Quarterly Report for Quarter Ending September 30, 2025 (Form 10-Q)

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

U.S. Global Investors, Inc. (the "Company" or "U.S. Global") has made forward-looking statements concerning the Company's performance, financial condition, and operations in this report. The Company from time to time may also make forward-looking statements in its public filings and press releases. Such forward-looking statements are subject to various known and unknown risks and uncertainties and do not guarantee future performance. Actual results could differ materially from those anticipated in such forward-looking statements due to a number of factors, some of which are beyond the Company's control, including: (i) the volatile and competitive nature of the investment management industry, (ii) changes in domestic and foreign economic conditions, including significant economic disruptions from epidemics, pandemics or outbreaks and the actions taken in connection therewith, (iii) the effect of government regulation on the Company's business, and (iv) market, credit, and liquidity risks associated with the Company's investment management activities. Due to such risks, uncertainties, and other factors, the Company cautions each person receiving such forward-looking information not to place undue reliance on such statements. All such forward-looking statements are current only as of the date on which such statements were made.

FACTORS AFFECTING OUR BUSINESS

The Company's business activities are affected by many factors, including, without limitation, market volatility, investor sentiment, general economic and business conditions, interest rate movements, taxes, inflation, labor costs, competitive conditions, and industry regulation, many of which are beyond the control of the Company's management. Further, the business and regulatory environments in which the Company operates remain complex, uncertain, and subject to change. We expect that regulatory requirements and developments will cause us to incur additional administrative and compliance costs. 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, 2025.

BUSINESS SEGMENTS

The Company, with principal operations located in San Antonio, Texas, manages two business segments: (1) the Company offers a broad range of investment management products and services to meet the needs of individual and institutional investors, and (2) the Company invests for its own account in an effort to add growth and value to its cash position.

The following is a brief discussion of the Company's business segments.

Investment Management Services

The Company provides advisory services for four U.S.-based exchange-traded fund ("ETF") clients and receives monthly advisory fees based on the net asset values of the funds. Information on the U.S.-based ETFs can be found at www.usglobaletfs.com, including the prospectus, performance and holdings. The Company also serves as investment advisor to one European-based ETF and receives a monthly advisory fee based on the net asset value of the fund. The European-based ETF is not available to U.S. investors. The ETFs' authorized participants are not required to give advance notice prior to redemption of shares in the ETFs, and the ETFs do not charge a redemption fee.

The Company also generates operating revenues from managing and servicing U.S. Global Investors Funds ("USGIF" or the "Funds"). 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 asset levels of the Funds, thereby affecting income and results of operations. Detailed information regarding the Funds managed by the Company within USGIF can be found on the Company's website, www.usfunds.com, including the prospectus and performance information for each Fund. The mutual fund shareholders in USGIF are not required to give advance notice prior to redemption of shares in the Funds.

At September 30, 2025, total assets under management, including ETF and USGIF clients, were approximately $1.4 billion compared to $1.5 billion at September 30, 2024, a decrease of $167.2 million. During the three months ended September 30, 2025, average assets under management, including ETF and USGIF clients, were $1.4 billion, compared to $1.5 billion during the three months ended September 30, 2024. At June 30, 2025, the Company's prior fiscal year end, total assets under management, including ETF and USGIF clients, were approximately $1.3 billion, and increased $52.9 million during the three months ended September 30, 2025.

The following tables summarize the changes in assets under management for USGIF for the three months ended September 30, 2025, and 2024.

		Changes in Assets Under Management
		Three Months Ended September 30,
		2025												2024
(dollars in thousands)		Equity				Fixed Income				Total				Equity				Fixed Income				Total
Beginning Balance		$	296,756			$	53,679			$	350,435			$	233,296			$	55,102			$	288,398
Market appreciation (depreciation)			109,755				576				110,331				27,598				818				28,416
Dividends and distributions			-				(411	)			(411	)			-				(468	)			(468	)
Net shareholder purchases (redemptions)			2,257				(2,488	)			(231	)			(4,335	)			(951	)			(5,286	)
Ending Balance		$	408,768			$	51,356			$	460,124			$	256,559			$	54,501			$	311,060
Average investment management fee			0.82	%			0.00	%			0.71	%			0.77	%			0.00	%			0.62	%
Average net assets		$	330,796			$	52,101			$	382,897			$	240,947			$	55,207			$	296,154

As shown above, USGIF's period-end assets under management (AUM) at September 30, 2025, were higher than at September 30, 2024. Average net assets during the three months ended September 30, 2025, were also higher than the corresponding period in 2024. For both the three months ended September 30, 2025, and 2024, USGIF's period-end AUM increased, primarily driven by market appreciation in the equity funds.

The average annualized investment management fee rate (total advisory fees, excluding performance fees, as a percentage of average assets under management) was 71 basis points for the three months ended September 30, 2025, compared to 62 basis points for the same period in 2024. For equity funds, the average investment management fee was 82 basis points for the three months ended September 30, 2025, compared to 77 basis points for the same period in 2024. The Company has agreed to contractually or voluntarily limit the expenses of the Funds. Therefore, the Company waived or reduced its fees and/or agreed to pay expenses of the Funds. As a result of these fee waivers, the average investment management fee for the fixed income funds was minimal.

Corporate Investments

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. The Company's investment activities are reviewed and monitored by Company compliance personnel, and various reports are provided to certain investment advisory clients. Written procedures are in place to manage compliance with the code of ethics and other policies affecting the Company's investment practices. 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 September 30, 2025, the Company held investments carried at fair value on a recurring basis of $13.6 million and a cost basis of $16.3 million. The fair value of these investments is approximately 27.8 percent of the Company's total assets at September 30, 2025. In addition, the Company held other investments of approximately $2.7 million, and held-to-maturity debt investments, net of allowance for credit losses, of $953,000.

Investments recorded at fair value on a recurring basis were approximately $13.6 million at September 30, 2025, compared to approximately $13.8 million at June 30, 2025, the Company's prior fiscal year end, which is a decrease of approximately $148,000. See Note 2, Investments, in the Notes to Consolidated Financial Statements of this Quarterly Report on Form 10-Q, for further information regarding investment activities.

RESULTS OF OPERATIONS - Three months ended September 30, 2025, and 2024

The Company recorded net income of $1.5 million ($0.12 per share) for the three months ended September 30, 2025, compared to $315,000 ($0.02 per share) for the three months ended September 30, 2024, an increase of approximately $1.2 million. The increase is primarily attributed to an increase in net investment income and an increase in operating revenues, partially offset by an increase in tax expense and operating expenses during the current period compared to the same period in the prior year, as discussed further below.

Operating Revenues

Total consolidated operating revenues for the three months ended September 30, 2025, increased $94,000, or 4.4 percent, compared with the three months ended September 30, 2024. The increase was primarily attributable to the following:

•

There were no performance fee adjustments for USGIF in the current period, compared to fees paid of $103,000 in the corresponding period in the prior year, representing a favorable change. The USGIF performance fee, which applied to the equity funds only, were fulcrum fees consisting of a 0.25 percent upwards or downwards adjustment of the base management fee when there was a 5 percent or more performance difference between a fund's performance and that of its designated benchmark index over the prior rolling 12 months. This performance adjustment began to be phased out during the fourth quarter of fiscal 2024 and ceased during the fourth quarter of fiscal 2025. During the phase-out period, the adjustment for the performance fee could only be adjusted downward.

•

Administrative service fees for USGIF increased $12,000, reflecting higher average assets under management, primarily in the equity funds.

•

Base management fees decreased $21,000. ETF unitary management fees decreased $240,000 primarily due to lower average assets under management in the Jets ETF. USGIF advisory fees increased $219,000, reflecting higher average assets under management, primarily in the equity funds.

Operating Expenses

Total consolidated operating expenses for the three months ended September 30, 2025, increased $50,000, or 1.8 percent, compared with the same period in 2024. The increase was primarily driven by a $101,000, or 9.3 percent, rise in employee compensation and benefits, reflecting higher bonuses, and a $52,000, or 47.7 percent, increase in advertising expenses related to expanded ETF marketing efforts. These increases were partially offset by a $93,000, or 6.2 percent, decline in general and administrative expenses, primarily due to lower ETF-related and travel and entertainment costs. Other operating expense categories experienced smaller, offsetting fluctuations.

Other Income (Loss)

Total consolidated other income was $2.4 million for the three months ended September 30, 2025, an increase of $1.4 million compared with $995,000 for the same period in 2024. The increase was primarily attributable to higher net investment income, which totaled $2.3 million for the three months ended September 30, 2025, compared with $917,000 in the prior year period. The change in net investment income was driven by the following components:

	•	Net unrealized gains on equity securities totaled $1.9 million in the current period, compared to $33,000 in the prior year period, reflecting a favorable change of $1.9 million. The current period includes $1.3 million of unrealized gains recognized under the measurement alternative; none were recorded in the prior year period.
	•	Dividend and interest income was $397,000 in the current period compared with $600,000 in the prior year period, a decrease of $203,000. The decline primarily reflects lower interest income earned on the Company's investment in HIVE convertible debentures due to principal repayments.
	•	Realized and unrealized gains on debt securities totaled $60,000 in the current period compared with $243,000 in the prior year period, a decrease of $183,000.

•

Foreign currency losses were $93,000 in the current period compared with gains of $47,000 in the prior year period, an unfavorable change of $140,000.

Provision for Income Taxes

A tax expense of $337,000 was recorded for the three months ended September 30, 2025, compared to $121,000 for the same period in 2024, reflecting an increase of $216,000. The increase was primarily driven by higher net investment income in the current period.

LIQUIDITY AND CAPITAL RESOURCES

At September 30, 2025, the Company had net working capital (current assets minus current liabilities) of approximately $37.2 million, a decrease of $51,000, or 0.1 percent, since June 30, 2025, and a current ratio (current assets divided by current liabilities) of 20.5 to 1. With approximately $24.6 million in cash and cash equivalents, an increase of $34,000, or 0.1 percent since June 30, 2025, and $12.8 million in securities carried at fair value on a recurring basis, excluding convertible securities, which together comprise approximately 76.4 percent of total assets, the Company has adequate liquidity to meet its current obligations.

The increase in cash and cash equivalents was primarily due to proceeds from principal paydowns of $750,000 and return of capital distributions of $88,000; partially offset by repurchases of the Company's common stock of $390,000, dividends paid of $292,000, and purchases of corporate investments of $100,000. Consolidated shareholders' equity at September 30, 2025, was $46.0 million, an increase of $784,000, or 1.7 percent since June 30, 2025. The increase was primarily driven by net income of $1.5 million, partially offset by repurchases of the Company's common stock (including excise tax) of $404,000, dividends declared of $287,000, and other comprehensive loss of $59,000 for the three months ended September 30, 2025.

The Company also has access to a $1.0 million credit facility, which can be utilized for working capital purposes. The credit agreement requires the Company to maintain certain covenants; the Company has been in compliance with these covenants during the current fiscal year. The credit agreement expires on May 31, 2026, and the Company intends to renew it biennially. The credit facility is collateralized by approximately $1.0 million, included in restricted cash on the Consolidated Balance Sheets, held in deposit in a money market account at the financial institution that provided the credit facility. As of September 30, 2025, this credit facility remained unutilized by the Company.

Investment advisory contracts pursuant to the Investment Company Act of 1940 and related affiliated contracts in the U.S., by law, may not exceed one year in length and, therefore, must be renewed at least annually after an initial two-year term. The investment advisory and related contracts between the Company and USGIF have been renewed through September 2026. The advisory agreement for the U.S.-based ETFs has been renewed through July 2026.

The primary cash requirements are for operating activities. The Company also uses cash to purchase investments, pay dividends and repurchase Company stock. The cash outlays for investments and dividend payments are discretionary and management or the Board may discontinue as deemed necessary. The stock repurchase plan is approved through December 31, 2025, but may be suspended or discontinued. Cash and securities recorded at fair value on a recurring basis, excluding convertible securities, of approximately $37.4 million, are available to fund current activities.

Management believes current cash reserves, investments, and financing available will be sufficient to meet foreseeable cash needs for operating activities.

CRITICAL ACCOUNTING ESTIMATES

For a discussion of other critical accounting policies that the Company follows, please refer to Item 7 in the Annual Report on Form 10-K for the year ended June 30, 2025.