Table of Contents



UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549


FORM 10-Q


Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the quarterly period ended DecemberMarch 31, 2017


2024

OR


Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the transition period from ____________ to ____________.

Commission File Number 0-13928

U.S. GLOBAL INVESTORS, INC.

(Exact name of registrant as specified in its charter)


Texas

74-1598370

(State or other jurisdiction of

incorporation or organization)

(IRS Employer Identification No.)

7900 Callaghan Road

San Antonio, Texas

78229

(Zip Code)

(Address of principal executive offices)

(210) 308-1234

(Registrant’s telephone number, including area code)

Not Applicable

(Former name, former address, and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading symbol(s)

Name of each exchange on which registered

Class A common stock,

$0.025 par value per share

GROW

NASDAQ Capital Market

Securities registered pursuant to Section 12(g) of the Act: None

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 No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

Accelerated filer

Non-accelerated filer   (Do not check if a smaller reporting company)

☒  

Smaller reporting company

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No

On January 29, 2018,May 2, 2024, there were 13,866,69113,866,999 shares of Registrant’s class A nonvoting common stock issued and 13,074,27011,844,295 shares of Registrant’s class A nonvoting common stock issued and outstanding; no shares of Registrant’s class B nonvoting common shares outstanding; and 2,068,8572,068,549 shares of Registrant’s class C voting common stock issued and outstanding.





TABLE OF CONTENTS


PART I. FINANCIAL INFORMATION

1

1

1

2

3

4

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

4

6

5

7

20

22

25

26

26

27

PART II. OTHER INFORMATION

27

28

27

28

27

28

28

28

29

29

30



 


PART I. FINANCIAL INFORMATION


ITEM 1. FINANCIAL STATEMENTS


U.S. GLOBAL INVESTORS, INC.

CONSOLIDATED BALANCE SHEETS

  

March 31, 2024

  

June 30, 2023

 

(dollars in thousands)

 

(unaudited)

     

Assets

        

Current Assets

        

Cash and cash equivalents

 $27,460  $25,401 

Restricted cash

  1,000   1,000 

Investments in trading securities at fair value, current

  10,071   11,642 

Accounts and other receivables (net of allowance for credit losses of $0, and $0, respectively)

  1,027   1,245 

Tax receivable

  749   576 

Prepaid expenses

  635   510 

Total Current Assets

  40,942   40,374 
         

Net Property and Equipment

  1,154   1,138 
         

Other Assets

        

Deferred tax asset

  1,840   1,920 

Investments in trading securities at fair value, non-current

  1,435   1,563 

Investments in available-for-sale debt securities at fair value (amortized cost: $6,651, and $7,729, respectively) (net of allowance for credit losses of $0, and $0, respectively)

  5,190   7,008 

Investments in held-to-maturity debt securities at amortized cost

  1,000   1,000 

Less: Allowance for credit losses

  (157)  - 

Investments in held-to-maturity debt securities, net of allowance for credit losses

  843   1,000 

Other investments

  1,114   2,388 

Financing lease, right of use assets

  45   65 

Other assets, non-current

  209   217 

Total Other Assets

  10,676   14,161 

Total Assets

 $52,772  $55,673 

Liabilities and Shareholders’ Equity

        

Current Liabilities

        

Accounts payable

 $58  $143 

Accrued compensation and related costs

  306   1,165 

Dividends payable

  317   329 

Financing lease liability, short-term

  31   28 

Other accrued expenses

  1,629   1,274 

Total Current Liabilities

  2,341   2,939 
         

Long-Term Liabilities

        

Deferred tax liability

  20   4 

Reserve for uncertain tax positions

  549   496 

Financing lease liability, long-term

  16   38 

Total Long-Term Liabilities

  585   538 

Total Liabilities

  2,926   3,477 
         

Commitments and Contingencies (Note 14)

          
         

Shareholders’ Equity

        

Common stock (class A) - $0.025 par value; nonvoting; 28,000,000 shares authorized; 13,866,999 shares issued at March 31, 2024, and June 30, 2023; 11,908,737 and 12,496,674 shares outstanding at March 31, 2024, and June 30, 2023, respectively

  347   347 

Common stock (class B) - $0.025 par value; nonvoting; 4,500,000 shares authorized; no shares issued

  -   - 

Convertible common stock (class C) - $0.025 par value; voting; 3,500,000 shares authorized; 2,068,549 shares issued and outstanding at March 31, 2024, and June 30, 2023

  52   52 

Additional paid-in-capital

  16,444   16,442 

Treasury stock, class A shares at cost; 1,958,262 and 1,370,325 shares at March 31, 2024, and June 30, 2023, respectively

  (5,456)  (3,740)

Accumulated other comprehensive income, net of tax

  831   1,348 

Retained earnings

  37,628   37,747 

Total Shareholders’ Equity

  49,846   52,196 

Total Liabilities and Shareholders’ Equity

 $52,772  $55,673 

Assets December 31, 2017  June 30, 2017 
(dollars in thousands) (UNAUDITED)    
Current Assets      
Cash and cash equivalents $2,977  $3,958 
Restricted cash  1,000   1,000 
Investment securities - trading, at fair value  7,433   9,720 
Accounts and other receivables  1,177   520 
Note receivable  1,977   1,952 
Prepaid expenses  399   315 
Total Current Assets  14,963   17,465 
         
Net Property and Equipment  2,092   2,212 
         
Other Assets        
Investment securities - available-for-sale, at fair value  22,372   3,401 
Other investments  2,109   2,130 
Equity method investment  3,252   - 
Note receivable, long term  234   234 
Other assets, long term  53   78 
Total Other Assets  28,020   5,843 
Total Assets $45,075  $25,520 
Liabilities and Shareholders’ Equity        
Current Liabilities        
Accounts payable $198  $118 
Accrued compensation and related costs  425   390 
Dividends payable  114   114 
Other accrued expenses  827   544 
Total Current Liabilities  1,564   1,166 
         
Long-Term Liabilities        
Deferred tax liability  3,923   - 
Total Long-Term Liabilities  3,923   - 
Total Liabilities  5,487   1,166 
         
Commitments and Contingencies (Note 11)        
         
Shareholders’ Equity        
Common stock (class A) - $0.025 par value; nonvoting; authorized, 28,000,000 shares; issued, 13,866,691 shares and 13,866,601 shares at December 31, 2017, and June 30, 2017, respectively  347   347 
Common stock (class B) - $0.025 par value; nonvoting; authorized, 4,500,000 shares; no shares issued  -   - 
Convertible common stock (class C) - $0.025 par value; voting; authorized, 3,500,000 shares; issued, 2,068,857 shares and 2,068,947 shares at December 31, 2017, and June 30, 2017, respectively  52   52 
Additional paid-in-capital  15,647   15,646 
Treasury stock, class A shares at cost; 790,421 and 751,303 shares at December 31, 2017, and June 30, 2017, respectively  (1,876)  (1,760)
Accumulated other comprehensive income, net of tax  13,703   264 
Retained earnings  11,112   9,321 
Total U.S. Global Investors Inc. Shareholders’ Equity  38,985   23,870 
Non-Controlling Interest in Subsidiary  603   484 
Total Shareholders’ Equity  39,588   24,354 
Total Liabilities and Shareholders’ Equity $45,075  $25,520 

The accompanying notes are an integral part of these consolidated financial statements.Consolidated Financial Statements.



U.S. GLOBAL INVESTORS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

  

Nine Months Ended

  

Three Months Ended

 
  

March 31,

  

March 31,

 

(dollars in thousands, except per share data)

 

2024

  

2023

  

2024

  

2023

 

Operating Revenues

                

Advisory fees

 $8,458  $11,663  $2,566  $3,591 

Administrative services fees

  86   101   27   33 

Total Operating Revenues

  8,544   11,764   2,593   3,624 

Operating Expenses

                

Employee compensation and benefits

  3,445   3,569   1,209   1,264 

General and administrative

  4,725   4,489   1,733   1,477 

Advertising

  291   297   97   91 

Depreciation

  163   183   41   61 

Interest

  2   3   1   1 

Total Operating Expenses

  8,626   8,541   3,081   2,894 

Operating Income (Loss)

  (82)  3,223   (488)  730 

Other Income (Loss)

                

Net investment income (loss)

  1,363   (189)  460   1,155 

Other income (loss)

  183   184   68   61 

Total Other Income (Loss)

  1,546   (5)  528   1,216 

Income (Loss) Before Income Taxes

  1,464   3,218   40   1,946 

Provision for Income Taxes

                

Tax expense (benefit)

  446   698   75   326 

Net Income (Loss)

 $1,018  $2,520  $(35) $1,620 
                 

Earnings (Loss) Per Share

                

Basic Net Income (Loss) per share

 $0.07  $0.17  $(0.00) $0.11 

Diluted Net Income (Loss) per share

 $0.07  $0.17  $(0.00) $0.11 
                 

Basic weighted average number of common shares outstanding

  14,278,691   14,862,893   14,077,042   14,747,537 

Diluted weighted average number of common shares outstanding

  14,278,777   14,863,188   14,077,042   14,747,637 

  Six Months Ended December 31,  Three Months Ended December 31, 
(dollars in thousands, except per share data) 2017  2016  2017  2016 
 Operating Revenues            
 Advisory fees $3,362  $3,460  $1,929  $1,569 
 Administrative services fees  121   163   64   73 
   3,483   3,623   1,993   1,642 
 Operating Expenses                
 Employee compensation and benefits  2,041   1,886   1,140   899 
 General and administrative  1,862   1,733   914   863 
 Advertising  86   80   27   51 
 Depreciation and amortization  122   127   61   63 
   4,111   3,826   2,142   1,876 
 Operating Loss  (628)  (203)  (149)  (234)
 Other Income                
 Investment income  452   502   243   249 
 Income from equity method investment  2,731   -   1,218   - 
 Other income  17   -   14   - 
   3,200   502   1,475   249 
 Income Before Income Taxes  2,572   299   1,326   15 
 Provision for Income Taxes                
 Tax expense (benefit)  452   10   442   (10)
 Net Income  2,120   289   884   25 
 Less: Net Income Attributable to Non-Controlling Interest  101   18   135   17 
 Net Income Attributable to U.S. Global Investors, Inc. $2,019  $271  $749  $8 
                 
 Earnings Per Share Attributable to U.S. Global Investors, Inc.                
 Basic $0.13  $0.02  $0.05  $- 
 Diluted $0.13  $0.02  $0.05  $- 
                 
 Basic weighted average number of common shares outstanding  15,171,620   15,229,845   15,160,589   15,218,734 
 Diluted weighted average number of common shares outstanding  15,171,620   15,229,845   15,160,589   15,218,734 

The accompanying notes are an integral part of these consolidated financial statements.

Consolidated Financial Statements.

 

U.S. GLOBAL INVESTORS, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (UNAUDITED)

  

Nine Months Ended

  

Three Months Ended

 
  

March 31,

  

March 31,

 

(dollars in thousands)

 

2024

  

2023

  

2024

  

2023

 

Net Income (Loss)

 $1,018  $2,520  $(35) $1,620 

Other Comprehensive Income (Loss)

                

Unrealized gains (losses) on available-for-sale securities arising during period, net of tax

  199   (939)  79   80 

Less: reclassification adjustment for gains included in net income (loss), net of tax

  (716)  (1,026)  (211)  (311)

Net change from available-for-sale securities

  (517)  (1,965)  (132)  (231)

Other Comprehensive Income (Loss)

  (517)  (1,965)  (132)  (231)

Total Comprehensive Income (Loss)

 $501  $555  $(167) $1,389 

  Six months ended December 31,  Three Months Ended December 31, 
(dollars in thousands) 2017  2016  2017  2016 
 Net Income Attributable to U.S. Global Investors, Inc. $2,019  $271  $749  $8 
 Other Comprehensive Income (Loss), Net of Tax:                
Unrealized gains (losses) on available-for-sale securities arising during period  13,417   369   4,277   (308)
Less:  reclassification adjustment for gains/losses included in net income  (31)  (15)  (24)  (31)
Net change from available-for-sale investments, net of tax  13,386   354   4,253   (339)
Foreign currency translation adjustment  71   (54)  17   (39)
 Other Comprehensive Income (Loss)  13,457   300   4,270   (378)
 Comprehensive Income (Loss)  15,476   571   5,019   (370)
 Less: Comprehensive Income (Loss) Attributable to Non-Controlling Interest  18   (19)  -   (14)
 Comprehensive Income (Loss) Attributable to U.S. Global Investors, Inc. $15,458  $590  $5,019  $(356)


The accompanying notes are an integral part of these consolidated financial statements.


Consolidated Financial Statements.

 

U.S. GLOBAL INVESTORS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWSSHAREHOLDERS EQUITY (UNAUDITED)

  

Common Stock

  

Convertible Common Stock

      

Treasury Stock

  

Accumulated

         
  

(class A)

  

(class C)

  

Additional

          

Other

         
                  

Paid-in

          

Comprehensive

  

Retained

     

(dollars in thousands)

 

Shares

  

Par Value

  

Shares

  

Par Value

  

Capital

  

Shares

  

Cost

  

Income (Loss)

  

Earnings

  

Total

 

Balance at June 30, 2023

  13,866,999  $347   2,068,549  $52  $16,442   1,370,325  $(3,740) $1,348  $37,747  $52,196 

Impact of ASU 2016-13 adoption, net of tax (Note 2)

  -   -   -   -   -   -   -   -   (183)  (183)

Balance at June 30, 2023 (as adjusted for change in accounting principle)

  13,866,999  $347   2,068,549  $52  $16,442   1,370,325  $(3,740) $1,348  $37,564  $52,013 

Repurchases of shares of Common Stock (class A), including excise tax

  -   -   -   -   -   198,213   (617)  -   -   (617)

Issuance of stock under ESPP of shares of Common Stock (class A)

  -   -   -   -   2   (5,494)  15   -   -   17 

Dividends declared

  -   -   -   -   -   -   -   -   (322)  (322)

Other comprehensive income (loss), net of tax

  -   -   -   -   -   -   -   (214)  -   (214)

Net income (loss)

  -   -   -   -   -   -   -   -   (176)  (176)

Balance at September 30, 2023

  13,866,999  $347   2,068,549  $52  $16,444   1,563,044  $(4,342) $1,134  $37,066  $50,701 

Repurchases of shares of Common Stock (class A), including excise tax

  -   -   -   -   -   196,295   (566)  -   -   (566)

Issuance of stock under ESPP of shares of Common Stock (class A)

  -   -   -   -   -   (6,100)  17   -   -   17 

Dividends declared

  -   -   -   -   -   -   -   -   (320)  (320)

Other comprehensive income (loss), net of tax

  -   -   -   -   -   -   -   (171)  -   (171)

Net income (loss)

  -   -   -   -   -   -   -   -   1,229   1,229 

Balance at December 31, 2023

  13,866,999  $347   2,068,549  $52  $16,444   1,753,239  $(4,891) $963  $37,975  $50,890 

Repurchases of shares of Common Stock (class A), including excise tax

  -   -   -   -   -   211,282   (582)  -   -   (582)

Issuance of stock under ESPP of shares of Common Stock (class A)

  -   -   -   -   -   (6,259)  17   -   -   17 

Dividends declared

  -   -   -   -   -   -   -   -   (312)  (312)

Other comprehensive income (loss), net of tax

  -   -   -   -   -   -   -   (132)  -   (132)

Net income (loss)

  -   -   -   -   -   -   -   -   (35)  (35)

Balance at March 31, 2024

  13,866,999  $347   2,068,549  $52  $16,444   1,958,262  $(5,456) $831  $37,628  $49,846 

  Six Months Ended December 31, 
(dollars in thousands) 2017  2016 
Cash Flows from Operating Activities:      
Net income $2,120  $289 
Adjustments to reconcile net income (loss) to net cash provided by operating activities: 
Depreciation and amortization  122   127 
Net recognized (gain) loss on securities  675   (15)
Net income from equity method investment  (2,731)  - 
Provision for deferred taxes  417   - 
Stock bonuses  14   3 
Changes in operating assets and liabilities:        
Accounts and notes receivable  (678)  122 
Prepaid and other assets  (58)  (109)
Trading securities  1,551   425 
Accounts payable and accrued expenses  391   (124)
Total adjustments  (297)  429 
Net cash provided by operating activities  1,823   718 
Cash Flows from Investing Activities:        
Purchase of equity method investment  (501)  - 
Purchase of available-for-sale securities  (2,420)  (457)
Purchase of other investments  -   (776)
Proceeds on sale of available-for-sale securities  401   649 
Return of capital on investment  22   29 
Net cash used in investing activities  (2,498)  (555)
Cash Flows from Financing Activities:        
Issuance of common stock  3   3 
Repurchases of common stock  (131)  (80)
Dividends paid  (227)  (228)
Net cash used in financing activities  (355)  (305)
Effect of exchange rate changes on cash and cash equivalents  49   (50)
Net decrease in cash and cash equivalents  (981)  (192)
Beginning cash and cash equivalents  3,958   3,993 
Ending cash and cash equivalents $2,977  $3,801 
Supplemental Disclosures of Cash Flow Information        
Cash paid for income taxes $-  $12 

The accompanying notes are an integral part of these consolidated financial statements.


Consolidated Financial Statements.

Page 4


U.S. GLOBAL INVESTORS, INC.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY (CONTINUED) (UNAUDITED)

  

Common Stock

  

Convertible Common Stock

      

Treasury Stock

  

Accumulated

         
  

(class A)

  

(class C)

  

Additional

          

Other

         
                  

Paid-in

          

Comprehensive

  

Retained

     

(dollars in thousands)

 

Shares

  

Par Value

  

Shares

  

Par Value

  

Capital

  

Shares

  

Cost

  

Income (Loss)

  

Earnings

  

Total

 

Balance at June 30, 2022

  13,866,999  $347   2,068,549  $52  $16,438   978,049  $(2,599) $3,624  $35,923  $53,785 

Repurchases of shares of Common Stock (class A)

  -   -   -   -   -   39,965   (133)  -   -   (133)

Issuance of stock under ESPP of shares of Common Stock (class A)

  -   -   -   -   3   (3,983)  10   -   -   13 

Share-based compensation, adjustment for forfeitures, net of tax

  -   -   -   -   (1)  -   -   -   -   (1)

Dividends declared

  -   -   -   -   -   -   -   -   (335)  (335)

Other comprehensive income (loss), net of tax

  -   -   -   -   -   -   -   (486)  -   (486)

Net income (loss)

  -   -   -   -   -   -   -   -   53   53 

Balance at September 30, 2022

  13,866,999  $347   2,068,549  $52  $16,440   1,014,031  $(2,722) $3,138  $35,641  $52,896 

Repurchases of shares of Common Stock (class A)

  -   -   -   -   -   87,407   (249)  -   -   (249)

Issuance of stock under ESPP of shares of Common Stock (class A)

  -   -   -   -   1   (4,898)  13   -   -   14 

Dividends declared

  -   -   -   -   -   -   -   -   (335)  (335)

Other comprehensive income (loss), net of tax

  -   -   -   -   -   -   -   (1,248)  -   (1,248)

Net income (loss)

  -   -   -   -   -   -   -   -   847   847 

Balance at December 31, 2022

  13,866,999  $347   2,068,549  $52  $16,441   1,096,540  $(2,958) $1,890  $36,153  $51,925 

Repurchases of shares of Common Stock (class A)

  -   -   -   -   -   193,040   (556)  -   -   (556)

Issuance of stock under ESPP of shares of Common Stock (class A)

  -   -   -   -   1   (5,486)  15   -   -   16 

Dividends declared

  -   -   -   -   -   -   -   -   (329)  (329)

Other comprehensive income (loss), net of tax

  -   -   -   -   -   -   -   (231)  -   (231)

Net income (loss)

  -   -   -   -   -   -   -   -   1,620   1,620 

Balance at March 31, 2023

  13,866,999  $347   2,068,549  $52  $16,442   1,284,094  $(3,499) $1,659  $37,444  $52,445 

The accompanying notes are an integral part of these Consolidated Financial Statements.

Page 5

U.S. GLOBAL INVESTORS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

  

Nine Months Ended March 31,

 

(dollars in thousands)

 

2024

  

2023

 

Cash Flows from Operating Activities:

        

Net income (loss)

 $1,018  $2,520 

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

        

Depreciation, amortization and accretion

  (103)  (198)

Net recognized (gain) loss on disposal of fixed assets

  -   3 

Net realized (gains) losses on securities

  5,928   (1,286)

Unrealized (gains) losses on securities

  (5,594)  2,504 

Investment basis adjustment

  -   (5)

Provision for deferred taxes

  282   (265)

Allowance for credit losses

  (75)  - 

Changes in operating assets and liabilities:

        

Accounts and other receivables

  45   754 

Prepaid expenses and other assets

  (97)  (146)

Accounts payable and other accrued liabilities

  (551)  (1,252)

Total adjustments

  (165)  109 

Net cash provided by (used in) operating activities

  853   2,629 

Cash Flows from Investing Activities:

        

Purchase of property and equipment

  (179)  (14)

Purchase of trading securities at fair value, non-current

  (219)  - 

Purchase of other investments

  -   (663)

Proceeds on sale of trading securities at fair value, current

  1,600   350 

Proceeds on sale of trading securities at fair value, non-current

  179   - 

Proceeds from principal paydowns of available-for-sale debt securities at fair value

  2,250   2,250 

Return of capital on other investments

  259   - 

Net cash provided by (used in) investing activities

  3,890   1,923 

Cash Flows from Financing Activities:

        

Principal payments on financing lease

  (22)  (20)

Issuance of common stock

  51   43 

Repurchases of common stock

  (1,748)  (938)

Dividends paid

  (965)  (1,004)

Net cash provided by (used in) financing activities

  (2,684)  (1,919)

Net increase (decrease) in cash, cash equivalents, and restricted cash

  2,059   2,633 

Beginning cash, cash equivalents, and restricted cash

  26,401   23,314 

Ending cash, cash equivalents, and restricted cash

 $28,460  $25,947 
         

Supplemental Disclosures of Non-Cash Investing and Financing Activities

        

Dividends declared but not paid

 $317  $332 

Excise tax liability accrued on stock repurchases

 $17  $- 

Unsettled purchases of other investments

 $-  $186 

Unsettled class A common stock repurchases

 $11  $- 
         

Supplemental Disclosures of Cash Flow Information

        

Cash paid for income taxes

 $250  $470 

The accompanying notes are an integral part of these Consolidated Financial Statements.

Page 6

U.S. GLOBAL INVESTORS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)


NOTE 1. REVISION OF PREVIOUSLY ISSUED CONSOLIDATED FINANCIAL STATEMENTS

In connection with the preparation of its Consolidated Financial Statements for the fiscal year ended June 30, 2023, the Company determined that its previously issued Consolidated Financial Statements as of and for the three and nine months ended March 31, 2023, contained an error. Specifically, the Company did not record certain liabilities as required by FASB Interpretation No.48 “Accounting for Uncertainty in Income Taxes” (codified under ASC 740-10). Based on management’s evaluation of the accounting error under the SEC Staff’s Accounting Bulletins Nos. 99 and 108 and interpretations thereof, the Company concluded the error is not material, on an individual or aggregate basis, to the Company’s previously reported financial statements. The Company has corrected this accounting error in the accompanying Consolidated Financial Statements as of and for the three and nine months ended March 31, 2023, as a revision to those financial statements.

The following table sets forth the impact of correcting this error in the Company’s previously issued Consolidated Financial Statements.

  

Nine Months Ended March 31, 2023

  

Three Months Ended March 31, 2023

 
  

As

          

As

         
  

Previously

  

Immaterial

  

As

  

Previously

  

Immaterial

  

As

 

(dollars in thousands, except per share data)

 

Reported

  

Revisions

  

Revised

  

Reported

  

Revisions

  

Revised

 

Tax expense (benefit)

 $602  $96  $698  $306  $20  $326 

Net Income (Loss)

 $2,616  $(96) $2,520  $1,640  $(20) $1,620 
                         

Earnings Per Share

                        

Basic Net Income (Loss) per Share

 $0.18  $(0.01) $0.17  $0.11  $(0.00) $0.11 

Diluted Net Income (Loss) per Share

 $0.18  $(0.01) $0.17  $0.11  $(0.00) $0.11 

In addition to the changes listed above, the Consolidated Statements of Comprehensive Income, Consolidated Statements of Shareholders' Equity, Consolidated Statements of Cash Flows, and impacted footnote disclosures have also been revised to reflect the error correction.

NOTE 2. BASIS OF PRESENTATION


AND CONSOLIDATION

U.S. Global Investors, Inc. (the “Company” or “U.S. Global”) has prepared the consolidated financial statements pursuant toConsolidated Financial Statements in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and the rules and regulations of the United States Securities and Exchange Commission (“SEC”) that permit reduced disclosure for interim periods. The financial information included herein reflects all adjustments (consisting solely of normal recurring adjustments), which are, in management’s opinion, necessary for a fair presentation of results for the interim periods presented. The Company has consistently followed the accounting policies set forth in the notes to the consolidated financial statementsConsolidated Financial Statements in the Company’s Form 10-K10-K for the fiscal year ended June 30, 2017,2023 ("Form 10-K"), except for the adoption of the new accounting pronouncementspronouncement discussed below.


The consolidated financial statementsConsolidated Financial Statements include the accounts of the Company and its wholly owned subsidiaries, U.S. Global Brokerage, Inc., U.S. Global Investors (Bermuda) Limited, U.S. Global Investors (Canada) Limited (“USCAN”), and U.S. Global Indices, LLC, and its 65 percent interest in Galileo Global Equity Advisors Inc. (“Galileo”). U.S. Global Brokerage, Inc. ceased operations in December 2015.


Galileo is consolidated with the operations of the Company. The non-controlling interest in this subsidiary is included in “Non-Controlling Interest in Subsidiary” in the equity section of the Consolidated Balance Sheets. Frank Holmes, CEO, and Susan McGee, President and General Counsel, serve as directors of Galileo.

LLC.

There are two primary consolidation models in U.S. GAAP, the variable interest entity (“VIE”) and voting interest entity models. The Company’s evaluation for consolidation includes whether entities in which it has an interest or from which it receives fees are VIEs and whether the Company is the primary beneficiary of any VIEs identified in its analysis. A VIE is an entity in which either (a) the equity investment at risk is not sufficient to permit the entity to finance its own activities without additional financial support or (b) the group of holders of the equity investment at risk lack certain characteristics of a controlling financial interest. The primary beneficiary is the entity that has the obligation to absorb a majority of the expected losses or the right to receive the majority of the residual returns and consolidates the VIE on the basis of having a controlling financial interest.


The Company holds variable interests in, but is not deemed to be the primary beneficiary of, certain funds it advises, specifically, certain funds in U.S. Global Investors Funds (“USGIF” or the “Funds”) and one of the offshore funds.. The Company’s interests in these VIEs consist of the Company’s direct ownership therein and any fees earned but uncollected. See further information about these funds in Notes 23 and 3.4. In the ordinary course of business, the Company may choose to waive certain fees or assume operating expenses of the funds it advises for competitive, regulatory or contractual reasons (see Note 34 for information regarding fee waivers). The Company has not provided financial support to any of these entities outside the ordinary course of business. The Company’s risk of loss with respect to these VIEs is limited to the carrying value of its investments in, and fees receivable from, the entities. The Company is not deemed to be the primary beneficiary because it does not have the obligation to absorb a majority of the expected losses or the right to receive the majority of the residual returns. The Company does not consolidate these VIEs because it is not the primary beneficiary. The Company’s total exposure to unconsolidated VIEs, consisting of the carrying value of investment securities and receivables for fees, was $8.9$10.9 million at DecemberMarch 31, 2017,2024, and $11.3$12.5 million at June 30, 2017.2023.

Page 7


The Company holds a variable interestcarrying amount of assets and liabilities recognized in a fund advised by Galileo, but this fund does not qualifythe Consolidated Balance Sheets related to the Company's interests in these non-consolidated VIEs were as a VIE. follows:

  

Carrying Value and Maximum Exposure to Loss

 

(dollars in thousands)

 

March 31, 2024

  

June 30, 2023

 

Investments in securities at fair value, current

 $10,071  $11,642 

Investments in equity securities at fair value, non-current

  830   785 

Other receivables

  29   45 

Total VIE assets, maximum exposure to loss

 $10,930  $12,472 

Since the fundCompany is not a VIE, the primary beneficiary of the above funds it advises, the Company evaluated if it should consolidate the fund under the voting interest entity model. Under the voting interest model, for legal entities other than partnerships, the usual condition for control is ownership, directly or indirectly, of more than 50 percent of the outstanding voting shares over an entity. The Company does not have control of any of the fund and,above funds it advises; therefore, does not consolidate the fund. However, the Company owns approximately 30 percentdoes not consolidate any of the fund, and is considered to have the ability to exercise significant influence. Thus, the investment is accounted for under the equity method of accounting. See further information about this investment in Note 2.


these funds.

All significant intercompany balances and transactions have been eliminated in consolidation. Certain amounts have been reclassified for comparative purposes. Due to rounding, the year-to-date amount may not be the exact sum of the quarterly amounts. The results of operations for the six months ended December 31, 2017,interim periods disclosed herein are not necessarily indicative of the results to be expectedthe Company may expect for the entire year.


fiscal year ending June 30, 2024 (“fiscal 2024”).

The unaudited interim financial information in these condensed financial statementsConsolidated Financial Statements should be read in conjunction with the consolidated financial statementsConsolidated Financial Statements contained in the Company’s annual report.


Recentreport on Form 10-K; interim disclosures generally do not repeat those in the annual statements.

Use of Estimates

Preparation of the Consolidated Financial Statements in accordance with GAAP requires management to make estimates and assumptions that affect amounts reported in the Consolidated Financial Statements and accompanying notes. Actual results may materially differ from those estimates.

Adoption of New Accounting Pronouncements


Accounting Pronouncements Adopted During Standard

In June 2016, the Period


In March 2016, the FASB issuedFinancial Accounting Standards Update (“ASU”Board ("FASB") 2016-09, Improvements to Employee Share-Based Payment Accounting (“ASU 2016-09”). ASU 2016-09 includes provisions intended to simplify various aspects related to how share-based payments are accounted for and disclosed. ASU 2016-09 is effective for public business entities for annual reporting periods beginning after December 15, 2016, and interim periods within those annual periods. The Company adopted this guidance on July 1, 2017, without a material impact to the consolidated financial statements.

Page 5


Accounting Pronouncements Not Yet Adopted

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (“ASU 2014-09”), which supersedes nearly all existing revenue recognition guidance under U.S. GAAP. The core principle of ASU 2014-09 is to recognize revenues when promised goods or services are transferred to customers in an amount that reflects the consideration to which an entity expects to be entitled for those goods or services. ASU 2014-09 defines a five-step process to achieve this core principle and, in doing so, more judgment and estimates may be required within the revenue recognition process than are required under existing U.S. GAAP. The standard is effective for annual periods beginning after December 15, 2017, and interim periods therein, using either of the following transition methods: (i) a full retrospective approach reflecting the application of the standard in each prior reporting period with the option to elect certain practical expedients, or (ii) a retrospective approach with the cumulative effect of initially adopting ASU 2014-09 recognized at the date of adoption (which includes additional footnote disclosures). Early adoption is permitted, but the Company currently does not expect to implement the new standard before the required effective date. Additional ASUs have been issued to clarify certain aspects of ASU 2014-09. ASU 2016-08, Principal versus Agent Considerations (Reporting Revenue Gross versus Net) amends ASU 2014-09 to clarify that an entity should evaluate whether it is the principal or the agent for each specified good or service promised in a contract with a customer. ASU 2016-10, Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing, clarifies the guidance related to identifying performance obligations and the licensing guidance in ASU 2014-09. ASU 2016-12, Narrow-Scope Improvements and Practical Expedients, and ASU 2016-20, Technical Corrections and Improvements in Topic 606 Revenue from Contracts with Customers, provide additional clarification to a number of topics addressed in ASU No. 2014-09. These ASUs are effective in conjunction with the adoption of ASU 2014-09. The Company expects to adopt the guidance in the first quarter of fiscal year 2019 on a modified retrospective basis. The Company is in the process of evaluating its contracts using the prescribed five-step process to determine the impact of this standard and does not currently expect the adoption to have a material impact on its consolidated financial statements. While the Company continues to evaluate the impact of the revenue recognition guidance and cannot currently quantify the impact of the guidance, the Company has begun a preliminary assessment of the impact. The assessment includes a detailed review of the investment management agreements, establishing which agreements are expected to be in place, and understanding when revenue would be recognized under those agreements. The Company anticipates completing its evaluation in the year ending June 30, 2018.

In January 2016 the FASB issued ASU 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities (“ASU 2016-01”). ASU 2016-01 amends the guidance on the classification and measurement of investments in equity securities. It also amends certain presentation and disclosure requirements. Under the amended guidance, all equity investments in unconsolidated entities (other than those accounted for using the equity method of accounting) will generally be measured at fair value through earnings. There will no longer be an available-for-sale classification (changes in fair value reported in other comprehensive income) for equity securities with readily determinable fair values. ASU 2016-01 is effective for public business entities for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. As indicated, when this standard is adopted, changes in the fair value of the Company’s equity investments classified as available-for-sale will no longer be reported through other comprehensive income, but rather through earnings, causing investment income (loss) to be more volatile. As a significant amount of the Company’s assets are in available-for-sale equity investments, the effect of adoption is currently expected to be material to the Company’s consolidated financial statements. The Company is currently evaluating other potential impacts of this standard on its consolidated financial statements.

In February 2016, the FASB issued ASU 2016-02, Leases (“ASU 2016-02”). ASU 2016-02 introduces a lessee model that brings most leases on the balance sheet by recording a lease asset and a lease liability. The new guidance will be effective for public business entities for annual periods beginning after December 15, 2018, and interim periods therein. Early adoption is permitted. The Company’s current leases are primarily for equipment and for office space for the Canadian subsidiary. The Company does not expect that adoption will have a material impact on its consolidated statements of operations because its leases are currently classified as operating leases, which under the guidance will continue to be recognized as expense on a straight-line basis. The adoption, however, will result in a gross up in total assets and total liabilities on the Company’s consolidated balance sheets.

In June 2016, the FASB issued ASU 2016-13, -13,Financial Instruments Credit Losses (Topic 326),326): Measurement of Credit Losses on Financial Instruments, (“ASU 2016-13”and has subsequently issued several amendments (collectively, “ASU 2016-13”). ASU 2016-132016-13 adds to U.S. GAAP an impairment model (known as the current expected credit loss model)model, or "CECL") that is based on expected losses rather than incurred losses.losses for most financial assets and certain other instruments. Under the new guidance, an entity recognizes as an allowance its estimate of expected credit losses. It also modifies the impairment model for available-for-sale debt securities; the concept of "other-than-temporary" impairment was replaced by a determination of whether any impairment is a result of a credit loss or other factors. To adopt the standard, entities are required to make a cumulative-effect adjustment to beginning retained earnings as of the beginning of the fiscal year in which the guidance is effective. The Company adopted the standard using the modified-retrospective approach for all financial assets measured at amortized cost on July 1, 2023, and recognized an initial allowance for credit losses of $232,000 for one held-to-maturity debt security. The cumulative-effect adjustment to beginning retained earnings, net of the related tax effect, was a decrease of $183,000.

Recent Accounting Pronouncements

In June 2022, the FASB issued ASU 2016-13 is effective2022-03,Fair Value Measurement (Topic 820): Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions (“ASU 2022-03”) to clarify the guidance in Topic 820, Fair Value Measurement, when measuring the fair value of an equity security subject to contractual restrictions that prohibit the sale of an equity security, and to introduce new disclosure requirements for public business entitiesequity securities subject to contractual sale restrictions that are SEC filersmeasured at fair value. ASU 2022-03 will be effective for fiscal years beginning after December 15, 2019, including interim periods within those years. Earlier application is permitted only for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. The Company is currently evaluating the potential impact of this standard on its consolidated financial statements.


In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments (“ASU 2016-15”). ASU 2016-15 may change how an entity classifies certain cash receipts and cash payments on its statement of cash flows to reduce existing diversity in practice. The guidance will generally be applied retrospectively and is effective for public business entities for fiscal years beginning after December 15, 2017, and interim periods within those years. 2023. Early adoption is permitted for both interim and the Company is in the process of determining whether the standard will be early adopted.annual financial statements that have not yet been issued or made available for issuance. The Company is currently evaluatinghas evaluated the potential impact of this standard butguidance and does not currently expect the adoption to have a material impact onof the consolidated statements of cash flows.
Page 6


In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash (“ASU 2016-18”). Under ASU 2016-18, restricted cash and restricted cash equivalents will be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. ASU 2016-18 is effective for public business entities for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. The guidance will be applied retrospectively, and early adoption is permitted. The Company is in the process of determining whether thenew standard will be early adopted but does not currently expect the adoption to have a material impact on its Consolidated Financial Statements.

In November 2023, the FASB issued ASU 2023-07,Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures (“ASU 2023-07”), which enhances the disclosures required for reportable segments in annual and interim consolidated financial statements.statements, including additional, more detailed information about a reportable segment’s expenses. ASU 2023-07 will be effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, on a retrospective basis. Early adoption is permitted. The Company is currently evaluating the impact of the pending adoption of ASU 2023-07 on its Consolidated Financial Statements.

In December 2023, the FASB issued ASU 2023-09,Income Taxes (Topic 740): Improvements to Income Tax Disclosures (“ASU 2023-09”), which enhances the transparency and decision usefulness of income tax disclosures. ASU 2023-09 will be effective for fiscal years beginning after December 15, 2024. Early adoption is permitted for annual financial statements that have not yet been issued or made available for issuance. The Company is currently evaluating the impact of the pending adoption of ASU 2023-09 on its Consolidated Financial Statements.

Significant Accounting Policies
 
As a result of the adoption of an accounting pronouncement during the current fiscal year, the following accounting policies have been updated. For a complete listing of the Company's significant accounting policies, please refer to the Annual Report on Form
10-K for the year ended June 30, 2023.

Investments in Debt Securities. The Company classifies debt investments based on the Company’s intent to sell the security or its intent and ability to hold the debt security to maturity. Debt securities classified as trading are acquired with the intent to sell in the near term and are carried at fair value with changes reported in earnings. Held-to-maturity debt securities are purchased with the intent and ability to hold until maturity and are measured at amortized cost. All other debt securities are classified as available-for-sale and are carried at fair value, and changes in unrealized gains and losses are reported net of tax in accumulated other comprehensive income (loss), except for declines in fair value determined to be a result of credit loss, which are reported in earnings. Upon the disposition of an available-for-sale security, the Company reclassifies the gain or loss on the security from accumulated other comprehensive income (loss) to net investment income (loss). Both available-for-sale and held-to-maturity debt securities are subject to an allowance for credit losses. 

Page 8

Allowance for Credit Losses (Held-to-Maturity Debt Securities). For held-to-maturity debt securities, the Company is required to utilize the CECL methodology to estimate expected credit losses. Securities are evaluated on an individual basis. The individual assessment and determination of expected credit losses is generally based on the discounted cash flow method. Under the discounted cash flow method, the allowance for credit losses reflects the difference between the amortized cost basis and the present value of the expected cash flows. The Company adjusts the discount rate utilized to determine the present value of the expected cash flows quarterly for subsequent fluctuations in market interest rates. Changes in the present value attributable to the passage of time are those solely due to changes in the present value of the expected cash flows as the instrument approaches maturity rather than expectations of cash flow timing or amounts, and are included in interest income within net investment income (loss) on the Consolidated Statements of Operations. Changes in the allowance attributable to expectations of cash flow timing or amounts are recorded as a provision (or release) for credit losses and are included within other income (loss) on the Consolidated Statements of Operations. Held-to-maturity debt securities, or portions thereof, are charged against the allowance when management believes the uncollectible status of a held-to-maturity security is confirmed. Accrued interest receivable is excluded from the allowance for credit losses. For more information about held-to-maturity debt securities, see Note 3, Investments.

Allowance for Credit Losses (Available-for-Sale Debt Securities). The impairment model for available-for-sale debt securities differs from the CECL methodology applied for held-to-maturity debt securities because available-for-sale debt securities are measured at fair value rather than amortized cost. For available-for-sale debt securities in an unrealized loss position, the Company first assesses whether it intends to sell, or it is more likely than not that it will be required to sell, the security before recovery of its amortized cost basis. If either criterion is met, the security’s amortized cost basis is written down to fair value through earnings. For available-for-sale debt securities where neither of the criteria is met, the Company evaluates whether the decline in fair value has resulted from credit losses or other factors. In making this assessment, management considers the extent to which fair value is less than amortized cost, any changes to the credit rating of the security by a rating agency, and adverse conditions specifically related to the security, among other factors. If this assessment indicates that a credit loss exists, the present value of cash flows expected to be collected from the security are compared to the amortized cost basis of the security. If the present value of cash flows expected to be collected is less than the amortized cost basis, a credit loss exists and an allowance for credit losses is recorded for the credit loss, limited to the amount that the fair value is less than the amortized cost basis. Any remaining discount that has not been recorded through an allowance for credit losses is recognized in other comprehensive income. Changes in the allowance for credit losses are recorded as a provision (or release) for credit losses and are included within other income (loss) on the Consolidated Statements of Operations. Losses are charged against the allowance when management believes the uncollectible status of an available-for-sale security is confirmed or when either of the criteria regarding intent or requirement to sell is met. Accrued interest receivable is excluded from the allowance for credit losses. See Note 3, Investments, for more information about available-for-sale debt securities.

Credit Quality Indicators. The Company monitors the credit quality of debt securities through credit ratings from various rating agencies. Credit ratings express opinions about the credit quality of a security and are utilized by the Company to make informed decisions. Investment grade securities are rated BBB-/Baa3 or higher and generally considered by the rating agencies and market participants to be of low credit risk. Conversely, securities rated below investment grade are considered to have distinctively higher credit risk than investment grade securities. For securities without credit ratings, the Company utilizes other financial information indicating the financial health of the underlying organization.  

Receivables and Allowance for Credit Losses. Receivables consist primarily of advisory and other fees owed to the Company by clients. The Company records an expense based on a forward-looking current expected credit loss model to maintain an allowance for credit losses. When determining the allowance for receivables, the probability of recoverability of the receivable based on past experience, taking into account current collection trends and general economic factors, including bankruptcy rates, is considered. The Company also considers future economic trends to estimate expected credit losses over the lifetime of the asset. Credit risks are assessed based on historical write-offs, net of recoveries, as well as an analysis of the aged accounts receivable balances with allowances generally increasing as the receivable ages. Accounts receivable may be fully reserved for when specific collection issues are known to exist, such as pending bankruptcies. Due to the short-term nature, the Company had no allowance for credit losses related to receivables as of March 31, 2024, or June 30, 2023.

Dividends and Interest. Dividends are recorded on the ex-dividend date, and interest income is recorded on an accrual basis. Debt investments are placed on a non-accrual status when they are past due 180 days or more as to contractual obligations or when other circumstances indicate that collection is not probable. When a debt investment is placed on a non-accrual status, any interest accrued but not received is reversed against interest income. Any discount between the cost and the principal amount of debt investments is amortized to interest income using the effective interest method. When the discounted cash flow method is utilized to estimate expected credit losses for held-to-maturity debt securities, any changes in the allowance for credit losses that are attributable to the passage of time are recognized in interest income. Both dividends and interest income are included within net investment income (loss) on the Consolidated Statements of Operations.

Page 9

NOTE 2.3. INVESTMENTS


As of DecemberMarch 31, 2017,2024, the Company held investments with acarried at fair value on a recurring basis of approximately $29.8$16.7 million and a cost basis of approximately $12.6$18.9 million. The fair value of these investments is approximately 66.131.6 percent of the Company’s total assets.assets at March 31, 2024. In addition, the Company held other investments of $2.1approximately $1.1 million accountedand held-to-maturity debt investments, net of allowance for undercredit losses, of $843,000.

The cost basis of investments is adjusted for amortization of premium or accretion of discount on debt securities held or the cost methodrecharacterization of accounting and an investment of approximately $3.3 million accounted for under the equity method of accounting.


Investments in securities classified as trading are reflected as current assets on the Consolidated Balance Sheets at their fair value. Unrealized holding gains and losses on trading securities are included in earnings in the Consolidated Statements of Operations.

Investments in securities classified as available-for-sale, which may not be readily marketable, are reflected as non-current assets on the Consolidated Balance Sheets at their fair value. Unrealized holding gains and losses on available-for-sale securities are excludeddistributions from earnings and reported in other comprehensive income as a separate component of shareholders’ equity until realized.

Other investments consist of equity investments in entities over which the Company is unable to exercisepartnerships.

Concentrations of Credit Risk

A significant influence and which do not have readily determinable fair values. These investments are accounted for under the cost method of accounting and evaluated periodically for impairment.


The Company considers many factors in determining impairment, including the severity and duration of the decline in value below cost, the Company’s interest and ability to hold the security for a period of time sufficient for an anticipated recovery in value, and the financial condition and specific events related to the issuer. When an impairment of a security is determined to be other than temporary, the impairment is recognized as a loss in the Company’s earnings.

Investments classified as equity method consist of investments in companies in which the Company is able to exercise significant influence but not control. Under the equity method of accounting, the investment is initially recorded at cost, then the Company’s proportional share of investee’s underlying net income or loss is recorded as a component of “other income” with a corresponding increase or decrease to the carrying value of the investment. Distributions received from the investee reduce the Company’s carrying value of the investment. These investments are evaluated for impairment if events or circumstances arise that indicate that the carrying amount of such assets may not be recoverable.

The Company records security transactions on trade date. Realized gains (losses) from security transactions are calculated on the first-in/first-out cost basis, unless otherwise identifiable, and are recorded in earnings on the date of sale.

Page 7


The following details the componentsportion of the Company’s investments recordedcarried at fair value on a recurring basis is investments in USGIF, which were $10.9 million and $12.4 million as of DecemberMarch 31, 2017,2024, and June 30, 2017.

  December 31, 2017 
(dollars in thousands) Cost  Gains  (Losses)  Fair Value 
Trading securities1
            
Mutual funds - Fixed income $7,035  $26  $-  $7,061 
Mutual funds - Domestic equity  535   -   (163)  372 
Other  45   -   (45)  - 
Offshore fund  -   -   -   - 
Total trading securities  7,615   26   (208)  7,433 
Available-for-sale securities2
                
Common stock - Domestic  -   -   -   - 
Common stock - International  2,554   16,704   -   19,258 
Corporate debt3
  1,071   632   -   1,703 
Mutual funds - Fixed income  1,000   -   (5)  995 
Mutual funds - Domestic equity  394   22   -   416 
Other  -   -   -   - 
Total available-for-sale securities4
  5,019   17,358   (5)  22,372 
Total securities at fair value $12,634  $17,384  $(213) $29,805 

  June 30, 2017 
(dollars in thousands) Cost  Gains  (Losses)  Fair Value 
Trading securities1
            
Mutual funds - Fixed income $8,884  $50  $(7) $8,927 
Mutual funds - Domestic equity  535   -   (157)  378 
Other  45   -   (45)  - 
Offshore fund  1,184   -   (769)  415 
Total trading securities  10,648   50   (978)  9,720 
                 
Available-for-sale securities2
                
Common stock - Domestic  109   4   -   113 
Common stock - International  191   12   -   203 
Corporate debt3
  1,042   427   -   1,469 
Mutual funds - Fixed income  1,148   1   (5)  1,144 
Mutual funds - Domestic equity  394   12   -   406 
Other  56   10   -   66 
Total available-for-sale securities4
  2,940   466   (5)  3,401 
Total securities at fair value $13,588  $516  $(983) $13,121 

1Unrealized and realized gains and losses on trading securities are included in earnings in the statement of operations.
2Unrealized gains and losses on available-for-sale securities are excluded from earnings and recorded in other comprehensive income as a separate component of shareholders’ equity until realized.
3Corporate debt matures in 2024.
4
Net unrealized gains (losses) on available-for-sale securities gross and net of tax as of December 31, 2017, are $17,353 and $13,847, respectively, and as of June 30, 2017, are $461 and $461, respectively.

On December2023, respectively, and investments in HIVE Digital Technologies Ltd. (“HIVE”), which were convertible debentures valued at $5.2 million at March 31, 2017,2024, and convertible debentures and common share purchase warrants valued at $7.3 million at June 30, 2023. For these investments, the maximum amount of loss due to credit risk the Company had $8.8 million at fair value invested in USGIF. These investments were included incould incur is the Consolidated Balance Sheets and the table above as “trading securities” and “available-for-sale securities.”

Investment income can be volatile and varies depending on market fluctuations, the Company’s ability to participate in investment opportunities, and timing of transactions. The Company expects that gains and losses will continue to fluctuate in the future.

Page 8


Investment income (loss) from the Company’s investments includes:

•  realized gains and losses on sales of securities;
•  unrealized gains and losses on trading securities;
•  realized foreign currency gains and losses;
•  other-than-temporary impairments on available-for-sale securities;
•  other-than-temporary impairments on held-at-cost securities; and
•  dividend and interest income.

The following summarizes investment income (loss) reflected in earnings for the periods discussed:

  Six Months Ended  Three Months Ended 
(dollars in thousands) December 31,  December 31, 
Investment Income 2017  2016  2017  2016 
Realized gains on sales of available-for-sale securities $31  $31  $24  $31 
Realized losses on sales of trading securities  (736)  -   (82)  - 
Unrealized gains (losses) on trading securities  746   (26)  60   (125)
Realized foreign currency gains (losses)  (19)  (5)  3   (7)
Other-than-temporary declines in available-for-sale securities  -   (16)  -   - 
Dividend and interest income  430   518   238   350 
Total Investment Income $452  $502  $243  $249 

Included in investment income were other-than temporary declines in value on available-for-sale securities of approximately $16,000 for the six months ended December 31, 2016. There were no impairment losses for the three and six months ended December 31, 2017, or the three months ended December 31, 2016. During the six months ended December 31, 2016, impairment losses resulted from fair values of securities being lower than book value, and two securities with a combined cost basis of $98,000 were written down to a combined fair value of $82,000. In making these determinations, the Company considered the length of time and extent to which the fair value has been less than cost basis, financial condition and prospects of the issuers and the Company’s ability to hold the investment until recovery.

Unrealized Losses

The following tables show the gross unrealized losses and fair values of available-for-sale investment securities with unrealized losses aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position. The Company reviewed the gross unrealized losses shown as of December 31, 2017, and determined that the losses were not other-than-temporary based on consideration of the nature of the investment and the cause, severity and duration of the loss.

  December 31, 2017 
  Less Than 12 Months  12 Months or Greater  Total 
     
Gross
Unrealized
     
Gross
Unrealized
     
Gross
Unrealized
 
(dollars in thousands) Fair Value  Losses  Fair Value  Losses  Fair Value  Losses 
Available-for-sale securities                  
Common stock - Domestic $-  $-  $-  $-  $-  $- 
Common stock - International  -   -   -   -   -   - 
Corporate debt  -   -   -   -   -   - 
Mutual funds - Fixed income  995   (5)  -   -   995   (5)
Mutual funds - Domestic equity  -   -   -   -   -   - 
Other  -   -   -   -   -   - 
Total available-for-sale securities $995  $(5) $-  $-  $995  $(5)


Page 9



  June 30, 2017 
  Less Than 12 Months  12 Months or Greater  Total 
     
Gross
Unrealized
     
Gross
Unrealized
     
Gross
Unrealized
 
(dollars in thousands) Fair Value  Losses  Fair Value  Losses  Fair Value  Losses 
Available-for-sale securities                  
Common stock - Domestic $-  $-  $-  $-  $-  $- 
Common stock - International  -   -   -   -   -   - 
Corporate debt  -   -   -   -   -   - 
Mutual funds - Fixed income  -   -   95   (5)  95   (5)
Mutual funds - Domestic equity  -   -   -   -   -   - 
Other  -   -   -   -   -   - 
Total available-for-sale securities $-  $-  $95  $(5) $95  $(5)

instruments.

Fair Value Hierarchy


ASC 820,

Fair Value Measurement and Disclosures, defines fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. ASC 820 establishes a hierarchy that prioritizes inputs toThe valuation techniques described below maximize the use of observable inputs and minimize the use of unobservable inputs in determining fair value.

The inputs used to measure fair value and requires companies to disclose the fair value of theirfor measuring financial instruments according to a fair value hierarchy (i.e., Levels 1, 2, and 3 inputs, as defined below). The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities and the lowest priority to unobservable inputs.


Financial instruments measured and reported at fair value are classified and disclosedsummarized in one of the following categories:
three broad levels listed below:

Level 1Valuations based onInputs represent unadjusted quoted prices in active markets for identical assets exchanged in active markets.

Level 2 – Inputs include directly or liabilities at the reporting date. Since valuations are based onindirectly observable inputs (other than Level 1 inputs) such as quoted prices that are readily and regularly availablefor similar assets exchanged in an active market, value of these products does not entail a significant degree of judgment.

Level 2 – Valuations based onor inactive markets; quoted prices for identical assets exchanged in markets for which not all significantinactive markets; other inputs are observable, directly or indirectly. Corporate debt securities valuedthat may be considered in accordance withfair value determinations of the evaluated price supplied by an independent service are categorizedassets, such as Level 2 in the hierarchy. Other securities categorized as Level 2 include securities valued at the mean between the last reported bidinterest rates and ask quotationyield curves; and securities valued with an adjustment to the quoted price due to restrictions.
Level 3 – Valuations based on inputs that are derived principally from or corroborated by observable market data by correlation or other means.

Level 3 – Inputs include unobservable inputs used in the measurement of assets. The Company is required to use its own assumptions regarding unobservable inputs because there is little, if any, market activity in the assets and significantit may be unable to corroborate the fair value measurement.


related observable inputs. Unobservable inputs require management to make certain projections and assumptions about the information that would be used by market participants in valuing assets.

The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the financial instrument. The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with the investing in those securities. Because of the inherent uncertainties of valuation, the values reflected may materially differ from the values received upon actual sale of those investments.


The Company has established a Proprietary Valuation Committee (the “Committee”) to administer and oversee the Company’s valuation policies and procedures, which are approved by the Board of Directors, and to perform a periodic review of valuations provided by independent pricing services.

For actively traded securities, the Company values investments using the closing price of the securities on the exchange or market on which the securities principally trade. If the security is not traded on the last business day of the quarter, it is generally valued at the mean between the last bid and ask quotation. The fair value of a security that has a restriction is based on the quoted price for an otherwise identical unrestricted instrument that trades in a public market, adjusted for the estimated effect of the restriction. Mutual funds, which include open- and closed-end funds exchange-traded funds, and offshoreexchange-traded funds, are valued at net asset value or closing price, as applicable. Certain corporate debt securities

For common share purchase warrants not traded on an exchange, the estimated fair value is determined using the Black-Scholes option-pricing model. This sophisticated model utilizes a number of assumptions in arriving at its results, including the estimated life, the risk-free interest rate, and historical volatility of the underlying common stock. The Company may bechange the assumption of the risk-free interest rate and utilize the yield curve for instruments with similar characteristics, such as credit ratings and jurisdiction, or change the expected volatility. The effects of changing any of the assumptions or factors employed by the Black-Scholes model may result in a significantly different valuation.

Certain convertible debt securities not traded on an exchange are valued by an independent pricing servicethird party using an evaluated quotea binomial lattice model based on factors such factors as institutional-size trading in similar groups of securities, yield, quality, maturity, coupon rate, type of issuance, and individual trading characteristics of the underlying common shares and other market data. As partThe model utilizes a number of assumptions in arriving at its independent price verification process,results. The effects of changing any of the Company periodically reviewsassumptions or factors utilized in the binomial lattice model, including expected volatility, credit adjusted discount rates, and discounts for lack of marketability, may result in a significantly different valuation for the securities.

For other securities included in the fair value provided byhierarchy with unobservable inputs, the pricing service using information such as transactions in these investments, broker quotes, market transactions in comparable investments, general market conditions and the issuer’s financial condition. Certain debt securities may be valued based on review of similarly structured issuances in similar jurisdictions, when possible, or based on other traded debt securities issued by the issuer. The Company also takes into consideration numerous other factors that could affect valuation such as overall market conditions, liquidity of the security and bond structure. Securities for which market quotations are not readily available are valued at their fair value as determined by the portfolio management team. The portfolio management team includes representatives from the investment, accounting and legal/compliance departments. The portfolio management team meets periodically to considerCommittee considers a number of factors in determining a security’s fair value, including the security’s trading volume, market values of similar class issuances, investment personnel’s judgment regarding the market experience of the issuer, financial status of the issuer, the issuer’s management, and back testing, as appropriate. The fair values may differ from what may have been used had a broader market for these securities existed. The portfolio management teamCommittee reviews inputs and assumptions and reports material items to the boardBoard of directors.


Directors. Securities which do not have readily determinable fair values are also periodically reviewed by the Committee.

Page 10



The following presents fair value measurements, as of December 31, 2017, and June 30, 2017, fortables summarize the major categories of U.S. Global’s investments measuredwith fair values adjusted on a recurring basis as of March 31, 2024, and June 30, 2023, and other investments with fair values adjusted on a nonrecurring basis, with fair values shown according to the fair value hierarchy.

  

March 31, 2024

 
      

Significant

  

Significant

     
  Quoted  Other  Unobservable     
  

Prices

  

Inputs

  

Inputs

     

(dollars in thousands)

 

(Level 1)

  

(Level 2)

  

(Level 3)

  

Total

 

Investments carried at fair value on a recurring basis:

                

Investments in trading securities:

                

Equity securities:

                

Equities - International

 $411  $-  $-  $411 

Mutual funds - Fixed income

  10,071   -   -   10,071 

Mutual funds - Global equity

  829   -   -   829 

Total equity securities

  11,311   -   -   11,311 

Debt securities:

                

Corporate debt securities

  195   -   -   195 

Total investments in trading securities:

  11,506   -   -   11,506 

Investments in available-for-sale debt securities:

                

Corporate debt securities - Convertible debentures

  -   -   5,190   5,190 

Total investments carried at fair value on a recurring basis:

 $11,506  $-  $5,190  $16,696 

Investments carried at fair value on a nonrecurring basis:

                

Other investments (1)

 $-  $-  $600  $600 

1.

Other investments include equity securities without readily determinable fair values that were adjusted as a result of the measurement alternative on dates during the nine months ended March 31, 2024. These securities are classified as level 3 due to the infrequency of the observable price changes and/or restrictions on the shares.

  

June 30, 2023

 
      

Significant

  

Significant

     
  Quoted  Other  Unobservable     
  

Prices

  

Inputs

  

Inputs

     

(dollars in thousands)

 

(Level 1)

  

(Level 2)

  

(Level 3)

  

Total

 

Investments carried at fair value on a recurring basis:

                

Investments in trading securities:

                

Equity securities:

                

Equities - International

 $488  $-  $290  $778 

Mutual funds - Fixed income

  11,642   -   -   11,642 

Mutual funds - Global equity

  785   -   -   785 

Total equity securities

  12,915   -   290   13,205 

Debt securities:

                

Corporate debt securities

  -   -   -   - 

Total investments in trading securities:

  12,915   -   290   13,205 

Investments in available-for-sale debt securities:

                

Corporate debt securities - Convertible debentures

  -   -   7,008   7,008 

Total investments carried at fair value on a recurring basis:

 $12,915  $-  $7,298  $20,213 

Investments carried at fair value on a nonrecurring basis:

                

Other investments (1)

 $-  $-  $1,786  $1,786 

1.

Other investments include equity securities without readily determinable fair values that were adjusted as a result of the measurement alternative on dates during the fiscal year ended June 30, 2023. These securities are classified as level 3 due to the infrequency of the observable price changes and/or restrictions on the shares.

The securities classified as Level 3 and carried at fair value on a recurring basis:


  December 31, 2017 
  Quoted Prices  
Significant
Other
Inputs
  
Significant
Unobservable
Inputs
    
(dollars in thousands) (Level 1)  (Level 2)  (Level 3)  Total 
Trading securities            
Mutual funds - Fixed income $7,061  $-  $-  $7,061 
Mutual funds - Domestic equity  372   -   -   372 
Other  -   -   -   - 
Offshore fund investment measured at net asset value1
              - 
Total trading securities  7,433   -   -   7,433 
Available-for-sale securities                
Common stock - Domestic  -   -   -   - 
Common stock - International  158   19,100   -   19,258 
Corporate debt  -   1,703   -   1,703 
Mutual funds - Fixed income  995   -   -   995 
Mutual funds - Domestic equity  416   -   -   416 
Other  -   -   -   - 
Total available-for-sale securities  1,569   20,803   -   22,372 
Total securities at fair value $9,002  $20,803  $-  $29,805 

  June 30, 2017 
  Quoted Prices  
Significant
Other
Inputs
  
Significant
Unobservable
Inputs
    
(dollars in thousands) (Level 1)  (Level 2)  (Level 3)  Total 
Trading securities            
Mutual funds - Fixed income $8,927  $-  $-  $8,927 
Mutual funds - Domestic equity  378   -   -   378 
Other  -   -   -   - 
Offshore fund investment measured at net asset value1
              415 
Total trading securities  9,305   -   -   9,720 
Available-for-sale securities                
Common stock - Domestic  113   -   -   113 
Common stock - International  203   -   -   203 
Corporate debt  1,469   -   -   1,469 
Mutual funds - Fixed income  1,144   -   -   1,144 
Mutual funds - Domestic equity  406   -   -   406 
Other  66   -   -   66 
Total available-for-sale securities  3,401   -   -   3,401 
Total securities at fair value $12,706  $-  $-  $13,121 

1In accordance with Subtopic 820-10, certain investments that are measured at fair value using the net asset value per share (or its equivalent) practical expedient have not been classified in the fair value hierarchy. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the Consolidated Balance Sheets.

As of December 31, 2017, approximately 30 percent of the Company’s financial assets measured at fair value were classified as Level 1 and 70 percent of the Company’s financial assets measured at fair value were classified as Level 2. As of June 30, 2017, 100 percent of the Company’s financial assets were classifiedbasis in the fair value hierarchy as Level 1. The Company recognizes transfers between levels at the endpreceding tables are investments in convertible securities of each quarter.

Page 11


During the quarter ended September 30, 2017, the Company invested in 10 million common shares of HIVE, Blockchain Technologies Ltd. (“HIVE”), a company that is headquartered and traded in Canada with cryptocurrency mining facilities in Iceland, Sweden, and Sweden,Canada. The Company purchased convertible securities for $15.0 million in January 2021. The convertible securities were comprised of 8.0% interest-bearing unsecured convertible debentures, payable in quarterly installments with a final maturity in January 2026, and 5 million common share purchase warrants in the capital of HIVE. Under the original terms, the principal amount of each debenture was convertible into common shares in the capital of HIVE at a costconversion rate of $2.4 million. The shares held by$2.34, and each whole warrant, which expired in January 2024, entitled the Company are restricted for resale until mid-March 2018 and are also subject to Canadian insider regulations. The original restriction onacquire one common share at a price of $3.00 (Canadian). Under the shares until January 2018 was extended to mid-March 2018 to facilitate additional share offerings by HIVE. The investment, classified as available-for-sale, was valued at approximately $19.1 million at December 31, 2017, based oncurrent terms, which reflect a reverse stock split, the quoted market price adjusted for the restriction on resale andprincipal amount of each debenture is classified as Level 2convertible into common shares in the fair value hierarchy.capital of HIVE at a conversion rate of $11.70, and each five whole warrants entitled the Company to acquire one common share at a price of $15.00 (Canadian). The remaining principal amount was $5.3 million as of March 31, 2024. Cryptocurrency markets and related stockssecurities have been, and are expected to continue to be, volatile. Cryptocurrency mining is considered an early stage high-risk industry, and the nature of mining is expected to evolve. There is potential forhas been significant volatility in the market price of HIVE, which couldhas materially impactimpacted the investment’s value of the investments included on the balance sheetConsolidated Balance Sheets, unrealized gain (loss) recognized in net investment income (loss), and unrealized gain (loss) recognized in other comprehensive income. A unit trust investment fund managed by Galileo, described below under Investment Classified as Equity Method, also holds common shares of HIVE.income (loss). The Company had a directinvestments did not represent ownership ofin HIVE of approximately 3.3 percent as of DecemberMarch 31, 2017, and a combined direct and indirect ownership of HIVE of approximately 4.0 percent as of December 31, 2017.2024, or June 30, 2023. The securities are subject to Canadian securities regulations. Frank Holmes isserves on the non-executiveboard as executive chairman of HIVE and held shares and options at DecemberMarch 31, 2017.2024. From August 2018 through January 2023, Mr. Holmes was Interim CEO of HIVE.

Page 11


The Company has available-for-sale investments in corporate debt securities maturing in 2024 which were valuedrecorded the debentures at $1.7the estimated fair value of $16.0 million as of December 31, 2017, based on the mean between the last reported bid/ask quotation and were classified as Level 2. As of June 30, 2017, these securities were valued at $1.5 million based on a quoted price on the reportingpurchase date, and were classified as Level 1.


The Company had an unrealized gain of $6.9 million was recognized in other comprehensive income (loss), which will be realized in net investment in an affiliated offshore fund, classified as trading, which invested in companies inincome (loss) ratably using the energy and natural resources sectors.effective interest method until maturity, conversion, or other disposition. The fair value of this investmentthe debentures was $5.2 million and $7.0 million at March 31, 2024, and June 30, 2023, respectively. The warrants were recorded at the estimated basedfair value of $5.9 million on the purchase date, and upon expiration in January 2024, a realized loss of $5.9 million was recognized in net assetinvestment income (loss). The fair value per shareof the warrants was $290,000 at $415,000June 30, 2023.

The Company utilizes an independent third-party to estimate the fair values of the HIVE convertible securities and currently considers the fair value measurements to contain Level 3 inputs. The following table is a reconciliation of investments recorded at fair value for which unobservable inputs (Level 3) were used in determining fair value during the nine months ended March 31, 2024.

Changes in Level 3 Assets Measured at Fair Value on a Recurring Basis

  

Nine Months Ended March 31, 2024

 
  

Investments in

  

Investments in

 

(dollars in thousands)

 

equity securities

  

debt securities

 

Beginning Balance

 $290  $7,008 

Principal repayments

  -   (2,250)

Amortization of day one premium

  -   (137)

Accretion of bifurcation discount

  -   403 

Total gains or losses included in:

        

Net Investment Income (Loss)

  (290)  821 

Other Comprehensive Income (Loss)

  -   (655)

Ending Balance

 $-  $5,190 

The following is quantitative information as of March 31, 2024, with respect to the securities measured and carried at fair value on a recurring basis with the use of significant unobservable inputs (Level 3).

  

March 31, 2024

 

(dollars in thousands)

 

Fair Value

 

Principal Valuation Techniques

 

Unobservable Inputs

 

Investments in available-for-sale debt securities:

           

Corporate debt securities - Convertible debentures

 $5,190 

Binomial lattice model

 

Volatility

  110.0%
       

Credit Spread

  7.00%
       

Risk-Free Rate

  4.28%

Investments in Trading Securities at Fair Value

Investments in trading securities with readily determinable fair values are carried at fair value, and changes in unrealized gains or losses are reported in the current period's earnings. The following details the components of the Company’s trading securities carried at fair value as of March 31, 2024, and June 30, 2017. This offshore fund liquidated during2023.

  

March 31, 2024

 

(dollars in thousands)

 

Cost

  

Unrealized Gains (Losses)

  

Fair Value

 

Trading securities at fair value

            

Equity securities:

            

Equities - International

 $746  $(335) $411 

Equities - Domestic

  45   (45)  - 

Mutual funds - Fixed income

  10,280   (209)  10,071 

Mutual funds - Global equity

  929   (100)  829 

Total equity securities

  12,000   (689)  11,311 

Debt securities:

            

Corporate debt securities

  215   (20)  195 

Total trading securities at fair value

 $12,215  $(709) $11,506 

  

June 30, 2023

 

(dollars in thousands)

 

Cost

  

Unrealized Gains (Losses)

  

Fair Value

 

Trading securities at fair value

            

Equity securities:

            

Equities - International

 $6,679  $(5,901) $778 

Equities - Domestic

  45   (45)  - 

Mutual funds - Fixed income

  11,947   (305)  11,642 

Mutual funds - Global equity

  930   (145)  785 

Total equity securities

  19,601   (6,396)  13,205 

Debt securities:

            

Corporate debt securities

  -   -   - 

Total trading securities at fair value

 $19,601  $(6,396) $13,205 

Page 12

Debt Investments

Investments in debt securities are classified on the current fiscal year,acquisition dates and at each balance sheet date. Securities classified as held-to-maturity are carried at amortized cost, net of allowance for credit losses, reflecting the ability and intent to hold the securities to maturity. Debt securities classified as trading are acquired with partial liquidation proceeds receivedthe intent to sell in the quarter ended September 30, 2017,near term and final proceeds received duringare carried at fair value with changes reported in earnings. All other debt securities are classified as available-for-sale and are carried at fair value.

Investment gains and losses on available-for-sale debt securities are recorded when the quarter ended December 31, 2017.


Investment Classifiedsecurities are sold, as Equity Method

Duringdetermined on a specific identification basis, and recognized in current period earnings. Changes in unrealized gains on available-for-sale debt securities are reported net of tax in accumulated other comprehensive income (loss). For debt securities in an unrealized loss position, a loss in earnings is recognized for the quarter ended September 30, 2017,excess of amortized cost over fair value if the Company intends to sell before the price recovers. Otherwise, the Company evaluates as of the balance sheet date whether the unrealized losses are attributable to credit losses or other factors. The severity of the decline in value, creditworthiness of the issuer and other relevant factors are considered. The portion of unrealized loss the Company believes is related to a credit loss is recognized in earnings, and the portion of unrealized loss the Company believes is not related to a credit loss is recognized in other comprehensive income (loss).

Certain derivatives embedded in other financial instruments, such as the conversion option in a convertible bond, are reported at fair value, and changes in fair value are recorded through USCAN, invested approximately $500,000earnings within net investment income (loss). The host contract continues to be accounted for in accordance with the appropriate accounting standard. The embedded derivative and the related host contract represent one legal contract and are combined on the Consolidated Balance Sheets and the tables below. The Company held one financial instrument classified as available-for-sale containing an embedded derivative, which represents an investment in HIVE, at March 31, 2024, and June 30, 2023. As of March 31, 2024, the unrealized loss position in the Galileo Partners Fund, a Canadian unit trust investment fund managedavailable-for-sale security was related to changes in the fair value of the embedded derivatives and not the result of credit losses; therefore, an allowance for credit losses was not recorded.

The following details the components of the Company’s available-for-sale debt investments as of March 31, 2024, and June 30, 2023.

  

March 31, 2024

 

(dollars in thousands)

 

Amortized Cost

  

Gross Unrealized Gains in Other Comprehensive Income (Loss)

  

Gross Unrealized Losses in Other Comprehensive Income (Loss)

  

Gross Unrealized Losses in Net Investment Income (Loss) (1)

  

Fair Value

  

Allowance for Credit Losses

 

Available-for-sale debt securities:

                        

Corporate debt securities - Convertible debentures

 $6,651  $1,052  $-  $(2,513) $5,190  $- 

  

June 30, 2023

 

(dollars in thousands)

 

Amortized Cost

  

Gross Unrealized Gains in Other Comprehensive Income (Loss)

  

Gross Unrealized Losses in Other Comprehensive Income (Loss)

  

Gross Unrealized Losses in Net Investment Income (Loss) (1)

  

Fair Value

  

Allowance for Credit Losses

 

Available-for-sale debt securities:

                        

Corporate debt securities - Convertible debentures

 $7,729  $1,707  $-  $(2,428) $7,008  $- 

1.

Represents changes in unrealized gains and losses related to embedded derivatives included within net investment income (loss) on the Consolidated Statements of Operations. 

The following table summarizes the fair values of embedded derivatives on the Consolidated Balance Sheets, categorized by Galileo. This fund’s primary investment is in HIVE,risk exposure, at March 31, 2024, and June 30, 2023.

  

March 31, 2024

  

June 30, 2023

 
  

Other Assets

  

Other Assets

 
  

Investments in

  

Investments in

 
  

available-for-sale

  

available-for-sale

 

(dollars in thousands)

 

debt securities

  

debt securities

 

Embedded Derivatives:

        

Equity price risk exposure

 $29  $114 

The following table presents the same company described above thateffect of embedded derivatives on the Consolidated Statements of Operations, categorized by risk exposure, for the three and nine months ended March 31, 2024, and 2023.

  

Nine Months Ended

  

Three Months Ended

 
  

March 31,

  

March 31,

 
  

2024

  

2023

  

2024

  

2023

 
  

Other Income (Loss)

  

Other Income (Loss)

  

Other Income (Loss)

  

Other Income (Loss)

 

(dollars in thousands)

 

Net Investment Income (Loss)

  

Net Investment Income (Loss)

  

Net Investment Income (Loss)

  

Net Investment Income (Loss)

 

Embedded Derivatives:

                

Equity price risk exposure

 $(85) $82  $(22) $55 

Page 13

At March 31, 2024, and June 30, 2023, the Company held one debt security classified as held-to-maturity. The security had an estimated fair value that was lower than the carrying value by $157,000 at March 31, 2024, and $232,000 at June 30, 2023. The security has also investedbeen in directly;a continuous unrealized loss position for over twelve months. We have evaluated the fund held 6.5 million common sharesunrealized loss on the security at March 31, 2024, and determined it to be of HIVEa temporary nature and caused by fluctuations in market interest rates, not by concerns regarding the ability of the issuer to meet their obligations.

The following details the components of the Company’s held-to-maturity debt investments as of DecemberMarch 31, 2017. This concentration may result in volatility2024, and June 30, 2023.

  

March 31, 2024

 

(dollars in thousands)

 

Amortized Cost

  

Gross Unrecognized Holding Gains

  

Gross Unrecognized Holding Losses

  

Fair Value

  

Allowance for Credit Losses

 

Held-to-maturity debt securities(1):

                    

Corporate debt securities

 $1,000  $-  $(157) $843  $157 

  

June 30, 2023

 

(dollars in thousands)

 

Amortized Cost

  

Gross Unrecognized Holding Gains

  

Gross Unrecognized Holding Losses

  

Fair Value

  

Allowance for Credit Losses

 

Held-to-maturity debt securities(1):

                    

Corporate debt securities

 $1,000  $-  $(232) $768  $- 

1.

Held-to-maturity debt investments are carried at amortized cost, net of allowance for credit losses, and the fair value is classified as Level 2 according to the fair value hierarchy.

On July 1, 2023, the Company adopted ASU 2016-13, which replaced the incurred loss methodology for determining our allowance for credit losses and related provision for credit losses with an expected loss methodology that is referred to as the Current Expected Credit Losses ("CECL") model. CECL is a significant accounting estimate used in the valuationpreparation of the Galileo Partners Fund. Company's Consolidated Financial Statements. Upon adoption of ASU 2016-13, the Company replaced the incurred loss impairment model that recognizes losses when it becomes probable that a credit loss will be incurred, with a requirement to recognize lifetime expected credit losses immediately when a financial asset is originated or purchased. CECL is a valuation account that is deducted from the amortized cost basis of held-to-maturity debt securities to present the net amount expected to be collected on the securities. Held-to-maturity debt securities, or portions thereof, are charged against the allowance when they are deemed uncollectible. Arriving at an appropriate level of credit losses involves a high degree of judgment. While management uses available information to recognize losses, changing economic conditions and the economic prospects of the issuers may necessitate future additions or reductions to the allowance.

The Company owns approximately 30 percentmonitors the credit quality of Galileo Partners Funddebt securities through credit ratings from various rating agencies. Credit ratings express opinions about the credit quality of a security and isare utilized by the Company to make informed decisions. Investment grade securities are rated BBB-/Baa3 or higher and generally considered by the rating agencies and market participants to be of low credit risk. Conversely, securities rated below investment grade are considered to have distinctively higher credit risk than investment grade securities. For securities without credit ratings, the abilityCompany utilizes other financial information indicating the financial health of the underlying organization. As of March 31, 2024, and June 30, 2023, the held-to-maturity debt investment held by the Company did not have a credit rating.

Since the held-to-maturity debt security does not have a credit rating, management has determined that the discounted cash flow method provides the best basis for its assessment and determination of expected credit losses. The Company has elected to reflect the change in the allowance solely attributable to the passage of time in interest income. Changes attributable to the passage of time are those solely due to changes in the present value of the expected cash flows as the instrument approaches maturity rather than expectations of cash flow timing or amounts. Since the adoption of ASU 2016-13 on July 1, 2023, and through March 31, 2024, the allowance for credit losses decreased $75,000 which was attributable to the passage of time. For the three and nine months ended March 31, 2024, $20,000 and $75,000, respectively, was included as an increase in interest income within net investment income (loss) on the Consolidated Statements of Operations.

The following table presents the activity in the allowance for credit losses for the held-to-maturity debt investment. There was no allowance at June 30, 2023.

(dollars in thousands)

 

March 31, 2024

 

Beginning Balance, prior to adoption of ASU 2016-13

 $- 

Impact of ASU 2016-13 adoption

  232 

Provision for credit losses - reversal (1)

  (75)

Ending Balance

 $157 

1.Represents the change in present value attributable to the passage of time included in interest income.

The following summarizes the net carrying amount and estimated fair value of debt securities at March 31, 2024, by contractual maturity dates. Actual maturities may differ from final contractual maturities due to principal repayment installments or prepayment rights held by issuers.

  

March 31, 2024

 
  

Available-for-sale

  

Held-to-maturity

 
  

debt securities

  

debt securities

 
  

Convertible

  

Due after one year

 

(dollars in thousands)

 

debentures (1)

  

through five years

 

Amortized Cost

 $6,651  $1,000 

Fair Value

 $5,190  $843 

1.

Principal payments of $750,000 are due quarterly with a final maturity date in January 2026.

As of March 31, 2024, none of the Company's investments in debt securities were delinquent or in a non-accrual status.

Page 14

Other Investments

Other investments consist of equity investments in entities over which the Company is unable to exercise significant influence. Thus,influence and which do not have readily determinable fair values. For these securities, the Company generally elects to value using the measurement alternative, under which such securities are measured at cost, less impairment, if any. If the Company identifies observable price changes for identical or similar securities of the same issuer, the equity security is measured at fair value as of the date the observable transaction occurred, with such changes recorded in net investment is accounted forincome (loss).

The carrying value of equity securities without readily determinable fair values was approximately $2.4 million as of June 30, 2023. The following table presents the carrying value of equity securities without readily determinable fair values held as of March 31, 2024, and 2023, that are measured under the measurement alternative and the related adjustments recorded during the periods presented for those securities with observable price changes or impairments. These securities are included in the nonrecurring fair value hierarchy tables when applicable price changes are observable, or when impairments occur.

  

Nine Months Ended

  

Three Months Ended

 
  

March 31,

  

March 31,

 

(dollars in thousands)

 

2024

  

2023

  

2024

  

2023

 

Other Investments

                

Carrying value

 $1,114  $2,827  $1,114  $2,827 

Upward carrying value changes

 $-  $14  $-  $9 

Downward carrying value changes/impairment

 $(1,274) $(1,841) $(499) $- 

The period-end carrying values reflect cumulative purchases and sales in addition to upward and downward carrying value changes. The cumulative amount of upward adjustments to all equity methodsecurities without readily determinable fair values total $2.5 million since their respective acquisitions through March 31, 2024. The cumulative amount of accounting. Underimpairments and other downward adjustments, which include return of capital distributions and observable price changes, to all equity securities without readily determinable fair values total $5.0 million since their respective acquisitions through March 31, 2024.

The Company has an investment in The Sonar Company (“Sonar”), a company headquartered in the equity method,United States, at a cost of $175,000. The investment had a carrying value of approximately $362,000 at March 31, 2024, and at June 30, 2023. Roy D. Terracina, Director and Vice Chairman of the Board of Directors for U.S. Global, has served as the CEO of Sonar since July 2021, and the Company’s proportional shareownership of Sonar was approximately 2.8 percent as of March 31, 2024.

Net Investment Income (Loss)

Net investment income (loss) from the fund’sCompany’s investments includes:

realized gains and losses on sales of securities;

realized gains and losses on principal payment proceeds;

unrealized gains and losses on securities at fair value;

impairments and observable price changes on equity investments without readily determinable fair values;

dividend and interest income; and

realized foreign currency gains and losses.

The following summarizes net investment income or loss, which primarily consists(loss) reflected in earnings for the periods presented.

  

Nine Months Ended

  

Three Months Ended

 

(dollars in thousands)

 

March 31,

  

March 31,

 

Net Investment Income (Loss)

 

2024

  

2023

  

2024

  

2023

 

Realized gains (losses) on equity securities

 $(6,834) $(13) $(6,094) $(13)

Realized gains (losses) on debt securities

  906   1,299   267   394 

Unrealized gains (losses) on equity securities

  5,699   (2,586)  5,863   283 

Unrealized gains (losses) on debt securities

  (20)  -   (65)  - 

Unrealized gains (losses) on embedded derivatives

  (85)  82   (22)  55 

Unrealized gains (losses) on cash equivalents

  (2)  -   -   - 

Dividend and interest income

  1,781   1,321   595   421 

Realized foreign currency gains (losses)

  (82)  (292)  (84)  15 

Total Net Investment Income (Loss)

 $1,363  $(189) $460  $1,155 

Realized gains on debt securities reclassified from other comprehensive income (loss) related to the Company's investment in HIVE debentures were $267,000 and $906,000 for the three and nine months ended March 31, 2024, respectively, and $394,000 and $1.3 million for the three and nine months ended March 31, 2023, respectively.

Page 15

The following table presents unrealized gains and losses recognized during the three and nine months ended March 31, 2024, and 2023, on investments offset by fund expenses, is recognizedequity securities and debt securities classified as trading still held at each respective date. 

  

Nine Months Ended

  

Three Months Ended

 
  

March 31,

  

March 31,

 

(dollars in thousands)

 

2024

  

2023

  

2024

  

2023

 

Unrealized gains and losses for securities held at the reporting date:

                

Equity securities:

                

Net gains and losses recognized during the period

 $(1,135)  (2,599) $(231) $270 

Less: Net gains and losses recognized during the period on securities sold during the period

  (256)  (13)  (3)  (13)

Unrealized gains and losses recognized during the reporting period on securities still held at the reporting date (1)

 $(879) $(2,586) $(228) $283 

Debt securities classified as trading:

                

Net gains and losses recognized during the period

 $(20)  -  $(65) $- 

Less: Net gains and losses recognized during the period on securities sold during the period

  -   -   -   - 

Unrealized gains and losses recognized during the reporting period on securities still held at the reporting date

 $(20) $-  $(65) $- 

1.

Includes net unrealized and realized losses as a result of the measurement alternative of $240,000 and $1.0 million for the three and nine months ended March 31, 2024, respectively, and $0 and $1.8 million, for the three and nine months ended March 31, 2023, respectively.

Net investment income (loss) can be volatile and vary depending on market fluctuations, the Company’s ability to participate in investment opportunities, and the timing of transactions. The Company expects that gains and losses will continue to fluctuate in the Company’s earnings. Included in other income for the three and six months ending December 31, 2017, is $1.2 million and $2.7 million, respectively, of equity method income of Galileo Partners Fund. The Company’s investment in the fund was valued at approximately $3.3 million at December 31, 2017. Frank Holmes also directly held an investment in the fund as of December 31, 2017.future.


Summarized income statement information on the Galileo Partners Fund since the Company’s investment is as follows:

Galileo Partners Fund   
Summary Financial Information   
For the Period from August 31, 2017 (investment) to December 31, 2017 
(dollars in thousands)   
Realized gains on sales of investments $1,921 
Unrealized gains on investments  9,612 
Fund fees and expenses, including performance fees  (2,810)
Net income of fund $8,723 
     
Company's share of income from equity method investment $2,731 

Subsequent to December 31, 2017, the Company redeemed a portion of its investment in the Galileo Partners Fund. See Note 12, Subsequent Event, for further information.

NOTE 3.4. INVESTMENT MANAGEMENT AND OTHER FEES


The following table presents operating revenues disaggregated by performance obligation.

  

Nine Months Ended

  

Three Months Ended

 
  

March 31,

  

March 31,

 

(dollars in thousands)

 

2024

  

2023

  

2024

  

2023

 

ETF advisory fees

 $7,394  $10,360  $2,224  $3,142 

USGIF advisory fees

  1,408   1,693   443   558 

USGIF performance fees received (paid)

  (344)  (390)  (101)  (109)

Total Advisory Fees

  8,458   11,663   2,566   3,591 

USGIF administrative services fees

  86   101   27   33 

Total Operating Revenue

 $8,544  $11,764  $2,593  $3,624 

The Company serves as investment advisor to three U.S.-based exchange-traded funds (ETFs): U.S. Global Jets ETF (ticker JETS), U.S. Global GO GOLD and Precious Metal Miners ETF (ticker GOAU), and U.S. Global Sea to Sky Cargo ETF (ticker SEA). The Company receives a unitary management fee of 0.60 percent of average net assets of the ETFs, and has agreed to bear all expenses of the ETFs, except the U.S. Global Sea to Sky Cargo ETF ("SEA"). The Company has agreed to contractually limit the expenses of SEA through April 2025. The aggregate fees waived, and expenses borne by the Company for SEA were $37,000 and $115,000 for the three and nine months ended March 31, 2024, respectively, and $28,000 and $77,000 and for the three and nine months ended March 31, 2023, respectively. The Company also serves as investment advisor to one European-based ETF, the U.S. Global Jets UCITS ETF. The Company receives a unitary management fee of 0.65 percent of average net assets and has agreed to bear all expenses of the ETF.

The Company serves as investment adviser to USGIF and receives a fee based on a specified percentage of netaverage assets under management. The Company recorded base advisory fees from USGIF totaling $1.2 million and $2.3 million, respectively, for the three and six months ended December 31, 2017, compared with $1.2 million and $2.6 million, respectively, for the corresponding periods in the prior fiscal year.



The advisory agreement for the equity funds within USGIF provides for a base advisory fee that is adjusted upwards or downwards by 0.25 percent when there is a performance difference of 5 percent or more between a fund’s performance and that of its designated benchmark index over the prior rolling 12 months. For the three and six months ended December 31, 2017, the Company realized a decrease in its base advisory fees from USGIF of $192,000 and $308,000, respectively. For the three and six months ended December 31, 2016, the Company realized a (decrease) increase in its base advisory fees from USGIF of ($9,000) and $30,000, respectively.

The Company has agreed to contractually limit the expenses of the Near-Term Tax Free Fund and the Global Luxury Goods Fund through April 2018. 2025. The Company has voluntarily waived or reduced its fees and/or agreed to pay expenses on the remaining USGIF funds. These caps will continue on a voluntary basis at the Company’s discretion. The aggregate fees waived and expenses borne by the Company for USGIF were $193,000 and $638,000 for the three and sixnine months ended DecemberMarch 31, 2017, were $102,0002024, respectively, and $334,000, respectively, compared with $313,000$299,000 and $546,000, respectively,$822,000 for the corresponding periods in the prior fiscal year.three and nine months ended March 31, 2023, respectively. Management cannot predict the impact of future waivers due to the number of variables and the range of potential outcomes.


The Company receives administrative service fees from USGIF based on an annual rate of 0.05 percent on the average daily net assets at an annual rate 0.05 percent per investor class and 0.04 percent per institutional class of each fund.


The Company also serves as investment advisor to two exchange-traded funds (ETFs). The U.S. Global Jets ETF commenced operations in April 2015, and U.S. Global GO GOLD and Precious Metal Miners ETF commenced operations in June 2017. The Company receives a unitary management fee of 0.60 percent of average net assets and has agreed to bear all expenses of the ETFs. The Company recorded ETF advisory fees totaling $184,000 and $369,000, respectively, for the three and six months ended December 31, 2017, compared with $76,000 and $142,000, respectively, for the corresponding periods in the prior fiscal year.

The Company provided advisory services for offshore clients and receives advisory fees based on the net asset values of the clients and performance fees, if any, based on the overall increase in net asset values. The Company recorded advisory fees from these clients of $2,000 and $3,000, respectively, for the three and six months ended December 31, 2017, compared with $32,000 and $68,000, respectively, for the corresponding periods in the prior fiscal year. The Company recorded no performance fees from these clients for the three and six months ended December 31, 2017, and 2016. Frank Holmes, CEO, served as a director of the offshore clients. The offshore clients completed their respective liquidations in the second quarter of fiscal year 2018.
Galileo provides advisory services for clients in Canada and receives advisory fees based on the net asset values of the clients. Galileo recorded advisory fees from these clients totaling $287,000 and $505,000, respectively, for the three and six months ended December 31, 2017, compared with $303,000 and $603,000, respectively, for the corresponding periods in the prior fiscal year. Galileo may also receive performance fees from certain clients when market appreciation or realized net gains exceeds established benchmarks. Galileo recorded performance fees of $464,000 from these clients for three and six months ended December 31, 2017. The majority of the performance fees recorded in the current period are annual performance fees calculated at calendar year-end. Galileo recorded no performance fees for the three and six months ended December 31, 2016. Galileo may, at its discretion, waive and absorb some of its clients’ operating expenses. The amount of expenses waived and absorbed was $9,000 and $33,000 for the three and months ended December 31, 2017, and $9,000 and $21,000 for the three and months ended December 31, 2016, respectively. On September 29, 2017, Galileo launched its first ETF, U.S. Global GO GOLD and Precious Metal Miners ETF (ticker GOGO), on the Toronto Stock Exchange.

As of DecemberMarch 31, 2017,2024, the Company had just over $1.0receivables from fund clients of $858,000, of which $738,000 was from the ETFs and $120,000 was from USGIF. As of June 30, 2023, the Company had $1.1 million in receivables from fund clients, of which $381,000$1.0 million was from USGIF, $605,000ETFs and $126,000 was from Galileo clients and $63,000 from ETFs.


NOTE 4. NOTES RECEIVABLE

The Company has invested in notes receivable consisting of two promissory notes. One note with a principal amount of $2 millionUSGIF. There was entered into with an unrelated third party in June 2016 with a one-year maturity. As allowed by the agreement, in June 2017, the initial maturity was extended one-year to June 2018, and the Company received a $50,000 extension fee and all interest to date. The fee, which is included in Notes Receivable on the balance sheet, is amortized to interest income using the interest method over the remaining term of the note. The note bears interest at 12 percent, with 10 percent payable monthly and 2 percent payable at maturity. In case of prepayment, there would be a penalty for the amount of lost interest. The balance of this note was approximately $2.0 million at December 31, 2017, and June 30, 2017.

The other note of $234,000 is with an unrelated third party, has an annual interest rate of 15 percent and matures in 2021. Interest is paid monthly. Principal repayments are scheduled to start in February 2019. The balance of this note was $234,000 at December 31, 2017, and June 30, 2017.

The Company considered the credit quality of the other parties and determined that no allowance for credit losses is necessary.

related to receivables as of March 31, 2024, or June 30, 2023.

Page 1316



NOTE 5. BORROWINGS


As RESTRICTED AND UNRESTRICTED CASH

The Company maintains its cash deposits with established commercial banks. At times, balances may exceed federally insured limits. We have not experienced any losses in such accounts and do not believe that we are exposed to any significant credit risk associated with our cash deposits. Restricted cash represents cash invested in a money market account as collateral for credit facilities that is not available for general corporate use.

A reconciliation of Decembercash, cash equivalents, and restricted cash reported from the Consolidated Balance Sheets to the Consolidated Statements of Cash Flows is shown below.

(dollars in thousands)

 

March 31, 2024

  

June 30, 2023

 

Cash and cash equivalents

 $27,460  $25,401 

Restricted cash

  1,000   1,000 

Total cash, cash equivalents, and restricted cash

 $28,460  $26,401 

NOTE 6. LEASES

The Company has lease agreements for office equipment that expire in the fiscal year 2026. Lease expenses included in general and administrative expense on the Consolidated Statements of Operations totaled $33,000 and $99,000 for the three and nine months ended March 31, 2017,2024, respectively, and $32,000 and $86,000 for the three and nine months ended March 31, 2023, respectively.

The following table presents the components of lease cost.

  

Nine Months Ended

  

Three Months Ended

 
  

March 31,

  

March 31,

 

(dollars in thousands)

 

2024

  

2023

  

2024

  

2023

 

Finance lease cost:

                

Amortization of right-of-use assets

 $23  $22  $7  $7 

Interest on lease liabilities

  2   3   1   1 

Total finance lease cost

  25   25   8   8 

Short-term lease cost

  76   64   26   25 

Total lease cost

 $101  $89  $34  $33 

Supplemental information related to the Company's leases follows.

  

Nine Months Ended

  

Three Months Ended

 
  

March 31,

  

March 31,

 

(dollars in thousands)

 

2024

  

2023

  

2024

  

2023

 

Operating cash flows from financing leases included in lease liabilities

 $2  $3  $1  $1 

Financing cash flows from financing leases included in lease liabilities

 $22  $20  $7  $7 

Additional qualitative information concerning the Company’s leases follows.

  

March 31, 2024

  

June 30, 2023

 

Weighted-average remaining lease term - financing leases (years)

  1.50   2.25 

Weighted-average discount rate - financing leases

  4.75%  4.75%

The following table presents the maturities of lease liabilities as of March 31, 2024.

(dollars in thousands)

    

Fiscal Year

 

Finance Leases

 

2024 (excluding the nine months ended March 31, 2024)

 $8 

2025

  33 

2026

  8 

Total lease payments

  49 

Less imputed interest

  (2)

Total

 $47 

The Company is the lessor of certain areas of its owned office building under operating leases expiring in various months through fiscal year 2025. At the commencement of an operating lease, no income is recognized; subsequently, lease payments received are recognized on a straight-line basis. Lease income included in other income on the Consolidated Statements of Operations was $23,000 and $78,000 for the three and nine months ended March 31, 2024, respectively, and $31,000 and $96,000 for the three and nine months ended March 31, 2023, respectively. The cost of obtaining lessor contracts, which is included in other assets on the Consolidated Balance Sheets, was $3,000 at March 31, 2024, and $4,000 at June 30, 2023.

Page 17

The following is a summary analysis of annual undiscounted cash flows to be received on leases as of March 31, 2024.

(dollars in thousands)

    

Fiscal Year

 

Operating Leases

 

2024 (excluding the nine months ended March 31, 2024)

 $10 

2025

  36 

Total lease payments

 $46 

The Company may terminate the building leases with one hundred eighty days written notice if it sells the property. If the Company has no borrowingsterminates the lease, the Company will pay the tenant a termination fee of the lesser of six months of the base monthly rent or long-term liabilities except for deferred taxes.the base monthly rent times the number of months remaining in the initial term.

NOTE 7. OTHER ACCRUED EXPENSES

Other accrued expenses consist of the following:

(dollars in thousands)

 

March 31, 2024

  

June 30, 2023

 

Professional fees

 $538  $697 

Vendors payable

  359   157 

ETF operating and distribution expenses

  548   344 

Other taxes payable

  73   76 

Other

  111   - 

Other accrued expenses

 $1,629  $1,274 

The Company had $127,000 and $43,000 of receivables from HIVE included in the Consolidated Balance Sheets within receivables as of March 31, 2024, and June 30, 2023, respectively, related to the reimbursement of certain amounts reflected in the table above.


NOTE 8. DEBT

The Company has access to a $1 million credit facility for working capital purposes. The credit agreement requires the Company to maintain certain covenants; the Company has been in compliance with these covenants during the current fiscal year. The credit agreement will expireexpires on May 31, 2018,2024, and the Company intends to renew annually. The credit facility is collateralized by approximately $1 million at DecemberMarch 31, 2017, shown as2024, included in restricted cash on the balance sheet,Consolidated Balance Sheets, held in deposit in a money market account at the financial institution that provided the credit facility. As of DecemberMarch 31, 2017,2024, the credit facility remains unutilized by the Company.


NOTE 6. STOCKHOLDERS’9. STOCKHOLDERS EQUITY


Payment of cash dividends is within the discretion of the Company’s boardBoard of directorsDirectors and is dependent on earnings, operations, capital requirements, general financial condition of the Company, and general business conditions. AThe dividend rate per share was $0.0075 per month for fiscal year 2023 and through March 2024.

In March 2024, the Board authorized the continuance of the monthly dividend of $0.0025$0.0075 per share was paid for Julyfrom April through December 2017 and is authorized through March 2018,June 2024, at which time it will be considered for continuation by the Board.


The Board of Directors approvedCompany has a share repurchase program, on December 7, 2012,approved by the Board of Directors, authorizing the Company to annually purchase up to $2.75$5.0 million of its outstanding common shares, as market and business conditions warrant, on the open market in compliance with Rule 10b-1810b-18 and Rule 10b5-1 of the Securities Exchange Act of 1934 through 1934. The repurchase program has been in place since December 31, 2013. In December 2013, December 2014, December 2015, December 2016, 2012, and December 2017, the Board of Directors has annually renewed the repurchase program foreach calendar years 2014, 2015, 2016, 2017, and 2018, respectively.year. The total amountCompany announced on February 25, 2022, that the Board of shares that may be repurchased in calendar year 2018 underDirectors of the renewedCompany approved an increase to the limit of its annual share buyback program isfrom $2.75 million to $5.0 million. The acquired shares may be used for corporate purposes, including shares issued to employees in the Company’s stock-based compensation programs. For the three and sixnine months ended DecemberMarch 31, 2017,2024, the Company repurchased 36,748211,282 and 45,947605,790 class A shares using cash of $117,000$577,000 and $131,000,$1.7 million, respectively. For the three and sixnine months ended DecemberMarch 31, 2016,2023, the Company repurchased 32,605193,040 and 47,552320,412 class A shares using cash of $50,000$556,000 and $80,000,$938,000, respectively.


Stock compensation plans

In August 2022, the Inflation Reduction Act (IRA) was signed into law, which made a number of changes to the Internal Revenue Code, including adding a 1% excise tax on stock buybacks by publicly traded corporations, effective on January 1, 2023. Any excise tax incurred is recognized as part of the cost basis of the shares acquired in the Consolidated Statements of Shareholders' Equity. The impact of these provisions was $5,000 and $17,000 for the three and nine months ended March 31, 2024, respectively.

The Company’s stock option plans provide for the granting of class A shares as either incentive or nonqualified stock options to employees and non-employee directors. Options are subject to terms and conditions determined by the Compensation Committee of the Board of Directors. ThereAt March 31, 2024, and 2023, there were 2,000229,000 options outstanding and exercisable at December 31, 2017,under the 1989 Plan at a weighted average exercise price of $12.31.$6.05, and 2,000 options outstanding and exercisable under the 1997 Plan at a weighted average exercise price of $2.74. There were no options granted exercised or forfeitedexercised for the sixthree and nine months ended DecemberMarch 31, 2017.


The Company accounts for stock-based compensation in accordance with ASC 718 Compensation – Stock Compensation2024, or 2023. There were no options forfeited during the three and nine months ended March 31, 2024, no options forfeited during the three months ended March 31, 2023, and 2,000 options forfeited during the nine months ended March 31, 2023.

Stock-based compensation expense is recorded formeasured at the grant date based on the fair value of the award, and the cost of stock options.is recognized as expense ratably over the award’s vesting period. There was no stock-based compensation expense for the three and sixnine months ended DecemberMarch 31, 2017, and 2016.2024, or 2023. As of DecemberMarch 31, 2017, 2024, and 2016,2023, there was no unrecognized share-based compensation cost related to share-based compensationawards granted under the plans to be recognized over the remainderplans.

Page 18


ASU 2016-09, which was issued in March 2016 and became effective for interim and annual reporting periods beginning after December 15, 2016, simplifies several aspects of accounting for employee share-based payment transactions. The Company adopted ASU 2016-09 on July 1, 2017, without a material impact to the consolidated financial statements.

NOTE 7.10. EARNINGS PER SHARE


The basic earnings per share (“EPS”) calculation excludes dilution and is computed by dividing net income by the weighted average number of common shares outstanding for the period. Diluted EPS reflects the potential dilution of EPS that could occur if options to issue common stock were exercised.


The following table sets forth the computation for basic and diluted EPS:

  Six Months Ended December 31,  Three Months Ended December 31, 
(dollars in thousands, except per share data) 2017  2016  2017  2016 
Net Income $2,120  $289  $884  $25 
Less: Net Income Attributable to Non-Controlling Interest  101   18   135   17 
Net Income Attributable to U.S. Global Investors, Inc. $2,019  $271  $749  $8 
                 
Weighted average number of outstanding shares                
     Basic  15,171,620   15,229,845   15,160,589   15,218,734 
Effect of dilutive securities                
Employee stock options  -   -   -   - 
Diluted  15,171,620   15,229,845   15,160,589   15,218,734 
                 
Earnings Per Share Attributable to U.S. Global Investors, Inc.                
Basic $0.13  $0.02  $0.05  $- 
Diluted $0.13  $0.02  $0.05  $- 

EPS.

  

Nine Months Ended

  

Three Months Ended

 
  

March 31,

  

March 31,

 

(dollars in thousands, except per share data)

 

2024

  

2023

  

2024

  

2023

 

Net Income (Loss)

 $1,018  $2,520  $(35) $1,620 
                 

Weighted average number of outstanding shares

                

Basic

  14,278,691   14,862,893   14,077,042   14,747,537 

Effect of dilutive securities

                

Stock options

  86   295   -   100 

Diluted

  14,278,777   14,863,188   14,077,042   14,747,637 
                 

Earnings (Loss) Per Share

                

Basic Net Income (Loss) per share

 $0.07  $0.17  $(0.00) $0.11 

Diluted Net Income (Loss) per share

 $0.07  $0.17  $(0.00) $0.11 

The diluted EPS calculation excludes the effect of stock options when their exercise prices exceed the average market price for the period.period, as their inclusion would be anti-dilutive. For the three and sixnine months ended DecemberMarch 31, 2017,2024, employee stock options of 231,000 and 2016, 2,000 options229,000, respectively, were excluded from diluted EPS.


 For the three and nine months ended March 31, 2023, employee stock options of 229,000 were excluded from diluted EPS. 

During the three andnine months ended DecemberMarch 31, 2017,2024, and 2016,2023, the Company repurchased class A shares on the open market. Upon repurchase, these shares are classified as treasury shares and are deducted from outstanding shares in the earnings per share calculation.


NOTE 8.11. INCOME TAXES


The Company and its non-Canadian subsidiaries file a consolidated U.S. federal income tax return. USCAN and Galileo filefiles a separate tax returnsreturn in Canada. Provisions for income taxes include deferred taxes for temporary differences in the bases of assets and liabilities for financial and tax purposes resulting from the use of the liability method of accounting for income taxes.


The Tax Cuts and Jobs Act (“

Income tax expense for the Act”) was enacted on December 22, 2017. The Act reducesquarter is based upon the U.S. federal corporate tax rate from 35 percent to 21 percent, requires companies to pay a one-time transition tax on earnings of certain foreign subsidiaries that were previously tax deferred and creates new taxes on certain foreign sourced earnings. In the second quarter,estimated annual ordinary income in each jurisdiction in which the Company revised its estimated annual effective rate to reflect a change in its U.S. federal statutory rate from 34 percent to 21 percent.operates. The rate change is effective on January 1, 2018; therefore, the Company’s blended U.S. statutory tax rate for the fiscal year ended June 30, 2018, is approximately 28 percent.


At December 31, 2017, the Company has not completed its accounting for the tax effects of enactment ofdiscrete items are recognized in the Act; however,tax provision in certain cases,the period they occur in accordance with U.S. GAAP. Due to various factors, such as described below, the Company has made a reasonable estimate of the effects on existing deferred tax balancesitem’s significance in relation to total ordinary income and the one-time transition tax. In other cases,rate of tax, discrete items in any quarter can materially impact the Company has not been able to make a reasonable estimate and continues to account for those items based on existing accounting under ASC 740, Income Taxes, and the provisions of thereported effective tax laws that were in effect immediately prior to enactment.rate. The Securities and Exchange Commission has issued guidance that allows for a measurement period of up to one year after the enactment date of the Act to finalize the recording of the related tax impacts. The final transitional impacts of the Act may differ from the initial estimates.

Provisional amounts
Deferred tax assets and liabilities: Certain domestic-related deferred tax assets and liabilities were remeasured based on the rates at which they are expected to reverse in the future, which is generally 21 percent. The remeasurement at the lowereffective tax rate on domestic-related deferred tax assetswas 187.5 percent and liabilities resulted in a deferred tax benefit of approximately $1.4 million. However, the Company is still analyzing certain aspects of the Act and refining the calculations, which could potentially affect the measurement of these balances or potentially give rise to new deferred tax amounts. As a valuation allowance is recorded30.5 percent for the full amount of these deferred tax assetsthree and liabilities, the remeasurement of the deferred tax assetsnine months ended March 31, 2024, respectively; and liabilities was offset by a corresponding remeasurement of the valuation allowance.
Foreign tax effects: The one-time transition tax is based on total post-1986 earnings16.8 percent and profits (“E&P”) that were previously deferred from U.S. income taxes. The Company recorded a provisional amount21.7 percent for the one-time transition tax liability for foreign subsidiaries, resulting in an estimated increase in income tax expense of $17,000. The Company has not yet completed its calculation of the total post-1986 E&P for these foreign subsidiaries. Further, the transition tax is based in part on the amount of those earnings held in cashthree and other specified assets. This amount may change when the calculations are finalized. No additional income taxes have been provided for any remaining undistributed foreign earnings not subject to the transition tax, or any additional outside basis difference inherent in these entities, as these amounts continue to be indefinitely reinvested in foreign operations.
For federal income tax purposes at Decembernine months ended March 31, 2017, the Company has charitable contribution carryovers totaling approximately $155,000, with $68,000 expiring in fiscal year 2018, $34,000 expiring in fiscal year 2019, $19,000 expiring in fiscal year 2020, $5,000 expiring in fiscal year 2021, $21,000 expiring in fiscal year 2022, and $8,000 expiring in fiscal year 2023. The Company has federal net operating loss carryovers of $4.9 million with $2.0 million expiring in fiscal year 2035, $2.7 million expiring in fiscal year 2036, and $161,000 expiring in fiscal year 2038. For Canadian income tax purposes, Galileo has net operating loss carryovers of $68,000 expiring in fiscal 2036. If certain changes in the Company’s ownership should occur, there could be an annual limitation on the amount of net operating loss carryovers that could be utilized.
2023, respectively.

A valuation allowance is provided when it is more likely than not that some portion of the deferred tax amount will not be realized. At December 31, 2017, and June 30, 2017, aA valuation allowance of $1.2 million$26,000 and $3.3 million, respectively,$24,000 was included to fully reserve for Canadian net operating loss carryovers other carryoversat March 31, 2024, and certain book/June 30, 2023, respectively.

The Company maintains a reserve for uncertain tax differences inpositions for income tax matters. The Company believes the balance sheet. Deferred taxesreserve for uncertain tax positions, including interest and penalties, and net of $417,000 were recorded infederal benefits, of $549,000 adequately covers open tax years and uncertain tax positions up to and including March 31, 2024, for major taxing jurisdictions. As of March 31, 2024, the Statemententire $549,000 of Operations inunrecognized tax benefits, if recognized, would impact the current period for USCAN book/Company's effective income tax differences in the balance sheet.rate. 

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NOTE 9.12. ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)


The following table presents the change in accumulated other comprehensive income (loss) (“AOCI”) by component:component.

(dollars in thousands)

 

Unrealized gains (losses) on available-for-sale investments

 

Nine Months Ended March 31, 2024

    

Balance at June 30, 2023

 $1,348 

Other comprehensive income (loss) before reclassifications

  251 

Tax effect

  (52)

Amount reclassified from AOCI

  (906)

Tax effect

  190 

Net other comprehensive income (loss)

  (517)

Balance at March 31, 2024

 $831 
     

Nine Months Ended March 31, 2023

    

Balance at June 30, 2022

 $3,624 

Other comprehensive income (loss) before reclassifications

  (1,189)

Tax effect

  250 

Amount reclassified from AOCI

  (1,299)

Tax effect

  273 

Net other comprehensive income (loss)

  (1,965)

Balance at March 31, 2023

 $1,659 


(dollars in thousands) 
Unrealized gains (losses) on available-for-sale investments 1
  Foreign currency adjustment  Total 
 Six months ended December 31, 2017         
 Balance at June 30, 2017 $461  $(197) $264 
Other comprehensive income before reclassifications  16,923   53   16,976 
Tax effect  (3,506)  -   (3,506)
Amount reclassified from AOCI  (31)  -   (31)
Tax effect  -   -   - 
Net other comprehensive income for six months ended December 31, 2017  13,386   53   13,439 
 Balance at December 31, 2017 $13,847  $(144) $13,703 
             
 Three Months Ended December 31, 2017            
 Balance at September 30, 2017 $9,594  $(161) $9,433 
Other comprehensive income before reclassifications  7,783   17   7,800 
Tax effect  (3,506)  -   (3,506)
Amount reclassified from AOCI  (24)  -   (24)
Tax effect  -   -   - 
Net other comprehensive income for quarter  4,253   17   4,270 
 Balance at December 31, 2017 $13,847  $(144) $13,703 

(dollars in thousands) 
Unrealized gains (losses) on available-for-sale investments 1
  Foreign currency adjustment  Total 
 Six months ended December 31, 2016         
 Balance at June 30, 2016 $45  $(194) $(149)
Other comprehensive income (loss) before reclassifications  369   (35)  334 
Tax effect  -   -   - 
Amount reclassified from AOCI  (15)  -   (15)
Tax effect  -   -   - 
Net other comprehensive income (loss) for six months ended December 31, 2016  354   (35)  319 
 Balance at December 31, 2016 $399  $(229) $170 
             
 Three Months Ended December 31, 2016            
 Balance at September 30, 2016 $738  $(204) $534 
Other comprehensive income (loss) before reclassifications  (308)  (25)  (333)
Tax effect  -   -   - 
Amount reclassified from AOCI  (31)  -   (31)
Tax effect  -   -   - 
Net other comprehensive income (loss) for quarter  (339)  (25)  (364)
 Balance at December 31, 2016 $399  $(229) $170 

1.
Amounts reclassified from unrealized gains (losses) on available-for-sale investments, net of tax, were recorded in investment income (loss) on the Consolidated Statements of Operations.


NOTE 10.13. FINANCIAL INFORMATION BY BUSINESS SEGMENT


The Company operates principally in threetwo business segments: providing investment management services to USGIF offshore clients and ETF clients; investment management services in Canada; and investing for its own account in an effort to add growth and value to its cash position. The following schedule details gross identifiable assets, total revenues, and income by business segment:segment.

(dollars in thousands)

 

Investment Management Services

  

Corporate Investments

  

Consolidated

 

Nine Months Ended March 31, 2024

            

Net operating revenues

 $8,544  $-  $8,544 

Net investment income (loss)

 $-  $1,363  $1,363 

Other income (loss)

 $183  $-  $183 

Income (loss) before income taxes

 $164  $1,300  $1,464 

Depreciation

 $163  $-  $163 

Gross identifiable assets at March 31, 2024

 $27,542  $23,390  $50,932 

Deferred tax asset

         $1,840 

Consolidated total assets at March 31, 2024

         $52,772 

Nine Months Ended March 31, 2023

            

Net operating revenues

 $11,764  $-  $11,764 

Net investment income (loss)

 $-  $(189) $(189)

Other income (loss)

 $184  $-  $184 

Income (loss) before income taxes

 $3,461  $(243) $3,218 

Depreciation

 $183  $-  $183 

Gross identifiable assets at March 31, 2023

 $25,056  $29,030  $54,086 

Deferred tax asset

         $1,659 

Consolidated total assets at March 31, 2023

         $55,745 

Three Months Ended March 31, 2024

            

Net operating revenues

 $2,593  $-  $2,593 

Net investment income (loss)

 $-  $460  $460 

Other income (loss)

 $68  $-  $68 

Income (loss) before income taxes

 $(389) $429  $40 

Depreciation

 $41  $-  $41 

Three Months Ended March 31, 2023

            

Net operating revenues

 $3,624  $-  $3,624 

Net investment income (loss)

 $-  $1,155  $1,155 

Other income (loss)

 $61  $-  $61 

Income (loss) before income taxes

 $815  $1,131  $1,946 

Depreciation

 $61  $-  $61 

Page 20


(dollars in thousands) Investment Management Services  
Investment Management
Services - Canada
  Corporate Investments  Consolidated 
Six months ended December 31, 2017            
Net operating revenues $2,514  $969  $-  $3,483 
Net other income $7  $10  $3,183  $3,200 
Income (loss) before income taxes $(915) $305  $3,182  $2,572 
Depreciation and amortization $116  $6  $-  $122 
Capital expenditures $-  $-  $-  $- 
Gross identifiable assets at December 31, 2017 $8,702  $2,137  $34,236  $45,075 
Deferred tax asset             $- 
Consolidated total assets at December 31, 2017          $45,075 
Six months ended December 31, 2016                
Net operating revenues $3,020  $603  $-  $3,623 
Net other income $-  $-  $502  $502 
Income (loss) before income taxes $(223) $30  $492  $299 
Depreciation and amortization $119  $8  $-  $127 
Capital expenditures $-  $-  $-  $- 
Three months ended December 31, 2017                
Net operating revenues $1,242  $751  $-  $1,993 
Net other income $5  $10  $1,460  $1,475 
Income (loss) before income taxes $(515) $381  $1,460  $1,326 
Depreciation and amortization $58  $3  $-  $61 
Capital expenditures $-  $-  $-  $- 
Three months ended December 31, 2016                
Net operating revenues $1,339  $303  $-  $1,642 
Net other income $-  $-  $249  $249 
Income (loss) before income taxes $(275) $33  $257  $15 
Depreciation and amortization $59  $4  $-  $63 
Capital expenditures $-  $-  $-  $- 

Net operating revenues from investment management services includes operating revenues from USGIFETF clients of $1.0$2.2 million and $2.1$7.4 million respectively, for the three and sixnine months ended DecemberMarch 31, 2017,2024, respectively, and $1.2$3.1 million and $2.8$10.4 million respectively, for the three and sixnine months ended DecemberMarch 31, 2016.2023, respectively. Net operating revenues from investment management services also include operating revenues from ETF clientsUSGIF of $184,000$369,000 and $369,000, respectively,$1.2 million for the three and sixnine months ended DecemberMarch 31, 2017,2024, respectively, and $76,000$482,000 and $142,000, respectively,$1.4 million for the three and sixnine months ended DecemberMarch 31, 2016.2023, respectively.


Net operating revenues from investment management services in Canada includes revenues from Galileo funds of $747,000 and $961,000, respectively, for the three and six months ended December 31, 2017, and $223,000 and $448,000, respectively, for the three and six months ended December 31, 2016, and from other significant advisory clients of $78,000 and $148,000, respectively, for the three and six months ended December 31, 2016.

NOTE 11.14. CONTINGENCIES AND COMMITMENTS


The Company continuously reviews all investor, employee and vendor complaints, and pending or threatened litigation. The likelihood that a loss contingency exists is evaluated through consultation with legal counsel, and a loss contingency is recorded if probable and reasonably estimable.



During the normal course of business, the Company may be subject to various claims, legal proceedings, and other contingencies. These matters are subject to various uncertainties, and it is possible that some of these matters may be resolved unfavorably. The Company establishes accruals for matters for which the outcome is probable and can be reasonably estimated. Management believes that any liability in excess of these accruals upon the ultimate resolution of these matters will not have a material adverse effect on the consolidated financial statementsConsolidated Financial Statements of the Company.


Excluding reserves for uncertain tax positions, the Company recorded no accruals for contingencies as of March 31, 2024, or June 30, 2023.

The Board has authorized a monthly dividend of $0.0025$0.0075 per share through March 2018,June 2024, at which time it will be considered for continuation by the Board. Payment of cash dividends is within the discretion of the Company’s Board of Directors and is dependent on earnings, operations, capital requirements, general financial condition of the Company, and general business conditions. The total amount of cash dividends expected to be paid to class A and class C shareholders from JanuaryApril to March 2018June 2024 is approximately $114,000.$317,000.

The COVID-19 pandemic and the resulting actions to control or slow the spread have affected global and domestic economies and financial markets, and in the future it or other epidemics, pandemics or outbreaks may adversely affect the Company's results of operations, cash flows and financial position. The Company cannot reasonably estimate the future impact of these events, given the uncertainty over the duration and severity of the economic impact.


NOTE 12.15. SUBSEQUENT EVENT

As discussed in Note 2,

USGIF advisory fees are comprised of two components: a base management fee and a performance fee. The performance fee is a fulcrum fee that is adjusted upwards or downwards by 0.25 percent when there is a performance difference of 5 percent or more between a fund’s performance and that of its designated benchmark index over the Company owned approximately 30 percentprior rolling 12 months.


For
three of Galileo Partners Fund at December 31, 2017. This investment is accounted for under thefour USGIF equity method of accounting. Effective January 31, 2018, a portion of the investment in the fund was redeemed (sold) for proceeds of approximately $1.5 million. As the Company had recorded its proportional shares of the fund’s net income under the equity method of accounting, the proceeds will reduce the carrying value of the investment. Afterfunds, this transaction, the Company owns approximately 24 percent of the fund. As the Company will continue to have the ability to exercise significant influence, the investment will continueperformance adjustment began to be accounted for underphased out on April 1, 2024, and will cease on April 1, 2025. In the equity method of accounting. The results of this transaction willphase-out period, performance can only be reflected in the financial statements for the quarter ended March 31, 2018.


adjusted downward.

Page 1921


ITEM 2. MANAGEMENT’SMANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS


U.S. Global Investors, Inc. (the “Company”Company or “U.S. Global”U.S. Global) has made forward-looking statements concerning the Company’sCompanys performance, financial condition, and operations in this report. The Company from time to time may also make forward-looking statements in its public filings and press releases. Such forward-looking statements are subject to various known and unknown risks and uncertainties and do not guarantee future performance. Actual results could differ materially from those anticipated in such forward-looking statements due to a number of factors, some of which are beyond the Company’sCompanys control, including: (i) the volatile and competitive nature of the investment management industry, (ii) changes in domestic and foreign economic conditions, including significant economic disruptions from COVID-19 or other epidemics, pandemics or outbreaks and the actions taken in connection therewith, (iii) the effect of government regulation on the Company’sCompanys business, and (iv) market, credit, and liquidity risks associated with the Company’sCompanys investment management activities. Due to such risks, uncertainties, and other factors, the Company cautions each person receiving such forward-looking information not to place undue reliance on such statements. All such forward-looking statements are current only as of the date on which such statements were made.


FACTORS AFFECTING OUR BUSINESS

The rapid spread of COVID-19 and actions taken in response had a significant detrimental effect on the global and domestic economies and financial markets. Market declines affect the Company’s assets under management, and thus its revenues and also the valuation of the Company’s corporate investments. If this macro-economic risk persists, it could have an adverse material financial impact on the Company’s business and investments, including a material reduction in its results of operations.

COVID-19-related circumstances (e.g., remote work arrangements) did not adversely affect the Company’s ability to maintain operations, including financial reporting systems, internal controls over financial reporting, and disclosure controls and procedures.

Market volatility in the prices of digital assets has been elevated due to a variety of factors, including, but not limited to, the macroeconomic environment (high inflation and rising interest rates) as well as the ‘crypto credit crisis of 2022’ brought on by the collapse and bankruptcy of a number of key players in the sector (cryptocurrency Luna collapse, hedge fund Three Arrows Capital default on loans and filing for bankruptcy, crypto-lending platform Celsius freezing all withdraws, cryptocurrency lender Voyager Digital filing for bankruptcy, crypto platform FTX filing for bankruptcy, crypto platform BlockFi filing for bankruptcy among others). The Company did not have direct exposure to any of the foregoing firms affected by the crypto credit crisis of 2022. Although the Company has no current intention of directly investing in cryptocurrencies, the Company has indirect exposure to cryptocurrencies by investing in securities of issuers with exposure to the cryptocurrency industry. There has been significant volatility in the market price of the securities, which has had a material impact, and may continue to have a material impact, on the investment values included on the Consolidated Balance Sheets and unrealized gain (loss) recognized in net investment income.

BUSINESS SEGMENTS


The Company, with principal operations located in San Antonio, Texas, manages threetwo business segments: (1) the Company offers a broad range of investment management products and services to meet the needs of individual and institutional investors;investors, and (2) the Company, through its Canadian subsidiary, owns a 65 percent controlling interest in Galileo Global Equity Advisors Inc. (“Galileo”), which offers investment management products and services in Canada; and (3) the Company invests for its own account in an effort to add growth and value to its cash position. Although the Company usually generates the majority of its revenues from its investment advisory segments, the Company holds a significant amount of its total assets in investments.

The following is a brief discussion of the Company’s three business segments.


Investment Management Services


The Company provides advisory services for three U.S.-based exchange-traded fund (“ETF”) clients and receives monthly advisory fees based on the net asset values of the funds. Information on the U.S.-based ETFs can be found at www.usglobaletfs.com, including the prospectus, performance and holdings. The Company also serves as investment advisor to one European-based ETF and receives a monthly advisory fee based on the net asset value of the fund. The European-based ETF is not available to U.S. investors. The ETFs’ authorized participants are not required to give advance notice prior to redemption of shares in the ETFs, and the ETFs do not charge a redemption fee.

The Company also generates operating revenues from managing and servicing U.S. Global Investors Funds (“USGIF” or the “Funds”) and other advisory clients.. These revenues are largely dependent on the total value and composition of assets under its management. Fluctuations in the markets and investor sentiment directly impact the asset levels of the Funds, and other advisory clients, thereby affecting income and results of operations. Detailed information regarding the Funds managed by the Company within USGIF can be found on the Company’s website, www.usfunds.com, including the prospectus and performance information for each Fund. The mutual fund shareholders in USGIF are not required to give advance notice prior to redemption of shares in the Funds.


The Company provides advisory services for two exchange-traded fund (“ETF”) clients and receives monthly advisory fees based on the net asset values of the funds. Information on the ETFs can be found at www.usglobaletfs.com, including the prospectus, performance and holdings. The ETFs’ authorized participants are not required to give advance notice prior to redemption of shares in the ETFs, and the ETFs do not charge a redemption fee.

The Company provided advisory services for offshore clients and received advisory fees based on the net asset values of the clients and performance fees, if any, based on the overall increase in net asset values. Frank Holmes, CEO, served as a director of the offshore clients. The offshore clients completed their respective liquidations in the second quarter of fiscal year 2018.

At DecemberMarch 31, 2017,2024, total assets under management, including USGIFETF and ETFUSGIF clients, were $681.2 millionapproximately $1.7 billion versus $683.1 million$2.3 billion at DecemberMarch 31, 2016,2023, a decrease of 0.3 percent.$0.5 billion. During the sixnine months ended DecemberMarch 31, 2017,2024, average assets under management, including ETF and USGIF clients, were $702.4 million$1.9 billion, versus $773.9 million$2.6 billion during the sixnine months ended DecemberMarch 31, 2016. Total assets under management as of period-end at December 31, 2017, including USGIF and ETF clients, were $681.2 million versus $711.9 million at2023. At June 30, 2017,2023, the Company’s prior fiscal year end.


end, total assets under management, including ETF and USGIF clients, were approximately $2.4 billion, and decreased $0.6 billion during the nine months ended March 31, 2024.


The following tables summarize the changes in assets under management for USGIF for the three and sixnine months ended DecemberMarch 31, 2017,2024, and 2016:


  Changes in Assets Under Management 
  Six Months Ended December 31, 
  2017  2016 
(dollars in thousands) Equity  Fixed Income  Total  Equity  Fixed Income  Total 
Beginning Balance $442,916  $136,500  $579,416  $525,778  $177,242  $703,020 
Market appreciation (depreciation)  36,345   22   36,367   (45,536)  (1,947)  (47,483)
Dividends and distributions  (34,479)  (660)  (35,139)  (7,723)  (898)  (8,621)
Net shareholder purchases (redemptions)  2,660   (17,315)  (14,655)  (22,508)  (22,302)  (44,810)
Ending Balance $447,442  $118,547  $565,989  $450,011  $152,095  $602,106 
                         
Average investment management fee  1.00%  0.08%  0.80%  0.96%  0.00%  0.73%
Average net assets $450,124  $129,908  $580,032  $536,384  $174,116  $710,500 

  Changes in Assets Under Management 
  Three Months Ended December 31, 
  2017  2016 
(dollars in thousands) Equity  Fixed Income  Total  Equity  Fixed Income  Total 
Beginning Balance $460,960  $129,571  $590,531  $578,588  $181,217  $759,805 
Market appreciation (depreciation)  8,284   1,582   9,866   (96,256)  (1,773)  (98,029)
Dividends and distributions  (34,480)  (357)  (34,837)  (7,722)  (459)  (8,181)
Net shareholder purchases (redemptions)  12,678   (12,249)  429   (24,599)  (26,890)  (51,489)
Ending Balance $447,442  $118,547  $565,989  $450,011  $152,095  $602,106 
                         
Average investment management fee  1.00%  0.17%  0.82%  0.94%  0.00%  0.70%
Average net assets $445,890  $125,819  $571,709  $492,403  $167,635  $660,038 

2023.

  

Changes in Assets Under Management

 
  

Three Months Ended March 31,

 
  

2024

  

2023

 

(dollars in thousands)

 

Equity

  

Fixed Income

  

Total

  

Equity

  

Fixed Income

  

Total

 

Beginning Balance

 $233,187  $56,722  $289,909  $278,037  $64,995  $343,032 

Market appreciation (depreciation)

  6,985   242   7,227   18,763   542   19,305 

Dividends and distributions

  -   (480)  (480)  -   (394)  (394)

Net shareholder purchases (redemptions)

  (10,728)  334   (10,394)  (5,889)  (3,042)  (8,931)

Ending Balance

 $229,444  $56,818  $286,262  $290,911  $62,101  $353,012 
                         

Average investment management fee

  0.81%  0.00%  0.64%  0.79%  0.00%  0.65%

Average net assets

 $219,813  $57,103  $276,916  $289,682  $63,337  $353,019 

  

Changes in Assets Under Management

 
  

Nine Months Ended March 31,

 
  

2024

  

2023

 

(dollars in thousands)

 

Equity

  

Fixed Income

  

Total

  

Equity

  

Fixed Income

  

Total

 

Beginning Balance

 $265,329  $63,110  $328,439  $286,367  $71,161  $357,528 

Market appreciation (depreciation)

  3,781   1,618   5,399   22,292   323   22,615 

Dividends and distributions

  (2,235)  (1,517)  (3,752)  (11,329)  (931)  (12,260)

Net shareholder purchases (redemptions)

  (37,431)  (6,393)  (43,824)  (6,419)  (8,452)  (14,871)

Ending Balance

 $229,444  $56,818  $286,262  $290,911  $62,101  $353,012 
                         

Average investment management fee

  0.81%  0.00%  0.64%  0.81%  0.00%  0.65%

Average net assets

 $231,059  $58,926  $289,985  $281,745  $65,978  $347,723 

As shown above, USGIF period-end assets under management were lower at DecemberMarch 31, 2017,2024, compared to DecemberMarch 31, 2016. Also, average2023. Average net assets for the three-three and six-month periodsnine months in the current fiscal year were lower than the same periods in the previous fiscal year. Both

USGIF period-end assets under management decreased during the nine months ended March 31, 2024, and 2023, decreased during the three and six months ended DecemberMarch 31, 2017, had net market appreciation, primarily in the equity funds, compared to net market depreciation for2024, and increased during the three and six months ended DecemberMarch 31, 2016, also2023. During the nine months ended March 31, 2024, the decrease was primarily indue to redemptions, primarily driven by equity fund liquidations. The increase during the equity funds. A significant portion of the dividends and distributions shown above are reinvested and included in net shareholder purchases (redemptions). The combined amounts for these two lines for all periods shown were negative, thus contributingthree months ended March 31, 2023, was primarily due to the decline in net assets.


market appreciation.

The average annualized investment management fee rate (total advisory fees, excluding performance fees, as a percentage of average assets under management) was 82 and 8064 basis points for the three and sixnine months ended DecemberMarch 31, 2017, respectively,2024, and 70 and 7365 basis points for the same periods in the prior year.three and nine months ended March 31, 2023. The average investment management fee for the equity funds was 10081 basis points for the three and sixnine months ended DecemberMarch 31, 2017,2024, and 9479 basis points and 9681 basis points for the same periods in the prior year.three and nine months ended March 31, 2023, respectively. The Company has agreed to contractually or voluntarily limit the expenses of the Funds. Therefore, the Company waived or reduced its fees and/or agreed to pay expenses of the Funds. Due to fee waivers, the average investment management fee for the fixed income funds was 17 and 8 basis pointsminimal. Additionally, due to fee waivers, the equity fund liquidations did not have a significant impact of decreasing the average investment management fee rate for the three and six months ended December 31, 2017, respectively, compared to nil for the three and six months ended December 31, 2016.


Investment Management Services - Canada

The Company owns a 65 percent controlling interest in the Canadian asset management firm Galileo. These revenues are largely dependent on the total value and composition of assets under its management. Fluctuations in the markets and investor sentiment directly impact the funds’ asset levels, thereby affecting income and results of operations.

At December 31, 2017, total Galileo assets under management were $64.8 million versus $128.4 million at December 31, 2016, a decrease of 49.5 percent. During the six months ended December 31, 2017, average assets under management were $57.6 million versus $124.3 million during the six months ended December 31, 2016. Total assets under management at December 31, 2017, were $64.8 million versus $47.8 million at June 30, 2017, the Company’s prior fiscal year end.

On September 29, 2017, Galileo launched its first ETF, U.S. Global GO GOLD and Precious Metal Miners ETF (ticker GOGO), on the Toronto Stock Exchange.


equity funds.

Investment Activities


Management believes it can more effectively manage the Company’s cash position by broadening the types of investments used in cash management and continues to believe that such activities are in the best interest of the Company. The Company’s investment activities are reviewed and monitored by Company compliance personnel, and various reports are provided to certain investment advisory clients. Written procedures are in place to manage compliance with the code of ethics and other policies affecting the Company’s investment practices. This source of revenue does not remain consistent and is dependent on market fluctuations, the Company’s ability to participate in investment opportunities, and timing of transactions.


As of DecemberMarch 31, 2017,2024, the Company held investments with acarried at fair value of approximately $29.8$16.7 million and a cost basis of approximately $12.6$18.9 million. The fair value of these investments is approximately 66.131.6 percent of the Company’s total assets. See Note 2 (Investments) for additional detail regarding investment activities.assets at March 31, 2024. In addition, the Company held other investments of $2.1approximately $1.1 million accountedand held-to-maturity debt investments, net of allowance for under the cost methodcredit losses, of accounting, $3.3 million in investments accounted for under the equity method of accounting, and $2.2 million in notes receivable.


$843,000.

Investments recorded at fair value on a recurring basis were approximately $29.8$16.7 million at DecemberMarch 31, 2017,2024, compared to approximately $13.1$20.2 million at June 30, 2017,2023, the Company’s prior fiscal year end, which is an increasea decrease of approximately $16.7$3.5 million. This increase is primarily due to unrealized gain on an available-for-sale security acquired during the current period. See Note 2 (Investments)3, Investments, in the Notes to Consolidated Financial Statements of this Quarterly Report on Form 10-Q, for further information. In addition, aninformation regarding investment was made in the current period in a Galileo fund that is accounted for under the equity methodactivities.

Page 23

RESULTS OF OPERATIONS Three months ended DecemberMarch 31, 2017,2024, and 2016


2023

The Company postedrecorded a net income attributable to U.S. Global Investors, Inc.loss of $749,000$35,000 ($0.05(0) per share) for the three months ended DecemberMarch 31, 2017,2024, compared withto net income attributable to U.S. Global Investors, Inc. of $8,000$1.6 million ($0.000.11 per share) for the three months ended DecemberMarch 31, 2016, an increase in net income2023, a change of approximately $741,000.$1.7 million. The increasechange is primarily due to a decrease in operating revenues and net investment income from an equity method investment.

compared to the same period in the prior year, as discussed further below.

Operating Revenues


Total consolidated operating revenues for the three months ended DecemberMarch 31, 2017, increased $351,000,2024, decreased $1.0 million, or 21.428.4 percent, compared with the three months ended DecemberMarch 31, 2016.2023. This increasedecrease was primarily attributable to the following:


Advisory fees increaseddecreased by $360,000,$1.0 million, or 22.928.5 percent, primarily as a result of performance fees from Galileo clients. Advisory fees are comprised of two components: a base management fee and a performance fee.

•  Base management fees increased $79,000, primarily due to an increase in ETF unitary management fees resulting from an increase in ETF average assets under management, partially offset by a decrease in base fees for USGIF and Galileo clients primarily as a result of lower average assets under management largely due to shareholder redemptions. The effect of the decline in net assets on base fees for USGIF was offset in the current period byETFs and a declinedecrease in base management fee waivers. fees received. Advisory fees are comprised of two components: base management fees and performance fees.

Base management fees decreased $1.0 million. The majority of this decrease was from ETF unitary management fees, which decreased $918,000 as the result of a decrease in ETF average assets under management, primarily for the offshore funds decreased due to these funds liquidating in the current year.Jets ETF.

Performance fees for USGIF paid out in the current period were $192,000$101,000 compared to $9,000 in fees paid out$109,000 in the corresponding period in the prior year, reducing revenue by $183,000.year. The performance fee, which applies to the USGIF equity funds only, is a fulcrum fee that is adjusted upwards or downwards by 0.25 percent when there is a performance difference of 5 percent or more between a fund’s performance and that of its designated benchmark index over the prior rolling 12 months.

•  Performance fees for Galileo clients received in the current period were $464,000 compared to none in the corresponding period in the prior year, increasing revenue by $464,000. Galileo may receive performance fees from certain clients when market appreciation or realized net gains exceeds established benchmarks. The majority of the performance fees recorded in the quarter are annual performance fees calculated at calendar year-end.
•  Administrative services fee revenue decreased by $9,000, or 12.3 percent, due to lower average net assets under management upon which these fees are based in the current period.

Operating Expenses


Total consolidated operating expenses for the three months ended DecemberMarch 31, 2017,2024, increased $266,000,$187,000, or 14.26.5 percent, compared with the three months ended DecemberMarch 31, 2016.2023. The changeincrease in operating expenses was primarily attributable to an increase in general and administrative expenses of $256,000, or 17.3 percent, somewhat offset by a decrease in employee compensation and benefits expenses of $241,000,$55,000, or 26.8 percent, primarily due to increased bonuses and an4.4 percent. The increase in general and administrative expenses of $51,000, or 5.9 percent,are primarily due to increased ETF costs and increased costs by Galileoincreases in USGIF expenses related to new fund startup costs. This increase was somewhat offset by a decreaseperformance fee elimination proxy; and increases in advertisingETF expenses of $24,000, or 47.1 percent, primarily duerelated to decreasedmerging the European-based ETF, marketing.



the U.S. Global Jets UCITS ETF, into the Travel UCITS ETF (TRIP).

Other Income

(Loss)

Total consolidated other income for the three months ended DecemberMarch 31, 2017, increased2024, was $528,000, compared to $1.2 million or 492.4 percent, compared withfor the three months ended DecemberMarch 31, 2016. The increase2023, a decrease of approximately $688,000. This decrease was primarily due to an investment made in the quarter ended September 30, 2017, in a Galileo fund that is accounted for under the equity method of accounting. Under the equity method of accounting, the Company’s share of the fund’s net income, which primarily consists of realized and unrealized gains and losses on investments offset by fund expenses, is recognized in the Company’s earnings. The Galileo fund’s investments are concentrated in a cryptocurrency mining stock. Cryptocurrency markets and related stocks have been, and are expected to continue to be, volatile. Cryptocurrency mining is considered an early stage high-risk industry, and the nature of mining is expected to evolve. There is potential for significant volatility in the valuation of the fund’s investments, and thus the fund’s net income that is included in the Company’s earnings. See further discussion in Note 2, Investments, to the Consolidated Financial Statements of this Quarterly Report on Form 10-Q. In addition, the Company redeemed a portion of its investment in the fund after December 31, 2017. See further discussion in Note 12, Subsequent Event, to the Consolidated Financial Statements of this Quarterly Report on Form 10-Q.

following factors:

Net investment income was $460,000 for the three months ended March 31, 2024, compared to $1.2 million for the prior period, a decrease of $695,000. This decrease in net investment income is comprised of net realized and unrealized losses on equity securities of $231,000 in the current period compared to net realized and unrealized gains on equity securities of $270,000 in the same quarter in the prior year, an unfavorable change of $501,000; and a decrease in realized gains on debt securities of $127,000 compared to the prior period.

Provision for Income Taxes


The Tax Cuts and Jobs Act

A tax expense of $75,000 was enacted on December 22, 2017. The Act reduces the U.S. federal corporate tax rate from 35 percent to 21 percent, requires companies to pay a one-time transition tax on earnings of certain foreign subsidiaries that were previously tax deferred and creates new taxes on certain foreign sourced earnings. In the second quarter, the Company revised its estimated annual effective rate to reflect a change in its federal statutory rate from 34 percent to 21 percent. The rate change is effective on January 1, 2018; therefore, the Company’s blended statutory tax raterecorded for the fiscal yearthree months ended June 30, 2018, is 28 percent. At DecemberMarch 31, 2017,2024, compared to $326,000 for the Company has not completed its accounting for allthree months ended March 31, 2023, a decrease of $251,000. The decrease was primarily the tax effectsresult of enactment of the Act; however, a reasonable estimate has been made of the one-time transition tax of $17,000, which is included as a component of tax expense in the current quarter. The final transitional impacts of the Act may differ from the initial estimates. Note that the Company currently has netan operating loss carryovers in most jurisdictions, including the U.S. A valuation allowance has been recorded to fully reserve for net operating loss carryovers, other carryovers and certain book/tax differences in the balance sheet. Deferred taxes of $417,000 were recorded in the Statement of Operations in the current period for USCAN book/tax differencescompared to operating income in the balance sheet.


same period in the prior year, and lower net investment income (loss) in the current period compared to the same period in the prior year.

RESULTS OF OPERATIONS Six Nine months ended DecemberMarch 31, 2017,2024, and 2016


2023

The Company postedrecorded net income attributable to U.S. Global Investors, Inc. of $2.0$1.0 million ($0.130.07 per share) for the sixnine months ended DecemberMarch 31, 2017,2024, compared withto net income attributable to U.S. Global Investors, Inc. of $271,000$2.5 million ($0.020.17 per share) for the sixnine months ended DecemberMarch 31, 2016, an increase in net income2023, a decrease of approximately $1.7$1.5 million. The increasedecrease is primarily due to income from equity method investment,a decrease in operating revenues compared to the same period in the prior year, somewhat offset by a decreasenet investment income in revenues, which was the result of a decreasecurrent period compared to net investment losses in assets under management, and an increasesame period in operating expensesthe prior year, as discussed further below.

Operating Revenues


Total consolidated operating revenues for the sixnine months ended DecemberMarch 31, 2017,2024, decreased $140,000,$3.2 million, or 3.927.4 percent, compared with the threenine months ended DecemberMarch 31, 2016.2023. This decrease was primarily attributable to the following:


Advisory fees decreased by $98,000,$3.2 million, or 2.827.5 percent, primarily as a result of lower assets under management. Advisory fees are comprised of two components: a base management fee and a performance fee.

•  Base management fees decreased $224,000. Base fees for USGIF and Galileo clients decreased primarily as a result of lower average assets under management primarily due to shareholder redemptions. in the ETFs and a decrease in base management fees received. Advisory fees are comprised of two components: base management fees and performance fees.

Base management fees for the offshore funds decreased due to these funds liquidating in the current year. These decreases were somewhat offset by an increase in$3.3 million. The majority of this decrease was from ETF unitary management fees, due to an increasewhich decreased $3.0 million as the result of a decrease in ETF average assets under management.management, primarily for the Jets ETF.

Performance fees for USGIF paid out in the current period were $308,000$344,000 compared to $30,000 in fees received$390,000 in the corresponding period in the prior year, reducing revenue by $338,000.year. The performance fee, which applies to the USGIF equity funds only, is a fulcrum fee that is adjusted upwards or downwards by 0.25 percent when there is a performance difference of 5 percent or more between a fund’s performance and that of its designated benchmark index over the prior rolling 12 months.

•  Performance fees for Galileo clients received in the current period were $464,000 compared to none in the corresponding period in the prior year, increasing revenue by $464,000. Galileo may receive performance fees from certain clients when market appreciation or realized net gains exceeds established benchmarks. The majority of the performance fees recorded in the period are annual performance fees calculated at calendar year-end.
•  Administrative services fee revenue decreased by $42,000, or 25.8 percent, due to lower average net assets under management upon which these fees are based in the current period.

Operating Expenses


Total consolidated operating expenses for the sixnine months ended DecemberMarch 31, 2017,2024, increased $285,000,$85,000, or 7.41.0 percent, compared with the sixnine months ended DecemberMarch 31, 2016.2023. The changeincrease in operating expenses was primarily attributable to an increase in general and administrative expenses of $236,000, or 5.3 percent, partially offset by a decrease in employee compensation and benefits expenses of $155,000,$124,000, or 8.2 percent, primarily due to increased bonuses, and an3.5 percent. The increase in general and administrative expenses of $129,000, or 7.4 percent,are primarily due to increased ETF costs and increased costs by Galileoincreases in USGIF expenses related to new fund startup costs.


a performance fee elimination proxy; and increases in ETF expenses related to merging the European-based ETF, the U.S. Global Jets UCITS ETF, into the Travel UCITS ETF (TRIP).

Page 2324



Other Income

(Loss)

Total consolidated other income for the sixnine months ended DecemberMarch 31, 2017, increased $2.72024, was $1.5 million, or 537.5 percent, compared withto a loss of $5,000 for the sixnine months ended DecemberMarch 31, 2016. The increase2023, a change of approximately $1.6 million. This change was primarily due to an investment made in the quarter ended September 30, 2017, in a Galileo fund that is accounted for under the equity method of accounting. Under the equity method of accounting, the Company’s share of the fund’s net income, which primarily consists of realized and unrealized gains and losses on investments offset by fund expenses, is recognized in the Company’s earnings. The Galileo fund’s investments are concentrated in a cryptocurrency mining stock. Cryptocurrency markets and related stocks have been, and are expected to continue to be, volatile. Cryptocurrency mining is considered an early stage high-risk industry, and the nature of mining is expected to evolve. There is potential for significant volatility in the valuation of the fund’s investments, and thus the fund’s net income that is included in the Company’s earnings. See further discussion in Note 2, Investments, to the Consolidated Financial Statements of this Quarterly Report on Form 10-Q. In addition, the Company redeemed a portion of its investment in the fund after December 31, 2017. See further discussion in Note 12, Subsequent Event, to the Consolidated Financial Statements of this Quarterly Report on Form 10-Q.

following factors:

Net investment income was $1.4 million for the nine months ended March 31, 2024, compared to a loss of $189,000 for the prior period, a change of $1.6 million. This change in net investment income is primarily attributable to net realized and unrealized losses on equity securities of $1.1 million in the current period, compared to $2.6 million in the comparable period, a favorable change of $1.5 million.

Provision for Income Taxes


The Tax Cuts and Jobs Act

A tax expense of $446,000 was enacted on December 22, 2017. The Act reduces the U.S. federal corporate tax rate from 35 percent to 21 percent, requires companies to pay a one-time transition tax on earnings of certain foreign subsidiaries that were previously tax deferred and creates new taxes on certain foreign sourced earnings. In the second quarter, the Company revised its estimated annual effective rate to reflect a change in its federal statutory rate from 34 percent to 21 percent. The rate change is effective on January 1, 2018; therefore, the Company’s blended statutory tax raterecorded for the fiscal yearnine months ended June 30, 2018, is 28 percent. At DecemberMarch 31, 2017,2024, compared to $698,000 for the Company has not completed its accounting for allnine months ended March 31, 2023, a decrease of $252,000. The decrease was primarily the tax effectsresult of enactment of the Act; however, a reasonable estimate has been made of the one-time transition tax of $17,000, which is included as a component of tax expense in the current quarter. The final transitional impacts of the Act may differ from the initial estimates. Note that the Company currently has netan operating loss carryovers in most jurisdictions, including the U.S. A valuation allowance has been recorded to fully reserve for net operating loss carryovers, other carryovers and certain book/tax differences in the balance sheet. Deferred taxes of $417,000 were recorded in the Statement of Operations in the current period for USCAN book/tax differencescompared to operating income in the balance sheet.


same period in the prior year, partially offset by higher net investment income (loss) in the current period compared to the same period in the prior year.

LIQUIDITY AND CAPITAL RESOURCES


At DecemberMarch 31, 2017,2024, the Company had net working capital (current assets minus current liabilities) of approximately $13.4$38.6 million, an increase of $1.2 million, or 3.1 percent, since June 30, 2023, and a current ratio (current assets divided by current liabilities) of 9.617.5 to 1. With approximately $3.0$27.5 million in cash and cash equivalents, an increase of $2.1 million, or 8.1 percent since June 30, 2023, and approximately $10.7$11.5 million in unrestricted marketable securities carried at fair value on a recurring basis, excluding convertible securities, which together comprise approximately 73.8 percent of total assets, the Company has adequate liquidity to meet its current obligations. Total U.S. Global Investors, Inc.

The increase in cash, and accordingly, net working capital, was primarily due to net cash provided by operating activities of $853,000, proceeds from principal paydowns of $2.3 million, and proceeds from sales of corporate investments of $1.8 million; offset by repurchases of the Company's common stock of $1.7 million, and dividends paid of $965,000. Consolidated shareholders’ equity is approximately $39.0at March 31, 2024, was $49.8 million, with cash, cash equivalents, and unrestricted marketable securities comprising 30.4a decrease of $2.4 million, or 4.5 percent of total assets. Approximately $1.4 million in cash in Galileo is included in the amounts above. USGI would be requiredsince June 30, 2023. The decrease was primarily due to accrue and pay taxes to repatriate (i.e., bring back into the U.S.) these funds, and there is no current intention to repatriate. However, the Company is still evaluating the provisionsrepurchases of the Tax Cuts and Jobs Act that was enacted in December 2017 and may change its intent to repatriate inCompany's common stock of $1.8 million, dividends declared of $954,000, the future.


Asimpact of DecemberASU 2016-13 adoption of $183,000, other comprehensive loss of $517,000, offset by net income of $1.0 million, for the nine months ended March 31, 2017, the Company has no borrowings or long-term liabilities except for deferred taxes. The Company’s primary commitment going forward is for operating expenses. 2024.

The Company also has access to a $1 million credit facility, which can be utilized for working capital purposes. The credit agreement requires the Company to maintain certain covenants; the Company has been in compliance with these covenants during the current fiscal year. The credit agreement will expireexpires on May 3, 2018,31, 2024, and the Company intends to renew annually. The credit facility is collateralized by approximately $1 million, at December 31, 2017,included in restricted cash on the Consolidated Balance Sheets, held in deposit in a money market account at the financial institution that provided the credit facility. As of DecemberMarch 31, 2017, the2024, this credit facility remainsremained unutilized by the Company.


Investment advisory contracts pursuant to the Investment Company Act of 1940 and related affiliated contracts in the U.S., by law, may not exceed one year in length and, therefore, must be renewed at least annually after an initial two-year term. The investment advisory and administrative servicesrelated contracts between the Company and USGIF have been renewed through September 2018, and management anticipates that2024. The advisory agreement for the contracts will be renewed. The investment advisory contract between the Company and U.S. Global Jets ETF expires in April 2018, and management anticipates that the contract will be renewed. The investment advisory contract between the Company and U.S. Global GO GOLD and Precious Metal Miners ETF is in its initial two-year term and will not expire until June 2019. Galileo’s investment management agreement with Canadian registered mutual funds may be terminated each September 30 with a 180-day prior notice of unitholders’ resolution. Galileo’s advisory agreements with other advisory clients can be terminated upon 30-day written notice. The Company’s two offshore clients have completed their respective liquidations, and no fees will be received in the future.


U.S.-based ETFs has been renewed through July 2024.

The primary cash requirements are for operating activities. The Company also uses cash to purchase investments, pay dividends and repurchase Company stock. The cash outlays for investments and dividend payments are discretionary and management or the Board may discontinue as deemed necessary. The stock repurchase plan is approved through December 31, 2018,2024, but may be suspended or discontinued at any time. Cash and unrestricted marketablesecurities recorded at fair value on a recurring basis, excluding convertible securities, of approximately $13.7$39.0 million are available to fund current activities.

Management believes current cash reserves, investments, and financing available will be sufficient to meet foreseeable cash needs for operating activities.


CRITICAL ACCOUNTING ESTIMATES

For a discussion of other critical accounting policies that the Company follows, please refer to the notes to the consolidated financial statementsConsolidated Financial Statements included in the Annual Report on Form 10-K for the year ended June 30, 2017.

2023. There have been no material changes to our critical accounting policies, except for the Company's adoption of a new accounting standard as discussed in Item 1, Financial Statements at Note 2, Basis of Presentation and Consolidation, of this Quarterly Report on Form 10-Q.


ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK


COVID-19 had an adverse effect on global and domestic financial markets, which may reoccur and continue for an undetermined period. This may adversely affect assets under management and thus the Company’s revenues and operating results. Market declines also affect the valuation of the Company’s corporate investments, which also adversely affects the Company’s balance sheet and results of operations.
 
Macroeconomic declines, including inflation; negative political developments, including volatile market conditions due to investor concerns regarding inflation, and the Russia-Ukraine and Israel-Palestine conflicts; adverse market conditions, including cryptocurrency market disruptions; and catastrophic events may cause a decline in the Company’s revenue, an increase in the Company’s costs, negatively affect the Company’s operating results, adversely affect the Company’s cash flow, and could result in a decline in the Company’s stock price.

Investment Management and Administrative Services Fees


Revenues are generally based upon a percentage of the market value of assets under management in accordance with contractual agreements. Accordingly, fluctuations in the financial markets have a direct effect on the Company’s operating results. A significant portion of assets under management in equity funds have exposure to international markets and/or natural resource sectors, which may experience volatility. In addition, fluctuations in interest rates may affect the value of assets under management in fixed income funds.


Performance Fees


USGIF advisory fees are comprised of two components: a base management fee and a performance fee. The performance fee is a fulcrum fee that is adjusted upwards or downwards by 0.25 percent when there is a performance difference of 5 percent or more between a fund’s performance and that of its designated benchmark index over the prior rolling 12 months.


As a result, the Company’s revenues are subject to volatility beyond market-based fluctuations discussed in the investment management and administrative services fees section above. For the three and six months ended December 31, 2017,Due to these performance adjustments, the Company realized a decrease in its USGIF base advisory fee of $192,000$101,000 and $308,000, respectively, due to these performance adjustments. For the three and six months ended December 31, 2016, the Company realized a (decrease) increase in its USGIF base advisory fee of ($9,000) and $30,000, respectively, due to these performance adjustments.

Galileo may receive performance fees from certain clients when market appreciation or realized net gains exceeds established benchmarks. Galileo recorded performance fees of $464,000 from these clients for three and six months ended December 31, 2017. The majority of the performance fees recorded in the current period are annual performance fees calculated at calendar year-end. Galileo recorded no performance fees from these clients$344,000 for the three and sixnine months ended DecemberMarch 31, 2016.
2024, respectively, and $109,000 and $390,000 for the three and nine months ended March 31, 2023, respectively.

Corporate Investments


The Company’s Consolidated Balance Sheets includesinclude substantial amounts of assets whose fair value isvalues are subject to market risks. risk. The market risks are primarily associated with equity prices and foreign currency exchange rates. The fair values of corporate investments with exposure to the cryptocurrency industry are subject to considerable volatility.
 
The Company’s investment activities are reviewed and monitored by Company compliance personnel, and various reports are provided to certain investment advisory clients. Written procedures are in place to manage compliance with the code of ethics and other policies affecting the Company’s investment practices.

Equity price risk

Due to the Company’s investments in securities recordedcarried at fair value, equity price fluctuations represent a market risk factor affecting the Company’s consolidated financial position. The carrying values of investments subject to equity price risks are based on quoted market prices or, if not actively traded, management’s estimate of fair value as of the balance sheet date. Market prices fluctuate, and the amount realized in the subsequent sale of an investment may differ significantly from the reported marketfair value.


The Company’s investment activities are reviewed and monitored by Company compliance personnel, and various reports are provided to certain investment advisory clients. Written procedures are in place to manage compliance with the code of ethics and other policies affectingfollowing table summarizes the Company’s investment practices.


The table below summarizes the Company’sequity price risks in securities recorded at fair value on a recurring basis as of DecemberMarch 31, 2017,2024, and shows the effects of a hypothetical 25 percent increase and a 25 percent decrease in market prices.

(dollars in thousands) 
Fair Value at
December 31, 2017
 Hypothetical Percentage Change Estimated Fair Value After Hypothetical Price Change  Increase (Decrease) in Shareholders’ Equity, Net of Tax 
Trading securities ¹ $7,433 25% increase $9,291  $1,858 
     25% decrease $5,575  $(1,858)
Available-for-sale securities ² $22,372 25% increase $27,965  $4,584 
     25% decrease $16,779  $(4,584)

       Estimated Fair Value  Estimated Increase 
  

Fair Value at

 

Hypothetical

 

After Hypothetical

  

(Decrease) in

 

(dollars in thousands)

 

March 31, 2024

 

Percentage Change

 

Price Change

  

Net Income (Loss)(1)

 

Trading securities at fair value

 $11,506 

25% increase

 $14,383  $2,272 
     

25% decrease

 $8,630  $(2,272)

Embedded derivatives at fair value (2)

 $29 

25% increase

 $36  $6 
     

25% decrease

 $22  $(6)

11.

Unrealized and realized

Changes in unrealized gains and losses on embedded derivatives and trading securities at fair value are included in earnings in the statementConsolidated Statements of operations.Operations. The estimated increase (decrease) is after income taxes at the statutory rate in effect as of the balance sheet date.

22.

Unrealized gains

An embedded derivative and lossesits related host contract represent one legal contract and are combined within the investments in available-for-sale debt securities on available-for-sale securities are excluded from earnings and recorded in other comprehensive income as a component of shareholders’ equity until realized.the Consolidated Balance Sheets.

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The selected hypothetical changes do not reflect what could be considered best- or worst-case scenarios. Results could be significantly different due to both the nature of markets and the concentration of the Company’s investment portfolio.



A substantial portion

COVID-19 had an effect on volatility in global and domestic financial markets, which may reoccur and continue for an undetermined period. This may not only adversely affect the Company’s assets under management but also the valuation of the available-for-sale securities recorded at fair valueCompany’s corporate investments.

The embedded derivatives subject to equity price risk shown in the above table is an investmentare related to investments in convertible debentures of HIVE BlockchainDigital Technologies Ltd. (“HIVE”), which was valued at $19.1 million at December 31, 2017.. HIVE is discussed in more detail in Note 2,3, Investments, in the notes to the Consolidated Financial Statements of this Quarterly Report on Form 10-Q. HIVE is a company that is headquartered and traded in Canada with cryptocurrency mining facilities in Iceland, Sweden and Sweden,Canada. Cryptocurrency markets and related stocks have been, and are expected to continue to be, volatile. Cryptocurrency mining is considered an early stage high-risk industry, and the nature of mining is expected to evolve. There is potential for significant volatility in the market price of HIVE, which could materially impact the investment’s value included on the balance sheetConsolidated Balance Sheets and unrealized gain (loss) recognized in comprehensive income.


In additionnet investment income (loss).

Interest rate risk

Due to the Company’s investments in debt securities recordedcarried at fair value, discussed above,interest rate fluctuations represent a market risk factor affecting the Company also has an equity method investmentCompany’s consolidated financial position. Debt securities may fluctuate in value due to changes in interest rates. Typically, investments subject to interest rate risk will decrease in value when interest rates rise and increase in value when interest rates decline. Fluctuations in interest rates could have a material impact on the amount of $3.3 million at December 31, 2017. As discussed furtherCompany’s investments in Note 2, Investments, todebt securities included on the Consolidated Financial Statements of this Quarterly Report on Form 10-Q, this equity method investment is in the Galileo Partners Fund, a Canadian unit trust investment fund managed by Galileo. This fund has a concentrated investment in HIVE, which is also held by the Company as described above. This concentration may result in volatility in the valuation of the Galileo Partners Fund. Under the equity method, the Company’s proportional share of the fund’s net income or loss, which primarily consists of realizedBalance Sheets, and unrealized gains (losses) and losses on investments offset by fund expenses, isinterest income recognized in the Company’s earnings. Due to the concentrated nature of the fund’s investments, the potential significant volatility in HIVE’s valuation could cause the fund’s net investment income or loss to vary significantly from period to period, which in turn would be reflected in the Company’s earnings. Subsequent to December 31, 2017, the Company redeemed a(loss).

Foreign currency risk

A portion of its investment in the Galileo Partners Fund. See Note 12, Subsequent Event, to the Consolidated Financial Statements of this Quarterly Report on Form 10-Q, for further information.


Foreign currency risk

The Company’s subsidiary Galileo conducts its business in Canada. Galileo’s foreign currency financial statements are translated into U.S. dollars in the financial statement consolidation process. Adverse changes in foreign currency exchange rates would lower the carrying value of Galileo’s assetscash and reduce its results in the consolidated U.S. financial statements. For the three and six months ended December 31, 2017, Galileo represented 37.7 percent and 27.8 percent of net operating revenues and 28.7 percent and 11.9 percent of consolidated income before income taxes, and at December 31, 2017, represented 4.7 percent of total assets (see Note 10, Financial Information by Business Segment, to the Consolidated Financial Statements of this Quarterly Report on Form 10-Q). Certaincertain corporate investments including the Company’s equity method investment, are held in foreign currencies, primarily Canadian. Adverse changes in foreign currency exchange rates would also lower the value of those cash accounts and corporate investments. Certain assets under management also have exposure to foreign currency fluctuations in various markets, which could have an impact on their valuation and thus the revenue received by the Company.

Indirect exposure to cryptocurrencies risk

Cryptocurrencies (also referred to as “virtual currencies” and “digital currencies”) are digital assets that are designed to act as a medium of exchange. Although the Company has no current intention of directly investing in cryptocurrencies, the Company has indirect exposure to cryptocurrencies by investing in securities of issuers with exposure to the cryptocurrency industry. Cryptocurrencies (some of the most well-known include Bitcoin, Dogecoin and Ethereum) are not backed by any government, corporation, or other identified body. Trading markets for cryptocurrencies are often unregulated and may be more exposed to operational or technical issues as well as the potential for fraud or manipulation than established, regulated exchanges for securities, derivatives and traditional currencies.

Cryptocurrencies have been subject to significant fluctuations in value. The value of a cryptocurrency may significantly fluctuate precipitously (including declining to zero) and unpredictably for a variety of reasons, including, but not limited to: investor perceptions and expectations; regulatory changes; general economic conditions; adoption and use in the retail and commercial marketplace; public opinion regarding the environmental impact of the creation (“minting” or “mining”) of cryptocurrency; confidence in, and the maintenance and development of, its network and open-source software protocols such as blockchain for ensuring the integrity of cryptocurrency transactional data; and general risks tied to the use of information technologies, including cybersecurity risks.

ITEM 4. CONTROLS AND PROCEDURES


An evaluation of the effectiveness of the design and operation of the Company’s disclosure controls and procedures as of DecemberMarch 31, 2017,2024, was conducted under the supervision and with the participation of management, including our Chief Executive Officer and Chief Financial Officer. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the disclosure controls and procedures were not effective as of DecemberMarch 31, 2017.


There2024, due to the existence of the material weaknesses in internal control over financial reporting described below (which we view as an integral part of our disclosure controls and procedures).

The material weaknesses in internal controls over financial reporting that were disclosed in our annual report on Form 10-K as of and for the year ended June 30, 2023, were also present as of March 31, 2024. Notwithstanding the material weaknesses, we believe that the Consolidated Financial Statements included in this quarterly report on Form 10-Q fairly present, in all material respects, our financial position, results of operations and cash flows as of the date, and for the period, presented, in conformity with U.S. GAAP.

Other than as described above, there has been no change in the Company’s internal control over financial reporting that occurred during the three and nine months ended DecemberMarch 31, 2017,2024, that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.



 

PART II. OTHER INFORMATION


ITEM 1A. RISK FACTORS

The following modifications to risk factors is intended to supplement and should be read along with the

For a discussion of other risk factors which could affect the Company, included inplease refer to Item 1A, “Risk Factors” in the Annual Report on Form 10-K for the year ended June 30, 2017.


Additional Risk Factor:

The Company has exposure2023. There have been no material changes since the fiscal year end to the cryptocurrency markets through its investments.

The Company has invested in a security in the cryptocurrency mining industry through its corporate investments and indirectly through an investment accounted for under the equity method of accounting. Cryptocurrency markets and related stocks have been, and are expected to continue to be, volatile. Cryptocurrency mining is considered an early stage high-risk industry, and the nature of mining is expected to evolve. There is potential for significant volatility in the valuation of the Company’s cryptocurrency-related investments.

Modifications to Risk Factors:

The market price and trading volume of the Company’s class A common stock may be volatile, which could result in rapid and substantial losses for the Company’s stockholders.

(Additional discussion added to risk factor)

In addition, the Company has invested in a security in the cryptocurrency mining industry through its corporate investments and indirectly through an investment accounted for under the equity method of accounting. As discussed above, cryptocurrency markets and related stocks have been, and are expected to continue to be, volatile. This volatility may materially impact the Company’s financial statements and thus affect the Company’s common stock market price. In addition, the price of the Company’s common stock may fluctuate to the extent that shareholders invest in the Company’s common stock as a proxy for cryptocurrency. The investing public may be influenced by future anticipated appreciation or depreciation in value of cryptocurrencies or blockchain generally, factors over which the Company has little or no influence or control. The Company’s stock price may also be subject to volatility due to supply and demand factors associated with few or limited public company options for investment in the segment, which may change over time. The magnitude of cryptocurrency volatility in relation to the broader market is illustrated by the daily standard deviation of the following over the one-year period ended December 31, 2017: the S&P 500 Index – 0.4 percent; gold stocks represented by the NYSE Arca Gold Miners Index – 1.4 percent; Bitcoin – 5.9 percent; and the Company’s class A common stock – 7.1 percent.

listed therein.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS


Issuer Purchases of Equity Securities


(dollars in thousands, except price data)              
Period 
Total Number of Shares
Purchased 1
  Total Amount Purchased  
Average Price Paid Per Share 2
  
Total Number of Shares Purchased as Part of Publicly Announced Plan 3
  Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plan 
10-01-17 to 10-31-17  10,000  $23  $2.29   10,000  $2,679 
11-01-17 to 11-31-17  19,748   64   3.26   19,748   2,615 
12-01-17 to 12-31-17  7,000   30   4.29   7,000   2,585 
Total  36,748  $117  $3.19   36,748     

(dollars in thousands, except price data)

                     
   

Total Number

          

Total Number of Shares

  

Approximate Dollar Value

 
   

of Shares

  

Total Amount

  

Average Price

  

Purchased as Part of

  

of Shares that May Yet Be

 

Period

  

Purchased (1)

  

Purchased

  

Paid Per Share (2)

  

Publicly Announced Plan(3)

  

Purchased Under the Plan

 
01-01-24 to 01-31-24   51,109  $144  $2.82   51,109  $4,856 
02-01-24 to 02-29-24   102,636   281  $2.73   102,636  $4,575 
03-01-24 to 03-31-24   57,537   152  $2.64   57,537  $4,423 

Total

   211,282  $577  $2.73   211,282     

11.

The Board of Directors of the company approved on December 7, 2012, and has renewed on December 12, 2013, December 10, 2014, December 9, 2015, December 6, 2016, and December 5, 2017, a repurchaseannually, repurchases of up to $2.75 million in each of calendar years 2013 2014, 2015, 2016, 2017, and 2018, respectively,through 2022 of its outstanding class A common stock from time to time on the open market in accordance with all applicable rules and regulations. On February 25, 2022, the Company announced that the Board of Directors of the Company approved an increaseto the limit of its annual share buyback program from $2.75 million to $5.0 million.

22.

The average price paid per share of stock repurchased under the stock repurchase program includes the commissions paid to brokers.

33.

The repurchase plan was approved on December 7, 2012, and renewed on December 12, 2013, December 10, 2014, December 9, 2015, December 6, 2016, and December 5, 2017, and will continue through calendar year 2018.

The total amount of shares that may be repurchased in 20182024 under the renewed program is $2.75$5.0 million.

ITEM 5. OTHER INFORMATION

Investors and others should note that the Company announces material financial information to its investors using the website (www.usfunds.com), SEC filings, press releases, public conference calls and webcasts. The Company also uses social media to communicate with its customers and the public about the Company. It is possible that the information it posts on social media could be deemed to be material information. Therefore, the Company encourages investors, the media, and others interested in the Company to review the information it posts on social media channels listed below. This list may be updated from time to time.

https://www.facebook.com/USFunds
https://twitter.com/USFunds
https://twitter.com/USGlobalETFs
https://www.linkedin.com/company/u-s-global-investors
https://www.instagram.com/usglobal
https://pinterest.com/usfunds
https://www.youtube.com/c/usglobalinvestorssanantonio
https://www.youtube.com/channel/UCDkX1zvbWPyWc99esHOhwRQ

Information contained on the Company’s website or on social media channels is not deemed part of this report.

ITEM 6. EXHIBITS


1. Exhibits –

31

31.1

32

32.1

  

101.INS

Inline XBRL Instance Document

101.SCH

Inline XBRL Taxonomy Extension Schema Document

101.CAL

Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF

Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB

Inline XBRL Taxonomy Extension Labels Linkbase Document

101.PRE

Inline XBRL Taxonomy Extension Presentation Linkbase Document

104Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)


SIGNATURES


Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereto duly authorized.


U.S. GLOBAL INVESTORS, INC.

DATED:

February 14, 2018

May 9, 2024

BY: /s/ Frank E. Holmes

            Frank E. Holmes

            Chief Executive Officer

DATED:

February 14, 2018May 9, 2024

BY: /s/ Lisa C. Callicotte

            Lisa C. Callicotte

            Chief Financial Officer



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