FRMO Corporation (FRMO) Earnings Call Transcript

Good afternoon, everyone. This is Therese Byars 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 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.

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 2 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 our 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, you can see that our total assets, $548 million, that's a record for us in any 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. But if we did exceed it, 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 of 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. So 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 ETFs. And you see our cost basis comfortably exceeds $10 million and the market value is less than $1 million. It would be nice if we could carry that and never realize a tax, but there are 2 things about it. Number one, sometimes if these are exchange-traded notes or ETNs, some of these are exchange-traded notes, they have a 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 ETFs and they are not notes, and therefore, we don't have a maturity date as such. Those funds pass out K-1s to people, 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 that you hold, 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. The other 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 onetime 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 2. 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 Winland. So we do 2 things. One, we buy Winland in the market to gradually increase our exposure. But secondarily, of late, for most of the cryptocurrency mining equipment we bought, we basically swapped that. We buy new equipment, we swap it with Winland in exchange for shares of Winland that, of course, raises our ownership of Winland. The reason for the gradualist approach is 2-fold. 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 8 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've ever been. And I would say this year, the 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 8 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 and you could wait for it to depreciate, 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 in 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 the 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. And therefore, we have to be very careful not to put too much money into any one generation of equipment for 2 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 3 years, we ended up getting an economically useful life that exceeded 4 years, sometimes it happens, and being very fortunate in that regard. On the other hand, sometimes some other things happened 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, and then effect of 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 there 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 and sometimes these things happen. Here's something that we probably could not have predicted, but happened to us. We have diversified our equipment into a variety of different hosting sites. In 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. It wasn't destroyed, but it 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 is 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 Winland, and we're increasing our crypto mining activities. They're getting much more profitable than they've 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. At that point, FRMO will be effectively an operating company. So as I said, we're learning constantly. Our profitability 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 an 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, of all the potentialities, there were businesses that we didn't know very well, and 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 a 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.

I'd be happy to. The first one we have is, what FRMO issue keeps you up at night?

What FRMO -- 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 exist 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 U.S. 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, and it's going to be 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.

Yes. The next is, what is MIAX's competitive advantage?

What is MIAX's competitive advantage? Well, to begin with, and this is an opinion, MIAX 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, MIAX does have one other interesting attribute that the other exchanges, I think, do not have. That's more tangible. So MIAX is a multi-asset class, multi-geography exchange. So are there multi-asset class exchanges? Yes. So MIAX is all they ask, because it has a stock exchange and options exchange and it also has a futures exchange, which is the old Minneapolis Grain Exchange, that's now MIAX futures. So the CBOE has an equity exchange, an options exchange and a futures exchange. So it has that, but MIAX also owns Bermuda Stock Exchange, and that puts us in a different geographical jurisdiction. None of the other American exchanges have that. And the 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 that. It's pretty neat. And I think MIAX, as you can see from their press releases, they're building on that, and we'll see how they do as the months progress.

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 latency?

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 10 or 12 days ago, People's Republic of China launched their competitor to SpaceX, which is known as Thousand Sails. So SpaceX, I think, is supposed to have 7,000 low earth orbit satellites, and I think Thousand 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. It may well be that you get free cooling because you're outside the earth's atmosphere. So that's good. But the trouble is, you've now got to project the results of inquiries down to base stations and 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 numbers, their 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.

Next question has a long prelude. Management has proposed that index ETFs are becoming the marginal price setter in the market. The 2023 second quarter Horizon Kinetics commentary asserts that "if index funds had begun in direct contravention of its purpose to directly change clearing prices and the very character of the markets that purported to free ride upon." 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 trading of ETF shares, which do not cause 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 "A drop in the bucket, indexing's share of U.S. trading activity," 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 ETFs set prices given their apparently small contribution to total trading activity?

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. The -- 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 SPDR, symbol SPY. And I don't remember 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, IVV has no effect on security prices. When it's the major share of New York Stock Exchange trading volume, the problem with that whole analysis is, I'll go into it deeper in a second. So basically, say there's volume of X on New York 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 ETFs. There's no question about it, and I could give you many, many more ETFs to look at, you can 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. So that's number one. So to do a proper study that way, you'd have to add the trading of the ETFs, 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. So to 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. Now 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, the next 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 are -- what is the market value of index investments that are managed in accordance with their indexes. And it's an incredibly big number. I put it in one of the compendia. I don't remember which one it is, I don't remember the number off the top of my head, but I'm willing to bet whatever I said, it wasn't that long ago, but it's bigger today. So now if you take that figure, which is -- it's a big figure, whatever it is, you look at your trading volume, how could you come to any other conclusion then the theory that's a drop in the bucket is ludicrous on its face. So that's my response.

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 of mining equipment with the price of bitcoin from dash.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?

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 3 vectors that really govern the price of bitcoin. So one is the halving. So every 4 years, the block reward gets cut in half. And if you want to look at it this way, if you want to mine the same amount of coins, assuming the equipment doesn't get 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 halving. 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 S21 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 can buy the machine in the futures market, device in the futures market for January delivery. And the difference between the price for delivery ASAP and the price in January is the amount of money you would have made in the interim, difference in game delivery ASAP and waiting until January for delivery. And 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 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 in any way. So I hope that's a good answer.

You said there were 3 vectors, and you mentioned one, I think, unless I missed the other 2.

No. There is the halving which is every 4 years they halve. There's the price of machines. And the third one is the hashrate or better said, difficulty coefficient. The reason I say hash, I'm going to define these terms in a minute. The reason I say the hashrate is because the hashrate is the easiest to understand. The hashrate is the aggregate computational power of the system, and if you take every bitcoin mining device and add up with computational power is, some are more powerful than others, some are earlier or some are later generations, so they have different computational power, add it all up, that's the hashrate. And the hashrate right now or at least I looked an hour ago, so I'm not looking now, was 711 exahash, exa means 1 followed by 18 zeros. And the reason I use that term hashrate, even though it's a common industry term reluctantly, I use it because when I say, yes, you're a computational power of the system, it's easy to understand, as opposed to the difficulty coefficient, which is harder to understand what we get to in a minute. So yes, every understands, 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 hashrate number is not that there is 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 2 weeks basically of blocks on activity before they recalibrate something called difficulty coefficient, which I'll get to in a minute. So during those 2 weeks, a block can be solved in 10 minutes, a block can be solved in 11 minutes, a block can be solved in 8 minutes. Well, if they're solved in more than 10 minutes, the difficulty coefficient is going to decline. If they're solved in less than 10 minutes, difficulty coefficient is going to go up and the computer estimates what difficulty coefficient is. And at the end of that period of time, the computer comes up with a number. So the hashrate is estimated. So I use it with a little reluctance, because I know people are going to think -- they're going to say that, well, this is what the aggregate 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't measure it precisely. So basically, if the blocks are being solved in 8 minutes instead of 10 minutes, we're going to assume that the hashrate computational power of the 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 a number. Now what is that number? Now once you understand that what this number is, you'll understand difficultly coefficient. So basically, you're trying to guess a number and what's called the SHA, S.H.A. stands for Secure Hashing Algorithm. The SHA-256 algorithm, what does that mean? That means that you have to guess a number that's 256 digits long everywhere from 265 zeros and a 1 to 256 99999s. 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, yes, 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 it's something called difficulty coefficient, difficulty coefficient, just a coefficient 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 2 or by 3 or by 4 or by 10 and so on and so forth. Right now, the difficulty coefficient exceeds 95 trillion. So this number, this 256 digit number that is a vast number of possibilities. You take that and you multiply by, I believe it's 95.2 trillion, you create many more possibilities. So -- 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 coefficient. So I probably gave you more information than you want on how this whole system works, but -- I hope I addressed your question in any event.

I recall that Mr. 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 rigs as management has published articles about in the past, would greater commercial and practical utility not drive greater transaction volumes and Ts and thus greater bitcoin dominated net present values for mining rigs that would raise the price of the rigs and bitcoin alike? Posted another way, what does management see as being the essential factors that drive mining rig value and thus bitcoin prices?

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 difficulty coefficient, it's driven by the hashrate, the price of the equipment and by the halving. Those are the vectors. There are 3 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 4-megabyte block size limitation. That means there's only so many transactions you can fit in a 4-megabyte block, and 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 4-megabyte block size. So let's expand the block size, and there are many people who propose that. And the bitcoin holders or the bitcoin miners and the bitcoin holders or the bitcoin community, if you prefer that phrase, bitcoin community, and I include myself in that is 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 and purposes, they have a limited block size. So in bitcoin, one of the things I should have said is, it's a 4-megabyte block size and you only have 10 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 a 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 has never been hacked. That's why everybody opposed it. So -- and 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 so far, and I'll refer you to some statistics, you can see this for yourself in a moment, that the 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 cup cake, bitcoin is not for that. You could theoretically do it. It's not designed for that. It's 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 to give you an idea of what that number is, it's probably more than the volume of Apple, which is 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 is 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 market capitalization of bitcoin. Bitcoin is like $1.3 trillion plus market capitalization. Litecoin on a good day is $6 billion, if it's even $6 billion. So it's a tiny fraction of bitcoin. However, having said that, litecoin does in volume about $4 billion a day. So assuming in round numbers is $6 billion market cap, 2/3s of it is trading every day. So for small transactions, bitcoin has a block time of 2.5 minutes. So you like that sort of thing, then litecoin is a 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, it doesn't have anything remotely close to the transactional volume of litecoin or bitcoin. But it does match to do a couple of 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, and it seems reasonable that it's possible that what was once known as Twitter and is now known as X could find a use case for dogecoin by making it the transactable currency in that social media. So you want exchange value, maybe it will be dogecoin. Maybe it 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, then the people who are purist, which at the moment is way over 99% of them are going to go to another cryptocurrency. And you'll never stop the bitcoin people because they modify bitcoin. If somebody actually did it, the purist will just have unmodified bitcoin because it's all open source code. So nobody is stopping 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?

Regarding one of FRMO's smaller venture investments, how does Diamond Standard solve the logistical and security issues with the 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 big diamonds before trading the physical asset, et cetera? 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?

Well, 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 anyway, the Gemological Institute of America will not honor a GeM certificate. So you're certified by the Gemological Institute of America. So if you mess with it, I don't think anyone is going to validate that. So I don't think that's a realistic risk. I wouldn't worry much about it. 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. And I don't think it's going to stop the diamond market. With modern technology, you can validate all these things.

Okay. During the 2023 shareholders' meeting, a question was brought up regarding FRMO's stake in the RENN Fund and a large holding of the fund in Apyx 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 Apyx 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 fund or since HK -- Horizon Kinetics has taken over management of RENN. 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?

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. Or if we want to keep it, we can keep it. So what happened to that company is 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 a technology, a 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 will call them applicators, but there are 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. It 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, the return on investment, from everybody's point of view, will 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 if people use it more, it'd be just 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, in May, this is October. We got to give the person a chance and let's see if the person is 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 at any time, including tomorrow if we are such -- if we are so inclined.

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 FRMO's or Winland's broken down or aggregate mining metrics such as hash price hash rate, energy costs from its mining operations and hash rate capacity factor of rigs? Other public crypto mining operations such as TeraWulf 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.

Okay. I have 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. I 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.

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 share price offers of about $24 and last reported financials.

Well, it doesn't impact the financial statement as such, the numbers you see in the financial statement, because we can continue in Horizon to use the equity accounting method. The only differences that you can figure out from the financial statements, what percent we own of Horizon Kinetics, what the market capitalization is, you can take that percentage and multiply it by the market capitalization and you can see what the market value of Horizon Kinetics position is if it's bigger or smaller than what we carried on the balance sheet for. So you can get a different look. It 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 brought it 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, but that's the fairest way. And that's the story basically. Horizon Kinetics didn't need any capital and wasn't looking to raise any capital. It's got plenty of capital. So that's actually what happened.

When and what dividends shall be paid by, I'm going to call it, HKHC, for example, quarterly dividends and the 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 fund's fiscal year. 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?

Okay. To begin with, we are 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, there'll probably be an extra dividend. We're a publicly traded company. I can't guarantee there's going to be a performance fee, but where -- the Board is 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 2 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 1 year. That could actually happen. So I'm reluctant off the 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 2 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 Horizon Kinetics will provide it because people are probably going to want it.

What is the year-to-date performance percentage of these funds?

Year-to-date performance? Well, again, I don't want to quote a number because I don't remember the number off the top of my head. And I'm sitting here -- 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 it, but that'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.

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

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 will provide all sorts of information. Not all the funds have TPL. 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 to give you the actual numbers off the top of my head, I don't have them, but I'm sure Horizon, in due course, will produce all that information. Remember, it's a horizon -- those are Horizon statistics, not necessarily FRMO statistics. But I'm sure they'll produce all those numbers.

Another TPL-related question. How many shares of TPL does FRMO own today? And I actually looked it up around 230 and it's -- if you want me to disclose this?

Well, if you looked it up, then it should be disclosed, right? Let's disclose it.

Okay. It's 24,024 shares at Fidelity. And I don't know...

Are you sure? I don't think that's the number, Therese. I think you're wrong about that.

You know what? I didn't include Fromex either. So you're right. That's...

Well, that's number one. And number 2, 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?

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

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.

Okay. In the meantime, I can give you another question. Same question regarding...

Okay. You know what? Let me -- while you're looking at -- 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 are you coming?

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.

Okay. Is it on the website now? Let me ask you because...

It's 159,101.