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What changed in U S GLOBAL INVESTORS INC's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of U S GLOBAL INVESTORS INC's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+171 added−161 removedSource: 10-K (2023-11-16) vs 10-K (2022-09-02)

Top changes in U S GLOBAL INVESTORS INC's 2023 10-K

171 paragraphs added · 161 removed · 137 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

21 edited+0 added−1 removed30 unchanged
Biggest changeIn the advisory agreement, the Company is charged with seeking the best overall terms in executing portfolio transactions and selecting brokers or dealers. 1 Table of Contents As required by the Investment Company Act of 1940, as amended (“Investment Company Act”), the advisory agreement with USGIF is subject to annual renewal and is terminable upon 60-day notice.
Biggest changeAs required by the Investment Company Act of 1940, as amended (“Investment Company Act”), the advisory agreement with USGIF is subject to annual renewal and is terminable upon a 60 days' notice. In September 2023, the Board of Trustees of USGIF approved the annual renewal of the advisory agreement.
If the ability to use soft dollar arrangements were reduced or eliminated as a result of statutory amendments, new regulations or change in business practices, the Company’s operating expenses would increase. Relationships with Clients The business of the Company is to a significant degree dependent on its association and contractual relationships with USGIF and exchange traded fund clients.
If the ability to use soft dollar arrangements were reduced or eliminated as a result of statutory amendments, new regulations or a change in business practices, the Company’s operating expenses would increase. Relationships with Clients The business of the Company is to a significant degree dependent on its association and contractual relationships with USGIF and exchange traded fund clients.
In addition to base salary and bonus compensation, we also offer employees benefits such as life, disability, and health (medical, dental and vision) insurance, paid time off, a 401(k) plan that includes a match, discretionary profit-sharing, and assistance with savings programs. Long-term incentive awards include stock options. Competition The mutual fund industry is highly competitive.
In addition to base salary and bonus compensation, we also offer employees benefits such as life, disability, and health (medical, dental and vision) insurance, paid time off, a 401(k) plan that includes a match, discretionary profit-sharing, and assistance with savings programs. We also offer long-term incentive awards which include stock options. Competition The mutual fund industry is highly competitive.
Global, offer a greater variety of investment objectives and have greater resources to promote the sale of investments therein. However, the Company believes it has the resources, products, and personnel to compete with these other mutual funds. In particular, the Company is known for its expertise in the gold mining and exploration, natural resources, emerging markets, and airlines.
Global, offer a greater variety of investment objectives and have greater resources to promote the sale of investments therein. However, the Company believes it has the resources, products, and personnel to compete with these other mutual funds. In particular, the Company is known for its expertise in gold mining and exploration, natural resources, and airlines.
In addition to providing management and advisory services, the Company is actively engaged in investing for its own account. See segment information in the Notes to the Consolidated Financial Statements at Note 15, Financial Information by Business Segment, of this Annual Report on Form 10-K.
In addition to providing management and advisory services, the Company is actively engaged in investing for its own account. See segment information in the Notes to the Consolidated Financial Statements at Note 16, Financial Information by Business Segment, of this Annual Report on Form 10-K.
Many of these institutions are able to engage in more liberal advertising than mutual funds and ETFs and may offer accounts at competitive interest rates, which may be insured by federally chartered corporations such as the Federal Deposit Insurance Corporation. A number of mutual fund groups are significantly larger than the funds managed by U.S.
Many of these institutions are able to engage in more liberal advertising than mutual funds and ETFs and may offer accounts at competitive interest rates, which may be insured by federally chartered corporations such as the Federal Deposit Insurance Corporation. 2 Table of Contents A number of mutual fund groups are significantly larger than the funds managed by U.S.
Costs of distribution and compliance continue to put pressure on profit margins for the mutual fund industry. Despite the Company’s expertise in gold mining and exploration, natural resources, emerging markets, and airlines, the Company faces the same obstacle many advisers face, namely uncovering undervalued investment opportunities as the markets face further uncertainty and increased volatility.
Costs of distribution and compliance continue to put pressure on profit margins for the mutual fund industry. Despite the Company’s expertise in gold mining and exploration, natural resources, and airlines, the Company faces the same obstacles many advisers face, namely uncovering undervalued investment opportunities as the markets face further uncertainty and increased volatility.
Regulatory pronouncements and oversight have significantly increased the burden of compliance infrastructure with respect to the mutual fund industry and the capital markets. This momentum of regulations has contributed significantly to the costs of managing and administering mutual funds. 3 Table of Contents U.S. Global is registered as an investment adviser with the SEC.
Regulatory pronouncements and oversight have significantly increased the burden of compliance infrastructure with respect to the mutual fund industry and the capital markets. This momentum of regulations has contributed significantly to the costs of managing and administering mutual funds. U.S. Global is registered as an investment adviser with the SEC.
Global Jets UCITS ETF is not subject to renewal on an annual basis and is terminable upon 6-months' notice. Net assets under management on June 30, 2022, and June 30, 2021, are detailed in the following table. Assets Under Management (“AUM”) Fund Ticker June 30, 2022 June 30, 2021 (dollars in thousands) ETF Clients Airline and Cargo U.S.
Global Jets UCITS ETF is not subject to renewal on an annual basis and is terminable upon 6-months' notice. 1 Table of Contents Net assets under management on June 30, 2023, and 2022, are detailed in the following table. Assets Under Management (“AUM”) Fund Ticker June 30, 2023 June 30, 2022 (dollars in thousands) ETF Clients Airline and Cargo U.S.
The Company considers its relationship with its employees to be good. Our compensation program is designed to attract, retain and reward qualified individuals who possess the skills and motivation necessary to support our business objectives and assist in the achievement of goals. Key to our compensation program are performance-based cash and fund share bonuses and incentives for achieving professional certifications.
Our compensation program is designed to attract, retain and reward qualified individuals who possess the skills and motivation necessary to support our business objectives and assist in the achievement of goals. Key to our compensation program are performance-based cash and fund share bonuses and incentives for achieving professional certifications.
Additional Segment Information See additional financial information about business segments in Part II, Item 8, Financial Statements and Supplementary Data at Note 15, Financial Information by Business Segment, of this Annual Report on Form 10-K. 2 Table of Contents Human Capital As of June 30, 2022, U.S. Global and its wholly-owned subsidiaries employed 20 full-time employees and 2 part-time employees.
Additional Segment Information See additional financial information about business segments in Part II, Item 8, Financial Statements and Supplementary Data at Note 16, Financial Information by Business Segment, of this Annual Report on Form 10-K. Human Capital As of June 30, 2023, U.S. Global and its wholly-owned subsidiaries employed 21 full-time employees and 3 part-time employees.
According to the Investment Company Institute, at the end of 2021 there were approximately 8,900 domestically registered open-end investment companies and approximately 2,700 exchange-traded funds of varying sizes and investment policies, whose shares are being offered to the public in the U.S.
According to the Investment Company Institute, at the end of 2022 there were approximately 8,800 domestically registered open-end investment companies and approximately 3,000 exchange-traded funds of varying sizes and investment policies, whose shares are being offered to the public in the U.S.
The administrative services agreement with USGIF is subject to renewal on an annual basis and is terminable upon 60-day notice. In September 2021, the Board of Trustees of USGIF approved for an annual period the continuance of the agreement. Corporate Investments Investment Activities.
The administrative services agreement with USGIF is subject to renewal on an annual basis and is terminable upon 60 days' notice. In September 2023, the Board of Trustees of USGIF approved the annual renewal of the advisory agreement. Corporate Investments Investment Activities.
Global considers its relationships with its clients to be good, and management has no reason to believe that the management and service contracts will not be renewed in the future; however, there is no assurance that USGIF and/or the exchange traded fund clients will choose to continue their relationships with the Company.
Global considers its relationships with its clients to be good, and management has no reason to believe that the management and service contracts will not be renewed in the future; however, there is no assurance that USGIF and/or the exchange traded fund clients will choose to continue their relationships with the Company. 3 Table of Contents Available Information The Company’s Internet website address is www.usfunds.com.
Available Information The Company’s Internet website address is www.usfunds.com. Information contained on the Company’s website is not part of this annual report on Form 10-K.
Information contained on the Company’s website is not part of this annual report on Form 10-K.
Government Securities Ultra-Short Bond UGSDX 35,490 39,079 Near-Term Tax Free NEARX 35,671 36,763 Total Bond 71,161 75,842 Total U.S. Global Investors Funds 357,527 509,222 Total AUM $ 2,907,906 $ 4,229,609 Administrative Services. The Company also manages, supervises and conducts certain other affairs of USGIF, subject to the control of the Funds’ Board of Trustees pursuant to an administrative services agreement.
Government Securities Ultra-Short Bond UGSDX 33,214 35,490 Near-Term Tax Free NEARX 29,896 35,671 Total Bond 63,110 71,161 Total U.S. Global Investors Funds 328,439 357,527 Total AUM $ 2,370,092 $ 2,907,906 Administrative Services. The Company also manages, supervises and conducts certain other affairs of USGIF, subject to the control of the Funds’ Board of Trustees pursuant to an administrative services agreement.
Consistent with the investment restrictions, objectives and policies of the particular client, the portfolio team for each client determines what investments should be purchased, sold, and held, and makes changes in the portfolio deemed necessary or appropriate.
Consistent with the investment restrictions, objectives and policies of the particular client, the portfolio team for each client determines what investments should be purchased, sold, and held, and makes changes in the portfolio deemed necessary or appropriate. In the advisory agreement, the Company is charged with seeking the best overall terms in executing portfolio transactions and selecting brokers or dealers.
In September 2021, the Board of Trustees of USGIF approved for an annual period the continuance of the advisory agreement. In addition to providing advisory services to USGIF, the Company provides advisory services to three U.S.-based ETFs: U.S. Global Jets ETF, U.S. Global GO GOLD and Precious Metal Miners ETF, and the U.S. Global Sea to Sky Cargo ETF.
In addition to providing advisory services to USGIF, the Company provides advisory services to three U.S.-based ETFs: U.S. Global Jets ETF, U.S. Global GO GOLD and Precious Metal Miners ETF, and the U.S. Global Sea to Sky Cargo ETF. The advisory agreement for the U.S. based ETFs have been renewed through July 2024.
Global Jets ETF JETS $ 2,453,268 $ 3,616,805 U.S. Global Jets UCITS ETF JETS 12,934 947 U.S. Global Sea to Sky ETF SEA 7,568 - Total Airline and Cargo 2,473,770 3,617,752 Gold and Natural Resources U.S. Global GO GOLD and Precious Metal Miners ETF GOAU 76,609 102,635 Total Gold and Natural Resources 76,609 102,635 Total ETF Clients 2,550,379 3,720,387 U.S.
Global Jets ETF JETS $ 1,939,144 $ 2,453,268 U.S. Global Jets UCITS ETF JETS 5,893 12,934 U.S. Global Sea to Sky ETF SEA 3,636 7,568 Total Airline and Cargo 1,948,673 2,473,770 Gold and Natural Resources U.S. Global GO GOLD and Precious Metal Miners ETF GOAU 92,980 76,609 Total Gold and Natural Resources 92,980 76,609 Total ETF Clients 2,041,653 2,550,379 U.S.
Global Investors Funds Gold and Natural Resources Global Resources PSPFX 57,385 70,758 World Precious Minerals UNWPX 59,075 112,861 Gold and Precious Metals USERX 111,953 158,378 Total Gold and Natural Resources 228,413 341,997 Emerging Markets Emerging Europe EUROX 10,821 24,779 China Region USCOX 7,624 12,546 Total Emerging Markets 18,445 37,325 International Equity Global Luxury Goods (formerly known as Holmes Macro Trends) USLUX 39,508 54,058 Total International Equity 39,508 54,058 Bond U.S.
Global Investors Funds Gold and Natural Resources Global Resources PSPFX 50,758 57,385 World Precious Minerals UNWPX 47,661 59,075 Gold and Precious Metals USERX 99,697 111,953 Total Gold and Natural Resources 198,116 228,413 Emerging Markets Emerging Europe EUROX 12,274 10,821 China Region USCOX 6,707 7,624 Total Emerging Markets 18,981 18,445 International Equity Global Luxury Goods USLUX 48,232 39,508 Total International Equity 48,232 39,508 Bond U.S.
Global Sea to Sky Cargo ETF will continue in force for the initial period of two years from January 2022, and thereafter, the advisory agreement will be subject to renewal on an annual basis. The Company also serves as investment advisor to one European-based ETF, the U.S. Global Jets UCITS ETF. The advisory services agreement for the U.S.
The Company also serves as investment advisor to one European-based ETF, the U.S. Global Jets UCITS ETF. The advisory services agreement for the U.S.
Removed
The advisory agreement for the U.S. Global Jets ETF and the U.S. Global GO GOLD and Precious Metal Miners ETF has been renewed through September 2023. T he advisory agreement for the U.S.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

19 edited+16 added−3 removed58 unchanged
Biggest changeRedemptions would decrease the Company’s assets under management, which would reduce its advisory revenues and net income. 5 Table of Contents Investment Company Act - Certain changes in control of the Company would automatically terminate our investment management agreements with our client, unless the funds' boards of directors and shareholders vote to continue the agreements.
Biggest changeInvestment Company Act - Certain changes in control of the Company would automatically terminate our investment management agreements with our client unless the funds' boards of directors and shareholders vote to continue the agreements. Under the Investment Company Act, an investment management agreement with a fund must provide for its automatic termination in the event of its assignment.
Natural disasters, outbreaks of epidemics, terrorist attacks, extreme weather events or other unpredictable events could adversely affect our revenues, expenses, and net income by: ● decreasing investment valuations in, and returns on, the investment portfolios that we manage and our corporate portfolio, thus causing reductions and volatility in revenue, ● causing disruptions in national or global economies that decrease investor confidence and make investment products generally less attractive, ● incapacitating or reducing the availability of key personnel necessary to conduct our business activities, ● interrupting the Company’s business operations or those of critical service providers, ● triggering technology delays or failures, and ● requiring substantial capital expenditures and operating expenses to remediate damage, replace our facilities, and restore our operations.
Natural disasters, outbreaks of epidemics or pandemics, terrorist attacks, extreme weather events or other unpredictable events could adversely affect our revenues, expenses, and net income by: ● decreasing investment valuations in, and returns on, the investment portfolios that we manage and our corporate portfolio, thus causing reductions and volatility in revenue, ● causing disruptions in national or global economies that decrease investor confidence and make investment products generally less attractive, ● incapacitating or reducing the availability of key personnel necessary to conduct our business activities, ● interrupting the Company’s business operations or those of critical service providers, ● triggering technology delays or failures, and ● requiring substantial capital expenditures and operating expenses to remediate damage, replace our facilities, and restore our operations.
Macroeconomic declines, including inflation; negative political developments, including volatile market conditions due to investor concerns regarding inflation and potential hostilities between Russia and Ukraine; adverse market conditions; and catastrophic events may cause a decline in the Company’s revenue, an increase in the Company’s costs, negatively affect the Company’s operating results, adversely affect the Company’s cash flow, and could result in a decline in the Company’s stock price.
Macroeconomic declines, including inflation; negative political developments, including volatile market conditions due to investor concerns regarding inflation and hostilities between Russia and Ukraine; adverse market conditions; and catastrophic events may cause a decline in the Company’s revenue, an increase in the Company’s costs, negatively affect the Company’s operating results, adversely affect the Company’s cash flow, and could result in a decline in the Company’s stock price.
Typically, investments subject to interest rate risk will decrease in value when interest rates rise and increase in value when interest rates decline. Fluctuations in investment income are expected to continue in the future. The Company has exposure to the cryptocurrency markets through its investments.
Typically, investments subject to interest rate risk will decrease in value when interest rates rise and increase in value when interest rates decline. Fluctuations in investment income are expected to continue in the future. The Company has indirect exposure to the cryptocurrency markets through its investments.
A recurrence of an outbreak of any kind of epidemic, communicable disease or virus or major public health issue could cause a slowdown in the levels of economic activity generally, which would adversely affect the Company’s business, financial condition and operations. The loss of key personnel could negatively affect the Company ’ s financial performance.
An epidemic, pandemic, or outbreak of any kind of communicable disease or virus or major public health issue could cause a slowdown in the levels of economic activity generally, which would adversely affect the Company’s business, financial condition and operations. The loss of key personnel could negatively affect the Company ’ s financial performance.
This restriction may discourage potential purchasers from acquiring a controlling interest in the Company. Risks Related to Our Common Stock One person beneficially owns substantially all of our voting stock and controls the outcome of all matters requiring a vote of stockholders, which may influence the value of our publicly traded non-voting stock.
This restriction may discourage potential purchasers from acquiring a controlling interest in the Company. 5 Table of Contents Risks Related to Our Common Stock One person beneficially owns substantially all of our voting stock and controls the outcome of all matters requiring a vote of stockholders, which may influence the value of our publicly traded non-voting stock.
In addition, the Company has invested in convertible securities and warrants in the cryptocurrency mining industry through its corporate investments. Cryptocurrency markets and related stocks have been, and are expected to continue to be, volatile. This volatility may materially impact the Company’s financial statements and thus affect the Company’s common stock market price.
In addition, the Company has invested in convertible securities and warrants in the cryptocurrency mining industry through its corporate investments. Cryptocurrency markets and related stocks have been, and are expected to continue to be, volatile. This volatility may have a material impact on the Company’s financial statements and thus affect the Company’s common stock market price.
In addition, such transactions are subject to acquisition costs and expenses, are likely to divert the attention of management’s time, and can dilute the stockholders of the combined company if the acquisition is made for stock of the combined company. Risks Related to Our Operations Natural disasters, global pandemics and other unpredictable events could adversely affect our operations.
In addition, such transactions are subject to acquisition costs and expenses, are likely to divert the attention of management’s time, and can dilute the stockholders of the combined company if the acquisition is made for stock of the combined company. 6 Table of Contents Risks Related to Our Operations Natural disasters, epidemics, pandemics and other unpredictable events could adversely affect our operations.
Finally, federal legislation relating to cyber-security threats could impose additional requirements on our operations. 7 Table of Contents Higher insurance premiums and related insurance coverage risks could increase costs and reduce profitability. While U.S.
Finally, federal legislation relating to cyber-security threats could impose additional requirements on our operations. Higher insurance premiums and related insurance coverage risks could increase costs and reduce profitability. While U.S.
Global Jets ETF (86 percent and 82 percent of average net assets for fiscal years 2022 and 2021, respectively). Consequently, the Company’s revenues followed a similar pattern of concentration (82 percent and 76 percent of total operating revenues for fiscal years 2022 and 2021, respectively).
Global Jets ETF (83 percent and 86 percent of average net assets for fiscal years 2023 and 2022, respectively). Consequently, the Company’s revenues followed a similar pattern of concentration (84 percent and 82 percent of total operating revenues for fiscal years 2023 and 2022, respectively).
In our case, an assignment would occur with a transfer or issuance of a controlling block of Class C shares. The Company cannot be certain that our clients will consent to assignments of our investment management agreements or approve new agreements with us if an assignment occurs.
The Company cannot be certain that our clients will consent to assignments of our investment management agreements or approve new agreements with us if an assignment occurs.
Risks Related to Assets Under Management Poor investment performance could lead to a decline in revenues. Success in the investment management industry is largely dependent on investment performance relative to market conditions and the performance of competing products. Good relative performance generally attracts additional assets under management, resulting in additional revenues.
Success in the investment management industry is largely dependent on investment performance relative to market conditions and the performance of competing products. Good relative performance generally attracts additional assets under management, resulting in additional revenues. Conversely, poor performance generally results in decreased sales and increased redemptions with a corresponding decrease in revenues.
These sales, or the possibility that these sales may occur, also might make it more difficult for the Company to raise additional capital by selling equity securities in the future, at a time and price the Company deems appropriate. 6 Table of Contents The Company intends to pay regular dividends to its stockholders, but the ability to do so is subject to the discretion of the Board of Directors.
These sales, or the possibility that these sales may occur, might also make it more difficult for the Company to raise additional capital by selling equity securities in the future, at a time and at a price the Company deems appropriate.
These information systems are subject to damage or interruption from a number of potential sources including natural disasters, software viruses or other malware, power failures, cyber-attacks and other events to the extent that these information systems are under our control.
These information systems include data network and telecommunications, internet access and our websites, and various computer hardware equipment and software applications. These information systems are subject to damage or interruption from a number of potential sources including natural disasters, software viruses or other malware, power failures, cyber-attacks and other events.
Under the Investment Company Act, an investment management agreement with a fund must provide for its automatic termination in the event of its assignment. The funds' board and shareholders must vote to continue the agreement following its assignment, the cost of which ordinarily would be borne by the Company.
The funds' board and shareholders must vote to continue the agreement following its assignment, the cost of which ordinarily would be borne by the Company. Under the Advisers Act, a client's investment management agreement may not be assigned by the investment advisor without the client's consent.
Conversely, poor performance generally results in decreased sales and increased redemptions with a corresponding decrease in revenues. Therefore, poor investment performance relative to the portfolio benchmarks and to competitors could impair the Company’s revenues and growth.
Therefore, poor investment performance relative to the portfolio benchmarks and to competitors could impair the Company’s revenues and growth.
We have cash and certain corporate investments held in foreign currencies. Adverse changes in foreign currency exchange rates would also lower the value of those assets. Certain assets under management also have exposure to foreign currency fluctuations in various markets, which could impact their valuation and thus the revenue we receive. 9 Table of Contents Item 1B.
Certain assets under management also have exposure to foreign currency fluctuations in various markets, which could have an impact on their valuation and thus the revenue we receive. 9 Table of Contents Item 1B. Unresolved Staff Comments Not applicable for smaller reporting companies.
Certain insurance coverage may not be available or may be prohibitively expensive in future periods. As U.S. Global’s insurance policies come up for renewal, the Company may need to assume higher deductibles or co-insurance liabilities, or pay higher premiums, which would increase the Company’s expenses and reduce net income.
Global’s insurance policies come up for renewal, the Company may need to assume higher deductibles or co-insurance liabilities, or pay higher premiums, which would increase the Company’s expenses and reduce net income. 7 Table of Contents We have identified material weaknesses in our internal control over financial reporting.
Under the Advisers Act, a client's investment management agreement may not be assigned by the investment advisor without the client's consent. An advisor's ownership is considered to be assigned to another party when a controlling block of the advisor's ownership is transferred.
An advisor's ownership is considered to be assigned to another party when a controlling block of the advisor's ownership is transferred. In our case, an assignment would occur with the transfer or issuance of a controlling block of Class C shares.
Removed
These information systems include data network and telecommunications, internet access and our websites, and various computer hardware equipment and software applications.
Added
Redemptions would decrease the Company’s assets under management, which would reduce its advisory revenues and net income. New tax legislation or changes to existing tax laws, our failure to adequately comply with tax laws, or the outcome of any audits or regulatory disputes with respect to our compliance with tax law could adversely affect us.
Removed
The Company has invested in convertible securities and warrants in the cryptocurrency mining industry through its corporate investments. Cryptocurrency markets and related stocks have been, and are expected to continue to be, volatile. There is potential for significant volatility in the valuation of the Company’s cryptocurrency-related investments. Adverse changes in foreign currencies could negatively impact financial results.
Added
Changes to tax law could be enacted in the future that could have a material adverse effect on our business, results of operations, and financial condition. Further, we are subject to potential tax audits in various jurisdictions and in such an event, tax authorities may review and challenge certain positions we have taken and assess penalties or additional taxes.
Removed
Unresolved Staff Comments Not applicable for smaller reporting companies.
Added
These challenges may result in adjustments to, or impact the timing or amount of, taxable income, deductions or other tax allocations, which may adversely affect the Company’s effective tax rate and overall financial condition.
Added
While we regularly assess the likely outcomes of these potential audits, there can be no assurance that we will accurately predict the outcome of a potential audit, and an audit could have a material adverse impact on our business, results of operations, and financial condition.
Added
The Company intends to pay regular dividends to its stockholders, but the ability to do so is subject to the discretion of the Board of Directors.
Added
Certain insurance coverage may not be available or may be prohibitively expensive in future periods. As U.S.
Added
These material weaknesses could continue to adversely affect our ability to report the results of operations and financial condition accurately and in a timely manner.
Added
As further described in Item 9A of this Form 10-K, management has concluded that, because of material weaknesses in internal control over financial reporting, our internal control over financial reporting and our disclosure controls and procedures were not effective as of June 30, 2023.
Added
A “material weakness” is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the annual or interim financial statements would not be prevented or detected on a timely basis.
Added
If we fail to remediate these material weaknesses in our internal controls, or after having remediated such material weaknesses, thereafter fail to maintain the adequacy of our internal control over financial reporting or our disclosure controls and procedures, we could be subjected to regulatory scrutiny, civil or criminal penalties or shareholder litigation, the defense of any of which could cause the diversion of management’s attention and resources, we could incur significant legal and other expenses, and we could be required to pay damages to settle such actions if any such actions were not resolved in our favor.
Added
Moreover, we may be the subject of negative publicity focusing on these material weaknesses and we may be subject to negative reactions from shareholders and others with whom we do business. Risks Related to Assets Under Management Poor investment performance could lead to a decline in revenues.
Added
Cryptocurrencies (also referred to as “virtual currencies” and “digital currencies”) are digital assets that are designed to act as a medium of exchange. Although the Company has no current intention of directly investing in cryptocurrencies, the Company has indirect exposure to cryptocurrencies by investing in securities of issuers with exposure to the cryptocurrency industry.
Added
Cryptocurrencies (some of the most well-known include Bitcoin, Dogecoin and Ethereum) are not backed by any government, corporation, or other identified body. Trading markets for cryptocurrencies are often unregulated and may be more exposed to operational or technical issues as well as the potential for fraud or manipulation than established, regulated exchanges for securities, derivatives and traditional currencies.
Added
Cryptocurrencies have been subject to significant fluctuations in value.
Added
The value of a cryptocurrency may significantly fluctuate precipitously (including declining to zero) and unpredictably for a variety of reasons, including, but not limited to: investor perceptions and expectations; regulatory changes; general economic conditions; adoption and use in the retail and commercial marketplace; public opinion regarding the environmental impact of the creation (“minting” or “mining”) of cryptocurrency; confidence in, and the maintenance and development of, its network and open-source software protocols such as blockchain for ensuring the integrity of cryptocurrency transactional data; and general risks tied to the use of information technologies, including cybersecurity risks.
Added
Adverse changes in foreign currencies could negatively impact financial results. We have cash and certain corporate investments held in foreign currencies. Adverse changes in foreign currency exchange rates would also lower the value of those assets.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest change(dollars in thousands, except price data) Approximate Dollar Total Number of Value of Shares that Shares Purchased as May Yet Be Total Number of Total Amount Average Price Part of Publicly Purchased Under Period Shares Purchased 1 Purchased Paid Per Share 2 Announced Plan 3 the Plan 04-01-22 to 04-30-22 15,544 $ 80 $ 5.14 15,544 $ 4,823 05-01-22 to 05-31-22 16,897 80 $ 4.74 16,897 $ 4,743 06-01-22 to 06-30-22 13,255 59 $ 4.43 13,255 $ 4,684 Total 45,696 $ 219 $ 4.78 45,696 1.
Biggest change(dollars in thousands, except price data) Approximate Dollar Total Number of Value of Shares that Shares Purchased as May Yet Be Total Number of Total Amount Average Price Part of Publicly Purchased Under Period Shares Purchased 1 Purchased Paid Per Share 2 Announced Plan 3 the Plan 04-01-23 to 04-30-23 27,109 $76 $2.81 27,109 $4,368 05-01-23 to 05-31-23 41,114 114 $2.77 41,114 $4,254 06-01-23 to 06-30-23 23,622 67 $2.82 23,622 $4,187 Total 91,845 $257 $2.79 91,845 1.
Securities authorized for issuance under equity compensation plans Information relating to equity compensation plans under which our stock is authorized for issuance is set forth in Item 12 of Part III of this Form 10-K under the heading “Equity Compensation Plan Information.” Purchases of equity securities by the issuer The Company has a share repurchase program, approved by the Board of Directors, authorizing the Company to annually purchase up to $5.0 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 through December 31, 2022.
Securities authorized for issuance under equity compensation plans Information relating to equity compensation plans under which our stock is authorized for issuance is set forth in Item 12 of Part III of this Form 10-K under the heading “Equity Compensation Plan Information.” Purchases of equity securities by the issuer The Company has a share repurchase program, approved by the Board of Directors, authorizing the Company to annually purchase up to $5.0 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 through December 31, 2023.
The Company may repurchase class A stock from employees; however, none were repurchased from employees during the quarter ended June 30, 2022. The Company did not repurchase any classes B or C common stock during the quarter ended June 30, 2022.
The Company may repurchase class A stock from employees; however, none were repurchased from employees during the quarter ended June 30, 2023. The Company did not repurchase any classes B or C common stock during the quarter ended June 30, 2023.
The total amount of cash dividends to be paid to class A and class C shareholders from July 2022 to September 2022 will be approximately $337,000, which is included as dividends payable in the Consolidated Balance Sheets at June 30, 2022.
The total amount of cash dividends to be paid to class A and class C shareholders from July 2023 to September 2023 will be approximately $329,000, which is included as dividends payable in the Consolidated Balance Sheets at June 30, 2023.
The total amount of shares that may be repurchased in 2022 under the program is $5.0 million. Dividends The Board of Directors has authorized a monthly dividend of $0.0075 per share from July 2022 through September 2022.
The total amount of shares that may be repurchased in 2023 under the program is $5.0 million. Dividends As of June 30, 2023, the Board of Directors has authorized a monthly dividend of $0.0075 per share from July 2023 through September 2023.
The repurchase program has been in place since December 2012, and the Board of Directors has annually renewed the repurchase program each calendar year. For the quarter ended June 30, 2022, the Company purchased a total of 45,696 class A shares using cash of $219,000.
The repurchase program has been in place since December 2012, and the Board of Directors has annually renewed the repurchase program each calendar year. For the quarter ended June 30, 2023, the Company purchased a total of 91,845 class A shares using cash of $257,000.
Holders On August 19, 2022, there were approximately 181 holders of record of class A common stock, no holders of record of class B common stock, and 20 holders of record of class C common stock.
Holders On November 8, 2023, there were approximately 189 holders of record of class A common stock, no holders of record of class B common stock, and 19 holders of record of class C common stock.

Item 6. [Reserved]

Selected Financial Data — reserved (removed by SEC in 2021)

4 edited+1 added−0 removed0 unchanged
Biggest changeChanges in and Disagreements with Accountants on Accounting and Financial Disclosure 51 Item 9A. Controls and Procedures 51 Item 9B. Other Information 52 Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections 52 Part III of Annual Report on Form 10-K 53 Item 10. Directors, Executive Officers and Corporate Governance 53 Item 11. Executive Compensation 56 Item 12.
Biggest changeOther Information 49 Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections 49 Part III of Annual Report on Form 10-K 50 Item 10. Directors, Executive Officers and Corporate Governance 50 Item 11. Executive Compensation 51 Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 55 Item 13.
Exhibits, Financial Statement Schedules 64 Signatures 66 Exhibit 21 — Subsidiaries of the Company, Jurisdiction of Incorporation, and Percentage of Ownership Exhibit 23.1 — Consent of BDO USA, LLP Exhibit 31.1 — Rule 13a – 14(a) Certifications (under Section 302 of the Sarbanes-Oxley Act of 2002) Exhibit 32.1 — Section 1350 Certifications (under Section 906 of the Sarbanes-Oxley Act of 2002) Table of Contents Part I of Annual Report on Form 10-K
Exhibits, Financial Statement Schedules 57 Signatures 59 Exhibit 21 — Subsidiaries of the Company, Jurisdiction of Incorporation, and Percentage of Ownership Exhibit 23.1 — Consent of Grant Thornton LLP Exhibit 23.2 — Consent of BDO USA, LLP Exhibit 31.1 — Rule 13a – 14(a) Certifications (under Section 302 of the Sarbanes-Oxley Act of 2002) Exhibit 32.1 — Section 1350 Certifications (under Section 906 of the Sarbanes-Oxley Act of 2002) Table of Contents Part I of Annual Report on Form 10-K
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 62 Item 13. Certain Relationships and Related Transactions, and Director Independence 63 Item 14. Principal Accounting Fees and Services 63 Part IV of Annual Report on Form 10-K 64 Item 15.
Certain Relationships and Related Transactions, and Director Independence 55 Item 14. Principal Accounting Fees and Services 56 Part IV of Annual Report on Form 10-K 57 Item 15.
Item 6. [Reserved] 12 Item 7. Management ’ s Discussion and Analysis of Financial Condition and Results of Operations 12 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 21 Report of Independent Registered Public Accounting Firm (BDO USA, LLP; Dallas, Texas; PCAOB ID# 243) 23 Item 8. Financial Statements and Supplementary Data 23 Item 9.
Item 6. [Reserved] 12 Item 7. Management ’ s Discussion and Analysis of Financial Condition and Results of Operations 12 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 19 Item 8.
Added
Financial Statements and Supplementary Data 21 Report of Independent Registered Public Accounting Firm (Grant Thornton LLP; Dallas, Texas; PCAOB ID# 248) 21 Report of Independent Registered Public Accounting Firm (BDO USA, LLP; Dallas, Texas; PCAOB ID# 243) 23 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 47 Item 9A. Controls and Procedures 47 Item 9B.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

74 edited+15 added−20 removed24 unchanged
Biggest changeThe $16.6 realized gains on equity securities in the prior year ended June 30, 2021, was primarily from the sale of the Company’s investment in common stock of HIVE, resulting in $15.0 million of the realized gains included in investment income. ○ The year ended June 30, 2022, had dividend and interest income of $1.9 million, compared to $464,000 in the prior year ended June 30, 2021, an increase of $1.5 million, or 320.0 percent, primarily due to the Company’s investment in convertible debentures in HIVE during the prior year. ○ Also, due to the Company’s investment in convertible debentures in HIVE during the prior year, there were realized gains on debt securities of $2.2 million for the year ended June 30, 2022, compared to $1.2 million in the prior year ended June 30, 2021, an increase of $1.0 million, or 85.7 percent. ○ A significant portion of corporate investments is held in securities of a company in the business of mining cryptocurrency.
Biggest changeThis was due to a decrease in the fair value of the Company's investment in convertible debentures in HIVE in the prior year. ○ Also, due to the Company’s investment in convertible debentures in HIVE, there were realized gains on debt securities of $1.7 million for the year ended June 30, 2023, compared to $2.2 million in the prior year ended June 30, 2022, a decrease of $527,000, or 24.1 percent. ○ A significant portion of corporate investments is held in securities of a company in the business of mining cryptocurrency.
The preparation of these financial statements requires the Company to make estimates and judgments that affect the reported amounts of assets, liabilities, and expenses. Management reviews these estimates on an ongoing basis. Estimates are based on experience and on various other assumptions that the Company believes to be reasonable under the circumstances.
The preparation of these Consolidated Financial Statements requires the Company to make estimates and judgments that affect the reported amounts of assets, liabilities, and expenses. Management reviews these estimates on an ongoing basis. Estimates are based on experience and on various other assumptions that the Company believes to be reasonable under the circumstances.
Assessing the future tax consequences of events that have been recognized in the Company’s Consolidated Financial Statements or tax returns requires judgment. The Company believes that income taxes include critical accounting estimates because variations in the actual outcome of these future tax consequences could materially impact the Company’s financial position, results of operations or cash flows. 20 Table of Contents
Assessing the future tax consequences of events that have been recognized in the Company’s Consolidated Financial Statements or tax returns requires judgment. The Company believes that income taxes include critical accounting estimates because variations in the actual outcome of these future tax consequences could materially impact the Company’s financial position, results of operations or cash flows. 18 Table of Contents
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 2022.
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 2024.
The Company receives a unitary management fee of 0.60 percent of average net assets of the ETFs, and has agreed to bear all expenses of the ETFs, except the U.S. Global Sea to Sky Cargo ETF. The Company has agreed to contractually limit the expenses of the U.S. Global Sea to Sky Cargo ETF through April 2023.
The Company receives a unitary management fee of 0.60 percent of average net assets and has agreed to bear all expenses of the ETFs, except the U.S. Global Sea to Sky Cargo ETF. The Company has agreed to contractually limit the expenses of the U.S. Global Sea to Sky Cargo ETF through April 2024.
The Company believes that the estimates related to stock-based compensation expense are critical accounting estimates because the assumptions used could significantly impact the timing and amount of stock-based compensation expense recorded in the Company’s Consolidated Financial Statements. Income Taxes.
The Company believes that the estimates related to share-based compensation expense are critical accounting estimates because the assumptions used could significantly impact the timing and amount of share-based compensation expense recorded in the Company’s Consolidated Financial Statements. Income Taxes.
The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment dates. The Company assesses uncertain tax positions in accordance with ASC 740, Income Taxes.
The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment dates. The Company assesses uncertain tax positions in accordance with ASC 740, Income Taxes and maintains a reserve.
Stock-based compensation expense is measured at the grant date based on the fair value of the award, and the cost is recognized as expense ratably over the award’s vesting period. Forfeitures are recognized as they occur.
Share-based compensation expense is measured at the grant date based on the fair value of the award, and the cost is recognized as expense ratably over the award’s vesting period. Forfeitures are recognized as they occur.
Actual results may differ from these estimates under different assumptions or conditions. While significant accounting policies are described in more detail in Note 2 to the consolidated financial statements, the Company believes the accounting policies that require management to make assumptions and estimates involving significant judgment are those relating to valuation of investments, income taxes, and valuation of stock-based compensation.
Actual results may differ from these estimates under different assumptions or conditions. While significant accounting policies are described in more detail in Note 3 to the Consolidated Financial Statements, the Company believes the accounting policies that require management to make assumptions and estimates involving significant judgment are those relating to valuation of investments, income taxes, and valuation of share-based compensation.
The following summarizes the cost, unrealized gain or loss, and fair value of investments carried at fair value as of June 30, 2022, and June 30, 2021.
The following summarizes the cost, unrealized gain or loss, and fair value of investments carried at fair value as of June 30, 2023, and 2022.
These revenues are largely dependent on the total value and composition of assets under its management. Fluctuations in the markets and investor sentiment directly impact the Funds’ asset levels, thereby affecting income and results of operations.
These revenues are largely dependent on the total value and composition of assets under its management. Fluctuations in the markets and investor sentiment have a direct impact on the Funds’ asset levels, thereby affecting income and results of operations.
There has been significant volatility in the market price of HIVE, which has materially impacted the investment’s value included on the balance sheet, unrealized gain (loss) recognized in investment income (loss), and unrealized gain (loss) recognized in other comprehensive income (loss).
There has been significant volatility in the market price of HIVE, which has materially impacted the investment’s value included on the Consolidated Balance Sheets, unrealized gain (loss) recognized in net investment income (loss), and unrealized gain (loss) recognized in other comprehensive income (loss).
The Company believes that the estimates related to fair values of financial instruments are critical accounting estimates because the assumptions used could significantly impact the unrealized gains or losses recorded in the Company’s Consolidated Financial Statements. Stock-Based Compensation.
The Company believes that the estimates related to fair values of financial instruments are critical accounting estimates because the assumptions used could significantly impact the unrealized gains or losses recorded in the Company’s Consolidated Financial Statements. 17 Table of Contents Share-Based Compensation.
The Company has one European-based ETF product listed on various exchanges in Europe, the U.S. Global Jets UCITS ETF (ticker JETS), which concentrates on the U.S. and international airline industry. Assets in the Jets ETF were $2.5 billion and $3.6 billion at June 30, 2022, and 2021, respectively.
The Company has one European-based ETF product listed on various exchanges in Europe, the U.S. Global Jets UCITS ETF (ticker JETS), which concentrates on the U.S. and international airline industry. Assets in the Jets ETF were $1.9 billion and $2.5 billion at June 30, 2023, and 2022, respectively.
The credit facility is collateralized by approximately $1 million, included in restricted cash on the balance sheet, held in deposit in a money market account at the financial institution that provided the credit facility. As of June 30, 2022, this credit facility remained unutilized by the Company.
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 June 30, 2023, this credit facility remained unutilized by the Company.
The investments in HIVE are discussed in more detail in Note 3, Investments, to the Consolidated Financial Statements of this Annual Report on Form 10-K. HIVE is a company that is headquartered in Canada with cryptocurrency mining facilities in Iceland, Sweden, and Canada. Frank Holmes, CEO, is the executive chairman of HIVE. Effective August 31, 2018, Mr.
The investments in HIVE are discussed in more detail in Note 4, Investments, to the Consolidated Financial Statements of this Annual Report on Form 10-K. HIVE is a company that is headquartered in Canada with cryptocurrency mining facilities in Iceland, Sweden, and Canada. Frank Holmes, CEO, is the executive chairman of HIVE.
In addition to the investments above, as of June 30, 2022, and 2021, the Company owned other investments of approximately $4.0 million and $3.5 million, respectively, classified as securities without readily determinable fair values.
In addition to the investments above, as of June 30, 2023, and 2022, the Company owned other investments of approximately $2.4 million and $4.0 million, respectively, classified as securities without readily determinable fair values.
Changes in unrealized gains and losses are included in the statement of comprehensive income (loss), except for declines in fair value determined to be other than temporary, and amounts attributable to embedded derivatives, which are included in earnings in the statement of operations.
Changes in unrealized gains and losses are included in the Consolidated Statements of Comprehensive Income, except for declines in fair value determined to be other than temporary, and amounts attributable to embedded derivatives, which are included in net investment income (loss) in the Consolidated Statements of Operations.
The following is a brief discussion of the Company’s two business segments. 13 Table of Contents Investment Management Services The Company generates operating revenues from managing and servicing the Funds. The Company recorded advisory and administrative services fees from USGIF totaling approximately $3.8 million and $4.5 million in fiscal 2022 and fiscal 2021, respectively.
The following is a brief discussion of the Company’s two business segments. Investment Management Services The Company generates operating revenues from managing and servicing the Funds. The Company recorded advisory and administrative services fees from USGIF totaling approximately $1.9 million and $3.8 million in fiscal 2023 and fiscal 2022, respectively.
For the years ended June 30, 2022, and 2021, the Company adjusted its base advisory fees upward by $20,000 and $482,000, respectively.
For the years ended June 30, 2023, and 2022, the Company adjusted its base advisory fees downward by $490,000 and upward by $20,000, respectively.
To manage expenses, the Company maintains a flexible structure for one of its largest costs, compensation expense, by setting relatively low base salaries with bonuses that are tied to fund and Company performance. Thus, the Company’s expense model somewhat expands and contracts with asset swings and performance.
To manage expenses, the Company maintains a flexible structure for one of its largest costs, compensation expenses, by setting relatively low base salaries with bonuses that are tied to fund and Company performance.
Mutual fund investment advisory fees are also affected by changes in assets under management, which include: ● market appreciation or depreciation; ● the addition of new fund shareholder accounts; ● fund shareholder contributions of additional assets to existing accounts; ● withdrawals of assets from and termination of fund shareholder accounts; ● exchanges of assets between accounts or products with different fee structures; and ● the amount of fees voluntarily reimbursed.
Mutual fund investment advisory fees are also affected by changes in assets under management, which include: ● market appreciation or depreciation; ● the addition of new fund shareholder accounts; ● fund shareholder contributions of additional assets to existing accounts; ● withdrawals of assets from and termination of fund shareholder accounts; ● exchanges of assets between accounts or products with different fee structures; and ● the amount of fees reimbursed. 13 Table of Contents The following tables summarize the changes in assets under management for USGIF for fiscal years 2023 and 2022.
A significant portion of the securities recorded at fair value in the above table is in investments in HIVE Blockchain Technologies Ltd. (“HIVE”), which were warrants and convertible debentures valued at $14.1 million at June 30, 2022, and $25.1 million at June 30, 2021.
A significant portion of the securities recorded at fair value in the above table is in investments in HIVE Digital Technologies Ltd., formerly HIVE Blockchain Technologies Ltd., (“HIVE”), which were warrants and convertible debentures valued at $7.3 million and $11.1 million at June 30, 2023, and 2022, respectively.
The U.S. Global Jets UCITS ETF is not available to U.S. investors. Corporate Investments Management believes it can more effectively manage the Company’s cash position by maintaining certain types of investments utilized in cash management and continues to believe that such activities are in the best interest of the Company.
Corporate Investments Management believes it can more effectively manage the Company’s cash position by maintaining certain types of investments utilized in cash management and continues to believe that such activities are in the best interest of the Company.
This may adversely affect the Company’s balance sheet and results of operations. 19 Table of Contents Critical Accounting Estimates The discussion and analysis of financial condition and results of operations are based on the Company’s financial statements, which have been prepared in accordance with generally accepted accounting principles in the U.S. (“GAAP”).
Critical Accounting Estimates The discussion and analysis of financial condition and results of operations are based on the Company’s Consolidated Financial Statements, which have been prepared in accordance with generally accepted accounting principles in the U.S. (“GAAP”).
With approximately $22.3 million in cash and cash equivalents and $13.8 million in securities carried at fair value, excluding convertible securities, which together comprise approximately 59.5 percent of total assets, the Company has adequate liquidity to meet its current obligations. Total shareholders’ equity was approximately $56.5 million.
With approximately $25.4 million in cash and cash equivalents and $12.9 million in securities carried at fair value, excluding convertible securities, which together comprise approximately 68.8 percent of total assets, the Company has adequate liquidity to meet its current obligations. Total shareholders’ equity was approximately $52.2 million.
See further discussion of this security and other investments in Note 3, Investments, to the Consolidated Financial Statements of this Annual Report on Form 10-K. ● There was $206,000 in losses from equity method investments for the year ended June 30, 2022, compared to $347,000 in income for the year ended June 30, 2021, a decrease of $553,000.
See further discussion of these securities and other investments in Note 4, Investments, to the Consolidated Financial Statements of this Annual Report on Form 10-K. ● There was no income or loss from equity method investments for the year ended June 30, 2023, compared to a loss from equity method investments of $206,000 for the year ended June 30, 2022.
The average investment management fee for equity funds in both fiscal years 2022 and 2021 was 93 basis points. The average investment management fee for the fixed income funds was nil for both fiscal years 2022 and 2021, respectively.
The average investment management fee for equity funds in fiscal years 2023 and 2022 was 80 basis points and 93 basis points, respectively.
Global GO GOLD and Precious Metal Miners ETF (ticker GOAU), and U.S. Global Sea to Sky Cargo ETF (ticker SEA). The Company receives a unitary management fee of 0.60 percent of average net assets and has agreed to bear all expenses of the ETFs, except the U.S. Global Sea to Sky Cargo ETF.
The Company receives a unitary management fee of 0.60 percent of average net assets of the ETFs, and has agreed to bear all expenses of the ETFs, except the U.S. Global Sea to Sky Cargo ETF. The Company has agreed to contractually limit the expenses of the U.S. Global Sea to Sky Cargo ETF through April 2024.
Investment income (loss) is dependent on market fluctuations and does not remain at a consistent level. ○ The current year ended June 30, 2022, had unrealized losses on equity securities of $7.2 million, unrealized losses on embedded derivatives of $2.5 million, and realized gains on sales of securities of $1.8 million, whereas the prior year ended June 30, 2021, had unrealized gains of $9.9 million on equity securities, no unrealized losses on embedded derivatives, and realized gains on sales of equity securities of $16.6 million.
Net investment income (loss) is dependent on market fluctuations and does not remain at a consistent level. ○ The current year ended June 30, 2023, included changes in unrealized losses on equity securities of $2.6 million and realized losses on equity securities of $453,000, whereas the prior year ended June 30, 2022, included changes in unrealized losses on equity securities of $9.4 million and realized gains on sales of equity securities of $1.8 million.
This increase was primarily attributable to the following: ● Advisory fees increased by $3.1 million, or 14.4 percent, primarily as the result of higher ETF assets under management. Advisory fees are comprised of two components: a base management fee and a performance fee. ○ Base management fees increased approximately $3.5 million.
This decrease was primarily attributable to the following: ● Advisory fees decreased by $9.6 million, or 39.1 percent, primarily as the result of lower ETF assets under management. Advisory fees are comprised of two components: a base management fee and a performance fee. ○ Base management fees decreased approximately $9.1 million.
The Board of Directors has authorized a monthly dividend of $0.0075 per share from July 2022 through September 2022. The total amount of cash dividends to be paid to class A and class C shareholders from July 2022 to September 2022 will be approximately $337,000, which is included as dividends payable in the Consolidated Balance Sheets at June 30, 2022.
The total amount of cash dividends to be paid to class A and class C shareholders from July 2023 to September 2023 will be approximately $329,000, which is included as dividends payable in the Consolidated Balance Sheets at June 30, 2023.
Cryptocurrency mining companies face a variety of risks, including, but not limited to, environmental concerns, regulatory factors, and heightened risks of cybersecurity attacks for which there may be no source of recovery.
Cryptocurrency markets and related stocks have been, and are expected to continue to be, volatile, and may be influenced by a wide variety of factors, including speculative activity. Cryptocurrency mining companies face a variety of risks, including, but not limited to, environmental concerns, regulatory factors, and heightened risks of cybersecurity attacks for which there may be no source of recovery.
The change was primarily due to the following components and factors: ● Investment loss was $4.0 million for the year ended June 30, 2022, compared to investment income of $28.3 million for the year ended June 30, 2021, a change of approximately $32.4 million.
The change was primarily due to the following components and factors: ● Net investment income was $316,000 for the year ended June 30, 2023, compared to a net investment loss of $6.2 million for the year ended June 30, 2022, a change of approximately $6.5 million.
Year Ended June 30, 2022, Compared with Year Ended June 30, 2021 The Company posted net income, as shown in the Consolidated Statements of Operations, of $5.5 million ($ 0.37 per share) for the year ended June 30, 2022, compared with net income of $32.0 million ($ 2.12 per share) for the year ended June 30, 2021, a decrease of approximately $26.5 million.
Year Ended June 30, 2023, Compared with Year Ended June 30, 2022 The Company posted net income, as shown in the Consolidated Statements of Operations, of $3.1 million ($ 0.22 per share) for the year ended June 30, 2023, compared with net income of $3.4 million ($ 0.23 per share) for the year ended June 30, 2022, a decrease of approximately $291,000.
Assets Under Management (“AUM”) (dollars in thousands) June 30, 2022 June 30, 2021 Investment Management Services ETF Clients $ 2,550,379 $ 3,720,387 USGIF 357,527 509,222 Total AUM $ 2,907,906 $ 4,229,609 On June 30, 2022, total AUM as of period end was $2.9 billion compared to $4.2 billion on June 30, 2021, a decrease of $1.3 billion, or 31.2 percent.
Assets Under Management (“AUM”) (dollars in thousands) June 30, 2023 June 30, 2022 Investment Management Services ETF Clients $ 2,041,653 $ 2,550,379 USGIF 328,439 357,527 Total AUM $ 2,370,092 $ 2,907,906 On June 30, 2023, total AUM as of period end was $2.4 billion compared to $2.9 billion on June 30, 2022, a decrease of $537.8 million, or 18.5 percent.
The change is primarily due to lower realized gains and unrealized investment losses in the current year compared to higher realized gains and unrealized investment gains in the prior year, as discussed further below.
The change is primarily due to lower operating revenues, offset by net investment income in the current year compared to net investment losses in the prior year, and lower operating expenses, as discussed further below.
The Company also has access to a $1 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 will expire on May 31, 2023, and the Company intends to renew annually.
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 will expire on May 31, 2024, and the Company intends to renew it annually.
Changes in unrealized and realized gains and losses are included in earnings in the statement of operations. 2. Realized gains and losses are included in earnings in the statement of operations.
Changes in unrealized and realized gains and losses are included in net investment income (loss) in the Consolidated Statements of Operations. 2. Realized gains and losses are included in net investment income (loss) in the Consolidated Statements of Operations.
The USGIF performance fee, which applies to the equity funds only, is a fulcrum 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. ● Administrative services fees decreased by $20,000, or 9.6 percent, primarily as a result of higher net assets under management upon which these fees are based in the current period.
The USGIF performance fee, which applies to the equity funds only, is a fulcrum 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. 15 Table of Contents Advisory Fees.
USGIF advisory fees in total, including performance adjustments, decreased by approximately $755,000, or 17.5 percent, in fiscal year 2022 compared to fiscal year 2021, primarily as a result of a decrease in average assets under management driven by market depreciation in the equity funds and a decrease in received performance fees.
USGIF advisory fees in total, including performance adjustments, decreased by approximately $1.8 million, or 50.4 percent, in fiscal year 2023 compared to fiscal year 2022, primarily as a result of a decrease in average assets under management driven by redemptions and a change to performance fees paid versus performance fees received.
This increase was primarily attributable to increases in general and administrative expenses, offset by lower employee compensation, as described below. Employee Compensation and Benefits. Employee compensation and benefits decreased $1.3 million, or 17.8 percent, in fiscal year 2022, primarily as a result of lower bonuses related to lower realized investment gains than in the previous fiscal year. General and Administrative.
Employee compensation and benefits decreased $1.3 million, or 20.8 percent, in fiscal year 2023, primarily as a result of lower bonuses related to lower operating income and lower realized investment gains than in the previous fiscal year, and amortization expense of employee stock options in the prior fiscal year. General and Administrative.
Year Ended June 30, 2022 (dollars in thousands) Equity Fixed Income Total Beginning Balance $ 433,380 $ 75,842 $ 509,222 Market depreciation (110,465 ) (2,201 ) (112,666 ) Dividends and distributions (61,309 ) (285 ) (61,594 ) Net shareholder purchases (redemptions) 24,761 (2,195 ) 22,566 Ending Balance $ 286,367 $ 71,161 $ 357,528 Average investment management fee 0.93 % 0.00 % 0.78 % Average net assets $ 380,519 $ 71,818 $ 452,337 Year Ended June 30, 2021 (dollars in thousands) Equity Fixed Income Total Beginning Balance $ 343,214 $ 82,683 $ 425,897 Market appreciation 101,575 229 101,804 Dividends and distributions (16,243 ) (401 ) (16,644 ) Net shareholder purchases (redemptions) 4,834 (6,669 ) (1,835 ) Ending Balance $ 433,380 $ 75,842 $ 509,222 Average investment management fee 0.93 % 0.00 % 0.77 % Average net assets $ 412,905 $ 82,289 $ 495,194 14 Table of Contents The average annualized investment management fee rate (total advisory fees, excluding performance fees, as a percentage of average assets under management) was 78 basis points in fiscal year 2022 and 77 basis points in fiscal year 2021.
Year Ended June 30, 2023 (dollars in thousands) Equity Fixed Income Total Beginning Balance $ 286,367 $ 71,161 $ 357,528 Market appreciation 17,540 536 18,076 Dividends and distributions (11,329 ) (1,366 ) (12,695 ) Net shareholder redemptions (27,249 ) (7,221 ) (34,470 ) Ending Balance $ 265,329 $ 63,110 $ 328,439 Average investment management fee 0.80 % 0.00 % 0.65 % Average net assets $ 281,076 $ 65,312 $ 346,388 Year Ended June 30, 2022 (dollars in thousands) Equity Fixed Income Total Beginning Balance $ 433,380 $ 75,842 $ 509,222 Market depreciation (110,465 ) (2,201 ) (112,666 ) Dividends and distributions (61,309 ) (285 ) (61,594 ) Net shareholder purchases (redemptions) 24,761 (2,195 ) 22,566 Ending Balance $ 286,367 $ 71,161 $ 357,528 Average investment management fee 0.93 % 0.00 % 0.78 % Average net assets $ 380,519 $ 71,818 $ 452,337 The average annualized investment management fee rate (total advisory fees, excluding performance fees, as a percentage of average assets under management) was 65 basis points in fiscal year 2023 and 78 basis points in fiscal year 2022.
The base advisory fee on the equity funds within USGIF is adjusted upward or downward based on performance. For the years ended June 30, 2022, and 2021, the Company adjusted its base advisory fees upward by $20,000 and $482,000, respectively.
For the years ended June 30, 2023, and 2022, the Company adjusted its base advisory fees downward by $490,000 and upward by $20,000, respectively.
The increase in cash, and accordingly, net working capital, was primarily due to net cash provided by operating activities of $10.5 million, proceeds on sales of equity investments of $2.9 million, and proceeds from principal paydowns of $3.0 million, somewhat offset by $6.7 million of corporate investment purchases.
The increase in cash and cash equivalents of $3.1 million, and accordingly, net working capital, was primarily due to net cash provided by operating activities of $2.9 million and proceeds from principal paydowns of $3.0 million, offset by $1.2 million for repurchases of common stock and $1.3 million for dividends paid.
A significant portion of the unrealized gains and losses is concentrated in a small number of issuers. For fiscal year 2022, the Company had a total investment loss of $4.0 million, compared to $28.3 million investment income in fiscal year 2021. Due to market volatility, the Company expects that gains or losses will continue to fluctuate in the future.
For fiscal year 2023, the Company had net investment income of $316,000, compared to a $6.2 million net investment loss in fiscal year 2022. Due to market volatility, the Company expects that gains or losses will continue to fluctuate in the future.
Base fees for USGIF increased primarily as a result of higher average assets under management, primarily due to market appreciation. ○ Performance fee adjustments for USGIF received in the current year were $20,000 compared to $482,000 in the prior year, a decrease of $462,000.
Base fees for USGIF decreased primarily as a result of lower average assets under management due to shareholder redemptions and an increase management fee waivers. ○ Performance fee adjustments for USGIF in the current year resulted in fees paid of $490,000 compared to fees received of $20,000 in the prior year, a change of $510,000.
The Company recorded advisory fees from the ETF clients of $21.0 million and $17.1 million in fiscal years 2022 and 2021, respectively, due to an increase in assets as discussed above.
The Company recorded advisory fees from the ETF clients of $13.2 million and $21.0 million in fiscal years 2023 and 2022, respectively.
The cash outlays for investments and dividend payments are discretionary. The stock repurchase plan is approved through December 31, 2022, but may be suspended or discontinued as deemed necessary. Cash and securities recorded at fair value, excluding convertible securities, of approximately $36.1 million are available to fund current activities.
The stock repurchase plan is approved through December 31, 2023, but may be suspended or discontinued. Cash and securities recorded at fair value, excluding convertible securities, of approximately $38.3 million are available to fund current activities. As of June 30, 2023, the Board of Directors has authorized a monthly dividend of $0.0075 per share from July 2023 through September 2023.
Contractual obligations primarily consist of agreements for services used in daily operations and for marketing and distribution. Other contractual obligations consist of agreements to waive or reduce fees and/or pay expenses on certain funds. Future obligations under these agreements are dependent upon future levels of fund assets.
As of June 30, 2023, the Company had contractual obligations of $1.1 million for the fiscal years ending June 30, 2024, through 2026. Other contractual obligations consist of agreements to waive or reduce fees and/or pay expenses on certain funds. Future obligations under these agreements are dependent upon future levels of fund assets.
Operating Expenses Year ended June 30, $ % (dollars in thousands) 2022 2021 Change Change Employee compensation and benefits $ 6,059 $ 7,369 $ (1,310 ) (17.8 )% General and administrative 6,911 5,704 1,207 21.2 % Advertising 405 220 185 84.1 % Depreciation and amortization 226 196 30 15.3 % Total $ 13,601 $ 13,489 $ 112 0.8 % Total operating expenses increased $112,000, or 0.8 percent, compared with the previous fiscal year.
Operating Expenses Year ended June 30, $ % (dollars in thousands) 2023 2022 Change Change Employee compensation and benefits $ 4,798 $ 6,059 $ (1,261 ) (20.8 )% General and administrative 6,122 6,911 (789 ) (11.4 )% Advertising 382 405 (23 ) (5.7 )% Depreciation 243 226 17 7.5 % Interest 4 - 4 n/a Total $ 11,549 $ 13,601 $ (2,052 ) (15.1 )% Total operating expenses decreased $2.1 million, or 15.1 percent, compared with the previous fiscal year.
Operating Revenues Year ended June 30, $ % (dollars in thousands) 2022 2021 Change Change ETF advisory fees: Airline and cargo ETFs $ 20,378 $ 16,473 $ 3,905 23.7 % Gold and natural resources ETF 584 654 (70 ) (10.7 )% Total ETF advisory fees 20,962 17,127 3,835 22.4 % Investment advisory fees - USGIF: Gold and natural resources funds $ 2,851 $ 3,606 $ (755 ) (20.9 )% Emerging markets funds 213 302 (89 ) (29.5 )% International equity funds 499 407 92 22.6 % Bond funds - 3 (3 ) (100.0 )% Total investment advisory fees - USGIF 3,563 4,318 (755 ) (17.5 )% Total advisory fees 24,525 21,445 3,080 14.4 % USGIF administrative services fees 189 209 (20 ) (9.6 )% Total Operating Revenues $ 24,714 $ 21,654 $ 3,060 14.1 % Total consolidated operating revenues for the year ended June 30, 2022, increased $3.1 million, or 14.1 percent, compared with the year ended June 30, 2021.
Operating Revenues Year ended June 30, $ % (dollars in thousands) 2023 2022 Change Change ETF advisory fees: Airline and cargo ETFs $ 12,668 $ 20,378 $ (7,710 ) (37.8 )% Gold and natural resources ETF 506 584 (78 ) (13.4 )% Total ETF advisory fees 13,174 20,962 (7,788 ) (37.2 )% Investment advisory fees - USGIF: Gold and natural resources funds $ 1,441 $ 2,851 $ (1,410 ) (49.5 )% Emerging markets funds 16 213 (197 ) (92.5 )% International equity funds 309 499 (190 ) (38.1 )% Bond funds - - - n/a Total investment advisory fees - USGIF 1,766 3,563 (1,797 ) (50.4 )% Total advisory fees 14,940 24,525 (9,585 ) (39.1 )% USGIF administrative services fees 134 189 (55 ) (29.1 )% Total Operating Revenues $ 15,074 $ 24,714 $ (9,640 ) (39.0 )% Total consolidated operating revenues for the year ended June 30, 2023, decreased $9.6 million, or 39.0 percent, compared with the year ended June 30, 2022.
An embedded derivative and its related host contract represent one legal contract and are combined within the investments in available-for-sale debt securities on the consolidated balance sheets. The investments shown above include investments at fair value of $12.8 million and $7.3 million, as of June 30, 2022, and 2021, respectively, invested in USGIF funds the Company advised.
An embedded derivative and its related host contract represent one legal contract and are combined within the investments in available-for-sale debt securities on the Consolidated Balance Sheets.
The low fee rate for the fixed income funds is due to voluntary fee waivers on these funds as discussed in Note 3, Investment Management and Other Fees, in the Consolidated Financial Statements of this Annual Report on Form 10-K. The Company serves as investment advisor to three U.S.-based exchange-traded funds (ETFs): U.S. Global Jets ETF (ticker JETS), U.S.
The average investment management fee for the fixed income funds was nil for both fiscal years 2023 and 2022 due to fee waivers on these funds as discussed in Note 5, Investment Management and Other Fees, to the Consolidated Financial Statements of this Annual Report on Form 10-K.
Business Segments The Company, with principal operations located in San Antonio, Texas, manages two business segments: 1. Investment management services, through which the Company offers, to U.S. Global Investors Funds (“USGIF” or the “Fund(s)”) and ETF clients, a range of investment management products and services to meet the needs of individual and institutional investors; and 2.
Global Investors Funds (“USGIF” or the “Fund(s)”) and ETF clients, a range of investment management products and services to meet the needs of individual and institutional investors; and 2. Corporate investments, through which the Company invests for its own account in an effort to add growth and value to its cash position.
Average assets in the ETFs increased in fiscal year 2022, primarily in the Jets ETF. Information on the U.S.-based ETFs can be found at www.usglobaletfs.com, including the prospectus, performance and holdings. 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 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 U.S. Global Jets UCITS ETF is not available to U.S. investors.
Investment income (loss) from the Company’s investments includes: ● realized gains and losses on sales of securities; ● realized gains and losses on principal payment proceeds; ● unrealized gains and losses on fair valued securities; ● realized foreign currency gains and losses; ● realized gains and losses on sale of subsidiary; ● impairments and observable price changes on equity investments without readily determinable fair values; and ● dividend and interest income. 15 Table of Contents Investment income can be volatile and may vary depending on market fluctuations, the Company’s ability to participate in investment opportunities, and timing of transactions.
The investments shown above include investments at fair value of $12.4 million and $12.8 million, as of June 30, 2023, and 2022, respectively, invested in USGIF, funds the Company advised. 14 Table of Contents Net investment income (loss) from the Company’s investments includes: ● realized gains and losses on sales of securities; ● realized gains on principal payment proceeds; ● unrealized gains and losses on fair valued securities; ● foreign currency gains and losses; ● impairments and observable price changes on equity investments without readily determinable fair values; and ● dividend and interest income.
The Company has agreed to contractually limit the expenses of the U.S. Global Sea to Sky Cargo ETF through April 2023. The Company also serves as investment advisor to one European-based ETF, the U.S. Global Jets UCITS ETF.
The Company also serves as investment advisor to one European-based ETF, the U.S. Global Jets UCITS ETF. The Company receives a unitary management fee of 0.65 percent of average net assets and has agreed to bear all expenses of the ETF.
In fiscal year 2022, these sources accounted for 84.8 percent and 14.4 percent, respectively, of the Company’s operating revenues. Investment base advisory fees from USGIF are calculated as a percentage of average net assets, ranging from 0.375 percent to 1.25 percent, and are paid monthly.
Investment base advisory fees from USGIF are calculated as a percentage of average net assets, ranging from 0.375 percent to 1.25 percent, and are paid monthly. The base advisory fee on the equity funds within USGIF is adjusted upward or downward based on performance.
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. Management believes current cash reserves, investments, and financing available will be sufficient to meet foreseeable cash needs for operating activities.
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. Contractual obligations primarily consist of agreements for services used in daily operations and for marketing and distribution.
Securities at Fair Value Cost Unrealized Gain in Other Comprehensive Income Unrealized Gain (Loss) in Investment Income (Loss) Fair Value (dollars in thousands) Equity securities at fair value 1 $ 19,967 $ - $ (3,539 ) $ 16,428 Available-for-sale debt securities at fair value 2 8,576 5,412 (2,539 ) 11,449 Total at June 30, 2022 $ 28,543 $ 5,412 $ (6,078 ) $ 27,877 Equity securities at fair value 1 $ 14,363 $ - $ 3,895 $ 18,258 Available-for-sale debt securities at fair value 2 8,741 8,308 - 17,049 Total at June 30, 2021 $ 23,104 $ 8,308 $ 3,895 $ 35,307 1.
Securities at Fair Value Cost Unrealized Gain in Other Comprehensive Income Unrealized Loss in Net Investment Income (Loss) Fair Value (dollars in thousands) Equity securities at fair value 1 $ 19,601 $ - $ (6,396 ) $ 13,205 Available-for-sale debt securities at fair value 2 7,729 1,707 (2,428 ) 7,008 Total at June 30, 2023 $ 27,330 $ 1,707 $ (8,824 ) $ 20,213 Equity securities at fair value 1 $ 19,967 $ - $ (5,667 ) $ 14,300 Available-for-sale debt securities at fair value 2 8,576 4,588 (2,539 ) 10,625 Total at June 30, 2022 $ 28,543 $ 4,588 $ (8,206 ) $ 24,925 1.
More recently the airline industry has become more significant to our revenue. All these markets are volatile and subject to capital cycles.
More recently the airline industry has become more significant to our revenue. All these markets are volatile and subject to capital cycles. Reflecting on the significant developments and challenges we have faced over the past year, the impacts and fears of COVID-19 seem to have diminished, as China successfully emerged from the COVID lockdown.
ETF unitary management fees increased due to an increase in ETF average assets under management, primarily in the Jets ETF, and the addition of the Jets ETF UCITS product in Europe and the Sea to Sky Cargo ETF.
ETF unitary management fees decreased due to a decrease in ETF average assets under management, primarily in the Jets ETF.
The spread of the global COVID-19 had an adverse effect on global and domestic economies and financial markets, which may reoccur and continue for an undetermined period. Market declines affect the Company’s assets under management, and thus its revenues and also the valuation of the Company’s corporate investments.
Management believes current cash reserves, investments, and financing available will be sufficient to meet foreseeable cash needs for operating activities and for contractual obligations. The spread of the global COVID-19 had an adverse effect on global and domestic economies and financial markets, which may reoccur and continue for an undetermined period.
These fees are paid by USGIF based on average daily net assets for administrative services provided by the Company to the Funds. Advisory Fees. Advisory fees, the largest component of the Company’s operating revenues, are derived from two sources: exchange-traded fund advisory fees and USGIF advisory fees.
Advisory fees, the largest component of the Company’s operating revenues, are derived from two sources: exchange-traded fund advisory fees and USGIF advisory fees. In fiscal year 2023, these sources accounted for 87.4 percent and 11.7 percent, respectively, of the Company’s operating revenues.
The increase was primarily due to inflows into the Jets ETF during fiscal 2021, resulting in an increase in average assets throughout the year, while average assets in fiscal 2022 were relatively steady until June 2022. The Jets ETF invests in airline-related stocks, including global airline carriers, airport operators and aircraft manufacturers.
During fiscal year 2023, average AUM was $2.5 billion compared to $3.9 billion in fiscal year 2022, a decrease of 35.6 percent. The decrease was primarily due to outflows from the Jets ETF. The Jets ETF invests in airline-related stocks, including global airline carriers, airport operators and aircraft manufacturers.
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. 18 Table of Contents Liquidity and Capital Resources At June 30, 2022, the Company had net working capital (current assets minus current liabilities) of approximately $33.9 million and a current ratio (current assets divided by current liabilities) of 9.2 to 1.
Liquidity and Capital Resources At June 30, 2023, the Company had net working capital (current assets minus current liabilities) of approximately $37.4 million and a current ratio (current assets divided by current liabilities) of 13.7 to 1.
Consolidated shareholders’ equity at June 30, 2022, was $56.5 million, an increase of $2.2 million, or 4.0 percent since June 30, 2021. The increase was primarily due to net income of $5.5 million for the year ended June 30, 2022, somewhat offset by decrease in other comprehensive income (loss) of $2.3 million, and dividends declared of $1.4 million.
The decrease was primarily due to other comprehensive loss of $2.3 million, dividends declared of $1.3 million, and repurchases of common stock of $1.2 million; offset by net income of $3.1 million for the year ended June 30, 2023. The Company also has access to a $1.0 million credit facility, which can be utilized for working capital purposes.
The advisory agreement for the U.S. Global Jets ETF and the U.S. Global GO GOLD and Precious Metal Miners ETF has been renewed through September 2023. The advisory agreement for the U.S.
The advisory agreement for the U.S. Global Jets ETF and the U.S. Global GO GOLD and Precious Metal Miners ETF has been renewed through July 2024. 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.
Corporate investments, through which the Company invests for its own account in an effort to add growth and value to its cash position. The Company holds a significant amount of its total assets in investments.
The Company holds a significant amount of its total assets in investments.
Other Income (Loss) Year ended June 30, $ % (dollars in thousands) 2022 2021 Change Change Investment income (loss) $ (4,046 ) $ 28,338 $ (32,384 ) (114.3 )% Income (loss) from equity method investments (206 ) 347 (553 ) (159.4 )% Gain on forgiveness of PPP loan - 444 (444 ) (100.0 )% Other income 235 144 91 63.2 % Total Other Income (Loss) $ (4,017 ) $ 29,273 $ (33,290 ) (113.7 )% 17 Table of Contents Total consolidated other loss for the year ended June 30, 2022, was $4.0 million, compared to $29.3 million in income for the year ended June 30, 2021, a change of $33.3 million, or 113.7 percent.
Other Income (Loss) Year ended June 30, $ % (dollars in thousands) 2023 2022 Change Change Net investment income (loss) $ 316 $ (6,174 ) $ 6,490 (105.1 )% Loss from equity method investments - (206 ) 206 (100.0 )% Other income 242 235 7 3.0 % Total Other Income (Loss) $ 558 $ (6,145 ) $ 6,703 (109.1 )% Total consolidated other income for the year ended June 30, 2023, was $558,000, compared to $6.1 million in losses for the year ended June 30, 2022, a change of $6.7 million.
General and administrative expenses increased $1.2 million, or 21.2 percent, in fiscal year 2022, primarily due to increased fund expenses and higher consulting and professional fees.
General and administrative expenses decreased $789,000, or 11.4 percent, in fiscal year 2023, primarily due to a decrease in director fees and expenses, fund expenses, and consulting and professional fees. The decrease in director fees and expenses is primarily due to the amortization expense of stock options in the prior fiscal year.
USGIF advisory fees in total, including performance adjustments, decreased by approximately $755,000, or 17.5 percent, in fiscal year 2022 compared to fiscal year 2021, primarily as a result of a decrease in average assets under management driven by market depreciation in the equity funds and a decrease in performance fees received. 16 Table of Contents Mutual fund investment advisory fees are also affected by changes in assets under management, which include: ● market appreciation or depreciation; ● the addition of new fund shareholder accounts; ● fund shareholder contributions of additional assets to existing accounts; ● withdrawals of assets from and termination of fund shareholder accounts; ● exchanges of assets between accounts or products with different fee structures; and ● the amount of fees voluntarily reimbursed.
USGIF advisory fees in total, including performance adjustments, decreased by approximately $1.8 million, or 50.4 percent, in fiscal year 2023 compared to fiscal year 2022, primarily as a result of a decrease in average assets under management driven by shareholder redemptions and a change from performance fees received to performance fees paid.
Holmes was named Interim CEO and Interim Executive Chairman of HIVE. Effective December 22, 2020, Mr. Holmes became the Executive Chairman of HIVE. Provision for Income Taxes A tax expense of $1.6 million was recorded for the year ended June 30, 2022, compared to a tax expense of $5.5 million for the year ended June 30, 2021.
The Company’s equity method investment was dissolved during the year ended June 30, 2022. 16 Table of Contents Provision for Income Taxes A tax expense of $934,000 was recorded for the year ended June 30, 2023, compared to $1.5 million for the year ended June 30, 2022, a decrease of $594,000, or 38.9 percent.
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The world economy has largely moved on from the current circulating COVID-19 variant except for China, where they have large city-wide lockdowns to try to halt the spread of virus, which have kept world supply chains tight to uncertain.
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With supply chains now open, ports are bustling with activity, allowing us to better navigate the current economic landscape. Throughout the spring and especially during the summer months, we experienced robust travel demand, which in turn drove investor flows into the airline stocks.
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With Russia invading Ukraine, this compounded the supply chain issues with most of the world, barring prominent China and India holdouts, having stopped trading for Russian commodities. However, Europe is still heavily dependent on Russian natural gas which is being used as leverage against Europe for helping Ukraine defend itself.
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This positive price momentum has been a key driver of revenue for our JETS ETF and airline industry related revenues at large. However, it is worth noting that this year has not been without challenges. We find ourselves still grappling with the highest inflation rates in four decades.
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The confluence of these factors has led to the highest inflation in the U.S. in forty years. Energy markets were tight with oil and natural gas futures up 58.6 percent and 81.7 percent, respectively, over the past fiscal year.
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This inflationary pressure is partly attributable to the Russian-Ukrainian war and increased consumer spending of disposable income. As always, we continue to closely monitor economic trends to navigate their potential impact on the Company's performance. In the broader market, we observed interesting sectoral dynamics.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeEquity Price Risk Due to the Company’s investments in securities carried at fair value, equity price fluctuations represent a market risk factor affecting the Company’s consolidated financial position. The carrying values of investments subject to equity price risks are based on quoted market prices or, if not actively traded, management’s estimate of fair value as of the balance sheet date.
Biggest changeThe carrying values of investments subject to equity price risks are based on quoted market prices or, if not actively traded, management’s estimate of fair value as of the balance sheet date. Market prices fluctuate, and the amount realized in the subsequent sale of an investment may differ significantly from the reported fair value.
HIVE is a company that is headquartered and traded in Canada with cryptocurrency mining facilities in Iceland, Sweden and Canada. Cryptocurrency markets and related stocks have been, and are expected to continue to be, volatile.
HIVE is a company that is headquartered in Canada with cryptocurrency mining facilities in Iceland, Sweden and Canada. Cryptocurrency markets and related stocks have been, and are expected to continue to be, volatile.
COVID-19 had an adverse effect on global and domestic financial markets, which may reoccur and continue for an undetermined period. This may adversely affect assets under management and thus the Company’s revenues and operating results. Market declines also affect the valuation of the Company’s corporate investments, which also adversely affects the Company’s balance sheet and results of operations.
COVID-19 had an adverse effect on global and domestic financial markets, which may reoccur and continue for an undetermined period. This may adversely affect assets under management and thus the Company’s revenues and operating results. Market declines also affect the valuation of the Company’s corporate investments, which also adversely affects the Company’s Consolidated Balance Sheets and results of operations.
Certain assets under management also have exposure to foreign currency fluctuations in various markets, which could impact their valuation and thus the revenue received by the Company. 22 Table of Contents
Certain assets under management also have exposure to foreign currency fluctuations in various markets, which could have an impact on their valuation and thus the revenue received by the Company. 20 Table of Contents
There is potential for significant volatility in the market price of HIVE, which could materially impact the investment’s value included on the balance sheet and unrealized gain (loss) recognized in investment income.
There is potential for significant volatility in the market price of HIVE, which could materially impact the investment’s value included on the Consolidated Balance Sheets and unrealized gain (loss) recognized in net investment income.
As a result, the Company’s revenues are subject to volatility beyond market-based fluctuations discussed in the investment management and administrative fees section above. For the years ended June 30, 2022, and 2021, the Company realized an increase in its USGIF base advisory fee of $20,000 and $482,000, respectively, due to these performance adjustments.
As a result, the Company’s revenues are subject to volatility beyond market-based fluctuations discussed in the investment management and administrative fees section above. For the year ended June 30, 2023, the Company realized a decrease in its USGIF base advisory fee of $490,000, and for fiscal year ended June 30, 2022, an increase of $20,000 due to these performance adjustments.
Typically, investments subject to interest rate risk will decrease in value when interest rates rise and increase in value when interest rates decline. Fluctuations in interest rates could materially impact the Company’s investments in debt securities carried at fair value included on the balance sheet and gains (losses) recognized in investment income.
Typically, investments subject to interest rate risk will decrease in value when interest rates rise and increase in value when interest rates decline. Fluctuations in interest rates could have a material impact on the Company’s investments in debt securities carried at fair value included on the Consolidated Balance Sheets and gains (losses) recognized in net investment income.
(“HIVE”), which were valued at $2.6 million at June 30, 2022. Also, the embedded derivatives shown in the above table, which were valued at $3,000 at June 30, 2022, are related to HIVE convertible debentures. HIVE is discussed in more detail in Note 3, Investments, to the Consolidated Financial Statements of this Annual Report on Form 10-K.
Also, the embedded derivatives shown in the above table, which were valued at $114,000 at June 30, 2023, are related to HIVE convertible debentures. HIVE is discussed in more detail in Note 4, Investments, to the Consolidated Financial Statements of this Annual Report on Form 10-K.
Market prices fluctuate, and the amount realized in the subsequent sale of an investment may differ significantly from the reported fair value. 21 Table of Contents The following table summarizes the Company’s equity price risks in securities carried at fair value as of June 30, 2022, and shows the effects of a hypothetical 25 percent increase and a 25 percent decrease in market prices.
The following table summarizes the Company’s equity price risks in securities carried at fair value as of June 30, 2023, and shows the effects of a hypothetical 25 percent increase and a 25 percent decrease in market prices.
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.
The Company’s investment activities are reviewed and monitored by Company compliance personnel, and various reports are provided to certain investment advisory clients.
Hypothetical Estimated Fair Value Estimated Increase Fair Value at Percentage After Hypothetical (Decrease) in (dollars in thousands) June 30, 2022 Change Price Change Net Income (Loss) (1) Equity securities at fair value $ 16,428 25% increase $ 20,535 $ 3,245 25% decrease $ 12,321 $ (3,245 ) Embedded derivatives at fair value 2 $ 3 25% increase $ 4 $ 1 25% decrease $ 2 $ (1 ) 1.
Hypothetical Estimated Fair Value Estimated Increase Fair Value at Percentage After Hypothetical (Decrease) in (dollars in thousands) June 30, 2023 Change Price Change Net Income (Loss) 1 Equity securities at fair value $ 13,205 25% increase $ 16,506 $ 2,608 25% decrease $ 9,904 $ (2,608 ) Embedded derivatives at fair value 2 $ 114 25% increase $ 143 $ 23 25% decrease $ 86 $ (23 ) 1.
This may not only adversely affect the Company’s assets under management but also the valuation of the Company’s corporate investments. A significant portion of the equity securities recorded at fair value in the above table subject to equity price risk are investments in common share purchase warrants of HIVE Blockchain Technologies Ltd.
A portion of the equity securities recorded at fair value in the above table subject to equity price risk are investments in common share purchase warrants of HIVE Digital Technologies Ltd. formerly HIVE Blockchain Technologies Ltd., (“HIVE”), which were valued at $290,000 at June 30, 2023.
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Written procedures are in place to manage compliance with the code of ethics and other policies affecting the Company’s investment practices. 19 Table of Contents Equity Price Risk Due to the Company’s investments in securities carried at fair value, equity price fluctuations represent a market risk factor affecting the Company’s consolidated financial position.
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This may not only adversely affect the Company’s assets under management but also the valuation of the Company’s corporate investments.

Other GROW 10-K year-over-year comparisons