FRMO has shown strong returns over the last month and three months, with price total returns of 15.44% and 17.29% respectively. These positive trends align with the company's bullish outlook and its transition into an operating company with increased focus on cryptocurrency and hard assets.

It's worth noting that InvestingPro offers 6 additional tips for FRMO, providing investors with a more comprehensive analysis of the company's financial health and market position. For those interested in delving deeper into FRMO's investment potential, exploring these additional insights on InvestingPro could prove valuable.

Full transcript - Frmo Corp (FRMO) Q1 2025:

Operator: The broadcast is now starting. All attendees are in listen-only mode.

Therese Byars: 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 Steven Bregman, President and Chief Financial Officer. They will review key points related to the fiscal 2025 first quarter earnings. And now I'll turn the discussion over to Mr. Stahl.

Murray Stahl: Okay, thank you, Therese. Thanks, everybody, for joining us. So I'm going to, in my introductory remarks, I'm going to do it in two parts. One, I'll point out some things I find interesting that are on our financial statements. Then I'll point out some things that are not on financial statements that I also find interesting that be good to get some more information on, I think. And then we'll go to questions. So let's start with the things that should be obvious. So looking at the balance sheet of, you can see that our total assets, $548 million, that's a record for us in the event. And you'll see our cash balance. I'm not sure if the $42.4 million is a record or not. It looks like it's certainly a recent record for many, many years. I don't know if we might have modestly exceeded that at one point. If we did exceed, we didn't exceed it by much. So it's close to a record, possibly a record. Here's some things that are on the balance sheet that the consequences are not necessarily so obvious. Let's do the most obvious or less obvious first. You'll see our deferred tax liability is now up exceeds $42 million. It's basically a tax free loan from the government. As long as we keep that going, we're going to earn a lot more money than we otherwise would earn if we paid that. So that's one of the reasons, but not the only reason, why we're long term investors. That is a number worth paying attention to. Now, a part of that number is something you'll see under securities sold, not that purchased. We basically sell short what we call dysfunctional and other people call path dependent ETF's. And you see our cost basis comfortably exceeds $10 million, and the market value is less than a million dollars. It would be nice if we could carry that and never realize a tax. But there are two things bad. Number one, sometimes if these are, these are Exchange Traded Notes, or ETNs. Some of these are exchange traded notes. They have maturity date, and we have to realize it. So we have no choice in that regard. And secondarily, even when they are funds, they're ETF's and they're not notes, and therefore, we don't have a maturity date as such, those funds pass out K1's to people. And if we're short, then we might inadvertently, or let's say by the nature of the investment, have profits passed out to us from being short, and therefore we have to pay tax on it. So it's not quite as good as a long term security threshold, but it's almost as good. So that when that declines in value, there's margin released. And as you can see, that is not insignificant part of our cash balance and we use our cash balance to do all sorts of interesting things. You'll hear about presently, another thing that you'll find not so obvious, but interesting, so you have these digital assets. It's now over $9.5 million. We keep mining more digital assets. You'll see the cost basis went up. Cost basis goes up. Not because we bought digital assets, we mine digital assets. So the mining is continuing. We have to live with the fluctuation up and down in value. And in this quarter, the value actually went down modestly. But in the long run, it's going to be a great investment that also forms a part of our deferred tax liability. It's worthwhile saying, now, if you go further down the balance sheet, and you will see digital mining assets, that is the equipment, net of accumulated depreciation. That's actually the equipment that we have, that we own, that we use to mine. You'll hear in a moment about, we've been doing a lot of our mining inside of Winland. You'll hear about that presently. We're not actually letting these amounts decline. Nothingness, you'll hear presently been changing the kinds of equipment we've been buying and we've been buying mining equipment gradually. This is a very unusual sort of balance sheet position relative to other companies. Other companies make huge investments at one time, and they want to dominate the market. We've had a gradual approach. Now, I'll go into the gradual approach in just a minute or two. Let me point out where we've been dramatically increasing our crypto investments, and that's by expanding into Winland. So much of our cryptocurrency mining activity takes place in Winland, so we own as a firm. Now, these are round numbers. They're not exact, but for our purposes, they're exact enough. We own as a firm about 38% of Winland. And because a company related to us called horizon common and myself personally own about 2%, we control about 40% of the votes of Wyndland. So we do two things. One, we buy Wyndland in the market to gradually increase our exposure. But secondarily of late, for most of the cryptocurrency mining equipment, we bought a We basically swap that. We buy new equipment, we swap it with Woodland in exchange for shares of woodland. And that, of course, raises our ownership of Woodland. The reason for the gradualist approach is twofold. The first is that when we started mining years ago, there was no one, including ourselves, that knew everything there was to know about mining. Nor could anyone have known everything there was to know about mining, because the nature of mining over the last eight years has changed, in some ways, quite dramatically. So we've been learning as we go, and our mining operations have gotten much more efficient than they were, than they ever been. And I would say this year to calendar year 2024, we made the biggest strides we ever made in efficiency and profitability, and we're still learning. So it's an ongoing learning experience for everyone. Second reason is the nature of the equipment is constantly changing. So you were to compare the most recent iterations of equipment and the energy efficiency related to that relative to the equipment that you could have purchased eight years ago. It's just incommensurable how much it's improved now. If the equipment generations were released on a predictable cycle, what you could do is you could buy a lot of equipment in one order. If the equipment generations were released on a predictable cycle, what you could do is you could buy a lot of equipment in one order, and you could wait for it to appreciate, and you'd know, would you be able to plan at what time you need to buy new equipment, meaning you'd be able to know, advance when your equipment might be obsoleted. The trouble is that there's a number of companies active in that field and no one knows, including, sometimes the companies that produce this equipment. When a new generation of equipment is going to be released, they're all competing with each other. So it's not an established market in the sense of equipment markets, under field trucking, agricultural equipment, automobiles. It doesn't have a schedule attached to new equipment iterations. Therefore, we have to be very careful not to put too much money into any one generation equipment for two reasons. One danger of being obsoleted by a new innovation, and secondarily, the new equipment, we like to buy a small amount and test it, because some equipment is just more durable than others. And we've had some great experiences where we bought equipment, and we would have thought ourselves very fortunate if we would have gotten a useful economic life of not even three years. We ended up getting an economically useful life that exceeded four years. Sometimes it happens. I've been very fortunate in that regard. On the other hand, sometimes some other things happen that we either couldn't have predicted or we should have predicted, but we didn't predict. Here's something we should have predicted. This happened a while ago that we just didn't predict. We should have more thoroughly checked every delivery of equipment for the presence of viruses. And on one delivery we forgot to do it. It's a remediable situation, but you have to stop what you're doing, unplug all the machines and search for viruses, and that can be very time consuming. Then you have to remove the viruses from machines that can be even more time consuming. Effective it is. We had a certain period of time when we couldn't use the equipment productively, meaning we couldn't mine. It wasn't a great number of devices, but it actually happened. And it wasn't a great number of devices because we never buy in any shipment a great number of devices. And that's one of the reasons we don't do it. Unfortunately, we forgot to check that shipment. And look, they're human beings. Sometimes these things happen. Here's something that we probably could not have predicted, but happened to us. We have diversified our equipment into variety of different hosting sites. Some cases we control those sites, other cases we don't. And believe it or not, some of our equipment actually got hit by lightning, wasn't destroyed, but was rendered basically inoperable. So did we have insurance for those machines? No, we did not have insurance for those devices. Why did we not have insurance? Should we not have predicted that? We did predict it. We would very much have liked to have had insurance. Unfortunately, at that point in time when these things happened, no insurance company was willing to insure small batches of devices. They felt that the underwriting results were too unpredictable. In any case, on our balance sheet, we're effectively not really, but effectively self insuring. We can afford the odd mishap if actually happens. So we're well prepared. In any event, at some point, or actually at this point, we're increasing our ownership of Woodland and we're increasing our crypto mining activities. They're getting much more profitable than they ever been. And at some point, if we reach that point, and we own over 50% of Winland, we're going to have to consolidate that point. FRMO will be effectively an operating company. So, as I said, we're learning constantly are probably is increasing. It's never been better than it is right now. And if things go as planned, it's going to be better yet in the forthcoming months. We've been looking for many, many years for business to get into, to turn this into operating company. We didn't want FRMO to be yet another asset management company. And of all the. And I wrote this in the shareholder letter, all the potentialities. There were businesses that we didn't know very well, we didn't want to buy those. There are businesses we did know very well and we liked, but they were just too expensive. We wouldn't have had a high return on capital. So it became this. And this is something that we thought would be within our ability to comprehend and end up having good outcome with. And I think you can see from the results, we have a pretty good outcome thus far. So that's the plan, and that's a brief resume of what we've done. So without further ado, maybe, Therese, you probably have some questions that you've compiled, and I think we'd be delighted to answer those if you would kindly read them to us.

Q - Therese Byars: I'd be happy to. The first one we have is what FRMO issue keeps you up at night?

Murray Stahl: What information? To tell you the truth, maybe I shouldn't say this, but I'll say it anyway. I actually sleep very, very soundly. And I'll tell you why. I sleep very soundly. Our equity investments, not entirely, but largely, were invested in hard assets. And if you examine the history of wealth on this planet, and I think I've written about this in several of my compendia, throughout history, wealth has been largely in hard assets. Why? Because unlike intellectual property assets, hard assets, they're like land or gold or things of that type, or diamonds, they existed more or less infinitely. Intellectual property can always be surpassed by superior intellectual property. We live in a very unique age historically, in which, if you look at stock market capitalizations, intellectual property has a lot more equity market capitalization than tangible assets, and I believe that's going to shift. So there's that. And then we also prepared, through our cryptocurrency investments, for the ongoing currency debasement that's taking place not just with us dollar, but everything in the world. And you'll see the BRICS companies, or BRICS countries, I should say, are about to have a meeting, and they're talking about having a BRICS currency that would at least trade alongside the dollar that's being backed by some hard asset, like gold or maybe a basket of hard assets. And there comes a time that the asset producing nations of the world will be reluctant to accept fiat currency. Those are the big risks we prepared for them. And I don't stay up at night worrying about it, but I will say during the daylight hours, we work exceedingly hard to prepare for a variety of contingencies, such as which I thus far talked about a few of our mishaps in cryptocurrency. So I hope that's a good answer.

Therese Byars: Yes. The next is, what is Max's competitive advantage?

Murray Stahl: What is Max's competitive advantage? Well, to begin with, and this is an opinion, Max's has, in my humble opinion, the best technology of all the exchanges, and I don't think it's even close. So, measured by latency, the ability to adapt to new products, I think it's the best. But of course, that's just my biased opinion, so you can take it for what it's worth. However, Max's has one other interesting attribute that the other exchanges I think do not have. That's more tangible. So Max's is a multi asset class, multi geography exchange. So are there multi asset class exchanges? Yeah. So Max’s is all the asset class because it has a stock exchange, an options exchange, and also has a features exchange, which is the old Minneapolis grant change that's now Max's features. So the CBOE has an equity exchange, an options exchange, and futures exchange, so it has that. But Max's also owns Bermuda Stock Exchange. That puts it in a different geographical jurisdiction. None of the other American exchanges have that. And Bermuda stock exchange, because on the one hand, it's part of the United Kingdom, so Brexit affects it. On the other hand, it's a separate jurisdiction. So Brexit doesn't entirely affect it. It has what's known as an ESMA, which is the right to trade in Europe under certain conditions. So I don't know of any exchange that's yet achieved that diversification of ass. It's pretty neat. And I think my next, as you can see from their press releases, they're building on that and we'll see how they do, as the months progress,

Therese Byars: SpaceX is increasingly launching heavier payloads. Will part of the AI infrastructure move from Earth to outer space to take advantage of lower temperatures and lower latencies? Latency?

Murray Stahl: Well, I'm out of my depth in answering a question like that. I can just tell you this, that the Chinese, I guess about ten or twelve days ago, peoples of Republic of China launched their competitor to SpaceX, which is known as thousand sales. So SpaceX, I think is supposed to have 7000 low Earth orbit satellites, 19,000 sails when it's finished, is going to be something like 14,000 or maybe 16,000 satellites. I don't recall exactly what it's going to be. Will the critical data of the world move out to space? I very much doubt. It may well be that you get free cooling because you're outside the Earth's atmosphere. That's good. The trouble is you've now got to project the results of inquiries down to base stations on earth, so all your secure data can be intercepted by anybody with a high quality antenna. So I don't think any corporation is going to have really secure data, and I don't think any person is going to want their Social Security number or their credit card number. Is it a bank account being beamed off satellites? Because any rascal could pick it up. So I think it's got to be secure. I think the only way to keep it secure is landline. So I don't think they're moving any of that data center business to space. That said, there may be computations that are very complicated that might be worthwhile doing in space, but nothing that's data proprietary, I shouldn't think.

Therese Byars: The next question has a long prelude. Management has proposed that index ETF's are becoming the marginal price setter in the market. The 2023 second quarter Horizon Kinetics commentary asserts that if index funds had, quote, begun in direct contravention of its purpose to directly change clearing prices and the very character of the markets it purported to free ride upon end of quote. An element of this idea that I'd like to ask about is whether management could recall here any data on the proportion of average trading volume in major index stocks that is directly attributable to ETF creation and redemption activities versus total market volumes, as opposed to secondary market grading of ETF shares which do not cost buying or selling of the underlying shares. One would think this proportion should be quite large in order for index funds to be price makers rather than price takers. My understanding is that share creations and redemptions in passive index strategies are responsible for only a small amount of total market trading activity. A 2019 Vanguard study, which management can find as titled quote, a drop in the bucket indexing share of us trading activity, end quote, concluded that only 5% of average trading volume in major index stocks is directly attributable to ETF creation and redemption activities, though I'd note they only use a single year of 2017 data. What evidence supports management's idea that ETF's set prices, given their apparently small contribution to total trading activity?

Murray Stahl: Okay, well, first of all, it's a good question. Let me start. There's a lot I can say. Let me start this way. That study is designed to answer its own question in the way it's supposed to be answered. So you can't merely look at redemption and creation baskets and then take the ETF trading itself and ignore it. So, for example, let's take the most widely traded ETF, what I believe is the S&P spider symbol SPY. And I don't remember the number, the number of shares traded off the top of my head every day, but I think you can look it up in minutes and you can see that it wouldn't take very many days before the entire spy changes over. So to say that the trading of SPY or the Vanguard ETF VOO also S&P 500 or the iShares S&P 500 ETF IV has no effect on security prices when it's the major share of New York stock chain trading volume. So the problem with that whole analysis is we'll go into it deeper in a second. So basically, say there's volume of X on the YRC stock exchange, and then you look at the creation redemption basket, say it's really only a small proportion of the volume. And you don't look at the major components of New York Stock Exchange volume are the trading of ETF's. There's no question about it. And I could give you many, many more ETF's to look at. You could look at QQQ, there are many others, and basically take all that ETF trading and put it into the column of the active managers when it's all indexed. To actually do that, I think that completely misses the mark, if I may say so, that's number one. So to do a proper study that way, you'd have to add the trading of the ETF's, because those are the stocks. So it's not that people create and redeem baskets, it's that they trade the indexes as if they are stocks. And in point of fact, they actually are stocks. Say that that index trading does not affect security prices. I mean, how do I say this politely? I don't know how to say it politely. It's an escape from reality. I'm sorry for expressing it that way. I normally don't say things like that, but it really is. And let's look at it another way. So if you were to look at it in terms of the assets under management of indexes, so for example, index providers, which is S&P Global, or MSCI or Russell, which is owned by London Stock Exchange. On their websites they give you what their assets under management are, meaning how much indexed investments, what is the market value, the index investments that are managed in accordance with their indexes. And it's an incredibly big number. I put it in one of the compendium. I remember which one it is and I remember a number off the top of my head. But I'm willing to bet whatever I said, it wasn't that long ago. I'll bet it's bigger today. So now if you take that figure, which is, it's a big figure, whatever it is, look at your trading volume. How could you come to any other conclusion then? The theory that's a drop in, that's a drop in the bucket is ludicrous on its face. So that's my response.

Therese Byars: Hey, in September of 2022, Horizon Kinetics published an article called Mining Economics and what drives the Bitcoin price volatility versus information efficiency, where they link the price of Bitcoin as being led by the price of ASIC mining rigs. The piece includes a graph that compares the price index mining equipment with the price of Bitcoin from dash dot hashrateindex.com, which seemed to show a strong correlation from the start of 2022. However, since January 2023, we've observed a significant divergence in this relationship with Bitcoin's price rising substantially while ASIC prices have remained relatively depressed and stable. How does management reconcile this apparent breakdown in the correlation that supported the thesis in this article? Has management's view on the relationship between mining economics and Bitcoin's price changed? Furthermore, how might this shift impact FRMO's Bitcoin or rig purchasing strategy moving forward?

Murray Stahl: Okay, well, first of all, I don't believe I wrote that. I don't know who wrote that. So somebody wrote it, but I don't think it was me. So let me just. I don't think it requires correction, but it requires some degree of explanation. There are three vectors that really govern the price of Bitcoin. So one is the halving. So every four years, the block reward gets cut in half. And if you want to look at it this way, if you want to mine the sand mineral coins, assuming the equipment isn't any better, you got to get twice as much equipment. But the thing is, the equipment does get better. So in order to understand what that's all about, you have to look at how much electric power the equipment actually uses. The equipment of today uses electric power much more efficiently than past years. But on the other hand, there's more mining rigs. So put all those things together, and that's really what drives the Bitcoin price. The most important vector, I would have to say, is the havoc so the equipment, it can affect the price. So, for example, if for some unexplainable reason, the equipment prices were to drop tomorrow, Bitcoin would definitely drop the reason that the equipment prices don't shift the way they did historically. And that's probably what you're referring to in that graph, whoever it was that did it, the person who did that graph is probably unaware that starting around the end of 2002 or the beginning of 2003, Bitcoin device prices established what is effectively a futures curve. So if I put an order in for an s 21 today, I'll pay X dollars for it, whatever that number is. But I can, as an alternative, say, I don't want to put an order in today for, let's say, December delivery. I want to put an order in for January delivery. They actually refer to it. It's not a real futures market, but when people talk among each other, they refer to it as the futures curve or the futures market. So you combine machine, futures market, device and futures market for January delivery, and the difference between the price for delivery ASAP, the price in January, is the amount of money you would have made in the interim difference in getting delivery ASAP and waiting till January for delivery. You'll see it's actually pretty efficient. So what's happened is the vector of the change in mining prices has now become completely predictable. And that's something that, if somebody is going to update that, that graph has to be taken into account. But it's not to say that there's no correlation between the price of the equipment and the price of Bitcoin. It's really not the price of the equipment. It's how much equipment you need to get the desired result, to get the desired outcome, how many coins you wish to mine. So, I think, had the graph been expressed that way, I think you look at it in a different way. But again, I don't believe I wrote that. I don't recall writing it anyway, so I hope that's a good answer.

Therese Byars: You said there were three vectors, and you mentioned one, I think, unless I missed the other two?

Murray Stahl: No, there is. There is the having, which is every four years, they have. There's the. The price machines, and the third one is the hash rate, or better set difficulty coefficient. The reason I say hash rate. I'm going to define these terms in a minute. The reason I say the hashrate is because the hash rate is easiest to understand. The hashrate is the aggregate computational power of the system mining device. And add up with computational power. Is some more powerful than others? Some are earlier, some are later generations. They have different computational power. Add it all up. That's the hash rate and the hashrate right now, or at least I looked an hour ago, so I'm not looking now, was 711 Exa hash. Exa means one followed by 18 zeros. And the reason I use that term, hashrate, even though it's a common industry terminal, reluctantly, I use it because when I say, yeah, you're a computational power to system, it's easy to understand, as opposed to the difficulty coefficient, which is harder to understand what you get to in a minute. So, yeah, every understand. Okay. I have all these computers. They have a certain processing power. Add it all up. I get it. The trouble is that they don't really get it, because this hash rate number is nothing. That there is an electric cable connecting every device in the world. That number, the hashrate, is an estimate. It's an estimate. It's a good estimate, but it's only an estimate, and it can be off. Sometimes the estimate is based on how long it takes to solve the block. So you have two weeks, basically a block song activity before they recalibrate. Something called difficulty coefficient, which I'll get to in a minute. So, during those two weeks, a block can be solved in ten minutes. A block can be solved eleven minutes. A block can be solved in eight minutes. Well, if they're solved in more than ten minutes, the difficult coefficient is going to decline. If they are solved less than ten minutes, difficulty coefficient is going to go up. And the computer estimates difficulty coefficient is. And at the end of that period of time, the computer comes up with numbers. So the hash rate is estimated. So I use it with a little reluctance, because I know people are going to think that they're going to say that, well, this is what the ag computational power system is. As if we had all these devices, all these servers within our control, we can actually measure it precisely. We can measure precisely. So, basically, if the blocks are being solved in eight minutes instead of ten minutes, we're going to assume that the hash rate computational power system went up by 20%, when in reality, it might just be randomness. Why is it randomness? Because the solving the block amounts to guessing a number. You're trying to guess a number. That's what you're trying to do. There's no fancy math involved. You're trying to guess number. Now, what is that number? Now, once you understand what this number is, you'll understand difficulty coefficient. So, basically, you're trying to guess a number, and what's called the Sha SHA stands for secure hashing algorithm. Algorithm. The SHA 256. The SHA 256 algorithm. What does that mean? That means that you have to guess a number that's 256 digits long, everywhere, from 255 zeros and a one to 256 9999. So the total number of values you can get is more than the number of grains of sand on this planet. So it's really a big number. So you would say, that sounds pretty secure. And when people say that, other people say, yeah, but what if you get more powerful computers? Like what if you get, like a quantum computer and couldn't guess it? Couldn't computer guess it a lot faster and thereby hack the system? And the answer to that is, yes, but it's not a problem. Why isn't it a problem? Because there's something called difficulty coefficient. Difficulty coefficient is just a coefficient in number. If you multiply the SHA 256 number by to create increased number of possibilities. So, for example, if you want to double the number of possibilities, you could multiply this huge, vast number by two or by three or by four or by ten, and so on and so forth. Right now, the difficulty coefficient exceeds 95 trillion. So this number, this 256 digit number, that is this vast number of possibilities, you take that and you multiply by, I believe it's 95.2 5trillion. You create many more possibilities. So. But you can know. But you can never get to the end of infinity. You can have infinity times infinity. So no matter how powerful the computers that are devised, you can always come up with greater difficulty coefficients. So I probably gave you more information than you want on how this whole system works, but I hope I addressed your question in the event.

Therese Byars: I recall that Mister Stahl once mentioned in the fiscal year 2022, third quarter call that he did not see much value in Bitcoin developers pursuing scalability or medium of exchange technologies such as the Lightning network. If the price of Bitcoin is ultimately linked to the price of mining registers, as management has published articles about in the past, would greater commercial and practical utility not drive greater transaction volumes and teas, and thus greater Bitcoin dominated net present values for mining rigs that would raise the price of the rigs and Bitcoin alike posed another way. What does management see as being the essential factors that drive mining rig value and thus Bitcoin prices?

Murray Stahl: Okay, so to begin with, I just said, and I just want to reiterate this, that the Bitcoin price is driven by the difficulty coefficient, it's driven by the price of the equipment, it's driven by the difficult coefficient, is driven by the hash rate, the price of the equipment, and by the halving. Those are the, the vectors. There are three of them. Those are the important things. Now, you might say, well, wouldn't it be great if you wouldn't have the block size limitation? The block size limitation, incidentally, for those who don't know what it is, when Bitcoin was designed, it was designed to have a four megabyte block size limitation. That means there's only so many transactions you can fit in a four megabyte block. That's it. So now, a lot of people, when they say, we got to get the scalability, well, we're going to have a lot of transactions. Those transactions then can fit into the four megabyte block size. So let's expand the block size. And there are many people propose that. And the Bitcoin holders, or Bitcoin miners, and the Bitcoin holders, or the Bitcoin community, if you prefer that phrase, Bitcoin community, and I include myself in that, it's 99.99% fanatical and does not want to even slightly increase the block size. Just don't want to do it. And every effort to create a fork to modify Bitcoin to increase the block size has met with unbelievable opposition. When I say unbelievable opposition, 99% plus, well over 99% don't like it. Why don't they like it? Because one of the reasons that you have hacking on the Internet and all these digital payment systems is because for all intentS&Purposes, they have unlimited block size. So in Bitcoin, one of the things I should have said is it's a four megabyte block size, and you only have ten minutes to solve the block. So basically, you got to get there first. And you can't have a computer that keeps trying to guess numbers forever, because sooner or later, someone's guessed number and be able to amend the block in the way that you don't want to happen. You will make it really, really difficult to validate a block. So the amount of money you spend on electric power is going to be more than the amount of money you can get if you're going to pursue some type of nefarious plan. And so far, Bitcoin's never been hacked. That's why everybody opposes it. So when I oppose it, too. So the last thing we want is scalability. So the way Bitcoin is evolving thus far, and as I said, it might change the way it's evolving thus far. And I'll refer you to some statistics. You can see this for yourself in a moment, that Bitcoin is evolving in the kind of system where you don't really want to use Bitcoin for a small transaction. You want to use it for a relatively big transaction. So if you want to send $2 to your friend or you want to buy a cupcake, Bitcoin is not for that. You could theoretically do it. It's not designed for that. Designed to transfer large amounts of money on a secured basis. So the dollar volume of Bitcoin is the biggest of all the cryptocurrencies, I believe. If I'm not mistaken, the dollar volume of Bitcoin every 24 hours is comfortably in excess of $24 billion. So 20, to give you an idea of what that number is, it's probably more than the volume of Apple (NASDAQ:AAPL). It's the biggest stock in the S&P expressed in dollars. Now, I'm not looking at these figures, so I may be a little bit off, but $24 billion is a big number. If you're interested doing small transactions, chances are you should go to another cryptocurrency that has the Bitcoin protocol. But it's set up for that because it solves the block more frequently. An example might be litecoin. So litecoin recently is doing. Litecoin, by the way, has a fraction of marketabilization Bitcoin. Bitcoin is like one point trillion plus markabilization. Litecoin, on a good day is $6 billion, if it's even $6 billion. So it's a tiny fraction of Bitcoin. But however, having said that, litecoin does, in volume about $4 billion a day. So assuming in round numbers is $6 billion mark cap, two thirds of it is trading every day. So for small transactions, Bitcoin has a block time of two and a half minutes. So you like that sort of thing then litecoin is the thing for you. Or if you prefer, and some people do prefer, you might wish to try dogecoin. Dogecoin has a more expansive monetary policy than either Bitcoin or litecoin, but it's not all that expensive. And the problem with dogecoin is doesn't have anything remotely close to the transactional volume of litecoin or Bitcoin, but it does manage to do a couple hundred million dollars a day. And some people have said, I don't know if this has any truth or not, but some people have said it seems reasonable that it's possible that what was once known as Twitter and is now known as Xdev could find a use case for dogecoin by making it the transactable currency in that social media. So you want to exchange value. Maybe it'll be dogecoin, maybe won't be, I just don't know. But that's a possibility. So Bitcoin was never designed to be all things to all people, and I don't think the holders of Bitcoin are ever going to accept that. There seems to be no evidence for that. And if they did accept it, if then the people who are purists, which at the moment is way over 99% of them, going to go to another cryptocurrency, and you'll never stop the Bitcoin people because they modify Bitcoin. If somebody actually did it, the purists will just have unmodified Bitcoin because it's all open source code. So nobody's stopping the, the innovators. If the innovators want to have a much bigger block size, they can create a fork and they've done it already several times, and they can invite people to use it. Well, every time they've done that, they've done it, I think, half a dozen times. Nobody comes and use it. Now I say nobody. It's virtually nobody. Some people do want it, but it's minority. So I guess that seems like what I have to say about that subject. So what's next?

Therese Byars: Regarding one of FRMO's smaller ventures, venture investments, how does diamond standard solve the logistical and security issues with a physical coin or other asset that is supposed to be tracked on a one to one basis on a digital blockchain, for example? It doesn't seem like anything stops someone from physically tampering with and removing the diamonds from the coin or bar from the resin itself and replacing them with fake diamonds before trading the physical asset, etcetera. Is it physically impossible to remove any diamonds from the physical asset without such tampering being detected by the onboard technology? What happens in issues of disputed tampering?

Murray Stahl: Well, what there is, there's an RF code that goes with it. So if you. You can certainly break the resin open and you're going to damage the transmitter, and I don't know how you can get around that. So that basically makes the coin automatically unauthentic and in any way. The Gemological Institute of America will not honor a gem certificate certified by the Gemological Institute of America. So if you mess with it, I don't think anyone's going to validate that. So I don't think that's a realistic risk. I wouldn't worry much about. It's very hard, by the way, to counterfeit diamonds. So you can always. If you were doing things like that, someone could bring a ring in to be engraved. It's a diamond ring, and it's happened. They take out the stone, they put in a much less valuable stone. The average person wouldn't know, but that's what you have appraisers for, so it gets detected pretty fast. Incidentally, you have forgeries, and I wrote about this recently. In the world of art, it's actually more common than you believe. You also have forgeries. In the world of rare wines, it's also common, but it doesn't stop the wine market, doesn't stop the art market. I don't think it's going to stop the diamond market. With modern technology, you can validate all these things.

Therese Byars: Okay. During the 2023 shareholders meeting, a question was brought up regarding FRMO's stake in the Ren fund and a large holding of the fund in Apex Medical, as well as some questions about the history of that CEO. That company's CEO, Charles Goodwin Management, revealed that there was an informal promise not to sell Apex without the agreement of the prior fund management. My question is, is that agreement expected to last indefinitely? That is, is there no corresponding informal expiration on holding that company? Like, say, if the investment doesn't work out within some period of time? By my accounting, the company has not had positive return on equity or return on invested capital since 2013. And it's not improved much while being held in the funds or since HK Horizon Kinetics has taken over management of Ren at what point does fund management have an overriding fiduciary duty to deal with the position based solely on its fundamentals on behalf of other shareholders?

Murray Stahl: Okay. To begin with, Horizon is solely responsible for success or failure of that position. If we feel like selling it, we're totally at liberty to sell it. We could sell it tomorrow. If we feel like it. If we want to keep it, we can keep it. So what happened to that company? Is the, the chairperson that you note resigned on a certain day in May, and a new person took the helm and is developing a very different marketing plan. The problem the company really had wasn't in technology. Technology works well. The problem is in marketing. So what you really want, ideally, is there are these renewable. I don't know what the right word is. There are, I'll call them applicators. I don't think the company would call them applicators, but they're applicators. So basically it's a skin treatment and you need this applicator. What the applicator basically does is it burns away the top layer of wrinkled skin and the technology actually works. Actually works very well. So if it were used more frequently by people, then basically you can't reuse the applicators. You'd sell more applicators and therefore return on investment, from everybody's point of view, would be a lot higher. So the really marketing challenge is to tell people about this procedure, and it has an amazingly high success rate, and the people use it more, which is great. So this person who took office recently, the person is a marketing specialist, and the person has developed a plan to address that issue. That person came in May, this is October. We got to give the person a chance and let's see if the person's going to be able to succeed or fail. So it took a few months to develop the plan. The plan was deployed in late August, early September. The little information I've had so far is it seems to be working well. Let's give the person a chance. If it doesn't work well, we can always dispose of it, but we're at liberty to dispose of it anytime, including tomorrow, if we are such, if we are so inclined.

Therese Byars: Okay. Management has expressed the intent to convert FRMO into a crypto mining business, eventually plans to list to a higher visibility exchange, and has recently added the company's direct digital asset ownership in its most recent quarterly filings. Given the intended direction of the company, would management consider providing look through reporting of FRMOs or Windlands broken down, or aggregate mining metrics such as hash price, hash rate, energy cost from its mining operations, and hash rate capacity factor of rigs. Other public crypto mining operations such as Terrawolf report such metrics, and having these metrics reported by FRMO may be useful in analyzing differences in trading multiples between FRMO and other miners. For example, this would allow derivation and comparison of things like operational costs and Bitcoin revenue versus hash rate, and understanding where various public operators stand along the cost curve in relation to FRMO.

Murray Stahl: Okay, no problem providing any of that information. I'm certainly willing to do it. There is some other information that you're going to get that is none of those figures. It's just additive. We're not going to hide anything. There's some other information that you're going to need to properly evaluate, and you can get that information too. So give us a chance. Right now we're in the process of improving our operations. It's pretty good right now. In 90 days, I suspect it's going to be better. Can't guarantee that, but I think it's going to be better. And we're ready to provide any and all information. And I think when you compare it to other firms, I think you'll be very pleased with the outcome. But I'm delighted to provide any information that people want. There's no secrets here.

Therese Byars: Please explain how Horizon Kinetics holding corporation, being public, will impact FRMO financial statements starting next quarter and what it would mean today. Based on latest Horizon Kinetics Holding Corporation fair price offers of about $24 and last reported financials?

Murray Stahl: Well, it doesn't impact the financial statement as such. The numbers you see in a financial statement, because we can continue in horizon to use the equity accounting method. The only difference is that you can figure out from the financial statements what percent we own a horizon kinetics. You know what the market capitalization is. You can take that percentage and multiply by the mark. Capitalization. You can see what the market value of horizon kinetics position is, if it's bigger or smaller than what we carry on the balance sheet for. So you can get a different look, doesn't mean it's a better look. You can get a different look than you can get by just reading the financial statement. We didn't bring it public for that reason. The only reason we borrow public is that one of our founding members unfortunately died and the estate has to be settled, and the estate needs the money. So the fairest way to value it for estate purposes is the market. You might like the price. You might not like the price. That's the fairest way. And that's the story. Basically, horizon mechanics didn't need any capital, was looking to raise any capital. It's got plenty of capital. So that's actually what happened.

Therese Byars: Steven, Then what dividends shall be paid by, I'm going to call it HKHC, for example, quarterly dividends and a year-end extra. Perhaps it is obvious that HKHC earnings are dependent on whether performance fees are owned by how many hedge funds, which can only be determined at year end of the funds. Fiscal years are the fiscal years. Are the years fiscal or calendar? What is the total approximate market value of how many hedge funds HKHC manages today?

Steven Bregman: Okay, to begin with, we're on a calendar year, so you'll find out the performance fee at the end of the year. I guess you'll find out in January. We'll find out on December 31. We intend to pay a quarterly dividend and we get a performance fee. They'll probably be an extra dividend. We're a publicly traded company can guarantee there's going to be a performance fee. But where the board's going to meet, look at the financials and we'll decide what the dividend is going to be. And there'll be a public announcement, whatever it is. And if we're so lucky to have a performance fee, you'll know. And there may be a dividend associated with that as well. What is the market value of all the performance fee products together? I don't know it off the top of my head. We could probably get you that number. Just understand on the performance fee, there's two dimensions to it. So we have funds that hold private securities that we accrue a performance fee. We don't realize the performance fee. So if the investment were to be realized, we would collect probably several years of performance fee in one year. That could actually happen. So I'm reluctant, off top of my head to give you the number because I don't remember it, number one. And so it's going to be inaccurate. So I don't want to do it, but it's no secret. I mean, we can get you that number. And the second thing is, when you look at that number, you're going to have to divide the performance fee eligible funds in two categories, those that accrue and collect the performance fee yearly because they're publicly traded securities, and those that accrue but do not collect the performance fee yearly because it only can be collected when there is a realizable event. So you'll need that information and I guess rise mechanics will provide it because people are probably going to want it.

Therese Byars: What is the year-to-date performance, percentage of these funds?

Steven Bregman: Year, date, performance. Well, again, I don't want to quote the number because I don't remember the number off top of my head, and I'm sitting, I'm not sitting here with a sheet of paper that has a number on it. Let's just say the number is satisfactory. And I'm sorry to be so vague about, but it's all I can do at the moment. I don't have a number in front of me, but we'll get you that number.

Therese Byars: Do all of the funds own TPL? Texas specific Land Corporation? And if so, how many shares of TPL are in these performance funds?

Murray Stahl: Okay, again, I don't have a spreadsheet with all those numbers. I never really needed it myself. We can get you all that information. Horizon is probably going to be asked all those questions, and it'll provide all sorts of information. Not all the funds have TPLed. As an example, I alluded to earlier, we have some private funds. TPL is a publicly traded security. If we have private funds, we own privately traded companies. TPL is not going to be included in that. So TPL is not in everything. But they give you the actual numbers? Off the top of my head, I don't have them. But I'm sure horizon and due course will produce all that information. Remember, that's a horizon. Those are horizon statistics. Not necessarily FRMO statistics, but I'm sure they'll produce all that, all those numbers.

Therese Byars: Another TPL related question. How many shares of TPL does FRMO own today? I actually looked it up, around 230. And it's. If you want me to disclose this?

Murray Stahl: Well, if you looked it up, then it should be disclosed. Right? Let's disclose it.

Therese Byars: Okay. It's 24,024 shares at Fidelity, and I don't know.

Murray Stahl: Are you sure? Are you sure? I don't think that's the number, Therese. I think you're wrong about that. Oh, you know what? I didn't include Bromax either, so you're right. Well, that's number one. And number two, you have to include the proportional shares that we own indirectly through the various funds, which is on that sheet of paper that you normally provide, which I don't have right now, but supposed to be on the website. Is it indeed on the website.

Therese Byars: I believe it is. And if it isn't, we'll make sure it is.

Murray Stahl: Why don't you look at. Why don't we take a deep breath? Why don't you look at the website and read the numbers and the date they're accounted on, and we can give everybody information.

Therese Byars: In the meantime, I can give you another question. Same question.

Murray Stahl: Okay. While you're looking at number, let's not go to another question. Let's deal with this question. In the meantime, while you're looking for that number, I will tell people, this is why I don't keep these numbers in my head, because as you can clearly see, even if you have spreadsheets in front of you, you can read the wrong line. It's not as easy as you might think. There's a lot of numbers to keep current with, and it's easy to confuse one number with another number. So that's why it's best to have a website where a separate human being, or I think it's a team of human beings, calculates these numbers. And that's why we have the website to provide people these numbers, which I'm hopeful you'll be able to find those numbers presently, how you come in.

Therese Byars: I do have the number from that spreadsheet. I am getting it from our files, but I'll make sure it's on the website.

Murray Stahl: Okay. Is it on the website? Now, let me ask you. Okay, that sounds right. So what is the number? Let's repeat that number. What's the number?

Therese Byars: 100. 159,101.

Murray Stahl: Okay, that sounds. Now, that number lets us specify if that's indeed the right number. Where are you getting that number from?

Therese Byars: From the spreadsheet that we had. We had for this quarter for the…

Murray Stahl: Okay, and what is the board looked at?

Therese Byars: That's what we would put a…

Murray Stahl: I understand, but what is the date? It's what month? And date?

Therese Byars: It is as of August 31, 2024.

Murray Stahl: Okay, and what does it say? What is the heading of that says, does this say our proportional ownership? Does it say. What does it say? Because it's not our direct ownership. It would have to be our direct ownership and our proportional ownership.

Therese Byars: And that's why you're the CEO.

Murray Stahl: Because what you might be looking at, Therese, just that's why. Be careful. What you might be looking at is you may be looking at the number that includes all of the shares of HK hard assets. And not all the shares of HK hard assets belong to FRMO because there are other investors. HK hard assets. So you might not be looking at the right number.

Therese Byars: I'm looking at held indirectly through public and private companies. So it's proportional. But I was not including what's held directly. So that.

Murray Stahl: Why don't we do this. Okay, well, go ahead, say what you have to say.

Therese Byars: Add the child directly. That number is indirectly proposing.

Murray Stahl: Okay, well, why don't you give the indirectly and directly number? Give both numbers and people can add them up.

Therese Byars: Okay.

Murray Stahl: What is the direct number?

Therese Byars: Directly. Direct number 29. 29,514. And the held indirectly, this is proportionally calculated is 159,101.

Murray Stahl: Okay, so our total ownership is obviously a sum of those numbers. Okay, that's good. Okay, what's the next question? I hope we addressed.

Therese Byars: That same question regarding land bridge. And with respect to that, did any of the above or any of the HKHC entities purchase shares at the $17 offering price? With respect to shares of FRMO, the hedge funds HKHC, of which we own almost 5% shares, is that correct? And purchased ELK Landbridge shares at what cost today?

Murray Stahl: Yes. Well, we obviously purchase shares on the initial public offering. We purchase shares subsequent, we have a certain number of shares and there's some spreadsheets somewhere that will tell you exactly how many shares we have. And if you have that, you can read it. If you don't have it, that's fine. I don't have it. Okay, well, it didn't come up in a spreadsheet because now someone's asking and I guess it's their number, you'll have to put on your spreadsheet so you can go back to the team, let them calculate those numbers. If you don't have number shares, obviously the other answers to question you couldn't have as well. So you'll have to gather that information.

Therese Byars: Okay. HKHC appears to have allocated the $80 million worth of land Bridge acquired at $17 to all of its investment advisory clients. Is that correct? What is the average fee a HKHP earns net on the investment advisory accounts? It is obvious that land bridge shares have tripled in price and value, and so will be a very meaningful source of HKHC revenues & profits, and hence book values, each of which we own almost 5% interest positions. At the same time, if HKHC is going to pay a dividend, and particularly a special dividend at year-end, or will it be next year in the first quarter, we FRMO should actually receive a meaningful amount of cash from dividend payments. Bottom line I am trying to get at, it's clear that the assets of HKHP manages, that the assets that HKHP manages should have meaningful positive revenue and earnings results the way things are going in the markets. And therefore, FRMO investments and revenues and net worth of HKHC could be significantly benefiting us

Murray Stahl: Okay, so let me just start by saying, so when we purchased $80 million of land bridge, it wasn't all our money, it was also purchased. A lot of it was on behalf of the clients. So as per how much was given to the clients, how much do we have in each HKHC and FRMO and etc. Etc. Etcetera. I don't have that number to hand, as you heard, but they will make every endeavor to get you that information. Now, in terms of directionally, you know, the earnings of rise mechanics, let's say this. I said something similar at the annual meeting. So really from 2007 to maybe the end of 2023, a period of, let's say, 16 years as a value investor, we made money. But relatively speaking, as a value investor to other investments one could have had, let's say, mega capitalization technology investments. We underperformed. We didn't underperform each and every year, but viewed cumulatively over 16 years, we did. So that affected our asset gathering and also affected the market value of the assets upon which we can charge. That changed depends on what month you want to look at it. But at some month in 2024, what month was it? Reasonable minds may differ, but it's gotten a lot better. So why has it gotten better? That's one question you might want to have, which I'll address momentarily, and why didn't we do something sooner to address that? And I'll address it right after first thing, why has it gotten better? Because the amounts of assets that had to be gathered to build data centers, it's in trillions of dollars just in the United States, America. But that doesn't measure it because data centers are worldwide phenomena. So it's some incredible amount of money that's going to be spent over the next five or six years. And beyond that, no one can see, except the spending will definitely not end five or six years from now. So that's going to put a severe strain on all kinds of hard assets. That's why we're positioned in hard assets, because that was our forecast and it finally came true. And that explains at least 2024 performance. So you might ask, well, why didn't you, in the interim, buy the other things, sell them at the opportune moment in, or swap them for the hard assets? Perhaps not entirely, but largely since the mega capitalization technology stocks are extremely liquid. Why didn't you do that? Well, the couple answers. That first answer was, we didn't get it right. We thought the meg capitalization technology trend was going to end in 2019 to 2020, and we might have been right were it not for the fact that a small thing like the corona virus happened. That led to the work at home movement and education, home and all sorts of things that probably nobody could have predicted. And that gave the technology companies an extra three or four years lease on life that prolonged our period of less than desirable performance. And the second thing was that even had we executed perfectly, wouldn't have helped us at all. So you might find that an astonishing statement. So I'll try to defend it that basically, in order to outperform the S&P 500 with technology, you have to have more technology. S&P 500, that's pretty obvious. So in round numbers, if you looked at the S&P tare sheet today, in round numbers, going to ignore decimal points, the S&P, the way it's calculated is 32% weighted in technology. However, I don't calculate it that way. I calculate that number is 42% in round numbers. And how dare I argue with such an obvious calculation? Well, because Facebook (NASDAQ:META), now known as meta platforms, and Google (NASDAQ:GOOGL), now known as Outlet and Amazon (NASDAQ:AMZN) are not included in technology group, even though everyone knows perfectly well they are the largest factors in the data center movement. So Amazon is in the consumer discretionary sector, and meta platforms now bet in the communication sector. So technically speaking, the manner in which it's calculated, it's not technology, but it is technology. So now you're at 42%. So you might say, well, why didn't we put 50% in technology and beat it? And we would have beaten it, but it would have helped us. Not at all. Why? Because no one would have compared us to the S&P 500. We have 50% technology, and rightly so. We would have been compared to technology funds that are 100% technology. We've underperformed anyway, so it would all have been for naught. We knew that in the beginning. So it was a very difficult period. And sometimes you just have to accept that. Not that we didn't make money for our clients, it's just that we weren't going to alter ourselves that way. In larger. The largest part of our money is high net worth individuals. They're all taxable. And then at some point we had made this transition and would have paid a huge tax bill. And to what end? Now, if you look at the funds and the mutual funds, at least publicly traded, look at it, you can look at it right now, look at our record relative to the S&P. And I think that the record speaks for itself. So you can look at the return up to September 30. That's the most recent numbers that are there. It's on the website. You can look at it. I think the returns at a paradigm fund or small capitalization fund as examples. I think they speak for themselves and you can be the judge whether, whether what we did was smart or not. But it was. We weren't going to help anybody by doing a lot of trading and making everybody pay a lot of taxes. We probably wouldn't have had the returns we even had. That's the best way I can answer it. Anyway. They're ordered returns. You can look at them, they're no secret they are what they are and I think they're pretty good, if I do say so myself.

Therese Byars: Isn't it also because of the difference between our fiscal years and the calendar year of HKDE and the time lag and FRMO reporting the full results from whatever its good fortune, FRMO is not likely to see any of it until our fiscal fourth quarter and annual report ending in May. Please elaborate.

Murray Stahl: Thats not true. Were on accrual counting. In the event we collect the performance fee and there is dividend, we own shares, which is extraordinary. If we own shares of FRMO, we own shares of rising common, which we do. Weighing in, horizon Common, horizon Cannon, which we do, we're going to get that dividend and it'll be received at the exact same time everybody else receives their dividend and it'll be booked quite appropriately. Don't forget, in the case of FRMO, it's not just a rising dividend, there's also the revenue share. So it's a big performance fee. There'll be a very big revenue share. And now you judge. Now you can judge why we never wanted to change the revenue share or sell it. Because one day there was going to be a big performance fee and we would collect a lot of money. Now, we can't guarantee you it's going to be a big performance fee. If it is. If there is one, we're getting it when we're entitled to get it. And before we get we're going to be required to accrue it. So you'll see it in the financials.

Therese Byars: Okay, now several multifaceted question on data centers. Is it likely or unlikely to see data center construction in the permian basin of the multi million square foot variety? Most observers and many high tech firms seem to be saying there will be a need for ten times more data centers than presently exist in our country. Larry Ellison in his last conference call actually said he needs ten times more. Do you have any idea of whether that means 100,000 or 200,000 or 300,000 square foot data centers or two to seven million square foot data centers. Facebook already has a seven plus million square foot data center in Oregon, I believe. Won't size of the center determine how many will be needed?

Murray Stahl: Not necessarily. All I can tell you is data centers primarily, they're going to be built of the hyperscale variety. Hyperscale data centers are in the millions of square feet. If you think that's a lot, think again. Next generation is going to be Exa scale data centers, much bigger than that. It's hard to even visualize what they're going to look like. So the amount of data that's going to be needed to provide the services that people seem to want to desire. By the way, I'll interrupt myself by saying I personally, just speaking for myself as a human being, not for FRMO, not Verizon (NYSE:VZ), just for myself as human being. I have no interest in having any of those services personally. But that's just me. Everyone else seems to want it. So let me tell you why. No matter how many data centers are built, it's not going to be enough. So the data center model that we're working with is derived from the Internet model that we have. The Internet model we have is clearly an advertising model. So you Google something and you may or may not, that may or may not result in a purchase, but it's a financial transaction in the sense that people are paid just to direct traffic to different websites. That's why you have a term called traffic acquisition costs. So it might be the biggest business there is, online commerce. Okay. Now, so tremendous amounts of money are being spended to attract people to choices between millions, hundreds of millions of websites or web locations. So now let's do a hypothetical, just so you understand how much data is needed. You decide for your anniversary, you and your wife are going to attend a Broadway show. You're going to go to the Wednesday matinee because it's not that crowded. And you walk out of the Wednesday matinee and it's about 430 and you really enjoy the show and you want to have dinner. And there are all these dining choices in the city of New York. And it's not unusual to suppose that you and your wife might look at your smartphone and see what are the available dining choices? Well, the available dining choices want to market to you. In order to market to you, they have to know where you are. So you must have had this experience. You're looking at something on the Internet. You're texting someone or you're emailing someone and all of a sudden you get some type of notification. That's something you're very interested in, is available right nearby.Well, one of the things that's going to happen, actually, it's happening right now. You have 336 million people in America, and during the bulk of the day, they're using some type of handheld device and they're being tracked in their location. Their dining choices are being tracked, their purchases are being tracked, not for any nefarious purposes, just to sell more goods and services, or if you prefer this phraseology, to make the advertising dollars more effective. So think of how much data is required, and it's never going to end because your preferences are always changing and they're always learning more about you and your location is always changing. That in itself is virtually limitless. Think of all the transactions on New York Stock Exchange, all the information you can get from that. Think of all the financial information the Internal Revenue Service needs. Think of Federal Aviation Administration that not just wants to track every aircraft that's in the air, but wouldn't it be great if they could track all the birds that are in the air? Because every now and then a bird gets into an engine, causes a plane crash. So if the FAA through radar could track all the birds, we'd have safer airline travel. So more accurate predicting of weather requires more data go on and on and on like this. The amount of data that's required is limitless. So here's a statistic I gave someone the other day. They were shocked. And but if you count self published books, because now you can on Amazon, you can publish your own book, you don't need a publisher. How many books yearly are published in the English language books? Typical book is 350 to 400 pages. The answer is somewhere between four and 5 million. And they're all online. Can you imagine how much data that is? It's so much data then nobody can ever read them all. Even the entirety of population couldn't read them all. So what can you do? You have to read them through devices, and devices need to summarize them. That's chat GPT. Then how many scholarly articles are written? How many tweets written? How much social media, Instagram chats, text, emails, videos, people take photographs, security cameras, etc. Etc. Etcetera. What establishment, whether it's entertainment or dining or shopping or education, airports doesn't have a multiplicity. Security cameras and the video is data rich. You never know when it's going to be needed, but it's cumulative. It's constantly being added to the system. So it's mind boggling how much data there is. It's being added, so let me just quantify it for you. The numbers I'm going to give you, they boggle the human imagination right now, according to the people who claim to know this subject, we have in the world today stored, and it's increasing, we have 100, what they call zettabytes. Zettabytes. What's a zettabyte? One zettabyte is a trillion gigabytes. So that's how much we have right now. And the people who claim to know this subject project that six months from today, we're going to have 200 zettabytes. That's in six months. So it's an astonishing amount of data. Now, where is this stored? On servers, obviously, where these servers, they're just big electromagnets. That's basically what they are. And they're constantly on because they had to be constantly on because you never know when someone's going to want data. So, and then even if you could turn it off for a while, the energy cost of turning it back on and powering up that system is more energy cost is leaving it on perpetually. So it's on perpetually. And the energy requirements to run the system like that globally is mind boggling. So it's going to have its impact on commodity prices, particularly the price of natural gas. She's going to end up being the fuel of choice. And that gets back to our earlier question, why we're positioned the way we're positioned. Because the river was flowing in a certain direction, was coming to us, so we had to do is wait. We didn't have to do anything, really, and we didn't. It's called intelligent inactivity. So it's incredible what's happening in the world. Now, having said that, I started this answer out, that speaking for myself as a human being, I don't require those kind of services. I'm personally delighted to go to the library and sit at desk, New York public Library and read the hard copy. If I really want to go to the movies, I'm happy Saturday night to go to the movies and watch what comes on the screen. I don't need to have Netflix (NASDAQ:NFLX) at 03:00 a.m. but I'm one person. That's not what the world wants. So you might call it progress, and maybe it is, and that's the direction the world's going, and it's going to go there. Whether I object to it or not. I don't personally object to it, I just don't participate in it. But that doesn't mean the rest of the world isn't going to do it. So it's incredible what's happening. It has a good side and it has a bad side. And the bad side, or one of the bad sides is going to be a insufficiency of resources, and not just for natural gas. More importantly, an insufficiency of water for cooling these data centers. And we'll see how far it goes. So sorry for the elongated answer, but that's the answer.

Therese Byars: Okay. Given HKHC is very significant, has a very significant investment in Landbridge, it is, of course, very clear you expect good things from that company. The company chairman made very clear his intention to have the company be home to data centers. Moreover, the majority of land bridge land only has surface rights. So the conclusion is obvious. In the case of TPL, that which should be obvious is by no means obvious. All the requirements for data centers would appear to be plentiful at TPL. Not just cheap land on which they can build, but not just plenty of water for air conditioning and gas to power turbines to generate electricity, but also on which to place windmills and solar collectors. Does TPL have markers seeking customers for data centers, or is their phone ringing off the hook? And if not, why? From all the companies that need ten times more data centers, as mentioned above, since Larry Ellison in particular just told the world that he needs what he needs, why wouldn't TPL have already been courting him and others? Why hasn't TPL made a peep with respect to data centers?

Murray Stahl: Okay, well, first of all, I don't wish to be, and I really shouldn't be the spokesperson for TPL on data centers or anywhere else. Let's just say demand is going to be extraordinary. And I don't think there's going to be any problems in having a great outcome at DPL, in my humble opinion, and I'm going to leave it at that. And those questions, which are really great questions, they're best addressed by the company, but I think it's going to have a great outcome. My personal opinion, and you know how much sock we own, I obviously believe that. I mean it sincerely. We'll see what happens.

Therese Byars: Okay. This is also about TPL and kind of related to what you said. I know you're not the complaint department for TPL, but I'd like to mention to you as an accessible insider today that when TPL holds its conference calls, they only last a little less than or a little more than a half hour versus every other company in the world that schedule an hour. An FRMO always relies time for all the listeners to ask all the questions they want to ask, even if it means reprising conference call, which of course, you have done. CPL takes questions from two and sometimes three so called analysts only that appear to be from institutions that frankly appear to be bottom ranked ones. The CFO and CEO who speak never allow any other questioners. And despite the passage of only 30 minutes, they don't even say, we'll see you again in three months, like every other company does. As a matter of fact, everything they say seems like they're reading from a script. As I say, you are not the complaint department. Would you do something to change the way these calls work and see to it that they allow more questioners with more questions to be tolerated? Please. The two top executives do act like they care not a lick, whether they make friends or positively influence people. Is the board aware of this? You don't have to answer, but you might share this information with this question with them. Ask them what the purpose of a conference call is when the two executives make it clear they have a strong distaste for taking questions quarterly from shareholder representatives or, heaven forbid, shareholders?

Murray Stahl: Well, to begin with, I don't think anybody company has a strong distaste for taking questions. I think everybody is interested in getting questions. I think every company appreciates interest in the company, and I know that to be true. And I don't think their conference call format is radically different than the conference calls that I see of the biggest capitalization companies. I'm on a lot of them, and they don't last any materially different amount of time than what you use a questioner have just described. So best thing to do is pick up the phone and call someone in management, and I have extreme confidence that they will engage with you and they'll get you an answer to your question. Speaking for myself and what I do. So I think, I think this is true. I believe it's true in the world of quarterly conference calls. I think, I think we hold a record for the amount of time we're willing to spend with investors and answer all manner of questions. So I'm prepared to stay here as long as I have to stay, and I'll answer any question anybody poses to me until you run out of questions. That's my practice. But, you know, I'm not faulting anyone else. I don't think that's the standard practice of the typical corporation. But again, I'm not faulting anybody. As far as TPL goes, I have every confidence they'll address any questions they receive. I think just pick up the phone and engage and I think you'll get a good response. It's my personal opinion.

Therese Byars: Okay. And the last question, by the way, when will HKHC be reporting its September quarterly results, and will you be holding a conference call, and when might that be?

Murray Stahl: Okay, we definitely are going to have a conference call. I don't know if a date has been scheduled yet, because I'm not the person who scheduled them. But whenever they schedule a commerce call, take my word for it, I will be there. I'll handle it in the exact same format. I will answer every single question. I think the way it works is the board first, you know, this is the first time they've gone through this exercise. The board reviews the financial results. The board. The order committee approves the financials. We approve the financials for release. There's going to be a press release, and then there'll be a quarterly conference call for investors, and you'll ask all sorts of questions. And even though I try to do my best to address everything, I may not necessarily have, as I had today, I may not necessarily have the answer statistically to every question at my fingertips. But we'll get you an answer. And eventually the way to deal with it is if they're important statistics, we'll do. We do an FMO, we'll have a series of tables. Be on the website, and you don't have to ask, it'll just be there. And if we miss something or you think of something that wasn't asked before, we'll put it up there. Because there aren't any secrets, really. You have every right to know, and I'm proud of it. And I like to give you the statistics. I have nothing to hideous, so I don't know what shareholders always want, but I'm happy to write everything that's within my power to provide. Just understand that I don't memorize every number. So I'm looking to give you a number I haven't committed to memory. With that qualification, I'll release everything and everything that legally is permissible to be released. Any further questions?

Therese Byars: His last comment was, thank you for taking my questions, Mister Stahl. We appreciate you and how you personally operate.

Murray Stahl: Okay, well, thank you very much for that compliment. It's high praise indeed. And so I think maybe I've been. Maybe I've exhausted everyone's patience, but if we. If you think of a question that occurs to you in the aftermath of this meeting, don't hesitate to get in touch with us. We'll get you an answer. And of course, we're going to reprieve this in about 90 days, and we're going to do an horizon mechanics conference call as well, and look forward taking questions. So thanks for being great audience, lots of very intriguing, great questions, and look forward doing this soon. Thanks very much and signing off now.

Therese Byars: Thank you, Murray. That's the end of the conference call. You may now disconnect.

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