e10vq
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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| þ |
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Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for
the quarterly period ended March 31, 2008 |
OR
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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)
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| Texas
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74-1598370 |
| (State or Other Jurisdiction of
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(IRS Employer Identification Number) |
| Incorporation or Organization) |
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| 7900 Callaghan Road
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78229-1234 |
| San Antonio, Texas
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(Zip Code) |
| (Address of Principal Executive Offices) |
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(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 (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 þ NO o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer,
a non-accelerated filer, or a smaller reporting company.
See the definitions of “large
accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
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| Large accelerated filer o
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Accelerated filer þ
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Non-accelerated filer o
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Smaller reporting company o |
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(Do not check if a smaller reporting company) |
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Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the
Exchange Act).
YES o NO þ
On April 30, 2008, there were 13,816,341 shares of Registrant’s class A nonvoting common stock
issued and 13,156,785 shares of Registrant’s class A nonvoting common stock issued and outstanding,
no shares of Registrant’s class B nonvoting common shares outstanding, and 2,095,207 shares of
Registrant’s class C common stock issued and outstanding.
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| U.S. Global Investors, Inc. |
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| March 31, 2008, Quarterly Report on Form 10-Q
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Page 1 of 21 |
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Consolidated Balance Sheets
Assets
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MARCH 31, |
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JUNE 30, |
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2008 |
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2007 |
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(UNAUDITED) |
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Current Assets |
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Cash and cash equivalents |
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$ |
23,150,313 |
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$ |
14,854,420 |
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Trading securities, at fair value |
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6,681,328 |
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6,334,474 |
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Receivables |
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Mutual funds |
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5,100,729 |
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4,739,763 |
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Offshore clients |
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256,268 |
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9,914,773 |
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Employees |
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19,860 |
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4,638 |
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Other |
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127,837 |
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7,382 |
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Prepaid expenses |
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921,894 |
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767,779 |
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Total Current Assets |
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36,258,229 |
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36,623,229 |
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Net Property and Equipment |
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2,210,340 |
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2,260,288 |
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Other Assets |
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Deferred tax asset, long term |
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324,747 |
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53,023 |
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Investment securities
available-for-sale, at fair value |
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1,017,914 |
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856,573 |
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Total Other Assets |
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1,342,661 |
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909,596 |
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Total Assets |
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$ |
39,811,230 |
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$ |
39,793,113 |
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The accompanying notes are an integral part of this statement.
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| U.S. Global Investors, Inc. |
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| March 31, 2008, Quarterly Report on Form 10-Q
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Page 2 of 21 |
Liabilities and Shareholders’ Equity
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MARCH 31, |
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JUNE 30, |
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2008 |
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2007 |
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(UNAUDITED) |
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Current Liabilities |
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Accounts payable |
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$ |
221,120 |
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$ |
272,564 |
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Accrued compensation and related costs |
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908,098 |
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3,356,488 |
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Deferred tax liability |
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316,811 |
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338,511 |
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Other accrued expenses |
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2,492,256 |
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4,730,348 |
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Total Current Liabilities |
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3,938,285 |
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8,697,911 |
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Total Liabilities |
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3,938,285 |
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8,697,911 |
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Shareholders’ Equity |
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Common stock (class A) — $.025 par value;
nonvoting; authorized, 28,000,000 shares; issued,
13,816,341 and 13,620,625 shares at March 31,
2008, and June 30, 2007, respectively |
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345,409 |
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340,516 |
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Common stock (class B) — $.025 par value;
nonvoting; authorized, 4,500,000 shares; no
shares issued |
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— |
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— |
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Common stock (class C) — $.025 par value; voting;
authorized, 3,500,000 shares; issued, 2,095,207 and
2,290,923 shares at March 31, 2008, and June 30,
2007, respectively |
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52,380 |
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57,273 |
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Additional paid-in-capital |
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13,753,141 |
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13,352,728 |
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Treasury stock, class A shares at cost; 662,182 and
672,867 shares at March 31, 2008, and June 30,
2007, respectively |
|
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(1,589,564 |
) |
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(1,640,792 |
) |
Accumulated other comprehensive loss, net of tax |
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|
(376,850 |
) |
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(5,589 |
) |
Retained earnings |
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23,688,429 |
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18,991,066 |
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Total Shareholders’ Equity |
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35,872,945 |
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31,095,202 |
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Total Liabilities and Shareholders’ Equity |
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$ |
39,811,230 |
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$ |
39,793,113 |
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The accompanying notes are an integral part of this statement.
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| U.S. Global Investors, Inc. |
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| March 31, 2008, Quarterly Report on Form 10-Q
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Page 3 of 21 |
Consolidated Statements of Operations and Comprehensive Income (Unaudited)
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Nine Months Ended |
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Three Months Ended |
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March 31, |
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March 31, |
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2008 |
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2007 |
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2008 |
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2007 |
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Revenues |
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Investment advisory fees |
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$ |
31,769,252 |
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$ |
29,859,339 |
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$ |
10,312,967 |
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$ |
10,170,685 |
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Transfer agent fees |
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6,321,165 |
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5,533,812 |
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2,137,967 |
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1,566,580 |
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Investment income (loss) |
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922,704 |
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1,214,804 |
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(225,838 |
) |
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676,043 |
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Other |
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|
66,751 |
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162,395 |
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40,312 |
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31,054 |
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39,079,872 |
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36,770,350 |
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12,265,408 |
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12,444,362 |
|
Expenses |
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Employee compensation and benefits |
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9,523,694 |
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7,740,655 |
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2,990,559 |
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2,526,898 |
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General and administrative |
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4,914,361 |
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5,017,991 |
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1,486,761 |
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1,931,148 |
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Subadvisory fees |
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|
7,002,339 |
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|
6,650,293 |
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2,143,811 |
|
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2,261,348 |
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Platform fees |
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|
6,577,569 |
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5,606,015 |
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2,304,349 |
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|
1,786,687 |
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Advertising |
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|
378,578 |
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|
359,318 |
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133,665 |
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|
138,553 |
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Depreciation |
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|
212,328 |
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|
178,695 |
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|
71,388 |
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|
|
62,002 |
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|
|
|
|
|
|
|
|
|
|
|
|
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|
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28,608,869 |
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25,552,967 |
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9,130,533 |
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8,706,636 |
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Income Before Income Taxes |
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10,471,003 |
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11,217,383 |
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3,134,875 |
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3,737,726 |
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Provision for Federal Income Taxes |
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Tax expense |
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|
3,474,906 |
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3,864,574 |
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1,012,213 |
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1,325,453 |
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|
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Net Income |
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|
6,996,097 |
|
|
|
7,352,809 |
|
|
|
2,122,662 |
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|
2,412,273 |
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Other comprehensive (loss), net of tax |
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Unrealized losses on
available-for-sale securities |
|
|
(371,188 |
) |
|
|
(34,931 |
) |
|
|
(354,193 |
) |
|
|
(368,563 |
) |
|
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|
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|
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Comprehensive Income |
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$ |
6,624,909 |
|
|
$ |
7,317,878 |
|
|
$ |
1,768,469 |
|
|
$ |
2,043,710 |
|
|
|
|
|
|
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|
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|
|
|
|
|
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Basic Net Income per Share |
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$ |
0.46 |
|
|
$ |
0.49 |
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|
$ |
0.14 |
|
|
$ |
0.16 |
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Diluted Net Income per Share |
|
$ |
0.46 |
|
|
$ |
0.48 |
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|
$ |
0.14 |
|
|
$ |
0.16 |
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|
|
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|
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|
|
|
|
|
|
|
|
|
|
|
|
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|
|
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|
Basic weighted average number of
common shares outstanding |
|
|
15,244,722 |
|
|
|
15,154,880 |
|
|
|
15,247,780 |
|
|
|
15,170,608 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
Diluted weighted average number of
common shares outstanding |
|
|
15,273,797 |
|
|
|
15,233,298 |
|
|
|
15,275,900 |
|
|
|
15,250,360 |
|
The accompanying notes are an integral part of this statement.
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| U.S. Global Investors, Inc. |
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| March 31, 2008, Quarterly Report on Form 10-Q
|
|
Page 4 of 21 |
Consolidated Statements of Cash Flows (Unaudited)
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NINE MONTHS ENDED MARCH 31, |
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2008 |
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2007 |
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Cash Flows from Operating Activities |
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Net income |
|
$ |
6,996,097 |
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$ |
7,352,809 |
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| |
Adjustments to reconcile net income to net cash provided by
operating activities: |
|
|
|
|
|
|
|
|
Depreciation |
|
|
212,328 |
|
|
|
178,695 |
|
Net recognized (gain) loss on securities |
|
|
167,639 |
|
|
|
(684,115 |
) |
Loss on disposal of fixed assets |
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|
388 |
|
|
|
— |
|
Provision for deferred taxes |
|
|
(102,279 |
) |
|
|
357,566 |
|
Stock bonuses |
|
|
47,219 |
|
|
|
— |
|
SFAS 123R compensation expense |
|
|
242,775 |
|
|
|
35,391 |
|
|
|
|
|
|
|
|
|
|
Changes in assets and liabilities, impacting cash from operations: |
|
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|
|
|
|
|
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Accounts receivable |
|
|
9,161,862 |
|
|
|
5,712,092 |
|
Prepaid expenses and other |
|
|
(154,115 |
) |
|
|
(625,555 |
) |
Trading securities |
|
|
(611,268 |
) |
|
|
(941,189 |
) |
Accounts payable and accrued expenses |
|
|
(4,737,926 |
) |
|
|
(4,696,824 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
Total adjustments |
|
|
4,226,623 |
|
|
|
(663,939 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
Net Cash Provided by Operations |
|
|
11,222,720 |
|
|
|
6,688,870 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
Cash Flows from Investing Activities |
|
|
|
|
|
|
|
|
Purchase of property and equipment |
|
|
(162,768 |
) |
|
|
(284,089 |
) |
Purchase of available-for-sale securities |
|
|
(744,257 |
) |
|
|
(2,072,532 |
) |
Proceeds on sale of available-for-sale securities |
|
|
117,284 |
|
|
|
1,707,211 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Cash Used in Investing Activities |
|
|
(789,741 |
) |
|
|
(649,410 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flow from Financing Activities |
|
|
|
|
|
|
|
|
Purchase of treasury stock |
|
|
— |
|
|
|
(709,231 |
) |
Proceeds from issuance or exercise of stock and options |
|
|
— |
|
|
|
537,089 |
|
Benefit from tax deduction in excess of stock-based
compensation cost |
|
|
— |
|
|
|
465,239 |
|
Treasury stock issued |
|
|
161,648 |
|
|
|
124,843 |
|
Dividends paid |
|
|
(2,298,734 |
) |
|
|
(3,715,084 |
) |
|
|
|
|
|
|
|
Net Cash Used in Financing Activities |
|
|
(2,137,086 |
) |
|
|
(3,297,144 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Increase in Cash and Cash Equivalents |
|
|
8,295,893 |
|
|
|
2,742,316 |
|
|
|
|
|
|
|
|
|
|
Beginning Cash and Cash Equivalents |
|
|
14,854,420 |
|
|
|
10,056,043 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending Cash and Cash Equivalents |
|
$ |
23,150,313 |
|
|
$ |
12,798,359 |
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of this statement.
|
|
|
| U.S. Global Investors, Inc. |
|
|
| March 31, 2008, Quarterly Report on Form 10-Q
|
|
Page 5 of 21 |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Note 1. Basis of Presentation
U.S. Global Investors, Inc. (the “Company” or “U.S. Global”) has prepared the consolidated
financial statements pursuant to 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 statements in the Company’s Form 10-K for the year ended June 30, 2007.
The consolidated financial statements include the accounts of the Company and its wholly owned
subsidiaries, United Shareholder Services, Inc. (“USSI”), A&B Mailers, Inc. (“A&B”), U.S. Global
Investors (Guernsey) Limited, U.S. Global Brokerage, Inc., and U.S. Global Investors (Bermuda)
Limited. As of December 31, 2007, A&B was dissolved as a corporation. Subsequent to the
dissolution, effective January 1, 2008, a new department was formed within USSI consisting of the
same employees performing the same functions as A&B prior to its dissolution. All assets and
liabilities that were previously held in A&B were transferred at cost to USSI. There was no
accounting impact, no personnel changes, and no accounting changes other than reconfiguring certain
internal reports.
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
nine months ended March 31, 2008, are not necessarily indicative of the results to be expected for
the entire year.
Note 2. Dividend
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 board of directors authorized a dividend of $0.01
per share per month beginning in June 2007. Subsequently, the board authorized an increase to
$0.02 per share per month beginning in October 2007. The dividend is authorized through December
31, 2008 and will be reviewed by the board quarterly.
Note 3. Investments
As of March 31, 2008, the Company held investments with a market value of approximately $7.7
million and a cost basis of approximately $7.9 million. The market value of these investments is
approximately 19.3 percent of the Company’s total assets. The Company currently has no investments
in debt securities or mortgage-backed securities.
Investments in securities classified as trading are reflected as current assets on the consolidated
balance sheet at their fair market value. Unrealized holding gains and losses on trading
securities are included in earnings in the consolidated statements of operations and comprehensive
income.
Investments in securities classified as available for sale, which may not be readily marketable,
are reflected as non-current assets on the consolidated balance sheet at their fair value.
Unrealized holding gains and losses on available-for-sale securities are excluded from earnings and
reported in other comprehensive income as a separate component of shareholders’ equity until
realized.
|
|
|
| U.S. Global Investors, Inc. |
|
|
| March 31, 2008, Quarterly Report on Form 10-Q
|
|
Page 6 of 21 |
The following summarizes the market value, cost, and unrealized gain or loss on investments as of
March 31, 2008, and June 30, 2007.
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized holding |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
losses on available- |
|
| |
|
|
|
|
|
|
|
|
|
Unrealized |
|
|
for-sale securities, |
|
| Securities |
|
Market Value |
|
|
Cost |
|
|
Gain (Loss) |
|
|
net of tax |
|
| |
Trading1 |
|
$ |
6,681,328 |
|
|
$ |
6,312,242 |
|
|
$ |
369,086 |
|
|
|
|
|
Available for sale2 |
|
|
1,017,914 |
|
|
|
1,588,899 |
|
|
|
(570,985 |
) |
|
$ |
(376,850 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total at March 31, 2008 |
|
$ |
7,699,242 |
|
|
$ |
7,901,141 |
|
|
$ |
(201,899 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trading1 |
|
$ |
6,334,474 |
|
|
$ |
5,990,256 |
|
|
$ |
344,218 |
|
|
|
|
|
Available for sale2 |
|
|
856,573 |
|
|
|
865,152 |
|
|
|
(8,579 |
) |
|
$ |
(5,589 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total at June 30, 2007 |
|
$ |
7,191,047 |
|
|
$ |
6,855,408 |
|
|
$ |
335,639 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 1 |
|
Unrealized and realized gains and losses on trading securities are included in earnings in the statement of operations. |
| |
| 2 |
|
Unrealized 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. |
Investment income can be volatile and varies depending on market fluctuations, the Company’s
ability to participate in investment opportunities, and timing of transactions. A significant
portion of the unrealized gains and losses for the three months ended March 31, 2008, is
concentrated in a small number of issuers. The Company expects that gains and losses will continue
to fluctuate in the future.
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; and |
| |
| |
• |
|
dividend and interest income. |
The following summarizes investment income (loss) reflected in earnings for the periods discussed:
| |
|
|
|
|
|
|
|
|
| |
|
NINE MONTHS ENDED MARCH 31, |
|
| Investment Income (Loss) |
|
2008 |
|
|
2007 |
|
| |
Realized gains on sales of available-for-sale securities |
|
$ |
96,774 |
|
|
$ |
454,388 |
|
Realized gains (losses) on sales of trading securities |
|
|
(264,413 |
) |
|
|
229,727 |
|
Unrealized gains (losses) on trading securities |
|
|
24,868 |
|
|
|
(147,032 |
) |
Realized foreign currency gains (losses) |
|
|
(21,045 |
) |
|
|
1,900 |
|
Dividend and interest income |
|
|
1,086,520 |
|
|
|
675,821 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Investment Income |
|
$ |
922,704 |
|
|
$ |
1,214,804 |
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
| |
|
THREE MONTHS ENDED MARCH 31, |
|
| Investment Income (Loss) |
|
2008 |
|
|
2007 |
|
| |
Realized gains on sales of available-for-sale securities |
|
$ |
62,253 |
|
|
$ |
454,388 |
|
Realized gains (losses) on sales of trading securities |
|
|
(1,907 |
) |
|
|
234,232 |
|
Unrealized losses on trading securities |
|
|
(530,534 |
) |
|
|
(237,036 |
) |
Realized foreign currency gains (losses) |
|
|
(21,228 |
) |
|
|
1,568 |
|
Dividend and interest income |
|
|
265,578 |
|
|
|
222,891 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Investment Income (Loss) |
|
$ |
(225,838 |
) |
|
$ |
676,043 |
|
|
|
|
|
|
|
|
|
|
|
| U.S. Global Investors, Inc. |
|
|
| March 31, 2008, Quarterly Report on Form 10-Q
|
|
Page 7 of 21 |
Note 4. 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. Three of the four funds within USGAF were sub-advised by third-party managers through
the first quarter of fiscal year 2008. These subadvisors are in turn compensated out of the
investment advisory fees received by the Company. The subadvisory agreement related to the
MegaTrends Fund (subsequently renamed the Global MegaTrends Fund) was terminated effective
September 30, 2007. USSI also serves as transfer agent to USGIF and USGAF and receives fees based
on the number of shareholder accounts as well as transaction and activity-based fees.
Additionally, the Company provides in-house legal and compliance services to USGIF and USGAF for
which it is reimbursed and receives certain miscellaneous fees directly from USGAF and USGIF
shareholders. Fees for providing investment management and transfer agent services to USGIF and
USGAF continue to be the Company’s primary revenue source.
Substantially all of the cash and cash equivalents included in the balance sheet at March 31, 2008,
and June 30, 2007, are invested in USGIF money market funds.
The Company has voluntarily waived or reduced its advisory fees and/or has agreed to pay expenses
on several funds within USGIF funds and one USGAF fund through November 1, 2008, and February 28,
2009, respectively, or such later date as the Company determines in order to maintain competitive
yields and to allow assets to grow in newer funds. The aggregate fees waived and expenses borne by
the Company for the nine months ended March 31, 2008, and March 31, 2007, were $1,168,234, and
$920,149, respectively.
The investment advisory and related contracts between the Company and USGIF and USGAF will expire
on February 28, 2009, and May 31, 2008, respectively. Management anticipates the trustees of both
USGIF and USGAF will renew the contracts.
Investment advisory fees for the SEC-registered funds totaled $29,456,383 and $27,185,386 for the
nine months ended March 31, 2008, and March 31, 2007, respectively. Transfer agency fees totaled
$6,321,165 and $5,533,812 for the nine months ended March 31, 2008, and March 31, 2007,
respectively.
The Company provides advisory services for several offshore clients and receives monthly advisory
fees based on the net asset values of each client, and performance fees, if any, based on the
overall increase in net asset values. The Company recorded fees totaling $2,312,869 and $2,673,953
for the nine months ended March 31, 2008, and March 31, 2007, respectively.
The performance fees for these clients are calculated and recorded quarterly or annually in
accordance with the terms of the advisory agreement. These fees may fluctuate significantly from
year to year based on factors that may be out of the Company’s control. Frank Holmes serves as a
director of each of the offshore clients.
The Company receives additional revenue from several sources including custodial fee revenues,
revenues from miscellaneous transfer agency activities, mailroom operations, as well as investment
income.
Note 5. Borrowings
As of March 31, 2008, the Company has no long-term liabilities.
The Company has access to a $1 million credit facility with a one-year maturity for working capital
purposes. The credit agreement requires the Company to maintain certain quarterly financial
covenants to access the line of credit. The covenants include (1) liquidity of $1 million or more
in cash, cash equivalents and marketable equity securities, and (2) a debt to equity ratio of 0.75
or less. As of March 31, 2008, this credit facility remained unutilized by the Company.
Note 6. Stock-Based Compensation
Beginning in fiscal year 2006, with the adoption of the Statement of Financial Accounting Standards
No. 123 (revised 2004), “Share-Based Payment” (“SFAS 123R”), stock-based compensation expense was
recorded for the cost of stock options. Stock-based compensation expense for the nine months ended
March 31, 2008, and March 31, 2007, respectively, was $242,347 and $35,391. In addition, $12,500
is charged to executive deferred stock compensation quarterly and will continue through June 30,
2008 As of March 31, 2008, and March 31, 2007, respectively, there was approximately $519,570 and
$9,855 of total unrecognized share-based compensation cost related to share-based compensation
granted under the plans that will be recognized over the remainder of their respective vesting
periods.
|
|
|
| U.S. Global Investors, Inc. |
|
|
| March 31, 2008, Quarterly Report on Form 10-Q
|
|
Page 8 of 21 |
Stock compensation plans
The Company’s stock option plans provide for the granting of 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.
The following table summarizes information about the Company’s stock option plans for the nine
months ended March 31, 2008.
| |
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
Weighted Average |
|
| |
|
Number of Options |
|
|
Exercise Price |
|
Options outstanding, beginning of
year |
|
|
57,000 |
|
|
$ |
11.65 |
|
Granted |
|
|
20,300 |
|
|
$ |
19.30 |
|
Exercised |
|
|
— |
|
|
|
— |
|
Forfeited |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options outstanding, end of period |
|
|
77,300 |
|
|
$ |
13.66 |
|
|
|
|
|
|
|
|
Options exercisable, end of period |
|
|
29,000 |
|
|
$ |
1.95 |
|
|
|
|
|
|
|
|
Note 7. 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 earnings per share (EPS):
| |
|
|
|
|
|
|
|
|
| |
|
NINE MONTHS ENDED MARCH 31, |
|
| |
|
2008 |
|
|
2007 |
|
Net income |
|
$ |
6,996,097 |
|
|
$ |
7,352,809 |
|
|
|
|
|
|
|
|
|
|
Weighted average number of outstanding shares |
|
|
|
|
|
|
|
|
Basic |
|
|
15,244,722 |
|
|
|
15,154,880 |
|
|
|
|
|
|
|
|
|
|
Effect of dilutive securities |
|
|
|
|
|
|
|
|
Employee stock options |
|
|
29,075 |
|
|
|
78,418 |
|
|
|
|
|
|
|
|
Diluted |
|
|
15,273,797 |
|
|
|
15,233,298 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share |
|
|
|
|
|
|
|
|
Basic |
|
$ |
0.46 |
|
|
$ |
0.49 |
|
Diluted |
|
$ |
0.46 |
|
|
$ |
0.48 |
|
| |
|
|
|
|
|
|
|
|
| |
|
THREE MONTHS ENDED MARCH 31, |
|
| |
|
2008 |
|
|
2007 |
|
Net income |
|
$ |
2,122,662 |
|
|
$ |
2,412,273 |
|
|
|
|
|
|
|
|
|
|
Weighted average number of outstanding shares |
|
|
|
|
|
|
|
|
Basic |
|
|
15,247,780 |
|
|
|
15,170,608 |
|
Effect of dilutive securities |
|
|
|
|
|
|
|
|
Employee stock options |
|
|
28,120 |
|
|
|
79,752 |
|
|
|
|
|
|
|
|
Diluted |
|
|
15,275,900 |
|
|
|
15,250,360 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share |
|
|
|
|
|
|
|
|
Basic |
|
$ |
0.14 |
|
|
$ |
0.16 |
|
Diluted |
|
$ |
0.14 |
|
|
$ |
0.16 |
|
|
|
|
| U.S. Global Investors, Inc. |
|
|
| March 31, 2008, Quarterly Report on Form 10-Q
|
|
Page 9 of 21 |
The diluted EPS calculation excludes the effect of stock options when their exercise prices exceed
the average market price for the period. For the quarter ended March 31, 2008, 43,000 options were
excluded from diluted EPS. For the quarter ended March 31, 2007, no options were excluded from
diluted EPS.
The Company may repurchase stock from employees. The Company made no repurchases of shares of its
class A, class B, or class C common stock during the quarter ended March 31, 2008. Upon repurchase,
these shares are classified as treasury shares and are deducted from outstanding shares in the
earnings per share calculation.
Note 8. Income Taxes
The Company and its subsidiaries file a consolidated federal income tax return. 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 current deferred tax liability primarily consists of unrealized
gains on trading securities as well as temporary differences in the deductibility of prepaid
expenses and accrued liabilities. The long-term deferred tax asset is composed primarily of
unrealized losses on available-for-sale securities.
A valuation allowance is provided when it is more likely than not that some portion of the deferred
tax amount will not be realized. No valuation allowance was included or deemed necessary at March
31, 2008, or June 30, 2007.
|
|
|
| U.S. Global Investors, Inc. |
|
|
| March 31, 2008, Quarterly Report on Form 10-Q
|
|
Page 10 of 21 |
Note 9. Financial Information by Business Segment
The Company operates principally in two business segments: providing investment management services
to the funds it advises, 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 by business segment:
| |
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Investment |
|
|
|
|
|
|
|
| |
|
Management |
|
|
Corporate |
|
|
|
|
| |
|
Services |
|
|
Investments |
|
|
Consolidated |
|
Nine months ended March 31, 2008 |
|
|
|
|
|
|
|
|
|
|
|
|
Revenues (loss) |
|
$ |
39,237,328 |
|
|
$ |
(157,456 |
) |
|
$ |
39,079,872 |
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before income taxes |
|
$ |
10,647,311 |
|
|
$ |
(176,308 |
) |
|
$ |
10,471,003 |
|
|
|
|
|
|
|
|
|
|
|
Depreciation |
|
$ |
212,328 |
|
|
$ |
— |
|
|
$ |
212,328 |
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures |
|
$ |
162,768 |
|
|
$ |
— |
|
|
$ |
162,768 |
|
|
|
|
|
|
|
|
|
|
|
Gross identifiable assets at March 31, 2008 |
|
$ |
31,706,611 |
|
|
$ |
7,779,872 |
|
|
$ |
39,486,483 |
|
|
|
|
|
|
|
|
|
|
|
Deferred tax asset |
|
|
|
|
|
|
|
|
|
$ |
324,747 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated total assets at March 31, 2008 |
|
|
|
|
|
|
|
|
|
$ |
39,811,230 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine months ended March 31, 2007 |
|
|
|
|
|
|
|
|
|
|
|
|
Revenues (loss) |
|
$ |
36,230,637 |
|
|
$ |
539,713 |
|
|
$ |
36,770,350 |
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before income taxes |
|
$ |
10,690,426 |
|
|
$ |
526,957 |
|
|
$ |
11,217,383 |
|
|
|
|
|
|
|
|
|
|
|
Depreciation |
|
$ |
178,695 |
|
|
$ |
— |
|
|
$ |
178,695 |
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures |
|
$ |
284,089 |
|
|
$ |
— |
|
|
$ |
284,089 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended March 31, 2008 |
|
|
|
|
|
|
|
|
|
|
|
|
Revenues |
|
$ |
12,753,362 |
|
|
$ |
(487,954 |
) |
|
$ |
12,265,408 |
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes |
|
$ |
3,641,318 |
|
|
$ |
(506,443 |
) |
|
$ |
3,134,875 |
|
|
|
|
|
|
|
|
|
|
|
Depreciation |
|
$ |
71,388 |
|
|
$ |
— |
|
|
$ |
71,388 |
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures |
|
$ |
15,392 |
|
|
$ |
— |
|
|
$ |
15,392 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended March 31, 2007 |
|
|
|
|
|
|
|
|
|
|
|
|
Revenues |
|
$ |
11,990,853 |
|
|
$ |
453,509 |
|
|
$ |
12,444,362 |
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes |
|
$ |
3,293,946 |
|
|
$ |
443,780 |
|
|
$ |
3,737,726 |
|
|
|
|
|
|
|
|
|
|
|
Depreciation |
|
$ |
62,002 |
|
|
$ |
— |
|
|
$ |
62,002 |
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures |
|
$ |
69,778 |
|
|
$ |
— |
|
|
$ |
69,778 |
|
|
|
|
|
|
|
|
|
|
|
Note 10. Contingencies and Commitments
The Company continuously reviews any investor, employee or vendor complaints, and any pending or
threatened litigation. The likelihood that a loss contingency exists is evaluated under the
criteria of SFAS No. 5, “Accounting for Contingencies,” through consultation with legal counsel,
and a loss contingency is recorded if the contingency is probable and reasonably estimable at the
date of the financial statements.
During the normal course of business, the Company may be subject to 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 statements of the Company.
|
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| U.S. Global Investors, Inc. |
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| March 31, 2008, Quarterly Report on Form 10-Q
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Page 11 of 21 |
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
U.S. Global has made forward-looking statements concerning the Company’s 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’s
control, including: (1) the volatile and competitive nature of the investment management industry,
(2) changes in domestic and foreign economic conditions, (3) the effect of government regulation on
the Company’s business, and (4) 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. Although the Company generates
the majority of its revenues from its investment advisory segment, the Company 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 operating revenues from managing and servicing
USGIF, USGAF 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 funds’ asset levels, thereby affecting income and results of operations.
The Company provides advisory services to various offshore clients. The Company generally receives
a monthly advisory fee and a quarterly or annual performance fee, if any, based on an agreed-upon
performance measurement. The Company provided advisory services to the U.S. Global Investors
Balanced Natural Resources Fund, Ltd., an offshore fund, through November 30, 2007, at which time
the fund was liquidated and the assets were transferred to the Meridian Global Energy and Resources
Fund Ltd. The contracts between the Company and the remaining offshore clients expire periodically,
and management anticipates that its offshore clients will renew the contracts.
At March 31, 2008, total assets under management as of period end, including both SEC-registered
funds and offshore clients, were $5.314 billion versus $4.860 billion at March 31, 2007. During the
nine months ended March 31, 2008, average assets under management were $5.382 billion versus $4.790
billion for the same period ended March 31, 2007. This increase was primarily due to an increase
in the natural resource and foreign equity funds under management.
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 review and monitor these activities,
and various reports are provided to investment advisory clients.
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; and |
| |
| |
• |
|
dividend and interest income. |
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 March 31, 2008, the Company held investments with a market value of approximately $7.7
million and a cost basis of approximately $7.9 million. The market value of these investments is
approximately 19.3 percent of the Company’s total assets. The Company currently has no investments
in debt securities or mortgage-backed securities.
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| U.S. Global Investors, Inc. |
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| March 31, 2008, Quarterly Report on Form 10-Q
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Page 12 of 21 |
The following summarizes investment income (loss) reflected in earnings for the periods discussed:
| |
|
|
|
|
|
|
|
|
| |
|
NINE MONTHS ENDED MARCH 31, |
|
| Investment Income (Loss) |
|
2008 |
|
|
2007 |
|
| |
Realized gains on sales of available-for-sale securities |
|
$ |
96,774 |
|
|
$ |
454,388 |
|
Realized gains (losses) on sales of trading securities |
|
|
(264,413 |
) |
|
|
229,727 |
|
Unrealized gains (losses) on trading securities |
|
|
24,868 |
|
|
|
(147,032 |
) |
Realized foreign currency gains (losses) |
|
|
(21,045 |
) |
|
|
1,900 |
|
Dividend and interest income |
|
|
1,086,520 |
|
|
|
675,821 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Investment Income |
|
$ |
922,704 |
|
|
$ |
1,214,804 |
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
| |
|
THREE MONTHS ENDED MARCH 31, |
|
| Investment Income (Loss) |
|
2008 |
|
|
2007 |
|
| |
Realized gains on sales of available-for-sale securities |
|
$ |
62,253 |
|
|
$ |
454,388 |
|
Realized gains (losses) on sales of trading securities |
|
|
(1,907 |
) |
|
|
234,232 |
|
Unrealized losses on trading securities |
|
|
(530,534 |
) |
|
|
(237,036 |
) |
Realized foreign currency gains (losses) |
|
|
(21,228 |
) |
|
|
1,568 |
|
Dividend and interest income |
|
|
265,578 |
|
|
|
222,891 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Investment Income (Loss) |
|
$ |
(225,838 |
) |
|
$ |
676,043 |
|
|
|
|
|
|
|
|
RESULTS OF OPERATIONS — NINE MONTHS ENDED MARCH 31, 2008, AND 2007
The Company posted net after-tax income of $6,996,097 ($0.46 income per share) for the nine months
ended March 31, 2008, compared with a net after-tax income $7,352,809 ($0.49 income per share) for
the nine months ended March 31, 2007.
Revenues
Total consolidated revenues for the nine months ended March 31, 2008, increased $2,309,522, or 6.3
percent, compared with the nine months ended March 31, 2007. This increase was primarily
attributable to the following:
| |
• |
|
Investment advisory fees increased by approximately $1,910,000 primarily as a result of
increased assets under management; and |
| |
| |
• |
|
Transfer agent fees increased by approximately $787,000 primarily as a result of a new
transfer agency agreement with USGIF and USGAF effective April 1, 2007. |
Expenses
Total consolidated expenses for the nine months ended March 31, 2008, increased $3,055,902, or 12.0
percent, compared with the nine months ended March 31, 2007. This was largely attributable to the
following:
| |
• |
|
Compensation expense increased by approximately $1,783,000 primarily due to
performance-based bonuses, as well as an increase in the number of employees; |
| |
| |
• |
|
Platform fees increased by approximately $972,000 due to increased asset flows through
broker/dealer platforms; and |
| |
| |
• |
|
Consistent with continued growth in the Eastern European Fund, subadvisory fees
increased by approximately $352,000. |
|
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| U.S. Global Investors, Inc. |
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| March 31, 2008, Quarterly Report on Form 10-Q
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|
Page 13 of 21 |
RESULTS OF OPERATIONS — THREE MONTHS ENDED MARCH 31, 2008, AND 2007
The Company posted net after-tax income of $2,122,662 ($0.14 income per share) for the three months
ended March 31, 2008, compared with a net after-tax income $2,412,273 ($0.16 income per share) for
the three months ended March 31, 2007.
Revenues
Total consolidated revenues for the quarter ended March 31, 2008, decreased $178,954, or 1.4
percent, compared with the quarter ended March 31, 2007. This decrease was primarily attributable
to the following:
| |
• |
|
Investment income decreased by approximately $902,000 primarily as a result of higher
unrealized gains and dividends on corporate investments in the comparative period; |
| |
| |
• |
|
Transfer agent fees increased by approximately $571,000 primarily due to the new
transfer agency agreement which incorporates transition and activity-based fees; and |
| |
| |
• |
|
Investment advisory fees increased by approximately $142,000 primarily as a result of
increased assets under management. |
Expenses
Total consolidated expenses for the quarter ended March 31, 2008, increased $423,897, or 4.9
percent, compared with the quarter ended March 31, 2007. This was largely attributable to the
following:
| |
• |
|
Platform fees increased approximately $518,000 due to increased asset flows through
broker/dealer platforms. |
| |
| |
• |
|
Compensation expense increased by approximately $464,000 primarily due to an increase in
the number of employees, as well as an increase in selective salaries to remain competitive
with current market conditions. |
| |
| |
• |
|
These increases were offset by general and administrative expenses, which decreased by
approximately $444,000 primarily due to lower consulting fees, travel expenses and legal
fees. |
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 2008, the Company had net working capital (current assets minus current liabilities)
of approximately $32.3 million and a current ratio (current assets divided by current liabilities)
of 9.2 to 1. With approximately $23.2 million in cash and cash equivalents and approximately $7.7
million in marketable securities, the Company has adequate liquidity to meet its current
obligations. Total shareholders’ equity was approximately $35.9 million, with cash, cash
equivalents, and marketable securities comprising 77.5% of total assets.
As of March 31, 2008, the Company has no long-term liabilities. The Company has access to a $1
million credit facility with a one-year maturity for working capital purposes. The credit agreement
requires the Company to maintain certain quarterly financial covenants to access the line of
credit. As of March 31, 2008, this credit facility remained unutilized by the Company.
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.
The investment advisory and related contracts between the Company and USGIF and USGAF will expire
on February 28, 2009, and May 31, 2008, respectively. Management anticipates the board of trustees
of both USGIF and USGAF will renew the contracts. As previously stated, the Company provided
advisory services to the U.S. Global Investors Balanced Natural Resources Fund, Ltd., an offshore
fund, through November 30, 2007, at which time the fund was liquidated and the assets were
transferred to the Meridian Global Energy and Resources Fund Ltd. The contracts between the Company
and the remaining offshore clients expire periodically and management anticipates that its offshore
clients will renew their contracts.
ACCOUNTING PRONOUNCEMENTS
The Company is subject to extensive and often complex, overlapping and frequently changing
governmental regulation and accounting oversight. Moreover, financial reporting requirements, such
as those listed below, and the processes, controls and procedures that have been put in place to
address them, are comprehensive and complex. While management has focused considerable attention
and resources on meeting these reporting requirements, interpretations by regulatory or accounting
agencies that differ from those of the Company could negatively impact financial results.
In June 2006, the Financial Accounting Standards Board (“FASB”) issued Interpretation No. 48,
“Accounting for Uncertainty in Income Taxes — an interpretation of FASB Statement No. 109” (“FIN
48”). FIN 48 is an interpretation of SFAS No. 109,
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| U.S. Global Investors, Inc. |
|
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| March 31, 2008, Quarterly Report on Form 10-Q
|
|
Page 14 of 21 |
“Accounting for Income Taxes,” and it seeks to reduce the diversity in practice associated with
certain aspects of measurement and accounting for income taxes and requires expanded disclosure
with respect to uncertainty in income taxes. FIN 48 is effective for fiscal years beginning after
December 15, 2006. Accordingly, the Company adopted FIN 48 on July 1, 2007. The adoption of FIN
48 did not have a material effect on the Company’s financial position or results of operations for
the quarter ended March 31, 2008. The Company’s policy is to recognize interest and penalties
related to uncertain tax positions in income tax expense. As of March 31, 2008, the Company did
not have any accrued interest or penalties related to uncertain tax positions. The tax years from
2003 through 2006 remain open to examination by the tax jurisdictions to which the Company is
subject.
In September 2006, the FASB issued Statement of Financial Accounting Standards (“SFAS”) No. 157,
“Fair Value Measurements.” SFAS 157 establishes a single authoritative definition of fair value,
sets out a framework for measuring fair value, and requires additional disclosures about fair value
measurements. SFAS 157 applies only to fair value measurements that are already required or
permitted by other accounting standards. SFAS 157 is effective for fiscal years beginning after
November 15, 2007. The Company is currently evaluating the impact that adopting SFAS 157 will have
on its financial position and results of operation.
In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and
Financial Liabilities.” SFAS 159 allows entities to voluntarily choose to measure many financial
assets and liabilities at fair value. The election is made on an instrument-by-instrument basis
and is irrevocable. Once the election is made for the instrument, all subsequent changes in fair
value for that instrument must be reported in earnings. SFAS 159 is effective for fiscal years
beginning after November 15, 2007. Management is currently evaluating this standard and its impact
on the financial statements, if any.
In June 2007, the Emerging Issues Task Force (“EITF”) issued EITF Issue No. 06-11, “Accounting for
Income Tax Benefits of Dividends on Share-Based Payment Awards,” (“EITF 06-11”). Under the
provisions of EITF 06-11, a realized income tax benefit from dividends or dividend equivalents that
are charged to retained earnings and are paid to employees for equity classified nonvested equity
shares, nonvested equity share units, and outstanding equity share options should be recognized as
an increase to additional paid-in capital. The amount recognized in additional paid-in capital for
the realized income tax benefit from dividends on those awards should be included in the pool of
excess tax benefits available to absorb tax deficiencies on share-based payment awards. EITF 06-11
should be applied prospectively to the income tax benefits that result from dividends on
equity-classified employee share-based payment awards that are declared in fiscal years beginning
after December 15, 2007, and interim periods within those fiscal years. Management is currently
evaluating EITF No. 06-11 and its impact on the financial statements, if any.
CRITICAL ACCOUNTING POLICIES
For a discussion of critical accounting policies that the Company follows, please refer to the
notes to the consolidated financial statements included in the Annual Report on Form 10-K for the
year ended June 30, 2007.
|
|
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| U.S. Global Investors, Inc. |
|
|
| March 31, 2008, Quarterly Report on Form 10-Q
|
|
Page 15 of 21 |
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
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,
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. Written procedures are also in place
to manage compliance with the code of ethics.
The table below summarizes the Company’s equity price risks as of March 31, 2008, and shows the
effects of a hypothetical 25 percent increase and a 25 percent decrease in market prices.
SENSITIVITY ANALYSIS
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
Estimated |
|
|
| |
|
|
|
|
|
|
|
|
|
Fair Value after |
|
Increase |
| |
|
|
|
|
|
Hypothetical |
|
Hypothetical |
|
(Decrease) in |
| |
|
Fair Value at |
|
Percentage |
|
Percent |
|
Shareholders’ |
| |
|
March 31, 2008 |
|
Change |
|
Change |
|
Equity, Net of Tax |
| |
|
|
Trading Securities1 |
|
$ |
6,681,328 |
|
|
25% increase |
|
$ |
8,351,660 |
|
|
$ |
1,102,419 |
|
|
|
|
|
|
|
25% decrease |
|
$ |
5,010,996 |
|
|
$ |
(1,102,419 |
) |
Available-for-Sale2 |
|
$ |
1,017,914 |
|
|
25% increase |
|
$ |
1,272,392 |
|
|
$ |
167,956 |
|
|
|
|
|
|
|
25% decrease |
|
$ |
763,435 |
|
|
$ |
(167,956 |
) |
|
|
|
| 1 |
|
Unrealized and realized gains and losses on trading securities are included in earnings in the statement of operations. |
| |
| 2 |
|
Unrealized 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. |
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.
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 March 31, 2008, 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 our disclosure
controls and procedures were effective as of March 31, 2008.
There has been no change in the Company’s internal control over financial reporting that occurred
during the quarter ended March 31, 2008, that has materially affected, or is reasonably likely to
materially affect, the Company’s internal control over financial reporting.
|
|
|
| U.S. Global Investors, Inc. |
|
|
| March 31, 2008, Quarterly Report on Form 10-Q
|
|
Page 16 of 21 |
PART II. OTHER INFORMATION
ITEM 1a. Risk Factors
For a discussion of risk factors which could affect the Company, please refer to Item 1A. “Risk
Factors” in the Annual Report on Form 10-K for the year ended June 30, 2007. There has been no
material changes since fiscal year end to the risk factors listed therein.
ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds
The Company may repurchase stock from employees. The Company made no repurchases of shares of its
class A, class B, or class C common stock during the quarter ended March 31, 2008.
ITEM 6. Exhibits
1. Exhibits
| |
31 |
|
Certifications of Chief Executive Officer and Chief Financial Officer Pursuant to
Section 302 of the Sarbanes-Oxley Act Of 2002 |
| |
| |
32 |
|
Certifications of Chief Executive Officer and Chief Financial Officer Pursuant to
Section 906 of the Sarbanes-Oxley Act Of 2002 |
|
|
|
| U.S. Global Investors, Inc. |
|
|
| March 31, 2008, Quarterly Report on Form 10-Q
|
|
Page 17 of 21 |
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: May 9, 2008
|
|
BY:
|
|
/s/ Frank E. Holmes |
|
|
|
|
|
|
|
|
|
|
|
|
|
Frank E. Holmes |
|
|
|
|
|
|
Chief Executive Officer |
|
|
|
|
|
|
|
|
|
DATED: May 9, 2008
|
|
BY:
|
|
/s/ Catherine A. Rademacher |
|
|
|
|
|
|
|
|
|
|
|
|
|
Catherine A. Rademacher |
|
|
|
|
|
|
Chief Financial Officer |
|
|