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, 1997
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 78229-2327
San Antonio, Texas (ZIP CODE)
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
(210) 308-1234
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
Not Applicable
(FORMER NAME, FORMER ADDRESS AND FORMER FISCAL YEAR,
IF CHANGED SINCE LAST REPORT)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months, and (2) has been subject to such filing requirements
for the past 90 days.
YES [X] NO [ ]
On October 27, 1997 there were 6,293,414 shares of Registrant's Class A common
stock outstanding and 496,860 shares of Registrant's Class C common stock issued
and outstanding.
<PAGE>
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION ............................................ 3
Item 1. Financial Statements ....................................... 3
Notes To Consolidated Financial Statements (Unaudited) .......... 7
Item 2. Management's Discussion And Analysis Of Financial
Condition And Results Of Operations.............................. 9
PART II. OTHER INFORMATION................................................ 12
Item 6. Exhibits And Reports On Form 8-K............................ 12
SIGNATURES................................................................ 13
EXHIBIT 11--SCHEDULE OF COMPUTATION OF NET EARNINGS PER SHARE............. 14
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS
ASSETS
SEPTEMBER 30, JUNE 30,
1997 1997
----------- -----------
(UNAUDITED)
CURRENT ASSETS
Cash and cash equivalents ................. $ 1,147,249 $ 722,121
Trading securities, at fair
value (Note B) ........................... 549,297 721,954
Receivables (Note C):
Mutual funds ........................... 933,266 1,080,046
Custodial fees ......................... 310,532 199,062
Employees .............................. 51,775 63,700
Receivable from brokers ................ 14,847 240,709
Residual equity interest ............... 217,861 --
Other .................................. 236,644 220,850
Prepaid expenses .......................... 406,832 475,577
Deferred tax asset (Note D) ............... 91,677 103,239
----------- -----------
TOTAL CURRENT ASSETS ................... 3,959,980 3,827,258
NET PROPERTY AND EQUIPMENT .................... 2,555,493 2,536,081
----------- -----------
OTHER ASSETS
Restricted investments .................... 650,875 642,528
Long-term receivables ..................... 349,531 424,026
Long-term deferred tax asset (Note D) ..... 1,062,043 1,102,531
Residual equity interest .................. -- 217,861
Investment securities
available-for-sale, at fair value (Note B) 597,122 557,315
Equity investment in affiliate (Note A) ... 1,371,142 1,322,032
Other ..................................... 68,103 83,143
----------- -----------
TOTAL OTHER ASSETS ..................... 4,098,816 4,349,436
----------- -----------
$10,614,289 $10,712,775
=========== ===========
The accompanying notes are an integral part of this statement.
<PAGE>
LIABILITIES AND SHAREHOLDERS' EQUITY
SEPTEMBER 30, JUNE 30,
1997 1997
----------- -----------
(UNAUDITED)
CURRENT LIABILITIES
Current portion of capital lease obligation $ 3,139 $ 9,614
Current portion of notes payable .......... 45,781 44,899
Current portion of annuity and
contractual obligation .................. 18,000 18,000
Accounts payable .......................... 254,499 367,163
Accrued compensation and related costs .... 116,826 223,639
Accrued profit sharing and 401(k) ......... 29,680 109,251
Accrued vacation pay ...................... 107,369 107,369
Accrued legal fees ........................ 60,213 62,493
Litigation accrual ........................ 300,000 300,000
Other accrued expenses .................... 178,835 144,632
----------- -----------
TOTAL CURRENT LIABILITIES ................ 1,114,342 1,387,060
----------- -----------
Notes Payable-Net of Current Portion .......... 1,203,809 1,215,386
Annuity and Contractual Obligations ........... 142,246 143,922
----------- -----------
TOTAL NON-CURRENT LIABILITIES ............ 1,346,055 1,359,308
----------- -----------
TOTAL LIABILITIES ........................ 2,460,397 2,746,368
----------- -----------
Commitments and contingent liabilities
Shareholders' Equity
Common stock (Class A)--
$0.05 par value; non-voting;
authorized, 7,000,000 shares ............. 314,621 311,354
Common stock (Class C)--
$.05 par value; voting;
authorized, 1,750,000 shares ............. 24,843 28,110
Additional paid-in-capital ................ 10,580,347 10,587,909
Treasury stock at cost .................... (431,274) (514,770)
Net unrealized loss on available-for-sale
securities (net of tax of $108,858
and $91,212, respectively ................ (211,314) (177,058)
Equity in net unrealized gain on
available-for-sale securities
held by affiliate (net of tax
of $26,342 and $10,237, respectively) .... 51,135 19,873
Retained earnings (deficit) ............... (2,174,466) (2,289,011)
----------- -----------
TOTAL SHAREHOLDERS' EQUITY ................ 8,153,892 7,966,407
----------- -----------
$10,614,289 $10,712,775
=========== ===========
The accompanying notes are an integral part of this statement.
<PAGE>
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
THREE MONTHS ENDED
SEPTEMBER 30,
-------------------------
1997 1996*
----------- -----------
REVENUE (NOTE C)
Investment advisory fee ................... $ 1,637,465 $ 1,626,788
Transfer agent fee ........................ 839,318 832,734
Accounting fee ............................ 260,312 130,703
Exchange fee .............................. 47,810 58,865
Custodial fees ............................ 133,032 145,582
Investment income (loss) .................. (45,385) 582,810
Other ............................ ........ 73,328 59,512
Government security interest income ....... -- 286,509
Government security accretion to par ...... -- 130,402
Gains (losses) on changes of
interest in affiliate (Note A) ........... 1,682 (23,925)
----------- -----------
2,947,562 3,829,980
----------- -----------
EXPENSES
General and administrative ................ 2,624,069 2,760,835
Depreciation and amortization ............. 124,117 107,438
Interest-note payable and other ........... 31,300 25,032
Interest expense-securities sold
under agreement to repurchase ............ -- 378,586
Interest expense-
subordinated debenture ................... -- 30,403
----------- -----------
2,779,486 3,302,294
----------- -----------
EARNINGS BEFORE MINORITY INTEREST,
EQUITY INTEREST AND INCOME TAXES .............. 168,076 527,686
Equity in Net Earnings of Joint
Venture (Note A) ............................ -- (41,130)
Equity In Net Earnings of
Affiliate (Note A) .......................... 61 299,521
----------- -----------
EARNINGS BEFORE INCOME TAXES .................. 168,137 786,077
PROVISIONS FOR FEDERAL INCOME TAXES
Current ................................... -- 12,000
Deferred (Note D) ......................... 53,592 202,441
----------- -----------
53,592 214,441
----------- -----------
NET EARNINGS .................................. $ 114,545 $ 571,636
=========== ===========
PER SHARE AMOUNTS
Primary and fully diluted
Continuing operations ........................ $ 0.02 $ 0 .09
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING
Primary and fully diluted .................... 6,677,878 6,619,329
=========== ===========
*Reclassified for comparative purposes
The accompanying notes are an integral part of this statement.
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
THREE MONTHS ENDED
SEPTEMBER 30,
-------------------------
1997 1996
----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings .............................. $ 114,545 $ 571,636
Adjustments to reconcile to net cash
provided by operating activities:
Depreciation and amortization ........... 124,117 107,438
Government security accretion ........... -- (130,402)
Net gain on sales of securities ......... (4,398) (500,101)
Gain on disposal of equipment ........... (602) (64)
Gains on changes of interest in affiliate (1,682) (129,132)
Treasury stock reissued ................. 53,434 104,094
Changes in assets and liabilities,
impacting cash from operations:
Restricted investments ................. (8,347) (8,066)
Accounts receivable .................... 354,298 246,168
Deferred tax asset ..................... 53,592 202,441
Prepaid expenses and other ............. 83,683 (453,917)
Trading securities ..................... 85,346 965,723
Accounts payable ....................... (112,664) (106,061)
Accrued expenses ....................... (154,461) (145,523)
----------- -----------
Total adjustments ......................... 472,316 152,598
----------- -----------
NET CASH PROVIDED BY OPERATIONS ............... 586,861 724,234
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of furniture and equipment ....... (143,489) (80,610)
Net proceeds on sale of equipment ......... 602 800
Purchase of available-for-sale securities . -- (100,000)
----------- -----------
NET CASH USED IN INVESTING ACTIVITIES ......... (142,887) (179,810)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on annuity ....................... (1,676) (1,563)
Payments on note payable to bank .......... (10,695) (15,275)
Payments on capital lease ................. (6,475) (17,773)
Net proceeds from securities sold
under agreement to repurchase ............ -- 133,625
Payments on subordinated debenture to
related party ............................ -- (150,000)
Proceeds from issuance of preferred
stock, warrants, and options ............. -- 7,500
Purchase of Treasury stock ................ -- (46,882)
NET CASH USED IN FINANCING ACTIVITIES ......... (18,846) (90,368)
----------- -----------
NET INCREASE IN CASH AND CASH EQUIVALENTS ..... 425,128 454,056
BEGINNING CASH AND CASH EQUIVALENTS ........... 722,121 666,250
----------- -----------
ENDING CASH AND CASH EQUIVALENTS .............. $ 1,147,249 $ 1,120,306
=========== ===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid for interest .................... $ 31,300 $ 468,229
The accompanying notes are an integral part of this statement.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE A. 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, 1997.
The consolidated financial statements include the accounts of the Company and
its wholly-owned subsidiaries, United Shareholder Services, Inc. ("USSI"),
Security Trust and Financial Company ("STFC"), A&B Mailers, Inc. ("A&B") and
U.S. Global Investors (Guernsey) Limited ("USGG"). Additionally, the Company has
continued to account for its investment in the offshore fund, U.S. Global
Strategies Fund Limited ("the Guernsey Fund") using the equity method of
accounting, as the Company held a 15% and 27% interest in the Guernsey Fund as
of September 30, 1997 and 1996, respectively. This resulted in the Company
recording earnings of $61 and $299,521 for the quarter ending September 30, 1997
and 1996 respectively, which is included in earnings before taxes in the income
statement. In addition, due to changes in its equity interest of the Guernsey
Fund during the quarter, the Company recorded a gain (loss) of $1,682 and
($23,925) for the quarter ended September 30, 1997 and 1996, respectively.
Similarly, the Company had a one-third interest in United Services Advisors
Canada, Inc. ("USACI"), which was sold in June 1997 to the USACI management
group, which now controls 100% of USACI. However, utilizing the equity method of
accounting, the Company recorded a net loss of $41,130 for the quarter ending
September 30, 1996.
All significant inter-company balances and transactions have been eliminated in
consolidation. Certain amounts have been reclassified for comparative purposes.
The results of operations for the three month period ended September 30,1997,
are not necessarily indicative of the results to be expected for the entire
year.
NOTE B. SECURITY INVESTMENTS
The Company accounts for its investment securities in accordance with SFAS 115
"Accounting for Certain Investments in Debt and Equity Securities." Accordingly,
the market value of investments classified as trading at September 30, 1997 and
1996 was $549,297 and $1,089,530, respectively. The net change in the unrealized
holding gain (loss) on trading securities held at September 30, 1997 and 1996
that has been included in earnings for the three-month period is ($80,606) and
$48,211, respectively.
The estimated fair value of the investments classified as available-for-sale at
September 30, 1997 was $597,122 with $320,172 (before tax) in unrealized losses
being recorded as a separate component of shareholders' equity. These venture
capital investments are reflected as non-current assets on the September 30,
1997 consolidated balance sheet. These investments are in private placements
which are restricted for sale as of September 30, 1997. It is anticipated the
securities obtained in these private placements will become free trading within
one year. During the quarter, the Company recorded no realized gains as no
securities were transferred from available-for-sale securities to trading
securities.
The estimated fair value of the investments classified as available-for-sale at
June 30, 1997 was $557,315 with $268,270 (before tax) in unrealized losses being
recorded as a separate component of shareholders' equity. During fiscal 1997,
the Company recorded income related to realized gains of $218,860 and unrealized
gains of $100,349 on securities which were transferred from the
available-for-sale category to the trading category upon becoming free trading.
NOTE C. INVESTMENT MANAGEMENT, TRANSFER AGENT AND OTHER FEES
The Company serves as investment advisor to U.S. Global Investors Funds
("USGIF"), U.S. Global Accolade Funds ("USGAF") and the Guernsey Fund 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 received a fee
based on the number of shareholder accounts. Additionally, the Company provides
in-house legal and accounting services to USGIF and USGAF. The Company has
decided to outsource the bookkeeping and accounting functions currently
performed by USSI during the second quarter
<PAGE>
of fiscal 1998. The Company also receives exchange, maintenance, closing, and
small account fees directly from USGIF and USGAF shareholders. Fees for
providing services to USGIF continue to be the Company's primary revenue source.
U.S. Global receives additional revenue from several sources including STFC
custodian and administrative fee revenues, gains on marketable securities
transactions, revenues from miscellaneous transfer agency activities including
lockbox functions as well as mailroom operations from A&B.
Investment advisory fees, transfer agency fees, accounting fees, custodian fees
and all other fees to the Company are recorded as income during the period in
which services are performed.
U.S. Global has voluntarily waived or reduced its advisory fee; guaranteed that
fund expenses will not exceed certain limits; and/or has agreed to pay expenses
on several USGIF and USGAF funds and the Guernsey Fund for purposes of enhancing
their performance. The aggregate amount of fees waived and expenses borne by the
Company for the three month period ended September 30, 1997, and September 30,
1996 was $987,198, and $801,018, respectively.
Receivables from mutual funds represent amounts due the Company and its
wholly-owned subsidiaries for investment advisory fees, transfer agent fees,
accounting fees, and exchange fees and are net of amounts payable to the mutual
funds.
The investment advisory contract and related contracts between the Company and
USGIF were recently renewed and expire on or about October 26, 1998, and the
contracts between the Company and USGAF expire on or about March 8, 1998.
Management anticipates the Trustees of both USGIF and USGAF will renew the
contracts.
NOTE D. INCOME TAXES
The differences in income taxes attributable to continuing operations determined
by applying the U.S. federal statutory rate of 34% and the Company's effective
tax rate are summarized as follows:
QUARTER ENDED
SEPTEMBER 30,
----------------------
1997 1996
--------- ---------
Tax expense at statutory rate .............. $ 57,167 $ 267,266
Exercise of non-qualified stock options
treated as equity for financial statements -- (2,284)
Non-deductible membership dues ............. 919 3,371
Non-deductible meals and entertainment ..... 3,038 9,528
Other ...................................... (7,530) (63,440)
--------- ---------
$ 53,592 $ 214,441
========= =========
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amount of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. The tax effects of these
temporary differences that give rise to the deferred tax asset as of September
30, 1997 and 1996 are presented below:
SEPTEMBER 30,
--------------------------
1997 1996
----------- -----------
Book/tax differences in the balance sheet:
Accumulated depreciation .................. $ 98,199 $ 115,544
Accrued expenses .......................... 47,039 32,791
Annuity obligations ....................... 54,484 56,705
Reduction in carrying value of joint venture -- 210,630
Net unrealized holding gain (affiliate) ... -- 50,495
Net unrealized holding gain ............... -- 98,064
Available-for-sale securities ............. 108,858 --
Trading securities ........................ 44,637 --
----------- -----------
353,217 564,229
Tax carryovers:
NOL carryover ............................. 754,879 748,228
Contributions carryover ................... 91,750 71,084
Investment credit carryover ............... -- 34,472
<PAGE>
Minimum tax credits ....................... 114,270 129,786
----------- -----------
960,899 983,570
----------- -----------
Total gross deferred tax asset ............... 1,314,116 1,547,799
----------- -----------
Affiliated investment ........................ (134,055) (185,287)
Trading securities ........................... -- (10,118)
Available-for-sale securities ................ (108,858) (98,064)
----------- -----------
Total gross deferred tax liability ........... (242,913) (293,469)
----------- -----------
Net deferred tax asset ....................... $ 1,071,203 $ 1,254,330
=========== ===========
For federal income tax purposes at September 30, 1997, the Company has net
operating losses ("NOLs") of approximately $2.2 million which will expire in
fiscal 2007 and 2010, charitable contribution carryovers of approximately
$270,000 expiring 1998-2000, and alternative minimum tax credits of $114,270
with indefinite expirations. Certain changes in the Company's ownership may
result in a limitation on the amount of NOLs that could be utilized under
Section 382 of the Internal Revenue Code. If certain changes in the Company's
ownership should occur subsequent to September 30, 1997, there could be an
annual limitation on the amount of NOLs that could be utilized.
A valuation allowance is provided when it is more likely than not that some
portion of the deferred tax amount will not be realized. Management believes
that taxable income during the carryforward periods will be sufficient to
utilize the NOLs which give rise to the deferred tax asset.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
U.S. Global Investors, Inc. ("the Company " or "U.S. Global") posted net after
tax earnings of $114,545 ($0.02 per share) for the quarter ended September 30,
1997, compared to net after tax earnings of $571,636 ($0.09 per share) for the
quarter ended September 30, 1996.
ASSETS UNDER MANAGEMENT
The primary source of the Company's revenue is advisory fees that are dependent
on average net assets of the mutual funds managed by the Company. Fluctuations
in the markets and investor sentiment directly impact the funds' asset levels,
therefore affecting income and results of operations. As of October 28, 1997,
total assets under management for U.S. Global Investors Funds ("USGIF") were
approximately $1.32 billion and total assets under management for U.S. Global
Accolade Funds ("USGAF") were approximately $143 million.
Assets under management for USGIF for the quarter ended September 30, 1997
averaged $1.35 billion versus $1.33 billion for the quarter ended September 30,
1996. This increase in average assets primarily resulted from an increase in the
value of non-gold related assets. Assets under management for USGAF averaged
$142 million for the quarter ended September 30, 1997 versus $81 million for the
quarter ended September 30, 1996. This increase in average assets is
attributable to an increase in assets in the Bonnel Growth Fund as well as the
addition of the MegaTrends Fund (November 1996), the Adrian Day Global
Opportunity Fund (February 1997), and the Regent Eastern European Fund (April
1997) to the USGAF family of funds.
REVENUES
Total consolidated revenues decreased approximately $882,000 (23%) primarily due
to a 107% decrease in investment income and a 100% decrease in interest income
and accretion of the U.S. Government Agency Notes ("Notes"). As previously
disclosed, these Notes matured during March 1997.
<PAGE>
Earnings before interest, taxes, depreciation and amortization (EBITDA)
increased approximately $274,000 (295%) to $367,000 ($0.06 per share), from
$93,000 ( $0.01 per share). This was primarily due to an increase in operating
revenues of $137,000 combined with a corresponding decrease in general and
administration expenses of the same amount.
EXPENSES
Offsetting the decrease of $882,000 in total consolidated revenues was a
$523,000 (16%) decrease in total consolidated expenses. This decrease resulted
from a reduction in interest expense of $409,000 on securities sold under
agreement to repurchase to broker-dealers and the subordinated debenture. This
reduction in interest expense is due to the fact that $26.75 million par value
Notes were held throughout the quarter ended September 30, 1996, whereas there
were no Notes held during the quarter ended September 30, 1997. During fiscal
1997 the balance of the Notes was paid in full. Exclusive of the expenses
attributable to the purchase and financing of the Notes, total consolidated
expenses of the Company decreased $114,000 (4%) for the quarter ended September
30, 1997 primarily due to decreases in compensation and travel-related
expenditures.
INVESTMENT ACTIVITIES
As of September 30, 1997, the Company held approximately $1.2 million in
investment securities compared to $1.3 million as of September 30, 1996. The
value of these investments approximated 14% and 16%, respectively, of
shareholders' equity at period end. Company investments in marketable securities
classified as trading securities totaled approximately $.6 million (market
value). In addition, there was approximately $.6 million in investments in
securities classified as available-for-sale. These securities are primarily
private placements that Management expects will become free-trading within one
year. During the quarter ending September 30, 1997, net investment gain from the
sale of investments aggregated approximately $4,000, compared to a gain of
$500,000 for the quarter ending September 30, 1996. As reflected by these
amounts, gains and/or losses on the Company's trading activities vary
significantly from period to period. However, Management is not concerned with
these fluctuations, and continues to believe that such activities are in the
best interest of the Company. The activities are reviewed by Company compliance
personnel and reported to investment advisory clients.
LIQUIDITY AND CAPITAL RESOURCES
FEE WAIVERS
The Company has agreed to waive a portion of its fee revenues and/or to pay for
expenses of certain mutual funds for purposes of enhancing the funds'
competitive market position. Should assets of these funds increase, fund
expenses borne by the Company would increase to the extent that such expenses
exceed any expense caps in place. The Company expects to continue to waive fees
and/or pay for fund expenses as long as market and economic conditions warrant.
However, subject to the Company's commitment to certain funds with respect to
fee waivers and expense limitations, the Company may reduce the amount of fund
expenses it is bearing.
TAX LOSS CARRYFORWARDS
Management assessed the likelihood of realization of the recorded deferred tax
asset at September 30, 1997. Net operating losses ("NOLs") of $2.2 million,
primarily resulting from the non-cash charge to earnings related to the purchase
of the Notes during fiscal 1995, do not expire until fiscal 2010. Based on the
current level of earnings and management's expectations for the future,
management believes that operating income will generate the minimum amount of
future taxable income necessary to fully realize the deferred tax assets. As
such, management has not included a valuation allowance at September 30, 1997.
SETTLEMENT POOL
In June 1992, the Company made its final payment to the settlement pool
established under the June 1988 settlement agreement relating to the original
Prospector Fund (now operating as the U.S. Global Resources Fund); and the
settlement pool made the final payout to "Eligible Shareholders" thereof in June
1992. Under the agreement, any amounts payable to "Eligible Shareholders" who
cannot be located, together with interest thereon, will be held until June 30,
1998.
At that time, such amounts will be made available to all persons claiming
subrogation. The Company has first right of subrogation to the amounts. The
amount of cash held at September 30, 1997, was approximately $649,000.
Management believes the Company will receive a sum that will equal or exceed the
amount currently recorded as the Company's residual equity
<PAGE>
interest, $217,861, and accordingly the Company would recognize income to the
extent the amount of cash received exceeds the residual equity interest.
DECISION TO OUTSOURCE
To continue to provide competitive and technologically advanced fund accounting
and shareholder record keeping services to its mutual fund clients, during the
quarter the Company made the decision to: 1) outsource the bookkeeping and
accounting functions currently performed by its wholly owned subsidiary, United
Shareholder Services, Inc, to Brown Brothers Harriman & Co. ("BBH"), and 2)
license DST's mutual fund software system for its transfer agent/shareholder
record keeping functions.
It is anticipated that the conversion to BBH will be completed during the second
quarter of fiscal 1998. While the Company will forego accounting fees associated
with this function, the company will experience corresponding reductions in
current direct departmental expenses, estimated costs required to hire
additional personnel, and expenses to maintain and upgrade equipment. In
addition, the decision to engage BBH will allow the Company to take advantage of
BBH's established international network with on-site contacts in the markets in
which the Company invests.
The decision to remotely utilize the DST transfer agent and image-based work
management system allows the Company to transfer the inherent technological
risks and associated significant capital expenditures required to update and
maintain a transfer agency system. It is expected that the conversion to the DST
mutual fund software will be completed by the end of the third quarter of fiscal
1998.
CONCLUSION
Management believes current cash reserves, plus financing obtained and/or
available, and cash flow from operations will be sufficient to meet foreseeable
cash needs or capital necessary for the above mentioned activities, as well as
allow the Company to take advantage of investment opportunities whenever
available.
<PAGE>
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
1. Exhibits
11 Statement re: Computation of Per Share Earnings
27 Financial Data Schedule
2. Reports on Form 8-K: None
<PAGE>
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: October 30, 1997 BY: /S/ SUSAN B. MCGEE
--------------------
Susan B. McGee
Executive Vice President
Corporate Secretary
General Counsel
DATED: October 30, 1997 BY: /S/ DAVID J. CLARK
--------------------
David J. Clark
Chief Financial Officer
Chief Operating Officer
DATED: October 30, 1997 BY: /S/ J. MICHAEL EDWARDS
----------------------
J. Michael Edwards
Chief Accounting Officer
EXHIBIT 11--SCHEDULE OF COMPUTATION OF NET EARNINGS PER SHARE
QUARTER ENDED
SEPTEMBER 30,
-----------------------
1997 1996
---------- ----------
Net earnings ............................. $ 571,636 $ 571,636
========== ==========
PRIMARY AND FULLY DILUTED
Weighted average number shares
outstanding during the year .......... 6,609,027 6,580,052
Add:
Common stock equivalent shares
(determined using the "treasury
stock" method) representing
shares issuable upon exercise
of preferred or common stock
warrants ............................ -- --
Common stock equivalent shares
(determined using the "treasury
stock" method) representing shares
issuable upon exercise of preferred
or common stock options ............. 68,851 39,277
---------- ----------
Weighted average number of shares
used in calculation of primary
earnings per share .................. 6,677,878 6,619,329
========== ==========
Primary earnings (loss) per share
Net Earnings Per Share ............... $ 0.02 $ 0.09
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE FINANCIAL DATA SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE COMPANY'S QUARTERLY REPORT ON FORM 10-Q FOR THE PERIOD ENDED SEPTEMBER
30, 1997, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<CIK> 0000754811
<NAME> U.S. GLOBAL INVESTORS, INC.
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-START> JUL-01-1997
<PERIOD-END> SEP-30-1997
<EXCHANGE-RATE> 1
<CASH> 1147249
<SECURITIES> 1146419
<RECEIVABLES> 2114456
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 3959980
<PP&E> 7564072
<DEPRECIATION> (5008579)
<TOTAL-ASSETS> 10614289
<CURRENT-LIABILITIES> 1114342
<BONDS> 0
0
0
<COMMON> 339464
<OTHER-SE> 7814428
<TOTAL-LIABILITY-AND-EQUITY> 10614289
<SALES> 2945880
<TOTAL-REVENUES> 2947623
<CGS> 0
<TOTAL-COSTS> 2779486
<OTHER-EXPENSES> 2748186
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 31300
<INCOME-PRETAX> 168137
<INCOME-TAX> 53592
<INCOME-CONTINUING> 114545
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 114545
<EPS-PRIMARY> .02
<EPS-DILUTED> .02
</TABLE>
