UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-Q
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[X] Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the quarterly period ended December 31, 2000
OR
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period from ________ to _________
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Commission File Number 0-13928
U.S. GLOBAL INVESTORS, INC.
(Exact Name of Registrant as Specified in Its Charter)
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TEXAS 74-1598370
(State or Other Jurisdiction of (IRS Employer Identification Number)
Incorporation or Organization)
7900 CALLAGHAN ROAD 78229-2327
SAN ANTONIO, TEXAS (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)
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 twelve months, and (2) has been subject to such filing
requirements for the past ninety days.
YES [X] NO [ }
On February 8, 2001, there were 6,299,474 shares of Registrant's class A common
stock issued and 6,033,258 shares of Registrant's class A common stock issued
and outstanding, no shares of Registrant's class B non- voting common shares
outstanding and 1,496,800 shares of Registrant's class C common stock issued and
outstanding.
U.S. GLOBAL INVESTORS, INC.
I N D E X
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Consolidated Balance Sheets - December 31, 2000 (Unaudited)
and June 30, 2000 3
Consolidated Statements of Operations and
Comprehensive Income (Loss) (Unaudited) - Six-month and
Three-month Periods Ended December 31, 2000 and 1999..............5
Consolidated Statements of Cash Flows (Unaudited) -
Six-month Period Ended December 31, 2000 and 1999...................6
Notes to Consolidated Financial Statements (Unaudited)..................7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.....................................9
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK............................................................12
PART II. OTHER INFORMATION..................................................14
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K..................................14
SIGNATURES..................................................................15
EXHIBIT 11 - SCHEDULE OF COMPUTATION OF NET INCOME (LOSS) PER SHARE.........16
U.S. Global Investors, Inc.
December 31, 2000, Quarterly Report on Form 10-Q Page 3 of 17
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS
ASSETS
DECEMBER 31, JUNE 30,
2000 2000
---------- ----------
(UNAUDITED)
CURRENT ASSETS
Cash and cash equivalents $1,481,614 $1,356,903
Trading securities, at fair value 1,050,553 1,424,120
Receivables
Mutual funds 745,923 779,809
Other 425,385 447,548
Prepaid expenses 341,682 350,729
Deferred tax asset 435,077 215,077
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TOTAL CURRENT ASSETS 4,480,234 4,574,186
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NET PROPERTY AND EQUIPMENT 2,120,774 2,278,744
---------- ----------
OTHER ASSETS
Restricted investments 240,000 240,000
Long-term deferred tax asset 799,524 836,056
Investment securities available-for-sale,
at fair value 907,613 1,159,042
Other 30,596 30,596
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TOTAL OTHER ASSETS 1,977,733 2,265,694
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TOTAL ASSETS $8,578,741 $9,118,624
========== ==========
The accompanying notes are an integral part of this statement.
U.S. Global Investors, Inc.
December 31, 2000, Quarterly Report on Form 10-Q Page 4 of 17
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LIABILITIES AND SHAREHOLDERS' EQUITY
DECEMBER 31, JUNE 30,
2000 2000
----------- ----------
(UNAUDITED)
CURRENT LIABILITIES
Accounts payable $ 205,151 $ 498,632
Accrued compensation and related costs 300,109 298,826
Current portion of notes payable 1,110,192 68,257
Current portion of annuity and
contractual obligation 8,487 8,487
Other accrued expenses 637,428 561,975
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TOTAL CURRENT LIABILITIES 2,261,367 1,436,177
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Notes payable-net of current portion -- 1,066,705
Annuity and contractual obligations 127,087 131,256
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TOTAL NON-CURRENT LIABILITIES 127,087 1,197,961
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TOTAL LIABILITIES 2,388,454 2,634,138
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SHAREHOLDERS' EQUITY
Common stock (Class A)-$.05 par value;
non-voting; authorized, 7,000,000 shares 314,974 314,974
Common stock (Class C)-$.05 par value;
voting; authorized, 1,750,000 shares 74,840 74,840
Additional paid-in-capital 10,628,419 10,578,419
Treasury stock, class A shares at cost;
266,216 and 282,350 shares at December 31,
2000 and June 30, 2000, respectively (607,938) (637,298)
Accumulated other comprehensive loss,
net of tax (62,225) (51,771)
Accumulated deficit (4,157,783)
-- (3,794,678)
TOTAL SHAREHOLDERS' EQUITY 6,190,287 6,484,486
----------- ----------
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY $ 8,578,741 $9,118,624
=========== ==========
The accompanying notes are an integral part of this statement.
U.S. Global Investors, Inc.
December 31, 2000, Quarterly Report on Form 10-Q Page 5 of 17
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CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
(UNAUDITED)
SIX MONTHS ENDED THREE MONTHS ENDED
DECEMBER 31, DECEMBER 31,
-------------------------- --------------------------
2000 1999 2000 1999
----------- ----------- ----------- -----------
REVENUE
Investment advisory fees $ 3,036,251 $ 3,020,185 $ 1,430,622 $ 1,553,943
Transfer agent fees 1,403,789 1,541,814 722,585 781,648
Custodial and administrative fees 167,939 258,163 78,689 128,790
Investment income (loss) 62,681 36,483 (299,024) 95,360
Other 219,975 209,547 108,103 113,955
----------- ----------- ----------- -----------
4,890,635 5,066,192 2,040,975 2,673,696
EXPENSES
General and administrative 5,225,583 4,633,851 2,623,438 2,424,488
Depreciation and amortization 135,563 179,561 64,228 91,367
Interest 62,217 54,005 32,367 40,537
----------- ----------- ----------- -----------
5,423,363 4,867,417 2,720,033 2,556,392
----------- ----------- ----------- -----------
INCOME (LOSS) BEFORE EQUITY INTEREST AND
INCOME TAXES (532,728) 198,775 (679,058) 117,304
EQUITY IN NET INCOME OF AFFILIATE -- 51,739 -- --
----------- ----------- ----------- -----------
INCOME (LOSS) BEFORE INCOME TAXES (532,728) 250,514 (679,058) 117,304
PROVISION FOR FEDERAL INCOME TAXES
Tax (Benefit) Expense (178,083) (183,034) (223,286) (206,807)
----------- ----------- ----------- -----------
NET INCOME (LOSS) $ (354,645) $ 433,548 $ (455,772) $ 324,111
Other comprehensive income (loss),
net of tax:
Unrealized gains (losses) on
available-for-sale securities (10,454) 19,065 (80,947) 31,298
----------- ----------- ----------- -----------
COMPREHENSIVE INCOME (LOSS) $ (365,099) $ 452,613 $ (536,719) $ 355,409
=========== =========== =========== ===========
Basic and Diluted Net Income (Loss)
Per Share $ (0.05) $ 0.06 $ (0.06) $ 0.04
=========== =========== =========== ===========
The accompanying notes are an integral part of this statement.
U.S. Global Investors, Inc.
December 31, 2000, Quarterly Report on Form 10-Q Page 6 of 17
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CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
SIX MONTHS ENDED
DECEMBER 31,
---------------------------
2000 1999
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (354,645) $ 433,548
Adjustments to reconcile net income
(loss) to net cash provided operating
activities:
Depreciation and amortization 135,563 179,561
Net gain on sales of
available-for-sale securities (32,662) --
Provision for deferred taxes (178,083) (183,034)
Reserve against impairment of
equipment 63,098 --
Changes in assets and liabilities,
impacting cash from operations:
Accounts receivable 56,049 (405,709)
Prepaid expenses and other 9,047 (60,881)
Trading securities 398,304 (20,250)
Accounts payable and accrued expenses (216,744) (17,725)
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Total adjustments 234,572 (508,038)
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NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES (120,073) (74,490)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (40,691) (64,193)
Proceeds from redemption of equity
affiliate -- 100,000
Purchase of available-for-sale securities -- --
Proceeds on sale of available-for-sale
securities 243,515 --
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NET CASH PROVIDED BY (USED IN)
INVESTING ACTIVITIES 202,824 35,807
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CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on annuity (4,169) (3,889)
Payments on note payable (24,770) (32,706)
Proceeds from issuance or exercise of
stock, warrants, and options 79,886 50,764
Purchase of treasury stock (8,987) (13,863)
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NET CASH PROVIDED BY (USED IN)
FINANCING ACTIVITIES 41,960 306
----------- -----------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 124,711 (38,377)
BEGINNING CASH AND CASH EQUIVALENTS 1,356,903 1,025,247
----------- -----------
ENDING CASH AND CASH EQUIVALENTS $ 1,481,614 $ 986,870
=========== ===========
SCHEDULE OF NON-CASH INVESTING
AND FINANCING ACTIVITIES:
Receipt of trading and available-for
-sale securities in liquidation
of equity investment -- $ 701,748
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Cash paid for interest $ 62,217 $ 54,005
The accompanying notes are an integral part of this statement.
U.S. Global Investors, Inc.
December 31, 2000, Quarterly Report on Form 10-Q Page 7 of 17
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1. BASIS OF PRESENTATION
The financial information included herein is unaudited; however, such
information reflects all adjustments (consisting solely of normal recurring
adjustments) which are, in the opinion of management, necessary for a fair
presentation of results for the interim periods presented. U.S. Global
Investors, Inc. (the Company or U.S. Global) has consistently followed the
accounting policies set forth in the Notes to the Consolidated Financial
Statements in the Company's Form 10-K for the year ended June 30, 2000.
The consolidated financial statements include the accounts of the Company and
its wholly owned subsidiaries, United Shareholder Services, Inc. (USSI),
Security Trust & Financial Company (STFC), A&B Mailers, Inc. (A&B), U.S. Global
Investors (Guernsey) Limited (USGG), U.S. Global Brokerage, Inc. (USGB), and
U.S. Global Administrators, Inc. (USGA).
All significant inter-company balances and transactions have been eliminated in
consolidation. Certain amounts have been reclassified for comparative purposes.
The results of operations for the six-month period ended December 31, 2000, are
not necessarily indicative of the results to be expected for the entire year.
NOTE 2. SECURITY INVESTMENTS
The Company accounts for its investment securities in accordance with SFAS 115,
Accounting for Certain Investments in Debt and Equity Securities. Accordingly,
the cost of investments classified as trading at December 31, 2000, and June 30,
2000, was $1,861,743 and $1,832,282, respectively. The market value of
investments classified as trading at December 31, 2000, and June 30, 2000, was
$1,050,553 and $1,424,120, respectively. The net change in unrealized holding
losses on trading securities held at December 31, 2000, and 1999, which has been
included in income for the six-month period, is $(404,233) and $(24,217),
respectively. Sales of trading securities generated realized gains of $364,617
and $19,804 for the six-month periods ended December 31, 2000 and 1999,
respectively.
The cost of investments in securities classified as available-for-sale, which
may not be readily marketable at December 31, 2000, and June 30, 2000, was
$1,001,893 and $1,237,483, respectively. These investments are reflected as
non-current assets on the consolidated balance sheet at their fair value at
December 31, 2000, and June 30, 2000, of $907,613 and $1,159,042, respectively,
with $(62,225) and $(51,771), respectively, net of tax, in unrealized losses
being recorded as a separate component of shareholders' equity.
NOTE 3. INVESTMENT MANAGEMENT, TRANSFER AGENT AND OTHER FEES
The Company serves as investment adviser to U.S. Global Investors Funds (USGIF)
and U.S. Global Accolade Funds (USGAF) and receives a fee based on a specified
percentage of net assets under management. The Company also serves as transfer
agent to USGIF and USGAF and receives a fee based on the number of shareholder
accounts. Additionally, the Company provides in-house legal services to USGIF
and USGAF, and the Company also receives certain miscellaneous fees directly
from USGIF and USGAF shareholders. Fees for providing services to USGIF and
USGAF continue to be the Company's primary revenue source.
The Company receives additional revenue from several sources including revenues
from custodian fees, miscellaneous transfer agency activities including lockbox
functions, mailroom operations from A&B, as well as gains on marketable
securities transactions.
The Company also receives revenues from administrative fees. Management has
decided to divest the Company of the 401(k) administration business. This action
will result in the loss of revenues, which are deemed immaterial, but the
Company will also eliminate costs associated with providing these services.
The Company has voluntarily waived or reduced its advisory fees and/or has
agreed to pay expenses on several USGIF funds through June 30, 2001, or such
later date as the Company determines. The aggregate amount of fees waived and
U.S. Global Investors, Inc.
December 31, 2000, Quarterly Report on Form 10-Q Page 8 of 17
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expenses borne by the Company for the six-month period ended December 31, 2000
and 1999, was $1,019,188 and $1,081,265, respectively.
The investment advisory and related contracts between the Company and USGIF and
USGAF will expire on February 28, 2001, and on March 8, 2001, respectively.
Management anticipates the board of trustees of both USGIF and USGAF will renew
the contracts.
NOTE 4. BORROWINGS
The Company has a note payable to a bank which is secured by land, an office
building and related improvements. As of December 31, 2000, the balance on the
note was $1,110,192. The loan currently amortizes over a twenty-year period with
payments of both principal and interest due monthly based on a floating rate of
Bank One Texas Prime plus 0.25%. The current monthly payment is $11,750, and the
note matures on July 1, 2001. Under this agreement, the Company must maintain
certain financial covenants. The Company is in full compliance with its
financial covenants at December 31, 2000.
Effective July 1, 2000, the long-term portion of the note payable was
reclassified as a current liability. Subsequent to December 31, 2000, the bank
committed to renew the note on the basis of a five-year maturity and a
twelve-year amortization. Upon execution of formal loan documents, the long-term
portion of the note will be reclassified out of current liabilities. The bank
also committed to providing a $1 million credit facility to the Company for
working capital purposes. Such credit facility will be secured by the Company's
eligible accounts receivable and will have a one-year maturity.
The bank's loan commitments are subject to final agreement and execution of
formal loan documents. While management believes that it will successfully
complete these loan transactions with the bank, it also believes that the
Company has adequate cash, cash equivalents, and equity in the underlying asset
to retire its existing loan obligation if necessary.
NOTE 5. INCOME TAXES
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. For federal
income tax purposes at December 31, 2000, the Company has net operating losses
(NOLs) of approximately $1.5 million, which will expire in fiscal 2007 and 2010,
charitable contribution carryovers of approximately $220,000 expiring between
2001 and 2005, and alternative minimum tax credits of $132,128 with indefinite
expirations. Certain changes in the Company's ownership may result in a
limitation on the amount of NOLs that could be utilized under Section 382 of the
Internal Revenue Code. If certain changes in the Company's ownership occur
subsequent to December 31, 2000, there could be an annual limitation on the
amount of NOLs that could be utilized.
A valuation allowance is provided when it is more likely than not that some
portion of the deferred tax amount will not be realized. Management included a
valuation allowance of approximately $302,000 and $293,000 at December 31, 2000,
and June 30, 2000, respectively, providing for the utilization of NOLs,
charitable contributions, and investment tax credits against future taxable
income.
NOTE 6. FINANCIAL INFORMATION BY BUSINESS SEGMENT
The Company operates principally in two business segments: providing mutual
fund investment management services to its clients, and investing for its own
account in an effort to add growth and value to its cash position. The following
schedule details total revenues and income (loss) by business segment:
U.S. Global Investors, Inc.
December 31, 2000, Quarterly Report on Form 10-Q Page 9 of 17
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INVESTMENT
MANAGEMENT CORPORATE
SERVICES INVESTMENT CONSOLIDATED
----------- ---------------- -----------
SIX MONTHS ENDED DECEMBER 31, 2000:
Net revenues $ 4,897,589 $ (6,954) $ 4,890,635
=========== ================ ===========
Net income (loss) before income taxes $ (496,810) $ (35,918) $ (532,728)
=========== ================ ===========
Depreciation and amortization $ 135,563 $ -- $ 135,563
=========== ================ ===========
Interest expense $ 62,033 $ 184 $ 62,217
=========== ================ ===========
Capital expenditures $ 40,691 $ -- $ 40,691
=========== ================ ===========
Gross identifiable assets at December 31, 2000 $ 5,450,084 $ 1,863,886 $ 7,313,970
Deferred tax asset 1,202,546
Accumulated other comprehensive loss 62,225
-----------
Consolidated total assets at December 31, 2000 $ 8,578,741
===========
SIX MONTHS ENDED DECEMBER 31, 1999:
Net revenues $ 5,070,605 $ (4,413) $ 5,066,192
=========== ================ ===========
Net income (loss) before income taxes and
equity interest $ 203,188 $ (4,413) $ 198,775
Equity in net income of affiliate -- 51,739 51,739
----------- ---------------- -----------
Net income (loss) before income taxes $ 203,188 $ 47,326 $ 250,514
=========== ================ ===========
Depreciation and amortization $ 179,561 $ -- $ 179,561
=========== ================ ===========
Interest expense $ 54,005 $ -- $ 54,005
=========== ================ ===========
Capital expenditures $ 64,193 $ -- $ 64,193
=========== ================ ===========
Gross identifiable assets at December 31, 1999 $ 5,564,186 $ 1,950,419 $ 7,514,605
Deferred tax asset 1,192,854
Accumulated other comprehensive loss 55,873
-----------
Consolidated total assets at December 31, 1999 $ 8,763,332
===========
U.S. Global Investors, Inc.
December 31, 2000, Quarterly Report on Form 10-Q Page 10 of 17
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
U.S. Global Investors, Inc. (Company) has made forward-looking statements
concerning the Company's performance, financial condition, and operations in
this quarterly 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's control,
including (i) the volatile and competitive nature of the investment management
industry, (ii) changes in domestic and foreign economic conditions, (iii) the
effect of government regulation on the Company's business, and (iv) market,
credit, and liquidity risks associated with the Company's 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.
BUSINESS SEGMENTS
The Company, with principal operations located in San Antonio, Texas manages two
business segments: (1) the Company offers a broad range of investment management
products and services to meet the needs of individual and institutional
investors, and (2) the Company invests for its own account in an effort to add
growth and value to its cash position.
The Company generates substantially all of its operating revenues from the
investment management of products and services offered to the U.S. Global
Investors Funds (USGIF) and U.S. Global Accolade Funds (USGAF). The Company also
holds a significant amount of its total assets in investments. The following is
a brief discussion of the Company's two business segments.
INVESTMENT MANAGEMENT PRODUCTS AND SERVICES
The Company generates substantially all of its revenues from managing and
servicing USGIF and USGAF. 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.
During the six-month period ended December 31, 2000, assets under management in
USGIF averaged $1.07 billion versus $1.20 billion for the same period ended
December 31, 1999. This decline was primarily due to declines in gold-related
assets and money market assets in conjunction with the falling equity markets.
Assets under management in USGAF averaged $242 million for the six-month period
ended December 31, 2000, versus $167 million for the same period ended December
31, 1999. This increase was primarily due to asset growth in the Bonnel Growth
Fund.
For the quarter ended December 31, 2000, assets under management in USGIF
averaged $1.07 billion versus $1.20 billion for the quarter ended December 31,
1999. The decrease parallels the same movement in assets described above for the
six-month period. The assets under management in USGAF averaged $220 million for
the quarter ended December 31, 2000, versus $189 million for the quarter ended
December 31, 1999. The increase, as above, was due to asset growth in the Bonnel
Growth Fund.
In response to the downturn in the economy affecting both the financial markets
and the mutual fund industry, the Company has taken action to restructure and
refocus its business operations. In addition to reducing the size of its
workforce and other controllable expenses, the Company is in the process of
eliminating its 401(k) administration operations. Though this action will result
in the loss of immaterial revenues, it will also eliminate the costs associated
with this line of business. Management believes that the elimination of this
high-cost, low-margin line of business will allow for better focus on its core
operations, leading to increased profit margins.
U.S. Global Investors, Inc.
December 31, 2000, Quarterly Report on Form 10-Q Page 11 of 17
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INVESTMENT ACTIVITIES
Management believes it can more effectively manage the Company's cash position
by broadening the types of investments utilized in its treasury management and
continues to believe that such activities are in the best interest of the
Company. These activities are reviewed and monitored by Company compliance
personnel and various reports are provided to investment advisory clients. On
December 31, 2000, the Company held approximately $2.0 million in investment
securities. The value of these investments is approximately 23 percent of total
assets and 32 percent of shareholders' equity at period end. Of the $2.0 million
in investment securities, the Company classified approximately $1,050,000 as
trading securities and approximately $908,000 as available-for-sale securities.
Investment income from these investments includes realized gains and losses,
unrealized gains and losses on trading securities, and dividend and interest
income. This source of revenue does not remain at a consistent level and is
dependent on market fluctuations, the Company's ability to participate in
investment opportunities, and timing of transactions. For the six months ended
December 31, 2000, there were realized gains of $397,279 from the sale of
investments, compared with gains of $19,804 for the six months ended December
31, 1999. The net change in the unrealized holding gains (losses) on trading
securities held at December 31, 2000 and 1999, which has been included in
earnings for the six-month period, was $(404,233) and $(24,217), respectively.
RESULTS OF OPERATIONS - SIX MONTHS ENDED DECEMBER 31, 2000 AND 1999
The Company posted a net loss of $354,645 ($0.05 loss per share) for the six
months ended December 31, 2000, compared with net income of $433,548 ($0.06
income per share) for the six months ended December 31, 1999. Although revenues
decreased slightly due to a $138,000 decline in transfer agent fees, the overall
decrease in income was primarily a result of increased general and
administrative expenses of $592,000.
REVENUES
Total consolidated revenues for the six months ended December 31, 2000,
decreased approximately $176,000, or 3%. As noted above, this was primarily due
to a $138,000, or 9%, decrease in net transfer agent fees. These fees declined
from $1.5 million for the six months ended December 1999 to $1.4 million for the
same period ended December 31, 2000. This was primarily a result of shareholders
of gold-related funds closing their accounts in response to continued declines
in the gold markets. Gold has been in a major bear market for more than five
years. Performance and asset growth of gold funds has suffered industry wide.
Gross advisory fees remained relatively constant as continued declines in
gold-related assets and the closure of the Real Estate Fund were offset by the
growth in assets of the Bonnel Growth Fund. Investment income remained
relatively flat as the overall performance of the underlying securities did not
materially change.
EXPENSES
Total consolidated expenses for the six months ended December 31, 2000,
increased almost $556,000, or 11%. This is attributable, as noted above, to an
increase in general and administrative expenses of the Company of almost
$592,000, or 13%, for the six months ended December 31, 2000. Specifically, the
Company saw increases in sub-advisory fees (which grew proportionately with the
asset growth in the Bonnel Growth Fund), health insurance costs, executive
compensation, consulting fees, and costs associated with eliminating the 401(k)
administration operations.
RESULTS OF OPERATIONS - QUARTER ENDED DECEMBER 31, 2000 AND 1999
The Company posted a net loss of $455,772 ($0.06 loss per share) for the quarter
ended December 31, 2000, compared with net income of $324,111 ($0.04 income per
share) for the quarter ended December 31, 1999. The decline in income was
primarily due to a $394,000 decline in investment income and a $123,000 drop in
investment advisory fees. Additionally, general and administrative expenses
increased $199,000.
REVENUES
Total consolidated revenues for the quarter ended December 31, 2000, decreased
approximately $633,000, or 24%, as compared with the quarter ended December 31,
1999. Market-wide, equity securities suffered declines during the
U.S. Global Investors, Inc.
December 31, 2000, Quarterly Report on Form 10-Q Page 12 of 17
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quarter, and such market declines significantly contributed to a $394,000, or
413%, decrease in investment income. This was primarily the result of unrealized
losses of approximately $520,000 impacting the Company's investment portfolio
during the quarter ended December 31, 2000. Additionally, net investment
advisory fees fell approximately $123,000, or 8%, for the quarter. This was a
direct result of the declines suffered by equity securities and the continued
fall of the gold sector, both of which directly impacted the assets of funds
invested in these respective areas. Transfer agent fees declined slightly due to
the closure of gold-related shareholder accounts.
EXPENSES
Total consolidated expenses for the quarter ended December 31, 2000, increased
approximately $164,000, or 6%, as compared with the quarter ended December 31,
1999. This was a result of increased consulting fees and costs associated with
eliminating the 401(k) administration operations.
INCOME TAXES
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. For federal
income tax purposes at December 31, 2000, the Company has net operating losses
(NOLs) of approximately $1.5 million, which will expire in fiscal 2007 and 2010,
charitable contribution carryovers of approximately $220,000 expiring between
2001 and 2005, and alternative minimum tax credits of $132,128 with indefinite
expirations. Certain changes in the Company's ownership may result in a
limitation on the amount of NOLs that could be utilized under Section 382 of the
Internal Revenue Code. If certain changes in the Company's ownership occur,
there could be an annual limitation on the amount of NOLs that could be
utilized.
A valuation allowance is provided when it is more likely than not that some
portion of the deferred tax amount will not be realized. Management included a
valuation allowance of approximately $302,000 and $293,000 at December 31, 2000,
and June 30, 2000, respectively, providing for the utilization of NOLs,
charitable contributions, and investment tax credits against future taxable
income.
LIQUIDITY AND CAPITAL STRUCTURE
LIQUIDITY
At December 31, 2000, the Company had net working capital (current assets minus
current liabilities) of approximately $2.2 million and a current ratio of 2.0 to
1. With approximately $1.5 million in cash and cash equivalents and
approximately $2.0 million in marketable securities, the Company has adequate
liquidity to meet its current debt obligations. Total shareholders' equity was
approximately $6.2 million and cash, cash equivalents, and marketable securities
comprise 40% of total assets. With the exception of operating expenses, the
Company's only material commitment is the mortgage on its corporate
headquarters. During the first quarter, this obligation became a current
liability. Subsequent to December 31, 2000, the bank committed to renew the note
for another five years while allowing the Company to take advantage of the
favorable interest rates that are available. The bank also committed to
providing a $1 million credit facility to the Company, which can be utilized for
working capital purposes. The Company's cash flow is expected to be sufficient
to cover current expenses, including debt service.
The investment advisory and related contracts between the Company and USGIF and
USGAF, will expire on February 28, 2001, and March 8, 2001, respectively.
Management anticipates the board of trustees of both USGIF and USGAF will renew
the contracts.
Management believes current cash reserves, financing obtained and/or available,
and cash flow from operations will be sufficient to meet foreseeable cash needs
or capital necessary for the above-mentioned activities and allow the Company to
take advantage of investment opportunities whenever available.
U.S. Global Investors, Inc.
December 31, 2000, Quarterly Report on Form 10-Q Page 13 of 17
- --------------------------------------------------------------------------------
CAPITAL STRUCTURE
The Company has three classes of common equity - class A, class B, and class C
common stock, par value $0.05 per share. There is no established public trading
market for the Company's class B and class C common stock. The Company's class A
common stock is traded over-the-counter and is quoted daily under the Nasdaq
Small Cap Issues. Trades are reported under the symbol "GROW."
The Company's current capital structure, as of February 8, 2001, included
6,299,474 shares of class A common stock, issued and 6,033,258 shares of class A
common stock issued and outstanding; no shares of class B common stock issued
and outstanding; and 1,496,800 shares of class C common stock issued and
outstanding.
U.S. Global Investors, Inc.
December 31, 2000, Quarterly Report on Form 10-Q Page 14 of 17
- --------------------------------------------------------------------------------
ITEM 3. MARKET RISK DISCLOSURES
The Company's balance sheet includes assets whose fair value is subject to
market risks. Due to the Company's investments in equity securities, 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,
based on 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 market value. The
Company's investment activities are reviewed and monitored by Company compliance
personnel and various reports are provided to investment advisory clients.
The table below summarizes the Company's equity price risks at December 31,
2000, and shows the effects of a hypothetical 25 percent increase and a 25
percent decrease in market prices.
ESTIMATED
HYPOTHETICAL FAIR VALUE AFTER
FAIR VALUE AT PERCENTAGE HYPOTHETICAL INCREASE (DECREASE) IN
DECEMBER 31, 2000 CHANGE PERCENT CHANGE SHAREHOLDERS' EQUITY
----------------- -------------- -------------- --------------------
Trading Securities $ 1,050,553 25% increase $ 1,313,191 $ 173,341
25% decrease $ 787,915 $(173,341)
Available-for-Sale $ 907,613 25% increase $ 1,134,516 $ 149,756
25% decrease $ 680,710 $(149,756)
The selected hypothetical change does not reflect what could be considered best-
or worst-case scenarios. Results could be significantly worse due to both the
nature of equity markets and the concentration of the Company's investment
portfolio.
U.S. Global Investors, Inc.
December 31, 2000, Quarterly Report on Form 10-Q Page 15 of 17
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PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
1. Exhibits
11 Statement re: Computation of Per Share Income
27 Financial Data Schedule
2. Reports on Form 8-K
None
U.S. Global Investors, Inc.
December 31, 2000, Quarterly Report on Form 10-Q Page 16 of 17
- --------------------------------------------------------------------------------
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, 2001 BY: /S/ FRANK E. HOLMES
-------------------------------
Frank E. Holmes
Chief Executive Officer
DATED: February 14, 2001 BY: /S/ BOBBY D. DUNCAN
-------------------------------
Bobby D. Duncan
Chief Financial Officer
Chief Operating Officer
DATED: February 14, 2001 BY: /S/ TRACY C. PETERSON
-------------------------------
Tracy C. Peterson
Chief Accounting Officer
U.S. Global Investors, Inc.
December 31, 2000, Quarterly Report on Form 10-Q Page 17 of 17
- --------------------------------------------------------------------------------
EXHIBIT 11 - SCHEDULE OF COMPUTATION OF NET INCOME (LOSS) PER SHARE
SIX MONTHS ENDED THREE MONTHS ENDED
DECEMBER 31, DECEMBER 31,
-------------------------- --------------------------
2000 1999 2000 1999
----------- ----------- ----------- -----------
Net income (loss) $ (354,645) $ 433,548 $ (455,772) $ 324,111
=========== =========== =========== ===========
BASIC
Weighted average number shares
outstanding during the period 7,523,381 7,299,388 7,529,986 7,520,336
Basic income (loss) per share $ (0.05) $ 0.06 $ (0.06) $ 0.04
=========== =========== =========== ===========
DILUTED
Weighted average number of shares
outstanding during the period 7,523,381 7,299,388 7,529,986 7,520,336
Effect of dilutive securities:
Common stock equivalent shares
(determined using the "treasury
stock" method) representing
shares issuable upon exercise
of preferred or common stock
options -- -- -- --
----------- ----------- ----------- -----------
Weighted average number of shares
used in calculation of diluted
income per share 7,523,381 7,299,388 7,529,986 7,520,336
=========== =========== =========== ===========
Diluted income (loss) per share $ (0.05) $ 0.06 $ (0.06) $ 0.04
=========== =========== =========== ===========
[GRAPHIC: U.S. GLOBAL INVESTORS LOGO]
February 14, 2001
Securities and Exchange Commission
Judiciary Plaza
450 Fifth Street, Northwest
Washington, D.C. 20549
Dear Sir/Madam:
SUBJECT: U.S. GLOBAL INVESTORS, INC. (USGI)
FILE NUMBER 0-13928
Enclosed for filing under Sections 13 and 15(d) of the Securities Exchange Act
of 1934 is USGI's quarterly report on Form 10-Q for the fiscal quarter ended
December 31, 2000.
If you have any questions or comments, please contact me at (210) 308-1234.
Sincerely,
/s/Susan B. McGee
Susan B. McGee
President
General Counsel
SBM:kle
via EDGARLink only
7900 Callaghan Road
........................
MAIL ADDRESS:
P.O. Box 781234
San Antonio, Texas
78278-1234
........................
Tel 210-308-1234
........................
1-800-US-FUNDS
........................
Fax 210-308-1223
........................
email shsvc@usfunds.com