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, 1999
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.)
5373 N. Union, Suite 100, Colorado Springs, Colorado 80918
(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, 1999, the Company had 640,256 shares of its $.01
par value common stock outstanding.
INDEX
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Statement of Assets and Liabilities at March 31, 1999
(unaudited) and December 31, 1998 (audited)
Schedule of Investments and Restricted Securities (unaudited)
Statement of Operations for the Three Months Ended
March 31, 1999 and March 31, 1998 (unaudited)
Statements of Stockholders' Equity for the Three Months
Ended March 31, 1999 (unaudited), and Years Ended
December 31, 1998 and 1997 (audited)
Statement of Changes in Net Assets as of March 31, 1999
and March 31, 1998 (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
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. 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, 1998. 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.
THE ROCKIES FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES
MARCH 31, 1999 AND DECEMBER 31, 1998
March 31,1999 December 31,1998
(unaudited) (audited)
ASSETS
Investments at value
(cost of $2,106,773,
March 31, 1999 and
$2,760,600, 1998)
Restricted and
unrestricted securities $ 2,627,465 $ 1,830,541
Notes receivable 708,544 554,582
Real estate 765,000 765,000
4,101,009 3,150,123
Cash:
Held by related party 22,193 232,351
Held by others 5,698 9,455
Investment securities sold 0 1,204,587
Accounts receivable 10,769 31,934
Accrued interest receivable 72,608 52,969
Prepaid loan payment 32,758 43,678
Total Current Assets 4,245,035 4,725,097
Property & Equipment:
Land 390,000 390,000
Automobile 15,162 15,162
Furniture and fixtures 7,939 7,939
Construction in progress 114,058 114,058
527,159 527,159
Less Accumulated Depreciation (11,131) (10,071)
516,028 517,088
Deposits 4,400 4,400
Total assets 4,765,463 5,246,585
THE ROCKIES FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES
MARCH 31, 1999 AND DECEMBER 31, 1998
(Continued)
March 31,1999 December 31,1998
(unaudited) (unaudited)
LIABILITIES
Payables:
Trade 174,997 258,394
Investment securities purchases 0 852,709
Accrued liabilities:
Property taxes and other 0 14,552
Income taxes 149,813 91,121
Interest payable 1,370 1,175
Current maturities of long-term debt:
Related parties 228,395 231,576
Others 710,178 653,975
Deposits and deferred rent 7,500 12,616
Deferred tax liability 110,104 178,405
Total current liabilities 1,382,357 2,294,523
Long term debt, net of
current maturities 231,417 242,176
Deferred tax liability 151,505 151,505
Total liabilities 1,765,279 2,688,204
NET ASSETS and STOCKHOLDER'S $ 3,000,184 $ 2,558,381
EQUITY
(Equivalent to $4.69 per
share at March 31,
1999 and $4.00 per share at
Dec. 31, 1998)
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 excess (deficit):
Accumulated net
investment loss (2,510,349) (2,489,304)
Accumulated net realized
gain from sales of
securities 1,895,938 1,750,517
Unrealized net appreciation
of investments 706,949 389,522
Total accumulated
excess (deficit) 92,538 (349,265)
Net assets $ 3,000,184 $ 2,558,381
<TABLE>
THE ROCKIES FUND, INC.
Schedules of Investments
March 31, 1999 and December 31, 1998
<CAPTION>
Initial **Cost at Fair value at Fair value at
Investment Mar 31, Mar 31, December 31,
Company Position Date 1999 1999 1998
<S> <C> <C> <C> <C> <C>
Restricted Securities:
Alta California Broadcasting 255,000 common stock Dec-98 0.00 255,000.00 255,000.00
American Educational
Products, Inc.* (1)<F1> 16,500 common stock Sep-96 82,500.00 152,625.00 156,750.00
Eclipse (fka) Bear Star,LLC 5% partnership interest Nov-94 0.00 0.00 0.00
305,000 common stock Jun-96 500.00 0.00 0.00
500.00 0.00 0.00
Communications World 40,000 common stock Feb-99 40,000.00 40,000.00 0.00
8,000 warrants Feb-99 0.00 0.00 0.00
40,000.00 40,000.00 0.00
COVA Technologies*<F1> 917 common stock Jul-96 20,035.00 20,035.00 20,035.00
Fieldpoint Petroleum 30,000 common stock Mar-99 22,500.00 22,500.00 0.00
Global Casinos, Inc.* (2)<F1> 3,800 common stock Nov-93 76,000.00 4,037.50 4,512.50
4,331 common stock Jan-94 50,068.21 4,601.69 5,143.06
1,724 common stock Jan-94 19,931.79 1,831.75 2,047.25
1,250 common stock Feb-94 25,000.00 1,328.13 1,484.38
75 common stock Mar-94 0.00 79.69 89.06
500 common stock Oct-94 10,000.00 531.25 593.75
5,000 common stock Feb-96 17,207.50 5,312.50 5,937.50
1,000 common stock Mar-96 3,125.00 1,062.50 1,187.50
291,667 preferred stock Dec-98 350,000.00 309,896.19 346,354.56
551,332.50 328,681.20 367,349.56
Hampton Court Resources 12,500 common stock Sep-97 11,542.00 10,750.00 11,375.00
Kinetiks.com 100,000 common stock Feb-98 5,000.00 11,000.00 11,000.00
100,000 common stock Jul-98 5,000.00 11,000.00 11,000.00
100,000 common stock Sep-98 5,000.00 11,000.00 11,000.00
100,000 common stock Sep-98 5,000.00 11,000.00 11,000.00
100,000 common stock Jan-99 5,000.00 11,000.00 0.00
100,000 common stock Jan-99 5,000.00 11,000.00 0.00
100,000 common stock Jan-99 5,000.00 11,000.00 0.00
1,300,000 warrants 2/97 - 3/99 0.00 0.00 0.00
35,000.00 77,000.00 44,000.00
Land Resource Corporation*<F1> 10,000 common stock Mar-97 10,000.00 10,000.00 10,000.00
Multi-Link Telecommunications 25,000 common stock Nov-98 25,000.00 25,000.00 25,000.00
Redwood Broadcasting, Inc. 8,000 common stock Dec-97 0.00 0.00 32,000.00
22,000 common stock Dec-97 26,400.00 214,500.00 88,000.00
26,400.00 214,500.00 120,000.00
Training Devices, Inc. 20,000 common stock Feb-97 25,000.00 40,000.00 40,000.00
Total Restricted Securities 849,809.50 1,196,091.20 1,049,509.56
Unrestricted Securities:
Astea International 5,000 common stock Jun-97 0.00 0.00 8,437.50
0.00 0.00 8,437.50
American Nortell Communications 25,000 common stock Mar-99 12,750.00 12,750.00 0.00
Biosource International 5,000 common stock Sep-98 0.00 0.00 14,687.50
2,500 common stock Sep-98 7,964.28 10,625.00 7,343.75
25,000 common stock Oct-98 72,764.20 106,250.00 73,437.50
20,000 common stock Dec-98 54,582.10 85,000.00 58,750.00
37,500 common stock Dec-98 107,915.95 159,375.00 110,156.25
20,000 common stock Feb-99 61,522.70 85,000.00 0.00
304,749.23 446,250.00 264,375.00
Exploration Company, The 30,600 common stock Oct-97 92,718.00 35,381.25 28,687.50
Globex Minining Enterprises 33,000 common stock Sep-98 6,535.00 4,785.00 2,970.00
170,000 common stock Mar-99 21,953.35 24,650.00 0.00
28,488.35 29,435.00 2,970.00
Hawks Industries 1,000 common stock Nov-98 1,312.50 875.00 1,125.00
2,000 common stock Dec-98 2,687.50 1,750.00 2,250.00
15,000 common stock Jan-99 17,750.00 13,125.00 0.00
9,000 common stock Feb-99 10,335.35 7,875.00 0.00
32,085.35 23,625.00 3,375.00
Informix Corporation 5,000 common stock Feb-99 47,578.13 36,875.00 0.00
International Remote Imaging 10,0000 common stock Nov-98 10,828.45 7,500.00 7,500.00
J2 Communications (3)<F1> 6,667 common stock May-98 0.00 0.00 13,336.00
3,333 common stock Sep-98 0.00 0.00 6,666.00
3,333 common stock Oct-98 6,250.00 5,624.44 6,666.00
3,333 common stock Oct-98 6,250.00 5,624.44 6,666.00
1,668 common stock Oct-98 2,919.00 2,814.75 3,334.00
25,500 common stock Nov-98 35,849.70 43,031.25 51,000.00
12,300 common stock Dec-98 21,528.45 20,756.25 24,600.00
3,000 common stock Feb-99 6,615.95 5,062.50 0.00
10,000 common stock Mar-99 20,003.45 16,875.00 0.00
99,416.55 99,788.63 112,268.00
Lycos, Inc. 1,000 common stock Feb-99 89,676.72 86,000.00 0.00
Morrow Snowboards 7,000 common stock Nov-98 8,097.20 2,625.00 5,687.50
Online System Services 8,000 common stock Dec-98 0.00 0.00 104,000.00
Premier Concepts 24,100 common stock Oct-98 0.00 0.00 16,568.75
10,900 common stock Oct-98 5,790.62 10,900.00 7,493.75
5,790.62 10,900.00 24,062.50
Redwood Energy 20,000 common stock Dec-98 8,377.52 11,800.00 9,200.00
125,000 common stock Jan-99 61,375.00 73,750.00 0.00
69,752.52 85,550.00 9,200.00
Southshore Corporation 15,000 common stock Sep-97 7,715.00 468.75 468.75
Tech Data Corporation 7,500 common stock Feb-99 183,797.15 172,031.25 0.00
Telxon Corporation 10,000 common stock Jan-99 102,659.70 93,750.00 0.00
5,000 common stock Feb-99 37,946.86 46,875.00 0.00
140,606.56 140,625.00 0.00
USAsurance Group 10,100 common stock Dec-96 0.00 0.00 41,662.50
4,150 common stock Dec-96 9,669.50 26,975.00 17,118.75
1,500 common stock Dec-96 3,850.00 9,750.00 6,187.50
2,500 common stock Jan-97 8,750.00 16,250.00 10,312.50
4,500 common stock Jun-97 6,106.25 29,250.00 18,562.50
7,500 common stock Dec-97 7,875.00 48,750.00 30,937.50
3,500 common stock Oct-98 27,619.50 22,750.00 14,437.50
7,500 common stock Nov-98 21,256.90 48,750.00 30,937.50
85,127.15 202,475.00 170,156.25
Whitewing Labs 15,000 common stock Jan-97 23,175.00 7,500.00 9,375.00
8,500 common stock Dec-98 5,861.50 4,250.00 5,312.50
29,036.50 11,750.00 14,687.50
World Cyberlink 8,750 common stock Jun-98 8,750.00 27,343.75 25,156.25
Total Unrestricted Securities 1,256,963.48 1,431,373.63 781,031.75
Notes Receivable:
Eclipse fka Bear Star, LLC Note Receivable, 10% Dec-95 0.00 5,811.44 5,811.44
Damach Note Receivable,12%,
due on demand Oct-96 32,500.00 32,500.00 32,500.00
Global Casinos, Inc.*<F1> Note Receivable, 12%,
due on demand Nov-96 163,343.13 163,343.13 175,000.00
Note Receivable, 9%
due on demand Mar-97 76,789.04 76,789.04 43,904.02
240,132.17 240,132.17 218,904.02
Kinetiks.com Note Receivable, 10%,
due on demand Feb-97 25,000.00 25,000.00 25,000.00
Note Receivable, 8%,
due on demand 83,447.87 83,447.87 61,476.26
108,447.87 108,447.87 86,476.26
Marco Foods, Inc.*<F1> Note Receivable, 12%
due on demand Jan-97 101,963.88 101,963.88 181,525.88
Webquest Note Receivable, 8%
due on demand Dec-98 250,688.49 250,688.49 104,676.21
Subtotal Notes Receivable 733,732.41 739,543.85 629,893.81
Allowance for Doubtful Notes 0.00 (31,000.00) (31,000.00)
Net Notes Receivable 733,732.41 708,543.85 598,893.81
Investments in Real Estate:
Chestnut Property Land & Building at
3515 N. Chestnut Sep-97 621,358.38 765,000.00 765,000.00
Total Real Estate Investments 621,358.38 765,000.00 765,000.00
Total Investments 3,461,863.77 4,101,008.68 3,194,435.12
<FN>
<F1>* 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 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
</FN>
See accompanying notes to financial statements.
Restricted Unrestricted and Real Estate 2,728,131.36 3,392,464.83 2,595,541.31
Vaule-Cost 639,144.91
</TABLE>
THE ROCKIES FUND, INC.
STATEMENT OF OPERATIONS
For the Three For the Three
Months Ended Months Ended
March 31,1999 March 31,1998
(Unaudited) (Unaudited)
Investment Income:
Rental income $ 37,125 $ 12,688
Consulting and other services 23,820 320
Interest and dividends 13,397 3,456
74,342 16,463
Expenses:
Wages and salaries 32,748 31,190
Professional fees (2,564) 12,673
Custodian fees 0 2,594
Directors fees 2,000 0
Interest 17,924 14,736
Travel and entertainment 3,343 7,168
Office 33,565 22,187
Building expenses 0 13,590
Investment expenses 8,313 789
Donations 58 0
Total expenses 95,387 104,927
Net investment loss $ ( 21,045) $ (88,464)
Realized and unrealized gain
from investments:
Net realized gain from
investments 145,421 15,702
(net ofincome and
deferred tax) 0
Net unrealized appreciation
(depreciation) of investments:
Beginning of period 389,522 30,918
End of period 706,949 179,346
Net unrealized appreciation
of investments 317,427 148,428
Net gain from investments $ 426,848 $ 164,130
Net increase in net assets
resulting from operations $ 441,803 $ 75,666
Per share amounts:
Net investment loss $ (0.03) $ (0.13)
Net realized gain from
investments 0.23 0.02
Net unrealized appreciation 0.49 0.23
of investments $ 0.69 $ 0.12
<TABLE>
Statements of Stockholders' Equity
Nine Months Ended March 31, 1999 and
Years Ended December 31, 1998 and 1997
<CAPTION>
Accumulated Net
Realized Gains Unrealized
Accumulated From Sales Net
Additional Net And Permanent Appreciation
Common Paid-In Investment Write-Downs 0f Net
Stock Capital (Loss) Of Securities Investments Assets
<S> <C> <C> <C> <C> <C> <C>
BALANCES AT
DECEMBER 31, 1997 $6,403 $2,901,243 $(1,919,099) $1,285,337 $30,918 $2,304,802
Net investment loss -- -- (570,205) -- -- (570,205)
Net realized loss on
sale of investments -- -- -- 465,180 -- 465,180
Unrealized net
appreciation of
investments -- -- -- -- 358,604 358,604
BALANCES AT
DECEMBER 31, 1998 $6,403 $2,901,243 $(2,489,304) $1,750,517 $389,522 $2,558,381
Net investment loss -- -- (21,045) -- -- (21,045)
Net realized gain
on sale of
investments -- -- -- 145,421 -- 145,421
Unrealized net
appreciation
of investments -- -- -- -- 317,427 317,427
BALANCES AT
MARCH 31, 1999 $6,403 $2,901,243 $(2,510,349) $1,895,938 $706,949 $3,000,184
</TABLE>
THE ROCKIES FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS
For the For the
Three Months Ended Three Months Ended
March 31, 1999 March 31, 1998
(Unaudited) (Unaudited)
Increase (decrease) in net assets
from investment activities:
Net investment loss $ ( 21,045) $ (88,465)
Net realized gain
from investments 145,421 15,702
(net of income tax expense)
Net unrealized appreciation
of investments 317,427 148,428
Net increase in net assets
from investment activities 441,803 75,665
Net assets at beginning of year 2,558,381 2,304,802
Net asset at end of year $ 3,000,184 $ 2,380,467
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") was incorporated in
Nevada on August 2, 1983, for the principal purpose of making
venture capital investments in developing companies located
primarily in the Rocky Mountain Region of the United States. The
Fund is registered under the Investment Fund Act of 1940 as a
business development company.
The interim unaudited financial statements have been
prepared by the Rockies Fund, Inc. and, in the opinion of
management, reflect all material adjustments which are necessary
to a fair statement of results of the interim periods presented.
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, 1998. 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
or Small Cap Market Systems are valued at the last sales price on the
valuation date or, absent a last sales price, at the closing bid
price on the valuation date. Securities traded in the over-the-
counter market are generally valued at the last bid price, based upon
quotes furnished by independent market makers for such securities.
Investments in notes receivable are valued at an estimated
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. Due to the inherent uncertainty of
valuation, those estimated values may differ significantly from
the values that would have been used had a ready market for the
investments existed, and the differences could be material.
Securities transactions are accounted for on a trade
date basis. Where possible, realized gains and losses on the
sales of investments are determined using the specific
identification method. If the specific identification method
cannot be utilized, realized gains and losses are determined
using the first in-first out method. Substantially all of the
Fund's investments are non-income producing.
In order to be as accurate as possible, the valuation
process undertaken by the Fund's Board of Directors attempts to
take into account all known information about a particular
investment company including but not limited to:
- Fundamental business performance of an investee company
and that of its competitors
- Market valuation of companies in the same or similar
industries
- Market liquidity of an investee company and its
competitors
- The estimated value in a private sale including the value
of intangibles
The valuations of the portfolio companies are to represent a
potential transaction between a willing buyer and a willing
seller in an orderly market. The valuations are not intended to
be for liquidation purposes with a time constraint. Accordingly,
the portfolio valuations as determined in good faith by the Board
of Directors should be viewed as an indication of reasonable
value and not as a representation of a final sales price.
(c) Income Taxes.
As a business development Fund, 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 unrealized gains on investments. For
Federal and State income tax purposes, the investments have the
same cost basis as shown in the financial statements.
During the year ended December 31, 1997, the Fund
utilized all remaining net operating loss carryforward.
2. Portfolio Securities
ALTA CALIFORNIA BROADCASTING
The Fund, at March 31, 1999, held 255,000 shares of Alta
California Broadcasting common stock, which is the result of a
dividend declaration by Alta on 12/21/98. The dividend shares
are subject to registration with the SEC; however, there is no
assurance that such registration will ever become affective. The
evidence of ownership is based upon notification of the dividend
declaration by Alta. The Fund has been advised by Alta that the
Net Tangible Book Value per share is a $1.39. However, in light
of the above circumstances, the Board of Directors has determined
the Fair Value of Alta to be $1.00 per share or $255,000.
AMERICAN EDUCATIONAL PRODUCTS, INC.
The Fund, at March 31, 1999, held 16,500 shares of American
Educational Products, Inc. common stock. The stock is restricted
as to sale due to the company being an affiliate, non-income
producing and has been valued by the Board of Directors at its
quoted market value of $9.25 per share or $152,625.
AMERICAN NORTELL
The Fund, at March 31, 1999, held 25,000 shares of American
Nortell common stock, which stock is restricted as to sale, non-
income producing, and has been valued at its cost of $.51 per
share or $12,750 on account of the purchase being recent enough
to warrant no change in the fundamentals of the valuation.
BIOSOURCE INTERNATIONAL
The Fund, at March 31, 1999, held 105,000 shares of
Biosource International common stock which stock is unrestricted
as to sale, non-income producing, and has been valued at its
quoted market price of $4.25 per share or $446,250.
COMMUNICATIONS WORLD
The Fund, at March 31, 1999, held 40,000 common shares and
8,000 warrants of Communications World, which stock is restricted
as to sale, non-income producing, and has been valued at its cost
of $1.00 per share or $40,000 on account of the purchase being
recent enough to warrant no change in the fundamentals of the
valuation.
COVA TECHNOLOGIES
The Fund, at March 31, 1999, held 917 shares of COVA
Technologies common stock, which stock is restricted as to sale,
non-income producing, and has been valued by the Board of
Directors at its cost of $20,035.
DAMACH, INC.
The Fund, at March 31, 1999, held a note receivable from
Damach in the amount of $32,500, which accrues interest at the
rate of 12% per year and was originally due on March 31, 1997.
An agreement was signed on March 4, 1997; to extend the
promissory note on a month to month basis or until the Fund makes
a written request for payment.
ECLIPSE fka BEAR STAR, LLC fka COLUMBINE HOME SALES, LLC
The Fund, at March 31, 1999, held 325,000 common shares of
Eclipse fka Bear Star, LLC 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.
EXPLORATION COMPANY, THE
The Fund, at March 31, 1999, held 30,600 shares of The
Exploration Company common stock, which stock is unrestricted as
to sale, non-income producing, and has been valued at its quoted
market price of $1.15625 per share or $35,381.25.
FIELDPOINT PETROLEUM
The Fund, at March 31, 1999, held 30,000 shares of
Fieldpoint Petroleum common stock, which stock is restricted as
to sale, non-income producing, and has been valued at its cost of
$.75 per share or $22,500 on account of the purchase being recent
enough to warrant no change in the fundamentals of the valuation.
GLOBAL CASINOS, INC.
The Fund, at March 31, 1999, held 17,680 shares of Global
Casinos, Inc. common stock valued at its quoted market price of
$1.0625 per share, or $18,785. The Fund, at March 31, 1999, also
held 291,667 shares of Global Casinos, Inc. preferred stock,
which was converted from debt, owed to the Fund by Global
Casinos. The stock has been valued at its conversion market
price of $1.0625 per share, or $309,896.19 which is below cost.
Both positions are restricted as to sale due to the company being
an affiliate, non-income producing. The Fund, at March 31, 1999,
also held a note receivable from Global Casinos, Inc. in the
amount of $163,343, which note is unsecured, accrues interest at
the rate of 12% per year, and is due on demand. 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 $76,789.04,
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.
GLOBEX MINING ENTERPRISES
The Fund, at March 31, 1999, held 203,000 shares of Globex
Mining Enterprises common stock, which stock is unrestricted as
to sale, non-income producing and has been valued at its quoted
market price of $.145 per share or $29,435.
HAMPTON COURT RESOURCES
The Fund, at March 31, 1999, 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 $.86 per share or $10,750.
HAWKS INDUSTRIES
The Fund, at March 31, 1999, held 27,000 shares of Hawks
Industries common stock, which stock is unrestricted as to sale,
non-income producing and has been valued at its quoted market
price of $.875 per share or $23,625.
INFORMIX CORPORATION
The Fund, at March 31, 1999, held 5,000 shares of Informix
Corporations common stock, which stock is unrestricted as to
sale, non-income producing and has been valued at it quoted
market price of $7.375 per share or $36,875.
INTERNATIONAL REMOTE IMAGING
At March 31, 1999, the Fund held 10,000 shares of
International Remote Imaging common stock, which stock is
unrestricted as to sale, non-income producing and has been valued
at its quoted market price of $.75 per share or $7,500.
J2 COMMUNICATIONS
The Fund, at March 31, 1999, held 59,134 shares of J2
Communications common stock, after giving effect to a 1-for-3
reverse split. The stock is unrestricted as to sale, non-income
producing and has been valued at its quoted market price of
$1.6875 per share or $99,788.63.
KINETIKS.COM
The Fund, at March 31, 1999, held 700,000 shares of
Kinetiks.com common stock, which stock is restricted as to sale
and non-income producing. Because Kinetiks.com is not current in
its filings with the SEC, the stock has been valued by the Board
of Directors below its quoted market bid price of $.12 per share,
instead its been valued at $.11 per share or $77,000. The Fund
also held warrants to purchase an additional 1,150,000 shares of
Kinetiks.com common stock at an exercise price of $.25 per share.
The Board of Directors has valued the warrants at $0. 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
is due on demand. The note provides for a default interest rate
of 18% and additional 50,000 warrants for each 30-day period that
it remains unpaid. The Fund holds notes receivable from Kinetiks.com
in the amount of $83,447.87 which note is unsecured, accrues interest
at the rate of 8% per year and is due on demand.
LAND RESOURCE CORPORATION
The Fund, at March 31, 1999, held 10,000 shares of Land
Resource Corporation 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 $1.00 per share or $10,000.
LYCOS, INC.
The Fund, at March 31, 1999, held 1,000 shares of Lycos
common stock, which stock is unrestricted as to sale, non-income
producing and has been valued at its quoted market price of $86
per share or $86,000.
MARCO FOODS, INC.
The Fund, at March 31, 1999, held a note receivable from
Marco Foods in the amount of $101,963.88, which note is
unsecured, accrues interest at the rate of 12% per year and is
due on demand.
MORROW SNOWBOARDS
The Fund, at March 31, 1999, held 7,000 shares of Morrow
Snowboards common stock, which stock is unrestricted as to sale,
non-income producing and has been valued at its quoted market
price of $.375 per share or $2,265.
MULTI-LINK TELECOMMUNICATIONS
The Fund, at March 31, 1999, held 25,000 shares of Multi-
Link Telecommunications common stock, which stock is restricted
as to sale, non-income producing and has been valued at its cost
of $1.00 per share or $25,000.
PREMIER CONCEPTS
The Fund, at March 31, 1999, held 10,900 shares of Premier
Concepts common stock, which stock is unrestricted as to sale,
non-income producing and has been valued at its quoted market
price of $1.00 per share or $10,900.
REDWOOD BROADCASTING, INC.
The Fund, at March 31, 1999, held 22,000 shares of Redwood
Broadcasting common stock, which stock is partially restricted as
to sale, non-income producing, and has been valued at its quoted
market price of $9.75 per share or $214,500.
REDWOOD ENERGY
At March 31, 1999, the Fund held 145,000 shares of Redwood
Energy common stock, which stock is unrestricted as to sale, non-
income producing and has been valued at its quoted market price
of $.59 per share or $85,550.
SOUTHSHORE CORPORATION
At March 31, 1999, the Fund held 15,000 shares of Southshore
Corporation common stock, which stock is unrestricted as to sale,
non-income producing and has been valued at its quoted market
price of $.03125 per share or $468.75.
TECH DATA CORPORATION
At March 31, 1999, the Fund held 7,500 shares of Tech Data
Corporation common stock, which stock is unrestricted as to sale,
non-income producing and has been valued at its quoted market
price of $22.9375 per share or $172,031.25.
TELXON CORPORATION
The Fund, at March 31, 1999, held 15,000 shares of Telxon
Corporation common stock, which stock is unrestricted as to sale,
non-income producing and has been valued at its quoted market
price of $9.375 per share or $140,625.
TRAINING DEVICES, INC.
The Fund, at March 31, 1999, held 20,000 shares of Training
Devices common stock. The stock is restricted as to sale, non-
income producing, and has been valued by the Board of Directors
at $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, 1999, held 31,150 shares of
USAsurance Group common stock, which stock is unrestricted as to
sale, non-income producing, and has been valued at its quoted
market price of $6.50 or $202,475.
WEBQUEST
The Fund, at March 31, 1999, held a Note Receivable from
Webquest in the amount of $250,688.49, which is unsecured,
accrues interest at the rate of 8% per year and is due on demand.
WHITEWING LABS
The Fund, at March 31, 1999, held 23,500 shares of Whitewing
Labs common stock, which stock is unrestricted as to sale, non-
income producing, and has been valued at its quoted market price
of $.50 per share or $11,750.
WORLD CYBERLINK
The Fund, at March 31, 1999, held 8,750 shares of World
Cyberlink common stock, which stock is unrestricted as to sale,
non-income producing, and has been valued at its quoted market
price of $3.125 per share or $27,343.75.
3. Real Estate Operations
During the year ended December 31, 1993 the Fund purchased a
26,500 square foot office building located in Colorado Springs,
Colorado (the "Northpark Building"). The Building was acquired
primarily to provide office space for the Fund and as a potential
source of income. The Fund sold its Northpark Building Effective
March 31, 1997. The sale was structured as a tax-free exchange
under Section 1031 of the Internal Revenue Code of 1986, as
amended. The proceeds received were utilized to pay
approximately $452,000 of mortgage, line of credit and other debt
resulting in a net gain of $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, 1998, consummated the
purchase of 5 acres of undeveloped commercial real estate located
at 3210 Woodman Road, Colorado Springs, CO (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
and 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.
Real Estate Investment
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 $621,358. 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 to avoid paying current taxes on the
Northpark Building gain. The Fund 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 has
signed a business lease agreement to lease the new Chestnut
Building for 8 months and 9 days expiring on September 1, 1998
for $35,000. Gerald L. Wiebe and Weebee Properties the "tenant"
agreed to pay for all property taxes, utilities, insurance and
maintenance associated with the building during the term of the
lease. 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. As of December 31, 1998, the tenant was in
default of the Chestnut Building purchase agreement and therefore
paid to the Fund the sum of $45,000 on January 27, 1999 for rent
and fees in addition to extending the purchase agreement to
February 28, 1999. On February 26, 1999, the tenant paid to the
Fund an additional $15,000 to extend the closing to March 31,
1999 and on April 9, 1999 the tenant paid to the Fund $12,000 to
extend the closing to April 30, 1999. On May 1, 1999, the tenant
signed a lease agreement to lease the Chestnut Building for a
peroid of one year, expiring on April 30, 2000, for a total sum
of $120,000, $10,000 per month, and a $10,000 deposit, due in
four installments.
On March 17, 1998, the Fund sold its 20% investment in the
Plaza Hotel & Apartments in Thermopolis, Wyoming (the "Hotel
Investment"). The hotel, which was purchased on September 24,
1997, was sold for its original purchase price of $200,000, of
that $50,000 was paid in cash and the purchaser assumed a
$150,000 note to Wyoming Resorts, LLC.
Office Facilities
The Fund, during September of 1998 moved its executive
office space to 5373 North Union, Suite 100, Colorado Springs,
CO., 80918, with a three year contract through September, 2001 at
$9.50 per square foot lease and $4.774 square foot for common
area maintenance ("CAM") charge per year. The CAM charge will
escalate depending on the actual building maintenance usage
determined for the year.
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
None.
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 - MARCH 31, 1999 COMPARED TO
DECEMBER 31, 1998
During the three months ended March 31, 1999, the Fund
liquidated certain securities, including 5,000 shares of Astea;
5,000 shares of Biosource; 10,000 shares of J2 Communications;
8,000 shares of Online System; 24,100 shares of Premier Concepys
and 10,100 shares of Usassurance.
During the three months ended March 31, 1999, The Fund
acquired 25,000 shares of Amercian Nortel, 20,000 shares of
Biosource, 40,000 shares of Commworld, 30,000 of Fieldpoint
Petrolium, 100,000 shares of Globex mining, 22,000 shares of
Hawks Industries, 5,000 shares of Informix, 13,000 shares of J2
Communications, 300,000 shares of Kinetiks, 1,000 shares of
Lycos, 125,000 shares of Redwood Energy, 7,500 shares of Tech
Data Corp and 15,000 shares of Telxon for a total investment of
$741,661. During the same period, the Fund purchased and
subsequently sold securities resulting in a net gain of
approximately $66,453.
The Fund's value in restricted and unrestricted securities
increased from $1,830,541 as of December 31, 1998, to $2,627,465
as of March 31, 1999, an increase of $796,924 or approximately
44%. Notes receivable increased $153,962, or approximately 28%,
from $554,582 as of December 31, 1998, to $708,544 as of March
31, 1999, mainly due to increases in Global Casino's, Marco Foods
and Kinetiks.Com notes. Global Casinos, an international gaming
Company, comprises approximately 34%, Marco Foods, an affiliate
of the Fund comprises approximately 14% and Kinetiks.Com a
venture capital investment company comprises 15% of total notes
receivable.
As of March 31, 1999, the Fund owns commercial real estate
purchased on September 4, 1997, for $621,358 with improvements,
and the building is in contract to sell for $775,000. Total
investments, therefore, increased from $3,150,123 on December 31,
1998, to $4,101,009 on March 31, 1999, an increase of $950,886
or 30%.
Cash held by related parties decreased from $232,252 as of
December 31, 1991 to $22,193 or 90% as of March 31, 1999, as
money held in broker accounts were utilized to purchase
investments. Cash held by others decreased 39.7% and accounts
receivable decreased 66%. Accounts receivable includes $9,059
of refundable taxes. Investment securities sold decreased from
$1,204,587 as of December 31, 1998, to $1,710 as of March 31, 1999
as income from pending sales were received during the first quarter
1999. Accrued interest receivable increased from $52,969 to $72,608
or 38% due to the increase in notes receivable. Prepaid loan payment
as of March 31, 1999 was $43,678, due to the Fund accruing three
months of payments on the twelve months of advance payments on the
Merit Broadcasting long term note payable.
Total current assets, therefore, decreased from $4,725,097
at December 31, 1998, to $4,245,035 at March 31, 1999, a decrease
of $480,062 or 11%.
The Woodman property purchases at $390,000 and
construction in progress at $114,058 as of March 31, 1999
remained the same from December 31, 1998.
Based on the foregoing, total assets decreased from
$5,246,585 on December 31, 1998, to $4,765,463 on March 31, 1999,
a decrease of $481,122 or 9.2%.
Total current liabilities decreased from $2,294,523 as of
December 31, 1998, to $1,382,357 as of March 31, 1999, a
reduction of $912,166 or approximately 40%. Payables trade
decreased 32% from $258,394 as of December 31, 1998, to $174,997
as of March 31, 1999, as the Fund made payments on legal and
other expenses during the quarter. Investment securities
purchased as of December 31, 1998 had a balance of $852,709 which
the Fund had paid during the first quarter 1999. Property taxes
and other decreased from $14,552 at December 31, 1998, to 0.00 at
March 31, 1999, as was paid during the quarter. Note payable
related parties decreased from $231,576 to $228,395 at March 31,
1999. Other current liabilities increased from $653,975 as of
December 31, 1998, to $776,178 as of March 31, 1999 or 8.6%. In
addition, the Fund has incurred income tax payable of $149,813;
$91,121 for 1998 and $58,692 for the first quarter on realized
gains from investments. The Fund also incurred a deferred tax
liability of $110,104 as of March 31, 1999 for unrealized gains
on investments, a decrease of 38% from December 31, 1998.
The Fund has a long-term debt to Merit Broadcasting, less
current portion, of $231,417 as of March 31, 1999, a decrease of
4.4% from December 31, 1998. Long term deferred tax liability
remained at $151,505 for deferred tax on the Fund's 1031 exchange
on investments.
The Fund still holds a $75,000 line of credit with a
balance of $0.00 as of March 31, 1999. Total liabilities,
therefore, decreased from $2,688,204 as of December 31, 1998, to
$1,765,279 as of March 31, 1999, a decrease of $922,925 or
approximately 34%.
Based on the foregoing, Net Asset Value increased during
the three months ended March 31, 1999, from $2,558,381 at
December 31, 1998, to $3,000,184 at March 31, 1999, an increase
of $411,803 or 17.3%. Net assets per common share increased from
$4.00 per share at December 31, 1998, to $4.69 per share on March
31, 1999, an increase of $0.69.
Management knows of no trends or demands, commitments,
events or uncertainties that will result in the Fund's liquidity
or capital resources materially increasing or decreasing.
RESULTS OF OPERATIONS THREE MONTHS ENDED MARCH 31, 1999 COMPARED
TO THREE MONTHS ENDED MARCH 31, 1998.
The Fund's income/revenue for the three months ended March
31, 1999, was $74,342, an increase of $57,879 or approximately
352% compared with the same period in 1998. This increase in
income/revenue was due to the Fund receiving rental income from
the Chestnut Building and interest from cash accounts. The
Fund's Chestnut Building is under sales contract and is currently
being leased to the purchaser under contract.
Expenses decreased from $104,927 as of March 31, 1998, to
$95,387 as of March 31, 1999, a decrease of $9,540 or
approximately 9%. Contributing to the decrease in expenses were
decreases in professional and legal expenses of 120%, due to the
reduction of accrual expenses; a reduction in travel and
entertainment of 53% and building expenses of 100%. Offsetting
against decreased expenses were increases in wages and salaries
of 5%, interest expense of 22% office expenses of 51% and
investment expenses of 146%.
Based on the foregoing, the Fund reported a net investment
loss for the three months ended March 31, 1999, of $(21,045), an
increase of 76% when compared to the net investment loss of
$(88,464) incurred during the same period in 1998.
The Fund's net realized gain from sales of as of March 31,
1999 was $145,421, an increase of $129,719 or 826% compared to a
net realized gain of $15,702 as of March 31, 1998. Unrealized
net depreciation relating to the current market value of
securities being held by the Fund increased $168,999 or 114% from
an unrealized net gain of $148,428 as of March 31, 1998, to an
unrealized net gain of $317,427 as of March 31, 1999.
Management knows of no trends or demands, commitments,
events or uncertainties that will result in the Fund's liquidity
or capital resources materially increasing or decreasing.
PART 1. OTHER INFORMATION
Item 1. Legal Proceedings
Starting in 1994, the Fund received requests for information
from the United States Securities and Exchange Commission ("SEC")
related to investigations 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 intended to
request that the Commission commence an administrative proceeding
against the Fund, its President and its directors based upon
certain transactions in securities then included in the Fund's
securities portfolio. In July 1997, the SEC informed us that the
Staff was planning to recommend an enforcement action against the
Fund's President for certain additional alleged violations of the
federal securities laws. On June 1998, the Commission issued an
order instituting public administrative proceedings. From
November 2 through November 6, 1998, an administrative trial was
held at which the Fund, its President and its directors contested
the Staff's allegations, which they believe to be substantially
without merit, and put on extensive defensive evidence. The
parties are in process of exchanging proposed findings of fact
and conclusions of law and legal briefs. As its exclusive relief
against the Fund, the Commissions Staff has requested the entry
of an order directing the Fund to cease and desist from
committing the securities law violations alleged by the Staff in
the enforcement proceeding. In addition, the Staff has requested
entry of such an order against the Fund's President and its
directors along with certain other relief. No decision has been
rendered and there is no timetable by which a decision must be
made. Under the circumstances, the Fund cannot predict with any
certainty the outcome of the action or whether the matter will
have a material impact upon the Fund or its President or
directors. Other than the foregoing, the Fund is not a party to
any material pending legal proceeding.
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
Year 2000 issues
The Company recognized the need to ensure its operations
will not be adversely impacted by Year 2000 software failures.
Software failures due to processing errors potentially arising
from calculations using the Year 2000 date are a known risk. The
Company is addressing this risk to the availability and integrity
of financial systems and the reliability of the operational
systems. The Company is evaluating and managing the risks and
cost associated with this problem, including communicating with
brokers, custodians and trust companies, and others with which it
does business to coordinate Year 2000 conversion. The total cost
of compliance and its effect on the Fund's future results of
operations is being determined as part of the detailed conversion
planning process.
Item 6. Exhibits and Reports on Form 8-K
None.
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: 05/17/99 By: /s/ Stephen G. Calandrella
Stephen G. Calandrella,President
Dated: 05/17/99 By: /s/Barbara A. Hamstad
Principal Accounting Officer
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