<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[ X ] QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended September 30, 1997
OR
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from _______________ to _______________
Commission file number 0-12444
THE ROCKIES FUND, INC.
------------------------------------------------------
(Exact Name of Registrant as Specified in its Charter)
Nevada 84-0928022
- ------------------------------- -----------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4465 Northpark Drive, Colorado Springs, Colorado 80907
- ------------------------------------------------ -------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (719) 590-4900
-------------------
N/A
- --------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [ X ] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS:
As of September 30, 1997, the Company had 640,256 shares of its $.01 par value
common stock outstanding.
<PAGE>
<PAGE>
INDEX
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Statement of Assets and Liabilities at September 30, 1997
(unaudited) and December 31, 1996 (audited)
Schedule of Investments and Restricted Securities (unaudited)
Statement of Operations for the Three Months Ended September 30,
1997 and September 30, 1996 (unaudited)
Statement of Operations for the Nine Months Ended September 30,
1997 and September 30, 1996 (unaudited)
Statements of Stockholders' Equity for the Nine Months Ended
September 30, 1997 (unaudited), and Years Ended December 31,
1996 and 1995 (audited)
Statement of Changes in Net Assets as of September 30, 1997 and
September 30, 1996 (unaudited)
Notes to Unaudited Financial Statements
Item 2. Management's Discussion and Analysis of Financial Conditions and
Results of Operations
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Item 2. Changes in Securities
Item 3. Defaults Upon Senior Securities
Item 4. Submission of Matters to a Vote of Security Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
<PAGE>
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
- ------- --------------------
The interim unaudited financial statements have been prepared by The
Rockies Fund, Inc. (the "Fund" or the "Company") and, in the opinion of
management, reflect all material adjustments which are necessary to a fair
statement of results of the interim periods presented. Such adjustments
consist only of normal recurring items. Certain information and footnote
disclosure made in the last annual report on Form 10-K have been condensed or
omitted for the interim statements. These statements should be read in
conjunction with the financial statements and notes thereto included in Form
10-K for the year ended December 31, 1996. The results of the interim periods
are not necessarily indicative of results which may be expected for any other
interim period or for the full years.
FORWARD LOOKING STATEMENTS
- --------------------------
In addition to historical information this Quarterly Report contains
"forward-looking" statements within the meaning of the Private Securities
Litigation Reform Act of 1995, and are thus prospective. The forward looking
statements contained herein are subject to certain risks and uncertainties that
could cause the 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 factors discussed in the Section entitled "Management's
Discussion and Analysis of Financial Condition and Results of Operations," and
other factors, some of which will be outside the control of the Company.
Readers are cautioned not to place undue reliance on those forward-looking
statements which reflect management's analysis only as of the date hereof. The
Company undertakes no obligation to publicly revise these forward-looking
statements to reflect events or circumstances that arise after the date hereof.
Readers should refer to and carefully review the information in future
documents the Company files with the Securities and Exchange Commission.
<PAGE>
<PAGE>
<TABLE>
THE ROCKIES FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 30, 1997 AND DECEMBER 31, 1996
<CAPTION>
September 30, December 31,
1997 1996
(unaudited) (audited)
----------- ------------
<S> <C> <C>
ASSETS
- ------
Investments at value
(See accompanying schedule):
Restricted and unrestricted
securities $ 2,087,008 $ 1,841,093
Notes receivable 334,822 138,404
----------- -----------
2,421,830 1,979,497
Cash:
Held by related party 0 391,698
Held by others 1,820 107,706
Accrued interest receivable 38,161 12,789
Receivables from investees 112 23,072
Other assets 584 15,809
----------- -----------
Total Current Assets 2,462,507 2,530,571
----------- -----------
Property & Equipment:
Land 685,000 102,775
Land Development 129,242 0
Building 305,000 633,496
Leasehold improvements 0 86,614
Equipment 0 1,484
Furniture and fixtures 8,739 12,461
Automobile 15,162 0
----------- -----------
1,143,143 836,830
Less Accumulated Depreciation (4,929) (72,309)
----------- -----------
Total Property and Equipment 1,138,214 764,521
----------- -----------
Investment in long term note
receivable related party 175,000 175,000
Investment in affiliate 200,000 0
----------- -----------
375,000 175,000
TOTAL ASSETS 3,975,721 3,470,092
=========== ===========
</TABLE>
<PAGE>
<PAGE>
<TABLE>
THE ROCKIES FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 30, 1997 AND DECEMBER 31, 1996
(Continued)
<CAPTION>
September 30, December 31,
1997 1996
(unaudited) (audited)
------------- -------------
<S> <C> <C>
LIABILITIES
- -----------
Payables:
Trade $ 107,395 $ 23,152
Related parties 0 153,566
Investment securities purchased 0 116,882
Accrued liabilities 51,957 82,408
Accrued income taxes 105,755 118,000
Accrued interest payable 5,323 7,428
Notes payable
Hotel Investment 150,000 0
Related parties 56,980 6,500
Mortgage note, current portion 30,000 43,087
Long term notes, current portion 21,450 0
Other 112,480 38,734
Borrowings under lines of credit 74,500 174,500
----------- -----------
Total Current Liabilities: 715,840 764,257
Security deposits 0 7,254
Other liabilities 0 52,500
Mortgage note, less current portion 470,000 315,349
Long term notes, less current portion 278,709 0
----------- -----------
Total Liabilities 1,464,549 1,139,360
NET ASSETS and STOCKHOLDERS' EQUITY $ 2,511,172 $ 2,330,732
- ----------------------------------- ============ ============
(Equivalent to $3.92 per share at
September 30, 1997 and $3.64 per
share at Dec. 31, 1996)
COMPONENTS OF NET ASSETS
- ------------------------
Common Stock, $.01 par value,
Authorized 5,000,000 shares;
640,256 issued and outstanding $ 6,403 $ 6,403
----------- -----------
Additional paid-in capital 2,901,243 2,901,243
----------- -----------
Accumulated (deficit):
Accumulated net investment loss (2,153,502) (1,893,303)
Accumulated net realized gain from 1,829,519 1,336,711
sales and permanent write-downs
of securities
Unrealized net depreciation of
investments (72,491) (20,322)
----------- -----------
Total accumulated deficit (396,474) (576,914)
----------- -----------
NET ASSETS $ 2,511,172 $ 2,330,732
============ ============
</TABLE>
<PAGE>
<PAGE>
<TABLE>
THE ROCKIES FUND, INC.
Schedules of Investments
September 30, 1997 and December 31, 1996
<CAPTION>
Initial **Cost at
investment September 30,
Company Position date 1997
- ---------------------- ------------------- ---------- -----------
<S> <C> <C> <C>
RESTRICTED SECURITIES:
- ----------------------
American Educational
Products, Inc.* *** 40,000 common stock Sep-96 200,000.00
40,000 warrants @$4.50 Sep-96 0.00
40,000 warrants @$10.00 Jun-97 0.00
-------------
200,000.00
Bear Star, LLC* 5% partnership interest Nov-94 0.00
COVA Technologies* 917 common stock Jul-96 20,035.00
Global Casinos, Inc.* 3,800 common stock Nov-93 76,000.00
4,331 common stock Jan-94 50,068.21
1,724 common stock Jan-94 19,931.79
1,250 common stock Feb-94 25,000.00
75 common stock Mar-94 0.00
500 common stock Oct-9 410,000.00
5,000 common stock Feb-96 17,207.50
1,000 common stock Mar-96 3,125.00
105,000 warrants Nov-96 0.00
-------------
201,332.50
Guardian Technologies,
Inc.* 8,333 common stock Feb-97 8,750.00
90,533 common stock Mar-97 126,450.00
5,000 common stock Jun-97 6,260.00
20,000 common stock Aug-97 29,005.00
2,500 common stock Sep-97 8,061.25
137,000 warrants Mar-97 26,255.00
-------------
204,781.25
</TABLE>
<PAGE>
<PAGE>
<TABLE>
THE ROCKIES FUND, INC.
Schedules of Investments
September 30, 1997 and December 31, 1996 (Continued)
<CAPTION>
Fair value at Fair value at
September 30, December 31,
Company 1997 1996
- ----------------------- -------------- --------------
<S> <C> <C>
RESTRICTED SECURITIES (continued):
- ----------------------------------
American Educational
Products, Inc.* *** 280,000.00 187,500.00
50,000.00 0.00
0.00 -
------------- -------------
330,000.00 187,500.00
Bear Star, LLC* 0.00 0.00
COVA Technologies* 20,035.00 20,035.00
Global Casinos, Inc.* 13,775.00 16,150.00
15,699.88 18,406.75
6,249.50 7,327.00
4,531.25 5,312.50
271.88 318.75
1,812.50 2,125.00
18,125.00 21,250.00
3,625.00 4,250.00
0.00 0.00
------------- -------------
64,090.01 75,140.00
Guardian Technologies,
Inc.* 26,040.63 -
282,915.63 -
15,625.00 -
62,500.00 -
7,812.50 -
51,375.00 -
------------- -------------
446,268.76 0.00
</TABLE>
<PAGE>
<PAGE>
<TABLE>
THE ROCKIES FUND, INC.
Schedules of Investments
September 30, 1997 and December 31, 1996 (Continued)
<CAPTION>
Initial **Cost at
investment September 30,
Company Position date 1997
- ---------------------- ------------------- ---------- -----------
<S> <C> <C> <C>
RESTRICTED SECURITIES (continued):
- ----------------------------------
Land Resource
Corporation* 10,000 common stock Mar-97 10,000.00
Lone Oak Vineyards,
Inc. 35,000 common stock Feb-97 35,000.00
Navidec 1,811 common stock Feb-97 7,705.20
4,261 common stock Feb-97 -
6,072 warrants Feb-97 0.00
-------------
7,705.20
Optek Music, Inc. 175,000 preferred stock Apr-97 35,000.00
Power Surge, Inc.* 20 common stock May-97 300,000.00
Southshore
Corporation*** 7,400 common stock Mar-94 11,770.44
10,000 common stock Dec-95 3,200.00
15,000 common stock Sep-97 7,715.00
-------------
22,685.44
Training Devices, Inc. 20,000 common stock Feb-97 25,000.00
</TABLE>
<PAGE>
<PAGE>
<TABLE>
THE ROCKIES FUND, INC.
Schedules of Investments
September 30, 1997 and December 31, 1996 (Continued)
<CAPTION>
Fair value at Fair value at
September 30, December 31,
Company 1997 1996
- ----------------------- -------------- --------------
<S> <C> <C>
RESTRICTED SECURITIES (continued):
- ----------------------------------
Land Resource
Corporation* 10,000.00 10,000.00
Lone Oak Vineyards,
Inc. 35,000 -
Navidec 11,318.75 -
- 17,543.57
5,123.55 -
------------- -------------
16,442.30 25,000.00
Optek Music, Inc. 35,000.00 -
Power Surge, Inc.* 300,000.00 -
Southshore Corporation*** 3,700.00 3,700.00
5,000.00 5,000.00
7,500.00 -
------------- -------------
16,200.00 8,700.00
Training Devices, Inc. 25,000.00 -
</TABLE>
<PAGE>
<PAGE>
<TABLE>
THE ROCKIES FUND, INC.
Schedules of Investments
September 30, 1997 and December 31, 1996 (Continued)
<CAPTION>
Initial **Cost at
investment September 30,
Company Position date 1997
- ---------------------- ------------------- ---------- -----------
<S> <C> <C> <C>
RESTRICTED SECURITIES (continued):
- ----------------------------------
Usasurance Group* 15,000 common stock Jul-96 94,550.00
10,000 common stock Sep-96 62,750.00
2,500 common stock Oct-96 12,375.00
31,500 common stock Dec-96 73,777.00
1,500 common stock Dec-96 -
2,500 common stock Jan-97 8,750.00
2,500 common stock Jun-97 2,066.25
2,000 common stock Jul-97 4,040.00
-------------
258,308.25
-------------
Total Restricted Securities 1,319,847.64
</TABLE>
<PAGE>
<PAGE>
<TABLE>
THE ROCKIES FUND, INC.
Schedules of Investments
September 30, 1997 and December 31, 1996 (Continued)
<CAPTION>
Fair value at Fair value at
September 30, December 31,
Company 1997 1996
- ----------------------- -------------- --------------
<S> <C> <C>
RESTRICTED SECURITIES (continued):
- ----------------------------------
Usasurance Group* 37,500.00 60,000.00
25,000.00 40,000.00
6,250.00 10,000.00
78,750.00 126,000.00
- 6,000.00
6,250.00 -
6,250.00 -
5,000.00 -
------------- -------------
165,000.00 242,000.00
------------- -------------
Total Restricted Securities 1,463,036.07 568,375.00
</TABLE>
<PAGE>
<PAGE>
<TABLE>
THE ROCKIES FUND, INC.
Schedules of Investments
September 30, 1997 and December 31, 1996 (Continued)
<CAPTION>
Initial **Cost at
investment September 30,
Company Position date 1997
- ---------------------- ------------------- ---------- -----------
<S> <C> <C> <C>
UNRESTRICTED SECURITIES:
- ------------------------
Alouette Cosmetics 2,500 common stock Nov-96 -
Astea International 5,000 common stock Sep-96 -
5,000 common stock Nov-96 -
10,000 common stock Feb-97 54,875.00
5,000 common stock Jun-97 16,354.41
-------------
71,229.41
Brassie Golf 35,000 common stock Aug-96 -
20,000 common stock Sep-96 -
85,000 common stock Oct-96 -
75,000 common stock Dec-96 -
-------------
0.00
Cable & Company
Worldwide 5,000 common stock Sep-96 -
15,000 common stock Oct-96 -
5,000 common stock Nov-96 -
53,000 common stock Dec-96 -
40,000 common stock Jan-97 27,200.00
10,000 common stock Mar-97 5,165.00
-------------
32,365.00
Cell Robotics
International, Inc. 20,000 common stock Oct-96 -
15,000 common stock Nov-96 -
-------------
0.00
</TABLE>
<PAGE>
<PAGE>
<TABLE>
THE ROCKIES FUND, INC.
Schedules of Investments
September 30, 1997 and December 31, 1996 (Continued)
<CAPTION>
Fair value at Fair value at
September 30, December 31,
Company 1997 1996
- ----------------------- -------------- --------------
<S> <C> <C>
UNRESTRICTED SECURITIES (continued):
- ------------------------------------
Alouette Cosmetics - 7,500.00
Astea International - 28,437.50
- 28,437.50
28,750.00 -
14,375.00 -
------------- -------------
43,125.00 56,875.00
Brassie Golf - 8,750.00
- 5,000.00
- 21,250.00
- 18,750.00
------------- -------------
0.00 53,750.00
Cable & Company Worldwide - 4,062.50
- 12,187.50
- 4,062.50
- 43,062.50
13,752.00 -
3,438.00 -
------------- -------------
17,190.00 63,375.00
Cell Robotics
International, Inc. - 40,000.00
- 30,000.00
------------- -------------
0.00 70,000.00
</TABLE>
<PAGE>
<PAGE>
<TABLE>
THE ROCKIES FUND, INC.
Schedules of Investments
September 30, 1997 and December 31, 1996 (Continued)
<CAPTION>
Initial **Cost at
investment September 30,
Company Position date 1997
- ---------------------- ------------------- ---------- -----------
<S> <C> <C> <C>
UNRESTRICTED SECURITIES (continued):
- ------------------------------------
Corfacts, Inc. 165,000 common stock Jul-96 10,312.50
35,000 common stock Jul-96 -
-------------
10,312.50
Coyote Sports, Inc. 2,500 common stock Sep-97 12,500.00
Enhanced Services 2,500 common stock Dec-96 -
5,000 common stock Jan-97 16,844.00
-------------
16,844.00
Exploration Company, The 7,500 common stock Aug-96 -
3,000 common stock Sep-96 -
7,500 common stock Oct-96 -
26,000 common stock Mar-97 130,000.00
5,000 common stock Sep-97 40,830.00
-------------
170,830.00
Expro Fuels, Inc. 5,700 common stock Aug-97 0.00
Hampton Court Resources 37,500 common stock Sep-97 34,625.00
Healthwatch, Inc. 34,400 common stock Oct-96 -
45,000 common stock Dec-96 -
-------------
0.00
Image Matrix 10,000 units
(1com/1wrnt) Jun-96 -
</TABLE>
<PAGE>
<PAGE>
<TABLE>
THE ROCKIES FUND, INC.
Schedules of Investments
September 30, 1997 and December 31, 1996 (Continued)
<CAPTION>
Fair value at Fair value at
September 30, December 31,
Company 1997 1996
- ----------------------- -------------- --------------
<S> <C> <C>
UNRESTRICTED SECURITIES (continued):
- ------------------------------------
Corfacts, Inc. 10,312.50 8,250.00
- 1,750.00
------------- -------------
10,312.50 10,000.00
Coyote Sports, Inc. 13,437.50 -
Enhanced Services - 8,125.00
16,250.00 -
------------- -------------
16,250.00 8,125.00
Exploration Company, The - 41,250.00
- 16,500.00
- 41,250.00
208,000.00 -
40,000.00 -
------------- -------------
248,000.00 99,000.00
Expro Fuels, Inc. 57.00 -
Hampton Court Resources 49,875.00 -
Healthwatch, Inc. - 68,800.00
- 90,000.00
------------- -------------
0.00 158,800.00
Image Matrix - 33,750.00
</TABLE>
<PAGE>
<PAGE>
<TABLE>
THE ROCKIES FUND, INC.
Schedules of Investments
September 30, 1997 and December 31, 1996 (Continued)
<CAPTION>
Initial **Cost at
investment September 30,
Company Position date 1997
- ---------------------- ------------------- ---------- -----------
<S> <C> <C> <C>
UNRESTRICTED SECURITIES (continued):
- ------------------------------------
J T's Restaurants 1,500 common stock Dec-96 -
Jarark Corporation 20,000 common stock Apr-97 5,625.00
Kinetiks.com* 10,000 common stock Sep-96 38,125.00
11,000 common stock Oct-96 24,312.50
20,000 common stock Nov-96 12,187.50
62,500 common stock Dec-96 44,851.88
10,000 common stock Jul-97 3,281.25
50,000 warrants Feb-97 0.00
50,000 warrants Mar-97 0.00
50,000 warrants Apr-97 0.00
50,000 warrants May-97 0.00
50,000 warrants Jun-97 0.00
50,000 warrants Jul-97 0.00
50,000 warrants Aug-97 0.00
50,000 warrants Sep-97 0.00
-------------
122,758.13
Laser Recording
Systems, Inc. 100,000 common stock Jun-95 5,050.00
Optimax Industries,
Inc.* 135,191 common stock Jun-94 162,229.20
12,500 warrants Sep-93 0.00
-------------
162,229.20
Organic Solutions, Inc. 42,500 common stock Feb-97 42,842.35
</TABLE>
<PAGE>
<PAGE>
<TABLE>
THE ROCKIES FUND, INC.
Schedules of Investments
September 30, 1997 and December 31, 1996 (Continued)
<CAPTION>
Fair value at Fair value at
September 30, December 31,
Company 1997 1996
- ----------------------- -------------- --------------
<S> <C> <C>
UNRESTRICTED SECURITIES (continued):
- ------------------------------------
J T's Restaurants - 3,187.50
Jarark Corporation 3,750.00 -
Kinetiks.com* 1,875.00 6,250.00
2,062.50 6,875.00
3,750.00 12,500.00
11,718.75 39,062.50
1,875.00 -
0.00 -
0.00 -
0.00 -
0.00 -
0.00 -
0.00 -
0.00 -
0.00 -
------------- -------------
21,281.25 64,687.50
Laser Recording Systems, Inc. 2,000.00 2,000.00
Optimax Industries, Inc.* 84,494.383 37,977.50
3,125.00 9,375.00
------------- -------------
87,619.38 347,352.50
Organic Solutions, Inc. 9,296.88 -
</TABLE>
<PAGE>
<PAGE>
<TABLE>
THE ROCKIES FUND, INC.
Schedules of Investments
September 30, 1997 and December 31, 1996 (Continued)
<CAPTION>
Initial **Cost at
investment September 30,
Company Position date 1997
- ---------------------- ------------------- ---------- -----------
<S> <C> <C> <C>
UNRESTRICTED SECURITIES (continued):
- ------------------------------------
Pacific Biometrics, Inc. 7,500 common stock Oct-96 -
7,500 warrants Oct-96 -
-------------
0.00
Poore Brothers 4,000 common stock Dec-96 -
Premium Cigars, Inc. 5,000 common stock Aug-97 23,893.00
Progress Software 1,000 common stock Dec-96 -
Redwood Broadcasting,
Inc. 5,000 common stock Feb-97 0.00
S&P 500 10 puts Dec '97 550 Jul-96 10,530.54
10 puts Dec '97 550 Aug-96 11,291.41
20 puts Dec '97 550 Sep-96 16,852.35
40 puts Dec '97 600 Dec-96 40,120.00
-------------
78,794.30
S2 Golf, Inc. 20,825 common stock Jul-96 -
Shiva Corporation 2,630 common stock Dec-96 0.00
Shopsmith 10,000 common stock Sep-96 -
10,000 common stock Oct-96 -
------------- 0.00
</TABLE>
<PAGE>
<PAGE>
<TABLE>
THE ROCKIES FUND, INC.
Schedules of Investments
September 30, 1997 and December 31, 1996 (Continued)
<CAPTION>
Fair value at Fair value at
September 30, December 31,
Company 1997 1996
- ----------------------- -------------- --------------
<S> <C> <C>
UNRESTRICTED SECURITIES (continued):
- ------------------------------------
Pacific Biometrics, Inc. - 23,437.50
- 1,406.25
------------- -------------
0.00 24,843.75
Poore Brothers - 14,250.00
Premium Cigars, Inc. 25,625.00 -
Progress Software - 19,750.00
Redwood Broadcasting, Inc. 6,250.00 -
S&P 500 62.50 5,875.00
62.50 5,875.00
125.00 11,750.00
250.00 33,000.00
------------- -------------
500.00 56,500.00
S2 Golf, Inc. - 19,523.44
Shiva Corporation 34,847.50 91,098.38
Shopsmith - 25,000.00
- 25,000.00
------------- -------------
0.00 50,000.00
</TABLE>
<PAGE>
<PAGE>
<TABLE>
THE ROCKIES FUND, INC.
Schedules of Investments
September 30, 1997 and December 31, 1996 (Continued)
<CAPTION>
Initial **Cost at
investment September 30,
Company Position date 1997
- ---------------------- ------------------- ---------- -----------
<S> <C> <C> <C>
UNRESTRICTED SECURITIES (continued):
- ------------------------------------
Sun Holdings, Inc. fka
Tampa Bay Corporation 1,191 common stock May-97 5,467.50
Tampa Bay Corporation 10,000 common stock Sep-96 -
5,000 common stock Dec-96 -
-------------
0.00
TELS Corporation 20,000 common stock Aug-96 12,812.50
10,000 common stock Sep-96 5,937.50
-------------
18,750.00
Topro, Inc. 2,500 common stock Sep-96 -
2,500 common stock Nov-96 -
2,500 common stock Dec-96 -
35,000 common stock Mar-97 -
-------------
0.00
Whitewing Labs 20,000 common stock Jan-97 31,350.00
Total Unrestricted Securities 845,465.39
-------------
</TABLE>
<PAGE>
<PAGE>
<TABLE>
THE ROCKIES FUND, INC.
Schedules of Investments
September 30, 1997 and December 31, 1996 (Continued)
<CAPTION>
Fair value at Fair value at
September 30, December 31,
Company 1997 1996
- ----------------------- -------------- --------------
<S> <C> <C>
UNRESTRICTED SECURITIES (continued):
- ------------------------------------
Sun Holdings, Inc. fka
Tampa Bay Corporation 2,679.75 -
Tampa Bay Corporation - 13,750.00
- 6,785.00
------------- -------------
0.00 20,535.00
TELS Corporation 6,250.00 9,376.00
3,125.00 4,688.00
------------- -------------
9,375.00 14,064.00
Topro, Inc. - 6,250.00
- 6,250.00
- 6,250.00
- 50,000.00
------------- -------------
0.00 68,750.00
Whitewing Labs 22,500 -
Total Unrestricted Securities 623,971.76 1,357,717.07
------------- -------------
</TABLE>
<PAGE>
<PAGE>
<TABLE>
THE ROCKIES FUND, INC.
Schedules of Investments
September 30, 1997 and December 31, 1996 (Continued)
<CAPTION>
Initial **Cost at
investment September 30,
Company Position date 1997
- ---------------------- ------------------- ---------- -----------
<S> <C> <C> <C>
NOTES RECEIVABLE:
- -----------------
Columbine Home
Sales, LLC* Note Receivable, 10% Dec-95 0.00
Damach Note Receivable, 12%
due on demand Oct-96 32,500.00
Phil Georgeson Note Receivable, 12%
due on demand Aug-96 6,789.55
Global Casinos, Inc.* Note Receivable, 8%
due 11/1/98 Nov-96 175,000.00
Note Receivable, 9%
due on demand Mar-97 37,280.44
Note Receivable, 12%
due 4/97 Aug-97 75,000.00
-------------
287,280.44
Kinetiks.com* Note Receivable, 10%
due 3/30/97 Feb-97 25,000.00
Marco Foods, Inc.* Note Receivable, 12%
due on demand Jan-97 132,437.50
NS Properties Note Receivable, 8%
due 1/2/98 Jan-97 20,000.00
Total Notes Receivable 504,007.49
-------------
Total Investments 2,669,320.52
=============
</TABLE>
<PAGE>
<PAGE>
<TABLE>
THE ROCKIES FUND, INC.
Schedules of Investments
September 30, 1997 and December 31, 1996 (Continued)
<CAPTION>
Fair value at Fair value at
September 30, December 31,
Company 1997 1996
- ----------------------- -------------- --------------
<S> <C> <C>
NOTES RECEIVABLE (continued):
- -----------------------------
Columbine Home
Sales, LLC* 5,814.06 5,814.06
Damach 32,500.00 32,500.00
Phil Georgeson 6,789.55 15,091.25
Global Casinos, Inc.* 175,000.00 175,000.00
37,280.44 -
75,000.00 -
------------- -------------
287,280.44 175,000.00
Kinetiks.com* 25,000.00 -
Marco Foods, Inc.* 132,437.50 -
NS Properties 20,000.00 -
Total Notes Receivable 509,821.55 228,405.31
------------- -------------
Total Investments 2,596,829,38 2,154,497.38
============= =============
</TABLE>
<PAGE>
<PAGE>
THE ROCKIES FUND, INC.
Schedules of Investments
September 30, 1997 and December 31, 1996 (Continued)
* These entities are considered to be affiliated companies as a result of
the Company's investment and/or position on the entity's Board of
Directors during 1997.
** After permanent write-downs.
*** Certain shares are free trading either under Rule 144 of the Securities
Act of 1933 or as a result of demand registration rights held by the
Company.
See accompanying notes to financial statements.
<PAGE>
<PAGE>
<TABLE>
THE ROCKIES FUND, INC.
STATEMENT OF OPERATIONS
<CAPTION>
For the For the
Three Months Ended Three Months Ended
September 30, 1997 September 30, 1996
(Unaudited) (Unaudited)
------------------ ------------------
<S> <C> <C>
INVESTMENT INCOME:
Rental income $ 5,477 $ 42,131
Consulting and other services 2,280 3,737
Interest and dividends 13,658 13,671
------------- -------------
Total Income/Revenue 21,415 59,539
------------- -------------
Expenses:
Wages and salaries 32,748 52,340
Professional and legal fees 13,597 41,185
Directors fees 2,000 2,000
Interest 12,215 8,351
Travel and entertainment 9,795 4,335
Office 27,901 23,470
Building expenses 15,070 39,961
Investment expenses 3,359 44,057
Donations 4,250 850
------------- -------------
120,935 216,549
Income tax benefit (13,559) 0
Net investment loss $ (85,961) $ (157,010)
============== ==============
Net realized gain from investments 73,277 1,803,872
Net unrealized appreciation
(depreciation) of investments:
Beginning of period 398,502 1,390,067
End of period (72,491) (246,384)
------------- -------------
Net unrealized depreciation
(appreciation) of investments 326,011 (1,636,451)
Net gain from investments $ 399,288 $ 167,421
============= ==============
Net increase in net assets
resulting from operations $ 313,327 $ 10,411
============= ==============
Per share amounts:
Net investment loss $(0.13) $(0.24)
Net realized gain from investments 0.11 2.81
Net unrealized appreciation
(depreciation) of investments 0.51 (2.55)
------------- -------------
$ 0.49 $ 0.02
============= ==============
</TABLE>
<PAGE>
<PAGE>
<TABLE>
THE ROCKIES FUND, INC.
STATEMENT OF OPERATIONS
<CAPTION>
For the For the
Nine Months Ended Nine Months Ended
September 30, 1997 September 30, 1996
(Unaudited) (Unaudited)
------------------ ------------------
<S> <C> <C>
INVESTMENT INCOME:
Rental income $ 56,724 $ 118,960
Consulting and other services 4,166 4,980
Interest and dividends 36,599 14,000
------------ ------------
Total Income/Revenue 97,489 137,940
------------ ------------
Expenses:
Wages and salaries 107,574 136,862
Professional and legal fees 34,588 75,849
Directors fees 6,000 4,000
Interest 23,164 35,313
Travel and entertainment 24,325 11,230
Office 87,712 53,189
Building expenses 55,813 84,523
Investment expenses 21,396 47,793
Donations 10,675 1,765
Bad debt 0 7,997
------------ ------------
371,247 458,521
Income tax benefit (13,559) 0
Net investment loss $ (260,199) $ (320,581)
============= =============
Net realized gain from investments 492,807 1,937,655
Net unrealized appreciation
(depreciation) of investments:
Beginning of period (20,322) 77,017
End of period (72,491) (246,384)
------------ -------------
Net unrealized depreciation
of investments (52,169) (323,401)
Net gain from investments $ 440,638 $ 1,614,254
============ =============
Net increase in net assets
resulting from operations $ 180,439 $ 1,293,673
============ =============
Per share amounts:
Net investment loss $(0.40) $(0.50)
Net realized gain
from investments 0.76 3.02
Net unrealized depreciation
of investments (0.08) (0.50)
------------ ------------
$ 0.28 $ 2.02
============ ============
</TABLE>
<PAGE>
<PAGE>
<TABLE>
THE ROCKIES FUND, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
NINE MONTHS ENDED SEPTEMBER 30, 1997 AND
YEARS ENDED DECEMBER 31, 1996 AND 1995
<CAPTION>
Accumulated
Net Realized
Gain (Losses) Unrealized Net
Accumulated From Sales And Appreciation
Additional Net Permanent (Depreciation)
Common Paid-In Investment Write-Downs of Net
Stock Capital (Loss) Of Securities Investments Assets
------ ---------- ------------ ------------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
BALANCES AT
DECEMBER 31, 1995 $6,403 $2,901,243 $(1,464,614) $(212,485) $ 77,017 $1,307,564
====== ========== ============ ========== ========== ===========
Net investment loss -- -- (428,689) -- -- (428,689)
Net realized gain on
sale of investments -- -- -- 1,549,196 -- 1,549,196
Unrealized net depreciation
of investments -- -- -- -- (97,339) (97,339)
------ ---------- ------------ -------------------- ---------------------
BALANCES AT
DECEMBER 31, 1996 $6,403 $2,901,243 $(1,893,303) $1,336,711 $ (20,322) $2,330,732
====== ========== ============ ========== ========== ===========
Net investment loss -- -- (80,150) -- -- (80,150)
Net realized gain on
sale of investments -- -- -- 478,541 -- 478,541
Unrealized net depreciation
of investments -- -- -- -- (116,629) (116,629)
------ ---------- ------------ ---------- ---------- -----------
BALANCES AT
MARCH 31, 1997 $6,403 $2,901,243 $(1,973,453) $1,815,252 $(136,951) $2,612,494
====== ========== ============ ========== ========== ===========
Net investment loss -- -- (94,088) -- -- (94,088)
Net realized gain on
sale of investments -- -- -- (59,010) -- (59,010)
Unrealized net depreciation
of investment -- -- -- -- (261,551) (261,551)
</TABLE>
<PAGE>
<PAGE>
<TABLE>
THE ROCKIES FUND, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
NINE MONTHS ENDED SEPTEMBER 30, 1997 AND
YEARS ENDED DECEMBER 31, 1996 AND 1995
<CAPTION>
Accumulated
Net Realized
Gain (Losses) Unrealized Net
Accumulated From Sales And Appreciation
Additional Net Permanent (Depreciation)
Common Paid-In Investment Write-Downs of Net
Stock Capital (Loss) Of Securities Investments Assets
------ ---------- ------------ ------------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
BALANCES AT
JUNE 30, 1997 $6,403 $2,901,243 ($2,067,541) $1,756,242 ($398,502) $2,197,845
====== ========== ============ ========== ========== ==========
Net investment loss -- -- (85,961) -- -- (85,961)
Net realized gain on
sale of investments -- -- -- 73,277 -- 73,277
Unrealized net depreciation
of investment -- -- -- -- 326,011 326,011
BALANCES AT
SEPTEMBER 30, 1997 $6,403 $2,901,243 ($2,153,502) $1,829,519 ($72,491) $2,511,172
====== ========== ============ ========== ========== ==========
</TABLE>
<PAGE>
<PAGE>
<TABLE>
THE ROCKIES FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS
<CAPTION>
For the For the
Nine Months Ended Nine Months Ended
September 30, 1997 September 30, 1996
(Unaudited) (Unaudited)
------------------ ------------------
<S> <C> <C>
Increase (decrease) in net assets
from investment activities:
Net investment loss $ (260,199) $ (320,581)
Net realized gain from investments 492,808 1,937,655
Net unrealized depreciation
of investments (52,169) (323,401)
------------ ------------
Net increase in net assets
from investment activities 180,440 1,293,673
Net assets at beginning of year 2,330,732 1,307,564
------------ ------------
Net assets at end of period $ 2,511,172 $ 2,601,237
============ ============
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
-----------------------------------------------------------
(a) Organization and Basis of Presentation.
---------------------------------------
The Rockies Fund, Inc. (the "Fund" or the "Company") was incorporated
in Nevada on August 2, 1983, for the principal purpose of making venture
capital investments in developing companies located primarily in the Rocky
Mountain Region of the United States. The Fund is registered under the
Investment Company Act of 1940 as a Business Development Company.
The interim Unaudited Financial Statements have been prepared by The
Rockies Fund, Inc. and, in the opinion of management, reflect all material
adjustments which are necessary to a fair statement of results of the interim
periods presented. Such adjustments consisted only of normal recurring items
(except as discussed in Note 3). Certain information and footnote disclosure
made in the Fund's last Annual Report on Form 10-K have been condensed or
omitted from the interim statements. These Financial Statements should be read
in conjunction with the Financial Statements and Notes thereto included in the
Fund's Annual Report on Form 10-K for the year ended December 31, 1996. The
results of the interim periods are not necessarily indicative of results which
may be expected for any other interim period or for the full years.
(b) Investment Valuation and Transactions.
--------------------------------------
Securities listed or traded on an exchange are valued at their last
sales price on the exchange where the securities are principally traded.
Securities reported on the NASDAQ National Market System are valued, at the
closing bid price on the valuation date. Securities traded on the over-the-
counter market are valued at the last bid price, based upon quotes furnished by
independent market makers for such securities. Investments in notes receivable
are valued at net realizable value. The Fund performs on-going evaluations
regarding collectability of receivables and provides allowances for potential
losses.
In the absence of readily ascertainable market values, investments in
restricted securities without quoted market prices are carried at estimated
fair value as determined by the Fund's Board of Directors (the "Board"). Due
to the inherent uncertainty of valuation, those estimated values may differ
significantly from the values that would have been used had a readily
ascertainable market for the investments existed, and the differences could be
material.
Securities transactions are accounted for on a trade date basis.
Where possible, realized gains and losses on the sales of investments are
determined using the specific identification method. If the specific
identification method cannot be utilized, realized gains and losses are
determined using the first in-first out method. Substantially all of the
Fund's investments are non-income producing.
(c) Income Taxes
------------
As a Business Development Company, the Fund is subject to Federal and
State income taxes at the applicable corporate rates. Deferred income taxes
are provided for timing differences between the reporting of income for
financial statement and tax return purposes, principally realized and
unrealized gains on investments. For Federal and State income tax purposes,
the investments have the same cost basis as shown in the financial statements.
Income tax payable consists of approximately $90,000 of federal and
$16,000 of state taxes resulting from the 1996 net realized gain from sale of
investments. The Fund re-evaluated an estimated 1997 loss carry back toward
1996 tax liability during the three months ended September 30, 1997.
2. PORTFOLIO SECURITIES
--------------------
AMERICAN EDUCATIONAL PRODUCTS, INC.
-----------------------------------
The Fund, at September 30, 1997, held 40,000 shares of American
Educational Products, Inc. common stock, after giving effect to a one-for-five
(1:5) reverse stock split, which shares are restricted as to sale, non-income
producing, and have been valued by the Board of Directors at their quoted
market value of $7.00 per share, or $280,000. The Fund also held, at September
30, 1997, common stock purchase warrants exercisable to purchase an additional
40,000 shares of common stock of American Educational Products, Inc. at an
exercise price of $4.50 per share. The Board of Directors valued these
warrants at $1.25 each, representing 50% of the difference between their
exercise price and the market value of the common stock. The Fund also held, at
September 30, 1997, common stock purchase warrants exercisable to purchase an
additional 40,000 shares at an exercise price of $10.00 per share. The Board
of Directors valued these warrants at $0.00. The Fund has certain registration
rights relating to these shares and warrants.
ASTEA INTERNATIONAL
-------------------
The Fund, at September 30, 1997, held 15,000 shares of Astea International
common stock, which shares are unrestricted as to sale, non-income producing,
and have been valued at their quoted market price of $2.875 per share, or
$43,125.
BEAR STAR (fka COLUMBINE HOME SALES, LLC)
------------------------------------------
The Fund has invested in Bear Star, which investment is restricted as to
sale, non-income producing, and has been valued by the Board of Directors at
$0.00. The Fund also holds a note receivable from Columbine Homes with
remaining amounts due of $5,814. The note accrues interest at the rate of 10%
per year, and is due on demand.
CABLE AND COMPANY WORLDWIDE
---------------------------
The Fund, at September 30, 1997, held 50,000 shares of Cable and Company
Worldwide common stock, which stock is unrestricted as to sale, non-income
producing, and has been valued at its quoted market price of $.34375 per share,
or $17,190.
<PAGE>
CORFACTS, INC.
---------------
The Fund, at September 30, 1997, held 165,000 shares of Corfacts, Inc.
common stock, which shares are unrestricted as to sale, non-income producing,
and have been valued at their quoted market price of $.06 per share, or
$10,312.50.
COVA TECHNOLOGIES
------------------
The Fund, at September 30, 1997, held 917 shares of Cova Technologies
common stock, which stock is restricted as to sale, non-income producing, and
has been valued by the Board of Directors at its cost of $20,035.
COYOTE SPORTS, INC.
-------------------
The Fund, at September 30, 1997, held 2,500 shares of Coyote Sports common
stock, which stock is unrestricted as to sale, non-income producing, and has
been valued at its quoted market price of $5.375 per share, or $13,437.50.
DAMACH
------
The Fund, at September 30, 1997, held a note receivable from Damach in the
amount of $32,500 which accrues interest at the rate of 12% per year and was
originally due on September 30, 1997. An extension agreement was signed on
March 4, 1997 extending 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 September 30, 1997, held 5,000 shares of Enhanced Services,
Inc. common stock, which shares are unrestricted as to sale, non-income
producing, and have been valued at their quoted market price of $3.25 per
share, or $16,250.
EXPLORATION COMPANY, THE
------------------------
The Fund, at September 30, 1997, held 31,000 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 $8.00 per
share, or $248,000. These share have been pledged as collateral securing a
$300,000 note payable to Merit Broadcasting.
EXPRO FUELS, INC.
-----------------
The Fund, at September 30, 1997, held 5,700 shares of Expro Fuels common
stock, which were received as a spin-off distribution from The Exploration
Company. The stock is unrestricted as to sale, non-income producing, and has
been valued by the Board of Directors at $.01 per share, or $57.00.
GEORGESON, PHIL
---------------
The Fund, at September 30, 1997, held a note receivable from Phil
Georgeson in the amount of $6,789.55. The note is secured by 7,000 shares of
National Equities Holdings, Inc. common stock, accrues interest at the rate of
12% per year, and is due on demand.
GLOBAL CASINOS, INC.
--------------------
The Fund, at September 30, 1997, held 17,680 shares of Global Casinos,
Inc. common stock, after giving effect to a 1-for-10 reverse split. The shares
are restricted as to sale due to the company being an affiliate, non-income
producing, and have been valued by the Board of Directors at their quoted
market price of $3.625 per share, or $64,090. The Fund, at September 30, 1997,
also held a note receivable from Global Casinos, Inc. in the amount of
$175,000, which note is unsecured, accrues interest at the rate of 8% per year,
and is due November 1, 1998. Said note is convertible into shares of Global
Casinos, Inc. common stock at a conversion price of $5.00 per share anytime
after November 1, 1997. The Fund holds a second note receivable from Global
Casinos in the amount of $40,843.70, which note is unsecured, accrues interest
at the rate of 9% per year, is due on demand, and is convertible into Global
Casinos common stock at $5.00 per share. The Fund also owns warrants
exercisable to purchase 35,000 shares of Global Common Stock at $6.00 per
share, 35,000 at $7.00 per share, and 35,000 at $8.00 per share, all of which
expire as of February 1, 1998 and have been valued at $0.00 by the Board of
Directors.
GUARDIAN TECHNOLOGIES, INC.
---------------------------
The Fund, at September 30, 1997, held 126,366 shares of Guardian
Technologies common stock, after giving effect to a one-for-three (1:3) reverse
split, 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 $3.125 per share, or $394,893.75. The Fund also held warrants
exercisable to purchase an additional 137,000 shares of Guardian Technologies
common stock, which warrants are also restricted as to sale due to the company
being an affiliate, non-income producing, and have been valued at their quoted
market price of $.375 each, or $51,375.
HAMPTON COURT RESOURCES
-----------------------
The Fund, at September 30, 1997, held 37,500 shares of Hampton Court
Resources common stock, which stock is unrestricted as to sale, non-income
producing, and has been valued at its quoted market price of $1.33 per share,
or $49,875.
JAYARK CORPORATION
------------------
The Fund, at September 30, 1997, held 20,000 shares of Jayark Corporation
common stock, which shares are unrestricted as to sale, non-income producing,
and have been valued at their quoted market price of $.1875 per share, or
$3,750.
KINETIKS.COM
------------
The Fund, at September 30, 1997, held 113,500 shares of Kinetiks.com
common stock, which shares are unrestricted as to sale, non-income producing,
and have been valued at their quoted market price of $.1875 per share or
$21,281.25. The Fund also held warrants exercisable to purchase an additional
400,000 shares of Kinetiks.com common stock at an exercise price of $.25 per
share. The warrants have been valued by the Board of Directors at $0.00. The
Fund also held Kinetiks.Com's note receivable in the amount of $25,000, which
note is unsecured, accrues interest at the rate of 10% per year, and was due on
March 30, 1997. The note provides for a default interest rate of 18% and
requires the issuance of an additional 50,000 warrants for each 30-day period
that it goes unpaid.
LAND RESOURCE CORPORATION
-------------------------
The fund, at September 30, 1997, held 10,000 shares of Land Resource
Corporation common stock, which shares are restricted as to sale, non-income
producing, and have been valued by the Board of Directors at their cost of
$1.00 each, or $10,000.
LASER RECORDING SYSTEMS, INC.
-----------------------------
The Fund, at September 30, 1997, held 100,000 shares of Laser Recording
Systems, Inc. common stock, which shares are unrestricted as to sale, non-
income producing, and have been valued at their quoted market price of $.02 per
share, or $2,000.
LOAN OAK VINEYARDS, INC.
-------------------------
The Fund, at September 30, 1997, held 35,000 share of Loan Oak Vineyards
common stock, which shares are restricted as to sale, non-income producing, and
have been valued by the Board of Directors at their cost of $1.00 each, or
$35,000.
MARCO FOODS, INC.
-----------------
The Fund, at September 30, 1997, held a note receivable from Marco Foods
in the amount of $132,437.50, which note is unsecured, accrues interest at the
rate of 12% per year, and is due on demand.
NAVIDEC, INC.
-------------
The Fund, at September 30, 1997, held 1,811 shares of Navidec common
stock, which shares are unrestricted as to sale, non-income producing, and have
been valued at their quoted market price of $6.25 per share, or $11,318.75.
The Fund also held warrants to purchase an additional 6,072 shares of common
stock, which warrants are unrestricted as to sale, non-income producing, and
have been valued at their quoted market price of $.84375 per share, or
$5,123.55.
NS PROPERTIES
-------------
The Fund, at September 30, 1997, held a note receivable from NS Properties
in the amount of $20,000, which note is unsecured, accrues interest at the rate
of 8% per year, and is due January 2, 1998.
OPTEK MUSIC, INC.
-----------------
At September 30, 1997, the Fund held 175,000 shares of Optek Music
preferred stock, which shares are restricted as to sale, non-income producing,
and have been valued by the Board of Directors at their cost of $.20 per
shares, or $35,000.
OPTIMAX INDUSTRIES, INC. (fka PLANTS FOR TOMORROW, INC.)
--------------------------------------------------------
At September 30, 1997, the Fund held 135,191 shares of Optimax Industries,
Inc. common stock, which shares are unrestricted as to sale, non-income
producing, and have been valued at their quoted market price of $.625 per
share, or $84,494.38. The Fund also holds warrants to purchase an additional
12,500 shares of Optimax Industries, Inc. common stock, which warrants are
valued at their quoted market price of $.25 each, or $3,125. The shares of
Optimax are pledged as collateral securing the Fund's line of credit.
ORGANIC SOLUTIONS, INC.
-------------------------
The Fund, at September 30, 1997, held 42,500 shares of Organic Solutions
common stock, which shares are unrestricted as to sale, non-income producing,
and have been valued at their quoted market price of $.21875 per share, or
$9,296.88.
PREMIUM CIGARS, INC.
--------------------
The Fund, at September 30, 1997, held 5,000 shares of Premium Cigars
common stock, which stock is unrestricted as to sale, non-income producing, and
has been valued at its quoted market price of $5.125 per share, or $25,625.
POWER SURGE, INC.
-----------------
The Fund, at September 30, 1997, held 20 shares of Power Surge, Inc.
common stock, which shares are restricted as to sale, non-income producing, and
have been valued by the Board of Directors at their cost of $15,000 per share,
or $300,000. Said shares were purchased in exchange for assuming a $300,000
share of a 10 year, 8% promissory note between the seller of the shares and a
third party.
REDWOOD BROADCASTING, INC.
---------------------------
The Fund, at September 30, 1997, held 5,000 shares of Redwood Broadcasting
common stock, which shares are unrestricted as to sale, non-income producing,
and have been valued by the Board of Directors at $1.25 per share, or $6,250.
S&P 500
-------
The Fund, at September 30, 1997, held 4,000 puts against the S&P 500 at
550. The puts are unrestricted as to sale and expire on December 20, 1997.
They have been valued at their quoted market price of $.0625 or $250. The Fund,
at September 30, 1997, also held 4,000 puts against the S&P 500 at 600. The
puts are unrestricted as to sale and expire on December 20, 1997. They have
been valued at their quoted market price of $.0625, or $250.
SHIVA CORPORATION
-----------------
The Fund, at September 30, 1997, held 2,630 shares of Shiva Corporation
common stock, which shares are unrestricted as to sale, non-income producing
and have been valued at their quoted market price of $13.25 per share, or
$34,847.50.
SOUTHSHORE CORPORATION
----------------------
At September 30, 1997, the Fund held 32,400 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 $16,200
SUN HOLDINGS, INC. (fka TAMPA BAY CORPORATION)
-----------------------------------------------
The Fund, at September 30, 1997, held 1,191 shares of Sun Holdings (fka
Tampa Bay Corporation) common stock, after giving effect to a 1:21 reverse
split. The stock is unrestricted as to sale, non-income producing, and has been
valued at its quoted market price of $2.25 per share, or $2,679.75.
TELS CORPORATION
----------------
The Fund, at September 30, 1997, held 30,000 shares of TELS Corporation
common stock, which shares are unrestricted as to sale, non-income producing,
and have been valued at their quoted market price of $.3125 per share, or
$9,375.
TRAINING DEVICES, INC.
----------------------
The Fund, at September 30, 1997, held 20,000 shares of Training Devices
common stock, which shares are restricted as to sale, non-income producing, and
have been valued by the Board of Directors at their cost of $1.25 per share, or
$25,000.
USASURANCE GROUP
----------------
The Fund, at September 30, 1997, held 66,000 shares of Usasurance Group
common stock, which shares are restricted as to sale due to the company being
an affiliate, non-income producing, and have been valued at their quoted market
price of $2.50, or $165,000.
WHITEWING LABS
--------------
The Fund, at September 30, 1997, held 20,000 shares of Whitewing Labs
common stock, which shares are unrestricted as to sale, non-income producing,
and have been valued at their quoted market price of $1.125 per share, or
$22,500.
3. REAL ESTATE OPERATIONS
----------------------
Effective March 31, 1997, The Rockies Fund, Inc. consummated the sale of
its 26,000 square foot commercial office building located at 4465 Northpark
Drive, Colorado Springs, Colorado (the "Northpark Building"). The sale price
for the Northpark Building was $1,080,000, which was paid in cash at closing.
The proceeds received were utilized in part to pay approximately $452,000 of
mortgage and other debt. This transaction resulted in a net gain of
approximately $388,000.
In a concurrent transaction structured to qualify as a tax-free exchange
under Section 1031 of the Internal Revenue Code of 1986, as amended, the Fund,
on April 1, 1997, consummated the purchase of 5 acres of undeveloped commercial
real estate located at 3210 Woodman Road, Colorado Springs, Colorado (the
"Property"). The Fund plans to undertake a phased development of two
commercial office buildings on the Property which will, upon completion,
consist of an aggregate of 55,000 square feet of commercial office space. The
purchase price for the Property was $390,000, which was paid in cash at the
time of closing, utilizing a portion of the proceeds realized by the Fund from
the sale of the Northpark Building. The Fund intends to hold this new real
estate in a wholly owned subsidiary called Strategic Properties, Inc.
Effective September 4, 1997, The Fund purchased commercial real estate
located at 3515 North Chestnut, Colorado Springs, (the "Chestnut Building") for
a purchase price of $600,000. The Fund utilized $100,000 from the Northpark
Building sale proceeds towards the purchase of the new Chestnut Building as a
tax-free exchange under Section 1031 and borrowed the remaining $500,000 from
State Bank and Trust at an initial interest rate of 9.75% with the assignment
of all rents as collateral. The Fund intends to lease office space at the
Chestnut Building as a source of income. The Chestnut Building has 0%
occupancy as of September 30, 1997 as improvements are under construction. The
Fund intends to have the Chestnut Building improvements completed and leasing
underway by December 31, 1997.
In addition, $50,000 of the Northpark Building sale proceeds were utilized
to purchase a 20% investment in Plaza Hotel & Apartments, a 40 room hotel,
located at 116 East Park Street, Hot Springs Park, Thermopolis, Wyoming, (the
"Hotel" investment), as a tax free exchange under section 1031 for a total
investment of $200,000. Effective September 25, 1997 the Fund owns a 20%
investment in the Wyoming Hotel. The Fund owes $150,000 to Wyoming Resorts,
LLC at an 8% per annum interest rate. The Fund is accounting for the
investment under the equity method of accounting. The Hotel, as of September
30, 1997, is under renovation and the Fund may therefore provide additional
developmental fees before the expected opening date in April, 1998.
The Fund plans to continue to occupy its current executive office space
located in the Northpark Building under a lease with the new owners, Northpark,
L.L.C., for $900 a month.
The commercial real estate market in Colorado Springs, Colorado, although
steadily improving over the last several years, still remains very competitive.
While the Board does not believe that a single firm or group dominates the
commercial real estate industry in Colorado Springs, many of the participants
are well-established and possess far greater financial and market resources
than the Fund.
4. CONTINGENCIES
-------------
Securities and Exchange Commission Investigation:
During 1995 and 1996, the Fund received requests for information from the
U.S. Securities and Exchange Commission ("SEC") related to an investigation by
the SEC which began in 1994 into various matters, including the administrative
and record keeping practices of the Fund, its securities trading activities and
those of one of its officers.
In September, 1996, the Fund received notification from the SEC that the
SEC staff was planning to recommend that an enforcement action be brought
against the Fund, its president, and each of its directors due to certain
alleged violations of federal securities laws.
The SEC invited the Fund to make a submission setting forth the Fund's
position and arguments regarding the SEC staff's planned recommendation. The
Fund did so in October, 1996, and, at the SEC's request, the Fund supplemented
its submission in December, 1996. The SEC has not responded to the Fund's
submissions and has not advised the Fund of any timetable for the SEC staff to
make its final determination about whether to recommend an enforcement action.
Management is unable to predict, with any certainty, the outcome of the
investigation, or the ultimate effect on the Fund.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
- -------------------------------------------------------------------------
The following discussion and analysis should be read in conjunction
with the Financial Statements and Notes thereto appearing elsewhere in this
report.
LIQUIDITY AND CAPITAL RESOURCES - SEPTEMBER 30, 1997 COMPARED TO DECEMBER 31,
1996
- ----------------------------------------------------------------
During the three months ended September 30, 1997, the Fund liquidated
certain securities, including 2,000 shares of Cell Robotics International,
Inc., 2,000 shares of Enhanced Services, 29,000 shares of The Exploration Co.,
5,000 shares of Focus Enhancements, 6,500 shares of Micro-Integration, 12,500
shares of Pacific Biometrics, 5,000 shares of Premium Cigars, Inc., and 5,000
shares of Shopsmith. The proceeds received from the liquidation of these
securities allowed the Fund to add a limited number of new investments to the
Fund's portfolio, including the following:
During the three months ended September 30, 1997, the Fund acquired
22,500 shares of Guardian Technologies, Inc. for a total investment of $37,066;
15,000 shares of Southshore Corp. for a total investment of $ 7,715; 2,000
shares of Usassurance Group for a total investment of $4,040; 2,500 shares of
Coyote Sports Inc. for a total investment of $12,500; 5,000 shares of The
Exploration Co. for a total investment of $40,830; 5,700 shares of Expro Fuels,
Inc. for a total investment of $0; 37,500 shares of Hampton Court Resources for
a total investment of $34,625; 150,000 warrants of Kinetiks.Com for a total
investment of $0; 5,000 shares of Premium Cigars, Inc. for a total investment
of $23,893.
The Fund has purchased several investments in its portfolio
contributing to the increase in value of restricted and unrestricted securities
from $1,841,093 as of December 31, 1996 to $2,087,008 as of September 30, 1997,
an increase of $245,915 or 13%.
Current notes receivable increased from $138,404 at December 31, 1996
to $334,822 as of September 30, 1997, an increase of $196,418 or 142%, due
primarily to additional note receivables from Marco Foods Inc. of approximately
$130,000 and Global Casinos, Inc. for $75,000. As a result, accrued interest
receivable increased $25,372 or 198% at September 30, 1997. Cash held by
related parties and others decreased significantly from $499,404 as of December
31, 1996, to $1,820 as of September 30, 1997, utilized primarily to purchase
undeveloped commercial real estate located at 3210 Woodman Road, Colorado
Springs, Colorado, commercial real estate located at 3515 North Chestnut,
Colorado Springs, Colorado, and related development expenses. Receivables from
investees and other assets decreased $38,183 or 98%.
Total current assets, therefore, decreased from $2,530,571 at
December 31, 1996 to $2,462,507 at September 30, 1997, a decrease of $68,064 or
2.7%.
During the nine months ended September 30, 1997, the Fund sold its
Northpark Building for a net gain and subsequently acquired five acres of
undeveloped commercial real estate for $390,000, a commercial office building
and land for $600,000, and a hotel and apartments in Thermopolis, Wyoming for
$200,000. (See Notes to Financial Statement, Note 3.) The Fund also made
certain improvements to its real estate totaling $129,242 and acquired an
automobile for $15,162. As a result, total property and equipment increased
from $764,521 as of December 31, 1996 to $1,338,214 as of September 30, 1997,
an increase of $573,693 or 75%.
The Fund, as of September 30, 1997, had a note receivable outstanding
with its affiliate, Global Casinos, Inc. for $175,000, due November 1998,
accruing interest at 8% per annum and convertible into Global Casinos shares at
a conversion rate of $5.00 per share.
Based on the foregoing, total assets increased from $3,470,092 on
December 31, 1996 to $3,975,721 on September 30, 1997, an increase of $505,629
or 15%.
The reduction in current liabilities is primarily due to the use by
the Fund of proceeds from the sale of the Northpark Building and certain
investments to retire debt. To this end, payables to related parties were
retired during the nine months ending September 30, 1997. This compares with a
balance of $153,566 as of December 31, 1996. Payables for investment
securities were also retired by September 30, 1997, reduced from a balance of
$116,882 as of December 31, 1996. Liabilities eliminated as a result of the
sale of the Northpark Building were the current portion of a mortgage note
payable, security deposits, other liabilities (due to lessee) and the State
Bank and Trust line of credit secured by the Northpark Building, the
elimination of which reduced liabilities by $518,190. The Fund executed a Note
for $150,000 payable to Wyoming Resorts, LLC at 8% per annum for the Hotel
Investment in Thermopolis, Wyoming, with the sum of $50,000 due October 25,
1997 and the sum of $100,000 due September 25, 1998. The Fund still holds a
$75,000 line of credit with a balance of $74,500 as of September 30, 1997 that
accrues interest at 10.5% and is secured by the Fund's shares of Optimax
Industries Inc. security.
As a result of the foregoing, current liabilities decreased from
$764,257 as of December 31, 1996, to $715,840 as of September 30, 1997, a
decrease of $48,417, or 6.3%.
The mortgage on the Northpark Building, as of December 31, 1996, was
$315,349. The Northpark Building was sold during the nine months ending
September 30, 1997 and replaced with the Chestnut Building effective September
4, 1997. In conjunction with the acquisition of the Chestnut Building, the
Fund executed a mortgage with a principal balance, less current portion, of
$470,000. The Fund also executed a $300,000 note payable to Merit Broadcasting
for the purchase of shares of Power Surge, Inc. with a September 30, 1997
balance of $288,289 and purchased a company automobile for $15,162, with a
September 30, 1997 balance of $11,870. These long term notes, less current
portion, have a balance of $278,709 as of September 30, 1997.
As a result of the foregoing, total liabilities increased from
$1,139,360 as of December 31, 1997 to $1,464,549 as of September 30, 1997, an
increase of $325,189, or 28.5%
Based on the foregoing, Net Asset Value increased during the nine
months ended September 30, 1997, from $2,330,732 at December 31, 1996, to
$2,511,172 at September 30, 1997, an increase of $180,440, or nearly 8%. Net
assets per common share increased from $3.64 per share at December 31, 1996, to
$3.92 per share on September 30, 1997, an increase of $0.28.
Management knows of no trends or demands, commitments, events or
uncertainties which will result in the Fund's liquidity or capital resources
materially increasing or decreasing.
RESULTS OF OPERATIONS THREE MONTHS ENDED SEPTEMBER 30, 1997 COMPARED TO THREE
MONTHS ENDED SEPTEMBER 30, 1996.
- -----------------------------------------------------------------------
The Fund's income/revenue for the three months ended September 30,
1997, was $21,415 a decrease of $38,124 or 64% compared with the same period in
1996. This decrease in income/revenue was due to the Fund's Northpark Building
being sold as of March 31, 1997 and producing no income for the three months
ending September 30, 1997. The new Chestnut Building, although not leased,
provided approximately $5,500 in property tax income at closing on September 4,
1997.
Expenses decreased from $216,549 for the quarter ended September 30,
1996 to $120,935 for the quarter ended September 30, 1997, a decrease of
$95,614 or approximately 44%. Contributing to the decrease in expenses were a
decrease in wages and salaries of 37% as one employee moved to part time, a
decrease in professional and legal fees of 67%, a decrease in building expenses
of 62% due to the sale of the Northpark Building, a decrease in investment
expense of 92% as the Fund had incurred large expenses in conjunction with its
dealings with Shiva Corporation in 1996. Income tax benefit was reduced as the
fund re-evaluated its estimated 1997 loss carry back to its 1996 tax liability.
Based on the foregoing, the Fund reported a net investment loss for
the three months ended September 30, 1997, of $(85,961), an increase of 45%
when compared to the net investment loss of $(157,010) incurred during the same
period in 1996.
The Fund's net realized gain from sales of investments was $73,277
for the quarter ended September 30, 1997, a decrease of $1,730,595, compared to
a realized gain of $1,803,872 for the quarter ended September 30, 1996.
Unrealized net appreciation (depreciation) relating to the current market value
of securities being held by the Fund increased $1,962,462 from an unrealized
net loss of ($1,636,451) for the quarter ended September 30, 1996 to an
unrealized net gain of $326,011 for the quarter ended September 30, 1997, due
to the unrealized appreciation of the Shiva Corporation investment in the
beginning period of 1996.
Management knows of no trends or demands, commitments, events or
uncertainties which will result in the Fund's liquidity or capital resources
materially increasing or decreasing.
RESULTS OF OPERATIONS NINE MONTHS ENDED SEPTEMBER 30, 1997 COMPARED TO NINE
MONTHS ENDED SEPTEMBER 30, 1996
- ---------------------------------------------------------------------------
The Fund's income/revenue for the nine months ended September 30,
1997 was $97,489 a decrease of $40,451 from the nine months ended September 30,
1996. Rental income decreased due to the sale of the Northpark Building
effective as of March 31, 1997. Interest income, however, increased due to
interest earned on note receivable balances during 1997.
Expenses decreased from $458,521 for the nine months ended September
30, 1996 to $371,247 for the nine months ending September 1997. The decrease
in expenses were mainly attributable to the decreases in wages and salaries,
professional and legal fees, building expenses, and investment expenses.
Income tax benefit was reduced as the fund re-evaluated its estimated 1997 loss
carry back to its 1996 tax liability.
The Fund had a net investment loss of ($260,199) for the nine months
ending September 30, 1997 compared to ($320,581) for the nine months ending
September 30, 1996. Net realized gains decreased from $1,937,655 for the nine
months ending September 30, 1996 to $492,807 during the same period in 1997, a
decrease of $1,444,848, mainly attributed to the Shiva Corp. realized gain in
1996. Net unrealized depreciation of investments decreased from ($323,401) as
of September 30, 1996 to ($52,169) as of September 30, 1997, a decrease of
$271,232, or 84%.
Management knows of no trends or demands, commitments, events or
uncertainties which will result in the Fund's liquidity or capital resources
materially increasing or decreasing.
<PAGE>
PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
- ------- -----------------
During the beginning of 1996, the Fund received requests for
information from the United States Securities and Exchange Commission ("SEC")
related to an investigation begun by the SEC during 1994 into various matters,
including the administrative and record keeping practices of the Fund, its
securities trading activities and those of its officers and directors. In
September 1996, the Fund was notified by the Commission's Staff that it intends
to request that the Commission commence an administrative proceeding against
the Fund and its directors based upon certain transactions in securities
formerly included in the Fund's securities portfolio. The Fund has responded
to Commission with a written submission which sets forth why there exists no
basis in fact or law for such a proceeding. It is impossible to predict whether
the staff will recommend a proceeding against the Fund or any of its directors,
and if such a recommendation is made, whether the Commission will authorize the
institution of a proceeding. There can be no assurance of the outcome of this
matter or the ultimate effect on the Fund's financial position.
Other than the foregoing, the Fund is not a party to any material
pending legal proceedings.
ITEM 2. CHANGES IN SECURITIES
- ------- ---------------------
None.
ITEM 3. DEFAULT UPON SENIOR SECURITIES
- ------- ------------------------------
There have been no defaults on any securities. The Fund has no
obligations with regard to dividends and no preferred stock is outstanding.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
- ------- ---------------------------------------------------
None
ITEM 5. OTHER INFORMATION
- ------- -----------------
None.
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
- ------- ---------------------------------
On September 18, 1997, the Company filed a Current Report on Form 8-
K, dated September 4, 1997, related to the acquisition by the Company of a
9,500 square foot commercial office building located at 3515 North Chestnut
Street, Colorado Springs, Colorado.
The report included:
Item 2: Acquisition of Assets
Item 7: Financial Statements and Exhibits
(c) Exhibits
10.1 State Bank Promissory Note
10.3 State Bank Deed of Trust
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
THE ROCKIES FUND, INC.
Dated: November 18, 1997 By: /s/ Stephen G. Calandrella
-------------------------- ----------------------------------
Stephen G. Calandrella, President
Dated: November 18, 1997 By: /s/ Barbara A. Hamstad
-------------------------- ----------------------------------
Barbara A. Hamstad,
Principal Accounting Officer
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
STATEMENT OF ASSETS AND LIABILITIES AND STATEMENT OF OPERATIONS ON PAGES 4
THROUGH 7 AND 27 THROUGH 30 OF THE COMPANY'S FORM 10-Q FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1997, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1997
<INVESTMENTS-AT-COST> 2,669,321
<INVESTMENTS-AT-VALUE> 2,421,830
<RECEIVABLES> 112
<ASSETS-OTHER> 586
<OTHER-ITEMS-ASSETS> 1,553,193
<TOTAL-ASSETS> 3,975,721
<PAYABLE-FOR-SECURITIES> 107,395
<SENIOR-LONG-TERM-DEBT> 748,709
<OTHER-ITEMS-LIABILITIES> 608,445
<TOTAL-LIABILITIES> 1,464,549
<SENIOR-EQUITY> 2,511,172
<PAID-IN-CAPITAL-COMMON> 2,901,243
<SHARES-COMMON-STOCK> 640,256
<SHARES-COMMON-PRIOR> 640,256
<ACCUMULATED-NII-CURRENT> (2,153,502)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 1,829,519
<OVERDISTRIBUTION-GAINS> 0
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<NET-ASSETS> 2,511,172
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 36,599
<OTHER-INCOME> 60,890
<EXPENSES-NET> 357,688
<NET-INVESTMENT-INCOME> (260,199)
<REALIZED-GAINS-CURRENT> 492,807
<APPREC-INCREASE-CURRENT> (52,169)
<NET-CHANGE-FROM-OPS> 180,439
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
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<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> (180,439)
<ACCUMULATED-NII-PRIOR> (320,581)
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<PER-SHARE-NAV-BEGIN> 3.64
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<PER-SHARE-GAIN-APPREC> .68
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</TABLE>
