NOTE 3. DISCONTINUED OPERATIONS

USCAN entered into a binding letter of intent dated December 30, 2019, with Galileo whereby Galileo, pursuant to a capital restructuring, agreed to repurchase all of its common shares owned by USCAN for $1.0 million (Canadian). The transaction was subject to the approval of Canadian securities regulatory authorities and to the satisfaction of other closing conditions. The transaction closed effective March 2, 2020. Proceeds of approximately $746,000 were received (the equivalent of $1.0 million Canadian), and a realized gain of approximately $151,000 was recorded. In addition, approximately $228,000 in foreign currency loss was released from accumulated other comprehensive income (loss) into realized foreign currency loss upon closing the sale.

After the transaction, the Company has not and will not have continuing involvement with the operations of Galileo, except for an equity method investment in a fund managed by Galileo. See further information on this equity method investment in Note 4, Investments.

The results of Galileo through the March 2, 2020, closing date are reflected as “discontinued operations” in the Consolidated Statements of Operations and are therefore, excluded from continuing operations results. Comparative periods shown in the Consolidated Financial Statements have been adjusted to conform to this presentation. Operations of Galileo had previously been presented as the separate business segment of Investment Management Services – Canada.

The components of assets and liabilities classified as discontinued operations were as follows:

	June 30,
(dollars in thousands)	2020		2019
Assets
Cash and cash equivalents	$	-	$	1,482
Accounts and other receivables		-		200
Prepaid expenses		-		52
Net property and equipment		-		38
Other assets, non-current		-		8
Total assets held related to discounted operations	$	-	$	1,780
Liabilities
Accounts payable	$	-	$	135
Accrued compensation and related costs		-		84
Other accrued expenses		-		262
Total liabilities held related to discontinued operations	$	-	$	481

Receivables of Galileo included advisory fees owed to Galileo by the funds and clients it manages. Galileo fixed assets, consisting of furniture, equipment and leasehold improvements, were depreciated over 2 to 5 years. Galileo had leases for office equipment and facilities. See further information on these leases in Note 11, Leases.

The components of income (loss) from discontinued operations were as follows. Note that amounts in the current fiscal year are through the March 2, 2020, closing date of sale.

	Year Ended June 30,
(dollars in thousands)	2020			2019
Revenues
Advisory fees	$	235		$	1,458
		235			1,458
Expenses
Employee compensation and benefits		77			534
General and administrative		508			1,121
Depreciation and amortization		6			10
		591			1,665
Other Income (Loss)
Investment income		24			18
Other income (loss)		(6	)		42
		18			60
Loss from discontinued operations of investment management services in Canada before income taxes		(338	)		(147	)
Tax benefit		-			-
Loss from discontinued operations of investment management services in Canada		(338	)		(147	)
Less: net loss attributable to non-controlling interest from discontinued operations		(118	)		(51	)
Net loss attributable to U.S. Global Investors, Inc. from discontinued operations of investment management services in Canada	$	(220	)	$	(96	)

Galileo provides advisory services for clients in Canada and receives advisory fees based on the agreed-upon percentages of AAUM or assets under management, depending on contractual terms. Galileo investment advisory agreements have a single performance obligation, since the promised services are not separately identifiable from other promises in the agreements and, therefore, are not distinct. Galileo may also receive performance fees from certain clients when market appreciation or realized net gains exceeds established benchmarks on an annual or quarterly basis. Performance fees, which were included in advisory fees in the table above, were recognized when it was determined that they were no longer probable of significant reversal. Galileo recorded no performance fees for the year ended June 30, 2020. Galileo recorded performance fees of $921,000 for the year ended June 30, 2019. Galileo may, at its discretion, waive and absorb some of its clients’ operating expenses. The amount of fund expenses waived and absorbed was $39,000 and $343,000 for the years ended June 30, 2020, and 2019, respectively.

Galileo files a separate tax return in Canada. At June 30, 2019, a valuation allowance for Galileo of $183,000 was included to fully reserve for net operating loss carryovers, other carryovers and certain book/tax differences in the balance sheet.