Business Combination

12 Months Ended

Jun. 30, 2014

Business Combinations [Abstract]

Business Combination

BUSINESS COMBINATION

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

Effective June 1, 2014, the Company, through USCAN, completed its purchase of an additional 15 percent interest in Galileo from the company’s founder, Michael Waring, for $180,000 cash. This strategic investment brings USCAN’s ownership to 65 percent of the issued and outstanding shares of Galileo, which represents a controlling interest of Galileo. Through Galileo, the Company expects to increase its presence in Canada. The non-controlling interest in this subsidiary is included in “non-controlling interest in subsidiaries” in the equity section of the Consolidated Balance Sheets. Frank Holmes, CEO, and Susan McGee, President and General Counsel, serve as directors of Galileo.

From March 31, 2013, to June 1, 2014, the Company accounted for its interest in Galileo under the equity method with its share of Galileo’s profit or loss recognized in earnings, including $20,000 and $54,000 in other income in fiscal year 2014 and 2013, respectively.

The Company accounted for the June 1, 2014, Galileo share purchase using the acquisition method of accounting, which requires, among other things, that the fair values of assets acquired, including an intangible asset, and liabilities assumed, along with the fair value of the non-controlling interest in the subsidiary, be recognized on the Consolidated Balance Sheets as of the acquisition date.

Business combinations achieved in stages also must value prior investments at fair value. A $161,000 increase in fair value of the Company’s initial investment was recognized as a gain and included in investment income.

The Company recognized a gain of $129,000 on the June 1, 2014, purchase since the fair value of the net assets acquired was greater than the fair value of consideration given. This gain is also included within investment income.

The Consolidated Balance Sheet as of June 30, 2014, reflects the purchase price allocations based on an assessment of the fair value of the assets acquired, liabilities assumed and non-controlling interest in subsidiary. The Company is continuing to evaluate the transaction and future changes to the amounts recorded could occur. The table below presents the preliminary purchase price allocation as of the June 1, 2014, acquisition date:

(dollars in thousands)
Fair value of acquisition components
Current assets	$	1,788
Property and equipment	149
Intangible asset re: non-compete agreement	90
Other noncurrent assets	13
Current liabilities	(278		)
Non-controlling interest in subsidiary	(617		)
Gain on purchase of 15%	(129		)
	$	1,016
Fair value of consideration as of June 1, 2014
Fair value of March 31, 2013 initial investment for 50% of stock	$	836
June 1, 2014 acquisition for 15% of stock for cash	180
	$	1,016

The following unaudited pro forma condensed consolidated results of operations for the years ended June 30, 2014; 2013; and 2012 are presented as if the Galileo acquisition had been completed on July 1, 2011. The unaudited pro forma results do not include any adjustments to eliminate the impact of cost savings or other synergies that may result from the acquisition. In addition, the unaudited pro forma results of operations do not purport to be indicative of the actual results that would have been achieved by the combined company for the periods presented or that may be achieved by the combined company in the future.

The information below reflects certain nonrecurring adjustments to remove the Company’s equity in earnings of Galileo and include amortization of the intangible asset.

	Year Ended June 30,
(dollars in thousands)	2014			2013			2012
Operating revenues	$	13,771		$	20,234		$	25,229
Net income (loss)	(856		)	(13		)	1,475
Net income (loss) attributable to U.S. Global Investors, Inc.	(916		)	(99		)	1,484
Net Income (Loss) per Share
Income (loss) from continuing operations - basic	$	(0.04	)	$	0.00		$	0.11
Income (loss) from continuing operations - diluted	(0.04		)	0.00			0.11

Post-Acquisition Financial Information

The following amounts associated with the acquisition of Galileo, subsequent to the June 1, 2014, effective date, are included in the Consolidated Statements of Operations:

(dollars in thousands)
Total revenues	$	234
Net income	18
Net income attributable to U.S. Global Investors, Inc.	12
Costs associated with the acquisition 1	33

^1.  Costs associated with the Galileo acquisition are included in generaland administrative expenses in the Consolidated Statements of Operations.