U S GLOBAL INVESTORS INC

U.S. Global Investors, Inc. operates in the investment management industry, providing advisory and administrative services to mutual funds and exchange-traded funds. The Company also engages in corporate investments for its own account. The mutual fund industry is highly competitive, with approximately 8,400 domestically registered open-end investment companies and approximately 3,900 exchange-traded funds offered to the public in the U.S. as of the end of 2024. The Company competes with other mutual fund managers, investment advisers, insurance companies, banks, securities broker-dealers, and other financial institutions.

The Company's primary competitors include a large number of investment management firms, commercial banks, broker-dealers, insurance companies, and other financial institutions. The Company believes it has the resources, products, and personnel to compete effectively within the investment advisory industry and is known for its expertise in gold mining and exploration, natural resources, and airlines. A substantial amount of assets under management is concentrated in the U.S. Global Jets ETF, which represented 69 percent and 79 percent of average net assets for fiscal years 2025 and 2024, respectively, and 69 percent and 80 percent of total operating revenues for those same periods.

The Company generates operating revenues primarily from investment advisory services and administrative services provided to U.S. Global Investors Funds and ETF clients, as well as from investment income on its corporate investments. Advisory fees are based on a percentage of average net assets under management, with base management fees and, historically, performance fee adjustments. The Company also receives a unitary management fee from its ETF clients. Revenue is highly correlated to the level of assets under management and is affected by market fluctuations, shareholder inflows and outflows, and product mix.

The Company manages two business segments: Investment Management Services and Corporate Investments. Through Investment Management Services, the Company offers investment management products and services to U.S. Global Investors Funds and ETF clients. As of June 30, 2025, the Company advised four U.S.-based ETFs: U.S. Global Jets ETF, U.S. Global GO GOLD and Precious Metal Miners ETF, U.S. Global Sea to Sky Cargo ETF, and U.S. Global Technology and Aerospace & Defense ETF, and one European-based ETF, The Travel UCITS ETF. The Company also advises multiple mutual funds within USGIF, including gold and natural resources funds, international equity funds, and bond funds. For the year ended June 30, 2025, ETF advisory fees were $6,642,000 ¹ and USGIF advisory fees were $1,683,000 ², with USGIF administrative services fees of $127,000 ³. The Company recorded advisory fees from ETF clients of $6.6 million ⁴ and $9.4 million ⁵ in fiscal years 2025 and 2024, respectively. USGIF advisory fees in total, including performance adjustments, increased by approximately $230,000 ⁶, or 15.8 percent ⁷, in fiscal year 2025 compared to fiscal year 2024.

Through the Corporate Investments segment, the Company invests for its own account to add growth and value to its cash position. As of June 30, 2025, the Company held investments carried at fair value on a recurring basis of $13.8 million ⁸ with a cost basis of $17.0 million ⁹. These investments include trading securities at fair value of $12,188,000 ¹⁰ and available-for-sale debt securities at fair value of $1,576,000 ¹¹. The Company also held other investments of approximately $1.3 million ¹² and held-to-maturity debt investments, net of allowance for credit losses, of $948,000 ¹³. A significant portion of the Company's investments is in funds it advises, with fair values of $10.6 million ¹⁴ at June 30, 2025, and $10.5 million ¹⁵ at June 30, 2024. The Company also holds investments in HIVE Digital Technologies Ltd., which were convertible debentures and common shares valued at $1.6 million ¹⁶ at June 30, 2025, and convertible debentures valued at $4.4 million ¹⁷ at June 30, 2024.

During fiscal year 2025, the Company repurchased 801,043 ¹⁸ of its class A shares on the open market using cash of $2.0 million ¹⁹. The Company has a share repurchase program authorizing the Company to annually purchase up to $5.0 million ²⁰ of its outstanding common shares through December 31, 2025. As of June 30, 2025, approximately $4.1 million ²¹ remains available for repurchase. The Board of Directors has authorized a monthly dividend of $0.0075 ²² per share from July 2025 through September 2025, with total dividends payable of approximately $296,000 ²³. Dividends totaling $1.0 million ²⁴ were paid to holders of class A common stock and $186,000 ²⁵ to holders of class C common stock in fiscal year 2025. The Company also received loan proceeds of $75,000 ²⁶ from an entity in which it holds an equity investment.

Total consolidated operating revenues for the year ended June 30, 2025, were $8,452,000 ²⁷, a decrease of $2,532,000 ²⁸, or 23.1 percent ²⁹, compared to $10,984,000 ³⁰ in fiscal year 2024. The Company had a net loss of $334,000 ³¹ ($(0.03) ³² per share) for the year ended June 30, 2025, compared with net income of $1.3 million ³³ ($0.09 ³⁴ per share) for the year ended June 30, 2024. Total consolidated operating expenses decreased $26,000 ³⁵, or 0.2 percent ³⁶, to $11,438,000 ³⁷ from $11,464,000 ³⁸ in the prior year. Net investment income was $2,393,000 ³⁹ for fiscal year 2025, compared to $2,144,000 ⁴⁰ for fiscal year 2024. Cash and cash equivalents were $24,552,000 ⁴¹ at June 30, 2025, down from $27,399,000 ⁴² at June 30, 2024. Total shareholders' equity was $45,207,000 ⁴³ at June 30, 2025, a decrease of $3.8 million ⁴⁴, or 7.8 percent ⁴⁵, since June 30, 2024.

The Company's growth is tied to its ETF products, which include four U.S.-based ETFs listed on the New York Stock Exchange: U.S. Global Jets ETF, U.S. Global GO GOLD and Precious Metal Miners ETF, U.S. Global Sea to Sky Cargo ETF, and the U.S. Global Technology and Aerospace & Defense ETF, as well as one European-based ETF, The Travel UCITS ETF. The Company launched the U.S. Global Technology and Aerospace & Defense ETF (ticker WAR) during the period, which had $6,055,000 ⁴⁶ in assets under management as of June 30, 2025, and generated $10,000 ⁴⁷ in advisory fees in fiscal year 2025. The Company's focus remains on sustainable growth and innovation, with a commitment to navigating geopolitical and macroeconomic risks.

The Company's growth is also supported by its focus on natural resources and precious metals sectors, which management believes have generally benefited from geopolitical and macroeconomic shifts. The sustained demand for metals like gold and other commodities has supported performance-driven assets within these sectors. In the travel and tourism sector, robust demand persisted through the spring and summer months, translating into strong investor interest in airline stocks and related industries, which has been a significant driver for the Jets ETF and airline-related revenues.The Company's operational outlook is shaped by its reliance on technology infrastructure and its cybersecurity program. The Company has implemented a comprehensive technology and cybersecurity program as part of its overall risk management strategy, emphasizing defense, rapid detection, and swift remediation of cybersecurity threats. The Company's Director of Information Technology leads the cybersecurity program, supported by a Senior Systems Administrator, with over 65 years of combined information technology experience. The Company leverages external partners for expanded monitoring coverage and 24/7/365 coverage.

The Company has access to a $1.0 million ⁴⁸ credit facility for working capital purposes, which remains unutilized as of June 30, 2025. The credit agreement will expire on May 31, 2026 ⁴⁹, and the Company intends to renew it biennially. The Company's share repurchase program authorizes the Company to annually purchase up to $5.0 million ⁵⁰ of its outstanding common shares through December 31, 2025. The Board of Directors has authorized a monthly dividend of $0.0075 ⁵¹ per share from July 2025 through September 2025. The Company's capital allocation priorities include repurchases of common stock, which totaled $2.0 million ⁵² in fiscal year 2025, and dividends paid of $1.2 million ⁵³.

The Company faces headwinds from the persistence of tariffs and trade sanctions across several key nations, including ongoing tensions involving China, the Ukraine-Russia conflict, and geopolitical uncertainties surrounding India-Pakistan and Israel-Iran. The U.S. Federal Reserve has maintained higher interest rates for an extended period, with expectations for rate cuts being cautious due to inflation remaining above target and geopolitical uncertainties. Mutual funds continue to face outflows compared to ETFs and other alternative investments as investors seek more flexible or tactical exposure amid ongoing market volatility.

The Company's business is subject to substantial risk from litigation, regulatory investigations, and potential securities laws liability. The Company is exposed to liability under federal and state securities laws, and an adverse resolution of any lawsuit or proceeding could result in substantial costs or reputational harm. The Company also faces risks related to its indirect exposure to cryptocurrency markets through its investments in securities of issuers with operations in the cryptocurrency industry, which have been subject to significant fluctuations in value and may be influenced by a wide variety of factors including regulatory changes and cybersecurity risks.

The Company derives a substantial portion of revenue from one fund under management, the U.S. Global Jets ETF, which represented 69 percent ⁵⁴ of average net assets and 69 percent ⁵⁵ of total operating revenues for fiscal year 2025. A significant decrease in market value or redemptions in this fund would adversely affect revenues. The Company has indirect exposure to the cryptocurrency markets through its investments in HIVE Digital Technologies Ltd., which were valued at $1.6 million ⁵⁶ at June 30, 2025. Cryptocurrency markets have been subject to significant fluctuations in value, and this volatility may have a material impact on the Company's financial statements. The Company's investment advisory agreements are generally terminable on short notice and subject to annual renewal; the advisory agreements for the U.S.-based ETFs have been renewed through July 2026 ⁵⁷, but termination could lead to unexpected declines in revenue. The Company faces intense competition from a large number of investment management firms, commercial banks, and other financial institutions, and poor investment performance relative to benchmarks could impair revenues and growth. The Company also faces risks from increased regulatory and legislative actions, which could increase compliance costs and operational complexity.

Management's message emphasizes the ongoing impact of geopolitical tensions, monetary policy decisions, and market dynamics that have shaped the investment landscape. Management believes that certain asset classes, particularly those aligned with natural resources such as precious metals and mining, have generally benefited from geopolitical and macroeconomic shifts. The Company's focus remains on sustainable growth, innovation, and maintaining a vigilant approach to geopolitical and macroeconomic risks, positioning itself for resilience and long-term value creation. Management acknowledges that the persistence of tariffs and trade sanctions, the U.S. Federal Reserve's cautious approach to rate cuts, and the robust demand in the travel and tourism sector are key factors influencing the business. The Company's outlook acknowledges the ongoing impact of these factors and the Company's commitment to navigating these complexities.