<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 March 31, 1998
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 March 31, 1998, 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 March 31, 1998 (unaudited) and
December 31, 1997 (audited)
Schedule of Investments and Restricted Securities (unaudited)
Statement of Operations for the Three Months Ended March 31, 1998 and
March 31, 1997 (unaudited)
Statements of Stockholders' Equity for the Three Months Ended March 31,
1998 (unaudited), and Years Ended December 31, 1997 and 1996 (audited)
Statement of Changes in Net Assets as of March 31, 1998 and March 31,
1997 (unaudited)
Notes to Unaudited Financial Statements
Item 2. Management's Discussion and Analysis of Financial Conditions
and Results of Operations
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Item 2. Changes in Securities
Item 3. Defaults Upon Senior Securities
Item 4. Submission of Matters to a Vote of Security Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
<PAGE>
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
The interim unaudited financial statements have been prepared by the
Rockies Fund, Inc. (the "Fund" or the "Company") and, in the opinion of
management, reflect all material adjustments which are necessary to a fair
statement of results of the interim periods presented. Such adjustments
consisted only of normal recurring items. 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, 1997. 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 actual results to differ materially from those reflected in
the forward-looking statements. Factors that might cause such a difference
include, but are not limited to, competitive pressures, changing economic
conditions, those discussed in the Section entitled "Management's Discussion
and Analysis of Financial Condition and Results of Operations," and other
factors, some of which will be outside the control of the Company. Readers
are cautioned not to place undue reliance on these forward-looking statements,
which reflect management's analysis only as of the date hereof. The Company
undertakes no obligation to publicly revise these forward-looking statements
to reflect events or circumstances that arise after the date hereof. Readers
should refer to and carefully review the information in future documents the
Company files with the Securities and Exchange Commission.
<PAGE>
<PAGE>
THE ROCKIES FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES
MARCH 31, 1998 AND DECEMBER 31, 1997
<TABLE>
<CAPTION>
As of As of
March 31, December 31,
1998 1997
(unaudited) (audited)
----------- -----------
<S> <C> <C>
ASSETS
Investments at value (cost of $2,196,410, 1998
and $1,813,369, 1997)(See accompanying schedule):
Restricted and unrestricted securities $ 1,772,129 $ 1,725,831
Notes receivable 459,984 458,158
Real estate (cost of $621,358, 1998 and
$821,358, 1997) 756,000 965,000
----------- -----------
2,997,113 3,148,989
Cash:
Held by others 14,472 21,890
Investment securities sold 0 79,511
Accrued interest receivable held by others 56,282 53,045
Receivables from investees 353 562
----------- -----------
Total Current Assets 3,068,220 3,303,997
----------- -----------
Property & Equipment:
Land 390,000 390,000
Automobile 15,162 15,162
Furniture and fixtures 8,739 8,739
Constructions in progress 101,242 101,242
----------- -----------
515,143 515,143
Less Accumulated Depreciation (7,287) (5,474)
----------- -----------
507,856 509,669
----------- -----------
TOTAL ASSETS 3,576,076 3,813,666
LIABILITIES
Cash overdraft: 0 8,049
Payables:
Trade 125,512 108,506
Construction 55,000 55,762
Accrued liabilities:
Property taxes and other 0 23,011
Interest payable 5,135 8,565
Current maturities of long-term debt:
Related parties 6,500 172,374
Others 624,766 726,732
Deposits and deferred rent 28,646 41,334
Deferred tax liability, current 0 13,000
----------- -----------
Total Current Liabilities: 845,559 1,157,333
Long term debt, net of current maturities 255,550 259,531
Deferred tax liability 94,500 92,000
----------- -----------
Total Liabilities 1,195,609 1,508,864
NET ASSETS and STOCKHOLDER'S EQUITY $ 2,380,467 $ 2,304,802
(Equivalent to $3.72 per share at March 31, =========== ===========
1998 and $3.60 per share at Dec. 31, 1997)
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 (2,007,564) (1,919,099)
Accumulated net realized gain from
sales and permanent write-downs of securities 1,301,039 1,285,337
Unrealized net appreciation of investments 179,346 30,918
----------- -----------
Total accumulated deficit (527,179) (602,844)
----------- -----------
NET ASSETS $ 2,380,467 $ 2,304,802
</TABLE>
See Notes to Unaudited Financial Statements
<PAGE>
<PAGE>
THE ROCKIES FUND, INC.
Schedule of Investments
March 31, 1998 and December 31, 1997
<TABLE>
<CAPTION>
Initial **Cost at Fair value at Fair value at
Investment March 31, March 31, December 31,
Company Position date 1998 1998 1997
- ------- -------------- ---------- ---------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Restricted Securities:
- ---------------------
American Educational 29,000 common stock Sep-96 $ 145,000.00 $ 232,000.00 $ 170,375.00
Products, Inc.*(1) 2,000 common stock Sep-96 - - 11,750.00
20,000 warrants(ex.
@ $4.50) Sep-96 0.00 70,000.00 27,500.00
20,000 warrants(ex.
@ $4.50 Sep-96 - - 27,500.00
16,000 warrants(ex.
@ $10,00) Jun-97 0.00 20,000.00 4,000.00
15,000 warrants(ex.
@ $10.00 Jun-97 - - 3,750.00
---------- ----------- -----------
145,000.00 322,000.00 244,875.00
Bear Star, LLC* 5% partnership
interest Nov-94 0.00 0.00 0.00
COVA Technologies* 917 common stock Jul-96 20,035.00 20,035.00 20,035.00
Global Casinos, Inc.*(2) 3,800 common stock Nov-93 76,000.00 10,450.00 13,300.00
4,331 common stock Jan-94 50,068.00 11,910.00 15,159.00
1,724 common stock Jan-94 19,932.00 4,741.00 6,034.00
1,250 common stock Feb-94 25,000.00 3,438.00 4,375.00
75 common stock Mar-94 0.00 206.00 263.00
500 common stock Oct-94 10,000.00 1,375.00 1,750.00
5,000 common stock Feb-96 17,208.00 13,750.00 17,500.00
1,000 common stock Mar-96 3,125.00 2,750.00 3,500.00
105,000 warrants Nov-96 0.00 0.00 0.00
----------- ----------- -----------
201,333.00 48,620.00 61,880.00
Guardian Technologies,
Inc.*(3) 8,333 common stock Feb-97 8,750.00 20,833.00 22,916.00
90,533 common stock Mar-97 126,450.00 226,335.00 248,966.00
5,000 common stock Jun-97 6,260.00 12,500.00 13,750.00
20,000 common stock Aug-97 29,005.00 50,000.00 55,000.00
2,500 common stock Sep-97 8,061.00 6,250.00 6,875.00
137,000 warrants Mar-97 26,255.00 34,250.00 42,813.00
------------ ------------ ------------
204,781.00 350,168.00 390,319.00
Hampton Court Resources 12,500 common stock Sep-97 11,542.00 24,375.00 16,163.00
Land Resource Corporation* 10,000 common stock Mar-97 10,000.00 10,000.00 10,000.00
Lone Oak Vineyards, Inc.*(4) 35,000 common stock Feb-97 35,000.00 93,240.00 93,240.00
7,000 common stock Oct-97 7,000.00 18,648.00 18,648.00
7,000 common stock Nov-97 7,000.00 18,648.00 18,648.00
------------- ------------ ------------
49,000.00 130,536.00 130,560.00
Redwood Broadcasting,
Inc.(5) 5,000 common stock Feb-97 0.00 8,750.00 8,750.00
200,000 common stock Dec-97 240,000.00 350,000.00 350,000.00
50,000 common stock Dec-97 60,000.00 87,500.00 87,500.00
------------- ------------ ------------
300,000.00 446,250.00 446,250.00
Training Devices, Inc. 20,000 common stock Feb-97 25,000.00 40,000.00 40,000.00
Wilshire Technologies, Inc. 247 warrants Dec-97 0.00 0.00 0.00
------------ ------------ ------------
TOTAL RESTRICTED SECURITIES 966,691.00 1,391,984.00 1,360,058.00
Unrestricted Securities:
- ------------------------
Astea International 10,000 common stock Feb-97 - - 18,750.00
5,000 common stock Jun-97 16,354.00 16,719.00 9,375.00
------------ ------------ ------------
16,354.00 16,719.00 28,125.00
Cable & Company Worldwide 10,000 common stock Mar-97 5,165.00 700.00 1,250.00
40,000 common stock Nov-97 8,965.00 2,800.00 5,000.00
------------ ------------ ------------
14,130.00 3,500.00 6,250.00
Cusa Technologies, Inc. 30,000 common stock Nov-97 33,360.00 32,813.00 30,938.00
Exploration Company, The 31,000 common stock Oct-97 93,930.00 63,938.00 62,000.00
5,000 common stock Oct-97 - - 10,000.00
------------ ------------ ------------
93,930.00 63,938.00 72,000.00
Kinetiks.com 10,000 common stock Sep-96 38,125.00 313.00 0.00
11,000 common stock Oct-96 24,313.00 344.00 0.00
20,000 common stock Nov-96 12,188.00 625.00 0.00
62,500 common stock Dec-96 44,852.00 1,953.00 0.00
10,000 common stock Jul-97 3,281.00 313.00 0.00
Option to purchase
2.9M shares Feb-98 5,000.00 5,000.00 -
400,000 warrants Feb-97 - 0.00 0.00 0.00
Sep-97 ------------ ------------ ------------
127,758.00 8,547.00 0.00
Optimax Industries, Inc. 115,191 common stock Jun-94 138,229.00 10,367.00 18,004.00
Premium Cigars International,
Inc. 5,000 common stock Aug-97 23,893.00 6,875.00 12,813.00
Shiva Corporation 2,630 common stock Dec-96 0.00 26,300.00 22,519.00
Southshore Corporation 15,000 common stock Sep-97 7,715.00 150.00 3,750.00
TELS Corporation 20,000 common stock Aug-96 12,813.00 8,125.00 6,250.00
10,000 common stock Sep-96 5,938.00 4,063.00 3,125.00
----------- ------------ ------------
18,750.00 12,188.00 9,375.00
Usasurance Group 12,000 common stock Jul-96 75,620.00 30,000.00 24,000.00
3,000 common stock Jul-96 - - 6,000.00
10,000 common stock Sep-96 62,750.00 25,000.00 20,000.00
2,500 common stock Oct-96 12,375.00 6,250.00 5,000.00
31,500 common stock Dec-96 73,777.00 78,750.00 63,000.00
2,500 common stock Jan-97 8,750.00 6,250.00 5,000.00
4,500 common stock Jun-97 6,106.00 11,250.00 9,000.00
7,500 common stock Dec-97 7,875.00 18,750.00 15,000.00
------------ ------------ ------------
247,253.00 176,250.00 147,000.00
Whitewing Labs 15,000 common stock Jan-97 23,175.00 22,500.00 11,250.00
5,000 common stock Jan-97 - - 3,750.00
------------ ------------ ------------
23,175.00 22,500.00 15,000.00
TOTAL UNRESTRICTED SECURITIES $ 744,548.00 $ 380,145.00 $ 365,774.00
Notes Receivable:
- -----------------
Columbine Home Sales, LLC* Note Receivable, 10% Dec-95 0.00 5,814.00 5,814.00
Damach Note Receivable, 12%,
due 3/31/97 Oct-96 32,500.00 32,500.00 32,500.00
Phil Georgeson Note Receivable, 12%,
due on demand Aug-96 4,602.00 4,602.00 4,602.00
Note Receivable, 12%,
due on demand Mar-96 2,000.00 2,000.00 -
------------ ------------ ------------
6,602.00 6,602.00 4,602.00
Global Casinos, Inc.* Note Receivable, 8%,
due 11/1/98 Nov-96 175,000.00 175,000.00 175,000.00
Note Receivable, 9%,
due on demand Mar-97 45,181.00 45,181.00 43,904.00
Note Receivable, 24%,
due 4/15/98 50,850.00 50,850.00 75,000.00
Note Receivable
due on demand 35,000.00 35,000.00 -
------------ ------------ ------------
306,031.00 306,031.00 293,904.00
Kinetiks.com Note Receivable, 10%,
due 3/30/97 Feb-97 25,000.00 25,000.00 25,000.00
Marco Foods, Inc.* Note Receivable, 12%,
due on demand Jan-97 115,038.00 115,038.00 127,338.00
------------ ------------ ------------
Subtotal Notes Receivable 485,170.00 490,984.00 489,158.00
Allowance for Doubtful Notes 0.00 (31,000.00) (31,000.00)
NET NOTES RECEIVABLE 485,170.00 459,984.00 458,158.00
Investments in Real Estate:
- ---------------------------
Chestnut Property Land & building at
3515 N. Chestnut Sep-97 621,358.00 765,000.00 765,000.00
Themopolis Property Building at 116 E.
Park St. Sep-97 - - 200,000.00
------------- ------------- -------------
TOTAL REAL ESTATE INVESTMENTS 621,358.00 765,000.00 965,000.00
TOTAL INVESTMENTS $2,817,768.00 $2,997,113.00 $3,148,989.00
============= ============= =============
</TABLE>
- --------------------
* These entities are considered to be affiliated companies as a result of the
Company's investment and/or position on entity's Board of Directors
during the last 90 days.
** After permanent write-downs.
(1) After giving effect to a 1:5 reverse split
(2) After giving effect to a 1:10 reverse split
(3) After giving effect to a 1:3 reverse split
(4) The value of Loan Oak is based on the Company's pro rata share of a note
receivable for the sale of the Loan Oak's vineyard property less
allowances for tax consequences
(5) The 50,000 shares are subject to FCC approval of the change in ownership of
several radio stations
See Notes to Unaudited Financial Statements
<PAGE>
<PAGE>
THE ROCKIES FUND, INC.
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
For the Three For the Three
Months Ended Months Ended
March 31, 1998 March 31, 1997
(Unaudited) (Unaudited)
--------------- ---------------
<S> <C> <C>
INVESTMENT INCOME:
Rental income $ 12,688 $ 51,247
Consulting and other services 320 152
Interest and dividends 3,456 12,565
----------- -----------
Total Income/Revenue 16,463 63,963
----------- -----------
Expenses:
Wages and salaries 31,190 36,171
Professional fees 12,673 4,293
Custodian fees 2,594 3,559
Directors fees 0 2,000
Interest 14,736 11,253
Travel and entertainment 7,168 10,720
Office 22,187 32,111
Building expenses 13,590 33,481
Investment expenses 789 8,103
Donations 0 2,422
----------- -----------
104,927 144,113
Net investment loss $ (88,464) $ (80,150)
=========== ===========
Net realized gain from investments 15,702 90,065
Net realized gain from sale of building 0 388,476
----------- -----------
15,702 478,541
----------- -----------
Net unrealized appreciation
(depreciation) of investments:
Beginning of year 30,918 (20,322)
End of period 179,346 (136,951)
----------- -----------
Net unrealized depreciation of
investments 148,428 (116,629)
Net gain (loss) from investments $ 164,130 $ 361,912
=========== ===========
Net increase (decrease) in net assets
resulting from operations $ 75,666 $ 281,762
=========== ===========
Per share amounts:
Net investment loss $(0.13) $(0.12)
Net realized gain from investments 0.02 0.74
Net unrealized depreciation of
investments 0.23 (0.18)
----------- -----------
$0.12 $0.44
=========== ===========
</TABLE>
See Notes to Unaudited Financial Statements
<PAGE>
<PAGE>
THE ROCKIES FUND, INC.
Statements of Stockholders' Equity
Three Months Ended March 31, 1998 and
Years Ended December 31, 1997 and 1996
<TABLE>
<CAPTION>
Accumulated
Net Realized Unrealized
Gain (Losses) Net
Accumulated From Sales Appreciation
Additional Net And 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, 1996 $ 6,403 $ 2,901,243 $ (1,893,303) $ 1,336,711 $ (20,322) $ 2,330,732
========== =========== =========== =========== =========== ===========
Net investment loss - - (25,796) - - (25,796)
Net realized gain on
sale of investments - - - (51,374) - (51,374)
Unrealized net
depreciation of
investments - - - - 51,240 51,240
---------- ----------- ----------- ----------- ----------- -----------
BALANCES AT
DECEMBER 31, 1997 $ 6,403 $ 2,901,243 $ (1,919,099) $ 1,285,337 $ 30,918 $ 2,304,802
Net investment loss - - (88,465) - - (88,465)
Net realized gain
on sale of
investments - - - 15,702 - 15,702
Unrealized net
depreciation of
investments - - - - 148,428 148,428
---------- ----------- ----------- ----------- ----------- -----------
BALANCES AT
MARCH 31, 1998 $ 6,403 $ 2,901,243 $ (2,007,564) $ 1,301,039 $ 179,346 $ 2,380,467
========== =========== =========== =========== =========== ===========
</TABLE>
See Notes to Unaudited Financial Statements
<PAGE>
<PAGE>
THE ROCKIES FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
For the Three For the Three
Months Ended Months Ended
March 31, 1998 March 31, 1997
(Unaudited) (Unaudited)
---------- ----------
<S> <C> <C>
Increase (decrease) in net assets
from investment activities:
Net investment loss $ (88,465) $ (80,150)
Net realized gain from investments 15,702 90,065
Net realized gain from building 0 388,476
Net unrealized depreciation of investments 148,428 (116,629)
----------- -----------
Net increase (decrease) in net assets
from investment activities 75,665 281,762
Net assets at beginning of year 2,304,802 2,330,732
----------- -----------
Net asset at end of year $ 2,380,467 $ 2,612,494
=========== ===========
</TABLE>
See Notes to Unaudited Financial Statements
<PAGE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
1. Organization and Summary of Significant Accounting Policies
-----------------------------------------------------------
(a) Organization and Basis of Presentation.
--------------------------------------
The Rockies Fund, Inc. (the "Fund" or the "Company") was incorporated in
Nevada on August 2, 1983, for the principal purpose of making venture capital
investments in developing companies located primarily in the Rocky Mountain
Region of the United States. The Fund is registered under the Investment
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.
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, 1997. The
results for the interim periods are not necessarily indicative of results
which may be expected for any other interim period or for the full years.
(b) Investment Valuation and Transactions.
-------------------------------------
Securities listed or traded on an exchange are valued at their last sales
price on the exchange where the securities are principally traded. Securities
reported on the NASDAQ National Market System are valued at the closing bid
price on the valuation date. Securities traded in the over-the-counter market
are valued at the last bid price, based upon quotes furnished by independent
market makers for such securities. Investments in notes receivable are valued
at net realizable value. The Fund performs on-going evaluations regarding
collectability of receivables and provides allowances for potential losses.
In the absence of readily ascertainable market values, investments in
restricted securities without quoted market prices are carried at estimated
fair value as determined by the Fund's Board of Directors (the "Board"). Due
to the inherent uncertainty of valuation, those estimated values may differ
significantly from the values that would have been used had a ready market for
the investments existed, and the differences could be material.
Securities transactions are accounted for on a settlement 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.
A deferred tax liability is recognized for the future tax consequences
attributable to the sale proceeds of the Northpark Building utilized in a 1031
exchange.
2. Portfolio Securities
--------------------
AMERICAN EDUCATIONAL PRODUCTS, INC.
-----------------------------------
The Fund, at March 31, 1998, held 29,000 shares of American Educational
Products, Inc. common stock, after giving effect to a one-for-five reverse
stock split. The stock is restricted as to sale, non-income producing and has
been valued by the Board of Directors at its quoted market value of $8.00 per
share or $232,000. The Fund also held at March 31, 1998 common stock purchase
warrants exercisable to purchase an additional 20,000 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 $3.50 each or $70,000,
representing the difference between their exercise price and the market value
of the common stock. The Fund also held at March 31, 1998 common stock
purchase warrants exercisable to purchase 16,000 shares of common stock, at an
exercise price of $10.00 per share. These warrants were valued at their
quoted market price of $1.25 each or $20,000.
ASTEA INTERNATIONAL
-------------------
The Fund, at March 31, 1998, 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 $3.34 per share or
$16,718.75.
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 Bear Star 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 March 31, 1998, 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 $.07 per share or
$3,500.
COVA TECHNOLOGIES
-----------------
The Fund at March 31, 1998 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.
CUSA TECHNOLOGIES, INC.
-----------------------
The Fund, at March 31, 1998, held 30,000 shares of Cova Technologies,
Inc. common stock, which shares are unrestricted as to sale, non-income
producing, and have been valued at their quoted market price of $1.09 per
share or $32,812.50.
DAMACH, INC.
------------
The Fund, at March 31, 1998 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, 1998. An agreement was signed on March 4, 1997 to
extend this promissory note on to a month-to-month basis or until the Fund
makes a written request for payment.
EXPLORATION COMPANY, THE
------------------------
The Fund, at March 31, 1998, 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 $2.06 per
share or $63,937.50.
GEORGESON, PHIL
---------------
The Fund, at March 31, 1998 held notes receivable from Phil Georgeson
totaling $6,602.13. The notes are unsecured, accrue interest at the rate of
12% per year and are due on demand.
GLOBAL CASINOS, INC.
--------------------
The Fund, at March 31, 1998, 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 at their quoted market price of $2.75 per
share, or $48,620. The Fund, at March 31, 1998, 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. The Fund holds a second note receivable
from Global Casinos in the amount of $45,180.80, 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
holds a third note receivable from Global Casinos in the amount of $50,850,
which note is secured, accrues interest at the rate of 24% per year and is due
on April 15, 1998. The Fund holds a fourth note receivable from Global
Casinos in the amount of $35,000, which note is unsecured, accrues interest at
the rate of 12% per year and is due on demand. The Fund also owns 35,000
warrants exercisable at $8.00 per share, all of which expire as of February 1,
1999 and are valued at $0 by the Board of Directors.
GUARDIAN TECHNOLOGIES, INC.
---------------------------
The Fund, at March 31, 1998 held 126,367 shares of Guardian Technologies
common stock after giving effect to a one-for-three (1:3) reverse stock split.
The stock is restricted due to the company being an affiliate, non-income
producing, and has been valued at its quoted market price of $2.50 per share
or $315,917.50. The Fund also held warrants exercisable to purchase an
additional 137,000 shares of Guardian Technologies common stock, which
warrants are also restricted due to the Company being an affiliate, non-income
producing, and have been valued at their quoted market price of $.25 each or
$34,250.
HAMPTON COURT RESOURCES
-----------------------
The Fund, at March 31, 1998 held 12,500 shares of Hampton Court Resources
common stock, which stock is restricted as to sale, non-income producing and
has been valued at its quoted market price of $1.95 per share or $24,375.
KINETIKS.COM
------------
The Fund, at March 31, 1998 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 $.03 per share or $3,546.88.
The Fund also held warrants to purchase and additional 400,000 shares of
Kinetics.com common stock at an exercise price of $.25 per share. The
warrants have been valued by the Board of Directors at $0. The Fund also held
an option to purchase the shares held by one of Kinetiks' officers, which
option has been valued by the Board of Directors at its cost of $5,000. The
Fund also held a note receivable in the amount of $25,000 which note is
unsecured, accrues interest at the rate of 10% per year, and was due on March
30, 1997. The note provides for a default interest rate of 18% and an
additional 50,000 warrants for each 30-day period that it goes unpaid.
LAND RESOURCE CORPORATION
-------------------------
The Fund, at March 31, 1998 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.
LOAN OAK VINEYARDS, INC.
------------------------
The Fund, at March 31, 1998 held 49,000 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 $2.66 per
share or $130,536 representing the Fund's pro rata share of a note receivable
in favor of Lone Oak Vineyards received for the sale of its vineyard property,
less a 20% discount for tax consequences. The note is schedule to be replaced
by permanent financing in May of 1998, at which time Lone Oak will distribute
the net proceeds pro rata among its shareholders.
MARCO FOODS, INC.
-----------------
The Fund, at March 31, 1998 held a note receivable from Marco Foods in
the amount of $115,037.50, which note is unsecured, accrues interest at the
rate of 12% per year and is due on demand.
OPTIMAX INDUSTRIES, INC. (fka PLANTS FOR TOMORROW, INC.)
--------------------------------------------------------
At March 31, 1998, the Fund held 115,191 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 $.09 per share
or $10,367. The shares of Optimax are pledged as collateral securing the
Fund's line of credit.
PREMIUM CIGARS, INC.
--------------------
The Fund, at March 31, 1998 held 5,000 share of Premium Cigars common
stock, which shares are unrestricted as to sale, non-income producing, and
have been valued at their quoted market price of $1.38 per share or $6,875.
REDWOOD BROADCASTING, INC.
--------------------------
The Fund, at March 31, 1998, held 255,000 shares of Redwood Broadcasting
common stock, which stock is restricted as to sale, non-income producing, and
has been valued at its quoted market price of $1.75 per share or $446,250. Of
the above shares, 50,000 are held pending FCC approval of the change in
ownership of several of Redwood's radio stations. 250,000 of the above 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.
SHIVA CORPORATION
-----------------
The Fund, at March 31, 1998, held 2,630 shares of Shiva Corporation
common stock, which shares are unrestricted as to sale, non-income producing
and have been valued at their quoted market price of $10.00 per share or
$26,300.
SOUTHSHORE CORPORATION
----------------------
At March 31, 1998, the Fund held 15,000 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 $.01 per share or $150.
TELS CORPORATION
----------------
The Fund, at March 31, 1998, 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 $.41 per share or
$12,187.50.
TRAINING DEVICES, INC.
----------------------
The Fund, at March 31, 1998 held 20,000 share of Training Devices common
stock, which shares are restricted as to sale, non-income producing, and have
been valued by the Board of Directors at their cost of $2.00 per share or
$40,000, based on the price of the Company's most recent financing in October
of 1997.
USASURANCE GROUP
----------------
The Fund, at March 31, 1998, held 70,500 shares of Usasurance Group
common stock, which shares are unrestricted as to sale, non-income producing,
and have been valued at their quoted market price of $2.50 or $176,250.
WHITEWING LABS
--------------
The Fund, at March 31, 1998 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 $1.50 per share or $22,500.
WILSHIRE TECHNOLOGIES, INC.
---------------------------
The Fund, at March 31, 1998 held 247 shares of Wilshire Technologies
warrants, which warrants are restricted as to sale, non-income producing, and
have been valued by the Board of Directors at $0 based on their exercise price
being greater than the market price of Wilshire Technologies common stock.
3. Real Estate Operations
----------------------
Effective March 31, 1997, the Rockies Fund, Inc. consummated the sale of
its 26,000 square foot commercial office building located at 4465 Northpark
Drive, Colorado Springs, Colorado (the "Building"). The sale price for the
building was $1,080,000, which was paid in cash at closing.
The proceeds received were utilized in part to pay approximately $452,000
of mortgage and other debt. This transaction resulted in a net gain of
approximately $388,000.
In a concurrent transaction structured to qualify as a tax-free
reorganization under Section 1031 of the Internal Revenue Code of 1986, as
amended, (the "Code"), the Fund, on April 1, 1997 consummated the purchase of
5 acres of undeveloped commercial real estate located at 3210 Woodman Road,
Colorado Springs, Colorado (the "Property"). The Fund plans to undertake a
phased development of two commercial office buildings on the Property which
will, upon completion, consist of an aggregate of 55,000 square feet of
commercial office space. The purchase price for the Property was $390,000,
which was paid in cash on April 1, 1997 at the time of closing utilizing a
portion of the proceeds realized by the Fund from the sale of the Building.
The Fund intends to hold this new real estate as 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 and incurred approximately $20,000 of
improvements as of December 31, 1997. The Fund utilized $100,000 from the
Building sale proceeds towards the purchase of the new Chestnut Building as a
tax-free exchange under Section 1031 of the Code 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 as of December 31, 1997,
had signed an agreement to lease the Chestnut Building for eight months and
nine days expiring on September 1, 1998, for $35,000. In addition, the Fund
agreed to sell and the tenant agreed to buy the Chestnut Building for $775,000
upon the completion of the lease, September 1, 1998, for an approximate net
gain of $155,000. The tenant as of December 23, 1997, paid the Fund $35,000
prepaid rent through September 1, 1998. The tenant as of January 1998 paid
the Fund $7,500 earnest and partial payment of the Chestnut purchase price.
In addition, as of March 31, 1998, the Fund sold a 20% hotel investment which
was also utilized as a tax-free exchange under Section 1031 of the Code. The
hotel, which was purchased on September 24, 1997, was sold for its purchase
price of $200,000, of which $50,000 was paid in cash and the purchaser assumed
a $150,000 note to Wyoming Resorts, LLC.
The Fund is currently leasing executive office space located in the
Building for $1,100 a month (on a month to month basis) until the expiration
of their lease in September of 1998. The Fund is currently seeking a new
office location.
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.
<PAGE>
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS.
The following discussion and analysis should be read in conjunction
with the Unaudited Financial Statements and Notes thereto appearing elsewhere
in this report.
LIQUIDITY AND CAPITAL RESOURCES - MARCH 31, 1998 COMPARED TO DECEMBER 31, 1997
During the three months ended March 31, 1998, the Fund liquidated
certain securities, including 2,000 shares and 35,000 warrants of American
Educational Products, 10,000 shares of Astea International, 5,000 shares of
The Exploration Company, 3,000 shares of USAssurance and 5,000 shares of
Whitewing Labs. The Fund purchased no securities during the three months
ended March 31, 1998.
The Fund's value in restricted and unrestricted securities increased
from $1,725,831 as of December 31, 1997 to $1,772,129 as of March 31, 1998, an
increase of $46,298 or 2.6%. Notes receivable increased $1,827 from $458,158
as of December 31, 1997 to $459,985 as of March 31, 1998. Global Casinos, an
international gaming company, comprises approximately 58%, and an affiliate,
Marco Foods, approximately 25% of notes receivable.
As of March 31, 1998, the fund owns commercial real estate purchased
on September 4, 1997 for $621,358 with improvements, which the Fund has
contracted to sell for $775,000 commencing on September 1, 1998. As of
December 31, 1997, the Fund owned a $200,000 hotel investment which was
subsequently sold on March 17, 1998 for the Fund's cost of $200,000. As a
result, total investments decreased from $3,148,989 on December 31, 1997 to
$2,997,113 on March 31, 1998, a decrease of $151,876 or 4.8%.
Cash held by others decreased $7,418 or 34% and accrued interest
receivable increased $3,237 or 6.1% from December 31, 1997. Other assets
decreased from $79,511 as of December 31, 1997, to $0.00 as of March 31, 1998,
due primarily to trades pending collected during the first three months of
1998.
Total current assets therefore decreased from $3,303,997 at December
31, 1997 to $3,068,220 at March 31, 1998, a decrease of $235,777 or 7.1%.
Property and Equipment remained unchanged from December 31, 1997 to
March 31, 1998 while incurring $1,813 in additional accumulated depreciation.
Based on the foregoing, total assets decreased from $3,813,666 on
December 31, 1997 to $3,576,076 on March 31, 1998, a decrease of $237,590 or
0.6%.
Total liabilities decreased from $1,508,864 as of December 31, 1997 to
$1,195,609 as of March 31, 1998, a reduction of $313,255 or 21%. Payables
trade increased 15% from $108,506 as of December 31, 1997 to 0.00 at March 31,
1998, interest payable decreased from $8,565 to $5,135, note payable related
party decreased from $172,347 to $6,500 as notes to Redwood Microcap were paid
during the first quarter in addition to the sale of the hotel investment with
a note payable of $150,000. Notes payable other decreased from $726,732 as of
December 31, 1997 to $624,766 as of March 31, 1998 or 14% due to the payments
on margin account balances and a reduction to deferred taxes based on the sale
of the hotel investment as part of the 1031 exchange.
The Fund still has a $75,000 line of credit with a balance of $66,705
as of March 31, 1998 that accrues interest at 10.5%, secured by the Fund's
security holdings.
Based on the foregoing, Net Asset Value increased during the three
months ended March 31, 1998, from $2,304,802 at December 31, 1997, to
$2,380,467 at March 31, 1998, an increase of $75,665 or nearly 3.2%. Net
assets per common share increased from $3.60 per share at December 31, 1997,
to $3.72 per share on March 31, 1998, an increase of $0.12.
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 MARCH 31, 1998 COMPARED TO THREE
MONTHS ENDED MARCH 31, 1997.
The Fund's income/revenue for the three months ended March 31, 1998,
was $16,463, a decrease of $47,500 or 74% compared with the same period in
1997. This decrease in income/revenue was due to the sale of the building
which was fully leased for the three months ending March 31, 1997. The Fund's
Chestnut Building, however, provides minimal income as it is under a sale
contract and currently being leased to the purchaser under contract. Interest
and dividends decreased 72% as the Fund earned less interest on cash balances.
Expenses decreased from $144,113 as of March 31, 1997 to $104,927 as of March
31, 1998, a decrease of $39,186 or 27%. Contributing to the decrease in
expenses were decreased wages of $8,598, custodian fees of $1,000, directors
fees of $2,000, travel and entertainment of $3,553, office expenses of $9,924,
building expenses of $19,891, investment expense of $7,314 and donations of
$2,422. Offset against the foregoing decreases was an increase on interest
expenses of $3,483 due to the Chestnut Building mortgage.
Based on the foregoing, the Fund reported a net investment loss for
the three months ended March 31, 1998, of $88,464, an increase of 9.3% when
compared to the net investment loss of $80,150 incurred during the same period
in 1997.
The Fund's net realized gain from sales of investments and the sale of
the Northpark office building was $478,541 as of March 31, 1998, a decrease of
$462,839 or 96.7%, compared to a realized gain of $15,702 as of March 31,
1998. Net realized gain from sales of investments were $26,346 as of March
31, 1998, less a deferred tax adjustment of $10,645 due to the sale of the
Hotel investment. Unrealized net depreciation relating to the current market
value of securities being held by the Fund increased $265,057 or 22.7% from an
unrealized net loss of $116,629 as of March 31, 1997 to an unrealized net gain
of $148,428 as of March 31, 1998.
Management knows of no trends or demands, commitments, events or
uncertainties which will result in the Fund's liquidity or capital resources
materially increasing or decreasing.
<PAGE>
<PAGE>
PART 1. OTHER INFORMATION
Item 1. Legal Proceedings
During the beginning of 1996, the Fund received requests for information
from the United States Securities and Exchange Commission ("SEC") related to
an investigation begun by the SEC during 1994 into various matters, including
the administrative and record keeping practices of the Fund, its securities
trading activities and those of its officers and directors. In September
1996, the Fund was notified by the Commission's Staff that it intends to
request that the Commission commence an administrative proceeding against the
Fund and its directors based upon certain transactions in securities formerly
included in the Fund's securities portfolio. The Fund has responded to
Commission with a written submission which sets forth why there exists no
basis in fact or law for such a proceeding. It is impossible to predict
whether the staff will recommend a proceeding against the Fund or any of its
directors, and if such a recommendation is made, whether the Commission will
authorize the institution of a proceeding. There can be no assurance of the
outcome of this matter or the ultimate effect on the Fund's financial
position.
Other than the foregoing, the Fund is not a party to any material pending
legal proceedings.
Item 2. Changes in Securities
None.
Item 3. Default Upon Senior Securities
There have been no defaults on any securities. The Fund has no
obligations with regard to dividends and no preferred stock is outstanding.
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
None.
<PAGE>
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
THE ROCKIES FUND, INC.
Dated: May 13, 1998 By: /s/ Stephen G. Calandrella
--------------- ------------------------------------------
Stephen G. Calandrella, President
Dated: May 13, 1998 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 FOUND ON PAGES
4, 5 AND 11 OF THE COMPANY'S FORM 10-Q FOR THE THREE MONTHS ENDED MARCH 31 1998,
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1998
<INVESTMENTS-AT-COST> 2,817,768
<INVESTMENTS-AT-VALUE> 2,997,113
<RECEIVABLES> 353
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 576,610
<TOTAL-ASSETS> 3,576,076
<PAYABLE-FOR-SECURITIES> 180,512
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,015,097
<TOTAL-LIABILITIES> 1,195,609
<SENIOR-EQUITY> 2,380,467
<PAID-IN-CAPITAL-COMMON> 2,901,243
<SHARES-COMMON-STOCK> 640,256
<SHARES-COMMON-PRIOR> 640,256
<ACCUMULATED-NII-CURRENT> 2,007,564
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 1,301,039
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (527,179)
<NET-ASSETS> 2,380,467
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 3,456
<OTHER-INCOME> 13,008
<EXPENSES-NET> 104,927
<NET-INVESTMENT-INCOME> (88,464)
<REALIZED-GAINS-CURRENT> 15,702
<APPREC-INCREASE-CURRENT> 148,428
<NET-CHANGE-FROM-OPS> 75,666
<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> 75,666
<ACCUMULATED-NII-PRIOR> (80,150)
<ACCUMULATED-GAINS-PRIOR> 478,541
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 14,736
<GROSS-EXPENSE> 104,927
<AVERAGE-NET-ASSETS> 2,496,481
<PER-SHARE-NAV-BEGIN> 3.60
<PER-SHARE-NII> (.13)
<PER-SHARE-GAIN-APPREC> .25
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 3.72
<EXPENSE-RATIO> 5.8
<AVG-DEBT-OUTSTANDING> 1,352,237
<AVG-DEBT-PER-SHARE> 2,712
</TABLE>
