UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

þ Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
for the quarterly period ended December 31, 2005

OR

o Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
for the transition period from                      to                     

Commission File Number 0-13928

U.S. GLOBAL INVESTORS, INC.

(Exact name of registrant as specified in its charter)

Texas	74-1598370
(State or Other Jurisdiction of	(IRS Employer Identification Number)
Incorporation or Organization)
7900 Callaghan Road	78229-1234
San Antonio, Texas	(Zip Code)
(Address of Principal Executive Offices)

(210) 308-1234
(Registrant’s Telephone Number, Including Area Code)

Not Applicable
(Former Name, Former Address, and Former Fiscal Year, if Changed since Last Report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days.

YES þ NO o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o Accelerated filer þ Non-accelerated filer o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

YES o NO þ

On January 27, 2006, there were 6,334,974 shares of Registrant’s class A nonvoting common stock issued and 5,993,059 shares of Registrant’s class A nonvoting common stock issued and outstanding, no shares of Registrant’s class B nonvoting common shares outstanding, and 1,496,800 shares of Registrant’s class C common stock issued and outstanding.

Table of Contents

PART I. FINANCIAL INFORMATION	1
Item 1. Financial Statements	1
Consolidated Balance Sheets (Unaudited)	1
Consolidated Statements of Operations and Comprehensive Income (Unaudited)	3
Consolidated Statements of Cash Flows (Unaudited)	4
Notes To Consolidated Financial Statements (Unaudited)	5
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	13
Item 3. Quantitative and Qualitative Disclosures about Market Risk	17
Item 4. Controls and Procedures	17
PART II. OTHER INFORMATION	18
Item 6. Exhibits and Reports on Form 8-K	18
SIGNATURES	19
Certification Pursuant to Section 302
Certification Pursuant to Section 906

U.S. Global Investors, Inc.
December 31, 2005, Quarterly Report on Form 10-Q	Page 1 of 23

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

Consolidated Balance Sheets

Assets

	DECEMBER 31, 2005		JUNE 30, 2005
	(UNAUDITED)
Current Assets
Cash and cash equivalents	$	4,823,023	$	3,814,178
Due from brokers		2,297		¾
Trading securities, at fair value		3,313,500		2,612,529
Receivables
Mutual funds, net of allowance of $18,200 and $26,488 at December 31, 2005, and June 30, 2005, respectively		3,287,786		2,221,148
Other advisory clients		219,961		54,140
Employees		1,210		750
Other		324,760		43,274
Prepaid expenses		614,414		450,963
Deferred tax asset		¾		80,989
Total Current Assets		12,586,951		9,277,971
Net Property and Equipment		1,883,693		1,768,334
Other Assets
Long-term deferred tax asset		87,527		165,749
Investment securities available-for-sale, at fair value		525,247		890,461
Total Other Assets		612,774		1,056,210
Total Assets	$	15,083,418	$	12,102,515

The accompanying notes are an integral part of this statement.

U.S. Global Investors, Inc.
December 31, 2005, Quarterly Report on Form 10-Q	Page 2 of 23

Liabilities and Shareholders’ Equity

	DECEMBER 31, 2005			JUNE 30, 2005
	(UNAUDITED)
Current Liabilities
Accounts payable	$	220,104		$	193,249
Accrued compensation and related costs		1,016,714			525,140
Deferred tax liability		128,473			¾
Other accrued expenses		1,650,201			1,481,038
Total Current Liabilities		3,015,492			2,199,427
Total Liabilities		3,015,492			2,199,427
Shareholders’ Equity
Common stock (Class A) — $.05 par value; nonvoting; authorized, 7,000,000 shares; issued, 6,334,974 shares and 6,316,474 shares at December 31, 2005, and June 30, 2005, respectively		316,749			315,824
Common stock (Class B) — $.05 par value; nonvoting; authorized, 2,250,000 shares; no shares issued		¾			¾
Common stock (Class C) — $.05 par value; voting; authorized, 1,750,000 shares; issued, 1,496,800 shares		74,840			74,840
Additional paid-in-capital		11,192,266			11,008,535
Treasury stock, class A shares at cost; 341,915 and 326,988 shares at December 31, 2005, and June 30, 2005, respectively		(844,231	)		(650,592	)
Accumulated other comprehensive income, net of tax		300,625			390,329
Retained earnings (deficit)		1,027,677			(1,235,848	)
Total Shareholders’ Equity		12,067,926			9,903,088
Total Liabilities and Shareholders’ Equity	$	15,083,418		$	12,102,515

The accompanying notes are an integral part of this statement.

U.S. Global Investors, Inc.
December 31, 2005, Quarterly Report on Form 10-Q	Page 3 of 23

Consolidated Statements of Operations and Comprehensive Income (Unaudited)

	Six Months Ended						Three Months Ended
	December 31,						December 31,
	2005			2004			2005			2004
Revenues
Investment advisory fees	$	11,377,704		$	5,596,539		$	6,178,399		$	3,238,490
Transfer agent fees		2,219,492			1,461,613			1,168,380			766,508
Investment income (loss)		654,542			(65,993	)		361,006			56,579
Other		83,616			75,388			53,047			44,321
		14,335,354			7,067,547			7,760,832			4,105,898
Expenses
Employee compensation and benefits		3,962,234			2,843,117			2,078,915			1,598,891
General and administrative		2,237,648			1,585,345			1,322,935			877,555
Subadvisory fees		2,794,535			843,820			1,602,802			538,814
Omnibus fees		1,611,723			618,670			912,751			359,699
Advertising		239,924			180,740			98,546			93,401
Depreciation		60,930			54,367			31,993			27,121
		10,906,994			6,126,059			6,047,942			3,495,481
Income Before Income Taxes		3,428,360			941,488			1,712,890			610,417
Provision for Federal Income Taxes
Tax Expense		1,164,835			293,838			545,300			203,230
Net Income		2,263,525			647,650			1,167,590			407,187
Other comprehensive income (loss), net of tax
Unrealized gains (losses) on available-for-sale securities		(89,704	)		94,317			(80,825	)		(64,381	)
Comprehensive Income	$	2,173,821		$	741,967			1,086,765		$	342,806
Basic Net Income per Share	$	0.30		$	0.09		$	0.16		$	0.05
Diluted Net Income per Share	$	0.30		$	0.09		$	0.15		$	0.05
Basic weighted average number of common shares outstanding		7,493,405			7,477,007			7,494,317			7,480,792
Diluted weighted average number of common shares outstanding		7,602,690			7,538,353			7,612,235			7,546,380

The accompanying notes are an integral part of this statement.

U.S. Global Investors, Inc.
December 31, 2005, Quarterly Report on Form 10-Q	Page 4 of 23

Consolidated Statements of Cash Flows (Unaudited)

	SIX MONTHS ENDED DECEMBER 31,
	2005			2004
Cash Flows from Operating Activities:
Net income	$	2,263,525		$	647,650
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		60,930			54,367
Net recognized loss (gain) on securities		(74,564	)		95,596
Gain on disposal of fixed assets		—			(297	)
Provision for deferred taxes		333,894			157,707
Provision for losses on accounts receivable		(8,288	)		—
Changes in assets and liabilities, impacting cash from operations:
Accounts receivable		(1,508,414	)		(358,854	)
Prepaid expenses and other		(163,451	)		(256,782	)
Trading securities		(612,461	)		(45,762	)
Accounts payable and accrued expenses		687,592			13,538
Total adjustments		(1,284,762	)		(340,487	)
Net Cash Provided by Operating Activities		978,763			307,163
Cash Flows from Investing Activities:
Purchase of property and equipment		(176,289	)		(5,440	)
Purchase of available-for-sale securities		(8,420	)		—
Proceeds on sale of available-for-sale securities		223,774			—
Net Cash Provided by (Used in) Investing Activities		39,065			(5,440	)
Cash Flow from Financing Activities:
Proceeds from issuance or exercise of stock, warrants, and options		145,230			43,423
Purchase of treasury stock		(206,411	)		—
Treasury stock issued		52,198			(4,533	)
Net Cash Provided by (Used in) Financing Activities		(8,983	)		38,890
Net Increase in Cash and Cash Equivalents		1,008,845			340,613
Beginning Cash and Cash Equivalents		3,814,178			2,831,676
Ending Cash and Cash Equivalents	$	4,823,023		$	3,172,289

The accompanying notes are an integral part of this statement.

U.S. Global Investors, Inc.
December 31, 2005, Quarterly Report on Form 10-Q	Page 5 of 23

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Note 1. Basis of Presentation

The consolidated financial statements have been prepared by U.S. Global Investors, Inc. (the Company or U.S. Global) pursuant to accounting principles generally accepted in the United States of America and the rules and regulations of the Securities and Exchange Commission that permit reduced disclosure for interim periods. The financial information included herein reflects all adjustments (consisting solely of normal recurring adjustments), which are, in the opinion of management, necessary for a fair presentation of results for the interim periods presented. The Company has consistently followed the accounting policies set forth in the notes to the consolidated financial statements in the Company’s Form 10-K for the year ended June 30, 2005.

The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries, United Shareholder Services, Inc. (USSI), A&B Mailers, Inc. (A&B), U.S. Global Investors (Guernsey) Limited (USGG), U.S. Global Brokerage, Inc. (USGB), and US Global Investors (Bermuda) Limited (USBERM).

All significant intercompany balances and transactions have been eliminated in consolidation. Certain amounts have been reclassified for comparative purposes. The results of operations for the six-month and three-month periods ended December 31, 2005, are not necessarily indicative of the results to be expected for the entire year.

Note 2. Investments

As of December 31, 2005, the Company held investments with a market value of $3.84 million and a cost basis of $3.33 million. The market value of these investments is approximately 25.5 percent of the Company’s total assets.

Investments in securities classified as trading are reflected as current assets on the consolidated balance sheet at their fair market value. Unrealized holding gains and losses on trading securities are included in earnings in the consolidated statements of operations and comprehensive income.

Investments in securities classified as available for sale, which may not be readily marketable, are reflected as non-current assets on the consolidated balance sheet 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. The following summarizes the market value, cost, and unrealized gain or loss on investments as of December 31, 2005, and June 30, 2005.

								Unrealized holding
								gains on
								available-for-sale
					Unrealized			securities,
Securities	Market Value		Cost		Gain (Loss)			net of 34% tax
Trading1	$	3,313,500	$	3,262,221	$	51,279
Available for sale2		525,247		69,755		455,492		$	300,625
Total at December 31, 2005	$	3,838,747	$	3,331,976	$	506,771
Trading1	$	2,612,529	$	3,040,700	$	(428,171	)
Available for sale2		890,461		299,055		591,406		$	390,329
Total at June 30, 2005	$	3,502,990	$	3,339,755	$	163,235

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.

U.S. Global Investors, Inc.
December 31, 2005, Quarterly Report on Form 10-Q	Page 6 of 23

Investment income can be volatile and varies depending on market fluctuations, the Company’s ability to participate in investment opportunities, and timing of transactions. A significant portion of the unrealized gains and losses for the six months ending December 31, 2005, is concentrated in a small number of issuers. 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; and

• dividend and interest income.

The following summarizes investment income (loss) reflected in earnings for the periods discussed:

Investment Income (Loss)	Six months ended December 31,
	2005			2004
Realized gains on sales of available-for-sale securities	$	14,709		$	—
Realized gains (losses) on sales of trading securities		88,510			(726	)
Unrealized gains (losses) on trading securities		479,451			4,689
Realized foreign currency gains		1,347			—
Other-than-temporary declines in available-for-sale securities		(28,655	)		(94,870	)
Dividend and interest income		99,180			24,914
Total Investment Income	$	654,542		$	(65,993	)

Investment Income (Loss)	Three months ended December 31,
	2005		2004
Realized gains on sales of available-for-sale securities	$	26,400	$	—
Realized gains (losses) on sales of trading securities		88,510		(726	)
Unrealized gains (losses) on trading securities		188,614		42,376
Realized foreign currency gains		—		—
Other-than-temporary declines in available-for-sale securities		—		—
Dividend and interest income		57,482		14,929
Total Investment Income	$	361,006	$	56,579

U.S. Global Investors, Inc.
December 31, 2005, Quarterly Report on Form 10-Q	Page 7 of 23

Note 3. Investment Management, Transfer Agent and Other Fees

The Company serves as investment adviser to U.S. Global Investors Funds (USGIF) and U.S. Global Accolade Funds (USGAF) and receives a fee based on a specified percentage of net assets under management. Three of the four funds within USGAF are sub-advised by third-party managers, who are in turn compensated out of the investment advisory fees received by the Company. The Company also serves as transfer agent to USGIF and USGAF and receives a fee based on the number of shareholder accounts. Additionally, the Company provides in-house legal services to USGIF and USGAF for which it is reimbursed and receives certain miscellaneous fees directly from USGAF and USGIF shareholders. Fees for providing investment management and transfer agent services to USGIF and USGAF continue to be the Company’s primary revenue source.

The Company has voluntarily waived or reduced its advisory fees and/or has agreed to pay expenses on several funds within USGIF funds and one USGAF fund through November 1, 2006, and February 28, 2006, respectively, or such later date as the Company determines. The aggregate fees waived and expenses borne by the Company for the six month periods ended December 31, 2005, and 2004 were $699,971, and $665,885, respectively.

The investment advisory and related contracts between the Company and USGIF and USGAF will expire on February 28, 2007 and May 31, 2006, respectively. Management anticipates the trustees of both USGIF and USGAF will renew the contracts.

The Company began providing management and advisory services for the Meridian Global Gold and Resources Fund Ltd., an offshore fund, in the first quarter of fiscal year 2005. The Company receives a monthly management fee and a quarterly performance fee, if any, based on the overall increase in value of the net assets in the fund for the quarter. The Company has recorded fees totaling $495,989 and $197,303 for the six and three months ended December 31, 2005, respectively. For the six and three months ended December 31, 2004, the Company recorded total fees of $57,597 and $53,966, respectively.

On July 1, 2005, the Company began providing management and advisory services to the U.S. Global Investors Balanced Natural Resources Fund, Ltd., an offshore fund. For these services, the Company is paid a monthly management fee and a quarterly performance fee, if any. The Company recorded fees totaling $30,300 for the three months ended December 31, 2005. The Company waived management fees totaling $4,652 for the three months ended September 30, 2005, in order to allow the fund to deliver attractive performance returns while increasing its assets. No performance fees were earned or waived during the three months ended September 30, 2005.

In the second quarter of fiscal year 2006, the Company signed an agreement to provide investment advisory services for Endeavour Mining Capital Corp., an offshore company. Advisory services are expected to commence in the third quarter of fiscal year 2006, at which time the Company shall record a monthly management fee based on the net asset value of the portfolio, and an annual performance fee, if any, based on a percentage of consolidated net income from operations in excess of a predetermined percentage return on equity.

The Company receives additional revenue from several sources including custodial fee revenues, revenues from miscellaneous transfer agency activities including lockbox functions, mailroom operations from A&B, as well as investment income.

Note 4. Credit Facility

The Company has access to a $1 million credit facility with a one-year maturity for working capital purposes. Any use of this credit facility will be secured by the Company’s eligible accounts receivable. As of December 31, 2005, this credit facility remained unutilized by the Company.

Note 5. Stock-Based Compensation

In December 2004, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards No. 123 (revised 2004), “Share-Based Payment” (SFAS 123R). SFAS 123R eliminates the alternative to use

U.S. Global Investors, Inc.
December 31, 2005, Quarterly Report on Form 10-Q	Page 8 of 23

the intrinsic value method of accounting that was provided in SFAS 123, which generally resulted in no compensation expense recorded in the financial statements related to the issuance of equity awards to employees. SFAS 123R requires that the cost resulting from all share-based payment transactions be recognized in the financial statements. SFAS 123R establishes fair value as the measurement objective in accounting for share-based payment arrangements and requires all companies to apply a fair-value-based measurement method in accounting for generally all share-based payment transactions with employees.

On July 1, 2005 (the first day of the Company’s 2006 fiscal year), the Company adopted SFAS 123R. The provisions of SFAS 123R became effective the first annual reporting period beginning after June 15, 2005, and the Company adopted SFAS 123R using a modified prospective application, as permitted under SFAS 123R. Accordingly, prior period amounts have not been restated. Under this application, the Company is required to record compensation expense for all awards granted after the date of adoption and for the unvested portion of previously granted awards that remain outstanding at the date of adoption.

The following table details the effect on net income and earnings per share had compensation expense for the employee stock-based awards been recorded in the six months ended December 31, 2004 based on the fair value method under SFAS 123. The reported and pro forma net income and earnings per share for the six months ended December 31, 2005, are the same since stock-based compensation expense is calculated under the provisions of SFAS 123R. The amounts for the six and three months ended December 31, 2005, are included in the table below only to provide the detail for a comparative presentation to the period of the previous year.

	SIX MONTHS ENDED DECEMBER 31,
	2005			2004
Net Income, as reported	$	2,263,525		$	647,650
Add: Stock-based employee compensation expense included in reported net income, net of tax		24,190			16,500
Deduct: Total stock-based employee compensation expense determined under fair value based method, net of tax		(24,190	)		(18,323	)
Pro forma net income	$	2,263,525		$	645,827
Earnings per share:
Basic as reported	$	0.30		$	0.09
Basic pro forma	$	0.30		$	0.09
Diluted as reported	$	0.30		$	0.09
Diluted pro forma	$	0.30		$	0.09

	THREE MONTHS ENDED DECEMBER 31,
	2005			2004
Net Income, as reported	$	1,167,590		$	407,187
Add: Stock-based employee compensation expense included in reported net income, net of tax		12,154			8,250
Deduct: Total stock-based employee compensation expense determined under fair value based method, net of tax		(12,154	)		(9,162	)
Pro forma net income	$	1,167,590		$	406,275
Earnings per share:
Basic as reported	$	0.16		$	0.05
Basic pro forma	$	0.16		$	0.05
Diluted as reported	$	0.15		$	0.05
Diluted pro forma	$	0.15		$	0.05

Prior to the adoption of SFAS 123R, the Company applied Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees” (APB 25) to account for stock-based awards. Beginning with the 2006 fiscal year, with the adoption of SFAS 123R, stock-based compensation expense was recorded for the cost of stock options. Stock-based compensation expense for the six months ended December 31, 2005, was $36,650 ($24,190 after tax). As of December

U.S. Global Investors, Inc.
December 31, 2005, Quarterly Report on Form 10-Q	Page 9 of 23

31, 2005, there was approximately $36,650 of total unrecognized share-based compensation cost related to share-based compensation granted under the plans that will be recognized over the next year.

Stock compensation plans

The Company’s stock option plans provide for the granting of either incentive or nonqualified stock options to employees and non-employee directors. Options are subject to terms and conditions determined by the Compensation Committee of the Board of Directors, and generally are exercisable in increments of 20% per year beginning one year from date of grant and expire ten years from date of grant.

The following table summarizes information about our stock option plans for the six months ended December 31, 2005.

			Weighted Average
	Number of Options		Exercise Price
Options outstanding, beginning of year		164,500	$	2.11
Granted		—		—
Exercised		18,500	$	2.47
Forfeited		—		—
Options outstanding, end of quarter		146,000	$	2.06
Options exercisable, end of quarter		136,000	$	1.97

U.S. Global Investors, Inc.
December 31, 2005, Quarterly Report on Form 10-Q Page 10 of 23

Note 6. Earnings Per Share

Basic earnings per share (“EPS”) excludes dilution and is computed by dividing net income by the weighted average number of common shares outstanding for the period. Diluted EPS reflects the potential dilution of EPS that could occur if options to issue common stock were exercised.

The following table sets forth the computation for basic and diluted earnings per share (EPS):

	SIX MONTHS ENDED DECEMBER 31,
	2005		2004
Net income	$	2,263,525	$	647,650
Weighted average number of outstanding shares
Basic		7,493,405		7,477,007
Effect of dilutive securities
Employee stock options		109,285		61,346
Diluted		7,602,690		7,538,353
Earnings per share
Basic	$	0.30	$	0.09
Diluted	$	0.30	$	0.09

	THREE MONTHS ENDED DECEMBER 31,
	2005		2004
Net income	$	1,167,590	$	407,187
Weighted average number of outstanding shares
Basic		7,494,317		7,480,792
Effect of dilutive securities
Employee stock options		117,918		65,588
Diluted		7,612,235		7,546,380
Earnings per share
Basic	$	0.16	$	0.05
Diluted	$	0.15	$	0.05

The diluted EPS calculation excludes the effect of stock options when their exercise prices exceed the average market price for the period. For the six-months ended December 31, 2005, and December 31, 2004, options for -0- and 40,000 shares, respectively, were excluded from diluted EPS. For the three-month period ended December 31, 2005, and December 31, 2004, options for -0- and 20,000 shares, respectively, were excluded from diluted EPS.

U.S. Global Investors, Inc.
December 31, 2005, Quarterly Report on Form 10-Q Page 11 of 23

Note 7. Income Taxes

The Company and its subsidiaries file a consolidated federal income tax return. 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. The current deferred tax liability primarily consists of temporary differences in the deductibility of prepaid expenses and accrued liabilities, as well as unrealized gains on trading securities. The long-term deferred tax asset is composed primarily of unrealized tax losses on available-for-sale securities and capital loss carryovers.

A valuation allowance is provided when it is more likely than not that some portion of the deferred tax amount will not be realized. No valuation allowance was included at December 31, 2005, or June 30, 2005, respectively.

U.S. Global Investors, Inc.
December 31, 2005, Quarterly Report on Form 10-Q Page 12 of 23

Note 8. Financial Information by Business Segment

The Company operates principally in two business segments: providing investment management services to its mutual funds and private client, and investing for its own account in an effort to add growth and value to its cash position. The following schedule details total revenues and income (loss) by business segment:

	Investment
	Management		Corporate
	Services		Investments			Consolidated
Six months ended December 31, 2005
Revenues	$	13,779,311	$	556,043		$	14,335,354
Income before income taxes	$	2,882,440	$	545,920		$	3,428,360
Depreciation	$	60,930	$	—		$	60,930
Capital expenditures	$	176,289	$	—		$	176,289
Gross identifiable assets at December 31, 2005	$	11,130,753	$	3,865,138		$	14,995,891
Deferred tax liability							87,527
Consolidated total assets at December 31, 2005						$	15,083,418
Six months ended December 31, 2004
Revenues (Investment loss)	$	7,158,404	$	(90,857	)	$	7,067,547
Income (loss) before income taxes	$	1,032,345	$	(90,857	)	$	941,488
Depreciation	$	54,367	$	—		$	54,367
Capital expenditures	$	5,440	$	—		$	5,440

	Investment
	Management		Corporate
	Services		Investments			Consolidated
Three months ended December 31, 2005
Revenues	$	7,457,308	$	303,524		$	7,760,832
Income before income taxes	$	1,412,352	$	300,538		$	1,712,890
Depreciation	$	31,993	$	—		$	31,993
Capital expenditures	$	129,727	$	—		$	129,727
Three months ended December 31, 2004
Revenues (Investment loss)	$	4,147,599	$	(41,701	)	$	4,105,898
Income (loss) before income taxes	$	652,118	$	(41,701	)	$	610,417
Depreciation	$	27,121	$	—		$	27,121
Capital expenditures	$	2,694	$	—		$	2,694

Note 9. Contingencies and commitments

The Company continuously reviews any investor, employee or vendor complaints and pending or threatened litigation. The likelihood that a loss contingency exists is evaluated under the criteria of SFAS No. 5, “Accounting for Contingencies,” through consultation with legal counsel and a loss contingency is recorded if the contingency is probable and reasonably estimable at the date of the financial statements.

During the normal course of business, the Company may be subject to claims, legal proceedings and other contingencies. These matters are subject to various uncertainties, and it is possible that some of these matters may be resolved in a manner unfavorable to the Company. The Company establishes accruals for matters for which the outcome is probable and can be reasonably estimated. Management believes that any liability in excess of these accruals upon the ultimate resolution of these matters will not have a material adverse effect on the consolidated financial statements of the Company.

U.S. Global Investors, Inc.
December 31, 2005, Quarterly Report on Form 10-Q Page 13 of 23

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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

BUSINESS SEGMENTS

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

The Company generates substantially all its operating revenues from the investment management of products and services for the U.S. Global Investors Funds (USGIF) and U.S. Global Accolade Funds (USGAF). Although the Company generates the majority of its revenues from this segment, the Company holds a significant amount of its total assets in investments. The following is a brief discussion of the Company’s two business segments.

Investment Management Products and Services

The Company generates substantially all of its operating revenues from managing and servicing USGIF and USGAF. 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.

During the six-month period ended December 31, 2005, domestic mutual fund assets under management averaged $2.62 billion versus $1.51 billion for the same period ended December 31, 2004. During the quarter ended December 31, 2005, mutual fund assets under management averaged $2.83 billion versus $1.67 billion for the same period ended December 31, 2004. This increase was primarily due to significant increases in the natural resource and foreign equity funds under management. These funds realized the benefit of net inflows as well as market appreciation.

The Company began providing management and advisory services for the Meridian Global Gold and Resources Fund Ltd., an offshore fund, in the first quarter of fiscal year 2005. The Company receives a monthly management fee and a quarterly performance fee, if any, based on the overall increase in value of the net assets in the fund for the quarter. The Company has recorded fees totaling $495,989 and $197,303 for the six and three months ended December 31, 2005, respectively. For the six and three months ended December 31, 2004, the Company recorded total fees of $57,597 and $53,966, respectively.

The Company began providing management and advisory services to the U.S. Global Investors Balanced Natural Resources Fund, Ltd., an offshore fund, in the first quarter of fiscal year 2006. For these services, the Company is paid a monthly management fee and a quarterly performance fee, if any. The Company recorded fees totaling $30,300 for the three months ended December 31, 2005. The Company waived all management and performance fees totaling $4,652 for the quarter ended September 30, 2005, in order to allow the fund to deliver attractive performance returns while increasing its assets.

U.S. Global Investors, Inc.
December 31, 2005, Quarterly Report on Form 10-Q Page 14 of 23

In the second quarter of fiscal year 2006, the Company signed an agreement to provide investment advisory services for Endeavour Mining Capital Corp., an offshore company. Advisory services are expected to commence in the third quarter of fiscal year 2006, at which time the Company shall record a monthly management fee based on the net asset value of the portfolio, and an annual performance fee, if any, based on a percentage of consolidated net income from operations in excess of a predetermined percentage return on equity.

Investment Activities

Management believes it can more effectively manage the Company’s cash position by broadening the types of investments used in cash management and continues to believe that such activities are in the best interest of the Company. Company compliance personnel review and monitor these activities, and various reports are provided to investment advisory clients.

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; and

• dividend and interest income.

This source of revenue does not remain at a consistent level and is dependent on market fluctuations, the Company’s ability to participate in investment opportunities, and timing of transactions.

As of December 31, 2005, the Company held approximately $3.84 million in investment securities with a cost basis of $3.33 million. The value of these investments is approximately 25.5 percent of total assets.

For the six-month period ended December 31, 2005, the Company had net realized gains on available-for-sale securities of $14,709 compared with $0 for the six-month period ended December 31, 2004 and net realized gains on trading securities of $88,510 compared with net realized losses of $726 for the six-month period ended December 31, 2004. The change in net unrealized holding gains and losses on trading securities held at December 31, 2005, and 2004, which has been included in income for the six-month period, was $479,451 and $4,689, respectively.

For available-for-sale securities with declines in value that are deemed other than temporary, the cost basis of the securities is reduced accordingly, and the resulting loss is realized in earnings. The Company recorded other than temporary declines of $28,655 and $94,870 for the six-month period ended December 31, 2005, and 2004, respectively.

Dividend and interest income for the six-month period ended December 31,2005 was $99,180 compared with $24,914 for the six-month period ended December 31, 2004.

U.S. Global Investors, Inc.
December 31, 2005, Quarterly Report on Form 10-Q Page 15 of 23

RESULTS OF OPERATIONS — SIX MONTHS ENDED DECEMBER 31, 2005 AND 2004

The Company posted net after-tax income of $2,263,525 ($.30 income per share) for the six-month period ended December 31, 2005, compared with net after-tax income of $647,650 ($.09 income per share) for the six-month period ended December 31, 2004.

Revenues

Total consolidated revenues for the six-month period ended December 31, 2005, increased $7,267,807 or 103 percent, compared with the six-month period ended December 31, 2004. This increase was primarily attributable to the following:

• Investment advisory fees grew by $5,781,000 as a result of increased assets under management and growth and performance of offshore funds;

• Transfer agent fees increased by $758,000 primarily as a result of growth in the number of shareholder accounts; and

• Investment income increased by $721,000 due primarily to an increase in realized and unrealized gains on corporate investments classified as trading securities.

Expenses

Total consolidated expenses for the six-month period ended December 31, 2005, increased $4,780,935, or 78 percent, compared with the six-month period ended December 31, 2004. This was largely attributable to the following:

• Consistent with continued growth in the Eastern European Fund, subadvisory fees increased by $1,951,000;

• Driven by strong mutual fund performance, compensation expense increased by $1,119,000;

• Omnibus platform fees increased by $993,000 due to increased mutual fund asset flows through broker/dealer omnibus platforms;

• General and administrative expensed increased by $652,000 primarily due to consulting and marketing-related travel and entertainment costs.

RESULTS OF OPERATIONS — QUARTER ENDED DECEMBER 31, 2005 AND 2004

The Company posted net after-tax income of $1,167,590 ($.16 income per share) for the three-month period ended December 31, 2005, compared with net after-tax income of $407,187 ($.05 income per share) for the three-month period ended December 31, 2004.

Revenues

Total consolidated revenues for the quarter ended December 31, 2005, increased $3,654,934 or 89 percent, compared with the quarter ended December 31, 2004. This increase was primarily attributable to the following:

• Mutual fund investment advisory fee grew by $2,940,000 as a result of increased assets under management and growth and performance of offshore funds;

• Transfer agent fees increased by $402,000 primarily as a result of growth in the number of shareholder accounts; and

• Investment income increased by $304,000 due primarily to an increase in realized and unrealized gains.

Expenses

Total consolidated expenses for the quarter ended December 31, 2005, increased $2,552,461, or 73 percent, compared with the quarter ended December 31, 2004. This was largely attributable to the following:

• Consistent with continued growth in the Eastern European Fund, subadvisory fees increased by $1,064,000;

• Omnibus platform fees increased by $553,000 due to increased mutual fund asset flows through broker/dealer omnibus platforms;

• Driven by strong mutual fund performance, compensation expense increased by $480,000; and

• General and administrative expenses increase by $446,000 primarily due to legal and consulting fees.

U.S. Global Investors, Inc.
December 31, 2005, Quarterly Report on Form 10-Q Page 16 of 23

LIQUIDITY AND CAPITAL RESOURCES

At December 31, 2005, the Company had net working capital (current assets minus current liabilities) of approximately $9.6 million and a current ratio (current assets divided by current liabilities) of 4.2 to 1. With approximately $4.8 million in cash and cash equivalents and approximately $3.8 million in marketable securities, the Company has adequate liquidity to meet its current obligations. Total shareholders’ equity was approximately $12.1 million, with cash, cash equivalents, and marketable securities comprising 57% of total assets.

As of December 31, 2005, the Company has no long-term liabilities. The Company has access to a $1 million credit facility with a one-year maturity for working capital purposes. Any use of this credit facility will be secured by the Company’s eligible accounts receivable. As of December 31, 2005, this credit facility remained unutilized by the Company. The Company’s available working capital and potential cash flow are expected to be sufficient to cover current expenses.

The investment advisory and related contracts between the Company and USGIF and USGAF will expire on February 28, 2007, and May 31, 2006, respectively. Management anticipates the board of trustees of both USGIF and USGAF will renew the contracts.

Management believes current cash reserves, financing obtained and/or available, and potential cash flow from operations will be sufficient to meet foreseeable cash needs or capital necessary for the above-mentioned activities and allow the Company to take advantage of opportunities for growth whenever available.

CRITICAL ACCOUNTING POLICIES

In December 2004, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards No. 123 (revised 2004), “Share-Based Payment” (SFAS 123R). SFAS 123R eliminates the alternative to use the intrinsic value method of accounting that was provided in SFAS 123, which generally resulted in no compensation expense recorded in the financial statements related to the issuance of equity awards to employees. SFAS 123R requires that the cost resulting from all share-based payment transactions be recognized in the financial statements. SFAS 123R establishes fair value as the measurement objective in accounting for share-based payment arrangements and requires all companies to apply a fair-value-based measurement method in accounting for generally all share-based payment transactions with employees.

On July 1, 2005 (the first day of the Company’s 2006 fiscal year), the Company adopted SFAS 123R. The provisions of SFAS 123R became effective the first annual reporting period beginning after June 15, 2005, and the Company adopted SFAS 123R using a modified prospective application, as permitted under SFAS 123R. Accordingly, prior period amounts have not been restated. Under this application, the Company is required to record compensation expense for all awards granted after the date of adoption and for the unvested portion of previously granted awards that remain outstanding at the date of adoption.

For discussion of other significant accounting policies that the Company follows, please refer to the notes to the consolidated financial statements included in the Annual Report on Form 10-K for the year ended June 30, 2005.

U.S. Global Investors, Inc.
December 31, 2005, Quarterly Report on Form 10-Q Page 17 of 23

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company’s balance sheet includes assets whose fair value is subject to market risks. Due to the Company’s investments in equity securities, 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. Market prices fluctuate, and the amount realized in the subsequent sale of an investment may differ significantly from the reported market value.

The Company’s investment activities are reviewed and monitored by Company compliance personnel, and various reports are provided to investment advisory clients. The Company has in place a code of ethics that requires pre-clearance of any trading activity by the Company. Written procedures are also in place to manage compliance with the code of ethics.

The table below summarizes the Company’s equity price risks as of December 31, 2005, and shows the effects of a hypothetical 25% increase and a 25% decrease in market prices.

SENSITIVITY ANALYSIS

				Estimated		Increase
				Fair Value after		(Decrease) in
			Hypothetical	Hypothetical		Shareholders’
	Fair Value at		Percentage	Percent		Equity, Net
	December 31, 2005		Change	Change		of Tax
Trading Securities	$	3,313,500	25% increase	$	4,141,875	$	546,728
			25% decrease	$	2,485,125	$	(546,728	)
Available-for-Sale	$	525,247	25% increase	$	656,559	$	86,666
			25% decrease	$	393,935	$	(86,666	)

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.

The selected hypothetical change does not reflect what could be considered best- or worst-case scenarios. Results could be significantly worse due to both the nature of equity markets and the concentration of the Company’s investment portfolio.

ITEM 4. CONTROLS AND PROCEDURES

An evaluation of the effectiveness of the design and operation of the Company’s disclosure controls and procedures as of December 31, 2005, was conducted under the supervision and with the participation of management, including the chief executive officer and chief financial officer. Based on that evaluation, the chief executive officer and chief financial officer concluded that the Company’s disclosure controls and procedures were effective as of December 31, 2005.

There has been no change in the Company’s internal control over financial reporting that occurred during the quarter ended December 31, 2005, that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

U.S. Global Investors, Inc.
December 31, 2005, Quarterly Report on Form 10-Q Page 18 of 23

PART II. OTHER INFORMATION

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

1. Exhibits

31	Certifications of Chief Executive Officer and Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act Of 2002
32	Certifications of Chief Executive Officer and Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act Of 2002

2. Reports on Form 8-K

Current Report on Form 8-K/A filed November 14, 2005, filing of Press Release Reporting Earnings and Other Financial Results for the first quarter ended September 30, 2005.

U.S. Global Investors, Inc.
December 31, 2005, Quarterly Report on Form 10-Q Page 19 of 23

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereto duly authorized.

		U.S. GLOBAL INVESTORS, INC.
DATED: February 14, 2006	BY:	/s/ Frank E. Holmes
		Frank E. Holmes
		Chief Executive Officer
DATED: February 14, 2006	BY:	/s/ Catherine A. Rademacher
		Catherine A. Rademacher
		Chief Financial Officer