<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[ X ] QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended June 30, 1997
OR
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from to
Commission file number 0-12444
THE ROCKIES FUND, INC.
------------------------------------------------------
(Exact Name of Registrant as Specified in its Charter)
Nevada 84-0928022
- ------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4465 Northpark Drive, Colorado Springs, Colorado 80907
- ------------------------------------------------ ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (719) 590-4900
--------------
N/A
- --------------------------------------------------------------------------
(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 (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [ X ] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS:
As of June 30, 1997, the Company had 640,256 shares of its $.01 par value
common stock outstanding. <PAGE>
<PAGE>
INDEX
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Statement of Assets and Liabilities at June 30, 1997
(unaudited) and December 31, 1996 (audited)
Schedule of Investments and Restricted Securities
(unaudited)
Statement of Operations for the Three Months Ended June 30,
1997 and June 30, 1996 (unaudited)
Statement of Operations for the Six Months Ended June 30,
1997 and June 30, 1996 (unaudited)
Statements of Stockholders' Equity for the Three Months
Ended June 30, 1997 (unaudited), and Years Ended
December 31, 1996 and 1995 (audited)
Statement of Changes in Net Assets as of June 30, 1997 and
June 30, 1996 (unaudited)
Notes to Unaudited Financial Statements
Item 2. Management's Discussion and Analysis of Financial
Conditions and Results of Operations
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Item 2. Changes in Securities
Item 3. Defaults Upon Senior Securities
Item 4. Submission of Matters to a Vote of Security Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
<PAGE>
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
The interim unaudited financial statements have been prepared by the
Rockies Fund, Inc. (the "Fund" or the "Company") and, in the opinion of
management, reflect all material adjustments which are necessary to a fair
statement of results of the interim periods presented. Such adjustments
consisted only of normal recurring items (except as discussed in Note 3).
Certain information and footnote disclosure made in the last annual report on
Form 10-K have been condensed or omitted for the interim statements. These
statements should be read in conjunction with the financial statements and
notes thereto included in Form 10-K for the year ended December 31, 1996. The
results of the interim periods are not necessarily indicative of results which
may be expected for any other interim period or for the full years.
<PAGE>
<PAGE>
<TABLE>
THE ROCKIES FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1997 AND DECEMBER 31, 1996
<CAPTION>
June 30, December 31,
1997 1996
(unaudited) (audited)
------------- ------------
<S> <C> <C>
ASSETS
- ------
Investments at value
(See accompanying schedule):
Restricted and unrestricted securities $ 1,806,633 $ 1,841,093
Notes receivable 279,884 138,404
------------ ------------
2,086,517 1,979,497
Cash:
Held by related party 146,629 391,698
Held by others 2,520 107,706
Accrued interest receivable held by others 26,373 12,789
Receivables from investees 1,332 23,072
Other assets 1,123 15,809
------------ ------------
Total Current Assets 2,264,494 2,530,571
------------ ------------
Property & Equipment:
Land 390,000 102,775
Land Development 62,582 0
Building 0 633,496
Leasehold improvements 0 86,614
Equipment 1,484 1,484
Furniture and fixtures 7,255 12,461
Automobile 15,162 0
------------ ------------
476,483 836,830
Less Accumulated Depreciation (4,023) (72,309)
------------ ------------
472,460 764,521
------------ ------------
Investment in long term note receivable
related party 175,000 175,000
------------ ------------
TOTAL ASSETS 2,911,954 3,470,092
</TABLE>
<PAGE>
<PAGE>
<TABLE>
THE ROCKIES FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1997 AND DECEMBER 31, 1996
(Continued)
<CAPTION>
June 30, December 31,
1997 1996
(unaudited) (audited)
------------ -------------
<S> <C> <C>
LIABILITIES
- -----------
Payables:
Trade $ 52,349 $ 23,152
Related parties 0 153,566
Investment securities purchased 0 116,882
Accrued liabilities 43,457 82,408
Accrued income taxes 118,000 118,000
Accrued interest payable 8,574 7,428
Notes payable
Related parties 344,500 6,500
Mortgage note, current portion 2,842 43,087
Other 60,170 38,734
Borrowings under lines of credit 74,500 174,500
------------ ------------
Total Current Liabilities: 704,392 764,257
Security deposits 7,254
Other liabilities 52,500
Mortgage note, less current portion 9,718 315,349
------------ ------------
Total Liabilities 714,110 1,139,360
NET ASSETS and STOCKHOLDER'S EQUITY $ 2,197,845 $ 2,330,732
- ----------------------------------- =========== ===========
(Equivalent to $3.43 per share at June 30,
1997 and $3.64 per share at Dec. 31, 1996)
COMPONENTS OF NET ASSETS
- ------------------------
Common Stock, $.01 par value, Authorized
5,000,000 shares; 640,256 issued and outstanding $ 6,403 $ 6,403
------------ ------------
Additional paid-in capital 2,901,243 2,901,243
------------ ------------
Accumulated (deficit):
Accumulated net investment loss (2,067,541) (1,893,303)
Accumulated net realized gain (losses) from 1,756,242 1,336,711
sales and permanent write-downs of securities
Unrealized net (depreciation) of investments (398,502) (20,322)
------------ ------------
Total accumulated deficit (709,801) (576,914)
------------ ------------
NET ASSETS $ 2,197,845 $ 2,330,732
============ ============
</TABLE>
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
THE ROCKIES FUND, INC.
Schedules of Investments
June 30, 1997 and March 31, 1997
- --------------------------------------------------------------------------------------------------------------
FAIR FAIR
INITIAL ** COST AT VALUE AT VALUE AT
INVESTMENT JUNE 30, JUNE 30, MARCH 31,
COMPANY POSITION DATE 1997 1997 1997
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
RESTRICTED SECURITIES:
- ---------------------
American Educational 40,000 common stock Sep-96 200,000.00 225,000.00 125,000.00
Products, Inc.* *** 40,000 warrants (ex. @ $4.50) Sep-96 0.00 0.00 0.00
40,000 warrants (ex. @ $10.00) Jun-97 0.00 0.00
-
-------------- -------------- -----------
200,000.00 225,000.00 125,000.00
Bear Star, LLC* 5% partnership interest Nov-94 0.00 0.00 0.00
COVA Technologies* 917 common stock Jul-96 20,035.00 20,035.00 20,035.00
Global Casinos, Inc.* 3,800 common stock Nov-93 76,000.00 10,687.50 13,775.00
4,331 common stock Jan-94 50,068.21 12,180.94 15,699.88
1,724 common stock Jan-94 19,931.79 4,848.75 6,249.50
1,250 common stock Feb-94 25,000.00 3,515.63 4,531.25
75 common stock Mar-94 0.00 210.94 271.88
500 common stock Oct-94 10,000.00 1,406.25 1,812.50
5,000 common stock Feb-96 17,207.50 14,062.50 18,125.00
1,000 common stock Mar-96 3,125.00 2,812.50 3,625.00
105,000 warrants Nov-96 0.00 0.00 0.00
-------------- -------------- -----------
201,332.50 49,725.01 64,090.01
Guardian Technologies,
Inc.* 8,333 common stock Feb-97 8,750.00 11,457.88 17,968.75
90,533 common stock Mar-97 126,450.00 124,482.88 195,212.50
5,000 common stock Jun-97 6,260.00 6,875.00 -
137,000 warrants Mar-97 26,255.00 8,562.50 25,687.50
-------------- -------------- -----------
167,715.00 151,378.26 238,868.75
Kinetiks.com* 10,000 common stock Sep-96 38,125.00 3,125.00 3,750.00
11,000 common stock Oct-96 24,312.50 3,437.50 4,125.00
20,000 common stock Nov-96 12,187.50 6,250.00 7,500.00
62,500 common stock Dec-96 44,851.88 19,531.25 23,437.50
50,000 warrants Feb-97 0.00 3,125.00 6,250.00
50,000 warrants Mar-97 0.00 3,125.00 6,250.00
50,000 warrants Apr-97 0.00 3,125.00 -
50,000 warrants May-97 0.00 3,125.00 -
50,000 warrants Jun-97 0.00 3,125.00 -
-------------- -------------- -----------
119,476.88 47,968.75 51,312.50
Land Resource
Corporation* 10,000 common stock Mar-97 10,000.00 10,000.00 10,000.00
Lone Oak Vineyards,
Inc. 35,000 common stock Feb-97 35,000.00 35,000.00 35,000.00
Navidec 1,811 common stock Feb-97 7,705.20 11,092.38 9,281.38
6,072 warrants Feb-97 0.00 4,744.05 3,795.00
-------------- -------------- -----------
7,705.20 15,836.43 13,076.38
Optek Music 175,000 preferred stock Apr-97 35,000.00 35,000.00 -
Optimax Industries,
Inc.* 135,191 common stock Jun-94 162,229.20 92,943.81 371,775.25
12,500 warrants Sep-93 0.00 3,125.00 9,375.00
-------------- -------------- -----------
162,229.20 96,068.81 381,150.25
Power Surge, Inc. 20 common stock May-97 300,000.00 300,000.00 -
Southshore
Corporation*** 7,400 common stock Mar-94 11,770.44 3,700.00 3,700.00
10,000 common stock Dec-95 3,200.00 5,000.00 5,000.00
-------------- -------------- -----------
14,970.44 8,700.00 8,700.00
Training Devices, Inc. 20,000 common stock Feb-97 25,000.00 25,000.00 25,000.00
Usasurance Group* 15,000 common stock Jul-96 94,550.00 37,500.00 45,000.00
10,000 common stock Sep-96 62,750.00 25,000.00 30,000.00
2,500 common stock Oct-96 12,375.00 6,250.00 7,500.00
31,500 common stock Dec-96 73,777.00 78,750.00 94,500.00
2,500 common stock Jan-97 8,750.00 6,250.00 7,500.00
2,500 common stock Jun-97 2,066.25 6,250.00 -
-------------- -------------- -----------
254,268.25 160,000.00 184,500.00
Total Restricted Securities 1,552,732.47 1,179,712.26 1,156,732.89
UNRESTRICTED SECURITIES:
- -----------------------
Astea International 5,000 common stock Sep-96 - - 20,000.00
5,000 common stock Nov-96 - - 20,000.00
10,000 common stock Feb-97 54,875.00 28,125.00 40,000.00
5,000 common stock Jun-97 16,354.41 14,062.50 -
-------------- -------------- -----------
71,229.41 42,187.50 80,000.00
Cable & Company
Worldwide 40,000 common stock Jan-97 27,200.00 11,252.00 16,250.00
60,000 common stock Jan-97 - - 24,375.00
10,000 common stock Mar-97 5,165.00 2,813.00 4,062.50
-------------- -------------- -----------
32,365.00 14,065.00 44,687.50
Corfacts, Inc. 165,000 common stock Jul-96 10,312.50 10,312.50 16,500.00
35,000 common stock Jul-96 - - 3,500.00
-------------- -------------- -----------
10,312.50 10,312.50 20,000.00
Enhanced Services 1,000 common stock Dec-96 3,665.00 3,250.00 4,500.00
1,500 common stock Dec-96 - - 6,750.00
6,000 common stock Jan-97 20,212.50 19,500.00 27,000.00
-------------- -------------- -----------
23,877.50 22,750.00 38,250.00
Exploration Company,
The 5,000 common stock Oct-96 14,475.00 36,250.00 30,000.00
2,500 common stock Oct-96 - - 15,000.00
50,000 common stock Mar-97 250,000.00 362,500.00 300,000.00
-------------- -------------- -----------
264,475.00 398,750.00 345,000.00
Image Matrix 10,000 units (1com/1wrnt) Jun-96 - - 28,125.00
Jayark Corporation 20,000 common stock Apr-97 5,625.00 3,750.00 -
Laser Recording
Systems, Inc. 100,000 common stock Jun-95 5,050.00 2,000.00 2,000.00
Organic Solutions, Inc. 42,500 common stock Feb-97 42,842.35 31,875.00 37,187.50
7,500 common stock Feb-97 - - 6,562.50
-------------- -------------- -----------
42,842.35 31,875.00 43,750.00
Pacific Biometrics,
Inc. 7,500 common stock Oct-96 36,252.00 12,656.25 15,000.00
5,000 common stock Feb-97 17,343.75 8,437.50 10,000.00
-------------- -------------- -----------
53,595.75 21,093.75 25,000.00
Poore Brothers 4,000 common stock Dec-96 - - 12,000.00
Racom Systems, Inc. 10,000 common stock Mar-97 - - 27,500.00
10,000 warrants Mar-97 - - 5,000.00
-------------- -------------- -----------
0.00 0.00 32,500.00
Redwood Broadcasting,
Inc. 5,000 common stock Feb-97 0.00 7,500.00 7,500.00
S&P 500 10 puts Dec '97 550 Jul-96 10,530.54 62.50 1,500.00
10 puts Dec '97 550 Aug-96 11,291.41 62.50 1,500.00
20 puts Dec '97 550 Sep-96 16,852.35 125.00 3,000.00
40 puts Dec '97 600 Dec-96 40,120.00 2,750.00 17,000.00
-------------- -------------- -----------
78,794.30 3,000.00 23,000.00
Shiva Corporation 2,630 common stock Dec-96 0.00 27,450.63 23,012.50
Shopsmith 10,000 common stock Sep-96 - - 24,375.00
5,000 common stock Oct-96 11,875.00 14,687.50 12,187.50
5,000 common stock Oct-96 - - 12,187.50
-------------- -------------- -----------
11,875.00 14,687.50 48,750.00
Tampa Bay Corporation 5,000 common stock Dec-96 - - 3,750.00
10,000 common stock Jan-97 - - 7,500.00
25,000 common stock May-97 5,467.50 7,812.50 -
-------------- -------------- -----------
5,467.50 7,812.50 11,250.00
TELS Corporation 20,000 common stock Aug-96 12,812.50 5,626.00 10,625.00
10,000 common stock Sep-96 5,937.50 2,810.00 5,312.50
-------------- -------------- -----------
18,750.00 8,436.00 15,937.50
Topro, Inc. 2,500 common stock Sep-96 - - 3,281.00
2,500 common stock Nov-96 - - 3,281.00
2,500 common stock Dec-96 - - 3,281.00
2,500 common stock Jan-97 - - 3,281.00
5,000 common stock Feb-97 - - 6,562.50
35,000 common stock Mar-97 - - 45,937.50
5,000 common stock Mar-97 - - 6,562.50
-------------- -------------- -----------
0.00 0.00 72,186.50
Whitewing Labs 20,000 common stock Jan-97 31,350.00 11,250.00 15,000.00
-------------- -------------- --------------
Total Unrestricted Securities 655,609.31 626,920.38 887,949.00
OTHER SECURITIES:
- ----------------
Columbine Home Sales,
LLC* Note Receivable, 10% Dec-95 0.00 5,814.06 5,814.06
Damach Note Receivable,12%,
due 3/31/97 Oct-96 32,500.00 32,500.00 32,500.00
Phil Georgeson Note Receivable,12%,
due on demand Aug-96 6,789.55 6,789.55 9,962.78
Global Casinos, Inc.* Note Receivable, 8%,
due 11/1/98 Nov-96 175,000.00 175,000.00 175,000.00
Note Receivable, 9%,
due on demand Mar-97 40,843.70 40,843.70 40,843.70
-------------- -------------- -------------
215,843.70 215,843.70 215,843.70
Kinetiks.com* Note Receivable, 10%,
due 3/30/97 Feb-97 25,000.00 25,000.00 25,000.00
NS Properties Note Receivable, 8%,
due 1/2/98 Jan-97 20,000.00 20,000.00 20,000.00
Marco Foods, Inc.* Note Receivable, 12%
due on demand Jan-97 142,637.50 142,637.50 97,550.00
-------------- -------------- --------------
Total Other Securities 442,770.75 448,584.81 406,670.54
-------------- -------------- --------------
TOTAL INVESTMENTS 2,651,112.53 2,255,217.45 2,451,352.43
* These entities are considered to be affiliated companies as a result of
the Company's investment and/or position on the entity's Board of
Directors during 1997.
** After permanent write-downs.
*** Certain shares are free trading either under Rule 144 of the Securities
Act of 1933 or as a result of demand registration rights
</TABLE>
See accompanying notes to financial statements.<PAGE>
<PAGE>
<TABLE>
THE ROCKIES FUND, INC.
STATEMENT OF OPERATIONS
<CAPTION>
For the For the
Three Months Ended Three Months Ended
June 30, 1997 June 30, 1996
(Unaudited) (Unaudited)
------------------ ------------------
<S> <C> <C>
INVESTMENT INCOME:
Rental income $ 0 $ 38,913
Consulting and other services 1,735 (4,457)
Interest and dividends 10,377 148
------------ ------------
Total Income/Revenue 12,112 34,605
------------ ------------
Expenses:
Wages and salaries 38,656 41,456
Professional fees 19,770 19,498
Directors fees 2,000 0
Interest 6,960 6,114
Travel and entertainment 6,202 2,714
Office 22,215 20,715
Building expenses 21 29,168
Investment expenses 6,376 3,143
Donations 4,000 0
Bad Debt 0 7,997
------------ ------------
106,200 130,806
Net investment loss $ (94,088) $ (96,201)
============ ============
Net realized gain /loss from investments (59,010) 36,593
Net unrealized appreciation (depreciation)
of investments:
Beginning of period (136,951) (106,134)
End of period (398,502) 1,390,067
------------ ------------
Net unrealized depreciation/
appreciation of investments (261,551) 1,496,201
Net gain (loss) from investments $ (320,561) $ 1,532,794
Net increase (decrease) in net assets ============ ============
resulting from operations $ (414,649) $ 1,436,593
============ ============
Per share amounts:
Net investment loss $(0.14) $(0.15)
Net realized gain /loss from investments (0.09) 0.05
Net unrealized depreciation of investments (0.40) 2.33
------------ ------------
$ (0.63) $ 2.23
============ ============
</TABLE>
<PAGE>
<PAGE>
<TABLE>
THE ROCKIES FUND, INC.
STATEMENT OF OPERATIONS
<CAPTION>
For the For the
Six Months Ended Six Months Ended
June 30, 1997 June 30, 1996
(Unaudited) (Unaudited)
------------------ ------------------
<S> <C> <C>
INVESTMENT INCOME:
Rental income $ 51,427 $ 76,829
Consulting and other services 1,886 1,244
Interest and dividends 22,941 329
------------ ------------
Total Income/Revenue 76,074 78,402
------------ ------------
Expenses:
Wages and salaries 74,827 84,522
Professional fees 24,063 24,664
Directors fees 4,000 0
Interest 10,948 9,432
Travel and entertainment 17,594 6,895
Office 53,654 32,634
Building expenses 40,742 62,092
Investment expenses 18,038 3,736
Donations 6,425 0
Bad Debt 0 7,997
------------ ------------
250,291 241,972
Net investment loss $ (174,217) $ (163,571)
============ ============
Net realized gain/loss from investments 419,531 133,783
Net unrealized appreciation
(depreciation) of investments:
Beginning of period (20,322) 77,017
End of period (398,502) 1,390,067
____________ ____________
Net unrealized depreciation/
appreciation of investments (378,180) 1,313,050
Net gain (loss) from investments $ 41,351 $ 1,446,833
Net increase (decrease) in net
assets resulting from operations $ (132,866) $ 1,283,262
Per share amounts:
Net investment loss $ (0.27) $ (0.25)
Net realized gain/loss from
investments 0.65 0.20
Net unrealized depreciation of
investments (.059) (2.05)
------------ ------------
$ 2.00 $ (0.21)
============ ============
/TABLE
<PAGE>
<PAGE>
<TABLE>
THE ROCKIES FUND, INC.
Statements of Stockholders' Equity
Three Months Ended June 30, 1997 and
Years Ended December 31, 1996 and 1995
<CAPTION>
Accumulated
Net Realized
Gain (Losses)
From Unrealized Net
Accumulated Sales And Appreciation
Additional Net Permanent (Depreciation)
Common Paid-In Investment Write-Downs of Net
Stock Capital (Loss) Of Securities Investments Assets
------ ---------- ------------ ------------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
BALANCES AT
DECEMBER 31, 1995 $6,403 $2,901,243 $(1,464,614) $(212,485) $ 77,017 $1,307,564
====== ========== ============ ========== ========== ===========
Net investment loss -- -- (428,689) -- -- (428,689)
Net realized gain on
sale of investments -- -- -- 1,549,196 -- 1,549,196
Unrealized net depreciation
of investments -- -- -- -- (97,339) (97,339)
------ ---------- ------------ ---------- ---------- -----------
BALANCES AT
DECEMBER 31, 1996 $6,403 $2,901,243 $(1,893,303) $1,336,711 $ (20,322) $2,330,732
====== ========== ============ ========== ========== ===========
Net investment loss -- -- (80,150) -- -- (80,150)
Net realized gain on
sale of investments -- -- -- 478,541 - 478,541
Unrealized net depreciation
of investments -- -- -- -- (116,629) (116,629)
------ ---------- ------------ ---------- ---------- -----------
BALANCES AT
MARCH 31, 1997 $6,403 $2,901,243 $(1,973,453) $1,815,252 $(136,951) $2,612,494
====== ========== ============ ========== ========== ===========
Net Investment Loss -- -- (94,088) -- -- (94,088)
Net realized gain on
sale of investments --- --- --- (59,010) --- (59,010)
Unrealized net depreciation
of investment --- --- --- --- (261,551) (261,551)
BALANCES AT JUNE 30, 1997 $6,404 $2,901,243 ($2,067,541) $1,756,242 ($398,502) $2,197,845
====== ========== ============ ========== ========== ==========
</TABLE>
<PAGE>
<PAGE>
<TABLE>
THE ROCKIES FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS
<CAPTION>
For the For the
Six Months Ended Six Months Ended
June 30, 1997 June 30, 1996
(Unaudited) (Unaudited)
---------------- ----------------
<S> <C> <C>
Increase (decrease) in net assets
from investment activities:
Net investment loss $ (174,217) $ (163,571)
Net realized gain/loss from investments 419,531 133,783
Net unrealized depreciation of investments (378,180) 1,313,050
____________ ____________
Net increase (decrease) in net assets
from investment activities (132,866) 1,283,262
Net assets at beginning of year 2,330,732 1,307,564
____________ ____________
Net asset at end of period $ 2,197,845 $ 2,590,828
============ ============
/TABLE
<PAGE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
-----------------------------------------------------------
(a) Organization and Basis of Presentation.
--------------------------------------
The Rockies Fund, Inc. (the "Fund" or the "Company") was incorporated
in Nevada on August 2, 1983, for the principal purpose of making venture
capital investments in developing companies located primarily in the Rocky
Mountain Region of the United States. The Fund is registered under the
Investment Fund Act of 1940 as a business development company.
The interim unaudited financial statements have been prepared by the
Rockies Fund, Inc. and, in the opinion of management, reflect all material
adjustments which are necessary to a fair statement of results of the interim
periods presented. Such adjustments consisted only of normal recurring items
(except as discussed in Note 3). Certain information and footnote disclosure
made in the last annual report on Form 10-K have been condensed or omitted for
the interim statements. These statements should be read in conjunction with
the financial statements and notes thereto included in Form 10-K for the year
ended December 31, 1996. The results of the interim periods are not
necessarily indicative of results which may be expected for any other interim
period or for the full years.
(b) Investment Valuation and Transactions.
-------------------------------------
Securities listed or traded on an exchange are valued at their last
sales price on the exchange where the securities are principally traded.
Securities reported on the NASDAQ National Market System are valued , at the
closing bid price on the valuation date. Securities traded in the over-the-
counter market are valued at the last bid price, based upon quotes furnished by
independent market makers for such securities. Investments in notes receivable
are valued at net realizable value. The Fund performs on-going evaluations
regarding collectability of receivables and provides allowances for potential
losses.
In the absence of readily ascertainable market values, investments in
restricted securities without quoted market prices are carried at estimated
fair value as determined by the Fund's Board of Directors (the "Board"). Due
to the inherent uncertainty of valuation, those estimated values may differ
significantly from the values that would have been used had a ready market for
the investments existed, and the differences could be material.
Securities transactions are accounted for on a trade date basis.
Where possible, realized gains and losses on the sales of investments are
determined using the specific identification method. If the specific
identification method cannot be utilized, realized gains and losses are
determined using the first in-first out method. Substantially all of the
Fund's investments are non-income producing.
(c) Income Taxes.
------------
As a business development company, the Fund is subject to Federal and
State income taxes at the applicable corporate rates. Deferred income taxes
are provided for timing differences between the reporting of income for
financial statement and tax return purposes, principally realized and
unrealized gains on investments. For Federal and State income tax purposes,
the investments have the same cost basis as shown in the financial statements.
Income tax payable consists of approximately $100,000 of federal and
$18,000 of state taxes resulting from the 1996 net realized gain from sale of
investments.
2. PORTFOLIO SECURITIES
--------------------
AMERICAN EDUCATIONAL PRODUCTS, INC.
-----------------------------------
The Fund, at June 30, 1997, held 40,000 shares of American Educational
Products, Inc. common stock, after giving effect to a one-for-five (1:5)
reverse stock split, which shares are restricted as to sale, non-income
producing and have been valued by the Board of Directors at their quoted market
price of $5.625 per share or $225,000. The Fund also held at June 30, 1997
common stock purchase warrants exercisable to purchase an additional 40,000
shares of common stock of American Educational Products, Inc. at an exercise
price of $4.50 per share. The Board of Directors valued these warrants at
$0.00 because they cannot be exercised until after September 23, 1997. The Fund
also held at June 30, 1997 common stock purchase warrants exercisable to
purchase an additional 40,000 shares at an exercise price of $10.00 per share.
The Board of Directors valued these warrants at $0.00. The Fund does have
certain registration rights relating to these shares and warrants.
ASTEA INTERNATIONAL
-------------------
The Fund, at June 30, 1997, held 15,000 shares of Astea International
common stock, which shares are unrestricted as to sale, non-income producing,
and have been valued at their quoted market price of $2.8125 per share or
$42,187.50.
BEAR STAR (fka COLUMBINE HOME SALES, LLC.)
------------------------------------------
The Fund has invested in Bear Star, which investment is restricted as to
sale, non-income producing, and has been valued by the Board of Directors at
$0.00. The Fund also holds a note receivable from Columbine Homes with
remaining amounts due of $5,814. The note accrues interest at the rate of 10%
per year, and is due on demand.
CABLE AND COMPANY WORLDWIDE
---------------------------
The Fund, at June 30, 1997, held 50,000 shares of Cable and Company
Worldwide common stock, which stock is unrestricted as to sale, non-income
producing, and has been valued at its quoted market price of $.28125 per share
or $14,065.
CORFACTS, INC.
--------------
The Fund, at June 30, 1997, held 165,000 shares of Corfacts, Inc. common
stock, which shares are unrestricted as to sale, non-income producing, and have
been valued at their quoted market price of $.06 per share or $10,312.50.
COVA TECHNOLOGIES
-----------------
The Fund at June 30, 1997 held 917 shares of Cova Technologies common
stock, which stock is restricted as to sale, non-income producing, and has been
valued by the Board of Directors at its cost of $20,035.
DAMACH
------
The Fund, at June 30, 1997 held a note receivable from Damach in the
amount of $32,500 which accrues interest at the rate of 12% per year and was
originally due on June 30, 1997. An extension agreement was signed on March 4,
1997 to extend this promissory note receivable to a month to month basis or
until the Fund makes a written request for payment.
ENHANCED SERVICES, INC.
-----------------------
The Fund, at June 30, 1997, held 7,000 shares of Enhanced Services, Inc.
common stock which shares are unrestricted as to sale, non-income producing and
have been valued at their quoted market price of $3.25 per share or $22,750.
EXPLORATION COMPANY, THE
------------------------
The Fund, at June 30, 1997, held 55,000 shares of The Exploration Company
common stock, which shares are unrestricted as to sale, non-income producing,
and have been valued at their quoted market price of $7.25 per share or
$398,750. These share have been pledged as collateral securing a $300,000 note
payable to Merit Broadcasting.
GEORGESON, PHIL
---------------
The Fund, at June 30, 1997 held a note receivable from Phil Georgeson in
the amount of $9,962.78. The note is secured by 7,000 shares of National
Equities Holdings, Inc. common stock, accrues interest at the rate of 12% per
year and is due on demand.
GLOBAL CASINOS, INC.
--------------------
The Fund, at June 30, 1997, held 17,680 shares of Global Casinos, Inc.
common stock, after giving effect to a 1-for-10 reverse split. The shares are
restricted as to sale due to the company being an affiliate, non-income
producing, and have been valued by the Board of Directors at their quoted
market price of $2.8125 per share, or $49,725. The Fund, at June 30, 1997,
also held a note receivable from Global Casinos, Inc. in the amount of
$175,000, which note is unsecured, accrues interest at the rate of 8% per year,
and is due November 1, 1998. Said note is convertible into shares of Global
Casinos, Inc. common stock at a conversion price of $5.00 per share anytime
after November 1, 1997. The Fund holds a second note receivable from Global
Casinos in the amount of $40,843.70, which note is unsecured, accrues interest
at the rate of 9% per year, is due on demand, and is convertible into Global
Casinos common stock at $5.00 per share. The Fund also owns 35,000 Global
warrants exercisable at $6.00, 35,000 warrants exercisable at $7.00 and 35,000
warrants exercisable at $8.00 per share, all of which expire as of February 1,
1998 and have been valued at $0 by the Board of Directors.
GUARDIAN TECHNOLOGIES, INC.
---------------------------
The Fund, at June 30, 1997 held 103,867 shares of Guardian Technologies
common stock, after giving effect to a one-for-three (1:3) reverse split, which
shares are restricted due to the company being an affiliate, non-income
producing, and have been valued at their quoted market price of $1.375 per
share or $142,815.76. The Fund also held warrants exercisable to purchase an
additional 137,000 shares of Guardian Technologies common stock, which warrants
are also restricted due to the company being an affiliate, non-income
producing, and have been valued at their quoted market price of $.0625 each or
$8,562.50.
JAYARK CORPORATION
------------------
The Fund, at June 30, 1997 held 20,000 shares of Jayark Corporation common
stock, which shares are unrestricted as to sale, non-income producing and have
been valued at their quoted market price of $.1875 per share or $3,750.
KINETIKS.COM
------------
The Fund, at June 30, 1997 held 103,500 shares of freely traded
Kinetiks.com common stock, which shares are restricted as to sale due to the
Company being an affiliate, non-income producing, and have been valued at their
quoted market price of $.3125 per share or $32,343.75. The Fund also held
warrants to purchase and additional 250,000 shares of Kinetiks.com common stock
at an exercise price of $.25 per share. The warrants have been valued by the
Board of Directors at $.0625 or $16,625 which represents the difference between
the exercise price of the warrants and the market price of the common stock.
The Fund also held a note receivable in the amount of $25,000 which note is
unsecured, accrues interest at the rate of 10% per year, and was due on March
30, 1997. The note provides for a default interest rate of 18% and an
additional 50,000 warrants for each 30-day period that it goes unpaid.
LAND RESOURCE CORPORATION
-------------------------
The fund, at June 30, 1997 held 10,000 shares of Land Resource Corporation
common stock, which shares are restricted as to sale, non-income producing, and
have been valued by the Board of Directors at their cost of $1.00 each or
$10,000.
LASER RECORDING SYSTEMS, INC.
-----------------------------
The Fund, at June 30, 1997, held 100,000 shares of Laser Recording
Systems, Inc. common stock, which shares are unrestricted as to sale, non-
income producing and have been valued at their quoted market price of $.02 per
share or $2,000.
LOAN OAK VINEYARDS, INC.
------------------------
The Fund, at June 30, 1997 held 35,000 share of Loan Oak Vineyards common
stock, which shares are restricted as to sale, non-income producing, and have
been valued by the Board of Directors at their cost of $1.00 each or $35,000.
MARCO FOODS, INC.
-----------------
The Fund, at June 30, 1997 held a note receivable from Marco Foods in the
amount of $133,137.50, which note is unsecured, accrues interest at the rate of
12% per year and is due on demand.
NS PROPERTIES
-------------
The Fund, at June 30, 1997 held a note receivable from NS Properties in
the amount of $20,000, which note is unsecured, accrues interest at the rate of
8% per year and is due January 2, 1998.
NAVIDEC, INC.
-------------
The Fund, at June 30, 1997, held 1,811 shares of Navidec common stock,
which shares are unrestricted as to sale, non-income producing, and have been
valued at their quoted market price of $6.125 per share or $11,092.38. The
Fund also held warrants to purchase an additional 6,072 shares of common stock,
which warrants are unrestricted as to sale, non-income producing, and have been
valued at their quoted market price of $.78125 per share or $4,744.05.
OPTEK MUSIC, INC.
-----------------
At June 30, 1997, the Fund held 175,000 shares of Optek Music preferred
stock, which shares are restricted as to sale, non-income producing and have
been valued by the Board of Directors at their cost of $.20 per shares or
$35,000.
OPTIMAX INDUSTRIES, INC. (fka PLANTS FOR TOMORROW, INC.)
--------------------------------------------------------
At June 30, 1997, the Fund held 135,191 shares of Optimax Industries, Inc.
common stock, which shares are restricted as to sale due to a lock-up agreement
and the company being an affiliate. The shares have been valued at $.6875 per
share or $92,943.81. The Fund also holds warrants to purchase an additional
12,500 shares of Optimax Industries, Inc. common stock, which warrants are
valued at their quoted market price of $.25 each or $3,125. The shares of
Optimax are pledged as collateral securing the Fund's line of credit.
ORGANIC SOLUTIONS, INC.
-----------------------
The Fund, at June 30, 1997 held 42,500 shares of Organic Solutions common
stock, which shares are unrestricted as to sale, non-income producing, and have
been valued at their quoted market price of $.75 per share or $$31,875.
PACIFIC BIOMETRICS, INC.
------------------------
The Fund, at June 30, 1997, held 12,500 shares of Pacific Biometrics, Inc.
common stock, which shares are unrestricted as to sale, non-income producing
and have been valued at their quoted market price of $1.6875 or $21,093.75.
POWER SURGE, INC.
-----------------
The Fund, at June 30, 1997, held 20 shares of Power Surge, Inc. common
stock, which shares are restricted as to sale, non-income producing and have
been valued by the Board of Directors at their cost of $15,000 per share or
$300,000. Said shares were purchased in exchange for assuming a $300,000 share
of a 10 year 8% promissory note between the seller of the shares and a third
party.
REDWOOD BROADCASTING, INC.
--------------------------
The Fund, at June 30, 1997 held 5,000 shares of Redwood Broadcasting
common stock, which shares are unrestricted as to sale, non-income producing,
and have been valued by the Board of Directors at $1.50 per share or $7,500.
S&P 500
-------
The Fund, at June 30, 1997, held 4,000 puts against the S&P 500 at 550.
The puts are unrestricted as to sale and expire on December 20, 1997. They
have been valued at their quoted market price of $.0625 or $250. The Fund, at
June 30, 1997, also held 4,000 puts against the S&P 500 at 600. The puts are
unrestricted as to sale and expire on December 20, 1997. They have been valued
at their quoted market price of $.6875 or $2,750.
SHIVA CORPORATION
-----------------
The Fund, at June 30, 1997, held 2,630 shares of Shiva Corporation common
stock, which shares are unrestricted as to sale, non-income producing and have
been valued at their quoted market price of $10.4375 per share or $27,450.63.
The shares had previously been held in escrow pending the completion of certain
performance requirements by Airsoft, Inc.
SHOPSMITH
---------
The Fund, at June 30, 1997, held 5,000 shares of Shopsmith common stock,
which shares are unrestricted as to sale, non-income producing, and have been
valued at their quoted market price of $2.9375 per share or $14,687.50.
SOUTHSHORE CORPORATION
----------------------
At June 30, 1997, the Fund held 17,400 shares of Southshore Corporation
common stock, which shares are restricted as to sale, non-income producing, and
have been valued at their quoted market price of $.50 per share or $8,700.
TAMPA BAY CORPORATION
---------------------
The Fund, at June 30, 1997, held 25,000 shares of Tampa Bay Corporation
common stock, which shares are unrestricted as to sale, non-income producing,
and have been valued at their quoted market price of $.3125 per share or
$7,812.50.
TELS CORPORATION
----------------
The Fund, at June 30, 1997, held 30,000 shares of TELS Corporation common
stock, which shares are unrestricted as to sale, non-income producing, and have
been valued at their quoted market price of $.28125 per share or $8,436.
TRAINING DEVICES, INC.
----------------------
The Fund, at June 30, 1997 held 20,000 share of Training Devices common
stock, which shares are restricted as to sale, non-income producing, and have
been valued by the Board of Directors at their cost of $1.25 per share or
$25,000.
USASURANCE GROUP
----------------
The Fund, at June 30, 1997, held 64,000 shares of Usasurance Group common
stock, which shares are restricted as to sale due to the company being an
affiliate, non-income producing, and have been valued at their quoted market
price of $2.50 or $184,500.
WHITEWING LABS
--------------
The Fund, at June 30, 1997 held 20,000 share of Whitewing Labs common
stock, which shares are unrestricted as to sale, non-income producing, and have
been valued at their quoted market price of $.5625 per share or $11,250.
3. REAL ESTATE OPERATIONS
----------------------
Effective March 31, 1997, the Rockies Fund, Inc. consummated the sale of
its 26,000 square foot commercial office building located at 4465 Northpark
Drive, Colorado Springs, Colorado (the "Building"). The sale price for the
building was $1,080,000, which was paid in cash at closing. The proceeds
received were utilized in part to pay approximately $452,000 of mortgage and
other debt. This transaction resulted in a net gain of approximately $388,000.
In a concurrent transaction structured to qualify as a tax-free exchange
under Section 1031 of the Internal Revenue Code of 1986, as amended, the Fund,
on April 1, 1997 consummated the purchase of 5 acres of undeveloped commercial
real estate located at 3210 Woodman Road, Colorado Springs, Colorado (the
"Property"). The Fund plans to undertake a phased development of two
commercial office buildings on the Property which will, upon completion,
consist of an aggregate of 55,000 square feet of commercial office space. The
purchase price for the Property was $390,000, which was paid in cash on April
1, 1997 at the time of closing utilizing a portion of the proceeds realized by
the Fund from the sale of the Building. The Fund intends to hold this new real
estate in a wholly owned subsidiary called Strategic Properties, Inc.
The Fund plans to occupy its current executive office space located in the
Building under a lease with the new owners, Northpark, L.L.C. for $900 a month.
The commercial real estate market in Colorado Springs, Colorado, although
steadily improving over the last several years, still remains very competitive.
While the Board does not believe that a single firm or group dominates the
commercial real estate industry in Colorado Springs, many of the participants
are well-established and possess far greater financial and market resources
than the Fund.
4. CONTINGENCIES
-------------
Securities and Exchange Commission Investigation:
During 1996 and 1995, the Fund received requests for information from
the U.S. Securities and Exchange Commission ("SEC") related to an investigation
by the SEC which began in 1994 into various matters, including the
administrative and record keeping practices of the Fund, its securities trading
activities and those of one of its officers.
In September 1996, the Fund received notification from the SEC that
the SEC staff was planning to recommend that an enforcement action be brought
against the Fund, its president, and each of its directors due to certain
alleged violations of federal securities laws.
The SEC invited the Fund to make a submission setting forth the
Fund's position and arguments regarding the SEC staff's planned recommendation.
The Fund did so in October 1996, and, at the SEC's request, the Fund
supplemented its submission in December 1996. The SEC has not responded to the
Fund's submissions and has not advised the Fund of any timetable for the SEC
staff to make its final determination about whether to recommend an enforcement
action.
Management is unable to predict, with any certainty, the outcome of
the investigation, or the ultimate effect on the Fund.
<PAGE>
<PAGE>
FORWARD-LOOKING STATEMENTS
--------------------------
In addition to historical information, this Quarterly Report contains
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995, and are thus prospective. The forward-looking
statements contained herein are subject to certain risks and uncertainties that
could cause actual results to differ materially from those reflected in the
forward-looking statements. Factors that might cause such a difference
include, but are not limited to, competitive pressures, changing economic
conditions, those discussed in the Section entitled "Management's Discussion
and Analysis of Financial Condition and Results of Operations," and other
factors, some of which will be outside the control of the Company. Readers are
cautioned not to place undue reliance on these forward-looking statements,
which reflect management's analysis only as of the date hereof. The Company
undertakes no obligation to publicly revise these forward-looking statements to
reflect events or circumstances that arise after the date hereof. Readers
should refer to and carefully review the information in future documents the
Company files with the Securities and Exchange Commission.
<PAGE>
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
- -------------------------------------------------------------------------
The following discussion and analysis should be read in conjunction
with the Financial Statements and Notes thereto appearing elsewhere in this
report.
LIQUIDITY AND CAPITAL RESOURCES - JUNE 30, 1997 COMPARED TO DECEMBER 31, 1996
- -----------------------------------------------------------------------------
During the three months ended June 30, 1997, the Fund liquidated
certain securities, including 10,000 shares of Asteal International, 35,000
shares of Corfacts, 1,500 shares of Enhanced Services, 2,500 shares of The
Exploration Company, 10,000 shares of Image Matrix, 7,500 shares of Organic
Solutions, 20,000 shares of Racom Systems, 15,000 shares of Tampa Bay Corp.,
55,000 shares of Topro, and 4,000 shares of Poor Brothers. The proceeds
received from the liquidation of these securities allowed the Fund to add a
limited number of new investments to the Fund's portfolio, including the
following:
During the three months ended June 30, 1997, the Fund acquired
40,000 warrants of American Educational Products for a total investment of $0;
5,000 shares of Astea International for a total investment of $16,354; 5,000
shares of Guardian Technologies for a total investment of $13,125; 150,000
shares of Kinetiks for a total investment of $0.00; 175,000 shares of Optek
Music for a total investment of $35,000; 20 shares of Power Surge for the total
investment of $300,000; 25,000 shares of Tampa Bay for a total investment of
$5,468 and 2,500 shares of Usassurance for a total investment of $2,066.
The Fund has sold several investments in its portfolio contributing
to the decreased value of restricted and unrestricted securities from
$1,841,093 as of December 31, 1996 to $1,806,633 as of June 30, 1997, a
decrease of $34,460 or 01%.
Current notes receivable increased from $138,404 as of December 31,
1996 to $279,884 as of June 30, 1997, an increase of $141,480 or 102%, due
primarily to a new note receivable of approximately $143,000 due from Marco
Foods. As a result accrued interest receivable increased $13,584 or 106% at
June 30, 1997. Cash held by related parties and others decreased from $499,404
as of December 31, 1996 to $149,149 as of June 30, 1997 utilized primarily to
purchase undeveloped commercial real estate located at 3210 Woodman Road,
Colorado Springs, Colorado and related development expenses.
Total current assets, therefore decreased from $2,530,571 at
December 31, 1996 to $2,264,494 at June 30, 1997, a decrease of $266,077 or
approximately 10%.
During the six months ended June 30, 1997, the Fund sold its office
building for a net gain and subsequently acquired commercial real estate
property for $390,000, improvements for $62,582 and an automobile for $15,162.
As a result, total property and equipment decreased from $764,521 as of
December 31, 1996 to $472,460 as of June 30, 1997, a decrease of 292,061 or
38%.
The Fund, as of June 30, 1997 had a note receivable outstanding with
its affiliate, Global Casinos, for $175,000, accruing interest at 8% and
convertible to Global Casinos shares at $5.00 per share.
Based on the foregoing, total assets decreased from $3,470,092 on
December 31, 1996 to $2,911,954 on June 30, 1997, a decrease of $558,138 or
16%.
Total liabilities decreased significantly from $1,139,360 as of
December 31, 1996 to $714,110 as of June 30, 1997, a reduction of $425,250 or
37%. The reduction in liabilities weas mainly attributable to the sale
proceeds of the Northpark office building and utilizing investment sale
proceeds to pay off debt. Payables to related parties were paid off by June
30, 1997 and had a balance of $153,566 as of December 31, 1996. Payables for
investment securities were paid and had a balance of $116,882 as of December
31, 1996 and accrued liabilities decreased $38,951 or 47%. Liabilities related
to the sale of the Northpark office building were mortgage note payable,
current portion, security deposits, other liabilities (due to lessee) and the
State Bank and Trust line of credit secured by the Fund's office building,
reducing liabilities by $518,190.
The Fund acquired a new note payable to Merit Broadcasting for
$300,000 for the purchase of shares of Power Surge, Inc. and a long term
liability of 9,718 for the purchase of a company automobile.
The Fund still holds a $75,000 line of credit with a balance of
$74,500 as of June 30, 1997 that accrues interest at 10.5% and is secured by
the Fund's shares of Optimax Industries security.
Based on the foregoing, Net Asset Value decreased during the six
months ended June 30, 1997, from $2,330,732 at December 31, 1996, to $2,197,845
at June 30, 1997, a decrease of $132,887 or nearly 6%. Net assets per common
share decreased from $3.64 per share at December 31, 1996, to $3.43 per share
on June 30, 1997, a decrease of $0.21.
Management knows of no trends or demands, commitments, events or
uncertainties which will result in the Fund's liquidity or capital resources
materially increasing or decreasing.
RESULTS OF OPERATIONS THREE MONTHS ENDED JUNE 30, 1997 COMPARED TO THREE MONTHS
ENDED JUNE 30, 1996
- -----------------------------------------------------------------------------
The Fund's income/revenue for the three months ended June 30, 1997,
was $12,112 a decrease of $22,493 or 64% compared with the same period in 1996.
This decrease in income/revenue was due to the Fund's office building being
sold and therefore producing no rental income during the 2nd quarter of 1997.
Interest and dividend income increased however from $148 for the quarter ended
June 30, 1996 to $10,377 for the quarter ended June 30, 1997 due to the
increase of notes receivable.
Expenses decreased from $130,806 for the quarter ended June 30, 1996 to
$106,200 for the quarter ended June 30, 1997, a decrease of $24,606 or 18%.
Contributing to the decrease in expenses were a decrease in wages and salaries
of 6%, building expenses of approximately 99%, as the building incurred minimal
expenses due to the sale as of March 31, 1997, and no bad debts were incurred
during the quarter ended June 30, 1997.
Based on the foregoing, the Fund reported a net investment loss for
the three months ended June 30, 1997, of $(94,088), a decrease of 2% when
compared to the net investment loss of $(96,201) incurred during the same
period in 1996.
The Fund's net realized loss from sales of investments was ($59,010)
for the quarter ended June 30, 1997, a decrease of $95,603 or 261%, compared to
a realized gain of $36,593 for the quarter ended June 30, 1996. . Unrealized
net appreciation/depreciation relating to the current market value of
securities being held by the Fund decreased $1,757,752 from an unrealized net
gain of $1,496,201 for the quarter ended June 30, 1996 to an unrealized net
loss of $(261,551) for the quarter ended June 30, 1997, due to the unrealized
appreciation of the Shiva investment in 1996.
Management knows of no trends or demands, commitments, events or
uncertainties which will result in the Fund's liquidity or capital resources
materially increasing or decreasing.
RESULTS OF OPERATIONS SIX MONTHS ENDED JUNE 30, 1997 COMPARED TO SIX MONTHS
ENDED JUNE 30, 1996
- ---------------------------------------------------------------------------
The Fund's income/revenue for the six months ended June 30, 1997 was
$76,074 a decrease of $2,328 from $78,402 for the six months ended June 30,
1996. Rental income decreased due to the building being sold as of March 31,
1997. Interest income, however, increased due to interest earned on cash
balances and notes receivable during 1997.
Expenses increased slightly from $241,972 for the six months ended June 30,
1996 to 250,291 for the six months ending June 1997. The increases in expenses
were mainly attributable to the increase in directors fees, travel and
entertainment, office expenses, investment expenses and donations.
The Fund had a net realized loss of ($174,217) for the six months ending June
30, 1997 compared to ($163,571) for the six months ending June 30, 1996. Net
realized gains increased from $133,783 for the six months ending June 30, 1996
to $419,531 for the six months June 30, 1997 an increase of $285,748 or 214%.
Net unrealized appreciation/depreciation of investments decreased significantly
from $1,313,050 for the six months ending June 30, 1996 to $(378,180) for the
six months ending June 30, 1997 a decrease of $1,691,230, due to the unrealized
appreciation of the Shiva investment in 1996.
Management knows of no trends or demands, commitments, events or uncertainties
which will result in the Fund's liquidity or capital resources materially
increasing or decreasing.
<PAGE>
<PAGE>
PART 1. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
During the beginning of 1996, the Fund received requests for
information from the United States Securities and Exchange Commission ("SEC")
related to an investigation begun by the SEC during 1994 into various matters,
including the administrative and record keeping practices of the Fund, its
securities trading activities and those of its officers and directors. In
September 1996, the Fund was notified by the Commission's Staff that it intends
to request that the Commission commence an administrative proceeding against
the Fund and its directors based upon certain transactions in securities
formerly included in the Fund's securities portfolio. The Fund has responded
to Commission with a written submission which sets forth why there exists no
basis in fact or law for such a proceeding. It is impossible to predict whether
the staff will recommend a proceeding against the Fund or any of its directors,
and if such a recommendation is made, whether the Commission will authorize the
institution of a proceeding. There can be no assurance of the outcome of this
matter or the ultimate effect on the Fund's financial position.
Other than the foregoing, the Fund is not a party to any material
pending legal proceedings.
ITEM 2. CHANGES IN SECURITIES
None.
ITEM 3. DEFAULT UPON SENIOR SECURITIES
There have been no defaults on any securities. The Fund has no
obligations with regard to dividends and no preferred stock is outstanding.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On June 30, 1997, The Rockies Fund held the regular annual meeting of
shareholders. The proxy results were as follows:
Proposal #1, election of Fund's Directors:
Votes
Votes For Withheld
--------- --------
Stephen G. Calandrella 599,862 77
Charles Powell 599,752 187
Clifford C. Thygesen 599,862 77
Proposal #2, approval of accountants:
Votes Votes Absten-
For Against tions
------- ------- -------
Gelfond, Hochstadt,
Pangburn & Co. 589,011 10,378 550
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
EXHIBITS
--------
27.0 Financial Data Schedule for Investment Companies
REPORTS ON FORM 8-K
-------------------
On April 15, 1997, the Company filed a Current Report on Form-K dated
March 31, 1997, related to the sale by the Company of a 26,000 square foot
commercial office building located at 4465 Northpark Drive, Colorado Springs,
Colorado, and the acquisition, in a concurrent transaction structured to
qualify as a tax-free reorganization under Section 10315 of the Internal
Revenue Code of 1986, as amended, of 5 acres of undeveloped commercial real
estate located at 3210 Woodman Road, Colorado Springs, Colorado, upon which the
Company plans to develop two commercial office buildings.
That report included:
Item 2: Acquisition and Disposition of Assets
Item 7: Financial Statements and Exhibits
(b) Proforma Financial Information
(c) Exhibits
10.1 Commercial Contract to Buy and Sell Real
Estate dated February 24, 1997
10.3 Seller's Closing Schedule
10.4 Buyer's Closing Schedule
<PAGE>
<PAGE>
SIGNATURE
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 hereunto duly authorized.
THE ROCKIES FUND, INC.
Dated: August 19, 1997 By: /s/ Stephen G. Calandrella
----------------------- ----------------------------------
Stephen G. Calandrella, President
Dated: August 19, 1997 By: /s/Barbara A. Hamstad
----------------------- ----------------------------------
Barbara A. Hamstad
Principal Accounting Officer
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
STATEMENT OF OPERATIONS ON PAGES 14 AND 15 OF THE COMPANY'S FORM
10-Q FOR THE SIX MONTHS ENDED JUNE 30, 1997 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1997
<INVESTMENTS-AT-COST> 2,641,613
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