FRMO Corporation (FRMO) Q2 FY2026 Earnings Call Transcript & Summary

Good afternoon, everyone. This is Thérèse Byars speaking, and I'm the Corporate Secretary of FRMO Corp. Thank you for joining us today. 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 are not to be -- 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, Chief Executive Officer; and Steven Bregman, President and Chief Financial Officer. They will review key points related to the fiscal 2026 second quarter earnings. And now I'll turn the discussion over to Mr. Stahl.

Okay. Thank you, Thérèse, and thank you, everybody, for joining us today. First, let me apologize for delayed filing and therefore, delayed meeting. You may be aware, we had to -- we had a little dispute about what our tax liability might be if we were to sell certain securities have required a recalculation. And we're not too distant future because we're now past the February quarter end. We're going to have another meeting in about 6 weeks to discuss the February results. You know what, we're going to have a different tax number as well. The simple reason that the market value of the assets have changed. But we'll talk about that then. So my apologies, but such as life. In any event, I'll do some key points right now, just tell you some things that are happening or happened very recently. And then we can go to questions. So one thing that I think is important. You may recall, we have an interest in a company called HashMaster. And we own the building or we owned the building which HashMaster was located, we sold that recently. And part of proceeds were used to prepay the mortgage or I should say, the buyer who is a company called Syntech, repaid or mortgage to zero. Now we are once again debt-free. And the rest of the proceeds we took in Syntech stock. So we're now a proud owner of a small interest in this company, Syntech, which is involved in all things supporting, a, the cryptocurrency industry; and b, the emerging data center industry. So we are a proud owner of that. Now we should point out that, that doesn't mean we're getting out of mining quite the contrary. We have in the last year or so preferred to do our mining through a publicly traded company called Winland. You might have observed, we made a number of investments in Winland. At the moment, we own approximately 45% of Winland, if and when we crossed the physician and barrier will be consolidated in Winland. So our financial statements will have a different look in character. However, you can tell a few things right now, we have not bought mining rigs in a little while. So if you look at the line on the balance sheet, digital mining assets and an appreciation, you'll see, a, de minimis some of about $31,000. I think you'll find this rather interesting. If you go to digital assets to our last, we didn't buy digital assets during the quarter as such. We, however, in the half month period of time, if you were to look on our balance sheet, you compare to digital assets cost basis on May, and May versus the cost base in December. In round numbers, the cost base is higher by $36,000. That $36,000 are the digital assets that we mined during this 6-month reporting period. Remind those digital assets with $31,000 worth of equipment is maybe get to that. Now before I go into the significance, I just want to point out, we say the cost of a digital asset of $36,000. The cost of digital assets are the market value that existed on the day we mine them. That doesn't mean that it actually cost us $36,000 to mine the assets or create the assets, if you like. That's just what the value would be if we were to sell those assets. So $36,000 assets on $31,000 of value, should tell you something. It tells you that one of the important variables in mining are longevity of your assets. So it's not something that people talk about a lot. Longevity assets is not the exact same thing as the life in the depreciation sense. We depreciate the assets generally over 3 years. That doesn't mean they last 3 years. So lately, last 1.5 years or 2, we've combined our mining interest in terms of newly purchased equipment or so-called Scrypt Mining. Scrypt Mining is -- S-C-R-Y-P-T. And the idea is that we make a higher return, Scrypt Mining and using some of the revenues to buy Bitcoin they would, we actually mined the bitcoin itself. And the more important point is that Scrypt Mining since most of the revenues come from Dogecoin has unique features, Scrypt Mining has no having. It does have a having in relation to the Litecoin assets or Scrypt Mining for those who are familiar with the term. Scrypt Mining is basically merged mining. You can mine 2 coins in one electric cart car. That's what makes it interesting. We mine Litecoin and Dogecoin. We keep Litecoin. We sell Dogecoin. We use some of the Dogecoin to pay our electricity charges and we use submit Dogecoin to actually buy some Bitcoin. That's how we increase our Bitcoin. Because Dogecoin represents the bulk of the assets, there is no halbing in Dogecoin. And halbing -- H-A-L-B-I-N-G is central to understanding a Bitcoin. Every 4 years, the block reward is reduced in half or by 50%. That's why they call it the So one of the most important things, arguably, the most important thing you can do cryptocurrency mining is to prepare for the halbing. So my personal observation that, a, very few people prepare for the halbing; and b, very few people even talk about the halbing; and c, many people are unaware that there is such a thing as a And when we get close enough to halbing and various participants become aware, there is such a thing as a halbing, and preparations have been made for the halbing, well, it has a tendency for reasons, maybe I'll get some questions have an opportunity to expand in this at length, has a tendency to be very disruptive to the Bitcoin markets. In principle, everything in cryptocurrency, everything in Bitcoin should be completely and totally transparent to everybody. Why? Because everything one needs to know is contained in regional working paper to protocol. There should be no surprises. However, very few people are aware of the protocol and are aware of the halbing. And therefore, there are surprises. And surprises typically tend to happen about more or less about 2 years before the next halbing. The next halbing is going to occur in approximately April 18, 2028, this is March 2026. So let's say, currently speaking, we're about 2 years away from halbing disruption is right on schedule. Ultimately, the market will sort out and Bitcoin will continue as it always has. So it won't be a big issue. But until such time, it's an issue. Essentially, what people have to do is there has to be a changeover in equipment. So the equipment you have today, unless you're doing scripting equipment, but it's not halbing, you're going to have to get new equipment. So we're going to have to get new equipment, how are you going to pay for the equipment. So the practice many people is to sell some of, and in some cases, a lot of the Bitcoin, they accumulated during the prior period. And then everybody has to prepare for the halbing more or less simultaneously that cryptocurrency comes on the market. And -- it's a seasonal phenomenon, so to speak. Eventually, I think people will master the reality and prepare gradually or prepare to do something else where there is not a halbing. So eventually, it will work its way out. In the meantime, it's just something we have to live with it. Some other points of interest. Liquidity, you will observe the liquidity, not just the cash on the balance sheet, but in fact, we have no debt. I believe this is the most liquid we've ever been on the balance sheet. And we have a lot of borrowing power that we really have never used. We could use it if we have to. But it's worthwhile reflecting on how much liquidity we really have, if we choose to use it. So it's the best position we've ever had in our history. Another one point that I'd like to make, that's not germane to the subject to cryptosexchanges. It's another big of ours. You might have noticed that in the summer MIAX came public. MIAX is private investment mix for those that are new to FRMO. Its origin is we were at one time the largest holder of two exchanges, one being the Minneapolis Greenfin, the other being the Bermuda Stock Change and we merged those in exchange for an interest in MIAX. MIAX is the only exchange investment, we have some other small exchange investment, but largely we're in MIAX. So the IPO was, I think, extremely successful, and that required a markup in value. And I commend my your attention. I think it's well worthwhile following. They're doing a lot of interesting things, but rather than go into what they're doing. I'll let the company speak for itself. And just related to you, I couldn't be more pleased what's going on at MIAX. And I'm really proud of everybody team and all they've been able to accomplish and what is really a short period of time. So that's what I had in terms of general remarks, and now I think it would be great if we could take some questions. So Thérèse so kind as to read them, I'd be delighted to respond.

We did do so. The first is, first of all, congratulations on your call regarding Zcash, which has performed exceptionally well in 2025. As you previously explained, a key driver of its success has been its monetary policy, which is similar to Bitcoin. Could you share your thoughts on Litecoin particularly in light of the recent launch of the first Litecoin ETF? What potential to your points do you see for Litecoin that could lead to a similar performance pattern as Zcash? While Litecoin has the privacy upgrade MWM, it seems that Zcash may have an edge in certain aspects. Additionally, Ethereum appears to be attempting to capitalize on the same and unlimited trend. Could you elaborate on FRMO's broader Altcoin strategy and what shareholders might expect in this regard?

Okay. First of all, the idea of operating completely anonymously, that idea is diametrically opposed, the idea of having broad-based global usage of the given cryptocurrency. So if a given currency is intrarecurrency community, I should say, is interested in maximizing It's just not going to be pay one of the leading coins. And the reason for that is it's just too dangerous to allow complete unanimity for a lot of reasons. One obvious reason is just taxation. The governments have to be able to collect taxation. So you couldn't have a situation in which people can escape taxation by anonymity. So you could have a small community that's able to do it. But government is going to make rules about whether or not you can use a given currency, that's the thrust of the currency. So it's interesting, but it's only interesting for small community users that governments in the world, they say governments in the pure, I don't mean any particular government. It's you're not going to create the next Bitcoin, if you're going to create a wholly anonymous currency. That's one thing. With Litecoin, you will observe, if you go to a website called bid info charts, which I'm actually going to do it, just so I can speak intelligently. So give me just one second, and I'm going to get there. I'm going to show you something. So the thing about Litecoin, that's intriguing is the amount of measured dollars, of course, so it's countable. The amount of dollars Monsoons measured dollars that traded in the last 24 hours. So this is off this website input charts, which is reading it off the blockchain. So it's accurate, in Bitcoin, I'm going to round. In the last 24 hours, the Bitcoin volume, so to speak, is $18.7 billion. That's $1 billion with a b. Litecoin volume in the same period of time last 24 hours is round numbers, $10 billion. I should point out to you, the market capitalization, Litecoin, it's only $4.2 billion. There's a lot of trading volume in Litecoin. So you can do a lot with Litecoin. Litecoin has more or less the same monetary policy is Bitcoin. Litecoin is not really anonymous. It may have a small subset of it that's going to become anonymous or that is -- currently has the faculty being anonymous. But you can do a lot with it. Among the things you might be able to do with it, you might be able to use it if it has these liquidity characteristics for instantaneous settlement of certain types of securities. So you might be aware that the world is moving to instantaneous settlement. So one of the reasons the world is moving the insane settlement is because markets globally as they connect as they get connected are moving to 24/7 trading. Now if we're going to have 24/7 trading. One of the problems in 24/7 trading is the banks. The banks aren't open 24/7. So what happened if it were as an example, Sunday and you saw in a market that has to be -- happens to be open on Sunday, you saw enormous opportunity to buy something. You have no access to your cash. So the market has created a solution for that release interim solution called stable coins. Stable coins trade 24/7. The stable coin market is now approaching in terms of the assets of stable coins, have trillion dollars. Stable coin market is largely dollar based. So it just continues, and I personally think it will. It's way of bypassing banks as payment modalities. As a matter of fact, if it were Sunday and you want to buy something, speaking purely theoretically, you could give someone x dollars worth of your money market fund if your money market fund or shares on your transfer, just your money market fund is not transferable. What is transfer is, you could draw money from your money market fund and transfer the money, but you only withdrawn up money during banking hours. So stable coin if you want to analogize it to something, make it easy to understand, it's like being able to trade on a 24/7 basis for being able to use a 24/7 basis. your money market fund, okay? So if you can do that and you're able to pay for things every 24 hours, then 7 days a week, 24 hours a day, then you might want to settle them. And the new trend to settle them either instantaneously or virtually and sanously. We don't have that yet in the United States, but we're moving to that. So we're going to have an insane settlement system and you want to track things a pretty good redundant debase is to use a mined cryptocurrency. It might be Litecoin. So in theory, you could divide Litecoin into enough pieces that each individual share could be tracked by a fraction of a Litecoin. It's possible. So if it's going to have $10 billion of volume a day, if you divide it up into small pieces, you could use Litecoin same new settlement. You could in theory use Dogecoin for instantaneous it. But Litecoin has much more volume than Dogecoin. Dogecoin just a matter of interest is only $161 million of volume versus $10 billion. So -- the only cryptocurrency that I'm aware that has that type of volume during the day is Litecoin. Incidentally, Litecoin volume is in round numbers, almost 3x the Ethereum volume. So I can see a possible use case, whether that's going to happen or not, time will tell. But that's my simplistic view of Litecoin.

The next question, if you're ready for it, is also related to tokenization. Would you please comment on how the tokenization and movement on chain of financial assets will affect the securities exchanges held by FRMO in various HK funds? What are your thoughts about the school of thoughts circulating recently. This is kind related recently that Bitcoin is no longer a fixed asset due to the ability of the markets to create synthetic supply? Those are two separate questions, which can be beat the second later.

Okay. So I'll do them both. Let's do the first part first. So I'm going to interpret the first part this way. So is tokenization a threat to exchanges? Not at all. Tokenization is one of the greatest things that could ever happen to exchanges. So -- the reason you need an exchange is because no one including securities participants want to have what's called Naked access. So how do you guarantee that your counterparty is legitimate. It's why you need intermediaries. Much, much more important than that. In electronic trading, there are all sorts of things people can do to disturb the market is an obvious thing, what's called spoofing. Spoofing evolves, you put bids and offers out there, you being some person out there in cyberspace. They're putting business offers for given security all say, okay. So Trader A and Trader B can come together in the green enterprise. What do you need a security exchange for a well. How you -- if you have to be either trade A or trader B, not your counterparty is even giving you proper formation. So your counterparty will say, I'm willing to -- I'm offering so many shares of something or other at a given price. Of course, it's whole electronic. And you or maybe your computer becomes aware of it. It says, yes, I would like to buy some or all those securities at that price, except it's not a real offer or might not be a real bit. And now the other side has gotten information about what your buy point is. There's no intermediary, that's the way securities markets would evolve. So just as a matter of historical interest. The London Stock Exchange was originally a coffee house inland. People met there. So they didn't call London Stock Exchange, and people would say all kinds of things in negotiating securities transactions, much of which was force. So even with the technology of the 18th century, everyone realized intermediary to enforce some rules. Similarly, New York Stock Exchange, originally, it was the button wood agreement were people who met under a tree with the view to exchanging securities, why did they all need to get together and have a certain rules-based system. Of course, they had no computers and not the technology we have today, but they needed a rules-based system. You need it and had to be enforced. So someone did something that person could be banditrading and the person will be identify this such. And it happened in many, many instances. So of course, you can move to the world with tokenization that will lead to either or virtually instantaneous or maybe the instantaneous settlement. But you're not going to eliminate the need for exchanges. And then some entity has to collect the data, meaning the aggregate data. There are people very interested in how many shares traded, what shares traded et cetera, et cetera, et cetera. Somebody has to pull that. And there has to be an interconnect point where everyone's trades are going to be monitored, not for tax purposes or anything just to keep everybody honest. That's why trading floors evolved. Everybody is going to be on the same floor. So you could have said 150 years ago when they had the first trading floors, why do we need a trading floor? Why is this trader A and trader -- why do Trader A and Trader B need to transact on the floor? Why can't they be half a mile away and transact. Because half a mile away, they're not subject to scrutiny and we don't know if one of counterparties is being and it takes a few people that are not honest and you destroy the the competence, everyone has securities markets and you can really hurt possibly even destroying the economy. And then all sorts of other things. I won't go into it, but you get the idea of how important it is. So why don't you repeat the second part, so I make sure I get this question right, Thérèse. What's the second part of the question? I just want to get it right. I think I know what it is...

The second part is what are your thoughts about the school thought circulating recently the Bitcoin is no longer a fixed unit asset due to the ability of the market to create synthetic supply?

Okay. I think it's ridiculous. And the reason it is ridiculous there is no such thing as synthetic supply other than the word synthetic supply. So you could talk about synthetic supply, you could be a derivative or an option. All those things are is a bit on what the future price of Bitcoin is going to be. It's not Bitcoin. So I could buy or sell a feature on Bitcoin and I can do it in any amount. So if the market capitalization of Bitcoin were, as it is now, somewhere between $1.3 billion and $1.4 trillion, could you create in principle, $2 trillion or $3 trillion or $4 trillion worth of futures. Yes, you can. But all it is, is people who are making a bet with you on the future price of bitcoin. It's not Bitcoin. Supply of Bitcoin fixed doesn't matter how many options you have, how many features you have, how many other types of exotic derivative contracts you have, there is right now almost 20 million Bitcoin is only $21 million. And that's it. So there is no such thing as synthetic supply. It doesn't exist other than in the vocabulary of people wish to make an assertion that is not correct.

Okay. The next question has to do with -- on the Q2 2025 conference call, ABAXX Technologies, A-B-A-X-X, was mentioned in the Q&A, and Murray was not familiar with it. He said he wasn't familiar with it. But we'll look into it for a future discussion. So I'm curious if you looked into it and what his thoughts are.

Okay. So what -- just so you know what it is, ABAXX is speaking loosely, the commodities have changed or a commodity exchange based in Singapore. And spent a lot of their time developing the trading systems. And not that many months ago, I remember how many months ago, but not that many months go commentating obviously, from a very low level. As far as I can tell, recently, from a very low level, their volume is up a lot. They're trading gold, they're trading natural gas. There are some other commodities the volume is up a lot. So it could possibly emerge as arrival to the multi-commodity exchange of India as possible. Just too early to tell. It trades and as far as I can determine, it seems to have a market capitalization already of $1.4 billion. Have to verify that, but I think I tried the year day to verify it, and it looked like it was $1.4 billion. I wanted to check the number of shares outstanding to make sure I didn't make a mistake, but that's what it looks like in any event. . That's a lot of market value for the level of trading they have. But on the other hand, I don't want to say it's outlandish because their growth rate albeit from a very low base is not far from 100%. There's a lot of in the Far East, a lot of underlying demand for commodity features, particularly in natural gas and particularly in gold. So it's an interesting company to follow, but I haven't bought any.

Next is, why do the condensed consolidated statements of income have the 3 months ending November 30, 2024, and the 6 months ending November 30, 2024, have different amounts for the diluted shares. It just seemed to me that if it's the same date, the number of shares should be the same.

Well, it seems that we -- you said and I don't want to cut the question off, I can answer it, but...

No, that's -- that's it.

Okay. Okay. Well, it seems that way to me, too, but there is -- like there isn't everything in accounting, a little bit of a wrinkle, I'll explain the wrinkle. So our directors are paid a certain number of options instead of cash. And we had the -- they were paid that. So those options are still outstanding. If the stock price rises and those options are in the money, well, they make it fully diluted shares outstanding because they can theory be exercised. If stock price goes down, well, then they're added money and no reasonable humans to exercise them, and the shares outstanding go down. It's not a big amount and it's not going to change the valuation of the company, but that's why we have that fluctuation. Good argument for paying directors in cash options.

Next, please provide an update on direct and indirect holdings of MIAX, including Warren.

I think we have the quarterly statement holdings. Does it include MIAX in there? Do you know, Thérèse?

I'm not 100% sure. In the the table. On the table, that's on the website.

Is it not there? Is it not there? I believe it says in -- I'm reading from the table. I didn't want to just quote a number. So in reading for the table, this is as of November 30, calculated by people other than myself, I'll read from the table, I'll just give these numbers. Restricted shares, 935,202, and these are publicly available shares 11,441 for a grand total of around numbers, 946,000 and some hundreds of shares, that's reading from the table.

I'll have to review how that's calculated if they include warrants were not...

I don't remember if they include warrants or not. But the warrants are in the money, sort of warrants in the money, you know what we're going to do.

Okay. And our last question is what are Mr. Stahl and Mr. Bregman's biggest regrets after 25 years of managing FRMO?

You want to talk about your biggest regret, Steven?

Just myself here. Sure.

Okay. I know you had I don't know you had regret.

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Well, here's mine. If you see in the beginning all the way at the top of the entire earnings release, the so-called quarterly report. And you'll see that I personally own a little bit over 8 million shares. My great regret is should have bought more during the windows. Of course, I can only buy during an open window, I should have bought more, and I didn't. And I regret that because the way FRMO and Winland and consensus mining and Horizon the way they're positioned. And I'm not saying this because you know I don't say things to be bothful or be promoting the companies. We've never been as well positioned as we are now. I'm more confident than I've ever been. I've always been confident that we're just extremely well positioned for the future. And I think a lot of great things are about to happen. A lot of great things are actually happening as we speak. Some of them are obvious. And when you look back, some people say, well, did you think it would take a long time to happen. I actually didn't. If you look back, it actually what in the scheme of things when you look at the magnitude of the some shipments didn't even take that long. Obviously, couldn't happen a day or a week. So make a big regret should avoid more stock. And you didn't -- but I did buy some and now I have over 8 million shares, which I would have bought more. But just -- and I'm not saying it just to promote the stock or anything. I really -- that is my regret, stable more, I should have been more aggressive than I just wasn't for whatever the reason was. That's my regret.

Well, that was our last question. I pass it to you to wrap it up.

I'll wrap it up by saying thanks so much for joining us, and thanks for your support. And normally, I say we're going to reprise this in 90 days. But now I can't say that because we're going to reprise this in, I think, about 6 weeks, maybe a little bit less than 6 weeks. So you have about that period of time to present more questions, we'd be like to answer. And if in the interim things occur to you that you didn't post right now don't hesitate to give us a call, and we'll get you an answer. So thanks again for joining us, and I'll just say good afternoon and signing off. Thanks so much.

The conference has now ended. You may disconnect.