Description

FRMO IS unique Co. That is, it is a one of a kind business. Its model is to receive wired funds to its bank acccount for advice given to various entities including several Hedge Funds, several Mutual Funds, wrap account manager, research publication, consulting clients and related.

The P &L is devoid of compensation expense other than a phantom non cash charge required by auditing standards (called contributed services). The only expenses are for accounting servises (auditor exp) and for servicing shareholderes (cost to be public co).

The Comapny was founded by two brilliant thinkers, Murray Stahl and Steven Bregman, the founders of Horiozon Research et al. The have built a brilliantly modeled foirm at Horizon and wanted to have apublic company to channel pieces of fees they recieve for advising others, mainly as to byuing and selling stocks.

Thus they have an 8.4% interest in the advisor to the Kinetics Hedge Funds (off and on shore entities) which are now in excess of $1B iun assets. The 8.4% is share of the 1, 1.5% mgt fee and the 20% of profits performance fee.

This is a rapidly growing set of numbers. i.e. Assets, mgt fee and pewrformance fee. The share of management fee ran 368K in the latest Q ended Nov 2004. The Q-3 of fiscal year to end Feb 2005.

This set of fees alone should keep growing and do so very rapidaly

Let your mind wander. Consider on $1B under managemment a 1.5% mgt fee and a 20% up year will equal at 8.4%, is $1.260M Mgt + $3.360M performance fee.

Let your mind wander and cio=onsider assets grwoing from additional investment and performance in the 20% range. Big numbers will accumulate from just this one source.

Now it should be noted that these Hedge Funds are new and started with zero assets in 2001 and have grown steadily. Pewrformance has been +9.7. +9.9%, +43.2%, +16.1% 2001-2004. On a cumulative basis, over the 4-year 4-month period from inception through year-end 2004, the Kinetics Partners Fund has returned 124%, whereas the S&P 500 Index has lost (15%). Not bad.

At November 30, 2004 and 2003, the Company's share of he
underlying net assets of Kinetics Advisors, LLC exceeded the investment which was zero, by $1,098,532 and $613,925, respectively.

This at current annualized rate bigger things are in store for FRMO.

Another goodie FRMO acquired on is On June 1, 2004,is a one-third interest in the advisory fee revenue that Horizon Asset Management, Inc. receives from the Lehman Brothers Manager Access Program, in exchange for 4,587 shares of FRMO. common stock. Under this program, Horizon Asset Management provides investment advisory services to certain Lehman Brothers clients, the fees being calculated on the basis of assets under management. While assets under management were quite modest at the time of acquisition, they have expanded significantly and exceeded $100 million as of December 31, 2004. Management believes that they will continue to expand in future years. The five-year investment returns of the strategy utilized by this program, through December 2004, amount to about 14% per year versus the approximately 2% annualized loss for the S&P 500 Index over the same period. Thesew assests under management should grow at a healtyh rate

Please see latest Q for all other intributiong revenue (fund wiring to FRMO)sources.

The balanc esheet is a thing of beauty a s Equity amounts to 72% of assets and should continue to grow toward 100%. Asssets by the way are almost entirely cash and investments The latter is mostly the performance fees and maagement fees uncollected, but remaining invested in the capital accounts of managed hedge funds. Virtually all assets are liquid
and taxes are the main liability feature of the balance sheet.

Bad news? Well the earnings of 3c P/S in Q-3 (nov) were reported on 7.7 mM diluted shares. The outstanding shares will in due course swell to swell to 36.1 M shares outsatnding. They will d that when The Stahl-Bregman group which created and fouinded this Company draws down by payng for 28M shares they bligated themselves to purchase for some $2.8M when they created the company.

These guys are geniuses and honest as the dayb is long. A bet on them is what we have here in a unique business format geared to make them wealthy and shareholdrs as well via ONLY STOCK appreciation, not salaries, not bonuses, not stock options, not fees, not any kind of normal corporate compensation.

The goal is to kep creating revenues and net profits near the revenues and a cpaital gain opportunity over the long-hai=ul par execellence.

By the way on present outsatnding shars the 12 cet annaulize d EPs means the stock is aat a mere 17.5 P/E

Catalyst