SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-K

            [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

                  For the fiscal year ended: February 29, 2004

             [_] TRANSITION REPORT PURSUANT TO SECTION 13(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

               For the transition period from ________ to ________


                         COMMISSION FILE NUMBER: 0-29346


                                   FRMO CORP.
             (Exact name of registrant as specified in its charter)


                  DELAWARE                                13-3754422
      (State or other jurisdiction of                  (I.R.S. Employer
       incorporation or organization)                 Identification No.)


      30 HAIGHTS CROSS ROAD, CHAPPAQUA, NY                    10514
    (Address of principal executive offices)                (Zip Code)


      (REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE): (914) 632-6730

        SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT: NONE

           SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:

                               Title of Each Class
                               -------------------
                          Common Stock, $.001 par value

      Indicate by check mark  whether the  registrant  (1) has filed all reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934  during  the  preceding  12 months  (or for such  shorter  period  that the
registrant was required to file such reports),  and (2) has been subject to such
filing requirements for the past 90 days. Yes (x) No(_)

      Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of  registrant's  knowledge in definitive  proxy or information  statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. (x)

      The aggregate market value of the voting stock held by  non-affiliates  of
the registrant at May 20, 2004 was $902,108.

      The number of shares  outstanding of the  registrant's  Common Stock as of
May 20, 2004 was 36,083,774 shares.

                        DOCUMENTS INCORPORATED BY REFERENCE

      Part III of this Form 10-K incorporates  information by reference from the
registrant's  definitive  proxy  statement to be filed with the  Securities  and
Exchange  Commission  within 120 days after the close of the year ended February
29, 2004.

<PAGE>

                                   FRMO CORP.


                                                      May 25, 2004




Dear Fellow Shareholder:


      The writers of the following  passages still choose to use such adjectives
as "small" in reference to FRMO Corp. As evidence of the  appropriate use to the
term, please observe that our shareholders' equity as of fiscal year end is only
$486,774,  rounded to the nearest dollar.  This is far greater than the $185,541
recorded as of February 2003.  Its  purchasing  power is 486 years of round trip
NYC subway rides based on the  assumption of 5 round trips per week for 50 weeks
each year.

      However, as small as this figure is, it will surely astonish the reader to
learn that it is substantially more  shareholders'  equity than certain publicly
traded multi-billion dollar market capitalization firms. This remark is not made
as a  prelude  to a  valuation  claim on  behalf  of our  firm.  It is merely an
illustration of the temper of the times

      Our primary assets are clearly related to equity markets and must function
in an environment of historically expensive valuations.  Nonetheless, our assets
continue to progress.  For instance,  the research fees that FRMO Corp. receives
from the Paradigm Fund have  increased  substantially.  Last year,  the Paradigm
Fund had $25 million in assets  under  management.  As of this  writing,  assets
under management for this fund now exceed $60 million. The fund outperformed the
S&P 500 Index in 2000,  2001,  2002 and 2003. It continues to be rated 5 star by
Morningstar.

      A more  substantive  asset is our interest in the Kinetics  Advisors hedge
funds.  The FRMO Corp.  proportionate  capital  interest is  estimated to exceed
$644,000 as of April 30, 2004.  It was $620,000 at fiscal year end. This is over
a three-fold  increase from the past year. Of course, we have not been permitted
to  display  this  asset on our  balance  sheet at its  actual  value due to the
requirements  of GAAP  accounting.  However,  we are  permitted to disclose this
fact.  The reality of this asset  should be at least  partially  apparent to our
shareholders,  since we were  compelled for tax reasons to recognize and collect
$34,196 of income  from  Kinetics  Advisors in fiscal  2004.  We would have much
preferred not to collect such income,  since  collection  exposes the capital to
taxation  and this  eliminates  our  theoretical  "interest  free" loan from the
government.  We will try to defer  taxation  on our asset for as long as this is
legally permissible. The capital can be subject to appreciation or depreciation,
since it is invested in securities  both long and short.  Of course,  we will do
our best to see that this asset appreciates. Yet, we can offer no guarantees.

<PAGE>

      Another  fact  that  might  intrigue  readers  is that  the  assets  under
management at Kinetics Advisors now exceed $500 million. The fund collects a fee
of 1% on assets under  management as well as 20% of profits.  Kinetics  Advisors
does have a variety of expenses.  However, given the arithmetic  characteristics
of the  hedge  fund  business,  the  FRMO  proportionate  8.44%  interest  could
appreciate  quite  substantially.  We must again  caution the reader that we can
offer no guarantees.

      In order  for a hedge to be  successful,  at  least  several  remunerative
investment ideas are required.  The current  environment does not lend itself to
the discovery of very many such ideas.  The investment  world is quite literally
awash in funds of every  conceivable  type.  Money continues to be invested most
unwisely,  although we hope not by us. In any case, current share valuations are
a circumstance  that cannot  possibly  endure.  History will repeat  itself,  we
believe, funds will one day exit the business, perhaps in the customary state of
panic, and opportunities  will thereby be created.  Some investment  patience is
therefore required and we will endeavor to exhibit such patience.

      Although  it might  seem  hard to  believe,  patient  inactivity  is hard,
demanding and exhausting  work. Yet,  management  continues to accept no cash or
equity  compensation.  This fact does not stop our auditors from  recording such
compensation  as if it were  accepted,  with the caveat that it is recorded as a
non-cash  charge,  since we don't accept any cash. We also don't accept non-cash
compensation.  Accounting  conventions as well as other regulations require such
entries that have the effect or reducing our company accounting profits although
our actual cash  profits are not reduced.  In the days of Soviet era  communism,
the local wits had an expression for this type of situation.  It was "We pretend
to work and they  pretend to pay us." In our  situation,  we promise you that we
will work and we further pledge that we will pretend to pay ourselves as long as
this pretense is legally required.

      In  essence,  if one  sums  current  shareholders'  equity  and  the  FRMO
unrecognized  proportionate capital interest in Kinetics Advisors,  shareholders
now have  one $1.1  million  of  capital  employed  on their  behalf.  This is a
milestone of sorts and we are pleased to be able to report  these  facts.  Doing
something  intelligent  with one  million  dollars  once it has been  earned has
generally  proven to be far more difficult  than actually  obtaining one million
dollars. A certain lassitude  regarding the expenditure of such sums is required
merely to retain such sums.  Lassitude is most assuredly a character  trait that
we possess.  It is in this light that the management  would like to be regarded.
We feel confident that at least in this aspect our shareholders  will agree with
management.



______________________________                ______________________________
Steven Bregman, President                       Murray Stahl, Chairman
and Chief Operating Officer                     and Chief Executive Officer

<PAGE>

Postscript:

Such is the speed and fluidity  with which the  accounting  profession,  perhaps
necessarily,  must adjust to the investing profession that between the time that
this letter was drafted and its publication  date, our auditors have informed us
of a new  accounting  standard  that has  significance  to FRMO and to this very
letter. In March 2004, a seemingly obscure accounting convention was ratified by
the body known as the Financial Accounting Standards Board, more specifically by
its Emerging Issues Task Force. The accounting  convention  ratified by the Task
Force is known as Issue No. 03-16.  This will require that FRMO must, after all,
reflect the income from its  proportional  interest in Kinetics  Advisors on the
FRMO income  statement,  whereas FRMO was previously  prohibited  from doing so.
This will become effective for us as of September 1st of this year.  Perhaps, as
is the practice in preparing accounting documents,  some elements of paragraph 4
of this letter should therefore be revised for being outmoded.  However,  we are
informed that the Shareholders' Letter grants somewhat broader artistic license.

<PAGE>

                                   FRMO CORP.

                           ANNUAL REPORT ON FORM 10-K

                  FOR THE FISCAL YEAR ENDED FEBRUARY 29, 2004



                                                                        Page No.

PART I

Item 1.    Business .......................................................   1
Item 2.    Properties .....................................................   4
Item 3.    Legal Proceedings ..............................................   4
Item 4.    Submission of Matters to a Vote of Security Holders and Other
              Information .................................................   4


PART II

Item 5.    Market for Registrant's Common Equity and Related Stockholder
           Matters ........................................................   5
Item 6.    Selected Financial Data ........................................   6
Item 7.    Management's Discussion and Analysis of Financial Condition and
              Results of Operations .......................................   7
Item 7A.   Quantitative and Qualitative Disclosures About Market Risk .....  10
Item 8.    Financial Statements and Supplementary Data ....................  10
Item 9.    Changes in and Disagreements with Accountants on Accounting and
              Financial Disclosure ........................................  10
Item 9A.   Controls and Procedures ........................................  10


PART III
Item 10.   Directors and Executive Officers of the Registrant .............  10
Item 11.   Executive Compensation .........................................  10
Item 12.   Security Ownership of Certain Beneficial Owners and Management    10
Item 13.   Certain Relationships and Related Transactions .................  10
Item 14.   Principal Accountants Fees and Services.........................  11


PART IV
Item 15.   Exhibits, Financial Statements, Schedules and Reports on Form
              8-K .........................................................  12

<PAGE>

                                     PART I


ITEM 1. BUSINESS


ORGANIZATION OF THE COMPANY

FRMO CORP. (the "Company or "FRMO") was incorporated in November 1993, under the
laws of the State of Delaware under the name of PSI Settlement Corp,  (initially
changed to FRM Nexus,  Inc. and then to FRMO Corp on November 29, 2001).  One of
the Company's former  subsidiaries was MFC Development  Corp.("MFC").  On August
31,  2000,  FRMO  transferred  to MFC all of its assets  (except  for  $10,000),
including all the shares of its wholly owned subsidiaries, subject to all of its
liabilities  which were assumed by MFC. This transfer was made in  contemplation
of a spin-off of the common shares of MFC to the Company's shareholders.

SPIN-OFF OF MFC

On August  31,  2000,  FRMO  filed  Form 8-K with the  Securities  and  Exchange
Commission,   which  disclosed  that  FRMO  contemplated   distributing  to  its
shareholders  one  share  of MFC  common  stock  for each  one  share of  FRMO's
1,800,000  shares  of  outstanding  common  stock at the  close of  business  on
November  1,  2000  (the  record  date).  The MFC  shares  were  distributed  to
shareholders of FRMO on January 23, 2001.

FRM CONTROL GROUP

After the spin-off,  FRMO was  recapitalized  privately by the FRM Control Group
(described  below)  purchasing  34,200,000 shares of common stock for $3,258,000
($0.095 per share). By retaining only $10,000 in cash in FRMO, the shareholders'
book value for the 1,800,000 shares outstanding was less than $.01 per share. By
fixing the price that the new  Control  Group  paid for their 95%  ownership  at
$.095 per share,  the existing  shareholders  realized an increase in book value
from about $.01 per share to about $.091 per share and the shares of the new FRM
Control Group were diluted from about $.095 to about $.091 per share. Book value
of FRMO did not take into account its existing  structure and status as a public
company with a reporting  history which was considered in the  transaction.  The
FRM  Control  Group  has  benefited  from  that as well as the  $10,000  in cash
remaining in FRMO.

Murray  Stahl  and  Steven  Bregman,  Chairman  and  President  of the  Company,
respectively, are the principal persons in the FRM Control Group, which includes
the other persons who purchased the shares for the  consideration  stated below.
Messrs.  Stahl and Bregman have worked together at Horizon  Research Group since
1994 and  before  that at  Bankers  Trust  Company.  They  are also  part of the
ownership of Kinetics Asset Management, Inc., which is the investment adviser to
several mutual funds and hedge funds,  including The Internet Fund, The Paradigm
Fund and Kinetics Partners, L.P.

The  34,200,000  shares  of  common  stock  of  FRMO  sold  after  the  spin-off
distribution date were issued to the FRM Control Group as follows:

            (i) 28,800,000  shares of common stock of FRMO Corp.  were issued to
      Peter  Doyle,  as Voting  Trustee of 8.1% of the  issued  and  outstanding
      shares of Kinetics Asset  Management  Inc.  ("Kinetics")  and Murray Stahl
      (the "Stahl Bregman  Group") for  $2,880,000,  payable as set forth below.
      The Stahl  Bregman  Group  includes  Murray Stahl,  Steven  Bregman,  John
      Meditz,  Peter Doyle,  Catherine  Bradford,  Thomas C. Ewing and Katherine
      Ewing.  That group will be in control of FRMO Corp.  and together with the
      persons named below are the "FRM Control  Group".  The  28,800,000  shares
      were issued to the Stahl Bregman Group on January 23, 2001 but are held in
      escrow and  delivered  as paid at the rate of ten cents  ($.10) per share.
      The Stahl  Bregman  Group is obligated to pay to FRMO the after tax amount

                                       1
<PAGE>

      (fixed at 54% of the dividend) of all dividends they receive from Kinetics
      until the total  $2,880,000 has been paid. The Stahl Bregman Group expects
      the  $2,880,000  to be paid to FRMO in about five years.  The  installment
      payments  depend on actual future  dividends  received from Kinetics.  The
      Stahl Bregman Group may make additional payments at its discretion but the
      payment  based on the  Kinetics  dividend  is  obligatory  until the fixed
      purchase  is  paid.  The  members  of the  Stahl  Bregman  Group  have  no
      obligation  other than to pay the net dividends  from  Kinetics  until the
      fixed  purchase  price is paid. The Stahl Bregman Group has agreed that it
      will not divest  itself of any part of its  Kinetics  shares or change the
      character  of its  ownership  so as to reduce  the  pro-rata  share of the
      dividends it currently  receives  from  Kinetics  without,  as a condition
      thereof,  paying  toward the fixed  purchase  price of its FRMO shares the
      after-tax  proceeds of that part divested,  as if the  divestiture had not
      occurred.

            (ii) 3,600,000  shares of common stock of FRMO were issued to Lestar
      Partners,  LLC,  ("LPC") a New York  Limited  Liability  Company  owned by
      Lester Tanner,  Secretary and a director of FRMO, together with members of
      his family,  for $360,000 payable as set forth below. The 3,600,000 shares
      were  issued  to LPC on  January  23,  2001  but are  held in  escrow  and
      delivered  as paid at the  rate of ten  cents  ($.10)  per  share.  LPC is
      obligated  to pay to FRMO in cash an amount equal to 12.5% of each payment
      made by the Stahl  Bregman  Group until the purchase  price of $360,000 is
      paid.

            (iii)  1,800,000  shares  of  common  stock of FRMO  were  issued to
      Lawrence J. Goldstein for $18,000 paid on January 23, 2001. Mr.  Goldstein
      is a director of FRMO and the General  Partner of Santa  Monica  Partners,
      LP, a private fund, which owns 218,000 shares of common stock of FRMO.

BUSINESS OF FRMO

FRMO Corp. is an intellectual capital firm. The experience of its management has
been in the  analysis  of public  companies  within a framework  of  identifying
investment strategies and techniques that reduce risk. The business will include
identification of assets,  particularly in the early stages of the expression of
their  ultimate  value,  and  the  participation  with  them in  ways  that  are
calculated  to increase the value of the  shareholders'  interest in FRMO.  Such
assets are  expected to include,  but are not limited to, those whose values and
earnings are based on  intellectual  capital.  Of the many  varieties of capital
upon which investors have earned  returns,  ranging from real estate to silicon,
perhaps the highest returns on capital have been earned on intellectual capital.
It is the  goal of FRMO to  maximize  its  return  on this  form of  asset.  The
identification of any business opportunities will follow the process employed by
Horizon  Research  Group to select and  evaluate  investment  opportunities  and
strategies.

Horizon  Research Group is a division of Horizon Asset  Management,  Inc., which
was  co-founded by Murray Stahl and Steven Bregman in 1994. It is an independent
research  firm  serving  primarily  mutual  fund  managers  and the  hedge  fund
community.  It provides  in-depth  analysis of  under-researched  companies  and
strategies  to  identify  complex  or  overlooked   situations  that  can  offer
asymmetric  risk/return  advantages  to the  investor.  These  publications  are
addressed to investment  managers,  but the concepts and process behind them are
expected to serve FRMO's efforts to identify  business  opportunities  in public
and private ventures.

SPECIFIC BUSINESS ACTIVITIES

Since  its  new  start  on  January  23,  2001,  FRMO  completed  the  following
transactions through February 29, 2004:

      i. The Company invested $5,000 in FRM NY Capital, LLC, a limited liability
      venture capital  company  whereby the substantial  investment of financial
      capital  will be made by  unrelated  parties  but  where  FRMO will have a

                                       2
<PAGE>

      carried  interest  based  on  leveraging  the  creative  services  of  its
      personnel (its intellectual  capital).  This interest was inactive and the
      investment was sold at cost during the fiscal 2004 year.

      ii. A consulting  agreement was signed effective January 1, 2001,  whereby
      FRMO is currently receiving  approximately $27,000 a year from the manager
      of Santa Monica  Partners,  LP, a director and  shareholder  of FRMO,  for
      access  to  consultations  with  the  Company's  personnel.  Santa  Monica
      Partners,  L.P. is a private  fund,  which owns  218,000  shares of common
      stock of FRMO.

      iii. In March 2001,  FRMO acquired the research  service fees that Horizon
      Research  Group had received from The Paradigm Fund in exchange for 80,003
      shares of FRMO common stock.  Management  believes that the growth of that
      Fund in the current fiscal year and future years will increase the current
      level of research  fees for which the stock  consideration  was paid.  The
      Paradigm  Fund   outperformed  the  S&P  500  Index  by  approximately  13
      percentage  points in its first fiscal year of operation,  Calendar  2000.
      From inception through Calendar 2003, it outperformed the S&P 500 Index by
      68 percentage points, or in the parlance of investment  professionals,  by
      6,800 basis  points.  In May 2003,  The New  Paradigm  Fund was assigned a
      five-star  rating by Morningstar,  Inc., the fund rating service.  This is
      Morningstar's  highest  rating and is often the basis on which mutual fund
      investors seek to select funds.

      iv. In October  2001,  FRMO  acquired a 2%  interest  in the  subscription
      revenues from The Capital Structure Arbitrage Report that Horizon Research
      Group  and  third  party  receive  in  exchange  for 50 shares of Series R
      preferred stock.  While the  subscriptions  were minimal at the time, they
      have advanced and management believes that they will continue to expand in
      future years.

      v. In February 2002, FRMO acquired a 7.71% interest in Kinetics  Advisors,
      LLC and the Finder's Fee Share Interest from the Stahl Bregman  Group,  in
      exchange  for 315 shares of FRMO  common  stock.  Kinetics  Advisors,  LLC
      controls  and provides  investment  advice to Kinetics  Partners,  a hedge
      fund, and to The Kinetics Fund, an offshore version of Kinetics  Partners.
      While these funds were quite small at the time of  acquisition,  they have
      expanded  dramatically  and  management  believes  that  they will grow in
      future years.  From its first year of operation in 2000,  through Calendar
      2003,  Kinetics  Partners  returned 95 percentage points more than the S&P
      500 Index.


MARKETING

Currently,  the  marketing  of the  Company's  services  and  programs is by the
officers of the Company.


COMPETITION

The  Company's  business  activities  are  founded on the  independent  research
experience of its personnel who provide in-depth  analysis of  information-poor,
under-researched  or complex  companies  and  securities,  and  develop  related
strategies  that can  offer an  advantage  to the  investor.  This  research  is
distinct from but competes with the traditional  "sell side" research  supported
by the trading  commissions  and corporate  finance fees of brokerage firms that
produce the great majority of "Wall Street" research.  The Company also competes
with a wide variety of independent entities, which sell periodicals and research
that is paid for by subscription or fees of its readers. The Company is small in
relation to such competitors but its services and programs are designed to reach
a niche market of sophisticated analysts and accredited investors.

                                       3
<PAGE>

TRADEMARKS - None.

EMPLOYEES

As of February 29, 2004, the Company had no paid employees.

REGULATORY LAWS

The  Company  is in  compliance  with the  regulatory  laws  that  relate to its
business  activities.  Its  operations  do not fall within the  definition of an
investment  company so as to require it to register under the Investment Company
Act of 1940.


ITEM 2. PROPERTIES

None.

ITEM 3. LEGAL PROCEEDINGS

FRMO is not a party to any material litigation.


ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS AND OTHER
        INFORMATION

None, other than the election of directors on July 17, 2003.


OTHER INFORMATION

CAUTIONARY STATEMENT

In  connection  with the "safe  harbor"  provisions  of the  Private  Securities
Litigation  Reform  Act  of  1995,  the  Company  is  hereby  filing  cautionary
statements  identifying  important  risk factors that could cause the  Company's
actual  results to differ  materially  from those  projected in forward  looking
statements of the Company made by or on behalf of the Company.

Such  statements  may relate,  but are not limited,  to projections of revenues,
earnings,  capital  expenditures,   plans  for  growth  and  future  operations,
competition  as well as assumptions  relating to the foregoing.  Forward-looking
statements  are  inherently  subject to risks and  uncertainties,  many of which
cannot be predicted or quantified.

When  the  Company  uses  the  words  "estimates",   "expects",   "anticipates",
"believes",  "plans",  "intends",  and  variations  of  such  words  or  similar
expressions,  they are  intended to  identify  forward-looking  statements  that
involve risks and  uncertainties.  Future events and actual results could differ
materially from those  underlying the  forward-looking  statements.  The factors
that could cause actual results to differ materially from those suggested by any
such statements  include,  but are not limited to, those discussed or identified
from time to time in the Company's  public filings,  including  general economic
and market conditions,  changes in domestic laws, regulations and taxes, changes
in competition and pricing environments.

Undue reliance should not be placed on these forward-looking  statements,  which
are  applicable  only as of the date they are made.  The Company  undertakes  no
obligation  to revise or update  these  forward-looking  statements  to  reflect
events or circumstances  that arise after that date or to reflect the occurrence
of anticipated events.

                                       4
<PAGE>

                                    PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCK HOLDER MATTERS

REGISTRATION AND MARKET PRICES OF COMMON STOCK

The authorized  capital stock of the Company consists of 92,000,000  shares,  of
which,  90,000,000  are shares of common  stock,  $.001 par value and  2,000,000
shares are preferred  stock,  $.001 par value. On February 29, 2004,  there were
36,083,774  shares of common  stock  and 50 shares of series R  preferred  stock
outstanding.   Subject  to  any  prior   rights  of  the   Company's   preferred
shareholders, FRMO's common shareholders are entitled:

      -     to receive  dividends  as are  declared by FRMO's Board of Directors
            out of funds legally available; and

      -     to full voting rights, each share being entitled to one vote.

The FRMO  Board of  Directors  may issue  additional  authorized  shares of FRMO
common stock without  shareholder  approval.  FRMO  shareholders do not have any
cumulative   rights  or  any  preemptive  rights  to  subscribe  for  additional
securities that FRMO may issue without obtaining shareholder consent. Subject to
any prior rights of the holders of any preferred stock then outstanding,  in the
event  of  liquidation,  dissolution,  or  winding  up of  the  company,  common
shareholders  would be  entitled to  receive,  on a pro rata  basis,  any assets
distributable to shareholders in respect of shares by them.

The FRMO certificate of  incorporation  authorizes the issuance by FRMO of up to
2,000,000  shares of FRMO  preferred  stock,  of which 50 shares  are issued and
outstanding.  The FRMO Board of Directors may issue its preferred  stock without
obtaining  shareholder  consent in one or more series at a time or times and for
consideration  or  considerations  as its Board of Directors may determine.  The
Board of Directors is authorized by the FRMO  certificate  of  incorporation  to
provide at any time for the  issuance of FRMO  preferred  stock with the rights,
preferences, and limitations as established by the Board.

The  Company's  common  stock is  registered  pursuant  to Section  12(g) of the
Securities  Exchange Act of 1934 and trades on the NASDAQ  Bulletin  Board under
the symbol FRMO.  The  following  table sets forth the range of high and low bid
quotations  of the  Company's  common stock for the periods set forth below,  as
reported by the  National  Quotation  Bureau,  Inc.  Such  quotations  represent
inter-dealer  quotations,  without  adjustment for retail markets,  markdowns or
commissions, and do not necessarily represent actual transactions.

           FISCAL PERIOD                                       COMMON STOCK
           -------------                                    HIGH BID    LOW BID
                                                            --------    -------
           2003
           ----
           1st       Fiscal Quarter ( 3/1/02 -  5/31/02)     $  0.65   $   0.40
           2nd       Fiscal Quarter ( 6/1/02 -  8/31/02)        0.41       0.25
           3rd       Fiscal Quarter ( 9/1/02 - 11/30/02)        0.25       0.20
           4th       Fiscal Quarter (12/1/02 -  2/28/03)        0.22       0.20

           2004
           ----
           1st       Fiscal Quarter ( 3/1/03 -  5/31/03)     $  0.21   $   0.20
           2nd       Fiscal Quarter ( 6/1/03 -  8/31/03)        1.01       0.20
           3rd       Fiscal Quarter ( 9/1/03 - 11/30/03)        0.70       0.45
           4th       Fiscal Quarter (12/1/03 -  2/29/04)        0.70       0.51

                                       5
<PAGE>

The high bid and low asked quote on May 20, 2004 was $.55 bid and $.95 asked.

DIVIDENDS

No cash dividend has been paid by FRMO since its  inception.  The Company has no
present intention of paying any cash dividends on its common stock.

HOLDERS

As of May 21, 2004,  there were  approximately  1,000  holders of record of FRMO
common  stock  representing  about  2,500  beneficial  owners of its  shares.  A
director and former  director have each been granted options to purchase a total
of 9,000 shares of the Company's common stock. There are no warrants to purchase
common stock of the Company outstanding. The Company does not know of any shares
of common stock of FRMO that are held by any  director,  officer or holder of as
much as 5% of the outstanding stock for sale pursuant to a filing under Rule 144
of the  Securities  Act. The Company has not agreed to register any common stock
for sale  under  the  Securities  Act by any  shareholder  or the  Company,  the
offering  of which  could  have a  material  effect on the  market  price of the
Company's common equity.


ITEM 6. SELECTED FINANCIAL DATA

Prior to February  28,  2001,  the  Company's  operations  were  included in the
financial reports of MFC Development Corp. and subsidiaries, which were spun off
to the  shareholders  of FRMO on January 23,  2001.  This  transaction  has been
accounted  for in a manner  similar  to a reverse  pooling of  interests  on the
Company's  books.  The Company had no  operations  prior to January 23, 2001 and
accordingly, there is no selected financial data to report before that date.

                                   FRMO Corp
                      Selected Consolidated Financial Data

<TABLE>
<CAPTION>
                                                             Fiscal Year Ended
                                         ------------------------------------------------------
                                         February 29,  February 28,  February 28,  February 28,
                                             2004          2003          2002          2001
                                         ------------  ------------  ------------  ------------
Income Statement Data:
<S>                                      <C>           <C>           <C>           <C>
     Total Revenue                       $    159,955  $    103,748  $     68,785  $      3,600
     Costs and expenses                        60,335        52,409        59,254         4,151
                                         ------------  ------------  ------------  ------------
Net Ordinary Income                            99,619        51,339         9,531          (551)
Other income                                    1,370         1,017         1,304            --
                                         ------------  ------------  ------------  ------------

Income (loss) from operations before
  provision for income taxes                  100,990        52,356        10,835          (551)
Provision for income taxes                     37,792        14,248         2,445            --
                                         ------------  ------------  ------------  ------------
Net Income                               $     63,198  $     38,108  $      8,390  $       (551)
                                         ============  ============  ============  ============
Earnings per common share:
     Basic earnings per common share     $       0.01  $       0.01  $         --  $         --
     Diluted earnings per common share   $       0.01  $       0.01  $         --  $         --
Number of shares used in computation of
  basic and diluted earnings per share:
     Basic                                  4,840,207     3,897,524     3,899,772     1,998,616
                                         ============  ============  ============  ============

     Diluted                                4,890,207     3,947,524     3,910,046     1,998,616
                                         ============  ============  ============  ============
</TABLE>

                                       6
<PAGE>

                                   FRMO Corp
                Selected Consolidated Financial Data (continued)

<TABLE>
<CAPTION>
                                   As of         As of
                               February 29,  February 28,  February 28,  February 28,
                                   2004          2003          2002          2001
<S>                            <C>           <C>           <C>           <C>
Balance Sheet Data:
Working Capital                $    430,316  $    116,561  $     61,890  $     43,824
                               ============  ============  ============  ============
Total Assets                   $    541,105  $    224,687  $    161,068  $     52,894
                               ============  ============  ============  ============
Long-term Debt                 $         --  $         --  $         --  $         --
                               ============  ============  ============  ============
Shareholders' Equity           $    486,774  $    185,745  $    138,433  $     48,824
                               ============  ============  ============  ============
Book Value per Share           $       0.08  $       0.05  $       0.04  $       0.02
                               ============  ============  ============  ============
Common Shares Outstanding (1)     6,197,524     3,897,524     3,890,087     1,998,616
</TABLE>


      (1)   Common shares  outstanding  is recorded net of the shares being held
            in escrow  (29,936,250  as of 2/29/04,  and 32,186,250 as of 2/28/03
            and  2/28/02)  for  shareholders  who have not yet  purchased  their
            stock, as described in Note 7 of the financial statements.


ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
        FINANCIAL CONDITION.

All statements contained herein that are not historical facts, including but not
limited to,  statements  regarding future  operations,  financial  condition and
liquidity,  capital  requirements  and the Company's  future  business plans are
based on current  expectations.  These  statements are forward looking in nature
and  involve a number of risks and  uncertainties.  Actual  results  may  differ
materially.  Among  the  factors  that  could  cause  actual  results  to differ
materially are changes in the financial markets that affect investment managers,
investors,  mutual funds and the Company's  consulting  clients,  and other risk
factors described herein and in the Company's reports filed and to be filed from
time to time with the Commission.  The discussion and analysis below is based on
the Company's Financial Statements and related Notes thereto included herein and
incorporated herein by reference.


OVERVIEW

By reason of the reverse pooling spin-off  transaction  described in Item 1, the
Company had a new start in terms of its  continuing  business and its  financial
statement as of January 23,  2001,  and there were no  operations  prior to that
date.  After the spin-off its balance sheet  consisted of $10,000 in assets,  no
liabilities  and  1,800,000  shares of common  stock.  On January  23,  2001 the
Company issued an additional 34,200,000 shares of common stock for $3,258,000 to
be paid as set forth in Item 1. The business  engaged in by FRMO  thereafter  is
described in Item 1.

CRITICAL ACCOUNTING POLICIES

Management's  discussion  and analysis of its financial  position and results of
operations are based upon the Company's  financial  statements,  which have been
prepared in accordance  with  accounting  principles  generally  accepted in the
United States of America. The preparation of these financial statements requires
management to make estimates and judgments that affect the

                                       7
<PAGE>

CRITICAL ACCOUNTING POLICIES (CONTINUED)

reported  amounts of assets,  liabilities,  revenues  and  expenses  and related
disclosure of contingent  assets and  liabilities.  Actual  results could differ
from those estimates.  Management believes that the critical accounting policies
and areas that require the most  significant  judgments and estimates to be used
in the  preparation  of the financial  statements  are revenue  recognition  and
accounting for investments in subsidiaries.

REVENUE RECOGNITION

The Company primarily  generates revenue through  consulting,  research fees and
subscription revenue.

Revenue   relating  to   consulting   agreements   is  earned   primarily  on  a
month-by-month basis.

Research  fees are earned and recorded on a monthly  basis based upon FRMO's pro
rata share of The New Paradigm Fund assets.

Subscription  revenues  are earned and  recorded  on a monthly  basis based upon
FRMO's  pro rata  share of the  subscription  revenue  generated  from a certain
research report provided by a related third party.

The accrual method of accounting is used to record all income.

ACCOUNTING FOR INVESTMENTS IN SUBSIDIARIES

Investments  in  subsidiaries  in which the Company holds a less than 20% voting
interest and does not exert a significant influence over operations or financial
policies are currently accounted for using the cost method.

In March 2004,  the FASB  ratified  Emerging  Issues Task Force Issue No. 03-16,
"Accounting for Investments in Limited Liability  Companies".  Under EITF 03-16,
investments in limited liability companies that have separate ownership accounts
for each investor  greater than 3 to 5 percent should be accounted for under the
equity method.  The Company is currently  accounting for its 8.44% investment in
Kinetics Advisers,  LLC ("Kinetics  Advisers") under the cost method.  Effective
September  1, 2004,  the Company will change its method of  accounting  for this
investment so that it will record its pro rata share of Kinetics Advisers income
(loss)  each  period.  Had EITF  03-16  applied  effective  March 1,  2003,  the
Company's  assets and pre-tax  income would have been  increased by $620,000 and
$530,000, respectively.

RESULTS OF OPERATIONS

YEAR ENDED FEBRUARY 29, 2004 COMPARED TO YEAR ENDED FEBRUARY 28, 2003

The Company's  revenues from operations  increased by $56,000 for the year ended
February 29, 2004 ("2004")  from  $104,000 for the year ended  February 28, 2003
("2003").  The  increases in 2003 were due primarily to income from (i) research
fees and (ii) income from unconsolidated subsidiaries.

Costs and  expenses  increased  by $8,000 in 2004,  from  $52,000  in 2003.  The
increase in 2004 was due  primarily to increases in  shareholder  reporting  and
accounting expenses, and higher franchise fees.

For the  reasons  noted  above,  the  Company's  net  income  for the year ended
February 29, 2004, increased by $25,000 to $63,000, as compared to net income of
$38,000 in 2003.

Some  discussion is required with respect to an asset that is presently  carried
at zero cost on the FRMO  balance  sheet and which had a  negligible  accounting
impact on fiscal 2003 earnings,  yet which has had a very  significant  economic

                                       8
<PAGE>

impact on FRMO.  This is the investment in Kinetics  Advisors,  LLC,  ("Kinetics
Advisors"), which was acquired in February 2002 (as discussed in Part I, Item 1,
under  the  heading  Specific  Business  Activities,  of this Form  10-K).  This
investment  takes the form of a minority  interest in Kinetics  Advisors,  which
controls and provides  investment  advice to two hedge funds.  Kinetics Advisors
has  elected  to  reinvest  in these two funds the major  portion of the fees to
which it is  entitled  from them.  As a  consequence,  FRMO does not receive its
proportional  interest  in those  fees until  such time that  Kinetics  Advisors
itself  elects to or is  required  to receive  them.  Under  generally  accepted
accounting principles, as they applied in fiscal 2003 and 2004, FRMO must record
this investment on a cost basis, which was $0 as of February 29, 2004.  However,
on an economic basis,  FRMO's  proportional  share of Kinetics Advisors' capital
accounts in those funds was approximately $620,000 (pre-tax and unaudited) as of
February 29,  2004.  FRMO's  proportional  share of the increase in the value of
Kinetics   Advisors'   capital  accounts  in  those  funds  during  the  period,
predominantly from fee income and appreciation (also pre-tax and unaudited), was
approximately  $530,000  during 2004.  As  disclosed in the Critical  Accounting
Policies section, in accordance with EITF 03-16,  "Accounting for Investments in
Limited  Liability  Companies",  the Company will change its  accounting  policy
regarding this investment effective September 1, 2004 to the equity method.

YEAR ENDED FEBRUARY 28, 2003 COMPARED TO YEAR ENDED FEBRUARY 29, 2002

The Company's  revenues from operations  increased by $35,000 for the year ended
February 28, 2003  ("2003")  from  $69,000 for the year ended  February 28, 2002
("2002").  The  increases in 2003 were due primarily to income from (i) research
fees and (ii) consulting fees.

Costs and  expenses  decreased  by $7,000 in 2003,  from  $59,000  in 2002.  The
decrease  in 2003 was due  primarily  to a  decrease  in  shareholder  reporting
expenses and lower  administrative  fees,  partially offset by higher accounting
fees  and  the  recording  of  non-cash   compensation   expense.  The  non-cash
compensation  expense  represents a notional salary allocation for the Company's
senior officers, as required under generally accepted accounting principles. The
officers of the Company are responsible for all of the Company's  operations and
have agreed to not draw any salaries during the period of formation.

For the  reasons  noted  above,  the  Company's  net  income  for the year ended
February 28, 2003, increased by $30,000 to $38,000, as compared to net income of
$8,000 in 2002.

LIQUIDITY AND CAPITAL RESOURCES

The Company's  activities during the year ended February 29, 2004 resulted in an
increase  in cash of  $271,000.  This  increase  was  due to net  income  (after
adjusting for  amortization and non-cash  compensation) of $83,000,  less $6,000
net increase of  receivables  over  payables and  deferrals,  which,  are normal
fluctuations  primarily  caused by  timing  differences.  Investing  activities,
primarily accounted for by the purchase of marketable  securities of $36,000 and
the sale of the Company's investment in an unconsolidated subsidiary,  decreased
the cash  balance by  $31,000;  there were no cash flows  provided by or used in
investing  activities during fiscal 2003.  Financing  activities during the year
ended in 2004 provided cash flow of $225,000 and is  attributable to the payment
of common  shares  held in escrow,  as  described  in Item 1; there were no such
activities  in 2003.  The Company  expects its  business  with  prospective  new
clients to develop  without the outlay of cash,  since the growth will come from
the services of its officers who will not receive  salaries  until the Company's
operations and revenues warrant the payment.

On January  23,  2001 the Company  issued  34,200,000  shares of $.001 par value
stock for  $3,258,000.  Only  $39,375 was paid for at the time,  and the balance
remaining as of February 29, 2004 of  $2,993,625  will be paid to the Company as
set forth in Item 1. The Company  believes that its present cash  resources will
be  sufficient  on a  short-term  basis  and  over the  next 12  months  to fund
continued expansion of its business.

                                       9
<PAGE>

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES OF MARKET RISK.

See  subsections (i) and (ii) at page 2 relating to the obligations of the Stahl
Bregman Group and LPC to pay for the shares of common stock of the Company based
on dividends  from Kinetics and the income  generated from the management of the
mutual funds for which Horizon is the investment advisor.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

Financial  Statements  and  supplementary  data  required by this Item 8 are set
forth at the pages indicated in Item 15(a) below.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
        FINANCIAL DISCLOSURE.

None.

ITEM 9A. CONTROLS AND PROCEDURES

We maintain  disclosure controls and procedures that are designed to ensure that
information  required to be disclosed in the Company's  Securities  Exchange Act
reports is recorded, processed,  summarized and reported within the time periods
specified in the SEC's rules and forms, and that such information is accumulated
and  communicated  to the Company's  management,  including its Chief  Executive
Officer and Chief Financial Officer,  as appropriate,  to allow timely decisions
regarding  required  disclosure.  In designing  and  evaluating  the  disclosure
controls and procedures, management recognized that any controls and procedures,
no matter how well designed and operated,  can provide only reasonable assurance
of achieving  the desired  control  objectives,  as ours are designed to do, and
management  necessarily  was  required to apply its judgment in  evaluating  the
cost-benefit relationship of possible controls and procedures.

During the 90-day  period prior to the date of this report,  an  evaluation  was
performed  under the  supervision  and with the  participation  of our Company's
management,  including  the Chief  Executive  Officer  and the  Chief  Financial
Officer,  of the  effectiveness  of the design and  operation of our  disclosure
controls and procedures. Based upon that evaluation, the Chief Executive Officer
and the Chief  Financial  Officer  concluded  that our  disclosure  controls and
procedures were effective. Subsequent to the date of this evaluation, there have
been no  significant  changes in the  Company's  internal  controls  or in other
factors  that could  significantly  affect  these  controls,  and no  corrective
actions taken with regard to significant  deficiencies or material weaknesses in
such controls.


                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The information  required by this Item is set forth in the Company's  definitive
proxy statement, which will be filed with the Securities and Exchange Commission
within 120 days of February 29, 2004. Such information is incorporated herein by
reference and made a part hereof.

ITEM 11. EXECUTIVE COMPENSATION.

The information  required by this Item is set forth in the Company's  definitive
proxy statement, which will be filed with the Securities and Exchange Commission
within 120 days of February 29, 2004. Such information is incorporated herein by
reference and made a part hereof.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

The information  required by this Item is set forth in the Company's  definitive
proxy statement, which will be filed with the Securities and Exchange Commission
within 120 days of February 29, 2004. Such information is incorporated herein by
reference and made a part hereof.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The information  required by this Item is set forth in the Company's  definitive
proxy statement, which will be filed with the Securities and Exchange Commission
within 120 days of February 29, 2004. Such information is incorporated herein by
reference and made a part thereof.

                                       10
<PAGE>

                                      PART IV


ITEM 14. PRINCIPAL ACCOUNTANTS FEES AND SERVICES

The information  required by this item is set forth in the Company's  definitive
proxy statement, which will be filed with the Securities and Exchange Commission
within 120 days of February 29, 2004. Such information is incorporated herein by
reference and made a part hereof.

                                       11
<PAGE>

ITEM 15. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES, AND REPORTS ON FORM 8-K

(A)   FINANCIAL STATEMENTS, SCHEDULES AND EXHIBITS

(1)   FINANCIAL STATEMENTS:

Index to Financial Statements and Schedules................................. F-1

Report of Holtz Rubenstein & Co., LLP....................................... F-2

Balance Sheets - February 29, 2004 and February 28, 2003 ................... F-3

Statements of Operations -
  Years ended February 29, 2004, February 28, 2003 and February 28, 2002 ... F-4

Statement of Stockholders' Equity -
  Years ended February 29, 2004, February 28, 2003 and February 28, 2002 ... F-5

Statements of Cash Flows -
  Years ended February 29, 2004, February 28, 2003 and February 28, 2002 ... F-6

Notes to Financial Statements .............................................. F-7

(2)   FINANCIAL STATEMENT SCHEDULES:

All  schedules are omitted  because they are not  applicable,  not required,  or
because the required  information  is included in the  financial  statements  or
notes thereto.

(3)   EXHIBITS:

Exhibits 3.01 and 21.01 are  incorporated  herein by reference to Form 8-K dated
January 25, 2001 with which said exhibits were previously  filed.  Exhibits 3.01
and 5.01 are  incorporated  herein by  reference  to Form 10 dated June 27, 1997
with which said exhibits were previously filed.

Exhibit
Number   Description
------   -----------

3.01     Amended Certificate of Incorporation of the Company*.

3.03     Amended By-Laws of the Company*.

5.01     Opinion of Tanner Propp, LLP*

21.01    The Company has no  subsidiaries.  The  spin-off on January 23, 2001 of
         MFC Development Corp, a former subsidiary ("MFC"), is described in Form
         10, the General Form for  Registration  of Common Stock of MFC pursuant
         to Section  12(g) of The  Securities  Exchange Act of 1934, as amended,
         which was incorporated by reference as an exhibit in the Company's Form
         8-K Current Report filed on January 25, 2001.*

31.1     Certification by the Chief Executive Officer Pursuant to Section 302 of
         the Sarbanes-Oxley Act of 2002.

31.2     Certification by the Chief Financial Officer Pursuant to Section 302 of
         the Sarbanes-Oxley Act of 2002.

32.1     Certification  of the  Chief  Executive  Officer  and  Chief  Financial
         Officer Pursuant to 18 U.S.C.  Section 1350 Adopted Pursuant to Section
         906 of the Sarbanes-Oxley Act of 2002.

-----------------

     * Previously filed

(B)   REPORTS ON FORMS 8-K

None.

                                       12
<PAGE>

                                   SIGNATURES

Pursuant to the requirements of Section 13 or 15(d)2 of the Securities  Exchange
Act of 1934 as amended,  the  Registrant has duly cause this Report to be signed
on its behalf by the undersigned, thereunto duly authorized, on May 28, 2004.

                                       FRMO CORP.

                                   By:
                                       -------------------------------
                                       Steven Bregman
                                       President and Chief Financial Officer
                                    (Principal Financial and Accounting Officer)



Pursuant to the requirements of the Securities Exchange Act of 1934, as amended,
this  Report has been  signed  below by the  following  persons on behalf of the
Registrant and in the capacities indicated on May 28, 2004.


Signature                          Title
---------                          -----



                                   Chairman of the Board
------------------------------     (Principal Executive Officer)
          Murray Stahl




                                   President, Director
------------------------------
         Steven Bregman



                                   Secretary, Director
------------------------------
         Lester Tanner



                                   Director
------------------------------
         Allan Kornfeld


                                   Director
------------------------------
          Peter Doyle

                                       13
<PAGE>

                                   FRMO Corp.
                         Index to Financial Statements


This Index..............................................................     F-1
Report of Independent Auditors                                               F-2
Balance Sheets --
   As of February 29, 2004 and February 28, 2003........................     F-3
Statements of Operations --
   Years Ended February 29, 2004, February 28, 2003
   and February 28, 2002 ...............................................     F-4
Statement of Stockholders' Equity --
   Years Ended February 29, 2004, February 28, 2003
   and February 28, 2002 ...............................................     F-5
Statements of Cash Flows --
   Years Ended February 29, 2004, February 28, 2003
   and February 28, 2002 ...............................................     F-6

Notes to Financial Statements ..........................................     F-7




The data  required by all other  schedules is either  included in the  financial
statements or is not required.

                                      F-1
<PAGE>

                         Report of Independent Auditors

The Board of Directors and Shareholders
FRMO Corp.

We have audited the accompanying balance sheets of FRMO Corp. as of February 29,
2004 and February 28, 2003 and the related  statements of income,  stockholders'
equity  and cash  flows for the three  years  ended  February  29,  2004.  These
financial  statements are the  responsibility of the Company's  management.  Our
responsibility  is to express an opinion on these financial  statements based on
our audits.

We conducted  our audits in  accordance  with  standards  of the Public  Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement.  An audit also includes examining,
on a  test  basis,  evidence  supporting  the  amounts  and  disclosures  in the
financial statements. An audit also includes assessing the accounting principles
used and  significant  estimates made by  management,  as well as evaluating the
overall financial statement  presentation.  We believe that our audits provide a
reasonable basis for our opinion.

In our opinion,  the financial  statements  referred to above present fairly, in
all material respects, the financial position of FRMO Corp. at February 29, 2004
and February 28, 2003,  and the results of its operations and its cash flows for
the three years ended February 29, 2004 in conformity with accounting principles
generally accepted in the United States of America.


                        /s/ HOLTZ RUBENSTEIN & CO., LLP
                        -------------------------------

Melville, New York
May 17, 2004

                                      F-2
<PAGE>

                                   FRMO Corp.
                                 Balance Sheets


                                                  FEBRUARY 29,  FEBRUARY 28,
                                                     2004          2003
                                                  --------------------------

    ASSETS
    Current assets:
   Cash and cash equivalents                      $    406,110  $    135,003
   Accounts receivable                                  41,637        20,500
   Investment in marketable securities                  36,900            --
                                                  --------------------------
Total current assets                                   484,647       155,503
                                                  --------------------------

Other assets:
   Intangible assets, net                               56,458        64,184
   Investments in unconsolidated subsidiaries               --         5,000
                                                  --------------------------
Total other assets                                      56,458        69,184
                                                  --------------------------

Total assets                                      $    541,105  $    224,687
                                                  ==========================

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
   Accounts payable and accrued expenses          $     20,187  $     20,551
   Income taxes payable                                 22,112        11,587
   Deferred income                                      12,031         7,008
                                                  --------------------------
Total current liabilities                               54,330        39,146
                                                  --------------------------

Stockholders' equity:
   Preferred stock - $.001 par value;
     Authorized - 2,000,000 shares;

     Issued and outstanding - 50 shares Series R            --            --
   Common stock - $.001 par value;
     Authorized - 90,000,000 shares;
     Issued and outstanding - 36,083,774 shares         36,083        36,083
   Capital in excess of par value                    3,334,136     3,322,136
   Unrealized gain on marketable securities              1,036            --
   Retained earnings                                   109,145        45,947
                                                  --------------------------
                                                     3,480,400     3,404,166
   Less: Receivables from shareholders for
                common stock issuance                2,993,625     3,218,625
                                                  --------------------------
   Total stockholders' equity                          486,775       185,541
                                                  --------------------------

   Total liabilities and stockholders' equity     $    541,105  $    224,687
                                                  ==========================


See accompanying notes.

                                       F-3
<PAGE>

                                   FRMO CORP.
                              STATEMENTS OF INCOME


<TABLE>
<CAPTION>
                                                      YEAR ENDED           YEAR ENDED           YEAR ENDED
                                                     FEBRUARY 29,         FEBRUARY 28,         FEBRUARY 28,
                                                         2004                 2003                 2002
                                                   -----------------    -----------------    -----------------
<S>                                                        <C>                   <C>                  <C>
REVENUES
      Consulting                                           $ 84,022              $87,839              $56,763
      Research Fees                                          33,130               12,438                8,041
      Subscriptions                                           8,606                3,676                3,018
      Investments                                            34,197                 (205)                 963
                                                   -----------------------------------------------------------
      Total Income                                          159,955              103,748               68,786
                                                   -----------------------------------------------------------

COSTS AND EXPENSES
      Amortization                                            7,725                7,359                9,676
      Accounting                                              9,250                7,030                6,100
      Shareholder reporting                                  26,363               23,775               36,588
      Office expenses                                        12,586               13,500                6,178
      Other                                                   4,411                  744                  712
                                                   -----------------------------------------------------------
                                                             60,335               52,409               59,254
                                                   -----------------------------------------------------------
Income from operations                                       99,620               51,339                9,531
  Dividend income                                             1,370                1,017                1,304
                                                   -----------------------------------------------------------
Income from operations before provision
  for income taxes                                          100,990               52,356               10,835
Provision for income taxes                                   37,792               14,248                2,445
                                                   -----------------------------------------------------------
Net income                                                  $63,198             $ 38,108               $8,390
                                                   ===========================================================
Basic earnings per common share                               $0.01               $ 0.01                $0.00
Diluted earnings per common share                             $0.01                $0.01                $0.00
Average shares of common stock outstanding:
  Basic                                                   4,840,207            3,897,524            3,889,772
                                                   ===========================================================
  Diluted                                                 4,890,207            3,947,524            3,910,046
                                                   ===========================================================
</TABLE>


See accompanying notes

                                      F-4
<PAGE>

                                   FRMO CORP.
                       STATEMENT OF STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
                                                                                             RECEIVABLES
                                                                                             FROM SHARE-   UNREALIZED
                                   SERIES R                           ADDITIONAL   RETAINED  HOLDERS FOR    GAIN ON       TOTAL
                               PREFERRED STOCK      COMMON STOCK        PAID-IN    EARNINGS  COMMON STOCK  MARKETABLE  STOCKHOLDERS'
                               SHARES   AMOUNT   SHARES      AMOUNT     CAPITAL   (DEFICIT)    ISSUANCE    SECURITIES     EQUITY
                              -----------------------------------------------------------------------------------------------------
<S>                             <C>       <C>   <C>          <C>       <C>           <C>      <C>                  <C>     <C>
Balance, February 28, 2001       -       $-     36,000,000  $36,000   $3,232,000  $  (551)   $(3,218,625)     $    -      $ 48,824
                              -----------------------------------------------------------------------------------------------------
  Issuance of new stock
    for the assignment
    of research agreements       -        -         83,459       83       54,886         -              -          -        54,969
  Issuance of new stock
    for the assignment of
    subscription revenue        50        -              -        -       26,250         -              -          -        26,250
  Issuance of new stock
    for the acquisition
    of 7.71% of Kinetics
    Advisors, LLC and 50%
    of Finder's Fee Share
    Interest                     -        -            315        -            -         -              -          -             -
  Net income (loss)              -        -              -        -            -     8,390              -          -         8,390
                              -----------------------------------------------------------------------------------------------------
Balance, February 28, 2002      50        -     36,083,774   36,083    3,313,136     7,839    (3,218,625)          -       138,433
  Non-cash compensation
    expense                      -        -              -        -        9,000         -              -          -         9,000
  Net income (loss)              -        -              -        -            -    38,108                                  38,108
                              -----------------------------------------------------------------------------------------------------
Balance, February 28, 2003      50        -     36,083,774   36,083    3,322,136    45,947    (3,218,625)          -       185,541
                              -----------------------------------------------------------------------------------------------------
  SUBSCRIPTION PAYMENT FOR
    STOCK HELD IN ESCROW         -        -              -        -            -         -        225,000          -       225,000
  UNREALIZED GAIN ON
     MARKETABLE                  -        -              -        -            -         -              -          -             -
     SECURITIES                  -        -              -        -            -         -              -      1,036         1,036
  NON-CASH COMPENSATION
     EXPENSE                     -        -              -        -       12,000         -              -          -        12,000
  NET INCOME (LOSS)              -        -              -        -            -    63,198              -          -        63,198
                              -----------------------------------------------------------------------------------------------------
BALANCE, FEBRUARY 29, 2004      50       $-     36,083,774  $36,083   $3,334,136  $109,145   $(2,993,625)     $1,036      $486,775
                              =====================================================================================================
</TABLE>

See accompanying notes

                                      F-5
<PAGE>

                                   FRMO CORP.
                            STATEMENTS OF CASH FLOWS


<TABLE>
<CAPTION>
                                                              YEAR ENDED     YEAR ENDED     YEAR ENDED
                                                             FEBRUARY 29,   FEBRUARY 29,   FEBRUARY 29,
                                                                 2004           2004           2004
                                                             ------------------------------------------
<S>                                                          <C>            <C>            <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income                                                   $     63,198   $     38,108   $      8,390
Adjustments to reconcile net income to net cash
 provided by operating activities:
       Amortization of research agreements                          7,725          7,359
                                                                                                  9,676
       Non-cash loss from unconsolidated subsidiary                    --            205             --
       Non-cash compensation                                       12,000          9,000
                                                             ------------------------------------------
       Changes in operating assets and liabilities:
       Other currentassets                                        (21,137)       (19,386)         1,823
       Accounts payable and accrued expenses                       10,162         12,004
                                                                                                 15,859
       Deferred income                                              5,023          4,302
                                                                                                  2,706
                                                             ------------------------------------------
Net cash provided by operating activities                          76,971         51,592         38,454
                                                             ------------------------------------------

CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of marketable securities                                 (35,864)            --             --
Proceeds from sale of FRM NY Capital, LLC                           5,000             --             --
                                                             ------------------------------------------
Net cash used in investing activities                             (30,864)            --             --
                                                             ------------------------------------------

CASH FLOWS FROM FINANCING ACTIVITIES
Payment for release of stock held in escrow                       225,000             --             --
                                                             ------------------------------------------
Net cash provided by financing activities                         225,000             --             --
                                                             ------------------------------------------

Net increase in cash and cash equivalents                         271,107         51,592         38,454
Cash and cash equivalents, beginning of year                      135,003         83,411         44,957
                                                             ------------------------------------------
Cash and cash equivalents, end of year                       $    406,110   $    135,003   $     83,411
                                                             ==========================================

ADDITIONAL CASH FLOW INFORMATION
Interest paid                                                $         --   $         --   $         --
                                                             ==========================================
Income taxes paid                                            $     12,926   $         --   $        155
                                                             ==========================================

NON-CASH INVESTING AND FINANCING ACTIVITIES
Preferred stock issued in consideration for the acquisition
 of research agreements                                      $         --   $         --   $     26,250
                                                             ==========================================

Common stock issued in consideration for the assignment
 of subscription revenues                                    $         --   $         --   $     54,886
                                                             ==========================================
</TABLE>

See accompanying notes

                                      F-6
<PAGE>

                                   FRMO Corp.
                         Notes to Financial Statements

1.    ORGANIZATION OF THE COMPANY

      FRMO CORP.  (the  "Company or "FRMO") was  incorporated  in November  1993
      under the laws of the State of Delaware  under the name of PSI  Settlement
      Corp,  (initially  changed  to FRM  Nexus,  Inc.  and then to FRMO Corp on
      November 29,  2001).  One of the  Company's  former  subsidiaries  was MFC
      Development Corp.("MFC").  On August 31, 2000, FRMO transferred to MFC all
      of its assets (except for $10,000), including all the shares of its wholly
      owned subsidiaries subject to all of its liabilities which were assumed by
      MFC. This transfer was made in contemplation of a spin-off of MFC.

      On August 31, 2000,  FRMO filed Form 8-K with the  Securities and Exchange
      Commission,  which  disclosed that FRMO  contemplated  distributing to its
      shareholders  one  share of MFC  common  stock  for each  share of  FRMO's
      1,800,000  shares of outstanding  common stock at the close of business on
      November 1, 2000 (the record date). In fiscal 2001, MFC filed a Form 10 to
      register its common stock and on January 23, 2001, 1,800,000 shares of MFC
      were distributed to FRMO's shareholders.

      Because FRMO and MFC were under common control,  the spin-off  transaction
      has been  accounted  for on FRMO's books in a manner  similar to a reverse
      pooling of interests with FRMO having a new start on January 23, 2001 with
      $10,000 in assets,  no  liabilities  and 1,800,000  shares of common stock
      outstanding.  The Statements of Shareholders'  Equity reflect the spin-off
      as of the beginning of the periods  presented,  with no  operations  until
      January 23, 2001.

      On November 29, 2000, the Company increased  authorized capital stock from
      2,000,000  shares  common  stock,  par value  $.10 per share to  2,000,000
      shares preferred  stock,  par value $.001 per share and 90,000,000  shares
      common stock,  par value $.001 per share.  Stockholders'  equity for prior
      periods was restated to reflect this change.

      On January 23, 2001,  34,200,000 shares of common stock were issued to the
      FRM Control Group. Murray Stahl and Steven Bregman, Chairman and President
      of the Company, respectively, are the principal persons in the FRM Control
      Group,  which  includes the other persons who purchased the shares for the
      consideration set forth in Note 6.

      On July 2, 2001,  the Company  authorized  the  establishment  of Series R
      preferred stock. The number of authorized shares is 5,000 with a par value
      of $.001 per share.  These shares are each  convertible to 1,000 shares of
      the Company's common stock at the option of the Company at any time and at
      the option of the holder  after March 1, 2006.  The Company may redeem the
      shares at $1,000  per share at any time  after  March 1, 2011 and shall be
      required  to redeem  them at $1,000 per share upon the request of a holder
      after March 1, 2012.  These  shares have one vote per share on all matters
      that common stock can vote upon. Upon liquidation,  there is preference to
      the extent of $1,000 per share.  No dividends  may be paid on common stock
      unless a dividend per share of 1,000% of common stock  dividends  are paid
      on the preferred stock.

                                       F-7
<PAGE>

2.    BASIS OF PRESENTATION

      BUSINESS ACTIVITIES OF THE COMPANY

      FRMO  Corp.  is an  intellectual  capital  firm.  The  experience  of  its
      management has been in the analysis of public companies within a framework
      of identifying  investment strategies and techniques that reduce risk. The
      business will include identification of assets,  particularly in the early
      stages of the expression of their ultimate  value,  and the  participation
      with  them in ways  that  are  calculated  to  increase  the  value of the
      shareholders'  interest in FRMO. Such assets are expected to include,  but
      are not  limited  to,  those  whose  values  and  earnings  are  based  on
      intellectual  capital.  Of  the  many  varieties  of  capital  upon  which
      investors  have  earned  returns,  ranging  from real  estate to  silicon,
      perhaps the highest  returns on capital  have been earned on  intellectual
      capital.  It is the goal of FRMO to  maximize  its  return on this form of
      asset. The  identification of any business  opportunities  will follow the
      process  employed  by  Horizon  Research  Group  to  select  and  evaluate
      investment opportunities and strategies.

      Horizon  Research  Group was co-founded by Murray Stahl and Steven Bregman
      in 1994. It is an independent  research firm serving primarily mutual fund
      managers and the hedge fund community.  It provides  in-depth  analysis of
      information-poor,  under-researched  companies and  strategies to identify
      the complex or  overlooked  situations  that can offer an advantage to the
      investor.

      Since its new start on January 23,  2001,  FRMO  completed  the  following
      transactions by February 29, 2004, the close of its fiscal year:

            i. The Company  invested  $5,000 in FRM NY  Capital,  LLC, a limited
            liability venture capital company whereby the substantial investment
            of financial  capital  will be made by  unrelated  parties but where
            FRMO will have a carried  interest  based on leveraging the creative
            services of its personnel (its intellectual capital).  This interest
            was inactive and the  investment  was sold at cost during the fiscal
            2004 year.

            ii. A  consulting  agreement  was signed  effective  January 1, 2001
            whereby FRMO is  currently  receiving  approximately  $27,000 a year
            from the  manager  of Santa  Monica  Partners,  LP, a  director  and
            shareholder of FRMO, for access to consultations  with the Company's
            personnel  designated  by Murray  Stahl and  Steven  Bregman.  Santa
            Monica  Partners,  L.P. is a private fund, which owns 218,000 shares
            of common stock of FRMO.

            iii. In March 2001,  FRMO  acquired the  research  service fees that
            Horizon  Research  Group had received  from The New Paradigm Fund in
            exchange for 80,003 shares of FRMO common stock. Management believes
            that the growth of that Fund in the  current  fiscal year and future
            years will increase the current level of research fees for which the
            stock consideration was paid.

            iv. In October 2001, FRMO acquired a 2% interest in the subscription
            revenues from  subscribers to The  Convertible/High  Yield Arbitrage
            Report that Horizon  Research  Group and another third party receive
            in exchange for 50 shares of Series R preferred  stock.  While these
            funds  were  quite  small  at the  time of  acquisition,  they  have
            advanced and  management  believes that they will continue to expand
            in future years.

            v. In  February  2002,  FRMO  acquired a 7.71%  interest in Kinetics
            Advisors,  LLC and the Finder's Fee Share Interest  (0.73%) from the
            Stahl  Bregman  Group,  in  exchange  for 315 shares of FRMO  common
            stock.  Kinetics  Advisors,  LLC controls  and  provides  investment
            advice to Kinetics  Partners  and Kinetics  Fund,  both of which are
            hedge funds. While the funds were quite

                                      F-8
<PAGE>

2.    BASIS OF PRESENTATION (CONTINUED)

            BUSINESS ACTIVITIES OF THE COMPANY (CONTINUED)

            small at the time of  acquisition,  they have expanded  dramatically
            and management believes that they will grow in future years.


3.    SIGNIFICANT ACCOUNTING POLICIES

      REVENUE RECOGNITION

      The Company primarily generates revenue through consulting,  research fees
      and subscription revenue.

      Revenue  relating  to  consulting  agreements  is  earned  primarily  on a
      month-by-month basis.

      Research fees are earned and recorded on a monthly basis based upon FRMO's
      pro rata share of The New Paradigm Fund assets.

      Subscription  revenues  are earned and  recorded on a monthly  basis based
      upon FRMO's pro rata share of the  subscription  revenue  generated from a
      certain research report provided by a related third party.

      The accrual method of accounting is used to record all income.

      RECEIVABLES

      Receivables  consist of  monthly  consulting  fees.  All  receivables  are
      current and management believes they are fully collectible.

      INVESTMENT IN FRM NY CAPITAL, LLC

      The  investment in FRM NY CAPITAL,  LLC represents a 7% Class B membership
      interest.  This  investment  is  accounted  for under  the cost  method of
      accounting.  This  investment  was  liquidated  in 2004,  and the  Company
      received a return of its $5,000 investment.

      INVESTMENT IN KINETICS ADVISERS, LLC

      The Company  accounts for its 8.44% investment in Kinetics  Advisers,  LLC
      using the cost method of  accounting  at February 29, 2004. In March 2004,
      the FASB ratified Emerging Issues Task Force Issue No. 03-16,  "Accounting
      for  Investments  in  Limited  Liability  Companies".  Under  EITF  03-16,
      investments in limited  liability  companies that have separate  ownership
      accounts for each investor greater than 3 to 5 percent should be accounted
      for under the equity method. Effective September 1, 2004, the Company will
      change its method of accounting for this investment so that it will record
      its pro rata share of Kinetics  Advisers  income  (loss) each period.  Had
      EITF 03-16  applied  effective  March 1, 2004,  the  Company's  assets and
      pre-tax  income  would  have been  increased  by  $620,000  and  $530,000,
      respectively.

                                      F-9
<PAGE>

3.    SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

      INVESTMENT IN MARKETABLE SECURITIES

      Investments  in debt and equity  securities  are  designated  as  trading,
      held-to-maturity or available-for-sale.  Available-for-sale securities are
      reported at amounts that approximate fair value. Temporary declines in the
      market  value of any  available-for-sale  security  below cost are charged
      against  stockholders'  equity;  meanwhile,  declines  deemed  other  than
      temporary are charged to earnings, resulting in the establishment of a new
      cost basis for the security.

      INCOME TAXES

      Deferred income taxes are recognized for all temporary differences between
      the  tax  and  financial  reporting  bases  of the  Company's  assets  and
      liabilities  based on enacted tax laws and statutory tax rates  applicable
      to the periods in which the  differences  are  expected to affect  taxable
      income.

      CASH AND CASH EQUIVALENTS

      For purposes of the  statements of cash flows,  the Company  considers all
      highly liquid,  short-term  investments with an original maturity of three
      months or less to be cash equivalents.

      INTANGIBLE ASSETS

      Intangible  assets are amortized over their  estimated  lives,  ten years,
      using the straight line method.

      CONCENTRATION OF CREDIT RISK

      Financial   instruments   that   potentially   subject   the   Company  to
      concentrations  of credit risk consist  principally of cash,  money market
      mutual funds, and trade  receivables.  The Company maintains cash and cash
      equivalents with major financial  institutions,  and at times such amounts
      may exceed the FDIC limits.

      Trade  receivables  arise from  consulting fees in the New York City area.
      For the year ended February 29, 2004,  fees earned from one client,  which
      is a related party,  represented  40% of all income,  and fees earned from
      another client  represented 21% of all income. For the year ended February
      28, 2003, fees earned from one client  represented 40% of all income,  and
      fees earned from another client, which is a related party, represented 24%
      of all income.  As of February 29, 2004, trade receivables from one client
      comprised 83% of total trade  receivables.  As of February 28, 2003, trade
      receivables from one client comprised 51% of total trade receivables.

      ADVERTISING COSTS

      The Company's  policy is to expense the cost of  advertising  as incurred.
      There were no  advertising  expenses for the years ended February 29, 2004
      and February 28, 2003 and 2002.

      FAIR VALUE OF FINANCIAL INSTRUMENTS

      The  following  disclosure  of  the  estimated  fair  value  of  financial
      instruments is made in accordance  with the  requirements  of Statement of
      Financial Accounting  Standards No. 107,  "Disclosures about Fair Value of
      Financial Instruments". The estimated fair values of financial instruments
      have been determined by the Company using available market information and
      appropriate valuation  methodologies.Considerable  judgment is required in
      interpreting market data to develop the estimates

                                      F-10
<PAGE>

3.    SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

      FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)

      of  fair  value.  Accordingly,  the  estimates  presented  herein  are not
      necessarily  indicative of the amounts that the Company could realize in a
      sale.  The carrying  amount of financial  instruments at the Balance Sheet
      dates,   except  for  the  investment  in   unconsolidated   subsidiaries,
      approximated their estimated fair value at those dates.

      USE OF ESTIMATES

      The  preparation  of financial  statements  in conformity  with  generally
      accepted  accounting  principles requires management to make estimates and
      assumptions that affect the reported amounts of assets and liabilities and
      disclosure  of  contingent  assets  and  liabilities  at the  date  of the
      financial  statements  and the  reported  amounts of revenues and expenses
      during the  reporting  period.  Actual  results  could  differ  from those
      estimates.

      COMPREHENSIVE INCOME (LOSS)

      Other comprehensive income refers to revenues,  expenses, gains and losses
      that under  generally  accepted  accounting  principles  are  included  in
      comprehensive  income but are excluded  from net income,  as these amounts
      are  recorded   directly  as  an  adjustment  to   stockholders'   equity.
      Comprehensive  income was $64,234 for the year ended  February  29,  2004.
      Comprehensive  income  (loss) was  equivalent to net income (loss) for the
      years ended February 28, 2003 and 2004.

      EFFECTS OF NEW ACCOUNTING PRONOUNCEMENTS

      RECENT ACCOUNTING PRONOUNCEMENTS

      In April 2002, the Financial  Accounting  Standards  Board ("FASB") issued
      Financial  Accounting Standard No. 145, "Rescission of FASB Statements No.
      4,  44  and  64,  Amendment  of  FASB  Statement  No.  13,  and  Technical
      Corrections"  was  issued.   This  statement   provides  guidance  on  the
      classification of gains and losses from the  extinguishment of debt and on
      the  accounting  for  certain   specified  lease   transactions.   Certain
      provisions of this statement  related to the  classification  of gains and
      losses from  extinguishment  of debt were adopted by the Company beginning
      March 1, 2003.  All other  provisions  were adopted after May 15, 2002. In
      June 2002,  SFAS No. 146,  "Accounting  for Costs  Associated with Exit or
      Disposal  Activities" was issued.  This statement provides guidance on the
      recognition  and  measurement  of  liabilities  associated  with  disposal
      activities  and became  effective for the Company on January 1, 2003.  The
      adoption  of  these  statements  did not  have a  material  impact  on the
      financial position, results of operations or liquidity of the Company.

      In  December  2002,  the  FASB  issued  SFAS  No.  148,   "Accounting  for
      Stock-Based Compensation - Transition and Disclosure, an amendment of FASB
      Statement No. 123," which amends SFAS No, 123, "Accounting for Stock-Based
      Compensation,"  to  provide   alternative  methods  of  transition  for  a
      voluntary  change  to the  fair  value  based  method  of  accounting  for
      stock-based  employee  compensation.  The transition and annual disclosure
      provisions  of SFAS No. 148 are  effective  for fiscal  years ending after
      December  15,  2002.  In  addition,  SFAS No. 148  amends  the  disclosure
      requirements  of SFAS No. 123 to  require  prominent  disclosures  in both
      annual and interim financial statements about the method of accounting for
      stock-based employee compensation and the effect of

                                      F-11
<PAGE>

3.    SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

      RECENT ACCOUNTING PRONOUNCEMENTS (CONTINUED)

      the method used on reported results.  The Company will continue to account
      for  stock-based  compensation  to employees  under APB Opinion No. 25 and
      related interpretations.

      STOCK BASED COMPENSATION

      The Company  applies APB  Opinion  No. 25 and related  interpretations  in
      accounting for stock based compensation to employees and directors.  Stock
      compensation to non-employees is accounted for at fair value in accordance
      with Statement of Financial  Accounting  Standard No. 123,  Accounting for
      Stock-Based Compensation ("SFAS 123").

      During the year ended  February 29, 2004,  the Company  granted a director
      and former  director  options to acquire a total of 6,000 shares of common
      stock,  at an exercise  price of $0.40 per share,  through  July 17, 2008.
      During the year ended  February 28, 2003,  the Company  granted an officer
      and two  directors  options to acquire a total of 36,000  shares of common
      stock, at an exercise price of $0.40 per share, through July 18, 2007. All
      options  are  exercisable  upon  issuance.  The  Company  has  elected the
      disclosure-only  provisions  of SFAS 123 in  accounting  for its  employee
      stock options.  Accordingly,  no compensation  expense has been recognized
      for these options.  Had the Company recorded  compensation expense for the
      stock options  based on the fair value at the date for awards,  consistent
      with the  provisions  of SFAS 123, the  Company's net income for the years
      ended  February  29, 2004 and February 28, 2003 would have been reduced by
      approximately  $2,000  ($0.00 per share) and  $11,000  ($0.00 per  share),
      respectively.

4.    INVESTMENT IN MARKETABLE SECURITIES

      During the year ended February 29, 2004, the Company  acquired  marketable
      equity securities with a cost of $35,864. The securities are classified as
      an available for sale investment.  The carrying value at February 29, 2004
      of $36,900 includes an unrealized gain of $1,036.

5.    INTANGIBLE ASSETS

      Intangible assets consist of the following:

                                      FEBRUARY 29,   FEBRUARY 28,
                                          2004           2003
                                      ------------   ------------
       Research agreements            $    51,003    $    51,003
       Subscription revenue                26,250         26,250
                                      ------------   ------------
                                           77,253         77,253
       Less accumulated amortization       20,795         13,069
                                      ------------   ------------
       Intangible assets, net         $    56,458    $    64,184
                                      ============   ============


Amortization of intangible assets was $7,725,  $7,359,  and $9,676 for the years
ended February 29, 2004, and February 28, 2003, and 2002,  respectively.  Annual
amortization expense for the next five years is estimated to approximate $7,700.

                                      F-12
<PAGE>

6.    COMMITMENTS AND CONTINGENCIES

      As of February  29, 2004,  the Company did not enter into any  commitments
      and management believes that there were no contingencies.

7.    RECEIVABLES FROM SHAREHOLDERS FOR ISSUANCE OF COMMON STOCK

      The  34,200,000  shares of common  stock of FRMO sold  after the  spin-off
      distribution date were issued to the FRM Control Group as follows:

      i.  28,800,000  shares of common stock of FRMO Corp.  were issued to Peter
      Doyle, as Voting Trustee of 8.1% of the issued and  outstanding  shares of
      Kinetics Asset  Management Inc.  ("Kinetics") and Murray Stahl (the "Stahl
      Bregman  Group") for  $2,880,000,  payable as set forth  below.  The Stahl
      Bregman Group includes Murray Stahl,  Steven Bregman,  John Meditz,  Peter
      Doyle, Catherine Bradford, Thomas C. Ewing and Katherine Ewing. That group
      is in control of FRMO Corp.  and together with the persons named below are
      the "FRM Control  Group".  The 28,800,000  shares were issued to the Stahl
      Bregman  Group on January 23, 2001 but are held in escrow and delivered as
      paid at the rate of ten cents ($.10) per share. The Stahl Bregman Group is
      obligated  to pay to  FRMO  the  after  tax  amount  (fixed  at 54% of the
      dividend) of all  dividends  they receive  from  Kinetics  until the total
      $2,880,000  has been paid.  The Stahl Bregman Group expects the $2,880,000
      to be paid to FRMO in about five years. The installment payments depend on
      actual future  dividends  received from Kinetics.  The Stahl Bregman Group
      may make  additional  payments at its  discretion but the payment based on
      the Kinetics  dividend is  obligatory  until the fixed  purchase  price is
      paid. The members of the Stahl Bregman Group have no obligation other than
      to pay the net dividends  from Kinetics  until the fixed purchase price is
      paid. The Stahl Bregman Group has agreed that it will not divest itself of
      any part of its Kinetics  shares or change the  character of its ownership
      so as to reduce the pro-rata share of the dividends it currently  receives
      from Kinetics  without,  as a condition  thereof,  paying toward the fixed
      purchase  price of its FRMO  shares the  after-tax  proceeds  of that part
      divested,  as if the divestiture  had not occurred.  During the year ended
      February  29,  2004,  the  Stahl  Bregman  Group  paid  $200,000  of  this
      receivable balance.

      ii.  3,600,000  shares  of  common  stock of FRMO  were  issued  to Lestar
      Partners,  LLC,  ("LPC") a New York  Limited  Liability  Company  owned by
      Lester Tanner,  Secretary and a director of FRMO, together with members of
      his family,  for $360,000 payable as set forth below. The 3,600,000 shares
      were  issued  to LPC on  January  23,  2001  but are  held in  escrow  and
      delivered  as paid at the  rate of ten  cents  ($.10)  per  share.  LPC is
      obligated  to pay to FRMO in cash an amount equal to 12.5% of each payment
      made by the Stahl  Bregman  Group until the purchase  price of $360,000 is
      paid.  During the year ended  February 29, 2004,  LPC paid $25,000 of this
      receivable balance.

      iii.  1,800,000  shares of common stock of FRMO were issued to Lawrence J.
      Goldstein  for  $18,000  paid on January  23,  2001.  Mr.  Goldstein  is a
      director of FRMO and the General Partner of Santa Monica  Partners,  LP, a
      private fund, which owns 218,000 shares of common stock of FRMO.

      iv. There now remain a total of 29,936,250 shares held in escrow.

                                      F-13
<PAGE>

8.    NET INCOME PER COMMON SHARE AND PER COMMON SHARE EQUIVALENT

      Basic earnings per common share for each of the three years ended February
      29, 2004 are  calculated  by dividing net income by the  weighted  average
      common shares outstanding  during the period.  Diluted earnings per common
      share for each of the three years ended  February 29, 2004 are  calculated
      by  dividing  net income by weighted  average  common  shares  outstanding
      during  the  period  plus  dilutive  potential  common  shares,  which are
      determined as follows:

                                         YEAR ENDED    YEAR ENDED    YEAR ENDED
                                        FEBRUARY 29,  FEBRUARY 28,  FEBRUARY 28,
                                            2004          2003          2002
                                        ------------  ------------  ------------

      Weighted average common shares       4,840,207     3,897,524     3,889,772
      Effect of dilutive securities:
        Conversion of preferred stock         50,000        50,000        20,274
                                        ------------  ------------  ------------
      Dilutive potential shares            4,890,207     3,947,524     3,910,046
                                        ============  ============  ============


9.    INCOME TAXES

      The provision for income taxes consist of the following:

                                         YEAR ENDED    YEAR ENDED    YEAR ENDED
                                        FEBRUARY 29,  FEBRUARY 28,  FEBRUARY 28,
                                            2004          2003          2002
                                        ------------  ------------  ------------

      Current:
        Federal                         $     27,130  $      8,952  $      1,497
        State                                 10,662         5,296           948
                                        ------------  ------------  ------------
      Total current                           37,792        14,248         2,445
                                        ============  ============  ============

      Deferred:
        Federal                                    -             -             -
        State                                      -             -             -
                                        ------------  ------------  ------------
      Total deferred                               -             -             -
                                        ------------  ------------  ------------
      Total                             $     37,792  $     14,248  $      2,445
                                        ============  ============  ============


      FRMO and its former  subsidiaries  filed  consolidated tax returns through
      January 23, 2001.  There was no federal tax  liability  due to current and
      prior year net operating losses. After January 23, 2001, FRMO began filing
      individual tax returns.  FRMO and its former subsidiaries filed individual
      state tax returns.  The Company has net operating  loss carry forwards for
      Federal purposes of approximately  $1,091,000 arising from FRMO's share of
      losses from the  consolidated  tax returns that were filed through January
      23, 2001. The use of these NOLs is  restricted,  subject to the provisions
      of Internal  Revenue  Code  section 382 and  accordingly,  the Company has
      taken a 100% reserve  against the deferred tax asset  resulting from these
      NOLs.

                                      F-14
<PAGE>

10.   INCOME TAXES (CONTINUED)

      The following is a reconciliation  of the statutory  federal and effective
      income tax rates for the years ended:

                                        FEBRUARY 29,  FEBRUARY 28,  FEBRUARY 28,
                                            2004          2003          2002
                                        ------------  ------------  ------------
  Statutory federal income tax
    expense rate                              34.0 %        34.0 %        34.0 %
  Adjustment for utilization of
    lower tax brackets                       (12.5)        (19.2)        (19.0)
  State taxes, less federal tax effect         6.1           2.3           7.6
  Permanent differences                        5.8           5.8             -
  Other                                        4.0           4.3             -
                                        ------------  ------------  ------------
                                              37.4 %        27.2 %        22.6 %
                                        ============  ============  ============

                                      F-15
<PAGE>

11.   SUPPLEMENTAL FINANCIAL INFORMATION SELECTED QUARTERLY FINANCIAL DATA
      (UNAUDITED)

<TABLE>
<CAPTION>
                                                           Quarter
                                         ------------------------------------------
                                           First     Second      Third     Fourth      Total
                                         ---------  ---------  ---------  ---------  ----------
<S>                                      <C>        <C>        <C>        <C>        <C>
YEAR ENDED FEBRUARY 29, 2004
Total revenue                            $  23,257  $  26,427  $  40,514  $  69,757  $  159,955
                                         =========  =========  =========  =========  ==========
Income from operations                   $  10,993  $   8,482  $  27,707  $  52,438  $   99,620
                                         =========  =========  =========  =========  ==========
Net income                               $   8,075  $   6,067  $  21,026  $  28,030  $   63,198
                                         =========  =========  =========  =========  ==========
Earnings per common share:
  Basic                                  $      --  $      --  $      --  $      --  $     0.01
                                         =========  =========  =========  =========  ==========
  Diluted                                $      --  $      --  $      --  $      --  $     0.01
                                         =========  =========  =========  =========  ==========
Number of shares used in computation of
  earnings per share:
  Basic                                  3,897,524  3,897,524  4,485,902  6,137,195   4,840,207
                                         =========  =========  =========  =========  ==========
  Diluted                                3,947,524  3,947,524  4,535,902  6,187,195   4,890,207
                                         =========  =========  =========  =========  ==========

YEAR ENDED FEBRUARY 28, 2003
Total revenue                            $  31,451  $  35,054  $  34,965  $   2,278  $  103,748
                                         =========  =========  =========  =========  ==========
Income (loss) from operations            $  17,566  $  17,440  $  20,876  $  (4,543) $   51,339
                                         =========  =========  =========  =========  ==========
Net income (loss)                        $  15,177  $  11,343  $  10,390  $   1,198  $   38,108
                                         =========  =========  =========  =========  ==========
Earnings (loss) per common share:
  Basic                                  $      --  $      --  $      --  $      --  $     0.01
                                         =========  =========  =========  =========  ==========
  Diluted                                $      --  $      --  $      --  $      --  $     0.01
                                         =========  =========  =========  =========  ==========
Number of shares used in computation of
  earnings per share:
  Basic                                  3,897,524  3,897,524  3,897,524  3,897,524   3,897,524
                                         =========  =========  =========  =========  ==========
  Diluted                                3,947,524  3,947,524  3,947,524  3,947,524   3,947,524
                                         =========  =========  =========  =========  ==========
</TABLE>

During the fourth  quarter of the fiscal  year  ended  February  28,  2003,  the
Company reevaluated its accounting for its investment in Kinetics Advisers, LLC.
As a result of this  reevaluation,  the  Company  recorded  an  adjustment  that
reduced revenues by $22,000. Of this amount,  approximately  $6,000,  $8,000 and
$8,000 are allocable to the first, second, and third quarters, respectively. The
adjustment also reduced net incomes by the same amount.

                                      F-16