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INVESTMENTS | 6 Months Ended
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Dec. 31, 2017
Disclosure Text Block Supplement [Abstract] |
Investments and Other Noncurrent Assets [Text Block] | NOTE 2. INVESTMENTS As of December 31, 2017, the Company held investments with a fair value of approximately $29.8 million and a cost basis of approximately $12.6 million. The fair value of these investments is approximately 66.1 percent of the Company’s total assets. In addition, the Company held other investments of $2.1 million accounted for under the cost method of accounting and an investment of approximately $3.3 million accounted for under the equity method of accounting. Investments in securities classified as trading are reflected as current assets on the Consolidated Balance Sheets at their fair value. Unrealized holding gains and losses on trading securities are included in earnings in the Consolidated Statements of Operations. Investments in securities classified as available-for-sale, which may not be readily marketable, are reflected as non-current assets on the Consolidated Balance Sheets at their fair value. Unrealized holding gains and losses on available-for-sale securities are excluded from earnings and reported in other comprehensive income as a separate component of shareholders’ equity until realized. Other investments consist of equity investments in entities over which the Company is unable to exercise significant influence and which do not have readily determinable fair values. These investments are accounted for under the cost method of accounting and evaluated periodically for impairment. The Company considers many factors in determining impairment, including the severity and duration of the decline in value below cost, the Company’s interest and ability to hold the security for a period of time sufficient for an anticipated recovery in value, and the financial condition and specific events related to the issuer. When an impairment of a security is determined to be other than temporary, the impairment is recognized as a loss in the Company’s earnings. Investments classified as equity method consist of investments in companies in which the Company is able to exercise significant influence but not control. Under the equity method of accounting, the investment is initially recorded at cost, then the Company’s proportional share of investee’s underlying net income or loss is recorded as a component of “other income” with a corresponding increase or decrease to the carrying value of the investment. Distributions received from the investee reduce the Company’s carrying value of the investment. These investments are evaluated for impairment if events or circumstances arise that indicate that the carrying amount of such assets may not be recoverable. The Company records security transactions on trade date. Realized gains (losses) from security transactions are calculated on the first-in/first-out cost basis, unless otherwise identifiable, and are recorded in earnings on the date of sale. The following details the components of the Company’s investments recorded at fair value as of December 31, 2017, and June 30, 2017.
|  | December 31, 2017 |
(dollars in thousands) |  | Cost |  |  | Gains |  |  | (Losses) |  |  | Fair Value |
Trading securities1 |  |  |  |  |  |  |  |  |  |  |  |
Mutual funds - Fixed income |  | $ | 7,035 |  |  | $ | 26 |  |  | $ | - |  |  | $ | 7,061 |
Mutual funds - Domestic equity |  |  | 535 |  |  |  | - |  |  |  | (163 | ) |  |  | 372 |
Other |  |  | 45 |  |  |  | - |  |  |  | (45 | ) |  |  | - |
Offshore fund |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |
Total trading securities |  |  | 7,615 |  |  |  | 26 |  |  |  | (208 | ) |  |  | 7,433 |
Available-for-sale securities2 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Common stock - Domestic |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |
Common stock - International |  |  | 2,554 |  |  |  | 16,704 |  |  |  | - |  |  |  | 19,258 |
Corporate debt3 |  |  | 1,071 |  |  |  | 632 |  |  |  | - |  |  |  | 1,703 |
Mutual funds - Fixed income |  |  | 1,000 |  |  |  | - |  |  |  | (5 | ) |  |  | 995 |
Mutual funds - Domestic equity |  |  | 394 |  |  |  | 22 |  |  |  | - |  |  |  | 416 |
Other |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |
Total available-for-sale securities4 |  |  | 5,019 |  |  |  | 17,358 |  |  |  | (5 | ) |  |  | 22,372 |
Total securities at fair value |  | $ | 12,634 |  |  | $ | 17,384 |  |  | $ | (213 | ) |  | $ | 29,805 |
|  | June 30, 2017 |
(dollars in thousands) |  | Cost |  |  | Gains |  |  | (Losses) |  |  | Fair Value |
Trading securities1 |  |  |  |  |  |  |  |  |  |  |  |
Mutual funds - Fixed income |  | $ | 8,884 |  |  | $ | 50 |  |  | $ | (7 | ) |  | $ | 8,927 |
Mutual funds - Domestic equity |  |  | 535 |  |  |  | - |  |  |  | (157 | ) |  |  | 378 |
Other |  |  | 45 |  |  |  | - |  |  |  | (45 | ) |  |  | - |
Offshore fund |  |  | 1,184 |  |  |  | - |  |  |  | (769 | ) |  |  | 415 |
Total trading securities |  |  | 10,648 |  |  |  | 50 |  |  |  | (978 | ) |  |  | 9,720 |
Available-for-sale securities2 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Common stock - Domestic |  |  | 109 |  |  |  | 4 |  |  |  | - |  |  |  | 113 |
Common stock - International |  |  | 191 |  |  |  | 12 |  |  |  | - |  |  |  | 203 |
Corporate debt3 |  |  | 1,042 |  |  |  | 427 |  |  |  | - |  |  |  | 1,469 |
Mutual funds - Fixed income |  |  | 1,148 |  |  |  | 1 |  |  |  | (5 | ) |  |  | 1,144 |
Mutual funds - Domestic equity |  |  | 394 |  |  |  | 12 |  |  |  | - |  |  |  | 406 |
Other |  |  | 56 |  |  |  | 10 |  |  |  | - |  |  |  | 66 |
Total available-for-sale securities4 |  |  | 2,940 |  |  |  | 466 |  |  |  | (5 | ) |  |  | 3,401 |
Total securities at fair value |  | $ | 13,588 |  |  | $ | 516 |  |  | $ | (983 | ) |  | $ | 13,121 |
1 | Unrealized and realized gains and losses on trading securities are included in earnings in the statement of operations.
2 | Unrealized gains and losses on available-for-sale securities are excluded from earnings and recorded in other comprehensive income as a separate component of shareholders’ equity until realized.
3 | Corporate debt matures in 2024.
4 | Net unrealized gains (losses) on available-for-sale securities gross and net of tax as of December 31, 2017, are $17,353 and $13,847, respectively, and as of June 30, 2017, are $461 and $461, respectively.
On December 31, 2017, the Company had $8.8 million at fair value invested in USGIF. These investments were included in the Consolidated Balance Sheets and the table above as “trading securities” and “available-for-sale securities.” Investment income can be volatile and varies depending on market fluctuations, the Company’s ability to participate in investment opportunities, and timing of transactions. The Company expects that gains and losses will continue to fluctuate in the future. Investment income (loss) from the Company’s investments includes:
• | realized gains and losses on sales of securities;
• | unrealized gains and losses on trading securities;
• | realized foreign currency gains and losses;
• | other-than-temporary impairments on available-for-sale securities;
• | other-than-temporary impairments on held-at-cost securities; and
• | dividend and interest income.
The following summarizes investment income (loss) reflected in earnings for the periods discussed:
|  | Six Months Ended |  |  | Three Months Ended |
(dollars in thousands) |  | December 31, |  |  | December 31, |
Investment Income |  | 2017 |  |  | 2016 |  |  | 2017 |  |  | 2016 |
Realized gains on sales of available-for-sale securities |  | $ | 31 |  |  | $ | 31 |  |  | $ | 24 |  |  | $ | 31 |
Realized losses on sales of trading securities |  |  | (736 | ) |  |  | - |  |  |  | (82 | ) |  |  | - |
Unrealized gains (losses) on trading securities |  |  | 746 |  |  |  | (26 | ) |  |  | 60 |  |  |  | (125 | )
Realized foreign currency gains (losses) |  |  | (19 | ) |  |  | (5 | ) |  |  | 3 |  |  |  | (7 | )
Other-than-temporary declines in available-for-sale securities |  |  | - |  |  |  | (16 | ) |  |  | - |  |  |  | - |
Dividend and interest income |  |  | 430 |  |  |  | 518 |  |  |  | 238 |  |  |  | 350 |
Total Investment Income |  | $ | 452 |  |  | $ | 502 |  |  | $ | 243 |  |  | $ | 249 |
Included in investment income were other-than temporary declines in value on available-for-sale securities of approximately $16,000 for the six months ended December 31, 2016. There were no impairment losses for the three and six months ended December 31, 2017, or the three months ended December 31, 2016. During the six months ended December 31, 2016, impairment losses resulted from fair values of securities being lower than book value, and two securities with a combined cost basis of $98,000 were written down to a combined fair value of $82,000. In making these determinations, the Company considered the length of time and extent to which the fair value has been less than cost basis, financial condition and prospects of the issuers and the Company’s ability to hold the investment until recovery. Unrealized Losses The following tables show the gross unrealized losses and fair values of available-for-sale investment securities with unrealized losses aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position. The Company reviewed the gross unrealized losses shown as of December 31, 2017, and determined that the losses were not other-than-temporary based on consideration of the nature of the investment and the cause, severity and duration of the loss.
|  | December 31, 2017 |
|  | Less Than 12 Months |  |  | 12 Months or Greater |  |  | Total |
|  |  |  |  | Gross Unrealized |  |  |  |  |  | Gross Unrealized |  |  |  |  |  | Gross Unrealized |
(dollars in thousands) |  | Fair Value |  |  | Losses |  |  | Fair Value |  |  | Losses |  |  | Fair Value |  |  | Losses |
Available-for-sale securities |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Common stock - Domestic |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | - |
Common stock - International |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |
Corporate debt |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |
Mutual funds - Fixed income |  |  | 995 |  |  |  | (5 | ) |  |  | - |  |  |  | - |  |  |  | 995 |  |  |  | (5 | )
Mutual funds - Domestic equity |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |
Other |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |
Total available-for-sale securities |  | $ | 995 |  |  | $ | (5 | ) |  | $ | - |  |  | $ | - |  |  | $ | 995 |  |  | $ | (5 | )
|  | June 30, 2017 |
|  | Less Than 12 Months |  |  | 12 Months or Greater |  |  | Total |
|  |  |  |  | Gross Unrealized |  |  |  |  |  | Gross Unrealized |  |  |  |  |  | Gross Unrealized |
(dollars in thousands) |  | Fair Value |  |  | Losses |  |  | Fair Value |  |  | Losses |  |  | Fair Value |  |  | Losses |
Available-for-sale securities |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Common stock - Domestic |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | - |
Common stock - International |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |
Corporate debt |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |
Mutual funds - Fixed income |  |  | - |  |  |  | - |  |  |  | 95 |  |  |  | (5 | ) |  |  | 95 |  |  |  | (5 | )
Mutual funds - Domestic equity |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |
Other |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |
Total available-for-sale securities |  | $ | - |  |  | $ | - |  |  | $ | 95 |  |  | $ | (5 | ) |  | $ | 95 |  |  | $ | (5 | )
Fair Value Hierarchy ASC 820, Fair Value Measurement and Disclosures, defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. ASC 820 establishes a hierarchy that prioritizes inputs to valuation techniques used to measure fair value and requires companies to disclose the fair value of their financial instruments according to a fair value hierarchy (i.e., Levels 1, 2, and 3 inputs, as defined below). The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. Financial instruments measured and reported at fair value are classified and disclosed in one of the following categories: Level 1 – Valuations based on quoted prices in active markets for identical assets or liabilities at the reporting date. Since valuations are based on quoted prices that are readily and regularly available in an active market, value of these products does not entail a significant degree of judgment. Level 2 – Valuations based on quoted prices in markets for which not all significant inputs are observable, directly or indirectly. Corporate debt securities valued in accordance with the evaluated price supplied by an independent service are categorized as Level 2 in the hierarchy. Other securities categorized as Level 2 include securities valued at the mean between the last reported bid and ask quotation and securities valued with an adjustment to the quoted price due to restrictions. Level 3 – Valuations based on inputs that are unobservable and significant to the fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the financial instrument. The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with the investing in those securities. Because of the inherent uncertainties of valuation, the values reflected may materially differ from the values received upon actual sale of those investments. For actively traded securities, the Company values investments using the closing price of the securities on the exchange or market on which the securities principally trade. If the security is not traded on the last business day of the quarter, it is generally valued at the mean between the last bid and ask quotation. The fair value of a security that has a restriction is based on the quoted price for an otherwise identical unrestricted instrument that trades in a public market, adjusted for the estimated effect of the restriction. Mutual funds, which include open- and closed-end funds, exchange-traded funds, and offshore funds, are valued at net asset value or closing price, as applicable. Certain corporate debt securities not traded on an exchange may be valued by an independent pricing service using an evaluated quote based on such factors as institutional-size trading in similar groups of securities, yield, quality maturity, coupon rate, type of issuance and individual trading characteristics and other market data. As part of its independent price verification process, the Company periodically reviews the fair value provided by the pricing service using information such as transactions in these investments, broker quotes, market transactions in comparable investments, general market conditions and the issuer’s financial condition. Certain debt securities may be valued based on review of similarly structured issuances in similar jurisdictions, when possible, or based on other traded debt securities issued by the issuer. The Company also takes into consideration numerous other factors that could affect valuation such as overall market conditions, liquidity of the security and bond structure. Securities for which market quotations are not readily available are valued at their fair value as determined by the portfolio management team. The portfolio management team includes representatives from the investment, accounting and legal/compliance departments. The portfolio management team meets periodically to consider a number of factors in determining a security’s fair value, including the security’s trading volume, market values of similar class issuances, investment personnel’s judgment regarding the market experience of the issuer, financial status of the issuer, the issuer’s management, and back testing, as appropriate. The fair values may differ from what may have been used had a broader market for these securities existed. The portfolio management team reviews inputs and assumptions and reports material items to the board of directors. The following presents fair value measurements, as of December 31, 2017, and June 30, 2017, for the major categories of U.S. Global’s investments measured at fair value on a recurring basis:
|  | December 31, 2017 |
|  | Quoted Prices |  |  | Significant Other Inputs |  |  | Significant Unobservable Inputs |  |  |  |
(dollars in thousands) |  | (Level 1) |  |  | (Level 2) |  |  | (Level 3) |  |  | Total |
Trading securities |  |  |  |  |  |  |  |  |  |  |  |
Mutual funds - Fixed income |  | $ | 7,061 |  |  | $ | - |  |  | $ | - |  |  | $ | 7,061 |
Mutual funds - Domestic equity |  |  | 372 |  |  |  | - |  |  |  | - |  |  |  | 372 |
Other |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |
Offshore fund investment measured at net asset value1 |  |  |  |  |  |  |  |  |  |  |  |  |  |  | - |
Total trading securities |  |  | 7,433 |  |  |  | - |  |  |  | - |  |  |  | 7,433 |
Available-for-sale securities |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Common stock - Domestic |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |
Common stock - International |  |  | 158 |  |  |  | 19,100 |  |  |  | - |  |  |  | 19,258 |
Corporate debt |  |  | - |  |  |  | 1,703 |  |  |  | - |  |  |  | 1,703 |
Mutual funds - Fixed income |  |  | 995 |  |  |  | - |  |  |  | - |  |  |  | 995 |
Mutual funds - Domestic equity |  |  | 416 |  |  |  | - |  |  |  | - |  |  |  | 416 |
Other |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |
Total available-for-sale securities |  |  | 1,569 |  |  |  | 20,803 |  |  |  | - |  |  |  | 22,372 |
Total securities at fair value |  | $ | 9,002 |  |  | $ | 20,803 |  |  | $ | - |  |  | $ | 29,805 |
|  | June 30, 2017 |
|  | Quoted Prices |  |  | Significant Other Inputs |  |  | Significant Unobservable Inputs |  |  |  |
(dollars in thousands) |  | (Level 1) |  |  | (Level 2) |  |  | (Level 3) |  |  | Total |
Trading securities |  |  |  |  |  |  |  |  |  |  |  |
Mutual funds - Fixed income |  | $ | 8,927 |  |  | $ | - |  |  | $ | - |  |  | $ | 8,927 |
Mutual funds - Domestic equity |  |  | 378 |  |  |  | - |  |  |  | - |  |  |  | 378 |
Other |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |
Offshore fund investment measured at net asset value1 |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 415 |
Total trading securities |  |  | 9,305 |  |  |  | - |  |  |  | - |  |  |  | 9,720 |
Available-for-sale securities |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Common stock - Domestic |  |  | 113 |  |  |  | - |  |  |  | - |  |  |  | 113 |
Common stock - International |  |  | 203 |  |  |  | - |  |  |  | - |  |  |  | 203 |
Corporate debt |  |  | 1,469 |  |  |  | - |  |  |  | - |  |  |  | 1,469 |
Mutual funds - Fixed income |  |  | 1,144 |  |  |  | - |  |  |  | - |  |  |  | 1,144 |
Mutual funds - Domestic equity |  |  | 406 |  |  |  | - |  |  |  | - |  |  |  | 406 |
Other |  |  | 66 |  |  |  | - |  |  |  | - |  |  |  | 66 |
Total available-for-sale securities |  |  | 3,401 |  |  |  | - |  |  |  | - |  |  |  | 3,401 |
Total securities at fair value |  | $ | 12,706 |  |  | $ | - |  |  | $ | - |  |  | $ | 13,121 |
1 | In accordance with Subtopic 820-10, certain investments that are measured at fair value using the net asset value per share (or its equivalent) practical expedient have not been classified in the fair value hierarchy. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the Consolidated Balance Sheets.
As of December 31, 2017, approximately 30 percent of the Company’s financial assets measured at fair value were classified as Level 1 and 70 percent of the Company’s financial assets measured at fair value were classified as Level 2. As of June 30, 2017, 100 percent of the Company’s financial assets were classified in the fair value hierarchy as Level 1. The Company recognizes transfers between levels at the end of each quarter. During the quarter ended September 30, 2017, the Company invested in 10 million common shares of HIVE Blockchain Technologies Ltd. (“HIVE”), a company that is headquartered and traded in Canada with cryptocurrency mining facilities in Iceland and Sweden, at a cost of $2.4 million. The shares held by the Company are restricted for resale until mid-March 2018 and are also subject to Canadian insider regulations. The original restriction on the shares until January 2018 was extended to mid-March 2018 to facilitate additional share offerings by HIVE. The investment, classified as available-for-sale, was valued at approximately $19.1 million at December 31, 2017, based on the quoted market price adjusted for the restriction on resale and is classified as Level 2 in the fair value hierarchy. Cryptocurrency markets and related stocks have been, and are expected to continue to be, volatile. Cryptocurrency mining is considered an early stage high-risk industry, and the nature of mining is expected to evolve. 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 comprehensive income. A unit trust investment fund managed by Galileo, described below under Investment Classified as Equity Method, also holds common shares of HIVE. The Company had a direct ownership of HIVE of approximately 3.3 percent as of December 31, 2017, and a combined direct and indirect ownership of HIVE of approximately 4.0 percent as of December 31, 2017. Frank Holmes is the non-executive chairman of HIVE and held shares and options at December 31, 2017. The Company has available-for-sale investments in corporate debt securities maturing in 2024 which were valued at $1.7 million as of December 31, 2017, based on the mean between the last reported bid/ask quotation and were classified as Level 2. As of June 30, 2017, these securities were valued at $1.5 million based on a quoted price on the reporting date and were classified as Level 1. The Company had an investment in an affiliated offshore fund, classified as trading, which invested in companies in the energy and natural resources sectors. The fair value of this investment was estimated based on the net asset value per share at $415,000 as of June 30, 2017. This offshore fund liquidated during the current fiscal year, with partial liquidation proceeds received in the quarter ended September 30, 2017, and final proceeds received during the quarter ended December 31, 2017. Investment Classified as Equity Method During the quarter ended September 30, 2017, the Company, through USCAN, invested approximately $500,000 in the Galileo Partners Fund, a Canadian unit trust investment fund managed by Galileo. This fund’s primary investment is in HIVE, the same company described above that the Company has also invested in directly; the fund held 6.5 million common shares of HIVE as of December 31, 2017. This concentration may result in volatility in the valuation of the Galileo Partners Fund. The Company owns approximately 30 percent of Galileo Partners Fund and is considered to have the ability to exercise significant influence. Thus, the investment is accounted for under the equity method of accounting. Under the equity method, the Company’s proportional share of the fund’s net income or loss, which primarily consists of realized and unrealized gains and losses on investments offset by fund expenses, is recognized in the Company’s earnings. Included in other income for the three and six months ending December 31, 2017, is $1.2 million and $2.7 million, respectively, of equity method income of Galileo Partners Fund. The Company’s investment in the fund was valued at approximately $3.3 million at December 31, 2017. Frank Holmes also directly held an investment in the fund as of December 31, 2017. Summarized income statement information on the Galileo Partners Fund since the Company’s investment is as follows:
Galileo Partners Fund |  |  |
Summary Financial Information |  |  |
For the Period from August 31, 2017 (investment) to December 31, 2017 |
(dollars in thousands) |  |  |
Realized gains on sales of investments |  | $ | 1,921 |
Unrealized gains on investments |  |  | 9,612 |
Fund fees and expenses, including performance fees |  |  | (2,810 | )
Net income of fund |  | $ | 8,723 |
Company's share of income from equity method investment |  | $ | 2,731 |
Subsequent to December 31, 2017, the Company redeemed a portion of its investment in the Galileo Partners Fund. See Note 12, Subsequent Event, for further information.

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