UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[ X ] QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 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 September 30, 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 September 30, 1999
(unaudited) and December 31, 1998 (audited)
Schedule of Investments and Restricted Securities
(unaudited)
Statement of Operations for the Three Months Ended
September 30, 1999 and September 30, 1998 (unaudited)
Statement of Operations for the Nine Months Ended
September 30, 1999 and September 30, 1998 (unaudited)
Statements of Stockholders' Equity for the Nine
Months Ended September 30, 1999 (unaudited), and
Years Ended December 31, 1998 and 1997 (audited)
Statement of Changes in Net Assets as of September 30, 1999
and September 30, 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
SEPTEMBER 30, 1999 AND DECEMBER 31, 1998
September 30, December 31,
1999 1998
(unaudited) (audited)
ASSETS
Investments at value
(cost of $2,756,882, September 30,
1999 and $2,760,600, December 31,
1998)
Restricted and unrestricted
securities $ 2,879,722 $ 1,830,541
Notes receivable, net allowances 1,015,325 554,582
Real estate - 765,000
Total Investments 3,895,047 3,150,123
Cash:
Held by related party 923 232,351
Held by others 3,775 9,455
Investment securities sold 0 1,204,587
Accounts receivable 29,988 31,934
Accrued interest receivable 63,054 52,969
Prepaid loan payment 10,920 43,678
Total Current Assets 4,003,707 4,725,097
Property & Equipment:
Real Estate 621,358 -
Land 390,000 390,000
Construction in progress 114,058 114,058
Automobile 15,162 15,162
Furniture and fixtures 7,939 7,939
Total Property & Equipment 1,148,517 527,159
Less Accumulated Depreciation (29,046) (10,071)
Net Property & Equipment 1,119,471 517,088
Deposits 4,400 4,400
Total assets 5,127,578 5,246,585
THE ROCKIES FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 30, 1999 AND DECEMBER 31, 1998
(Continued)
September 30, December 31,
1999 1998
(unaudited) (unaudited)
LIABILITIES
Payables:
Trade 253,280 258,394
Investment securities purchases 0 852,709
Accrued liabilities:
Property taxes and other 10,815 14,552
Income taxes 102,958 91,121
Interest payable 7,607 1,175
Current maturities of long-term debt:
Related parties 95,448 231,576
Others 1,174,733 653,975
Deposits and deferred rent 12,500 12,616
Deferred tax liability 71,258 178,405
Total current liabilities: 1,728,599 2,294,523
Long term debt, net of current maturities 222,347 242,176
Deferred tax liability 151,505 151,505
Total liabilities 2,102,451 2,688,204
NET ASSETS and STOCKHOLDER'S EQUITY
(Equivalent to $4.73 per share at
September 30,1999 and $4.00 per
share at Dec. 31,1998 $3,025,127 $ 2,558,381
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 (2,840,541) (2,489,304)
Accumulated net realized gain from 2,930,181 1,750,517
sales of securities
Unrealized net appreciation of
investments 27,841 389,522
Total accumulated excess (deficit) 117,481 (349,265)
Net assets $3,025,127 $ 2,558,381
<TABLE>
THE ROCKIES FUND, INC.
Schedule of Investments
December 31, 1998 and 1997
<CAPTION>
Fair Fair
Initial **Cost at value at value at
investment September 30, September 30, 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 - 255,000.00 255,000.00
American Educational
Products, Inc.*<F1>(1) 16,500 common stock Sep-96 82,500.00 168,093.75 156,750.00
Eclipse (fka) Bear
Star, LLC 305,000 common stock Jun-96 500.00 0.00 -
500.00 0.00 0.00
Communications World 40,000 common stock Feb-99 40,000.00 40,000.00 -
8,000 warrants Feb-99 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
Crystal Bay 6,250 common stock May-99 6,250.00 6,250.00 -
18,750 common stock Jun-99 18,750.00 18,750.00 -
15,000 common stock Jul-99 15,000.00 15,000.00 -
7,500 common stock Aug-99 7,500.00 7,500.00 -
51,000 common stock Sep-99 51,000.00 51,000.00 -
98,500.00 98,500.00 0.00
Fieldpoint Petroleum 30,000 common stock Mar-99 22,500.00 22,500.00 -
Global Casinos, Inc.*
<F1>(2) 3,800 common stock Nov-93 76,000.00 2,375.00 4,512.50
4,331 common stock Jan-94 50,068.21 2,706.88 5,143.06
1,724 common stock Jan-94 19,931.79 1,077.50 2,047.25
1,250 common stock Feb-94 25,000.00 781.25 1,484.38
75 common stock Mar-94 0.00 46.88 89.06
500 common stock Oct-94 10,000.00 312.50 593.75
5,000 common stock Feb-96 17,207.50 3,125.00 5,937.50
1,000 common stock Mar-96 3,125.00 625.00 1,187.50
291,667 preferred
stock Dec-98 350,000.00 182,291.88 346,354.56
551,332.50 193,341.89 367,349.56
Hampton Court
Resources 12,500 common stock Sep-97 11,542.00 12,000.00 11,375.00
Kinetiks.com 100,000 common stock Feb-98 5,000.00 30,000.00 11,000.00
100,000 common stock Jul-98 5,000.00 30,000.00 11,000.00
100,000 common stock Sep-98 5,000.00 30,000.00 11,000.00
100,000 common stock Sep-98 5,000.00 30,000.00 11,000.00
100,000 common stock Jan-99 5,000.00 30,000.00 -
100,000 common stock Jan-99 5,000.00 30,000.00 -
100,000 common stock Jan-99 5,000.00 30,000.00 -
522,332 common stock Apr-99 130,583.26 156,699.60 -
200,000 common stock Sep-99 54,219.36 60,000.00 -
850,000 warrants 2/97 -
6/99 0.00 0.00 0.00
219,802.62 426,699.60 44,000.00
Land Resource
Corporation*<F1> 10,000 common stock Mar-97 10,000.00 10,000.00 10,000.00
Medical Device
Technologies 250,000 common stock Jun-99 100,000.00 100,000.00 -
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 - - 32,000.00
14,000 common stock Dec-97 - - 56,000.00
8,000 common stock Dec-97 - - 32,000.00
0.00 0.00 120,000.00
Training Devices, Inc. 20,000 common stock Feb-97 25,000.00 40,000.00 40,000.00
Ugive.com 166,667 common stock Jul-99 50,000.00 50,000.00 -
166,667 common stock Jul-99 50,000.00 50,000.00 -
83,333 common stock Sep-99 25,000.00 25,000.00 -
125,000.00 125,000.00 0.00
Total Restricted
Securities 1,331,712.12 1,536,170.24 1,049,509.56
Unrestricted Securities:
Aerovox, Inc. 2,000 common stock Jul-99 5,190.95 5,250.00 -
American Bingo 5,000 common stock Jul-99 5,000.00 3,906.25 -
2,500 common stock Aug-99 2,109.25 1,953.13 -
7,109.25 5,859.38 0.00
Astea International 5,000 common stock Jun-97 - - 8,437.50
Biosource
International 5,000 common stock Sep-98 - - 14,687.50
2,500 common stock Sep-98 - - 7,343.75
20,800 common stock Oct-98 - - 61,100.00
4,200 common stock Oct-98 - - 12,337.50
20,000 common stock Dec-98 - - 58,750.00
2,300 common stock Dec-98 - - 6,756.25
35,200 common stock Dec-98 101,297.10 143,000.00 103,400.00
20,000 common stock Feb-99 61,522.70 81,250.00 -
15,000 common stock Aug-99 66,097.20 60,937.50 -
228,917.00 285,187.50 264,375.00
Commercial Assets,
Inc. 5,000 common stock Sep-99 27,177.00 25,937.50 -
Consumer Portfolio 30,000 common stock Jun-99 52,503.45 29,062.50 -
Direct Focus, Inc. 1,500 common stock Jun-99 32,155.16 28,312.50 -
2,000 common stock Jun-99 42,120.00 37,750.00 -
3,400 common stock Jul-99 55,879.00 64,175.00 -
2,000 common stock Jul-99 32,873.55 37,750.00 -
4,600 common stock Jul-99 77,329.55 86,825.00 -
240,357.26 254,812.50 0.00
Exploration Company,
The 9,600 common stock Oct-97 - - 9,000.00
20,000 common stock Oct-97 60,600.00 51,250.00 18,750.00
1,000 common stock Oct-97 3,030.00 2,562.50 937.50
20,000 common stock May-99 18,203.45 51,250.00 -
81,833.45 105,062.50 28,687.50
Family Steakhouse 10,000 common stock Jun-99 10,313.00 14,375.00 -
10,313.00 14,375.00 0.00
Globex Minining
Enterprises 33,000 common stock Sep-98 6,535.00 4,950.00 2,970.00
170,000 common stock Mar-99 21,953.35 25,500.00 -
100,000 common stock Apr-99 10,484.80 15,000.00 -
38,973.15 45,450.00 2,970.00
Guardian Technologies 5,000 common stock Jun-99 6,406.50 6,250.00 -
25,000 common stock Sep-99 32,300.00 31,250.00 -
38,706.50 37,500.00 0.00
Hauser, Inc. 2,500 common stock Jul-99 15,625.00 9,140.63 -
Hawks Industries 1,000 common stock Nov-98 1,312.50 1,125.00 1,125.00
2,000 common stock Dec-98 2,687.50 2,250.00 2,250.00
15,000 common stock Jan-99 17,750.00 16,875.00 -
9,000 common stock Feb-99 10,335.35 10,125.00 -
32,085.35 30,375.00 3,375.00
International Remote
Imaging 10,000 common stock Nov-98 - - 7,500.00
26,600 common stock Apr-99 15,997.90 29,925.00 -
15,997.90 29,925.00 7,500.00
J2 Communications<F1>(3) 6,667 common stock May-98 - - 13,336.00
3,333 common stock Sep-98 - - 6,666.00
3,333 common stock Oct-98 - - 6,666.00
3,333 common stock Oct-98 - - 6,666.00
1,668 common stock Oct-98 - - 3,334.00
25,500 common stock Nov-98 - - 51,000.00
12,300 common stock Dec-98 - - 24,600.00
0.00 0.00 112,268.00
Morrow Snowboards 7,000 common stock Nov-98 - - 5,687.50
Netivation.com 20,000 common stock Jul-99 181,250.00 91,250.00 -
Online System Services 8,000 common stock Dec-98 - - 104,000.00
Premier Concepts 24,100 common stock Oct-98 - - 16,568.75
10,900 common stock Oct-98 - - 7,493.75
- - 24,062.50
Redwood Energy 10,300 common stock Dec-98 - - 4,738.00
9,700 common stock Dec-98 4,063.10 4,074.00 4,462.00
70,000 common stock Jan-99 34,370.00 29,400.00 -
38,433.10 33,474.00 9,200.00
Southshore Corporation 15,000 common stock Sep-97 7,715.00 17,812.50 468.75
Telxon Corporation 9,000 common stock Jan-99 92,393.73 75,375.00 -
5,000 common stock Feb-99 37,946.86 41,875.00 -
3,400 common stock Feb-99 27,309.70 28,475.00 -
157,650.29 145,725.00 -
Thermogenesis 27,500 common stock Aug-99 36,162.50 42,968.75 -
USAsurance Group 10,100 common stock Dec-96 - - 41,662.50
2,000 common stock Dec-96 - - 8,250.00
2,000 common stock Dec-96 - - 8,250.00
150 common stock Dec-96 349.50 337.50 618.75
1,500 common stock Dec-96 3,850.00 3,375.00 6,187.50
2,500 common stock Jan-97 8,750.00 5,625.00 10,312.50
4,500 common stock Jun-97 6,106.25 10,125.00 18,562.50
7,500 common stock Dec-97 7,875.00 16,875.00 30,937.50
3,500 common stock Oct-98 27,619.50 7,875.00 14,437.50
7,500 common stock Nov-98 21,256.90 16,875.00 30,937.50
5,000 common stock May-99 34,303.45 11,250.00 -
20,000 common stock Sep-99 50,803.45 45,000.00 -
160,914.05 117,337.50 170,156.25
Whitewing Labs 15,000 common stock Jan-97 23,175.00 3,750.00 9,375.00
8,500 common stock Dec-98 5,861.50 2,125.00 5,312.50
29,036.50 5,875.00 14,687.50
World Cyberlink 8,750 common stock Jun-98 8,750.00 7,109.38 25,156.25
5,000 common stock Jun-99 10,468.75 4,062.50 -
19,218.75 11,171.88 25,156.25
Total Unrestricted 1,425,169.45 1,343,552.14 781,031.75
Securities
Notes Receivable:
Damach Note Receivable,12%,
due on demand Oct-96 32,500.00 32,500.00 32,500.00
Global Casinos, Inc.* Note Receivable,
<F1> 12%, due on demand Nov-96 163,343.13 163,343.13 175,000.00
Note Receivable,
9% due on demand Mar-97 314,562.25 314,562.25 43,904.02
477,905.38 477,905.38 218,904.02
Kinetiks.com Note Receivable,
10%, due 3/30/97 Feb-97 0.00 0.00 25,000.00
Note Receivable,
8%, due on demand 0.00 0.00 61,476.26
0.00 0.00 86,476.26
Marco Foods, Inc.*<F1> Note Receivable,
12% due on demand Jan-97 0.00 0.00 181,525.88
Other Note Receivable,
0% due on demand Jun-99 259,120.19 259,120.19 0.00
Webquest Note Receivable,
8% due on demand Dec-98 340,798.49 340,798.49 104,676.21
Subtotal Notes 1,110,324.06 1,110,324.06 624,082.37
Allowance for Doubtful
Notes 0.00 (95,000.00) (31,000.00)
Net Notes Receivable 1,110,324.06 1,015,324.06 593,082.37
Investments in Real
Estate:
Chestnut Property Land & Building at
3515 N. Chestnut Sep-97 0.00 0.00 765,000.00
Total Real Estate
Investments 0.00 0.00 765,000.00
Total Investments 3,867,205.63 3,895,046.44 3,188,623.68
<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
See accompanying notes to financial statements.
</FN>
Restricted Unrestricted and Real Estate 2,756,881.57 2,879,722.38 2,595,541.31
Vaule-Cost 27,840.81
</TABLE>
THE ROCKIES FUND, INC.
STATEMENT OF OPERATIONS
For the Three For the Three
Months Ended Months Ended
September 30, September 30,
1999 1998
(Unaudited) (Unaudited)
Investment Income:
Rental income $ 44,300 $ 23,708
Consulting and other services 13,901 983
Interest and dividends 24,165 17,490
82,366 42,181
Expenses:
Wages and salaries 34,110 34,100
Professional fees 107,740 139,917
Custodian fees - 2,463
Directors fees - 2,000
Interest 20,274 18,383
Travel and entertainment 5,335 7,147
Office 34,936 34,214
Building expenses 4,515 -
Investment expenses 10,440 2,143
Donations 7,200 1,710
Total expenses 224,550 242,077
Net investment loss $ (142,184) $ (199,896)
Realized and unrealized gain from investments:
Net realized gain from investments 416,911 185,643
(net of income and deferred tax)
Net unrealized appreciation (depreciation)
of investments:
Beginning of period 365,191 99,477
End of period 27,841 290,220
Net unrealized depreciation
of investments (337,350) 190,743
Net gain from investments $ 79,561 $ 376,386
Net increase/decrease in net assets
resulting from operations $ (62,623) $ 176,490
Per share amounts:
Net investment loss $ (0.22) $ (0.31)
Net realized gain from investments 0.65 0.29
Net unrealized appreciation/
depreciation (0.53) 0.30
of investments $ 0.10 $ 0.28
THE ROCKIES FUND, INC.
STATEMENT OF OPERATIONS
For the Nine For the Nine
Months Ended Months Ended
September 30, September 30,
1999 1998
(Unaudited) (Unaudited)
Investment Income:
Rental income $ 119,625 $ 49,083
Consulting and other services 41,046 2,134
Interest and dividends 66,988 47,170
227,659 98,387
Expenses:
Wages and salaries 100,317 101,138
Professional fees 126,802 179,604
Custodian fees - 5,973
Directors fees 2,000 2,000
Interest 60,829 53,944
Travel and entertainment 28,276 17,860
Office 193,609 77,293
Building expenses 28,342 13,590
Investment expenses 27,630 21,734
Donations 11,091 4,535
Total expenses 578,896 477,671
Net investment loss $(351,237) $ (379,284)
Realized and unrealized gain from investments:
Net realized gain from investments 1,179,664 395,674
(net of income and deferred tax)
Net unrealized appreciation (depreciation)
of investments:
Beginning of period 389,522 30,918
End of period 27,841 290,220
Net unrealized apprcn/dprcn
of investments (361,681) 259,302
Net gain from investments $ 817,983 $ 654,976
Net increase in net assets
resulting from operations $ 466,746 $ 275,692
Per share amounts:
Net investment loss $ (0.55) $ (0.59)
Net realized gain from investments 1.84 0.62
Net unrealized appreciation (0.56) 0.40
of investments $ 0.73 $ 0.43
<TABLE>
Statements of Stockholders' Equity
Nine Months Ended September 30, 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
Net investment loss -- -- (188,008) -- -- (188,008)
Net realized loss on
sale of investments -- -- -- 617,332 -- 617,332
Unrealized net
appreciation
of investments -- -- -- -- (341,758) (341,758)
BALANCES AT
JUNE 30, 1999 6,403 2,901,243 (2,698,357) 2,513,270 365,191 3,087,750
Net investment loss -- -- (142,184) -- -- (142,184)
Net realized loss on
sale of investments -- -- -- 416,911 -- 416,911
Unrealized net
appreciation
of investments -- -- -- -- (337,350) (337,350)
BALANCES AT
SEPTEMBER 30, 1999 6,403 2,901,243 (2,840,541) 2,930,181 27,841 3,025,127
</TABLE>
THE ROCKIES FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS
For the For the
Nine Months Nine Months
Ended Ended
September 30, September 30,
1999 1998
(Unaudited) (Unaudited)
Increase (decrease) in net assets
from investment activities:
Net investment loss $ (357,237) $ (379,284)
Net realized gain from
investments (net of income
and deferred taxes) 1,179,664 395,674
Net unrealized appreciation/
depreciation of investments (361,681) 259,302
Net increase in net assets
from investment activities 466,746 275,692
Net assets at beginning of year 2,558,381 2,304,802
Net asset at end of year $ 3,025,127 $ 2,580,494
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 Market System or small cap's 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 net an estimated 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 carryforwards.
2. Portfolio Securities
AEROVOX, INC.
The Fund, at September 30, 1999, held 2,000 shares of
Aerovox, Inc. common stock, which stock is unrestricted as to
sale, non-income producing, and has been valued at its market
price of $2.625 per share or $5,250.
ALTA CALIFORNIA BROADCASTING
The Fund, at September 30, 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.
Alta bases the evidence of ownership upon notification of the
dividend declaration. Alta has advised the Fund 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 BINGO
The Fund, at September 30, 1999, held 7,500 shares of
American Bingo common stock, which stock is unrestricted as to
sale, non-income producing, and has been valued at its market
price of $.78125 per share or $5,859.38.
AMERICAN EDUCATIONAL PRODUCTS, INC.
The Fund, at September 30, 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 market value of $10.1875 per share or $168,093.75.
BIOSOURCE INTERNATIONAL
The Fund, at September 30, 1999, held 70,200 shares of
Biosource International common stock which stock is unrestricted
as to sale, non-income producing, and has been valued at its
market price of $4.0625 per share or $285,187.50.
COMMERCIAL ASSETS, INC.
At September 30, 1999, the Fund held 5,000 shares of
Commercial Assets, Inc. common stock which stock is unrestricted
as to sale, non-income producing, and has been valued at its
market price of $5.1875 per share or $25,937.50.
COMMUNICATIONS WORLD
The Fund, at September 30, 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.
CONSUMER PORTFOLIO
The Fund, at September 30, 1999, held 30,000 shares of
Consumer Portfolio common stock, which stock is unrestricted as
to sale, non-income producing, and has been valued at its market
price of $.96875 per share or $29,062.50.
COVA TECHNOLOGIES
The Fund, at September 30, 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.
CRYSTAL BAY
At September 30, 1999, the Fund held 98,500 shares of
Crystal Bay common stock, which stock is restricted as to sale,
non-income producing and has been valued by the Fund's Board of
Directors at its cost of $1.00 per share or $98,500.
DIRECT FOCUS, INC.
The Fund, at September 30, 1999, held 13,500 shares of
Direct Focus common stock, which stock is unrestricted as to
sale, non-income producing, and has been valued at its market
price of $18.875 per share or $254,812.50.
ECLIPSE fka BEAR STAR, LLC fka COLUMBINE HOME SALES, LLC
The Fund, at September 30, 1999, held 305,000 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
EXPLORATION COMPANY, THE
The Fund, at September 30, 1999, held 41,000 shares of The
Exploration Company common stock, which stock is unrestricted as
to sale, non-income producing, and has been valued at its market
price of $2.5625 per share or $105,062.50.
FAMILY STEAKHOUSE
The Fund, at September 30, 1999, held 10,000 shares of
Family Steakhouse common stock, which stock is unrestricted as to
sale, non-income producing, and has been valued at its market
price of $1.4375 per share or $14,375.
FIELDPOINT PETROLEUM
The Fund, at September 30, 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 September 30, 1999, held 17,680 shares of
Global Casinos, Inc. common stock valued at its market price of
$.625 per share or $11,050. The Fund, at September 30, 1999,
also held 291,667 shares of Global Casinos, Inc. preferred stock,
which was converted from debt, owed to the Fund by Global
Casinos. Both positions are restricted as to sale due to the
company being an affiliate, non-income producing. The Fund, at
September 30, 1999, also held a note receivable from Global
Casinos, Inc. in the amount of $163,343.13, 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 $314,562.25, 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 September 30, 1999, held 303,000 shares of
Globex Mining Enterprises common stock, which stock is
unrestricted as to sale, non-income producing and has been valued
at its market price of $.15 per share or $45,450.
GUARDIAN TECHNOLOGIES
At September 30, 1999, the Fund held 30,000 shares of
Guardian Technologies common stock, which stock is unrestricted
as to sale, non-income producing and has been valued at its
market price of $1.25 per share or $37,500.
HAMPTON COURT RESOURCES
The Fund, at September 30, 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
market price of $.96 per share or $12,000.
HAUSER, INC.
At September 30, 1999, the Fund held 2,500 shares of Hauser,
Inc. common stock, which stock is unrestricted as to sale, non-
income producing and has been valued at its market price of
$3.65625 per share or $9,140.63.
HAWKS INDUSTRIES
The Fund, at September 30, 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 market price of
$1.125 per share or $30,375.
INTERNATIONAL REMOTE IMAGING
At September 30, 1999, the Fund held 26,600 shares of
International Remote Imaging common stock, which stock is
unrestricted as to sale, non-income producing and has been valued
at its market price of $1.125 per share or $29,925.
KINETIKS.COM
The Fund, at September 30, 1999, held 1,422,332 shares of
Kinetiks.com common stock, which stock is restricted as to sale
and non-income producing. Because Kinetiks.com recently became
current in its filings with the SEC, the stock has been valued by
the Board of Directors below its market price of $1.03125 per
share, instead its been valued at $.30 per share or $426,699.60.
The Fund also held warrants to purchase an additional 850,000
shares of Kinetiks.com common stock at an exercise price of $.25
per share. The Board of Directors has valued the warrants at $0.
LAND RESOURCE CORPORATION
The Fund, at September 30, 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.
MEDICAL DEVICE TECHNOLOGIES
The Fund, at September 30, 1999, held 250,000 shares of
Medical Device 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 $.40 per share or
$100,000.
MULTI-LINK TELECOMMUNICATIONS
The Fund, at September 30, 1999, held 5,000 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 $5.00 per share or $25,000.
NETIVATION.COM
At September 30, 1999, the Fund held 20,000 shares of
Netivation.com common stock, which stock is unrestricted as to
sale, non-income producing and has been valued at its market
price of $4.5625 per share or $91,250.
REDWOOD ENERGY
At September 30, 1999, the Fund held 79,700 shares of
Redwood Energy common stock, which stock is unrestricted as to
sale, non-income producing and has been valued at its market
price of $.42 per share or $33,474.
SOUTHSHORE CORPORATION
At September 30, 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
market price of $1.1875 per share or $17,812.50.
TELXON CORPORATION
The Fund, at September 30, 1999, held 17,400 shares of
Telxon Corporation common stock, which stock is unrestricted as
to sale, non-income producing and has been valued at its market
price of $8.375 per share or $145,725.
THERMOGENESIS
At September 30, 1999, the Fund held 27,500 shares of
Thermogenesis common stock, which stock is unrestricted as to
sale, non-income producing, and has been valued at its market
price of $1.5625 per share or $42,968.75.
TRAINING DEVICES, INC.
The Fund, at September 30, 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.
UGIVE.COM
The Fund, at September 30, 1999, held 416,667 shares of
UGive.com common stock, which stock is restricted as to sale, non-
income producing, and has been valued at its cost of $.30 per
share or $125,000.
USASURANCE GROUP
The Fund, at September 30, 1999, held 52,150 shares of
Usasurance Group common stock, which stock is unrestricted as to
sale, non-income producing, and has been valued at its market
price of $2.25 or $117,337.50.
WHITEWING LABS
The Fund, at September 30, 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 market
price of $.25 per share or $5,875.
WORLD CYBERLINK
The Fund, at September 30, 1999, held 13,750 shares of World
Cyberlink common stock, which stock is unrestricted as to sale,
non-income producing, and has been valued at its market price of
$.8125 per share or $11,171.88.
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,
CO (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
September 30, 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,
CO., (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 Vectra Bank 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 Chestnut
Building to Gerald L. Wiebe and Weebee Properties the "tenant",
which agreed to pay for all property taxes, utilities, insurance
and maintenance associated with the building during the term of
the lease. As of May 1, 1999 the tenant signed a new lease
agreement to lease the Chestnut Building for a period of one
year, expiring on April 30, 2000, for a total sum of $130,000,
$10,000 per month, and a $10,000 deposit, due in four equal
installments. As of June 30, 1999, the Fund reclassed the
Chestnut Building from an investment to a fixed asset. On
September 30, 1999, the Fund posted a receivable from the
Chestnut tenant for September rent and late fees of $15,800 which
was received on October 21, 1999.
On March 17, 1998, the Fund sold its 20% investment in the
Plaza Hotel & Apartments in Thermopolis, Wyoming (the "Hotel
Investment"). The Hotel Investment, 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. The Fund has a three year lease contract through
September, 2001 starting at $9.50 per square foot increasing .50
per square foot annually and a $4.774 per square foot charge for
common area maintenance ("CAM"). 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 posses far greater financial and market
resources than the Fund.
4. Contingencies
None.
5. Subsequent Event
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 - SEPTEMBER 30, 1999 COMPARED TO
DECEMBER 31, 1998
During the three months ended September 30, 1999, the Fund
liquidated certain securities, Including 15,500 shares of Allied
Health Care; 26,500 shares of Biosource; 9,600 shares of
Exploration; 62,500 shares of Family Steak House; 40,500 shares
of First Entertainment; 19,034 shares of J2 Communication; 22,500
shares of Netivation; 8,000 shares of Redwood Broadcasting and
19,500 shares of Thermogenesis.
During the three months ended September 30, 1999, The Fund
acquired approximately 2,000 shares of Aerovox; 7,500 shares of
American Bingo; 15,000 shares of Biosource; 5,000 shares of
Commercial Assets; 98,500 shares of Crystal Bay; 10,000 shares of
Direct Focus; 25,000 shares of Guardian Technologies; 2,500
shares of Hauser; 200,000 shares of Kinetiks.com; 27,500 shares
of Thermogenesis; 416,667 shares of Ugive.com; and 20,000 shares
of Usasurance for a total investment of $658,902. During the
same period, the Fund purchased and subsequently sold securities
resulting in a net gain of approximately $84,941.
The Fund's value in restricted and unrestricted securities
increased from $1,830,541 as of December 31, 1998, to $2,879,722
as of September 30, 1999, an increase of $1,049,181 or 57%.
Notes receivable increased $460,743, or approximately 83%, from
$554,582 as of December 31, 1998, to $1,015,325 as of September
30, 1999. Global Casinos, an international gaming Company,
comprises approximately 43%, Webquest a venture capital
investment company comprises 31% and other venture capital
investments are 23% of total note receivables.
The Fund owns commercial real estate purchased on
September 4, 1997, for $621,358 with improvements. As of
September 30, 1999 the commercial real estate was reclassed from
an investment to a fixed asset as the prior sales contract was
altered to a lease agreement with an option to buy. Total
investments, therefore, increased from $3,150,123 on December 31,
1998, to $3,895,047 on September 30, 1999, an increase of
$744,924 or 24%.
Cash held by related parties decreased from $232,252 as of
December 31, 1991 to $923 or 100% as of September 30, 1999, as
money held in security accounts were utilized to purchase
investments. Cash held by others decreased 60% from $9,455 to
$3,775 as of September 30, 1999. Investment securities sold
decreased from $1,204,587 as of December 31, 1998, to $0.00 as of
September 30, 1999 as income from pending sales were received
during the first quarter 1999. Accounts receivable decreased 6%
from $31,934 to $29,988 as of September 30, 1999, accounts
receivable also includes $9,059 of refundable taxes. Accrued
interest receivable increased from $52,969 to $63,054 or 19%
concurrent with the increase of notes receivable. Prepaid loan
payment as of September 30, 1999 was $21,839, a decrease of 75%,
due to the Fund accruing nine 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 $4,003,707 at September 30, 1999, a
decrease of $721,390 or 15%.
The Woodman property purchased at $390,000 and
construction in progress at $114,058 as of September 30, 1999
remained the same from December 31, 1998. The reclassification
of the Chestnut Building, however, increased Property and
Equipment from $527,159 to $1,148,517 or 118% as of September 30,
1999.
Based on the foregoing, total assets decreased from
$5,246,585 on December 31, 1998, to $5,127,578 on September 30,
1999, a decrease of $119,007 or 2%.
Total current liabilities decreased from $2,294,523 as of
December 31, 1998, to $1,728,599 as of September 30, 1999, a
reduction of $565,924 or approximately 25%. Payables trade
decreased 2% from $258,394 as of December 31, 1998, to $253,280
as of September 30, 1999. Investment securities purchased with a
balance of $852,709 as of December 31, 1998 had a balance of 0.00
as of September 30, 1999 due to the Fund paying securities owed
during the first quarter 1999. Property taxes and other decreased
from $14,552 at December 31, 1998, to 10,815 at September 30,
1999, as was accrued for three quarters year to date 1999. Note
payable related parties decreased from $231,576 to $95,488 at
September 30, 1999 a decrease of 59% as the Fund paid off some
debt. Note Payable other increased from $653,975 as of December
31, 1998, to $1,174,733 as of September 30, 1999 or 80% as
security trades payable increased in 1999 in addition to the Fund
utilizing 100% of its $100,000 line of credit. The Fund accrues
interest at 9.75% or 2% over prime for its line of credit,
secured by the Funds portfolio holdings. The Fund also accrued
income tax payable on its realized gains for year to date 1999
for $102,958. The Fund reclassed its 1998 estimated tax accrual
of $91,121 to accounts payable with a credit of $18,999 to adjust
to the 1998 actual tax due of $72,122. The Fund also incurred a
deferred tax liability of $71,258 as of September 30, 1999 for
unrealized gains on investments, a decrease of 60% from December
31, 1998.
The Fund has a long-term debt to Merit Broadcasting, less
current portion, of $222,347 as of September 30, 1999, a decrease
of approximately 8% from December 31, 1998. Long term deferred
tax liability remained at $151,505 for deferred tax on the Fund's
1031 exchange on investments.
Total liabilities, therefore, decreased from $2,688,204 as
of December 31, 1998, to $2,102,451 as of September 30, 1999, a
decrease of $585,753 or approximately 22%.
Based on the foregoing, Net Asset Value increased during
the nine months ended September 30, 1999, from $2,558,381 at
December 31, 1998, to $3,025,127 at September 30, 1999, an
increase of $466,746 or 18%. Net assets per common share
increased from $4.00 per share at December 31, 1998, to $4.73 per
share on September 30, 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.
RESULTS OF OPERATIONS THREE MONTHS ENDED SEPTEMBER 30, 1999
COMPARED TO THREE MONTHS ENDED SEPTEMBER 30, 1998.
The Fund's investment income for the three months ended
September 30, 1999, was $82,366, an increase of $40,185 or
approximately 95% compared with the same period in 1998. This
increase in investment income was due to the Fund receiving
rental income from the Chestnut Building property and interest
from security cash accounts.
Expenses decreased from $242,077 as of September 30, 1998,
to $224,550 as of September 30, 1999, a decrease of $17,527 or
approximately 7%. Contributing to the decrease in expenses were
decreases in professional fees of 23% and travel and
entertainment of 25%. Building expenses however, at 0.00 as of
September 30, 1998 were $4,515 at September 30, 1999 due to new
contract fees, investment expenses increased 387% from $2,143 to
$10,440 and donations increase 321% from $1,710 to $7,200.
Based on the foregoing, the Fund reported a net investment
loss for the three months ended September 30, 1999, of
$(142,184), an increase of 29% when compared to the net
investment loss of $(199,896) incurred during the same period in
1998.
The Fund's net realized gain from sales of as of September
30, 1999 was $416,911, an increase of $231,268 or 125% compared
to a net realized gain of $185,643 as of September 30, 1998.
Unrealized net appreciation/depreciation relating to the current
market value of securities being held by the Fund decreased
$528,093 or 277% from an unrealized net gain of $190,743 as of
September 30, 1998, to an unrealized net loss of $(337,350) as of
September 30, 1999.
RESULTS OF OPERATIONS NINE MONTHS ENDED SEPTEMBER 30, 1999
COMPARED TO NINE MONTHS ENDED SEPTEMBER 30, 1998.
The Fund's investment income for the nine months ended
September 30, 1999, was $227,659, an increase of $129,272 or
approximately 131% compared with the same period in 1998. This
increase in investment income was due to the Fund receiving
rental income from the Chestnut Building and interest from
security cash accounts.
Expenses increased from $477,671 as of September 30, 1998,
to $578,896 as of September 30, 1999, an increase of $101,225 or
approximately 21%. Contributing to the increase in expenses were
increases in travel and entertainment of 58%, building expenses
of 109% and office expenses of approximately 150% mainly due to
$95,000 of bad debt expense incurred for note receivable
allowances.
Based on the foregoing, the Fund reported a net investment
loss for the nine months ended September 30, 1999, of $(351,237),
a decrease of 7% when compared to the net investment loss of
$(379,284) incurred during the same period in 1998.
The Fund's net realized gain from sales of as of September
30, 1999 was $1,179,664, an increase of $783,990 or 198% compared
to a net realized gain of $395,674 as of September 30, 1998.
Unrealized net appreciation/depreciation relating to the current
market value of securities being held by the Fund decreased
$620,983 or 240% from an unrealized net gain of $259,302 as of
September 30, 1998, to an unrealized net loss of $(361,681) as of
September 30, 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.
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: 11/15/99 By: /s/ Stephen G. Calandrella
Stephen G. Calandrella, President
Dated: 11/15/99 By: /s/Barbara A. Hamstad
Principal Accounting Officer
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<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> SEP-30-1999
<INVESTMENTS-AT-COST> 2,756,882
<INVESTMENTS-AT-VALUE> 3,895,047
<RECEIVABLES> 29,988
<ASSETS-OTHER> 78,672
<OTHER-ITEMS-ASSETS> 1,123,871
<TOTAL-ASSETS> 5,127,578
<PAYABLE-FOR-SECURITIES> 253,280
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,849,171
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</TABLE>
