<PAGE>
FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from ------------------- to ------------------
Commission file number 0-12444-D
THE ROCKIES FUND, INC.
------------------------------------------------------
(Exact Name of Registrant as Specified in its Charter)
Nevada 84-0928022
- ------------------------------- -----------------------
(State or other jurisdiction I.R.S. Employer
of incorporation or organization) Identification number
4465 Northpark Drive, Colorado Springs, Colorado 80907
-----------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (719) 590-4900
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
None None
Securities registered pursuant to Section 12(g) of the Act:
Title of Each Class
$.01 Par Value Common Stock
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 [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
As of April 03, 1997, the aggregate market value of the Common Stock of
the Registrant based upon the average of the closing bid and asked prices of
the Common Stock as quoted on the OTC Electronic Bulletin Board held by non-
affiliates of the Registrant was $738,788. As of April 03, 1997, 640,256
shares of Common Stock of the Registrant were outstanding.<PAGE>
<PAGE>
DOCUMENTS INCORPORATED BY REFERENCE
The Registrant hereby incorporates herein by reference the following
documents:
Part IV - Exhibits
- ------------------
1. Incorporated by reference from the Fund's final Registration
Statement on Form N-2, No. 2-86057, as filed with the Securities and Exchange
Commission.
2. Incorporated by reference from the Fund's Notification Pursuant to
Rule 14f-1 under the Securities Exchange Act of 1934, as filed with the
Commission on January 15, 1991.
3. Incorporated by reference from the Fund's Annual Report on Form 10-K
for the fiscal year ended December 31, 1995.
FORWARD-LOOKING STATEMENTS
- --------------------------
In addition to historical information, this Annual 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 Fund. 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 Fund
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
Fund files with the Securities and Exchange Commission.
<PAGE>
<PAGE>
PART I
ITEM 1. BUSINESS
HISTORY AND BACKGROUND
The Rockies Fund, Inc. (the "Fund") was incorporated on August 2, 1983,
under the laws of the State of Nevada, for the principal purposes of making
venture capital investments in developing companies throughout the United
States. The Fund's initial capitalization consisted of a purchase of 12,500
shares of the Fund's Common Stock for a total of $100,000 by Galbreath
Financial Investment Corporation, an affiliate of the Fund's former Advisor,
Galbreath Financial Services Corporation, on August 5, 1983. On November 16,
1983, the Fund completed a public offering of its stock, whereby the Fund sold
a total of 425,000 shares of its $.01 par value Common Stock at a price of
$8.00 per share. The Fund received net proceeds from the offering of
$2,890,000.
Effective January 29, 1991, the Fund entered into an Agreement Concerning
the Change in Management ("Agreement"), which provided for the termination of
the Fund's management and advisor agreements and the resignation of the then
existing Board of Directors and executive officers of the Fund. Prior to
January 29, 1991, Galbreath Financial Services Corporation ("Advisor") had
provided management and administrative services to the Fund pursuant to a
Management Agreement between the parties and had provided investment services
pursuant to an Investment Advisory Agreement between the parties. Under the
terms of the Agreement, and with the approval of the Fund's majority and
controlling stockholder, D.A. Davidson & Company, the former five (5) members
of the Fund's Board of Directors, resigned in sequence and the vacancies
created by those resignations were filled by the Fund's current Board of
Directors, to serve until the next regular annual meeting of the Fund's
stockholders. (See Part III - "Directors and Executive Officers")
The Fund has elected treatment as a "business development company" under
the Investment Company Act of 1940, as amended (the "Act"), and is therefore
subject to the provisions of the Act which apply to such companies. As a
"business development company", the Fund is relieved from compliance with a
number of provisions of the Act which otherwise would significantly affect its
operations, but remains subject to other regulations affecting investment
companies. In order to maintain its status as a business development company,
approximately 70% of the Fund's assets must be comprised of venture capital
investments.
As a business development company, the Fund invests in, and makes
managerial assistance available to, new and developing companies. Prior to
making an investment in a company which is eligible for the Fund's venture
capital portfolio, the Fund's management conducts a review of the portfolio
company's operations to determine whether it is appropriate for investment by
the Fund. This review may include familiarization with the portfolio company's
business plan, a tour of the proposed portfolio company's facilities, credit
and reference checks and a careful review of the portfolio company's product,
its markets and growth prospects.
Consistent with the Fund's offer to provide managerial assistance to its
portfolio companies, the Fund attempts to arrange for its officers and
directors to serve as directors of such companies. Also, the Fund assists
portfolio companies in their efforts to recruit management, to define their
product planning and marketing strategies, to form financial plans and to
develop corporate goals. The Fund also assists such companies in establishing
professional relationships, in obtaining additional financing, in evaluating
merger opportunities and in conducting private and public offerings of their
securities.
FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS.
Since inception, the Fund has operated primarily in the venture capital
industry and plans to continue to devote a majority of its resources to
operations within this arena. However, during the third quarter of fiscal
1993, the Fund acquired a 26,500 square foot office building. The building was
purchased primarily to provide office space for the Fund and as a potential
source of income.
The following table sets forth for each of the Fund's last three fiscal
years, the amounts of revenue, operating profit or loss and identifiable
assets, attributable to the Fund's investment activities and to the operation
of the Fund's office building. The following information should be read in
conjunction with the Financial Statements and related Notes contained elsewhere
in this report and Management's Discussion and Analysis of Financial Condition
and Results of Operations.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------
AS OF OR FOR THE YEARS ENDED DECEMBER 31
-----------------------------------------
1996 1995 1994
- ----------------------------------------------------------------------------
<S> <C> <C> <C>
Investment Income:
Venture Capital Industry $ 36,057 $ 19,971 $ 23,654
Real Estate 170,434 157,565 142,921
Net Investment Income/(Loss):
Realized Investment Income 1,549,196 31,889 192,577
Venture Capital Industry (488,522) (289,512) (385,183)
Real Estate 59,833 30,570 20,034
Identifiable Assets:
Venture Capital Industry 2,733,821 1,525,053 1,761,343
Real Estate
(land and building at cost) 736,271 661,734 661,734
</TABLE>
NARRATIVE DESCRIPTION OF BUSINESS.
VENTURE CAPITAL OPERATIONS
--------------------------
The Fund's primary business remains investing in, and making managerial
assistance available to, new and developing companies. To this end, effective
July 19, 1994, the Fund changed and expanded its Investment Objective. As
amended, the Fund's Investment Objective is capital appreciation by making
venture capital investments primarily in developing companies located
throughout the United States and its territories which the Fund's management
believes offer significant growth opportunities. The Fund also invests in more
established companies which are experiencing financial difficulties if such
companies present special opportunities for growth. Thus, the Fund invests in
companies involving a high degree of risk and possessing the potential for
significant capital appreciation.
The Fund seeks to follow certain guidelines when identifying potential
portfolio companies, and attempts to invest in those companies which are unique
with regard to their products or their production or marketing techniques. The
Fund also looks for investment opportunities in companies that produce products
for which there is a discernible demand, at competitive costs. Strong growth
potential, a reasonable opportunity for liquidity, increases in gross revenues
in excess of industry averages and a lack of dependence upon governmental
contracts or any one sector of the economy, are important factors which the
Fund generally considers prior to making an investment.
The Fund presently has four employees. The Fund's executive officers and
directors screen, evaluate and structure investments and provide managerial
assistance to portfolio companies. The Fund's officers and directors provide
guidance regarding the propriety and structuring of investments and establish
periodically the valuation of securities held by the Fund.
The venture capital business is highly competitive. A recent dramatic
increase in the number of businesses engaged in venture capital investment
activities has meant that a larger number of firms are competing for a limited
number of attractive investment opportunities. Notwithstanding these
developments, however, no single firm or group of firms dominates the industry.
Where possible, the Fund seeks to participate with other venture capitalists in
their investment activities.
The following descriptions of certain companies in which the Fund has
invested contain information which has been obtained from officers and
directors of the respective companies, and from documents furnished to the Fund
by such companies. The description of the Fund's investments includes
valuation information which is based upon certain valuation methods which are,
in order of preference, the Public Market Method (used when there is an
established public market for the portfolio company's securities), the Private
Market Method (based upon private transactions), the Appraisal Method
(reflecting a comparison between the portfolio company and other public or
private companies engaged in the same or similar business activities), and the
Cost Method (based upon the cost of the Fund's investments as adjusted to
reflect significant developments affecting the investment).
PORTFOLIO COMPANIES
ALOUETTE COSMETICS, INC
-----------------------
The Fund, at December 31, 1996 held 2,500 shares of Alouette Cosmetics
common stock, which shares are unrestricted as to sale, non-income producing
and have been valued at their quoted market price of $3.00 per share or $7,500.
AMERICAN EDUCATIONAL PRODUCTS, INC.
-----------------------------------
The Fund, at December 31, 1996, held 200,000 shares of American
Educational Products, Inc. common stock, which shares are restricted as to
sale, non-income producing and have been valued by the Board of Directors at
their quoted market value of $.9375 per share or $187,500. The Company also
held at December 31, 1996 common stock purchase warrants exercisable to
purchase an additional 200,000 shares of common stock of American Educational
Products, Inc. at an exercise price of $1.00 per share. The Company valued
these warrants at $0. The Fund does have certain registration rights relating
to these shares and warrants.
ASTEA INTERNATIONAL
-------------------
The Fund, at December 31, 1996, held 10,000 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 $5.6875 per share or
$56,875.
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.
BRASSIE GOLF CORPORATION
------------------------
The Fund, at December 31, 1996, held 215,000 shares of Brassie Golf
Corporation common stock, which shares are unrestricted as to sale, non-income
producing, and have been valued at their quoted market price of $.25 per share
or $53,750.
CABLE AND COMPANY WORLDWIDE
---------------------------
The Fund, at December 31, 1996, held 78,000 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 $.8125 per share
or $63,375.
CELL ROBOTICS INTERNATIONAL, INC.
---------------------------------
The Fund, at December 31, 1996 held 35,000 shares of Cell Robotics
International, Inc. common stock, which shares are unrestricted as to sale,
non-income producing, and have been valued at their quoted market price of
$2.00 per share or $70,000.
CORFACTS, INC.
--------------
The Fund, at December 31, 1996, held 200,000 shares of Corfacts, Inc.
common stock, which shares are unrestricted as to sale, non-income producing,
and has been valued by the Board of Directors at $.05 per share or $10,000.
COVA TECHNOLOGIES
-----------------
The Fund at December 31, 1996 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 December 31, 1996 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 March 31, 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 December 31, 1996, held 2,500 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 $8,125.
EXPLORATION COMPANY, THE
------------------------
The Fund, at December 31, 1996, held 18,000 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 $5.50 per share
or $99,000.
GEORGESON, PHIL
---------------
The Fund, at December 31, 1996 held a note receivable from Phil Georgeson
in the amount of $15,090. The note is secured by 15,000 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 December 31, 1996, 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 $4.25 per share, or $75,140. The Fund, at December 31, 1996,
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 also owns 35,000 Global warrants excercisable
at $6.00, 35,000 warrants excercisable at $7.00 and 35,000 warrants
excercisable at $8.00 per share, all of which expire as of February 1, 1998 and
are valued at $0.
HEALTHWATCH, INC.
-----------------
The Fund, at December 31, 1996, held 79,400 shares of Healthwatch, Inc.
common stock, which shares are unrestricted as to sale, non-income producing,
and have been valued at their quoted market price of $2.00 per share or
$158,800.
IMAGE MATRIX CORPORATION
------------------------
The Fund, at December 31, 1996 held 10,000 units of Image Matrix
Corporation, which units are unrestricted as to sale, non-income producing, and
have been valued at their quoted market price of $3.375 per unit or $33,750.
J T'S RESTAURANTS, INC.
-----------------------
The Fund, at December 31, 1996, held 1,500 shares of J T's Restaurants,
Inc. common stock, which shares are unrestricted as to sale, non-income
producing and have been valued at their quoted market price of $2.125 or
$3,188.
KINETIKS.COM
------------
The Fund, at December 31, 1996 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 $.625 per share or $64,688.
LASER RECORDING SYSTEMS, INC.
-----------------------------
The Fund, at December 31, 1996, 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.
NAVIDEC, INC.
-------------
The Fund, at December 31, 1996, held a note receivable from Navidec, Inc.
in the amount of $25,000, which note is unsecured, accrues interest at the rate
of 10% and is due December 30, 1997.
NECO LAND RESOURCES, LLC.
-------------------------
The Fund, at December 31, 1996. held a note receivable from NECO Land
Resources, LLC in the amount of $10,000. The note is unsecured, accrues
interest at the rate of 8% per year and is due on August 29, 1997.
OPTIMAX INDUSTRIES, INC. (fka PLANTS FOR TOMORROW, INC.)
--------------------------------------------------------
At December 31, 1996, the Fund held 135,191 shares of Optimax Industries,
Inc. common stock, which shares are restricted as to sale, are non-income
producing, and have been valued at their quoted market price of $2.50 per
share or $337,978. 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 $.75 each or $9,375.
PACIFIC BIOMETRICS, INC.
------------------------
The Fund, at December 31, 1996, held 7,500 shares of Pacific Biometrics,
Inc. common stock, which shares are unrestricted as to sale, non-income
producing and have been valued at the quoted market price of $3.125 or $23,438.
Additionally, the Fund held 7,500 common stock purchase warrants which are also
unrestricted as to sale, non-income producing and have been valued at their
quoted market price of $.1875 or $1,406.
POORE BROTHERS, INC.
--------------------
The Fund, at December 31, 1996, held 4,000 shares of Poore Brothers, Inc.
common stock, which shares are unrestricted as to sale, non-income producing
and have been valued at their quoted market price of $3.5625 or $14,250.
PROGRESS SOFTWARE, INC.
-----------------------
The Fund, at December 31, 1996, held 1,000 shares of Progress Software,
Inc. common stock, which shares are unrestricted as to sale, non-income
producing and have been valued at their quoted market price of $19.75 per share
or $19,750.
S2 GOLF, INC.
-------------
The Fund, at December 31, 1996 held 20,825 shares of S2 Golf, Inc. (Square
Two Golf, Inc.), which shares are unrestricted as to sale, non-income producing
and have been valued at their quoted market price of $.9375 per share or
$19,523.
S&P 500
-------
The Fund, at December 31, 1996, 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 value of $5.875 or $23,500. The
Fund, at December 31, 1996, 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 value of $8.25 or $33,000.
SHIVA CORPORATION
-----------------
The Fund, at December 31, 1996, held 2,631 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 $34.625 per share or
$91,098. The shares had previously been held in escrow pending the completion
of certain performance requirements by Airsoft, Inc.
SHOPSMITH
---------
The Fund, at December 31, 1996, held 20,000 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 $2.50 per share or $50,000.
SOUTHSHORE CORPORATION
----------------------
At December 31, 1996, 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 December 31, 1996, held 15,000 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 $1.369 per
share or $20,535.
TELS CORPORATION
----------------
The Fund, at December 31, 1996, 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 $.4688 per share or
$14,064.
TOPRO, INC.
-----------
The Fund, at December 31, 1996, held 7,500 shares of Topro, Inc. common
stock, which shares are restricted as to sale, non-income producing, and have
been valued at their quoted market price of $2.50 per share or $18,750. The
Fund also held a $50,000 note receivable from Topro, Inc., which note accrues
interest at 12% per year and was paid in 1997.
USASURANCE GROUP
----------------
The Fund, at December 31, 1996, held 60,500 shares of Usasurance Group
common stock, which shares are restricted as to sale, non-income producing, and
have been valued at their quoted market price of $4.00 or $242,000.
REAL ESTATE OPERATIONS
During the third quarter of fiscal 1993 the Fund purchased a 26,500 square
foot office building located in Colorado Springs, Colorado (the "Building").
The Building was acquired primarily to provide office space for the Fund and as
a potential source of income. The Fund currently occupies approximately eight
percent (8%) of the Building and leases the remaining space to thirteen (13)
other unrelated parties under varying, noncancellable, operating leases
expiring in various years through 2002. The Building is currently 110%
occupied, including a one year lease for the Building roof for placement of
Antenna Facilities, effective September 16, 1996.
The Fund's Building Consultant is currently responsible for management and
leasing of the Building and has signed a Consultant Agreement with the Fund to
manage the Building as long as the Fund owns the Building and is subject to a
30 day cancellation by either party in writing.
At December 31, 1996, the Company was engaged in discussions calculated to
lead toward the future sale of the Building. Subsequent to December 31, 1996,
the Company executed a contract for and consummated the sale of the Building
for a price of $1,080,000. The sale was structured as a tax-free exchange
under Section 1031 of the Internal Revenue Code. In connection with that
transaction, the Company on April 1, 1997 consummated the purchase of five
acres of undeveloped commercial property located in Colorado Springs, Colorado.
The Company intends to build and develop a commercial office building on the
property during 1997. The Company will continue to occupy the Building which
it sold effective March 31, 1997 until its new building has been constructed
and completed. Additional investments in rental real estate must be made in
compliance with the provisions of the Act and must not jeopardize the Fund's
status as a business development company under the Act.
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.
INCOME TAXES
For federal income tax purposes, the Fund will utilize all of its net
operating loss and capital loss carryforwards for the 1996 tax return.
ITEM 2. PROPERTIES
Office Facilities.
------------------
The Fund's principal executive offices are maintained in the office
Building located at 4465 Northpark Drive, Colorado Springs, Colorado 80907.
The Fund's telephone number at that address is (719) 590-4900.
In conjunction with the Fund's acquisition of the Building, the Fund
executed and delivered its promissory note payable in monthly installments of
$5,806, including interest at 8% per annum, due August 1, 2003, and secured by
the Building. As of December 31, 1996, the principal amount outstanding under
this note was $358,436. The Fund also executed and delivered a second,
unsecured, promissory note, due on demand, with interest equal to 50% of the
net cash flows of the Building. During 1996, the Fund paid off the face amount
on this second, unsecured, promissory note. The transaction resulted in
termination of the noteholder's right to convert the note into equity in the
building. The resultant cost to terminate the noteholder's right of $74,537
was allocated to the Fund's building. Finally, the Fund had obtained a
variable rate $100,000 line of credit with interest at prime rate plus 2.0%.
The line of credit is secured by the Building, and is fully utilized as of
December 31, 1996. Subsequent to December 31, 1996, the Company sold the
Building and consummated the purchase of five acres of undeveloped commercial
property in Colorado Springs, Colorado. The Company will continue to occupy
its current offices in the Building until it has completed the construction and
development of a new office building on the newly purchased commercial
property.
ITEM 3. 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
Company was notified by the Commission's Staff that it intends to request that
the Commission commence an administrative proceeding against the Company and
its directors based upon certain transactions in securities formerly included
in the Company's securities portfolio. The Company has responded to the
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 Company 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 proceeding.
ITEM 4. MATTERS SUBMITTED TO VOTE OF SECURITY HOLDERS
The Fund did not submit any matters to a vote of its security holders
during the fourth quarter of its fiscal year ending December 31, 1996.<PAGE>
<PAGE>
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK
AND RELATED SECURITY HOLDER MATTERS
PRICE RANGE OF COMMON STOCK
The outstanding shares of common stock, are traded over-the-counter and
quoted in the OTC Electronic Bulletin Board under the symbol "ROCE." The
reported high and low bid prices for the common stock are shown below for the
period from January 1, 1995 through April 03, 1997:
<TABLE>
<CAPTION>
BID
---------------------------------
LOW HIGH
------- -------
<S> <C> <C>
1995
---------
First Quarter 1.625 1.75
Second Quarter 1.625 1.875
Third Quarter 1.625 2.00
Fourth Quarter 1.75 2.00
1996
----------
First Quarter 1.75 2.00
Second Quarter 2.00 2.50
Third Quarter 2.50 3.75
Fourth Quarter 3.50 4.00
1997
----------
First Quarter 4.00 4.125
(through 4/03/97)
</TABLE>
The bid price of the Fund's common stock as of April 03, 1997 was $4.125.
The prices presented are bid prices which represent prices between broker-
dealers and do not include retail mark-ups and mark-downs or any commissions to
the broker-dealer. The prices do not reflect prices in actual transactions.
As of December 31, 1996, there were approximately 116 holders of record of
the Fund's common stock. The closing bid price of the stock on that date was
$4.00.
DIVIDENDS
No cash dividends were paid by the Fund in 1995 or 1996.
ITEM 6. SELECTED FINANCIAL DATA
The selected financial data presented below is derived from audited
financial statements of the Fund. The following information should be read in
conjunction with the Financial Statements and related Notes contained elsewhere
in this report and Management's Discussion and Analysis of Financial Condition
and Results of Operations.
<PAGE>
<TABLE>
BALANCE SHEET DATA AT DECEMBER 31
<CAPTION>
1996 1995 1994 1993 1992
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Assets
Investments $2,154,497 $1,400,374 $1,699,582 $1,830,719 $1,158,919
Cash 499,404 1,193 37,081 9,072 25,557
Property and equipment, net 764,521 714,918 655,556 660,982 -0-
Other 51,670 70,302 30,858 3,323 2,843
---------- ---------- ---------- ---------- ----------
Total assets 3,470,092 2,186,787 2,423,077 2,504,096 1,187,319
Liabilities
Notes payable, lines of credit 262,821 191,627 195,444 165,444 95,750
Accounts payable, current 293,600 165,542 65,114 115,879 30,747
Accrued interest payable 7,428 19,588 14,628 14,268 3,814
Other accrued liabilities 82,408 39,697 12,500 70,123 -0-
Cash overdraft -0- 8,653 -0- 24,522 -0-
Long-term liabilities 375,103 454,116 428,352 462,274 -0-
Accrued income taxes 118,000 -0- -0- -0- -0-
Total liabilities 1,139,360 879,223 716,038 852,510 130,311
Net assets $2,330,732 $1,307,564 $1,707,039 $1,651,586 $1,057,008
========= ========= ========= ========= =========
Net assets per share
(shares issued and outstanding: 640,256
in 1992 - 1996) $3.64 $2.04 $2.67 $2.58 $1.65
</TABLE>
<TABLE>
STATEMENT OF OPERATIONS DATA FOR YEARS ENDED DECEMBER 31
<CAPTION>
1996 1995 1994 1993 1992
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Investment Income $ 206,491 $ 177,536 $ 166,575 $ 67,795 $ 7,684
Expenses 635,180 436,478 531,724 304,139 108,349
---------- ---------- ---------- ---------- ----------
Net Investment loss (428,689) (258,942) (365,149) (236,344) (100,665)
Net realized gain from sales
and permanent write-downs of
securities 1,549,196 31,889 192,577 642,478 176,001
Unrealized net appreciation
(depreciation) of investments (97,339) (172,422) 228,025 188,444 307,537
---------- ---------- ---------- ---------- ----------
Net increase (decrease) in net
assets from investment
activities $1,023,168 $ (399,475) $ 55,453 $ 594,578 $ 382,873
========= ========= ========= ========= =========
Per share amounts:
Net investment loss $(.067) $(0.40) $(0.56) $(0.36) $(0.15)
Net realized gains from
investments 2.42 0.05 0.30 1.00 0.27
Net unrealized depreciation
of net investments (0.15) (0.27) 0.35 0.29 0.48
__________ __________ __________ __________ __________
Net increase
(decrease) in net assets per
common share from
investment activities $1.60 $(.62) $0.09 $0.93 $0.60
--------------------- ==== ==== ==== ==== ====
</TABLE>
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATION
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 - DECEMBER 31, 1996.
During the year ended December 31, 1996, the Fund incurred substantial
realized gains from sales of securities which were partially offset by
unrealized depreciation of investments. Current assets and net assets
increased accordingly:
Primarily due to the proceeds from the sale of 23,679 shares of Shiva
Corp. (fka Airsoft) common stock during fiscal year ending December 31, 1996,
the Fund has added 24 new investments to its portfolio since December 31, 1995
contributing to the increased value of its investments from $1,400,374 on
December 31, 1995, to $2,154,497 on December 31, 1996, an increase of $754,123
or 53.9%. In addition to the increase in securities, was an increase in
notes receivable from a value of $6,175 on December 31, 1995 to $313,404 on
December 31, 1996, an increase of $307,229 or approximately 4,975%. Global
Casinos, Inc., an international gaming Company, comprises approximately 55% of
total notes receivable. The Fund believes that all notes receivable are fully
collectible.
Cash increased significantly from $1,193 at December 31, 1995 to $499,404
at December 31, 1996, an increase of $498,211 primarily due to the proceeds
from the sale of Shiva Corp. Accrued interest receivable increased from $2,130
at December 31, 1995 to $12,789 at December 31, 1996, an increase of $10,659 or
approximately 500%, attributable to the increase in notes receivable.
Receivables from investees decreased at December 31, 1996 from $61,518 at
December 31, 1995 to $23,072, or 62.5%, as the Fund received payments on these
receivables during the year. As a result, current assets increased in 1996
from $1,471,869 at December 31, 1995 to $2,705,571 at December 31, 1996, an
increase of $1,233,702 or approximately 83.8%.
During 1996, the Fund sold a promissory note to a party entitled to a one-
half interest in the Fund's Colorado Springs office building and to certain
real property and improvements of the Fund's building, which subsequently
increased the cost of the Fund's Office Building by $74,537, to $633,496 as of
December 31, 1996. Leasehold Improvements increased by $3,414, or 4% at
December 31, 1996 to accommodate improvements for a new lease tenant. As a
result, total fixed assets increased by $49,603 or 6.9%, less accumulated
depreciation.
Based on the foregoing, total assets increased significantly from
$2,186,785 at December 31, 1995 to $3,470,092 at December 31, 1996, in increase
of $1,283,307 or 58.7%.
Current liabilities increased during 1996 by $305,827, or by approximately
66%, due specifically to investment securities purchased, accounts payable,
accrued liabilities, accrued income taxes and borrowings under lines of credit.
Investment securities purchases accounted for $116,882 of the increase in
current liabilities and had a zero balance as of December 31, 1995, these
trades were purchased at the end of 1996, however did not settle until 1997 and
therefore are required to be recorded as a liability for the Fund. Accounts
payable increased by $120,724 or approximately 216%, due to trades purchased
and payment still outstanding as of December 31, 1996 . Accrued liabilities
increased $42,711 or 107%, due primarily to legal fees incurred as of
December 31, 1996. The Fund accrued income taxes of an estimated $118,000 as
of December 31, 1996, due to the significant increase in realized gains
incurred from the Shiva Corp. sale proceeds. Borrowings under lines of credit
increased $71,414 or 69.3% as the Fund had two lines of credit as of December
31, 1996, which include a fully drawn $100,000 line that accrued interest at
prime plus 2% secured by the Fund's Building; and a $75,000 line with an
outstanding balance of $74,500 as of December 31, 1996 that accrued interest at
9.5% secured by the Fund's Optimax Industries, Inc. holdings. The Fund had no
cash overdrafts as of December 31, 1996 and had paid $146,393 on notes payables
to related and other parties for a decrease of approximately 76.4% from
December 31, 1995 to December 31, 1996.
As a result, total liabilities increased from $879,223 at December 31,
1995 to $1,139,360 at December 31, 1996 an increase of $260,137 or 29.5%
Due to the increase in total assets and liabilities, net assets increased
from $1,307,564 at December 31, 1995 to $2,330,732 at December 31, 1996 and
from $2.04 per share to $3.64 per share, respectively, an increase of $1.60 per
share or 78%.
Any additional investments in rental real estate must be made in
compliance with the provisions of the Investment Fund Act of 1940 (the "Act"),
and cannot jeopardize the Fund's status as a business development company
registered under the Act.
Other than the sale of the Fund's office building, 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 - 1996 COMPARED TO 1995 AND 1994
As a direct result of the Fund's acquisition of the office building in
Colorado Springs, Colorado, during the third quarter of 1993, in addition to
the office building being fully leased in 1996, rental income has increased
from $142,921 in 1994, to $157,565 in 1995, to $170,434 in 1996. Interest and
dividend income increased significantly in 1996 due to sale proceeds from Shiva
Corp. from $5,392 in 1994, to $614 in 1995, to $30,248 in 1996. Total
investment income increased 16% from $166,575 in 1994, to $177,536 in 1995, to
$206,491 as of December 31, 1996.
Total expenses decreased from $531,724 at 1994, to $436,478 at 1995, and
increased 45.5% to $635,180 in 1996. Contributing to the increase in expenses
were increases in wages and salaries of 10.8%, professional fees of 126%,
office expenses of 57.9%, building expenses of 17.4%, and investment expenses
of 4,178%. The expense increases are mainly attributable to increases in
wages, legal services, purchase of tangible personal property, building
maintenance to accommodate new tenant improvements, and broker fees from
investment purchases and sales.
As a result of increased investment income and expenses in 1996, net
investment loss increased 65.6% to $(428,689) in 1996, compared to $(258,942)
in 1995, and $(365,149) in 1994.
Net realized gain from sale of investments increased significantly in 1996
to $1,549,196 from $31,889 in 1995 and $192,577 in 1994, an increase of
$1,517,307. This increase is mainly attributable to the sale of Shiva Corp.
(fka Airsoft) which increased $1,846,098 in value during 1996. Dignity
Partners also contributed to the increase in sale of investments by $42,283 and
Optimax, Redwood Broadcasting and Tampa Bay increasing approximately $25,000
each. These increases were offset primarily by income tax expense of $118,000
that was not required in 1994 or 1995; Newport FirstFax by $133,333 and BMPI by
$114,924 which have been producing an unrealized loss for the Fund and provided
a realized tax advantage for 1996. Unrealized net depreciation of investments
decreased 143% since 1994, however increased 43.5% from 1995, many of the
Fund's open positions were purchased at the very end of 1996 and any
depreciation/appreciation of unrealized investments were for a short period of
time.
Other than the sale of the Fund's office building described above,
Management knows of no trends or uncertainties that will have any material
impact on the income or expenses of the Fund.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See Item 14(a) below for a list of the Financial Statements and Financial
Statement Schedules included in this report following the signature page. The
supplementary financial information required by Item 302 of Regulation S-K does
not apply to the Fund.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
The Company retained the accounting firm of GELFOND HOCHSTADT PANGBURN &
CO. to serve as the Company's principal accountant to audit the Company's
financial statements. This engagement was effective July 30, 1996. Prior to
its engagement as the Company's principal independent accountant, GELFOND
HOCHSTADT PANGBURN & CO. had not been consulted by the Company either with
respect to the application of accounting principles to a specified transaction,
either completed or proposed, or the type of audit opinion that might be
rendered on the Company's financial statements or on any matter which was the
subject of any prior disagreement between the Company and its previous
certifying accountant.<PAGE>
<PAGE>
THE ROCKIES FUND, INC.
YEARS ENDED DECEMBER 31, 1996 AND 1995
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
- ---------------------------------------------------------------------------
<S> <C>
Independent auditors' reports F-3 - F-4
Financial statements:
Statements of assets and liabilities F-5 - F-6
Schedules of investments F-7 - F-12
Statements of operations F-13
Statements of shareholders' equity F-14
Statements of cash flows F-15 - F-16
Statements of changes in net assets F-17
Notes to financial statements F-18 - F-26
</TABLE>
<PAGE>
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Shareholders and Directors
The Rockies Fund, Inc.
We have audited the accompanying statement of assets and liabilities of The
Rockies Fund, Inc. (the "Fund"), including the schedule of investments, as of
December 31, 1996, and the related statements of operations, shareholders'
equity, cash flows, and changes in net assets for the year then ended. These
financial statements and schedule are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these financial
statements and schedule based on our audit. The 1995 financial statements,
including the 1995 schedule of investments, were audited by other auditors,
whose report dated March 15, 1996, expressed an unqualified opinion on those
statements and schedule.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and schedule
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1996, by correspondence with the custodian and brokers or
verification by examination. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for our opinion.
In our opinion, the financial statements and schedule referred to above present
fairly, in all material respects, the financial position of The Rockies Fund,
Inc. as of December 31, 1996, and the results of its operations, its cash
flows, and the changes in its net assets for the year then ended in conformity
with generally accepted accounting principles.
GELFOND HOCHSTADT PANGBURN & CO.
Denver, Colorado
February 28, 1997, except for Note 7, as to which the date is April 1, 1997
<PAGE>
<PAGE>
INDEPENDENT AUDITORS' REPORT
----------------------------
THE SHAREHOLDERS AND DIRECTORS
THE ROCKIES FUND, INC.:
We have audited the accompanying statement of assets and liabilities and
schedule of investments of The Rockies Fund, Inc. as of December 31, 1995 and
the related statements of operations, stockholders' equity, cash flows, and
changes in net assets for the year then ended. These financial statements and
schedule are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements and
schedule based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
schedules are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements and schedules. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement and schedule presentation. We
believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements and schedule referred to above present
fairly, in all material respects, the financial position of The Rockies Fund,
Inc. as of December 31, 1995 and the results of its operations, its cash flows,
and changes in net assets for the year then ended in conformity with generally
accepted accounting principles.
KPMG PEAT MARWICK LLP
Denver, Colorado
March 15, 1996<PAGE>
<PAGE>
<TABLE>
THE ROCKIES FUND, INC.
STATEMENTS OF ASSETS AND LIABILITIES
DECEMBER 31, 1996 AND 1995
<CAPTION>
ASSETS 1996 1995
- ---------------------------------------------------------------------------
<S> <C> <C>
Investments, at value
(cost of $1,999,819, 1996 and
$1,323,357, 1995):
Restricted and
unrestricted securities $ 1,841,093 $ 1,394,199
Notes receivable 138,404 6,175
---------- ----------
1,979,497 1,400,374
Cash:
Held by related party (Note 6) 391,698 -
Held by others 107,706 1,193
Accrued interest receivable 12,789 2,130
Receivables from investees (Note 6) 23,072 61,518
Other assets 15,809 6,654
---------- ----------
Total current assets 2,530,571 1,471,869
---------- ----------
Property and equipment (Note 3):
Land 102,775 102,775
Building 633,496 558,959
Leasehold improvements 86,614 83,200
Furniture and fixtures 12,461 13,461
Equipment 1,484 1,484
---------- ----------
836,830 759,879
Less accumulated depreciation 72,309 44,961
---------- ----------
764,521 714,918
---------- ----------
Investment in long-term note
receivable, related party
(Cost of $175,000, Note 6) 175,000 -
---------- ----------
Total assets 3,470,092 2,186,787
---------- ----------
</TABLE>
<PAGE>
<PAGE>
<TABLE>
THE ROCKIES FUND, INC.
STATEMENTS OF ASSETS AND LIABILITIES (CONTINUED)
DECEMBER 31, 1996 AND 1995
<CAPTION>
LIABILITIES 1996 1995
- ---------------------------------------------------------------------------
<S> <C> <C>
Cash overdraft $ - $ 8,653
Payables:
Trade 23,152 55,994
Related parties (Note 6) 153,566 -
Investment securities purchased
(Note 6) 116,882 -
Accrued liabilities 82,408 39,697
Accrued income taxes (Note 2) 118,000 -
Accrued interest payable 7,428 19,588
Notes payable (Note 3):
Related parties 6,500 71,278
Mortgage note, current portion 43,087 39,785
Other 38,734 120,349
Borrowings under lines of credit (Note 3) 174,500 103,086
---------- ----------
Total current liabilities 764,257 458,430
Security deposits 7,254 6,462
Other liabilities (Note 3) 52,500 62,500
Mortgage note, less current portion
(Note 3) 315,349 351,831
---------- ----------
Total liabilities 1,139,360 879,223
Commitments and contingencies (Note 5) ---------- ----------
Net assets and shareholders' equity
(equivalent to $3.64 per share for
1996 and $2.04 per share for
1995) $ 2,330,732 $ 1,307,564
========== ==========
COMPONENTS OF NET ASSETS
- ------------------------
Common stock, $.01 par value.
Authorized 5,000,000 shares;
640,256 shares issued
and outstanding $ 6,403 $ 6,403
---------- ----------
Additional paid-in capital 2,901,243 2,901,243
---------- ----------
Accumulated deficit:
Accumulated net investment loss (1,893,303) (1,464,614)
Accumulated net realized
gains (losses) from sales and
permanent write-downs of
securities 1,336,711 (212,485)
Unrealized net (depreciation)
appreciation of investments (20,322) 77,017
---------- ----------
Total accumulated deficit (576,914) (1,600,082)
---------- ----------
Net assets $ 2,330,732 $ 1,307,564
========== ==========
/TABLE
<PAGE>
<PAGE>
<TABLE>
THE ROCKIES FUND, INC.
SCHEDULES OF INVESTMENTS
DECEMBER 31, 1996 AND 1995
<CAPTION>
INITIAL **COST AT VALUE AT VALUE AT
INVESTMENT DECEMBER 31, DECEMBER 31, DECEMBER 31,
COMPANY POSITION DATE 1996 1996 1995
- ------- --------------- ------------ -------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
RESTRICTED SECURITIES:
- ---------------------
Airsoft, Inc. 166,667 common stock Jun-1993 $ - $ - $ 130,000
83,333 common stock Sep-1993 - - 65,000
35,417 common stock Sep-1993 - - 27,625
83,333 common stock Oct-1993 - - 65,000
78,332 common stock Dec-1993 - - 61,099
----------- ----------- -----------
- - 348,724
American Educational
Products, Inc. * ***
200,000 common stock Sep-1996 200,000 187,500 -
200,000 warrants Sep-1996 - - -
----------- ----------- -----------
200,000 187,500 -
Bear Star, LLC* 5% partnership interest Nov-1994 - - 30,000
BMPI Liquidating Trust 166,680 common stock Mar-1985 - - 19,515
333,360 common stock Nov-1985 - - 38,906
----------- ----------- -----------
- - 58,421
Capital 2000, Inc. 20,000 common stock Feb-1993 - - 5,000
6,000 common stock Feb-1995 - - 1,500
24,000 common stock Apr-1995 - - 6,000
----------- ----------- -----------
- - 12,500
Colorado Venture
Management Equity
Fund I, Ltd. 5,000 units Mar-1984 - - 10,000
of limited partnership
COVA Technologies* 917 common stock Jul-1996 20,035 20,035 -
Global Casinos, Inc. * ***
3,800 common stock Nov-1993 76,000 16,150 10,640
4,331 common stock Jan-1994 50,068 18,407 12,127
1,724 common stock Jan-1994 19,932 7,327 4,827
1,250 common stock Feb-1994 25,000 5,312 3,500
75 common stock Mar-1994 - 319 210
500 common stock Oct-1994 10,000 2,125 1,400
5,000 common stock Feb-1996 17,208 21,250 -
1,000 common stock Mar-1996 3,125 4,250 -
1,050,000 warrants
(Effective 11/97 at
exercise prices of
$6.00-$8.00) Nov-1996 - - -
----------- ----------- -----------
201,333 75,140 32,704
/TABLE
<PAGE>
<PAGE>
<TABLE>
THE ROCKIES FUND, INC.
SCHEDULES OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1996 AND 1995
<CAPTION>
INITIAL **COST AT VALUE AT VALUE AT
INVESTMENT DECEMBER 31, DECEMBER 31, DECEMBER 31,
COMPANY POSITION DATE 1996 1996 1995
- ------- --------------- ------------ -------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
RESTRICTED SECURITIES (CONTINUED):
- ---------------------------------
Kinetiks.com* 10,000 common stock Sep-1996 $ 38,125 $ 6,250 $ -
11,000 common stock Oct-1996 24,312 6,875 -
20,000 common stock Nov-1996 12,188 12,500 -
62,500 common stock Dec-1996 44,834 39,063 -
----------- ----------- -----------
119,459 64,688 -
Newport Firstfax, Ltd. 3.55% limited May-1985 - - 20,000
partnership interest
Optimax
Industries, Inc.* 135,191 common stock Jun-1994 162,229 337,978 287,281
15,833 common stock Jun-1994 - - 33,645
11,500 common stock Jun-1994 - - 24,438
12,500 warrants Sep-1993 - 9,375 9,375
----------- ----------- -----------
162,229 347,353 354,739
Palo Verde Group Partnership interest Mar-1995 - - 7,000
Premier Concepts, Inc. 500 common stock Oct-1992 - - 313
62 common stock May-1993 - - 39
188 common stock May-1993 - - 117
112,500 common stock Mar-1994 - - 70,313
25,000 common stock Jun-1994 - - 15,625
60,000 common stock Oct-1994 - - 37,500
25,000 common stock Dec-1994 - - 15,625
8,500 common stock Sep-1995 - - 5,313
200,000 common stock Sep-1995 - - 125,000
5,000 common stock Jan-1996 - - -
10,000 common stock Feb-1996 - - -
----------- ----------- -----------
- - 269,845
Redwood
Broadcasing, Inc. 26,250 common stock Jul-1993 - - 39,375
14,072 common stock Jan-1995 - - 21,107
----------- ----------- -----------
- - 60,482
Southshore Corporation 7,400 common stock Mar-1994 11,770 3,700 3,816
5,000 common stock Mar-1994 - - 2,578
10,000 common stock Dec-1995 3,200 5,000 5,156
----------- ----------- -----------
14,970 8,700 11,550
/TABLE
<PAGE>
<PAGE>
<TABLE>
THE ROCKIES FUND, INC.
SCHEDULES OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1996 AND 1995
<CAPTION>
INITIAL **COST AT VALUE AT VALUE AT
INVESTMENT DECEMBER 31, DECEMBER 31, DECEMBER 31,
COMPANY POSITION DATE 1996 1996 1995
- ------- --------------- ------------ -------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
RESTRICTED SECURITIES (CONTINUED):
- ---------------------------------
Topro, Inc 2,500 common stock Sep-1996 $ - $ 6,250 $ -
2,500 common stock Nov-1996 - 6,250 -
2,500 common stock Dec-1996 - 6,250 -
- 18,750 -
___________ ___________ ___________
- 18,750 -
Usasurance Group 15,000 common stock Jul-1996 94,550 60,000 -
10,000 common stock Sep-1996 62,750 40,000 -
2,500 common stock Oct-1996 12,375 10,000 -
33,000 common stock Dec-1996 77,627 132,000 -
___________ ___________ ___________
247,302 242,000 -
___________ ___________ ___________
Total restricted securities 965,328 964,166 1,215,965
UNRESTRICTED SECURITIES:
- -----------------------
Alouette
Cosmetics, Inc. 2,500 common stock Nov-1996 8,125 7,500 -
Astea International 5,000 common stock Sep-1996 27,625 28,438 -
5,000 common stock Nov-1996 24,575 28,437 -
----------- ----------- -----------
52,200 56,875 -
Brassie Golf 35,000 common stock Aug-1996 20,297 8,750 -
20,000 common stock Sep-1996 8,800 5,000 -
85,000 common stock Oct-1996 25,780 21,250 -
75,000 common stock Dec-1996 23,700 18,750 -
----------- ----------- -----------
78,577 53,750 -
Cable and Company
Worldwide 5,000 common stock Sep-1996 15,313 4,063 -
15,000 common stock Oct-1996 20,156 12,187 -
5,000 common stock Nov-1996 6,390 4,063 -
53,000 common stock Dec-1996 53,826 43,062 -
----------- ----------- -----------
95,685 63,375 -
Cell Robotics
International, Inc. 20,000 common stock Oct-1996 50,938 40,000 -
15,000 common stock Nov-1996 29,531 30,000 -
----------- ----------- -----------
80,469 70,000 -
</TABLE>
<PAGE>
<PAGE>
<TABLE>
THE ROCKIES FUND, INC.
SCHEDULES OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1996 AND 1995
<CAPTION>
INITIAL **COST AT VALUE AT VALUE AT
INVESTMENT DECEMBER 31, DECEMBER 31, DECEMBER 31,
COMPANY POSITION DATE 1996 1996 1995
- ------- --------------- ------------ -------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
UNRESTRICTED SECURITIES (CONTINUED):
- -----------------------------------
Corfacts, Inc. 200,000 common stock Jul-1996 $ 12,500 $ 10,000 $ -
Creative Programming and
Technology Ventures 26,500 common stock Dec-1995 - - 19,875
7,500 common stock Dec-1995 - - 5,625
----------- ----------- -----------
- - 25,500
Discovery
Technologies, Inc. 3,750 common stock Mar-1992 - - 3,047
7,000 common stock Sep-1993 - - 5,688
6,000 common stock Sep-1993 - - 4,875
10,000 common stock Mar-1994 - - 8,125
1,500 common stock Apr-1994 - - 1,219
3,000 common stock Jun-1994 - - 2,438
10,000 common stock Dec-1995 - - 8,124
----------- ----------- -----------
- - 33,516
EMC 3,577 common stock Dec-1995 - - 54,996
Enhanced Services, Inc. 2,500 common stock Dec-1996 9,163 8,125 -
The Exploration Company 7,500 common stock Aug-1996 17,580 41,250 -
3,000 common stock Sep-1996 7,500 16,500 -
7,500 common stock Oct-1996 21,713 41,250 -
----------- ----------- -----------
46,793 99,000 -
Good Times
Restaurants, Inc. 12,500 warrants Mar-1994 - - 375
Healthwatch, Inc. 35,000 common stock Jun-1995 - - 17,500
34,400 common stock Oct-1996 91,981 68,800 -
45,000 common stock Dec-1996 89,297 90,000 -
115,000 warrants Jun-1995 - - 8,550
(expired in 1996) ----------- ----------- -----------
181,278 158,800 26,050
Image Matrix 10,000 units
Corporation (1com/1wrnt) Jun-1996 57,500 33,750 -
J T's Restaurants, Inc. 1,500 common stock Dec-1996 4,545 3,188 -
Laser Recording
Systems Inc. 100,000 common stock Jun-1995 5,050 2,000 2,000
/TABLE
<PAGE>
<PAGE>
<TABLE>
THE ROCKIES FUND, INC.
SCHEDULES OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1996 AND 1995
<CAPTION>
INITIAL **COST AT VALUE AT VALUE AT
INVESTMENT DECEMBER 31, DECEMBER 31, DECEMBER 31,
COMPANY POSITION DATE 1996 1996 1995
- ------- --------------- ------------ -------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
UNRESTRICTED SECURITIES (CONTINUED):
- -----------------------------------
Pacific Biometrics, Inc. 7,500 common stock Oct-1996 $ 36,252 $ 23,438 $ -
7,500 warrants Oct-1996 652 1,406 -
----------- ----------- -----------
36,904 24,844 -
Poore Brothers, Inc. 4,000 common stock Dec-1996 14,000 14,250 -
Progress Software, Inc. 1,000 common stock Dec-1996 20,030 19,750 -
Realty Refund Trust 2,000 common stock Dec-1995 - - 11,250
S2 Golf, Inc. 20,825 common stock Jul-1996 18,597 19,523 -
S&P 500 10 puts 12/20/97 550 Jul-1996 10,531 5,875 -
10 puts 12/20/97 550 Aug-1996 11,291 5,875 -
20 puts 12/20/97 550 Sep-1996 16,852 11,750 -
40 puts 12/20/97 600 Dec-1996 40,120 33,000 -
----------- ----------- -----------
78,794 56,500 -
Shiva Corporation 2,631 common stock Jun-1996 - 91,098 -
Shopsmith 10,000 common stock Sep-1996 23,750 25,000 -
10,000 common stock Oct-1996 23,750 25,000 -
----------- ----------- -----------
47,500 50,000 -
Tampa Bay Corporation 10,000 common stock Sep-1996 25,285 13,750 -
5,000 common stock Dec-1996 10,156 6,785 -
----------- ----------- -----------
35,441 20,535 -
TELS Corporation 20,000 common stock Aug-1996 12,813 9,376 -
10,000 common stock Sep-1996 5,937 4,688 -
----------- ----------- -----------
18,750 14,064 -
TVG Technologies, Ltd. 1,000 A warrants Aug-1993 - - 563
36,600 A warrants Oct-1993 - - 20,606
4,000 A warrants Mar-1994 - - 2,252
2,000 A warrants Jun-1994 - - 1,126
----------- ----------- -----------
- - 24,547
Total unrestricted securities 901,901 876,927 178,234
----------- ----------- -----------
/TABLE
<PAGE>
<PAGE>
<TABLE>
THE ROCKIES FUND, INC.
SCHEDULES OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1996 AND 1995
<CAPTION>
INITIAL **COST AT VALUE AT VALUE AT
INVESTMENT DECEMBER 31, DECEMBER 31, DECEMBER 31,
COMPANY POSITION DATE 1996 1996 1995
- ------- --------------- ------------ -------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
NOTES RECEIVABLE:
- ----------------
Columbine Home Sales, LLC*
Note receivable, 10% Dec-1995 $ - $ 5,814 $ 6,175
due on demand
Damach Note receivable, 12% Oct-1996 32,500 32,500 -
due on demand
Phil Georgeson Note receivable, 12%, Aug-1996 15,090 15,090 -
due on demand
collateralized by
equity securities
Global Casinos, Inc.*
Note receivable, 8% Nov-1996 175,000 175,000 -
due 11/1/98, convertible
into shares of Global
Casinos, Inc. common
stock at a conversion price
of $5.00 per share after 11/1/97
Navidec, Inc. Note receivable, 10% Oct-1996 25,000 25,000 -
converted into 6,072
shares of Navidec, Inc.
common stock and
6,072 warrants in 1997
NECO Land Resources, LLC*
Note receivable, 8% Aug-1996 10,000 10,000 -
due on demand
Topro, Inc. Note receivable, 12% Sep-1996 50,000 50,000 -
converted into 50,000
shares of Topro, Inc. ----------- ----------- -----------
common stock in 1997
Total notes receivable 307,590 313,404 6,175
----------- ----------- -----------
TOTAL INVESTMENTS $ 2,174,819 $ 2,154,497 $ 1,400,374
========== ========== ==========
</TABLE>
<PAGE>
- ----------
* These entities are considered to be affiliated companies as a result of
the Fund's investment and/or position on the entity's Board of Directors
at December 31, 1996. Securities may be subject to some resale
restrictions due to the company being an affiliate.
** 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 held by the
Company at December 31, 1996.
<PAGE>
<PAGE>
THE ROCKIES FUND, INC.
STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
1996 1995
-------- --------
<S> <C> <C>
Investment income:
Rental (Note 4) $ 170,434 $ 157,565
Consulting and other services 5,809 19,357
Interest and dividends (Note 6) 30,248 614
---------- ----------
206,491 177,536
---------- ----------
Expenses:
Wages and salaries 170,762 154,175
Professional fees 139,207 61,497
Custodian fees (Note 6) 9,109 8,900
Directors' fees 6,000 1,000
Interest 57,519 51,411
Travel and entertainment 15,365 9,940
Office 80,973 51,291
Building expenses 110,601 94,216
Investment expenses (Note 6) 43,679 1,021
Donations 1,965 3,027
---------- ----------
635,180 436,478
---------- ----------
Net investment loss $ (428,689) $ (258,942)
========== ==========
Realized and unrealized gain (loss)
from investments:
Net realized gain from investments $1,667,196 $ 31,889
Income tax expense (Note 2) (118,000) -
---------- ----------
1,549,196 31,889
---------- ----------
Net unrealized appreciation
(depreciation) of investments
Beginning of year 77,017 249,439
End of year (20,322) 77,017
---------- ----------
Net unrealized depreciation
of investments (97,339) (172,422)
---------- ----------
Net gain (loss) from investments $1,451,857 $ (140,533)
========== ==========
Net increase (decrease) in net assets
resulting from operations $1,023,168 $(399,475)
========== ==========
Per share amounts:
Net investment loss $(0.67) $(0.40)
Net realized gain from investments 2.42 0.05
Net unrealized deprecation
of investments (0.15) (0.27)
---------- ----------
$1.60 $(0.62)
==== ====
/TABLE
<PAGE>
<PAGE>
<TABLE>
THE ROCKIES FUND, INC.
STATEMENTS OF SHAREHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1996 AND 1995
<CAPTION>
ACCUMULATED DEFICIT
-------------------------
ACCUMULATED
NET REALIZED
GAINS FROM
ACCUMULATED SALES AND UNREALIZED NET
ADDITIONAL NET PERMANENT APPRECIATION
COMMON PAID-IN INVESTMENT WRITE-DOWNS (DEPRECIATION) NET
STOCK CAPITAL LOSS OF SECURITIES OF INVESTMENTS ASSETS
------- ------- --------- --------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
Balances at
January 1, 1995 $6,403 $2,901,243 $(1,205,672) $(244,374) $249,439 $1,707,039
Net investment loss (258,942) (258,942)
Net realized gain on
investments 31,889 31,889
Unrealized net depreciation
of investments (172,422) (172,422)
---------- ---------- ---------- ---------- ---------- ----------
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
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
========== ========== ========== ========== ========== ==========
/TABLE
<PAGE>
<PAGE>
<TABLE>
THE ROCKIES FUND, INC.
STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1996 AND 1995
<CAPTION>
1996 1995
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net investment loss $ (428,689) $ (258,942)
Net realized gain from investments 1,549,196 31,889
----------- -----------
1,120,507 (227,053)
Adjustments to reconcile net investment
loss and net realized gain from investments
to net cash used in operating activities:
Net realized gain from investments (1,667,196) -
Depreciation expense 27,348 23,689
Decrease (increase) in operating assets:
Accrued interest receivable (10,659) 1,577
Receivable from investees 38,446 (39,298)
Other assets (9,155) (1,723)
Increase (decrease) in operating liabilities:
Accounts payable 120,724 2,643
Investment securities purchased 116,882 -
Accrued and other liabilities 32,711 17,197
Accrued income taxes 118,000 -
Accrued interest payable (12,160) 4,960
Notes payable, related parties - 24,578
Security deposits and
other liabilities 792 (2,456)
----------- -----------
Net cash used in
operating activities (123,760) (195,886)
----------- -----------
Cash flows from investing activities:
Proceeds from sales of investments 4,567,702 830,177
Purchases of investments (3,855,325) (703,391)
Proceeds from sale of property and equipment 1,000 -
Purchases of property and equipment (3,414) (10,551)
----------- -----------
Net cash provided by
investing activities 709,963 116,235
----------- -----------
Cash flows from financing activities:
Proceeds from notes payable, other 24,608 24,405
Repayment of note payable, other (77,403) -
Increase (decrease) in cash overdraft (8,653) 8,653
Proceeds from notes payable, related parties - 15,000
Repayment of notes payable, related parties (64,778) (67,800)
Repayment of long-term debt (33,180) (36,736)
Proceeds from line of credit 71,414 100,241
----------- -----------
Net cash (used in) provided by
financing activities (87,992) 43,763
----------- -----------
</TABLE>
<PAGE>
<PAGE>
<TABLE>
THE ROCKIES FUND, INC.
STATEMENTS OF CASH FLOWS (CONTINUED)
YEARS ENDED DECEMBER 31, 1996 AND 1995
<CAPTION>
1996 1995
----------- -----------
<S> <C> <C>
Net increase (decrease) in cash
and cash equivalents 498,211 (35,888)
Cash at beginning of year 1,193 37,081
----------- -----------
Cash at end of year $ 499,404 $ 1,193
========== ==========
Supplemental disclosure of cash flows
information, cash paid for interest $ 69,671 $ 46,451
========== ==========
</TABLE>
Supplemental disclosures of noncash investing and financing activities:
During 1996, the Fund settled an $85,944 note payable, which entitled the
holder to convert the note to 50% equity in the Fund's building. To
cancel the note, the Fund gave the note holder 40,321 shares of
Redwood Broadcasting, Inc. common stock, 7,000 shares of Palo Verde
Group, Inc. common stock, and a $93,000 promissory note payable.
The transaction resulted in termination of the note holder's right
to convert the note into equity in the building. The resultant cost
to terminate the note holder's right of $74,537 was allocated to the
Fund's building. The Fund subsequently reduced the $93,000
promissory note by $35,876, in exchange for 20,500 shares of
Discovery Technologies, Inc. common stock.
During 1995, an $18,409 note receivable and accrued interest receivable
were converted to 14,072 shares of Redwood Broadcasting, Inc.
(formerly Intelligent Financial Corporation). In addition, 3,577
shares of EMC common stock were received as a distribution from
Colorado Venture Management Equity Fund I, Ltd.
During 1995, the Fund acquired $80,000 of leasehold improvements
previously purchased by a tenant in the Fund's building in exchange
for a non-interest bearing liability due to the tenant.
<PAGE>
<PAGE>
<TABLE>
THE ROCKIES FUND, INC.
STATEMENTS OF CHANGES IN NET ASSETS
YEARS ENDED DECEMBER 31, 1996 AND 1995
<CAPTION>
1996 1995
----------- -----------
<S> <C> <C>
Increase (decrease) in net assets
from investment activities:
Net investment loss $ (428,689) $ (258,942)
Net realized gain from investments
(net of income taxes of
$118,000 in 1996) 1,549,196 31,889
Net unrealized depreciation of
investments (97,339) (172,422)
----------- -----------
Net increase (decrease) in net assets from
investment activities 1,023,168 (399,475)
Net assets at beginning of year 1,307,564 1,707,039
----------- -----------
Net assets at end of year $ 2,330,732 $ 1,307,564
========== ==========
</TABLE>
<PAGE>
<PAGE>
THE ROCKIES FUND, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1996 AND 1995
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
ORGANIZATION:
The Rockies Fund, Inc. (the "Fund") was incorporated in Nevada on August
2, 1983 for the principal purpose of making venture capital
investments in developing companies throughout the United States.
The Fund is registered under the Investment Company Act of 1940, as
amended, as a business development company. In order to maintain
its status as a business development company, approximately seventy
percent of the Fund's assets must be comprised of venture capital
investments.
The Fund currently makes investments in small public and private
companies, some of which are in the early stages of development with
little or no operating history, or more developed companies that
operate at losses or which experience substantial fluctuations in
operating results. These companies may also need substantial
capital to support expansion or to achieve or maintain a competitive
position. Such companies may face intense competition and risks of
product and technological obsolescence or rapidly changing
regulatory environments which could adversely affect such companies'
operations. These companies may have insufficient cash flow to
service their debt obligations, including bridge loans made by the
Fund. As a result, no assurance can be provided that the fund's
investments will not result in substantial or complete losses. The
Fund's management serves on the boards of directors of a number of
its portfolio companies.
A significant portion of the Fund's investments consists of securities
that are subject to restrictions on sale. Restricted securities
cannot be sold publicly without prior agreement with the issuer to
register these securities under the Securities Act of 1933, as
amended (the "Act"), or by selling such securities under Rule 144 of
the Act, or other rules under the Act which permit only limited
sales under specified conditions. The Fund's ability to sell its
investments in restricted securities may be limited by, and subject
to, the lack or limited nature of a trading market for such
securities. These limitations could prevent or delay any sale of
the Fund's securities or reduce the amount of proceeds that might
otherwise be realized. Restricted securities generally sell at a
price lower than similar securities that are not subject to
restrictions on sale. When restricted securities are sold to the
public, the Fund, under certain circumstances, may be deemed an
"underwriter" or a "controlling person" for the purposes of the Act,
and be subject to liabilities as such under the Act.
As shown in the accompanying financial statements, the fund incurred net
investment losses in 1996 and 1995. The Fund may be required to
liquidate investments or obtain debt or equity financing to fund
operations in the future.
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 last sales price on the valuation date or, absent a last
sales price, 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 collectibility 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. The estimated fair value of
restricted securities at December 31, 1996 and 1995 total
approximately $964,000 and $1,216,000, respectively.
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.
USE OF ESTIMATES:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amount of assets and
liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of
revenues and expenses during the reporting periods. Actual results
could differ form those estimates.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS:
In 1996, the Fund adopted the provisions of Statement of Financial
Accounting Standards No. 121, ACCOUNTING FOR THE IMPAIRMENT OF LONG-
LIVED ASSETS AND LONG-LIVED ASSETS TO BE DISPOSED OF ("SFAS NO.
121"). SFAS No. 121 establishes recognition and measurement
standards for the impairment of long-lived assets expected to be
held and used and long-lived assets to be disposed of. Generally,
assets to be held and used in operations are considered impaired if
the sum of expected undiscounted future cash flows is less than the
assets' carrying values. If an impairment is indicated, the loss is
measured based on the amounts by which the assets' carrying values
exceed their fair values. Assets to be disposed of are reported at
the lower of their carrying values or fair values less estimated
selling costs. There was no material financial statement impact
from the adoption of SFAS No. 121, as prior to the adoption of SFAS
No. 121, the Fund assessed impairment based on the expected future
cash flows from operations of its long-lived assets.
FINANCIAL INSTRUMENTS:
The carrying values of the Fund's financial instruments (other than
investments), including cash, receivables, payables, accruals and
non-related party debt approximates fair values primarily due to the
short maturities of these instruments and based on borrowing rates
that management believes are currently available to the Fund for
instruments with similar terms. The fair values of the related
party debt are not practicable to estimate, due to the related party
nature of the underlying transactions.
PROPERTY AND EQUIPMENT:
Property and equipment is recorded at cost. Deprecation is provided over
the estimated useful lives of the assets using the straight-line
method as follows: furniture, fixtures, and equipment, 6 to 10
years; leasehold improvements, 6 to 8 years; building, 40 years.
ACCOUNTING FOR INCOME TAXES:
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and
their respective tax bases. Deferred tax assets and liabilities are
measured using enacted tax rates expected to apply to taxable income
in the years in which those temporary differences are expected to
reverse. The effect on deferred tax assets and liabilities of a
change in tax rates is recognized in the statement of operations in
the period that includes the enactment date.
PER SHARE AMOUNTS:
Per share amounts are computed using the weighted average number of
shares outstanding each year.
RECLASSIFICATIONS:
Certain 1995 amounts have been reclassified to conform to the 1996
presentation.
2. INCOME TAXES:
The provision for income taxes in 1996 consists of approximately $100,000
of federal and $18,000 of state taxes and primarily relates to the net
realized gain from sales of investments. The reconciliation between the
statutory federal tax rate and the effective tax rate as a percent is as
follows:
<TABLE>
<CAPTION>
1996 1995
---------------------------------
<S> <C> <C>
Statutory federal income tax rate 34.0% 34.0%
State taxes, net of
federal income tax benefit 3.2 3.2
Deferred tax benefit recognized (26.9) (37.2)
----- -----
10.3% -- %
===== =====
</TABLE>
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at
December 31, 1996 and 1995 are as follows:
<TABLE>
<CAPTION>
1996 1995
------ --------
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards $ - $248,140
Investments, primarily due to
differences in accounting for
unrealized net losses 9,575 -
Less valuation allowance (9,575) (218,104)
----------- ---------
- 30,036
Deferred tax liability:
Investments, primarily due to
differences in accounting for
unrealized net gains - 30,036
---------- ----------
$ - $ -
========== ==========
</TABLE>
3. DEBT:
NOTES PAYABLE, RELATED PARTIES:
<TABLE>
<CAPTION>
1996 1995
------ --------
<S> <C> <C>
Unsecured, 12% notes payable to parties
related to the Fund's president,
due on demand $ 6,500 $ 46,700
Non-interest bearing advances from the
Fund's president, paid in 1996 - 24,578
---------- ----------
$ 6,500 $ 71,278
========== ==========
</TABLE>
NOTES PAYABLE, OTHER:
<TABLE>
<S> <C> <C>
Short-term borrowings on margin
accounts, interest rate at 9.25% $ 24,609 $ 34,405
Unsecured, 8% note payable,
due March 31, 1997 14,125 -
Unsecured note payable, with interest
equal to 50% of the building's net
cash flows, as defined, settled
in 1996 - 85,944
---------- ----------
$ 38,734 $ 120,349
========== ==========
</TABLE>
LINES OF CREDIT:
<TABLE>
<CAPTION>
1996 1995
------ --------
<S> <C> <C>
Line of credit at 9.5%, due May 5, 1997,
subject to $20,000 compensating balance
and personal guarantee of the Fund's
president; collateralized by certain
Fund investments; $500 credit available
at December 31, 1996 $ 74,500 -
Line of credit at prime plus 2% (10.25% at
December 31, 1996), due June 28, 1997,
collateralized by the building; no
remaining credit available at
December 31, 1996 100,000 100,000
Other - 3,086
-------- --------
$174,500 $103,086
======== ========
</TABLE>
MORTGAGE NOTE PAYABLE:
The Fund has a mortgage note payable in monthly installments of $5,806,
including interest at 8%, due August 1, 2003, which is
collateralized by land and building. The mortgage loan agreement
includes certain covenants, which require the Fund to comply with
various administrative and reporting requirements.
Future principal payments under the mortgage for years after December 31,
1996 are as follows:
<TABLE>
<S> <C>
1997 $ 43,087
1998 46,665
1999 50,537
2000 54,369
2001 64,188
Thereafter 99,590
--------
358,436
Less current portion 43,087
--------
$315,349
========
</TABLE>
The weighted average interest rates on all debt for 1996 and 1995 were
8.86% and 8.55%, respectively. Interest expense incurred on related
party debt was $3,567 and $5,600 in 1996 and 1995, respectively.
OTHER:
During 1995, the Fund acquired leasehold improvements previously
purchased by a tenant in the Fund's building. In consideration for
the acquired leasehold improvements, the Fund has agreed to reduce
the tenant's future monthly rentals. The total amount was recorded
as a non-interest bearing liability due to the tenant, to be reduced
over the term of the lease. Amounts due for years after December
31, 1996, which are included in accrued liabilities and non-current
other liabilities in the accompanying financial statements, are as
follows:
<TABLE>
<S> <C>
1997 $10,000
1998 10,000
1999 10,000
2000 10,000
2001 10,000
Thereafter 12,500
--------
62,500
Less current portion 10,000
--------
$52,500
========
</TABLE>
4. RENTAL INCOME:
The Fund leases space in its building as lessor under various
noncancelable operating leases expiring through 2002. Minimum
future rental receipts under noncancelable operating leases are as
follows:
<TABLE>
<S> <C>
1997 $192,912
1998 150,077
1999 115,536
2000 91,177
2001 87,375
Thereafter 24,971
--------
$662,048
========
</TABLE>
5. COMMITMENTS AND CONTINGENCIES:
SECURITIES AND EXCHANGE COMMISSION INVESTIGATION:
During 1996 and 1995, the Fund received requests for information from the
United States 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.
EMPLOYEE BENEFITS:
The Fund maintains a salary-deferred, simplified employee pension plan.
Employer contributions are discretionary, and there were no employer
contributions in 1996 and 1995.
BUILDING MANAGEMENT AGREEMENT:
In October 1996, the Fund entered into an agreement with a former officer
of the Fund, whereby the former officer provides building management
and consulting services for $1,000 a month. The agreement may be
terminated with 30-day notification by either party. Building
management expense for 1996 was $2,000.
6. TRANSACTIONS WITH INVESTEES AND AFFILIATES:
Receivables from investees represent reimbursable expenses totaling
$23,072 and $61,518 at December 1996 and 1995, respectively.
At December 31, 1996, the Fund has a $175,000, 8% note receivable from a
related party, which is due November 1998, and is convertible into
shares of the affiliate's common stock after November 1, 1997.
During 1996, the Fund also entered into a 12%, $250,000 revolving
loan agreement with this affiliate. Loans of $170,000 were made to
this affiliate during the year and were repaid by December 31, 1996.
Interest income on the note and line of credit was $9,235 in 1996.
The revolving loan agreement was terminated in December 1996.
The Fund utilizes the services of a brokerage company which is a
significant shareholder of the Fund. In 1996 and 1995, the Fund
incurred $43,679 and $871 in commissions and other expenses. At
December 31, 1996, $391,698 of the Fund's cash was held with this
affiliate under a verbal arrangement to maintain a cash balance of
$350,000 with the affiliate.
The Fund utilizes a trust company as primary custodian of its securities.
This company is an affiliate, through its relationship with the
brokerage company. Custodial fees incurred in 1996 and 1995 were
$9,109 and $8,900, respectively, and at December 31, 1996, the Fund
has a payable due to this affiliate, for investment securities
purchased, of approximately $153,566.
7. SUBSEQUENT EVENT:
Effective March 31, 1997, the Fund sold its building for $1,080,000, and
paid approximately $452,000 of mortgage and other debt. This
transaction resulted in a net gain of approximately $390,000. On
April 1, 1997, the Fund purchased five acres of undeveloped
commercial property located in Colorado Springs, Colorado for
$390,000. These real estate transactions were structured to qualify
as a tax-free exchange, pursuant to applicable Internal Revenue Code
sections. The Fund intends to build and develop a commercial office
building on the property in 1997, and the Fund intends to occupy the
existing building on a month-to-month basis until the new building
has been completed, for rent of $900 per month.<PAGE>
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The present term of office of each director will expire at the next
annual meeting of shareholders. The name, position with the Fund, and age of
each director and officer are as follows:
<TABLE>
<CAPTION>
Officer/
Director
Name Age Title Since
- ----------------------------------------------------------------------------
<S> <C> <C> <C>
Stephen G. Calandrella 36 President, Chief Executive Officer,
and Director 1991
Charles C. Powell 43 Director 1991
Clifford C. Thygesen 62 Director 1991
Barbara A. Hamstad 32 Chief Accounting Officer and
Treasurer 1996
Windy D. Haddad 25 Chief Administrative Officer and 1996
Secretary
- --------------------------------
</TABLE>
Stephen G. Calandrella, President and Director.
----------------------
Mr. Calandrella has been President and a Director of The Rockies Fund,
Inc. since February, 1991, and Chief Executive Officer since January 30, 1994.
Mr. Calandrella has previously served as a Director of Kelly Motors, Ltd.,
Good Times Restaurants, Inc., Southshore Corp., and Cogenco International,
Inc. Mr. Calandrella also served as a Director for Combined Penny Stock Fund,
Inc. and Redwood MicroCap Fund, Inc., both of which are closed-end investment
companies registered under the Investment Fund Act of 1940. Mr. Calandrella
currently serves as Interim President and a member of the Board of Directors
of Global Casinos, Inc., a publicly-held company engaged in the ownership and
operation of domestic and international casinos and limited stakes gaming
properties; and as a Director of Optimax Industries, Inc., a NASDAQ listed
holding company; American Educational Products, a NASDAQ listed supplier of
childrens learning tools; and Guardian Technologies, a NASDAQ listed maker of
bullet proof vests. Mr. Calandrella has also engaged in financing and
consulting activities for development stage companies, which consist of
advising public and private companies on capital formation methods, enhancing
shareholder valuations, mergers, acquisitions and corporate restructurings, as
well as arranging for bridge loans and equity purchases.
Charles M. Powell, Director.
-----------------
Mr. Powell is currently President and Director of Antalys Corporation, a
wholly owned subsidiary of Baan Company. From 1992 to 1996, Mr. Powell was
Vice-President of Finance for KaPre Software. From March 1992 to June 1993,
Mr. Powell was CEO of Generation 5 Technologies, Inc. From January 1989 to
March 1992, he was Director of International Operations at J.D. Edwards &
Company, a software company that develops and distributes general business
application financial software. From September to December, 1988, Mr. Powell
was employed by the company to provide assistance in financial and operation
areas. From April 1988 to June 1989, Mr. Powell was President of Sheridan
Securities, Inc., an investment banking firm. From January 1987 to March 1988
he was international sales manager for Columbine Systems, a software
development Fund for the broadcast industry. From January 1985 to December
1986, he was employed by Aweida Systems engaged in the business of
distributing company products, first as Chief Financial Officer and
subsequently as Vice President of Marketing. From February 1979 to December
1985, he was employed by Storage Technology, Inc., engaged in the business of
manufacturing computer storage devices in a variety of capacities, with his
last position being that of Vice President of Financial Marketing. Mr. Powell
graduated from the University of Colorado with a Bachelor of Science degree in
accounting and finance in 1976 and he received his license as a Certified
Public Accountant in 1976. Mr. Powell currently serves as a Director for The
Rockies Fund, Kinetics.com, and International Nursing.
Clifford C. Thygesen, Director.
--------------------
Mr. Thygesen has been a director of the Fund since February, 1991. Mr.
Thygesen has also been a Director of American Educational Products, Inc. since
1986, and President since January, 1996. American Education Products is a
publicly traded company involved in the manufacture and distribution of
educational products, with principal offices in Boulder, Colorado. Mr.
Thygesen is also a current Director of Wall Street Racing Stables, a publicly-
traded company involved in the ownership, racing and breeding of thoroughbred
horses. Mr. Thygesen is also a partner in two land development firms located
on Colorado Springs and Fleming, Colorado and a Board of Director for
Unasurance Group. From 1971 to 1973, Mr. Thygesen was Vice-President of
Operations for the Ithaca Gun Company of Ithaca, New York, a manufacturer of
high quality firearms. From 1973 to 1976, Mr. Thygesen served as President of
Alpine Designs Corporation, a company which produces backpacking equipment,
ski wear and hunting apparel. From 1977 to 1981, he served as Vice-President
of Manufacturing for Pure Cycle Corporation, a company that designed water
recycling systems for residential use. From 1981 until February, 1988, Mr.
Thygesen was President, Chief Operating Officer and a Director of Tri Coast
Environmental Corporation, formerly Colorado Venture Capital Corporation. He
received his B.S. degree in Industrial Administration from the University of
Illinois in 1961.
Barbara A. Hamstad,
------------------
Mrs. Hamstad has served as Internal Accountant for The Rockies Fund, Inc.
since September of 1993 and as Chief Accounting Officer and Treasurer since
September, 1996. Mrs. Hamstad also serves as Secretary and Director for Marco
Foods, Inc., a small public shell actively trading in the stock market. Prior
to Mrs. Hamstad's accounting positions she worked as a Vendor Cost Analyst for
Raytheon in Santa Barbara, California. From January, 1989, through June,
1992, she analyzed vendor cost proposals for subcontracted components,
conducted on-site evaluations of subcontractors, and developed price
recommendations based on detailed analyses of cost structure. From June 1987
through August 1988, she worked as a Financial Assistant at IDS Financial
Services in San Luis Opisbo, California. Mrs. Hamstad graduated from
California Polytechnic State University, San Luis Obispo, CA, with a
bachelor's degree in Business Administration, concentrating in Financial
Management.
Windy D. Haddad,
---------------
has worked for The Rockies Fund, Inc. since August 9, 1993 and has served
as Chief Administrative Officer since October 1, 1995 and as Corporate
Secretary since September 1, 1996. Ms. Haddad also serves as Vice President,
Secretary and Director of Land Resources Corporation, a real estate
development Fund with operations in Flemming, Colorado. Ms. Haddad graduated
from Colorado College in 1993, earning her Bachelor of Arts Degree in
Economics.
There are no material proceedings to which any director, officer or
affiliate of the Fund, or any owner of record or beneficially of more than
five percent (5%) of any class of voting securities of the Fund, or any
associate of any such director, officer, affiliate of the Fund, or security
holder is a party adverse to the Fund or any of its subsidiaries or has a
material interest adverse to the Fund or any of its subsidiaries.
During the last five (5) years except as set forth herein no director or
officer of the Fund has:
(1) had any bankruptcy petition filed by or against any business of
which such person was a general partner or executive officer either at the
time of the bankruptcy or within two years prior to that time;
(2) been convicted in a criminal proceeding or subject to a pending
criminal proceeding;
(3) been subject to any order, judgment, or decree, not subsequently
reversed, suspended or vacated, of any court of competent jurisdiction,
permanently or temporarily enjoining, barring, suspending or otherwise
limiting his involvement in any type of business, securities or banking
activities; or
(4) been found by a court of competent jurisdiction in a civil action,
the Commission or the Commodity Futures Trading Commission to have violated a
federal or state securities or commodities law, and the judgment has not been
reversed, suspended, or vacated.
Mr. Calandrella serves as Interim President of Global Casinos, Inc., a
portfolio and affiliated company. During 1995, Global Casinos, Inc. caused
one of its wholly-owned subsidiaries, Casinos USA, Inc. to file a voluntary
petition for reorganization under Chapter 11 of the United States Bankruptcy
Code. In December 1996, the United States Bankruptcy Court for the District
of Colorado entered an order confirming a plan of the organization for Casinos
USA, Inc.
There currently exists no arrangement or understanding between any
executive officer and between any other person pursuant to which any person is
to be selected as an executive officer. No family relationships exist between
any current or prospective executive officer or director.
Each director of the Fund who is not also an officer is paid the sum of
$1,000 for each director's meeting attended by such director. All directors
are reimbursed for expenses associated with attendance at Board of Directors
meetings of the Fund. Other than the foregoing, no director receives any
additional compensation or remuneration as a member of the Fund's Board of
Directors.
Each Director is elected to serve a term of one (1) year and is elected
annually at the regular annual meeting of the Fund's stockholders. Each
executive officer is elected annually at the first meeting of the Fund's Board
of Directors held immediately following each annual meeting of shareholders.
Each executive officer holds office until his successor is duly elected and
qualified or until his resignation or until he has been removed in the manner
provided by Fund's By-laws.
No Director has resigned or declined to stand for reelection to the Board
of Directors since the date of the last annual meeting of the Fund's
stockholders due to any disagreement with the Fund on any matter relating to
the Fund's operations, policies or practices.
During the fiscal year ended December 31, 1996, the Fund had four (4)
directors meetings which were attended in person by all of the Fund's
directors. The Fund does not have a standing audit, nominating or
compensation committee of the Board of Directors, or committees performing
similar functions.
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Under the Securities Laws of the United States, the Fund's Directors, its
Executive (and certain other) officers, and any persons holding more than ten
percent (10%) of the Fund's common stock are required to report their
ownership of the Fund's common stock and any changes in that ownership to the
Securities and Exchange Commission and the NASDAQ stock market. Specific due
dates for these reports have been established and the Fund is required to
report in this Report any failure to file. Based upon information provided to
the Company, all of these filing requirements were satisfied by its Officers
and Directors and ten percent holders as of December 31, 1996.
ITEM 11. EXECUTIVE COMPENSATION
The following tables and discussion set forth information with respect to
all plan and non-plan compensation awarded to, earned by or paid to the Chief
Executive Officer ("CEO"), and the Fund's three (3) most highly compensated
executive officers other than the CEO, for all services rendered in all
capacities to the Fund and its subsidiaries for each of the Fund's last three
(3) completed fiscal years; provided, however, that no disclosure has been
made for any executive officer, other than the CEO, whose total annual salary
and bonus does not exceed $100,000.
<PAGE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
SUMMARY COMPENSATION TABLE
- ---------------------------------------------------------------------------------------------------------
Long Term Compensation
Annual Compensation Awards Payouts
--------------------------------- ---------------------------------
Other
Name Annual Restricted
and Compen- Stock LTIP All Other
Principal Salary Bonus sation Award(s) Option/ Payouts Compensa-
Position Year ($) ($) ($) ($) SARs(#) ($) tion ($)
- ---------- ----- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1996 $48,000 -0- -0- $-0- -0- -0- -0-
Stephen G.
Calandrella, 1995 $48,000 -0- -0- $-0- -0- -0- -0-
President
1994 $48,000 -0- -0- $-0- -0- -0- -0-
</TABLE>
<PAGE>
No other executive officer of the Fund received compensation during the
years ended December 31, 1996, 1995 or 1994, in excess of $100,000.
All officers and employees of the Fund are eligible to participate in the
Fund's group health and dental insurance plan. The Fund also provides a
Salary Deferred Simplified Employee Pension Plan (SAR-SEP) adopted since
September, 1994. There has been no employer contribution made to the Plan
since inception, nor does the Fund incur any administrative fees associated
with this Plan. The Fund currently has one (3 year) employment agreement
written to an executive officer, Ms. Windy D. Haddad, effective October 1,
1995. In 1996, the Fund issued two cash bonuses to its employees, Mrs.
Barbara Hamstad and Ms. Windy Haddad.
Mr. John R. Overturf, Jr. resigned as Vice President of The Rockies Fund
Inc, effective August 28, 1996 and he signed a Consultant Agreement with The
Rockies Fund, Inc., effective October 1, 1996, as a consultant for the Fund's
Office Building located at 4465 Northpark Drive at $1,000 per month and
subject to a 30 day cancellation by either party in writing. Mr. Craig T.
Rogers resigned as Chief Operating Officer and Secretary, effective October
1, 1996.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
The following table sets forth as of December 31, 1996, the number of
shares of the Fund's common stock owned by each person who owned of record, or
was known to own beneficially, more than five percent (5%) of the Fund's
outstanding shares of common stock, sets forth the number of shares of the
Fund's outstanding common stock beneficially owned by each of the Fund's
current directors and officers and sets forth the number of shares of the
Fund's common stock beneficially owned by all of the Fund's current directors
and officers as a group:
<TABLE>
<CAPTION>
Title of Name and Address Amount and Nature Percent
Class of Beneficial Owner of Beneficial Ownership(1) of Class
- ------ ------------------ --------------------------- --------
<S> <C> <C> <C>
Common D.A Davidson & Co.(2) 226,772 35.4%
Stock 8 Third Street, North
Great Falls, Montana 59401
" Stephen G. Calandrella(3) 233,000 36.4%
" Charles C. Powell -0- 0.0%
" Clifford C. Thygesen 2,000 0.3%
" Barbara A. Hamstad 1,500 0.2%
" Windy D. Haddad 1,500 0.2%
" All Officers and
Directors as a
Group (5 Persons) 238,000 37.1%
------------------------------
</TABLE>
1. Beneficial Owners listed have sole voting and investment power with
respect to the shares unless otherwise indicated.
2. Voting and investment power with respect to securities held by D.A.
Davidson & Company is exercised by its Board of Directors.
3. Includes 12,500 shares of common stock held by Aztec Capital Corp. of
which Mr. Calandrella is officer, director and majority shareholder.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Notes payable to related parties at December 31, 1996 include $6,500
payable to a related party of the Fund's President, which note is unsecured,
carries interest at the rate of twelve percent (12%) per annum, and is due
upon demand.
The Fund currently holds a 5% ownership interest in Bear Star, LLC.,
formerly a wholly owned subsidiary of Columbine Home Sales, LLC., and
therefore Bear Star, LLC. would be considered to be an affiliated company as a
result of the Fund's ownership during 1996.
As a result of the Fund's investment during 1996 and/or position on the
entity's Board of Directors, the Fund would, at various times during fiscal
1996, be considered to have been an affiliate of Global Casinos, Inc., Optimax
Industries, Inc., Southshore Corporation, Cova Technologies, Kinetiks.com and
Neco Land Resources.
On October 1, 1995, Mr. Calandrella, the Fund's President and Director,
was elected to serve as Interim President of Global Casinos, Inc., a portfolio
company and affiliate of the Fund. In consideration of his services as
Interim President of Global Casinos, Inc., Mr. Calandrella received 9,000
shares in 1996 and has also been granted Incentive Stock Options under the
Global Casinos, Inc. Stock Incentive Plan, exercisable to purchase, in the
aggregate, 15,000 shares of common stock at an exercise price of $5.00 per
share. Of those Incentive Stock Options, 5,000 are fully vested, and the
remaining 10,000 Incentive Stock Options vest ratably over two (2) years,
subject to Mr. Calandrella's continuing to serve as an executive officer or
key employee of Global Casinos, Inc. As of March 15, 1997, Mr. Calandrella
has continued to serve as Interim President of Global Casinos.
Mr. Calandrella also serves as a member of the Board of Directors of
Global Casinos, Inc. In consideration of his services as a director of Global
Casinos, Inc., Mr. Calandrella has been granted Non-Qualified Stock Options
exercisable to purchase, in the aggregate, an additional 15,000 shares of
common stock at an exercise price of $5.00 per share, of which 5,000 Non-
Qualified Stock Options are fully vested, and the remaining 10,000 Non-
Qualified Stock Options vest ratably over two (2) years, subject to Mr.
Calandrella's continuing to serve as a director of that Fund.
There exists no arrangement or agreement whereby the Fund has any direct
or indirect beneficial interest or pecuniary interest in any of the securities
or other compensation issued to Mr. Calandrella in consideration of his
services as an executive officer or director of Global Casinos, Inc.<PAGE>
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS AND REPORTS ON FORM 8-K
EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND REPORTS ON FORM 8-K.
- -----------------------------------------------------------------
a. 1. FINANCIAL STATEMENTS.
--------------------
Independent Auditors' Reports;
Statements of Assets and Liabilities - December 31, 1996 and
1995;
Schedules of Investments - December 31, 1996 and 1995;
Statements of Operations - Years Ended December 31, 1996 and
1995;
Statements of Stockholders' Equity - Years Ended December 31,
1996 and 1995;
Statements of Cash Flows - Years Ended December 31, 1996 and
1995;
Statements of Changes in Net Assets - Years Ended December 31,
1996 and 1995;
Notes to Financial Statements - December 31, 1996 and 1995
2. FINANCIAL STATEMENT SCHEDULES.
-----------------------------
All schedules for which provision is made in the applicable
accounting regulations of Article 12 of Regulation S-X of the Securities and
Exchange commission have been omitted because either (i) such schedules are
not required under the related instructions, (ii) the required information is
not present or is not in amounts sufficient to require submission of the
schedule, or (iii) the information required is included in the Financial
Statements and Notes thereto.
b. CURRENT REPORTS ON FORM 8-K.
----------------------------
No current reports on Form 8-K were filed during the quarter ended
December 31, 1996.
c. EXHIBITS.
---------
The following Exhibits are filed pursuant to Item 601 of Regulation
S-K:
<TABLE>
<CAPTION>
Exhibit No. Title
- ---------- --------------------------------------------------------------
<S> <C>
3 Articles of Incorporation incorporated by reference to
Registration Statement on Form N-2, No. 2-86057.
3(a) Certificate of Amendment to Articles of Incorporation dated June
2, 1988, incorporated by reference to Form 10-K for the fiscal
year ended December 31, 1988.
3(b) Bylaws, as amended March 16, 1988, incorporated by reference to
Form 10-K for the fiscal year ended December 31, 1987.
10(a) Investment Advisory Agreement dated August 23, 1983, between
Registrant and Galbreath Financial Services Corporation
incorporated by reference to Registration Statement on Form N-2,
No. 2-86057.
10(b) Management Agreement dated August 23, 1983, between Registrant
and Galbreath Financial Services corporation incorporated by
reference to Registration Statement on Form N-2, No. 2-86057.
10(c) Agreement Concerning the Change in Management incorporated by
reference to Exhibit A
---------
to the Fund's Notification Pursuant to Rule 14f-1.
10(d) Subscription Agreement incorporated by reference to Exhibit A
---------
to the Fund's Notification Pursuant to Rule 14f-1.
</TABLE>
<PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this annual report to be signed on
its behalf by the undersigned, thereunto duly authorized.
ROCKIES FUND, INC.
Date: 4/11/97 By: /s/Stephen G. Calendrella,President
--------------------- -----------------------------------
Stephen G. Calandrella, President
Pursuant to the requirements of the Securities Exchange Act of 1934,
this Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Signature Position Date
- --------- -------- ----
/s/ Stephen G. Calendrella President, Director 4/11/97
- -------------------------- Chief Executive Officer -------
Stephen G. Calendrella
/s/ Charles M. Powell Director 4/11/97
- -------------------------- -------
Charles M. Powell
/s/ Clifford C. Thygesen Director 4/11/97
- -------------------------- -------
Clifford C. Thygesen
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
SHEETS FOUND ON PAGES F-5 AND F-6 AND STATEMENT OF OPERATIONS FOUND ON PAGE F-13
OF THE COMPANY'S FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1996 AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 1,999,819
<INVESTMENTS-AT-VALUE> 1,979,497
<RECEIVABLES> 210,861
<ASSETS-OTHER> 15,809
<OTHER-ITEMS-ASSETS> 1,263,925
<TOTAL-ASSETS> 3,470,092
<PAYABLE-FOR-SECURITIES> 293,600
<SENIOR-LONG-TERM-DEBT> 315,349
<OTHER-ITEMS-LIABILITIES> 530,411
<TOTAL-LIABILITIES> 1,139,360
<SENIOR-EQUITY> 2,330,732
<PAID-IN-CAPITAL-COMMON> 2,901,243
<SHARES-COMMON-STOCK> 640,256
<SHARES-COMMON-PRIOR> 640,256
<ACCUMULATED-NII-CURRENT> (1,893,303)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 1,336,711
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (20,322)
<NET-ASSETS> 2,330,732
<DIVIDEND-INCOME> 19
<INTEREST-INCOME> 30,229
<OTHER-INCOME> 5,809
<EXPENSES-NET> 635,180
<NET-INVESTMENT-INCOME> (428,689)
<REALIZED-GAINS-CURRENT> 1,549,196
<APPREC-INCREASE-CURRENT> (97,339)
<NET-CHANGE-FROM-OPS> 1,023,168
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 1,283,305
<ACCUMULATED-NII-PRIOR> (1,464,614)
<ACCUMULATED-GAINS-PRIOR> (212,485)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 57,519
<GROSS-EXPENSE> 635,180
<AVERAGE-NET-ASSETS> 1,819,148
<PER-SHARE-NAV-BEGIN> 2.04
<PER-SHARE-NII> (.67)
<PER-SHARE-GAIN-APPREC> 2.27
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 3.64
<EXPENSE-RATIO> .41
<AVG-DEBT-OUTSTANDING> 1,009,292
<AVG-DEBT-PER-SHARE> 1.57
</TABLE>
