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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 March 31, 2015

OR

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

 
Commission File Number 0-13928
 
 
 
 
 
U.S. GLOBAL INVESTORS, INC.
 
 
(Exact name of registrant as specified in its charter)
 
Texas
 
74-1598370
(State or other jurisdiction of
incorporation or organization)
 
(IRS Employer Identification No.)
 
 
7900 Callaghan Road
San Antonio, Texas
 
78229-1234
(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 (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 [X]                                NO [ ]
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
YES [X]                                NO [ ]
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer [    ]
Accelerated filer [ ]
Non-accelerated filer [  X  ] 
 Smaller Reporting Company [    ]
 
 
(Do not check if a smaller reporting company)
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
YES [ ]                                NO [X]
On May 5, 2015, there were 13,866,421 shares of Registrant’s class A nonvoting common stock issued and 13,312,314 shares of Registrant’s class A nonvoting common stock issued and outstanding, no shares of Registrant’s class B nonvoting common shares outstanding, and 2,069,127 shares of Registrant’s class C voting common stock issued and outstanding.





TABLE OF CONTENTS
 



PART I. FINANCIAL INFORMATION
 
ITEM 1.    FINANCIAL STATEMENTS

CONSOLIDATED BALANCE SHEETS
 
 
March 31, 2015
 
June 30, 2014
Assets
 
(UNAUDITED)
 
 
(dollars in thousands)
 
 
 
 
Current Assets
 
 
 
 
Cash and cash equivalents
 
$
3,671

 
$
5,910

Trading securities, at fair value
 
16,443

 
17,817

Receivables
 
1,900

 
2,513

Prepaid expenses
 
499

 
525

Deferred tax asset
 
213

 
51

Total Current Assets
 
22,726

 
26,816

Net Property and Equipment
 
2,804

 
3,024

Other Assets
 
 
 
 
Deferred tax asset, long term
 
709

 
298

Investment securities available-for-sale, at fair value
 
4,303

 
6,196

Other investments
 
2,413

 
1,413

Intangible assets, net
 
52

 
86

Other assets, long term
 
11

 
13

Total Other Assets
 
7,488

 
8,006

Total Assets
 
$
33,018

 
$
37,846

Liabilities and Shareholders’ Equity
 
 
 
 
Current Liabilities
 
 
 
 
Accounts payable
 
$
185

 
$
219

Accrued compensation and related costs
 
444

 
581

Dividends payable
 
231

 
232

Other accrued expenses
 
733

 
1,064

Total liabilities held related to discontinued operations
 

 
47

Total Current Liabilities
 
1,593

 
2,143

Commitments and Contingencies (Note 12)
 


 


Shareholders’ Equity
 
 
 
 
Common stock (class A) - $0.025 par value; nonvoting; authorized, 28,000,000 shares; issued, 13,866,421 and 13,866,361 shares at March 31, 2015, and June 30, 2014, respectively
 
347

 
347

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

 

Convertible common stock (class C) - $0.025 par value; voting; authorized, 3,500,000 shares; issued, 2,069,127 and 2,069,187 shares at March 31, 2015, and June 30, 2014, respectively
 
52

 
52

Additional paid-in-capital
 
15,690

 
15,669

Treasury stock, class A shares at cost; 557,555 and 501,518 shares at March 31, 2015, and June 30, 2014, respectively
 
(1,467
)
 
(1,280
)
Accumulated other comprehensive income (loss), net of tax
 
(462
)
 
906

Retained earnings
 
16,706

 
19,376

Total U.S. Global Investors, Inc. Shareholders' Equity
 
30,866

 
35,070

Non-Controlling Interest in Subsidiary
 
559

 
633

Total Shareholders' Equity
 
31,425

 
35,703

Total Liabilities and Shareholders’ Equity
 
$
33,018

 
$
37,846



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

PAGE 1



CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
 
 
Nine Months Ended March 31,
 
Three Months Ended March 31,
(dollars in thousands, except per share data)
 
2015
 
2014
 
2015
 
2014
Operating Revenues
 
 
 
 
 
 
 
 
Mutual fund advisory fees
 
$
5,359

 
$
5,737

 
$
1,248

 
$
1,826

Distribution fees
 
1,118

 
1,510

 
299

 
474

Shareholder services fees
 
507

 
721

 
143

 
229

Administrative services fees
 
516

 
566

 
141

 
213

 
 
7,500

 
8,534

 
1,831

 
2,742

Operating Expenses
 
 
 
 
 
 
 
 
Employee compensation and benefits
 
4,512

 
5,277

 
1,389

 
1,524

General and administrative
 
3,248

 
4,140

 
1,048

 
996

Platform fees
 
1,634

 
1,381

 
435

 
420

Advertising
 
286

 
505

 
96

 
155

Depreciation and amortization
 
246

 
187

 
81

 
62

 
 
9,926

 
11,490

 
3,049

 
3,157

Operating Loss
 
(2,426
)
 
(2,956
)
 
(1,218
)
 
(415
)
Other Income
 
 
 
 
 
 
 
 
Investment income
 
522

 
1,482

 
249

 
373

Equity in earnings of Galileo
 

 
15

 

 
30

 
 
522

 
1,497

 
249

 
403

Loss from Continuing Operations Before Income Taxes
 
(1,904
)
 
(1,459
)
 
(969
)
 
(12
)
Provision for Federal Income Taxes
 
 
 
 
 
 
 
 
Tax expense (benefit)
 
21

 
(466
)
 
25

 
14

Loss from Continuing Operations
 
(1,925
)
 
(993
)
 
(994
)
 
(26
)
Discontinued Operations (Note 13)
 
 
 
 
 
 
 
 
Loss from operations of discontinued transfer agent
 

 
(361
)
 

 
(3
)
Tax benefit
 

 
(123
)
 

 
(1
)
Loss from Discontinued Operations
 

 
(238
)
 

 
(2
)
Net Loss
 
(1,925
)
 
(1,231
)
 
(994
)
 
(28
)
Less: Net Income Attributable to Non-Controlling Interest
 
53

 

 
13

 

Net Loss Attributable to U.S. Global Investors, Inc.
 
$
(1,978
)
 
$
(1,231
)
 
$
(1,007
)
 
$
(28
)
Basic Net Loss per Share
 
 
 
 
 
 
 
 
Loss from continuing operations
 
$
(0.13
)
 
$
(0.06
)
 
$
(0.07
)
 
$

Loss from discontinued operations
 
$

 
$
(0.02
)
 
$

 
$

Net loss
 
$
(0.13
)
 
$
(0.08
)
 
$
(0.07
)
 
$

Diluted Net Loss per Share
 
 
 
 
 
 
 
 
Loss from continuing operations
 
$
(0.13
)
 
$
(0.06
)
 
$
(0.07
)
 
$

Loss from discontinued operations
 
$

 
$
(0.02
)
 
$

 
$

Net loss
 
$
(0.13
)
 
$
(0.08
)
 
$
(0.07
)
 
$

 
 
 
 
 
 
 
 
 
Basic weighted average number of common shares outstanding
 
15,406,189

 
15,466,280

 
15,379,365

 
15,454,932

Diluted weighted average number of common shares outstanding
 
15,406,189

 
15,466,280

 
15,379,365

 
15,454,932






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

PAGE 2




CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (UNAUDITED)

(dollars in thousands)
Nine Months Ended March 31,
 
Three Months Ended March 31,
2015
 
2014
 
2015
 
2014
Net Loss Attributable to U.S. Global Investors, Inc.
$
(1,978
)
 
$
(1,231
)
 
$
(1,007
)
 
$
(28
)
 Other Comprehensive Income (Loss), Net of Tax:
 
 
 
 
 
 
 
Unrealized gains (losses) on available-for-sale securities arising during period
(862
)
 
750

 
(13
)
 
380

Less: reclassification adjustment for gains/losses included in net income
(321
)
 
(657
)
 
(69
)
 
(201
)
Net change from available-for-sale investments, net of tax
(1,183
)
 
93

 
(82
)

179

Foreign currency translation adjustment
(285
)
 

 
(136
)
 

 Other Comprehensive Income (Loss)
(1,468
)
 
93

 
(218
)
 
179

 Comprehensive Income (Loss)
(3,446
)
 
(1,138
)
 
(1,225
)
 
151

Less: Comprehensive Loss Attributable to Non-Controlling Interest
(100
)
 

 
(48
)
 

Comprehensive Income (Loss) Attributable to U.S. Global Investors, Inc.
$
(3,346
)
 
$
(1,138
)
 
$
(1,177
)
 
$
151


































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

PAGE 3



CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
 
(dollars in thousands)
 
Nine Months Ended March 31,
2015
 
2014
Cash Flows from Operating Activities:
 
 
 
 
Net loss
 
$
(1,925
)
 
$
(1,231
)
Adjustments to reconcile net loss to net cash used in operating activities:
 
 
 
 
Depreciation and amortization
 
246

 
191

Net loss on disposal of property and equipment
 
26

 
25

Net recognized gain on securities
 
(483
)
 
(828
)
Net income from equity method investment
 

 
(15
)
Provision for deferred taxes
 
37

 
430

Stock bonuses
 
9

 
8

Stock-based compensation expense
 

 
1

Changes in operating assets and liabilities:
 
 
 
 
Accounts receivable
 
570

 
(973
)
Prepaid expenses
 
21

 
4

Trading securities
 
1,371

 
(14,056
)
Accounts payable and accrued expenses
 
(510
)
 
(269
)
Total adjustments
 
1,287

 
(15,482
)
Net cash used in operating activities
 
(638
)
 
(16,713
)
Cash Flows from Investing Activities:
 
 
 
 
Purchase of property and equipment
 
(40
)
 

Purchase of available-for-sale securities
 
(186
)
 
(1,055
)
Purchase of other investments
 
(1,000
)
 
(160
)
Proceeds on sale of available-for-sale securities
 
754

 
4,736

Proceeds from return of capital and principal payments on investments
 
19

 
43

Net cash provided by (used in) investing activities
 
(453
)
 
3,564

Cash Flows from Financing Activities:
 
 
 
 
Issuance of common stock
 
91

 
122

Repurchases of common stock
 
(266
)
 
(230
)
Distributions to non-controlling interest in subsidiary
 
(27
)
 

Dividends paid
 
(693
)
 
(696
)
Net cash used in financing activities
 
(895
)
 
(804
)
Effect of exchange rate changes on cash and cash equivalents
 
(253
)
 

Net decrease in cash and cash equivalents
 
(2,239
)
 
(13,953
)
Beginning cash and cash equivalents
 
5,910

 
18,085

Ending cash and cash equivalents
 
$
3,671

 
$
4,132

 
 
 
 
 
Supplemental Disclosures of Cash Flow Information:
 
 
 
 
Cash paid for income taxes
 
$

 
$





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

PAGE 4



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 fiscal year ended June 30, 2014.

The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries, United Shareholder Services, Inc. (“USSI”), U.S. Global Investors (Guernsey) Limited (“USGG”) (on August 3, 2013, USGG was dissolved), U.S. Global Brokerage, Inc., U.S. Global Investors (Bermuda) Limited, U.S. Global Investors (Canada) Limited (“USCAN”), and U.S. Global Indices, LLC, and its 65% interest in Galileo Global Equity Advisor Inc. (“Galileo”).

The Company's evaluation for consolidation includes whether entities in which it has an interest are variable interest entities (“VIEs”) and whether the Company is the primary beneficiary of any VIEs identified in its analysis. A VIE is an entity in which either (a) the equity investment at risk is not sufficient to permit the entity to finance its own activities without additional financial support or (b) the group of holders of the equity investment at risk lack certain characteristics of a controlling financial interest. The primary beneficiary is the entity that has the power to direct the activities that most significantly impact the VIE’s economic performance and the obligation to absorb losses of or right to receive benefits from the VIE that could potentially be significant to the VIE. If the VIE qualifies for the investment company deferral, the primary beneficiary is the entity that has the obligation to absorb a majority of the expected losses or the right to receive the majority of the residual returns.

The Company holds variable interests in, but is not deemed to be the primary beneficiary of, the mutual funds it advises. The Company has determined that these entities qualify for the investment company deferral in ASC 810-10-65-2 (aa) and thus determines whether it is the primary beneficiary of these entities by virtue of its exposure to the expected losses and expected residual returns of the entity. The Company’s interests in these entities consist of the Company’s direct ownership therein, which in each case is insignificant to the total ownership of the fund, and any fees earned but uncollected. In the ordinary course of business, the Company may choose to waive certain fees or assume operating expenses of the funds it advises for competitive, regulatory or contractual reasons (see Note 5 for information regarding fee waivers). The Company has not provided financial support to any of these entities outside the ordinary course of business. The Company’s risk of loss with respect to these managed entities is limited to the carrying value of its investments in, and fees receivable from, the entities. The Company does not consolidate these VIEs because it is not the primary beneficiary of these VIEs.

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, 2015, are not necessarily indicative of the results to be expected for the entire year.

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

Recent Accounting Pronouncements

In July 2013, the FASB issued ASU 2013-11, Income Taxes (Topic 740): Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists (“ASU 2013-11”). ASU 2013-11 became effective for the Company on July 1, 2014. The adoption of ASU 2013-11 was not material to the consolidated financial statements.

In April 2014, the FASB issued ASU No. 2014-08, Presentation of Financial Statements and Property, Plant, and Equipment - Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity (“ASU 2014-08”). ASU 2014-08 will become effective for the Company on July 1, 2015. Management is evaluating the ASU and its potential impact on the financial statements.

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (“ASU 2014-09”), which supersedes nearly all existing revenue recognition guidance under U.S. GAAP. The standard is effective for annual periods beginning after December 15, 2016, and interim periods therein, using either of the following transition methods: (i) a full retrospective approach

PAGE 5



reflecting the application of the standard in each prior reporting period with the option to elect certain practical expedients, or (ii) a retrospective approach with the cumulative effect of initially adopting ASU 2014-09 recognized at the date of adoption (which includes additional footnote disclosures). Management is currently evaluating the impact of the pending adoption of ASU 2014-09 on the consolidated financial statements and has not yet determined the method by which the Company will adopt the standard in 2017.

In August 2014, the FASB issued ASU 2014-15, Disclosure of Uncertainties about an Entity's Ability to Continue as a Going Concern (“ASU 2014-15”). This update requires an entity's management to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the entity's ability to continue as a going concern within one year after the date that the financial statements are issued (or within one year after the date that the financial statements are available to be issued when applicable). When conditions or events raise substantial doubts about an entity’s ability to continue as a going concern, management shall disclose: i) the principal conditions or events that raise substantial doubt about the entity's ability to continue as a going concern; ii) management's evaluation of the significance of those conditions or events in relation to the entity's ability to meet its obligations; and iii) management's plans that are intended to mitigate the conditions or events - and whether or not those plans alleviate the substantial doubt about the entity's ability to continue as a going concern. ASU 2014-15 is effective for the annual period ending after December 15, 2016, and early application is permitted. Management does not currently anticipate that this update will have any impact on the Company’s financial statement disclosures.

In November 2014, the FASB issued ASU 2014-17, Business Combinations: Pushdown Accounting (“ASU 2014-17”). ASU 2014-17 provides companies with the option to apply pushdown accounting in its separate financial statements upon occurrence of an event in which an acquirer obtains control of the acquired entity. The election to apply pushdown accounting can be made either in the period in which the change of control occurred, or in a subsequent period. If the election is made in a subsequent period, it would be considered a change in accounting principle and treated in accordance with Topic 250, Accounting Changes and Error Corrections. ASU 2014-17 became effective for the Company on November 18, 2014. The adoption of ASU 2014-17 was not material to the consolidated financial statements.

In February 2015, the FASB issued ASU 2015-02, Amendments to the Consolidation Analysis (“ASU 2015-02”), which amends the consolidation requirements in Accounting Standards Codification (“ASC”) 810, Consolidation. This standard modifies existing consolidation guidance for reporting organizations that are required to evaluate whether they should consolidate certain legal entities. ASU 2015-02 is effective for fiscal years and interim periods within those years beginning after December 15, 2015, and requires either a retrospective or a modified retrospective approach to adoption. Early adoption is permitted. The Company is currently evaluating the potential impact of this standard on its consolidated financial statements, as well as the available transition methods.
NOTE 2. INVESTMENTS

As of March 31, 2015, the Company held investments with a fair value of approximately $20.7 million and a cost basis of approximately $22.0 million. In addition, the Company held other investments of $2.4 million. Total investments are approximately 70.1 percent of the Company’s total assets. On March 31, 2015, the Company had $17.5 million and $465,000 at fair value invested in USGIF and an offshore fund the Company advises, respectively. These amounts were included in the Consolidated Balance Sheet as “trading securities” and “available-for-sale securities.”

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

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

Other investments consist of equity investments in entities over which the Company is unable to exercise significant influence and which do not have readily determinable fair values. These investments are accounted for under the cost method of accounting and evaluated for impairment.

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


PAGE 6



In December 2013, the shareholders of the U.S. Government Securities Savings Fund approved a proposal resulting in the conversion of the fund from a money market fund to a U.S. Government ultra-short bond fund that is not a money market fund. The fund was renamed U.S. Government Securities Ultra-Short Bond Fund (“Government Fund”). Prior to the conversion, while the fund was a money market fund, the amount held in the fund was classified as a cash equivalent. After the conversion, the amount held in the fund is classified as a trading mutual fund investment. The amount held in the fund by the Company as of the conversion date was $14.1 million.

The Company records security transactions on trade date. Realized gains (losses) from security transactions are calculated on the first-in/first-out cost basis, unless otherwise identifiable, and are recorded in earnings on the date of sale.
The following details the components of the Company’s investments recorded as fair value as of March 31, 2015, and June 30, 2014.
 
 
March 31, 2015
 
 
 
 
Gross Unrealized
 
 
(dollars in thousands)
 
Cost
 
Gains
 
(Losses)
 
Fair Value
Trading securities 1
 
 
 
 
 
 
 
 
Offshore fund
 
$
1,184

 
$

 
$
(719
)
 
$
465

Mutual funds - Fixed income
 
15,441

 
140

 
(1
)
 
15,580

Mutual funds - Domestic equity
 
535

 

 
(137
)
 
398

Other
 
81

 

 
(81
)
 

Total trading securities
 
$
17,241

 
$
140

 
$
(938
)
 
$
16,443

 
 
 
 
 
 
 
 
 
Available-for-sale securities 2
 
 
 
 
 
 
 
 
Common stock - Domestic
 
$
575

 
$
367

 
$
(13
)
 
$
929

Common stock - International
 
652

 
219

 
(32
)
 
839

Corporate debt
 
1,582

 

 
(912
)
 
670

Mutual funds - Fixed income
 
1,228

 
14

 
(13
)
 
1,229

Mutual funds - Domestic equity
 
543

 

 
(75
)
 
468

Other
 
170

 
3

 
(5
)
 
168

Total available-for-sale securities 3
 
$
4,750

 
$
603

 
$
(1,050
)
 
$
4,303

 
 
 
June 30, 2014
 
 
 
 
Gross Unrealized
 
 
(dollars in thousands)
 
Cost
 
Gains
 
(Losses)
 
Fair Value
Trading securities 1
 
 
 
 
 
 
 
 
Offshore fund
 
$
1,184

 
$

 
$
(186
)
 
$
998

Mutual funds - Fixed income
 
16,241

 
92

 

 
16,333

Mutual funds - Domestic equity
 
535

 

 
(76
)
 
459

Other
 
107

 

 
(80
)
 
27

Total trading securities
 
$
18,067

 
$
92

 
$
(342
)
 
$
17,817

 
 
 
 
 
 
 
 
 
Available-for-sale securities 2
 
 
 
 
 
 
 
 
Common stock - Domestic
 
$
535

 
$
586

 
$
(3
)
 
$
1,118

Common stock - International
 
607

 
802

 

 
1,409

Corporate debt
 
1,706

 

 
(74
)
 
1,632

Mutual funds - Fixed income
 
1,228

 
21

 
(2
)
 
1,247

Mutual funds - Domestic equity
 
543

 
7

 

 
550

Other
 
232

 
9

 
(1
)
 
240

Total available-for-sale securities 3
 
$
4,851

 
$
1,425

 
$
(80
)
 
$
6,196

 
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.
3 
Net unrealized gains (losses) on available-for-sale securities gross and net of tax as of March 31, 2015, are $(447) and $(295), respectively, and as of June 30, 2014, are $1,345 and $888, respectively.

PAGE 7




The following tables show the gross unrealized losses and fair values of available-for-sale investment securities with unrealized losses aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position:
 
 
March 31, 2015
 
 
Less Than 12 Months
 
12 Months or Greater
 
Total
(dollars in thousands)
 
Fair Value
 
Gross
Unrealized
Losses
 
Fair Value
 
Gross
Unrealized
Losses
 
Fair Value
 
Gross
Unrealized
Losses
Available-for-sale securities
 
 
 
 
 
 
 
 
 
 
 
 
Common stock - Domestic
 
$
45

 
$
(3
)
 
$
98

 
$
(10
)
 
$
143

 
$
(13
)
Common stock - International
 
75

 
(18
)
 
42

 
(14
)
 
117

 
(32
)
Corporate debt
 
425

 
(912
)
 

 

 
425

 
(912
)
Mutual funds - Fixed income
 
166

 
(10
)
 
50

 
(3
)
 
216

 
(13
)
Mutual funds - Domestic equity
 
467

 
(75
)
 

 

 
467

 
(75
)
Other
 
9

 
(5
)
 

 

 
9

 
(5
)
Total available-for-sale securities
 
$
1,187


$
(1,023
)
 
$
190

 
$
(27
)

$
1,377


$
(1,050
)
 
 
 
June 30, 2014
 
 
Less Than 12 Months
 
12 Months or Greater
 
Total
(dollars in thousands)
 
Fair Value
 
Gross
Unrealized
Losses
 
Fair Value
 
Gross
Unrealized
Losses
 
Fair Value
 
Gross
Unrealized
Losses
Available-for-sale securities
 
 
 
 
 
 
 
 
 
 
 
 
Common stock - Domestic
 
$
125

 
$
(3
)
 
$

 
$

 
$
125

 
$
(3
)
Corporate debt
 
1,382

 
(74
)
 

 

 
1,382

 
(74
)
Mutual funds - Fixed income
 
151

 
(2
)
 

 

 
151

 
(2
)
Other
 
118

 
(1
)
 

 

 
118

 
(1
)
Total available-for-sale securities
 
$
1,776

 
$
(80
)
 
$

 
$

 
$
1,776

 
$
(80
)

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

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 reflected in earnings for the periods discussed:
(dollars in thousands)
 
Nine Months Ended March 31,
 
Three Months Ended March 31,
Investment Income (Loss)
 
2015
 
2014
 
2015
 
2014
Realized gains on sales of available-for-sale securities
 
$
591

 
$
999

 
$
209

 
$
307

Realized gains (losses) on sales of trading securities
 
(3
)
 
(168
)
 
3

 

Unrealized gains (losses) on trading securities
 
(548
)
 
284

 
(21
)
 
5

Realized foreign currency gains
 
82

 
6

 
58

 
2

Other-than-temporary declines in available-for sale securities
 
(105
)
 
(3
)
 
(105
)
 
(3
)
Dividend and interest income
 
505

 
364

 
105

 
62

Total Investment Income
 
$
522

 
$
1,482

 
$
249

 
$
373



PAGE 8



Included in investment income were other-than temporary declines in value on available-for-sale corporate debt securities of approximately $105,000 for the three and nine months ended March 31, 2015. The impairment loss resulted from the issuers defaulting on scheduled payments. One security with a cost basis of $44,000 was written down to its fair value of $15,000. Another security, which has resumed interest payments, was written down to the net present value of estimated cash flows. This security had a cost basis of $310,000 and was written down to $234,000. In making these determinations, the Company considered the length of time and extent to which the fair value has been less than cost basis, financial condition and prospects of the issuers and the Company's ability to hold the investment until recovery.

NOTE 3. FAIR VALUE DISCLOSURES

Accounting Standards Codification (ASC) 820, Fair Value Measurement and Disclosures, defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. ASC 820 establishes a hierarchy that prioritizes inputs to valuation techniques used to measure fair value and requires companies to disclose the fair value of their financial instruments according to a fair value hierarchy (i.e., Levels 1, 2, and 3 inputs, as defined below). The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities and the lowest priority to unobservable inputs.

Financial instruments measured and reported at fair value are classified and disclosed in one of the following categories:
Level 1 – Valuations based on quoted prices in active markets for identical assets or liabilities at the reporting date. Since valuations are based on quoted prices that are readily and regularly available in an active market, value of these products does not entail a significant degree of judgment.
Level 2 – Valuations based on quoted prices in markets for which not all significant inputs are observable, directly or indirectly. Corporate debt securities valued in accordance with the evaluated price supplied by an independent service are categorized as Level 2 in the hierarchy. Other securities categorized as Level 2 include securities valued at the mean between the last reported bid and ask quotation.
Level 3 – Valuations based on inputs that are unobservable and significant to the fair value measurement.

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

For actively traded securities, the Company values investments using the closing price of the securities on the exchange or market on which the securities principally trade. If the security is not traded on the last business day of the quarter, it is generally valued at the mean between the last bid and ask quotation. Mutual funds, which include open- and closed-end funds, exchange-traded funds, and offshore funds, are valued at net asset value or closing price, as applicable. Certain corporate debt securities are valued by an independent pricing service using an evaluated quote based on such factors as institutional-size trading in similar groups of securities, yield, quality maturity, coupon rate, type of issuance and individual trading characteristics and other market data. As part of its independent price verification process, the Company reviews the fair value provided by the pricing service using information such as transactions in these investments, broker quotes, market transactions in comparable investments, general market conditions and the issuer's financial condition. Debt securities that are not valued by an independent pricing service are valued based on review of similarly structured issuances in similar jurisdictions, when possible, or based on other traded debt securities issued by the issuer. The Company also takes into consideration numerous other factors that could affect valuation such as overall market conditions, liquidity of the security and bond structure. Securities for which market quotations are not readily available are valued at their fair value as determined by the portfolio management team. The portfolio management team includes representatives from the investment, accounting and legal/compliance departments. The portfolio management team meets periodically to consider a number of factors in determining a security’s fair value, including the security’s trading volume, market values of similar class issuances, investment personnel’s judgment regarding the market experience of the issuer, financial status of the issuer, the issuer’s management, and back testing, as appropriate. The fair values may differ from what may have been used had a broader market for these securities existed. The portfolio management team reviews inputs and assumptions and reports material items to the board of directors.

Prior to March 31, 2014, the Company classified investments that were valued using the mean between the last reported bid ask quotation as Level 1 investments. The Company has determined that it is reasonable to classify these securities as Level 2 investments. This reclassification does not affect balance sheet presentation, net income or earnings per share.


PAGE 9



The following presents fair value measurements, as of March 31, 2015, and June 30, 2014, for the major categories of U.S. Global’s investments measured at fair value on a recurring basis:
 
 
Fair Value Measurement using
 
 
March 31, 2015
(dollars in thousands)
 
Quoted Prices
(Level 1)
 
Significant
Other Inputs
(Level 2)
 
Significant
Unobservable
Inputs
(Level 3)
 
Total
Trading securities
 
 
 
 
 
 
 
 
Offshore fund
 
$

 
$
465

 
$

 
$
465

Mutual funds - Fixed income
 
15,580

 

 

 
15,580

Mutual funds - Domestic equity
 
398

 

 

 
398

Other
 

 

 

 

Total trading securities
 
15,978

 
465

 

 
16,443

 
 
 
 
 
 
 
 
 
Available-for-sale securities
 
 
 
 
 
 
 
 
Common stock - Domestic
 
929

 

 

 
929

Common stock - International
 
839

 
1

 

 
840

Corporate debt
 

 
97

 
574

 
671

Mutual funds - Fixed income
 
1,229

 

 

 
1,229

Mutual funds - Domestic equity
 
467

 

 

 
467

Other
 
167

 

 

 
167

Total available-for-sale securities
 
3,631

 
98

 
574

 
4,303

Total Investments Measured at Fair Value on a Recurring Basis
 
$
19,609

 
$
563

 
$
574

 
$
20,746


 
 
Fair Value Measurement using
 
 
June 30, 2014
(dollars in thousands)
 
Quoted Prices
(Level 1)
 
Significant
Other Inputs
(Level 2)
 
Significant
Unobservable
Inputs
(Level 3)
 
Total
Trading securities
 
 
 
 
 
 
 
 
Offshore fund
 
$

 
$
998

 
$

 
$
998

Mutual funds - Fixed income
 
16,333

 

 

 
16,333

Mutual funds - Domestic equity
 
459

 

 

 
459

Other
 
27

 

 

 
27

Total trading securities
 
16,819

 
998

 

 
17,817

 
 
 
 
 
 
 
 
 
Available-for-sale securities
 
 
 
 
 
 
 
 
Common stock - Domestic
 
1,118

 

 

 
1,118

Common stock - International
 
1,406

 
3

 

 
1,409

Corporate debt
 
292

 
1,090

 
250

 
1,632

Mutual funds - Fixed income
 
1,247

 

 

 
1,247

Mutual funds - Domestic equity
 
550

 

 

 
550

Other
 
240

 

 

 
240

Total available-for-sale securities
 
4,853

 
1,093

 
250

 
6,196

Total Investments Measured at Fair Value on a Recurring Basis
 
$
21,672

 
$
2,091

 
$
250

 
$
24,013



PAGE 10



As of March 31, 2015, approximately 94 percent of the Company’s financial assets measured at fair value are derived from Level 1 inputs, three percent of the Company’s financial assets measured at fair value are derived from Level 2 inputs, and the remaining three percent are Level 3 inputs. As of June 30, 2014, approximately 90 percent of the Company’s financial assets measured at fair value are derived from Level 1 inputs, nine percent of the Company’s financial assets measured at fair value are derived from Level 2 inputs, and the remaining one percent are Level 3 inputs. The Company had transfers from Level 1 to Level 2 in the amount of $82,000 due to securities valued at the mean between bid and ask quotations at March 31, 2015, and which were valued at a quoted price at the prior period end. The Company had transfers from Level 2 to Level 3 in the amount of $343,000 due to securities being valued based on similarly structured issuances at March 31, 2015, and which were valued at a price supplied by an independent pricing service at the prior period end. The Company recognizes transfers between levels at the end of each quarter.

In Level 2, the Company has an investment in an affiliated offshore fund, classified as trading, with a fair value of $465,000 as of March 31, 2015, based on the net asset value per share, which invests in companies in the energy and natural resources sectors. The Company may redeem this investment on the first business day of each month after providing a redemption notice at least forty-five days prior to the proposed redemption date.

In addition, the Company has investments in corporate debt securities of $97,000 as of March 31, 2015, categorized as Level 2, which the Company valued in accordance with the evaluated price supplied by an independent pricing service or valued using the mean between the last reported bid ask quotation.

The corporate debt in Level 3 is valued based on review of similarly structured issuances in similar jurisdictions. At March 31, 2015, the Level 3 corporate debt is valued at cost, which approximates fair value as a result of the Company’s review of similar structured issuances in similar jurisdictions or valued based on traded issuances from the issuer.
The following table is a reconciliation of investments for which unobservable inputs (Level 3) were used in determining fair value during the nine months ended March 31, 2015, and March 31, 2014:
 
 
 
Changes in Level 3 Assets Measured at Fair Value on a Recurring Basis
 
 
March 31, 2015
 
March 31, 2014
(dollars in thousands)
 
Corporate Debt
 
Common Stock - International
 
Corporate Debt
 
Other
Beginning Balance
 
$
250

 
$
95

 
$

 
$
163

Return of capital/principal payments received
 
(19
)
 

 

 
(43
)
Total gains or losses (realized/unrealized)
 
 
 
 
 
 
 
 
Included in earnings (investment income)
 

 

 

 

Included in other comprehensive income
 

 
5

 

 
5

Purchases
 

 

 
250

 
160

Sales
 

 

 

 

Transfers into Level 3
 
343

 

 

 

Transfers out of Level 3
 

 
(100
)
 

 
(285
)
Ending Balance
 
$
574

 
$

 
$
250

 
$


NOTE 4. BUSINESS COMBINATION

Effective March 31, 2013, the Company, through USCAN, purchased 50 percent of the issued and outstanding shares of Galileo Global Equity Advisors, Inc., a privately held Toronto-based asset management firm, for $600,000 cash.

Effective June 1, 2014, the Company, through USCAN, completed its purchase of an additional 15 percent interest in Galileo from the company's founder, Michael Waring, for $180,000 cash. This strategic investment brings USCAN's ownership to 65 percent of the outstanding shares of Galileo, which represents a controlling interest in Galileo. Prior to June 1, 2014, the Company accounted for the investment in Galileo under the equity method of accounting. After June 1, 2014, Galileo was consolidated with the operations of the Company. Frank Holmes, CEO, and Susan McGee, President and General Counsel, serve as directors of Galileo.

Included in other income for the three and nine months ending March 31, 2014, is $30,000 and $15,000, respectively, from the Company's interest in Galileo, accounted for under the equity method of accounting.

PAGE 11



NOTE 5. INVESTMENT MANAGEMENT, TRANSFER AGENT AND OTHER FEES

The Company serves as investment adviser to U.S. Global Investors Funds (“USGIF” or the “Funds”) and receives a fee based on a specified percentage of net assets under management.

The advisory agreement for the equity funds provides for a base advisory fee that is adjusted upwards or downwards by 0.25 percent when there is a performance difference of 5 percent or more between a fund’s performance and that of its designated benchmark index over the prior rolling 12 months. For the three and nine months ended March 31, 2015, the Company realized a decrease in its base advisory fee of $281,000 and $710,000, respectively. For the corresponding periods in fiscal year 2014, base advisory fees were adjusted downward by $214,000 and $632,000, respectively.

The following changes were made during the prior fiscal year to the mutual funds the Company manages: (1) the Global Emerging Markets Fund liquidated on October 31, 2013, (2) the MegaTrends Fund was reorganized into the Holmes Growth Fund (renamed Holmes Macro Trends Fund), (3) the Tax Free Fund was reorganized into the Near-Term Tax Free Fund, (4) the Government Fund changed from a money market fund to a U.S. Government ultra-short bond fund, and (5) the U.S. Treasury Securities Cash Fund was liquidated on December 27, 2013. 

The Company has agreed to contractually limit the expenses of the Near-Term Tax Free Fund through April 2016. The Company has voluntarily waived or reduced its fees and/or agreed to pay expenses on the remaining funds. These caps will continue on a voluntary basis at the Company’s discretion. The aggregate fees waived and expenses borne by the Company for the three and nine months ended March 31, 2015, were $391,000 and $1,005,000, respectively, compared with $354,000 and $2,102,000, respectively, for the corresponding periods in the prior fiscal year.

Prior to the U.S. Treasury Securities Cash Fund liquidation and the U.S. Government Securities Savings Fund conversion, the Company voluntarily agreed to waive fees and/or reimburse the U.S. Treasury Securities Cash Fund and the Government Fund to the extent necessary to maintain the respective fund’s yield at a certain level as determined by the Company (Minimum Yield). The above waived fees for the three and nine months ended March 31, 2014, include total fees waived and/or expenses reimbursed as a result of this agreement of $0 and $584,000, respectively.

The Company may recapture any fees waived and/or expenses reimbursed to maintain the Minimum Yield within three years after the end of the fund’s fiscal year of such waiver and/or reimbursement. Thus, $510,000 of the waiver for the Government Fund is recoverable by the Company through December 31, 2015; and $498,000 through December 31, 2016.

The Company receives shareholder servicing fees based on the value of assets held through broker-dealer platforms.

Effective in December 2013, administrative service fees paid to the Company changed from an annual rate of 0.08 percent to 0.10 percent per investor class and from 0.06 percent to 0.08 percent per institutional class of each fund, based on average daily net assets, plus $10,000 per fund per year. Effective November 1, 2014, the per fund fee changed to $7,000 per year.

As of March 31, 2015, the Company had $502,000 of receivables from USGIF included in the Consolidated Balance Sheets with “receivables”.

The Company’s Board of Directors formally agreed on August 23, 2013, to exit the transfer agency business so that the Company could focus more on its core strength of investment management. USSI served as the transfer agent to the USGIF until conversion to a new transfer agent on December 9, 2013. Before the conversion, USSI received fees based on the number of shareholder accounts, transaction and activity-based fees and certain miscellaneous fees directly from USGIF shareholders. The transfer agency fees are included in discontinued operations in the statement of operations.

The Company provides advisory services for two offshore clients and received advisory fees based on the net asset values of the clients and performance fees, if any, based on the overall increase in net asset values. Another offshore fund had liquidated in November 2013. The Company recorded advisory and performance fees from these clients totaling $25,000 and $103,000, respectively, for the three and nine months ended March 31, 2015, and $42,000 and $147,000, respectively, for the corresponding periods in the prior fiscal year. Frank Holmes, CEO, serves as a director of the offshore clients.

Galileo provides advisory services for clients and receives advisory fees based on the net asset values of the clients. Galileo recorded advisory fees from these clients totaling $413,000 and $1.59 million, respectively, for the three and nine months ended March 31, 2015.

PAGE 12




NOTE 6. BORROWINGS

As of March 31, 2015, the Company has no long-term liabilities.

The Company has access to a $1 million credit facility with a 1-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 Company has been in compliance with all financial covenants during the fiscal year. As of March 31, 2015, this credit facility remained unutilized by the Company.

NOTE 7. STOCKHOLDERSEQUITY

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. A monthly dividend of $0.005 per share is authorized through June 30, 2015, and will be reviewed by the board quarterly.

The Board of Directors approved a share repurchase program on December 7, 2012, authorizing the Company to purchase up to $2.75 million of its outstanding common shares as market and business conditions warrant on the open market in compliance with Rule 10b-18 of the Securities Exchange Act of 1934. This share repurchase authorization ended on December 31, 2013. On December 12, 2013, and December 10, 2014, the Board of Directors renewed the repurchase program for calendar year 2014 and 2015, respectively. The total amount of shares that may be repurchased in 2015 under the renewed program is $2.75 million. The acquired shares may be used for corporate purposes, including shares issued to employees in the Company’s stock-based compensation programs. For the three and nine months ended March 31, 2015, the Company repurchased 19,245 and 86,250 class A shares using cash of $60,000 and $266,000, respectively. For the three and nine months ended March 31, 2014, the Company repurchased 35,065 and 76,511 class A shares using cash of $121,000 and $230,000, respectively.

Stock compensation plans

The Company’s stock option plans provide for the granting of class A shares as either incentive or nonqualified stock options to employees and non-employee directors. Options are subject to terms and conditions determined by the Compensation Committee of the Board of Directors. Options outstanding and exercisable at March 31, 2015, were 22,000 at a weighted average exercise price of $18.72. There were no options granted, exercised or forfeited for the nine months ended March 31, 2015. 

The Company accounts for stock-based compensation in accordance with ASC 718 Compensation – Stock Compensation. Stock-based compensation expense is recorded for the cost of stock options. There was no stock-based compensation expense for the three and nine months ended March 31, 2015. Due to option forfeitures that occurred in the three months ended March 31, 2014, the Company reversed $1,000 of compensation expense recognized during the first six months of the fiscal year. Stock-based compensation expense for the nine months ended March 31, 2014, was $1,000. As of March 31, 2015, and March 31, 2014, there was no unrecognized share-based compensation cost related to share-based compensation granted under the plans to be recognized over the remainder of their respective vesting periods.

PAGE 13



NOTE 8. EARNINGS PER SHARE

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

The following table sets forth the computation for basic and diluted EPS:
 
 
Nine Months Ended March 31,
 
Three Months Ended March 31,
(dollars in thousands, except per share data)
 
2015
 
2014
 
2015
 
2014
Net loss
 
 
 
 
 
 
 
 
Loss from continuing operations
 
$
(1,925
)
 
$
(993
)
 
$
(994
)
 
$
(26
)
Less: Income attributable to non-controlling interest in subsidiary
 
53

 

 
13

 

Loss from continuing operations attributable to U.S. Global Investors, Inc.
 
(1,978
)
 
(993
)
 
(1,007
)
 
(26
)
Loss from discontinued operations attributable to U.S. Global Investors, Inc.
 

 
(238
)
 

 
(2
)
Net loss attributable to U.S. Global Investors, Inc.
 
$
(1,978
)
 
$
(1,231
)
 
$
(1,007
)
 
$
(28
)
 
 
 
 
 
 
 
 
 
Weighted average number of outstanding shares
 
 
 
 
 
 
Basic
 
15,406,189

 
15,466,280

 
15,379,365

 
15,454,932

Effect of dilutive securities
 
 
 
 
 
 
 
 
Employee stock options
 

 

 

 

Diluted
 
15,406,189

 
15,466,280

 
15,379,365

 
15,454,932

 
 
 
 
 
 
 
 
 
Loss per share attributable to U.S. Global Investors, Inc.
 
 
 
 
 
 
 
 
Basic
 
 
 
 
 
 
 
 
   Loss from continuing operations
 
$
(0.13
)
 
$
(0.06
)
 
$
(0.07
)
 
$

   Loss from discontinued operations
 
$

 
$
(0.02
)
 
$

 

Net loss attributable to U.S. Global Investors, Inc.
 
$
(0.13
)
 
$
(0.08
)
 
$
(0.07
)
 
$

Diluted
 
 
 
 
 
 
 
 
   Loss from continuing operations
 
$
(0.13
)
 
$
(0.06
)
 
$
(0.07
)
 
$

   Loss from discontinued operations
 
$

 
$
(0.02
)
 
$

 
$

Net loss attributable to U.S. Global Investors, Inc.
 
$
(0.13
)
 
$
(0.08
)
 
$
(0.07
)
 
$

 
The diluted EPS calculation excludes the effect of stock options when their exercise prices exceed the average market price for the period. For the three and nine months ended March 31, 2015, and the three and nine months ended March 31, 2014, 22,000 options were excluded from diluted EPS.

During the three and nine months ended March 31, 2015, and the three and nine months ended March 31, 2014, the Company repurchased class A shares on the open market. Upon repurchase, these shares are classified as treasury shares and are deducted from outstanding shares in the earnings per share calculation.

NOTE 9. INCOME TAXES

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

PAGE 14




current deferred tax asset primarily consists of unrealized losses on trading securities. The long-term deferred tax asset is composed primarily of unrealized losses and other-than-temporary impairments on available-for-sale securities, differences in tax and book accumulated depreciation and the difference in tax treatment of stock options.

For federal income tax purposes at March 31, 2015, the Company has charitable contribution carryovers of approximately $121,000, expiring in fiscal years 2018 - 2020. The Company has net operating loss carryovers of $1,946,000, expiring in fiscal year 2035. If certain changes in the Company's ownership should occur, there could be an annual limitation on the amount of net operating loss carryovers that could be utilized.

A valuation allowance is provided when it is more likely than not that some portion of the deferred tax amount will not be realized. At March 31, 2015, and June 30, 2014, a valuation allowance of $703,000 and $35,000, respectively, was included related to the charitable contribution carryover and the fiscal 2014 net operating loss carryover.

NOTE 10. ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

The following table presents change in accumulated other comprehensive income (loss) ("AOCI") by component:

(dollars in thousands)
Unrealized gains (losses) on available-for-sale investments 1
 
Foreign currency adjustment
 
Total
Nine Months Ended March 31, 2015
 
 
 
 
 
Balance at June 30, 2014
$
888

 
$
18

 
$
906

Other comprehensive loss before reclassifications
(1,306
)
 
(185
)
 
(1,491
)
Tax effect
444

 

 
444

Amount reclassified from AOCI
(486
)
 

 
(486
)
Tax effect
165

 

 
165

Net other comprehensive loss for the nine months ended March 31, 2015
(1,183
)
 
(185
)
 
(1,368
)
Balance at March 31, 2015
$
(295
)
 
$
(167
)
 
$
(462
)

(dollars in thousands)
Unrealized gains (losses) on available-for-sale investments 1
 
Foreign currency adjustment
 
Total
Three Months Ended March 31, 2015
 
 
 
 
 
Balance at December 31, 2014
$
(213
)
 
$
(78
)
 
$
(291
)
Other comprehensive loss before reclassifications
(20
)
 
(89
)
 
(109
)
Tax effect
7

 

 
7

Amount reclassified from AOCI
(105
)
 

 
(105
)
Tax effect
36

 

 
36

Net other comprehensive loss for the three months ended March 31, 2015
(82
)
 
(89
)
 
(171
)
Balance at March 31, 2015
$
(295
)
 
$
(167
)
 
$
(462
)


PAGE 15



(dollars in thousands)
Unrealized gains (losses) on available-for-sale investments 1
 
Foreign currency adjustment
 
Total
Nine Months Ended March 31, 2014
 
 
 
 
 
Balance at June 30, 2013
$
652

 
$

 
$
652

Other comprehensive loss before reclassifications
1,137

 

 
1,137

Tax effect
(387
)
 

 
(387
)
Amount reclassified from AOCI
(996
)
 

 
(996
)
Tax effect
339

 

 
339

Net other comprehensive loss for the nine months ended March 31, 2014
93

 

 
93

Balance at March 31, 2014
$
745

 
$

 
$
745


(dollars in thousands)
Unrealized gains (losses) on available-for-sale investments 1
 
Foreign currency adjustment
 
Total
Three Months Ended March 31, 2014
 
 
 
 
 
Balance at December 31, 2013
$
566

 
$

 
$
566

Other comprehensive loss before reclassifications
575

 

 
575

Tax effect
(195
)
 

 
(195
)
Amount reclassified from AOCI
(304
)
 

 
(304
)
Tax effect
103

 

 
103

Net other comprehensive income for the three months ended March 31, 2014
179

 

 
179

Balance at March 31, 2014
$
745

 
$

 
$
745


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


PAGE 16



NOTE 11. FINANCIAL INFORMATION BY BUSINESS SEGMENT

The Company operates principally in three business segments: providing investment management services to USGIF and offshore funds it manages, investment management services in Canada, and investing for its own account in an effort to add growth and value to its cash position. The following schedule details total revenues and income by business segment:

(dollars in thousands)
 
Investment
Management
Services
 
Investment
Management
Services - Canada
 
Corporate
Investments
 
Consolidated
Nine months ended March 31, 2015
 
 
 
 
 
 
 
 
Net operating revenues
 
$
5,906

 
$
1,594

 
$

 
$
7,500

Net other income
 
$

 
$

 
$
522

 
$
522

Income (loss) from continuing operations before income taxes
 
$
(2,422
)
 
$
3

 
$
515

 
$
(1,904
)
Depreciation and amortization
 
$
190

 
$
56

 
$

 
$
246

Capital expenditures
 
$
40

 
$

 
$

 
$
40

Gross identifiable assets at March 31, 2015
 
$
6,979

 
$
1,790

 
$
23,327

 
$
32,096

Deferred tax asset
 
 
 
 
 
 
 
$
922

Consolidated total assets at March 31, 2015
 
 
 
 
 
 
 
$
33,018

Nine months ended March 31, 2014
 
 
 
 
 
 
 
 
Net operating revenues
 
$
8,534

 
$

 
$

 
$
8,534

Net other income
 
$

 
$

 
$
1,497

 
$
1,497

Income (loss) from continuing operations before income taxes
 
$
(2,950
)
 
$

 
$
1,491

 
$
(1,459
)
Loss from discontinued operations
 
$
(238
)
 
$

 
$

 
$
(238
)
Depreciation and amortization
 
$
191

 
$

 
$

 
$
191

Capital expenditures
 
$

 
$

 
$

 
$

Three months ended March 31, 2015
 
 
 
 
 
 
 
 
Net operating revenues
 
$
1,418

 
$
413

 
$

 
$
1,831

Net other income
 
$

 
$

 
$
249

 
$
249

Income (loss) from continuing operations before income taxes
 
$
(1,175
)
 
$
(39
)
 
$
245

 
$
(969
)
Depreciation and amortization
 
$
63

 
$
18

 
$

 
$
81

Capital expenditures
 
$

 
$

 
$