<PAGE>   1
                       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 28, 2001

      / /   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)

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


271 NORTH AVENUE, NEW ROCHELLE, NY                       10801
(Address of principal executive offices)               (Zip Codes)
</TABLE>

       REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (914) 636-3432

        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 21, 2001 was $1,776,013.

      The number of shares outstanding of the registrant's Common Stock as of
May 21, 2001 was 36,080,003 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
28, 2001.
<PAGE>   2
                                   FRMO CORP.

                           ANNUAL REPORT ON FORM 10-K

                   FOR THE FISCAL YEAR ENDED FEBRUARY 28, 2001

<TABLE>
<CAPTION>
                                                                                 Page No.
                                                                                 --------
<S>                                                                              <C>
PART I

      Item 1.     Business......................................................   1
      Item 2.     Properties....................................................   6
      Item 3.     Legal Proceedings.............................................   6
      Item 4.     Submission of Matters to a Vote of Security Holders
                        and Other Information ..................................   6


PART II

      Item 5.     Market for Registrant's Common Equity and Related
                         Stockholder Matters....................................   8
      Item 6.     Selected Financial Data.......................................   9
      Item 7.     Management's Discussion and Analysis of Financial
                        Condition and Results of Operations.....................   9
      Item 7A.    Quantitative and Qualitative Disclosures About
                        Market Risk.............................................  11
      Item 8.     Financial Statements and Supplementary Data...................  11
      Item 9.     Changes in and Disagreements with Accountants on
                        Accounting and Financial Disclosure.....................  11


PART III

      Item 10.    Directors and Executive Officers of the Registrant............  12
      Item 11.    Executive Compensation........................................  12
      Item 12.    Security Ownership of Certain Beneficial Owners
                        and Management..........................................  12
      Item 13.    Certain Relationships and Related Transactions................  12


PART IV

      Item 14.    Exhibits, Financial Statements, Schedules
                        and Reports on Form 8-K  ...............................  13
</TABLE>
<PAGE>   3
                                     PART I


ITEM 1.   BUSINESS


ORGANIZATION OF THE COMPANY


FRMO CORP. (the "Company or "FRM") 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 to FRMO Corp on November 29, 2001). One of the
Company's former subsidiaries was MFC Development Corp. ("MFC"). On August 31,
2000, FRM 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, FRM filed Form 8-K with the Securities and Exchange
Commission, which disclosed that FRM contemplated distributing to its
shareholders one share of MFC common stock for each one share of FRM's 1,800,000
shares of outstanding common stock at the close of business on November 1, 2000
(the record date). On October 19, 2000, FRM filed Form 8-K with the Securities
and Exchange Commission, which disclosed the board of directors' approval of the
distribution. MFC filed a Form 10 on October 2, 2000 to register its common
stock. Amendment Nos. 1, 2 and 3 to Form 10 were filed on November 20, 2000,
December 6, 2000 and January 16, 2001. The MFC shares were distributed on
January 23, 2001.

After January 23, 2001 FRM has had no further interest in MFC and it owns no
shares of MFC stock. The market value of MFC common stock at the date of
distribution was $1.00 per share but that is not taxable as ordinary income to
FRM's shareholders. Instead the $1.00 per share is the tax basis for the MFC
stock distributed in the spin-off. Shareholders' tax basis in their FRM shares
is reduced by $1.00 but not below zero. If $1.00 per share exceeds the
shareholder's basis before such reduction, the excess is treated as capital
gain. Because FRM and MFC were under common control, the spin-off transaction
has been accounted for on FRM's books in a manner similar to a reverse pooling
of interests with FRM having a new start on January 23, 2001 with $10,000 in
assets, no liabilities and 1,800,000 shares of common stock outstanding.

FRM CONTROL GROUP

After the spin-off, FRM 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 FRM, 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


                                       1
<PAGE>   4
$.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 FRM 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 benefitted from that as well as the $10,000 in cash
remaining in FRM.

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, including The Internet Fund.

The 34,200,000 shares of common stock of FRM 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 FRM 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 $2,880,000, payable as set forth below.
      The Stahl Bregman Group includes Murray Stahl, Steven Bregman, John
      Meditz, Peter Doyle, Catherine Bradford, Thomas C. Ewing and Katherine
      Ewing. That group will be in control of FRM Corp. and together with the
      persons named below are the "FRM Control Group". The 28,800,000 shares
      were issued to the Stahl Bregman Group on January 23, 2001 but are held in
      escrow and delivered as paid at the rate of ten cents ($.10) per share.
      The Stahl Bregman Group is obligated to pay to FRM 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 FRM 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 FRM 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 FRM were issued to Lestar
      Partners, LLC, ("LPC") a New York Limited Liability Company owned by
      Lester Tanner, Secretary and a director of FRM, together with members of
      his family, for


                                       2
<PAGE>   5
      $360,000 payable as set forth below. The 3,600,000 shares were issued to
      LPC on January 23, 2001 but are held in escrow and delivered as paid at
      the rate of ten cents ($.10) per share. LPC is obligated to pay to FRM 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 FRM were issued to
      Lawrence J. Goldstein for $18,000 paid on January 23, 2001. Mr. Goldstein
      is a director of FRM and the General Partner of Santa Monica Partners, LP,
      a private fund, which owns 218,000 shares of common stock of FRM.



BUSINESS OF FRM

FRMO Corp. is primarily a Financial Risk Management Organization in that the
experience of its management as described herein has been in the analysis and
research of public companies. 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 FRM. 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 FRM to
maximize its return on this form of asset. The identification of any business
opportunities will follow the process whereby Horizon Research Group selects and
evaluates 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. Horizon's research
periodicals organize the investment universe by functional sector rather than by
the standard division by industry sector. Among its publications are The
Contrarian Research Report, The Spin-Off Report, The Intangible Asset Report,
The Hidden Asset Report, The Devil's Advocate, The Convertible Arbitrage Report,
and The Skeptic's Almanac. These reports are addressed to investment managers,
but the concepts and process behind them are expected to serve FRM's efforts to
identify business opportunities in public and private ventures.

THE CONTRARIAN RESEARCH REPORT identifies any security that offers investors an
asymmetric return -- that is, where the likelihood of a positive return far
outweighs the likelihood of a loss. Its philosophy is to seek out-of-favor
investments whose low valuations serve to minimize risk, in contradistinction to
the search for maximum return with little regard for the consequences of being
in error.

                                       3
<PAGE>   6
THE SPIN-OFF REPORT provides an in-depth fundamental analysis of every domestic
tax-free spin-off, as well as a monthly calendar that monitors spin-offs in
progress. It is the only such publication of its kind and the only comprehensive
source of information about the spin-off market, which is a classic source of
inefficiently priced securities. Bits & Pieces, a second monthly calendar,
highlights equity arbitrage opportunities for the hedge-fund community.

THE INTANGIBLE ASSET REPORT is dedicated to the identification of companies that
are notable for a unique asset, strategy or niche, or for the intangible human
element behind value creation.

THE HIDDEN ASSET REPORT is a monthly publication that focuses on growth stocks
that represent either an under valuation opportunity relative to typical growth
stock benchmarks, or an emerging theme. They usually include an asset or
strategic opportunity that has not yet been expressed in the financial
statements, which are necessarily backward looking and therefore cannot be
screened for.

THE DEVIL'S ADVOCATE identifies and analyzes companies whose shares are
demonstrably overvalued. Typically, the report includes a specific strategy
whereby a short sale can be created in a manner that substantially eliminates
or reduces the risks ordinarily borne by the short seller.

THE CONVERTIBLE ARBITRAGE REPORT is geared specifically to the hedge fund
community. It identifies two or more securities of the same company that are
severely mis-priced relative to one another and the mechanism by which an
arbitrageur can profit from this gap.

THE SKEPTIC'S ALMANAC is a journal that investigates the process of investing
rather than investments per se.

SPECIFIC BUSINESS ACTIVITIES

Since its new start on January 23, 2001, FRM completed the following
transactions by February 28, 2001, 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 FRM will have a
carried interest based on leveraging the creative services of its personnel (its
intellectual capital).


                                       4
<PAGE>   7
      (ii) A consulting agreement has been signed effective January 1, 2001
whereby FRM will receive $21,600 a year from the manager of Santa Monica
Partners, LP, a director and shareholder of FRM, 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 FRM.

In the current fiscal year beginning March 1, 2001, FRM is engaged in the
following specific business activities:

      (iii) In March 2001 FRM acquired the research service fees that Horizon
Research Group had received from The New Paradigm Fund in exchange for 80,003
shares of FRM 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 New Paradigm Fund
outperformed the S & P 500 Index by approximately 13 percentage points in its
first fiscal year of operation, Calendar 2000. Its Net Asset Value (NAV) at May
11, 2001 was up 21.54% from May 10, 2000, compared to the S & P 500 Index, which
at May 11, 2001 was down 8.87% from May 10, 2000.

      (iv) In May 2001, FRM acquired the research service fees that Horizon
Research Group will receive from The Middle East Growth Fund in exchange for
3,456 shares of FRM common stock. While the fees are minimal at the present
time, management believes that they will grow in future years.

      (v) FRM has established three programs based on different investment
strategies designed by its personnel for which consultant fees are paid to the
Company that are asset based in nature. One program is a private hedge fund of
accredited investors including the Company operated by a limited partnership in
which FRM is the General Partner. A second program involves a manager of a
private investment fund who will implement an investment strategy designed for
the fund whereby consulting fees are paid to the Company or for its personnel
who may be outsourced to the manager. The third program is to enhance the growth
of small mutual funds, which will enter into new research agreements with FRMO
to focus on the funds' market sector or corporate strategy. These programs are
new, are in a development stage and are not expected to provide substantial
revenues in the current fiscal year.


MARKETING

Currently, the marketing of the Company's services and programs is by the
officers of the Company. FRM has established its own website at www.frmo.com
which will be enhanced this year to aid in the marketing effort.


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 companies and strategies to find the complex or overlooked
situations which can offer an advantage to the


                                       5
<PAGE>   8
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 which 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.


TRADEMARKS  -     None.


EMPLOYEES

As of February 28, 2001, 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

FRM 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 January 23, 2001.


                                       6
<PAGE>   9
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.


                                       7
<PAGE>   10
                                     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. 36,000,000 shares of common stock
were outstanding on February 28, 2001 and 36,080,003 shares were outstanding on
May 21,2001. No preferred shares are outstanding. Subject to any prior rights of
the Company's preferred shareholders, FRM's common shareholders are entitled:

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

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

      The FRM Board of Directors may issue additional authorized shares of FRM
common stock without shareholder approval. FRM shareholders do not have any
cumulative rights or any preemptive rights to subscribe for additional
securities that FRM 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 rate basis, any assets
distributable to shareholders in respect of shares by them.

The FRM certificate of incorporation authorizes the issuance by FRM of up to
2,000,000 shares of FRM preferred stock, none of which is issued and
outstanding. The FRM 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 FRM certificate of incorporation to
provide at any time for the issuance of FRM 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. Since the Company's post spin-off-new-business start on January
23, 2001 the range of high and low bid quotations in the fourth quarter of its
last fiscal year ended February 28, 2001 (namely from January 23 to February 28,
2001) was $.625 low bid and $1.5625 high bid 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. The high bid and low asked quotation
on May 21, 2001 was $1.20 bid and $1.30 asked.


                                       8
<PAGE>   11
DIVIDENDS


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


HOLDERS


As of May 1, 2001, there were approximately 1,100 holders of record of FRM
common stock representing about 2,500 beneficial owners of its shares. There are
no options or warrants to purchase common stock of the Company outstanding. The
Company does not know of any shares of common stock of FRM 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

Previously filed financial reports on Form 10-K during the five fiscal years
ended February 28, 2001, included the operations of MFC Development Corp. and
subsidiaries, which were spun-off to the shareholders of FRM 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.



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 which 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.


                                       9
<PAGE>   12
OVERVIEW

By reason of the spin-off transaction described in Item 1 the Company had a new
start in terms of its continuing business and its financial statement. 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 FRM in the days between January 23,
2001 and February 28, 2001 is described in Item 1 and reflected in the statement
of operations for the fiscal year ended February 28, 2001 included herein.

RESULTS OF OPERATIONS

YEAR ENDED FEBRUARY 28, 2001 COMPARED TO YEAR ENDED FEBRUARY 29, 2000

Due to the new start of FRM on January 23, 2001 and the accounting for the
spin-off as a reverse pooling, there were no operations prior to January 23,
2001.

The Company's revenues from operations increased by $3,600 for the year ended
February 28, 2001 ("2001") to $3,600 from $0 for the year ended February 29,
2000 ("2000"). The increase was a result of the initial revenue of the Company
after the spin-off, derived from its consulting agreement with the manager of
Santa Monica Partners, L.P.

Costs and expenses increased by $4,200 in 2001, to $4,200 as compared to $0 in
2000. The net increase in 2001 was due primarily to the audit fee for 2001,
transfer agent's fees and office expenses. The officers of the Company have
agreed not to draw any salaries currently and they are responsible for all of
the Company's operations.

For the reasons noted above, the Company's net loss increased by $600 in 2001 to
$600 as compared to a net loss of $0 in 2000.

LIQUIDITY AND CAPITAL RESOURCES

As part of the spin-off agreement, the Company retained $10,000 in cash. The
Company's activities during the year ended February 28, 2001, after the spin-off
resulted in an increase of cash in the amount of $35,000, from $10,000 in 2000
to $45,000 in 2001. The Company expects its business with prospective new
clients to develop without the outlay of cash since the growth will come from
the services if 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 of $3,218,625 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.

Cash provided by operations for the year ended in 2001 was $600, as compared to
$0 being provided in 2000. The $600 increase in cash in 2000 was due to a net
increase of payables over receivables, which are normal fluctuations primarily
caused by timing differences.


                                       10
<PAGE>   13
Cash used by investing activities was $5,000 for the year ended in 2001 as
compared with $0 being used in 2000. The $5,000 increase in the use of cash was
due to the investment in FRM NY Capital, LLC.

Net cash provided by financing activities was $39,375 for the year ended in 2001
as compared with $0 being provided in 2000. The $39,375 increase in cash being
provided in 2001 was due to the partial payment of the new shares that were
issued.



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 Kinetics 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 14(a) below.



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

None.


                                       11
<PAGE>   14
                                    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 28, 2001. 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 28, 2001. 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 28, 2001. 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 28, 2001. Such information is incorporated herein by
reference and made a part thereof.


                                       12
<PAGE>   15
                                     PART IV


ITEM 14.   EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES, AND REPORTS ON FORM 8-K


(a)   FINANCIAL STATEMENTS, SCHEDULES AND EXHIBITS


(1)   FINANCIAL STATEMENTS:

<TABLE>
<S>                                                                           <C>
Index to Consolidated Financial Statements and Schedules...................   F-1
Report of Holtz Rubenstein & Co., LLP......................................   F-2
Consolidated Balance Sheets - February 28, 2001 and February 29, 2000......   F-3
Consolidated Statement of Operations -
   Years ended February 28, 2001, February 29, 2000 and February 28, 1999..   F-5
Consolidated Statement of Stockholders' Equity -
   Years ended February 28, 2001, February 29, 2000 and February 28, 1999..   F-6
Consolidated Statement of Cash Flows -
   Years ended February 28, 2001, February 29, 2000 and February 28, 1999..   F-7
Notes to Consolidated Financial Statements.................................   F-8
</TABLE>


(2)   FINANCIAL STATEMENT SCHEDULES:

All schedules are omitted because they are not applicable, not required, or
because the required information is included in the consolidated 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.


<TABLE>
<CAPTION>
Exhibit
Number      Description
-------     -----------
<S>         <C>
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
</TABLE>


                                       13
<PAGE>   16
<TABLE>
<S>         <C>
            incorporated by reference as an exhibit in the
            Company's Form 8-K Current Report filed on January 25, 2001.*
</TABLE>

----------

*    Previously filed



(b)   REPORTS ON FORMS 8-K

The Company filed Form 8-K Current Reports on August 31, 2000, October 19, 2000
and January 25, 2001.


                                       14
<PAGE>   17
                                   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 23, 2001.



                                                 FRMO CORP.

                                     By:       /s/   Victor Brodsky
                                           ----------------------------
                                                 Victor Brodsky,
                                                    Treasurer
                                           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 22, 2001.


<TABLE>
<CAPTION>
Signature                                               Title
---------                                               -----


<S>                                                   <C>
     /s/   Murray Stahl                               Chairman of the Board
-------------------------------                       (Principal Executive Officer)
           Murray Stahl


     /s/   Steven Bregman                             President, Director
-------------------------------
           Steven Bregman


     /s/   Lester Tanner                              Secretary, Director
-------------------------------
           Lester Tanner


     /s/   Allan Kornfeld                             Director
-------------------------------
           Allan Kornfeld


     /s/   David Michael                              Director
-------------------------------
           David Michael
</TABLE>



<PAGE>   18
                                   FRMO Corp.
                          Index to Financial Statements





<TABLE>
<S>                                                                       <C>
This Index..........................................................      F- 1
Report of Independent Auditors......................................      F- 2
Balance Sheets --
   As of February 28, 2001 and February 29, 2000....................      F- 3
Statements of Operations --
   Years Ended February 28, 2001, February 29, 2000
   and February 28, 1999............................................      F- 5
Statements of Stockholders' Equity --
   Years Ended February 28, 2001, February 29, 2000
   and February 28, 1999............................................      F- 6
Statements of Cash Flows --
   Years Ended February 28, 2001, February 29, 2000
   and February 28, 1999............................................      F- 7

Notes to Financial Statements.......................................      F- 8
</TABLE>


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


                                      F-1
<PAGE>   19
                         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 28,
2001 and February 29, 2000 and the related statements of operations,
stockholders' equity and cash flows for the three years ended February 28, 2001.
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 auditing standards generally accepted
in the United States of America. 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 28, 2001
and February 29, 2000, and the results of its operations and its cash flows for
the three years ended February 28, 2001 in conformity with accounting principles
generally accepted in the United States of America.


                                                 /s/ HOLTZ RUBENSTEIN & CO., LLP




Melville, New York
May 11, 2001


                                      F-2
<PAGE>   20
                                    FRMO Corp
                                 Balance Sheets







<TABLE>
<CAPTION>
                                         FEBRUARY 28,  FEBRUARY 29,
                                             2001          2000
                                          -------       -------
<S>                                      <C>           <C>
ASSETS
Current assets:
  Cash & cash equivalents                 $44,957       $10,000
  Other current assets                      2,937            --
                                          -------       -------
Total current assets                       47,894        10,000
                                          -------       -------

Other assets:
  Investment in FRM NY Capital, LLC         5,000            --
                                          -------       -------
Total other assets                          5,000            --
                                          -------       -------

Total assets                              $52,894       $10,000
                                          =======       =======
</TABLE>


See accompanying notes.


                                      F-3
<PAGE>   21
                                   FRMO Corp.
                           Balance Sheets (continued)




<TABLE>
<CAPTION>
                                                                FEBRUARY 28,         FEBRUARY 29,
                                                                    2001               2000
                                                                -----------        -----------
<S>                                                             <C>                <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Accounts payable and accrued expenses                         $     4,070        $        --
                                                                -----------        -----------
Total current liabilities                                             4,070                 --
                                                                -----------        -----------

Commitments and contingencies

Stockholders' equity:
  Preferred stock - $.001 par value;
    Authorized - 2,000,000 shares;
    Issued and outstanding - 0 shares                                    --                 --
  Common stock - $.001 par value;
    Authorized - 90,000,000 shares;
    Issued and outstanding -  36,000,000 shares at
      February 28, 2001 and 1,816,462 shares at
      February 29, 2000                                              36,000              1,800
  Capital in excess of par value                                  3,232,000              8,200
  Accumulated deficit                                                  (551)                --
                                                                -----------        -----------
                                                                  3,267,449             10,000
  Less: Receivables from shareholders for
              common stock issuance                               3,218,625                 --
                                                                -----------        -----------
  Total stockholders' equity                                         48,824             10,000
                                                                -----------        -----------

Total liabilities and stockholders' equity                      $    52,894        $    10,000
                                                                ===========        ===========
</TABLE>


See accompanying notes


                                      F-4
<PAGE>   22
                                   FRMO Corp.
                            Statements of Operations


<TABLE>
<CAPTION>
                                                        YEAR ENDED        YEAR ENDED        YEAR ENDED
                                                        FEBRUARY 28,      FEBRUARY 29,     FEBRUARY 28,
                                                            2001             2000              1999
                                                        -----------        ---------       -----------
<S>                                                     <C>                <C>             <C>
REVENUES
  Consulting                                            $     3,600        $      --       $        --
                                                        -----------        ---------       -----------
  Total income                                                3,600               --                --
                                                        -----------        ---------       -----------

COSTS AND EXPENSES
  Accounting                                                  2,000               --                --
  Transfer agent                                              1,915
  State franchise tax                                           155
  Office supplies                                                81               --                --
                                                        -----------        ---------       -----------
  Total costs and expenses                                    4,151               --                --
                                                        -----------        ---------       -----------

Net loss                                                $      (551)       $      --       $        --
                                                        ===========        =========       ===========

Loss per common share:
Basic and diluted loss per common share                 $     (0.00)       $      --       $        --
                                                        ===========        =========       ===========

Number of shares used in computation of basic and
  diluted earnings per share                              1,998,616        1,800,000         1,800,000
                                                        ===========        =========       ===========
</TABLE>


See accompanying notes


                                      F-5
<PAGE>   23
                                   FRMO Corp.
                       Statements of Stockholders' Equity


<TABLE>
<CAPTION>

                                                                               ADDITIONAL
                                                 COMMON STOCK                   PAID-IN          (ACCUMULATED
                                          SHARES             AMOUNT             CAPITAL            DEFICIT)
                                         ----------        -----------        -----------        -----------
<S>                                       <C>              <C>                <C>                <C>
Balance, as previously reported,
  February 28, 1998                       1,816,462        $     1,816        $ 5,827,224        $  (253,794)
Adjustment related to transfer of
  ownership of FRMO Corp. assets            (16,462)               (16)        (5,819,024)           253,794
                                         ----------        -----------        -----------        -----------
Balance, February 28, 1998                1,800,000              1,800              8,200                 --
  Net income (loss)                              --                 --                 --                 --

  Comprehensive income (loss)                    --                 --                 --                 --
                                         ----------        -----------        -----------        -----------
Balance, February 28, 1999                1,800,000              1,800              8,200                 --
  Net income (loss)                              --                 --                 --                 --

  Comprehensive income (loss)                    --                 --                 --                 --
                                         ----------        -----------        -----------        -----------
BALANCE, FEBRUARY 29, 2000                1,800,000              1,800              8,200                 --
  ISSUANCE OF NEW STOCK                  34,200,000             34,200          3,223,800                 --
  NET INCOME (LOSS)                              --                 --                 --               (551)

  COMPREHENSIVE INCOME (LOSS)                    --                 --                 --                 --
                                         ----------        -----------        -----------        -----------
BALANCE, FEBRUARY 28, 2001               36,000,000        $    36,000        $ 3,232,000        $      (551)
                                         ==========        ===========        ===========        ===========
</TABLE>


<TABLE>
<CAPTION>
                                            RECEIVABLES FROM
                                             SHAREHOLDERS         TOTAL
                                              FOR COMMON       STOCKHOLDERS'     COMPREHENSIVE
                                            STOCK ISSUANCE        EQUITY         (LOSS)INCOME
                                            ----------------   -------------     --------------
<S>                                         <C>                <C>               <C>
Balance, as previously reported,
  February 28, 1998                         $        --        $ 5,575,246
Adjustment related to transfer of
  ownership of FRMO Corp. assets                     --         (5,565,246)
                                            -----------        -----------
Balance, February 28, 1998                           --             10,000
  Net income (loss)                                  --                 --        $        --
                                                                                  -----------
  Comprehensive income (loss)                        --                 --        $        --
                                            -----------        -----------        ===========
Balance, February 28, 1999                           --             10,000
  Net income (loss)                                  --                 --        $        --
                                                                                  -----------
  Comprehensive income (loss)                        --                 --        $        --
                                            -----------        -----------        ===========
BALANCE, FEBRUARY 29, 2000                           --             10,000
  ISSUANCE OF NEW STOCK                      (3,218,625)            39,375
  NET INCOME (LOSS)                                  --               (551)       $      (551)
                                                                                  ------------
  COMPREHENSIVE INCOME (LOSS)                        --                 --        $      (551)
                                            -----------        -----------        ============
BALANCE, FEBRUARY 28, 2001                  $(3,218,625)       $    48,824
                                            ===========        ===========
</TABLE>


See accompanying notes


                                      F-6
<PAGE>   24
                                   FRMO Corp.
                            Statements of Cash Flows

<TABLE>
<CAPTION>
                                                             YEAR ENDED     YEAR ENDED    YEAR ENDED
                                                            FEBRUARY 28,   FEBRUARY 29,   FEBRUARY 28,
                                                               2001            2000           1999
                                                           ------------    ------------   ------------
<S>                                                        <C>             <C>            <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss                                                     $   (551)       $     --       $     --
Adjustments to reconcile net loss to net cash provided
   by operating activities:
     Changes in operating assets and liabilities:
      Additions to accounts receivable                         (1,800)             --             --
      Other current assets                                     (1,137)             --             --
       Accounts payable and accrued expenses                    4,070              --             --
                                                             --------        --------       --------
Net cash provided by operating activities                         582              --             --
                                                             --------        --------       --------

CASH FLOWS FROM INVESTING ACTIVITIES
Investment in FRM NY Capital, LLC                              (5,000)             --             --
                                                             --------        --------       --------
Net cash used in investing activities                          (5,000)             --             --
                                                             --------        --------       --------

CASH FLOWS FROM FINANCING ACTIVITIES
Payment for issuance of new stock                              39,375              --             --
                                                             --------        --------       --------
Net cash provided by financing activities                      39,375              --             --
                                                             --------        --------       --------

Net increase in cash and cash equivalents                      34,957              --             --
Cash and cash equivalents, beginning of year                   10,000          10,000         10,000
                                                             --------        --------       --------

Cash and cash equivalents, end of year                       $ 44,957        $ 10,000       $ 10,000
                                                             ========        ========       ========

ADDITIONAL CASH FLOW INFORMATION
Interest paid                                                $     --        $     --       $     --
                                                             ========        ========       ========
Income taxes paid                                            $     --        $     --       $     --
                                                             ========        ========       ========
</TABLE>


See accompanying notes


                                      F-7
<PAGE>   25
                                   FRMO Corp.
                         Notes to Financial Statements


1. ORGANIZATION OF THE COMPANY

FRMO CORP. (the "Company or "FRM") 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 to FRMO Corp on November 29, 2001). One of the
Company's former subsidiaries was MFC Development Corp. ("MFC"). On August 31,
2000, FRM 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, FRM filed Form 8-K with the Securities and Exchange
Commission, which disclosed that FRM contemplated distributing to its
shareholders one share of MFC common stock for each share of FRM's 1,800,000
shares of outstanding common stock at the close of business on November 1, 2000
(the record date). On October 19, 2000 FRM filed Form 8-K with the Securities
and Exchange Commission, which disclosed the board of directors' approval of the
distribution. MFC filed a Form 10 on October 2, 2000 to register its common
stock. Amendment Nos. 1, 2 and 3 to Form 10 were filed on November 20, 2000,
December 6, 2000 and January 16, 2001. The MFC shares were distributed on
January 23, 2001.

Because FRM and MFC were under common control, the spin-off transaction has been
accounted for on FRM's books in a manner similar to a reverse pooling of
interests with FRM 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 amended its certificate of incorporation as
follows:

1.    The Company changed its name from FRM Nexus, Inc. to FRMO Corp.

2.    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 5.


                                      F-8
<PAGE>   26
                                   FRMO Corp.
                         Notes to Financial Statements


2. BASIS OF PRESENTATION

BUSINESS ACTIVITIES OF THE COMPANY

FRMO Corp. is primarily a Financial Risk Management Organization in that the
experience of its management as described herein has been in the analysis and
research of public companies. 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 FRM. 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 FRM to
maximize its return on this form of asset. The identification of any business
opportunities will follow the process whereby Horizon Research Group selects and
evaluates 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, FRM completed the following
transactions by February 28, 2001, 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 FRM will have a
carried interest based on leveraging the creative services of its personnel (its
intellectual capital).

      (ii) A consulting agreement has been signed effective January 1, 2001
whereby FRM will receive $21,600 a year from the manager of Santa Monica
Partners, LP, a director and shareholder of FRM, 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 200,000 shares of
common stock of FRM.

3. SIGNIFICANT ACCOUNTING POLICIES

REVENUE RECOGNITION

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

RECEIVABLES

Receivables consist of monthly, unpaid consulting fees with a related party. All
receivables are current and management believes they are fully collectible.


                                      F-9
<PAGE>   27
                                   FRMO Corp.
                         Notes to Financial Statements


3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

INVESTMENT IN FRM NY CAPITAL, LLC

The investment in FRM NY Capital, LLC represents a 7% Class B membership
interest. Class B members will not receive any distributions until all Class A
members are repaid their capital contributions, with interest. As of February
28, 2001, no distributions have been made to any Class B members. This
investment is accounted for under the cost method of accounting.

NET INCOME PER COMMON SHARE AND PER COMMON SHARE EQUIVALENT

The Company computes net income per share in accordance with the provisions of
Statement of Financial Standard ("SFAS") No. 128, "Earnings per Share". Under
SFAS No. 128, basic net income per share is computed by dividing the net income
for the period by the weighted average number of common shares outstanding
during the period. The weighted average number of common shares outstanding
excludes escrowed shares.

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.

CONCENTRATION OF RISK

Financial instruments which potentially subject the Company to concentrations of
credit risk consist principally of cash, money market mutual funds, and trade
receivables.

Trade receivables arise from consulting fees in the New York City area. For the
year ended February 28, 2001, fees earned from one client, who is also a related
party represented 100% of all fees. As of February 28, 2001, trade receivables
from the same client comprised 100% 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 28, 2001, February 29,
2000 and February 28 1999.


                                      F-10
<PAGE>   28
                                   FRMO Corp.
                         Notes to Financial Statements


3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

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 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
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.

EFFECTS OF NEW ACCOUNTING PRONOUNCEMENTS

ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

The Company adopted Statement No. 133, "Accounting for Derivative Instruments
and Hedging Activities", effective March 1, 2001. The Company does not
anticipate that the adoption of this Statement will have any effect on its
results of operations or financial position.

REVENUE RECOGNITION IN FINANCIAL STATEMENTS

The Company adopted Securities and Exchange Commission Staff Accounting Bulletin
101 ("SAB 101"), Revenue Recognition in Financial Statements in the quarter
starting December 1, 2000. SAB 101 requires revenue to either be realized or
realizable and earned prior to recognition. This generally does not occur until
there is persuasive evidence of an arrangement, delivery has occurred or
services have been rendered, the price is fixed or determinable, and
collectibility is reasonably assured. The adoption of SAB 101 has not impacted
the Company's revenue recognition policies and its results of operations or
financial position.

4. COMMITMENTS AND CONTINGENCIES

As of February 28, 2001, the Company did not enter into any commitments and
management believes that there were no contingencies.


                                      F-11
<PAGE>   29
                                   FRMO Corp.
                         Notes to Financial Statements


5.  RECEIVABLES FROM SHAREHOLDERS FOR ISSUANCE OF COMMON STOCK

The 34,200,000 shares of common stock of FRM 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 FRM 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 $2,880,000, payable as set forth below.
      The Stahl Bregman Group includes Murray Stahl, Steven Bregman, John
      Meditz, Peter Doyle, Catherine Bradford, Thomas C. Ewing and Katherine
      Ewing. That group will be in control of FRM Corp. and together with the
      persons named below are the "FRM Control Group". The 28,800,000 shares
      were issued to the Stahl Bregman Group on January 23, 2001 but are held in
      escrow and delivered as paid at the rate of ten cents ($.10) per share.
      The Stahl Bregman Group is obligated to pay to FRM 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 FRM 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 FRM 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 FRM were issued to Lestar
      Partners, LLC, ("LPC") a New York Limited Liability Company owned by
      Lester Tanner, Secretary and a director of FRM, 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 FRM 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 FRM were issued to
      Lawrence J. Goldstein for $18,000 paid on January 23, 2001. Mr. Goldstein
      is a director of FRM and the General Partner of Santa Monica Partners, LP,
      a private fund, which owns 218,000 shares of common stock of FRM.


                                      F-12
<PAGE>   30
                                   FRMO Corp.
                         Notes to Financial Statements


NOTE 6. INCOME TAXES

FRM 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, FRM will file an individual tax
return. FRM and its former subsidiaries filed individual state tax returns. The
Company has net operating loss carryforwards for federal purposes of
approximately $1,258,000 arising from FRM's share of losses from the
consolidated tax returns that were filed through January 23, 2001. As part of
the spin-off agreement, the parties agreed that the benefit of the FRM tax loss
carryforward, when and if realized, will be paid to MFC.

NOTE 7.  SUPPLEMENTAL FINANCIAL INFORMATION
         SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)

Previously filed quarterly financial reports on Form 10-Q during fiscal 2000 and
2001 included the operations of MFC Development Corp. and subsidiaries, which
were spun-off to the shareholders of FRM 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 unaudited quarterly data to report.


                                      F-13