UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------------------------------------
FORM 10-Q
------------------------------------------------------
[X] Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the quarterly period ended September 30, 2001
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 IRS Employer Identification Number)
Incorporation or Organization)
7900 CALLAGHAN ROAD 78229-1234
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 12 months, and (2) has been subject to such filing requirements
for the past 90 days.
YES [X] NO [ ]
On November 8, 2001, there were 6,299,474 shares of Registrant's class A common
stock issued and 5,953,887 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.
SEPTEMBER 30, 2001, QUARTERLY REPORT ON FORM 10-Q PAGE 2 OF 16
- -------------------------------------------------------------------------------
I N D E X
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Consolidated Balance Sheets.........................................3
Consolidated Statements of Operations and Comprehensive
Income (Loss) (Unaudited).........................................5
Consolidated Statements of Cash Flows (Unaudited)...................6
Notes to Consolidated Financial Statements (Unaudited)..............7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS...........................10
ITEM 3. MARKET RISK DISCLOSURES........................................12
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K...............................13
SIGNATURES..................................................................14
EXHIBIT 11 - SCHEDULE OF COMPUTATION OF NET INCOME (LOSS) PER SHARE.........16
U.S. GLOBAL INVESTORS, INC.
SEPTEMBER 30, 2001, QUARTERLY REPORT ON FORM 10-Q PAGE 3 OF 16
- -------------------------------------------------------------------------------
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS
ASSETS
SEPTEMBER 30, JUNE 30,
2001 2001
---------- ----------
(UNAUDITED)
CURRENT ASSETS
Cash and cash equivalents $1,286,263 $1,333,922
Trading securities, at fair value 964,944 1,163,693
Receivables
Mutual funds 854,382 773,595
Other 395,444 396,829
Prepaid expenses 175,076 203,565
Deferred tax asset 391,746 435,949
---------- ----------
TOTAL CURRENT ASSETS 4,067,855 4,307,553
---------- ----------
NET PROPERTY AND EQUIPMENT 1,995,584 2,029,899
---------- ----------
OTHER ASSETS
Restricted investments 225,000 225,000
Long-term deferred tax asset 715,530 605,066
Investment securities
available-for-sale, at fair value 639,918 694,870
Other 59,796 49,796
---------- ----------
TOTAL OTHER ASSETS 1,640,244 1,574,732
---------- ----------
TOTAL ASSETS $7,703,683 $7,912,184
========== ==========
The accompanying notes are an integral part of this statement.
U.S. GLOBAL INVESTORS, INC.
SEPTEMBER 30, 2001, QUARTERLY REPORT ON FORM 10-Q PAGE 4 OF 16
- -------------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
SEPTEMBER 30, JUNE 30,
2001 2001
---------- ----------
(UNAUDITED)
CURRENT LIABILITIES
Accounts payable $ 186,865 $ 280,587
Accrued compensation and related
costs 170,515 224,094
Current portion of notes payable 73,170 69,094
Current portion of annuity and
contractual obligation 9,261 9,100
Other accrued expenses 509,828 477,886
---------- ----------
TOTAL CURRENT LIABILITIES 949,639 1,060,761
---------- ----------
Notes payable-net of current portion 990,769 1,013,747
Annuity and contractual obligations 119,780 122,156
---------- ----------
TOTAL NON-CURRENT LIABILITIES 1,110,549 1,135,903
---------- ----------
TOTAL LIABILITIES 2,060,188 2,196,664
---------- ----------
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 10,678,419 10,678,419
Treasury stock, class A shares at
cost; 345,587 and 313,426 shares
at September 30, 2001, and
June 30, 2001, respectively (648,672) (632,261)
Accumulated other comprehensive
loss, net of tax (138,632) (102,364)
Accumulated deficit (4,637,434) (4,618,088)
---------- ----------
TOTAL SHAREHOLDERS' EQUITY 5,643,495 5,715,520
---------- ----------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $7,703,683 $7,912,184
========== ==========
The accompanying notes are an integral part of this statement.
U.S. GLOBAL INVESTORS, INC.
SEPTEMBER 30, 2001, QUARTERLY REPORT ON FORM 10-Q PAGE 5 OF 16
- -------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
(UNAUDITED)
THREE MONTHS ENDED SEPTEMBER 30,
--------------------------------
2001 2000
----------- ----------
REVENUES
Investment advisory fees $ 1,222,801 $1,605,629
Transfer agent fees 632,691 681,204
Custodial and administrative fees 44,516 89,250
Investment income (loss) (144,986) 361,705
Other 72,479 111,872
----------- ----------
1,827,501 2,849,660
----------- ----------
EXPENSES
General and administrative 1,823,893 2,602,145
Depreciation and amortization 34,315 71,335
Interest 21,772 29,850
----------- ----------
1,879,980 2,703,330
----------- ----------
INCOME (LOSS) BEFORE INCOME TAXES (52,479) 146,330
----------- ----------
PROVISION FOR FEDERAL INCOME TAXES
Tax (Benefit) Expense (47,578) 45,203
----------- ----------
NET INCOME (LOSS) $ (4,901) $ 101,127
Other comprehensive income (loss),
net of tax
Unrealized gains (losses) on
available-for-sale securities (36,268) 70,493
----------- ----------
COMPREHENSIVE INCOME (LOSS) $ (41,169) $ 171,620
=========== ==========
BASIC AND DILUTED NET INCOME (LOSS) PER SHARE $ 0.00 $ 0.01
=========== ==========
The accompanying notes are an integral part of this statement.
U.S. GLOBAL INVESTORS, INC.
SEPTEMBER 30, 2001, QUARTERLY REPORT ON FORM 10-Q PAGE 6 OF 16
- -------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
THREE MONTHS ENDED SEPTEMBER 30,
--------------------------------
2001 2000
----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (4,901) $ 101,127
Adjustments to reconcile net income
(loss) to net cash provided by operating
activities:
Depreciation and amortization 34,315 71,335
Net gain on sales of available-for-
sale securities -- (32,662)
Provision for deferred taxes (47,578) 45,203
Changes in assets and liabilities,
impacting cash from operations:
Accounts receivable (79,402) 518,441
Prepaid expenses and other 18,489 75,915
Trading securities 198,750 (14,742)
Accounts payable and accrued expenses (115,359) (321,985)
----------- -----------
Total adjustments 9,215 341,505
----------- -----------
NET CASH PROVIDED BY OPERATING ACTIVITIES 4,314 442,632
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment -- (37,382)
Purchase of available-for-sale
securities -- (130,134)
Proceeds on sale of available-for-
sale securities -- 237,614
----------- -----------
NET CASH PROVIDED BY INVESTING ACTIVITIES -- 70,098
----------- -----------
CASH FLOW FROM FINANCING ACTIVITIES:
Payments on annuity (2,215) (2,067)
Payments on note payable (18,902) (14,318)
Proceeds from issuance or exercise
of stock, warrants, and options 20,144 42,660
Purchase of treasury stock (51,000) --
----------- -----------
NET CASH (USED IN) PROVIDED BY FINANCING
ACTIVITIES (51,973) 26,275
----------- -----------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS (47,659) 539,005
BEGINNING CASH AND CASH EQUIVALENTS 1,333,922 1,356,903
----------- -----------
ENDING CASH AND CASH EQUIVALENTS $ 1,286,263 $ 1,895,908
=========== ===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION
Cash paid for interest $ 21,772 $ 29,850
The accompanying notes are an integral part of this statement.
U.S. GLOBAL INVESTORS, INC.
SEPTEMBER 30, 2001, QUARTERLY REPORT ON FORM 10-Q PAGE 7 OF 16
- -------------------------------------------------------------------------------
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, 2001.
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 intercompany balances and transactions have been eliminated in
consolidation. Certain amounts have been reclassified for comparative purposes.
The results of operations for the three-month period ended September 30, 2001,
are not necessarily indicative of the results to be expected for the entire
year.
NOTE 2. INVESTMENTS
The cost of investments classified as trading at September 30, 2001, and June
30, 2001, was $1,814,302 and $1,951,963, respectively. The market value of
investments classified as trading at September 30, 2001, and June 30, 2001, was
$964,944 and $1,163,693, respectively. The net change in unrealized holding
losses on trading securities held at September 30, 2001, and 2000, which has
been included in income for the quarter is ($61,088) and $116,312, respectively.
Sales of trading securities generated realized gains (losses) of ($101,276) and
$183,027 for the quarter ended September 30, 2001, and 2000, respectively.
The cost of investments in securities classified as available-for-sale, which
may not be readily marketable at September 30, 2001, and June 30, 2001, was
$849,966 and $849,966, respectively. These investments are reflected as
non-current assets on the consolidated balance sheet at their fair value at
September 30, 2001, and June 30, 2001, of $639,918 and $694,870, respectively,
with $138,632 and $102,364, respectively, net of tax, in unrealized losses being
recorded as a separate component of shareholders' equity.
NOTE 3. INVESTMENT ADVISORY, 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 custodian
fee revenues, revenues from miscellaneous transfer agency activities including
lockbox functions, mail room operations from A&B, as well as gains on marketable
securities transactions.
The Company has voluntarily waived or reduced its advisory fee and/or has agreed
to pay expenses on several USGIF funds through June 30, 2002, or such later date
as the Company determines. The aggregate fees waived and expenses borne by the
Company for the quarter ended September 30, 2001, and 2000, was $430,257 and
$547,812, respectively.
The investment advisory and related contracts between the Company and USGIF and
USGAF will expire in February 2002, and in May 2002, respectively. Management
anticipates the board of trustees of both USGIF and USGAF will renew the
contracts.
U.S. GLOBAL INVESTORS, INC.
SEPTEMBER 30, 2001, QUARTERLY REPORT ON FORM 10-Q PAGE 8 OF 16
- -------------------------------------------------------------------------------
NOTE 4. BORROWINGS
The Company has a note payable to a bank secured by land, an office building,
and related improvements. As of September 30, 2001, the balance on the note was
$1,063,939. The loan is currently amortizing over a twelve-year period with
payments of both principal and interest due monthly based on a fixed rate of
6.50 percent. The current monthly payment is $10,840, and the note matures on
January 31, 2006. Under this agreement, the Company must maintain certain
financial covenants. The Company is in full compliance with its financial
covenants at September 30, 2001.
Management believes that the Company has adequate cash, cash equivalents, and
equity in the underlying assets to retire the obligation if necessary.
The Company has access to a $1 million credit facility with a one-year maturity
for working capital purposes. Any use of this credit facility will be secured by
the Company's eligible accounts receivable and pledged securities.
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 September 30, 2001, the Company has net operating loss
carryovers (NOLs) of approximately $1.7 million, which will expire between
fiscal 2005 and 2011, charitable contribution carryovers of approximately
$206,000 expiring between 2002 and 2006, and alternative minimum tax credits of
$139,729 with indefinite expirations. If certain changes in the Company's
ownership occur subsequently to September 30, 2001, there could be an annual
limitation on the 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 $436,000 and $547,000 at September 30,
2001, and June 30, 2001, 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:
INVESTMENT
MANAGEMENT CORPORATE
SERVICES INVESTMENTS CONSOLIDATED
----------- ------------- -----------
THREE MONTHS ENDED
SEPTEMBER 30, 2001
Net revenues $ 1,972,487 $ (144,986) $ 1,827,501
=========== ============= ===========
Net income (loss) before
income taxes $ 140,373 $ (145,274) $ (4,901)
=========== ============= ===========
Depreciation and
amortization $ 34,315 $ -- $ 34,315
=========== ============= ===========
Interest expense $ 21,509 $ 263 $ 21,772
=========== ============= ===========
Capital expenditures $ -- $ -- $ --
=========== ============= ===========
Gross identifiable assets
at September 30, 2001 $ 4,852,913 $ 1,604,862 $ 6,457,775
Deferred tax asset 1,107,276
Accumulated other
comprehensive loss 138,632
-----------
Consolidated total assets
at September 30, 2001 $ 7,703,683
===========
U.S. GLOBAL INVESTORS, INC.
SEPTEMBER 30, 2001, QUARTERLY REPORT ON FORM 10-Q PAGE 9 OF 16
- -------------------------------------------------------------------------------
INVESTMENT
MANAGEMENT CORPORATE
SERVICES INVESTMENTS CONSOLIDATED
----------- ------------- -----------
THREE MONTHS ENDED
SEPTEMBER 30, 2000
Net revenues $ 2,517,659 $ 332,001 $ 2,849,660
=========== ============= ===========
Net income (loss)
before income taxes $ (185,671) $ 332,001 $ 146,330
=========== ============= ===========
Depreciation and
amortization $ 71,335 $ -- $ 71,335
=========== ============= ===========
Interest expense $ 29,850 $ -- $ 29,850
=========== ============= ===========
Capital expenditures $ 37,383 $ -- $ 37,383
=========== ============= ===========
Gross identifiable assets
at September 30, 2000 $ 5,375,737 $ 2,658,259 $ 8,033,996
Deferred tax asset 979,260
Accumulated other
comprehensive gain (18,722)
-----------
Consolidated total assets
at September 30, 2000 $ 8,994,534
===========
U.S. GLOBAL INVESTORS, INC.
SEPTEMBER 30, 2001, QUARTERLY REPORT ON FORM 10-Q PAGE 10 OF 16
- -------------------------------------------------------------------------------
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
U.S. Global Investors, Inc. (the Company or U.S. Global) 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 in San Antonio, Texas manages two
business segments: (1) the Company provides mutual fund investment services to
its clients, 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 its operating revenues from the
investment management of products and services for the U.S. Global Investors
Funds (USGIF) and U.S. Global Accolade Funds (USGAF). Notwithstanding that the
Company generates the majority of its revenues from this segment, the Company
holds a significant portion of its total assets in proprietary investments. The
following is a brief discussion of the Company's two business segments.
INVESTMENT MANAGEMENT PRODUCTS AND SERVICES
As noted above, 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 quarter ended September 30, 2001, assets under management in USGIF
averaged $1.08 billion versus $1.11 billion for the quarter ended September 30,
2000. This decline was primarily due to declines in equity and gold-related
assets, which were offset by growth in money market funds. Assets under
management in USGAF averaged $132 million for the quarter ended September 30,
2001, versus $271 million for the quarter ended September 30, 2000. This
decrease was primarily attributable to sharp declines in the net assets of the
Bonnel Growth Fund.
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. Company
compliance personnel reviewed and monitored these activities, and various
reports are provided to investment advisory clients. On September 30, 2001, the
Company held approximately $1.6 million in investment securities. The value of
these investments is approximately 21 percent of total assets and 28 percent of
shareholders' equity at period end. 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
quarter ended September 30, 2001, the Company had realized losses of
approximately $101,000 compared with gains of approximately $216,000 for the
quarter ended September 30, 2000. The Company expects that gains and losses will
continue to fluctuate in the future.
U.S. GLOBAL INVESTORS, INC.
SEPTEMBER 30, 2001, QUARTERLY REPORT ON FORM 10-Q PAGE 11 OF 16
- -------------------------------------------------------------------------------
RESULTS OF OPERATIONS - QUARTER ENDED SEPTEMBER 30, 2001 AND 2000
The Company posted a net after-tax loss of $4,901 ($0.00 loss per share) for the
quarter ended September 30, 2001, compared with net income of $101,127 ($0.01
income per share) for the quarter ended September 30, 2000. Net income declined
$106,000 as decreases in investment income and investment advisory fees of
$507,000 and $383,000, respectively, were offset by a decrease in general and
administrative expenses of $778,000.
REVENUES
Total consolidated revenues for the quarter ended September 30, 2001, decreased
approximately $1,022,000, or 36 percent, compared with the quarter ended
September 30, 2000. This was primarily due to the decrease in investment income
and investment advisory fees as stated above. The decline in investment income
came as a result of reduced valuations in the Company's investment portfolio and
realized losses of $101,000 from investment transactions in the quarter ended
September 30, 2001, compared with realized gains of $216,000 in the quarter
ended September 30, 2000. The decrease in investment advisory fees was primarily
due to a sharp drop in the assets of the Bonnel Growth Fund, as well as other
equity funds. Transfer agent fees for the quarter ended September 30, 2001,
decreased $49,000, or 7 percent, compared with the quarter ended September 30,
2000. This was due to a decline in the consolidated number of shareholder
accounts.
EXPENSES
Total consolidated expenses for the quarter ended September 30, 2001, decreased
approximately $823,000, or 30 percent, compared with the quarter ended September
30, 2000. This decrease, as noted above, was primarily a result of reduced
general and administrative expenses. The Company implemented restructuring
actions in the second half of fiscal year 2001, which resulted in a workforce
reduction, and the elimination of the Company's unprofitable 401(k)
administration operations. Both actions are reflected in the $778,000 drop in
general and administrative expenses.
EARNINGS BEFORE INTEREST, TAXES, DEPRECIATION, AND AMORTIZATION (EBITDA)
Management considers EBITDA to be the best measure of the Company's financial
performance. This measurement reflects the operations of the Company's primary
business segment, managing and servicing USGIF and USGAF. It does not take into
consideration realized and unrealized gains and losses, interest expense, taxes,
or depreciation and amortization expenses.
EBITDA for the quarter ended September 30, 2001, was $165,972, which was an
increase of $250,000 from an EBITDA loss of $84,486 for the quarter ended
September 30, 2000. The Company has experienced reduced investment advisory fees
due to depressed market conditions and a shareholder shift to money market and
fixed-income funds, which have lower profit margins. Despite these conditions,
management has undertaken steps to improve operational efficiencies and enhance
profit margins. In January 2001, the Company began a restructuring process. To
streamline operations, the Company instituted a workforce reduction and
initiated steps to eliminate its unprofitable 401(k) administration operations.
Additionally, the Company created a consistent focus on expenses and in July
2001 implemented profit-margin enhancing initiatives. As a result of these
efforts, EBITDA has improved dramatically despite depressed equity values, and
the Company is poised for continued operational growth when the markets begin a
sustained rebound.
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 September 30, 2001, the Company has net operating loss
carryovers (NOLs) of approximately $1.7 million, which will expire between
fiscal 2005 and 2011, charitable contribution carryovers of approximately
$206,000 expiring between 2002 and 2006, and alternative minimum tax credits of
$139,729 with indefinite expirations. If certain changes in the Company's
ownership occur subsequently to September 30, 2001, there could be an annual
limitation on the 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
U.S. GLOBAL INVESTORS, INC.
SEPTEMBER 30, 2001, QUARTERLY REPORT ON FORM 10-Q PAGE 12 OF 16
- -------------------------------------------------------------------------------
realized. Management included a valuation allowance of approximately $436,000
and $547,000 at September 30, 2001, and June 30, 2001, respectively, providing
for the utilization of NOLs, charitable contributions, and investment tax
credits against future taxable income.
LIQUIDITY AND CAPITAL RESOURCES
At September 30, 2001, the Company had net working capital (current assets minus
current liabilities) of approximately $3.1 million and a current ratio of 4.3 to
1. With approximately $1.3 million in cash and cash equivalents and
approximately $1.6 million in marketable securities, the Company has adequate
liquidity to meet its current debt obligations. Total shareholders' equity was
approximately $5.6 million, with cash, cash equivalents, and marketable
securities comprising 37.5 percent of total assets. With the exception of
operating expenses, the Company's only material commitment is the mortgage on
its corporate headquarters. The Company also has access to a $1 million credit
facility, which can be utilized for working capital purposes. The Company's
available working capital and potential cash flow are expected to be sufficient
to cover current expenses and debt service.
The investment advisory and related contracts between the Company and USGIF and
USGAF will expire on February 28, 2002, and May 31, 2002, 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 potential 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 opportunities for growth whenever available.
U.S. GLOBAL INVESTORS, INC.
SEPTEMBER 30, 2001, QUARTERLY REPORT ON FORM 10-Q PAGE 13 OF 16
- -------------------------------------------------------------------------------
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 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. Company compliance personnel reviewed and monitored
the Company's investment activities, and various reports are provided to
investment advisory clients.
The table below summarizes the Company's equity price risks as of September 30,
2001, and shows the effects of a hypothetical 25 percent increase and a 25
percent decrease in market prices.
ESTIMATED INCREASE
HYPOTHETICAL FAIR VALUE AFTER (DECREASE) IN
FAIR VALUE AT PERCENTAGE HYPOTHETICAL SHAREHOLDERS'
SEPTEMBER 30, 2001 CHANGE PERCENT CHANGE EQUITY
------------------ -------------- -------------- --------------
Trading Securities $964,944 25% increase $ 1,206,180 $ 159,216
25% decrease $ 723,708 $ (159,216)
Available-for-Sale $639,918 25% increase $ 799,898 $ 105,587
25% decrease $ 479,938 $ (105,587)
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.
SEPTEMBER 30, 2001, QUARTERLY REPORT ON FORM 10-Q PAGE 14 OF 16
- -------------------------------------------------------------------------------
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
1. Exhibits
11 Statement re: Computation of Per Share Income
2. Reports on Form 8-K
None
U.S. GLOBAL INVESTORS, INC.
SEPTEMBER 30, 2001, QUARTERLY REPORT ON FORM 10-Q PAGE 15 OF 16
- -------------------------------------------------------------------------------
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: November 14, 2001 BY: /s/ Frank E. Holmes
----------------------------------------
Frank E. Holmes
Chief Executive Officer
DATED: November 14, 2001 BY: /s/ Bobby D. Duncan
----------------------------------------
Bobby D. Duncan
Chief Financial Officer
Chief Operating Officer
DATED: November 14, 2001 BY: /s/ Tracy C. Peterson
----------------------------------------
Tracy C. Peterson
Chief Accounting Officer
U.S. GLOBAL INVESTORS, INC.
SEPTEMBER 30, 2001, QUARTERLY REPORT ON FORM 10-Q PAGE 16 OF 16
- -------------------------------------------------------------------------------
EXHIBIT 11 - SCHEDULE OF COMPUTATION OF NET INCOME (LOSS) PER SHARE
THREE MONTHS ENDED
SEPTEMBER 30,
----------------------------
2001 2000
----------- ----------
Net income (loss) $ (4,901) $ 101,127
=========== ==========
BASIC
Weighted average number of shares
outstanding during quarter 7,470,689 7,516,777
Basic income (loss) per share $ 0.00 $ 0.01
=========== ==========
DILUTED
Weighted average number of shares
outstanding during quarter 7,470,689 7,516,777
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 -- 6,633
----------- ----------
Weighted average number of shares used in
calculation of diluted income (loss)
per share 7,470,689 7,523,410
=========== ==========
Diluted income (loss) per share $ 0.00 $ 0.01
=========== ==========