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FRMO Corp. (FRMO-OTC-PINK) (“FRMO” or “Company”) today announced the completion of three previously communicated transactions. The first was a private placement of FRMO shares for certain accredited investors. The second was to amend the terms of the Company’s product-specific revenue interests in products managed by Horizon Kinetics LLC (“Horizon Kinetics”) and its subsidiaries so as to receive a single revenue interest in the gross revenues of Horizon Kinetics. The third was the exchange of certain privately held units of Horizon Kinetics for shares of FRMO.
Private Placement Completed
Pursuant to a private placement, the Company invited subscriptions from certain accredited investors to purchase up to a maximum of 1,730,103 shares of its common stock at $2.89 per share. Subscriptions were received by April 15, 2013 from 72 investors for 100% of the shares offered by the Company. The subscriptions were accepted by the Company, and the shares were issued on May 1, 2013 when the Company received payment of $4,999,997.67.
Adjustment of Product-Specific Revenue Interests
By agreement dated April 16, 2013, the Company amended the terms of its product-specific revenue interests in certain products managed by Horizon Kinetics and its subsidiaries: (i) a mutual fund, (ii) two private investment funds, (iii) a consultative relationship with an institutional investor and, (iv) an institutional separate account. The transaction was consummated at the close of business on May 31, 2013. FRMO will now receive a single revenue interest equal to 4.199% of the gross revenues of Horizon Kinetics.
As a result of this transaction, the Company expects to realize a gain in the transaction equal to the value of the 4.199% interest at the close of business May 31, 2013 less the cost basis of the revenue interests in the Horizon Kinetics related products transferred to Horizon Kinetics at that date. This gain will be reported in the Company’s audited Financial Statement for the fiscal year ended May 31, 2013. The income taxes on that gain will be deferred pursuant to Section 1031 of the Internal Revenue Code relating to “like exchanges” and will be reported as part of the Company’s Deferred Tax Liability.