UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file
number 811-3888
Combined Penny Stock Fund, Inc.
- -------------------------------------------------
Exact name of registrant as specified in charter)
6180 Lehman Drive #103, Colorado Springs, CO 80918
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(Address of principal executive offices) (Zip code)
John R Overturf
6180 Lehman Dr #103
Colorado Springs, CO 80918
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(Name and address of agent for service)
Registrant's telephone number including area code:(719)593-2111
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Date of fiscal year end: 09/30
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Date of reporting period: 03/31/04
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Form N-CSR is to be used by management investment companies to file reports with
the Commission not later than 10 days after the transmission to stockholders of
any report that is required to be transmitted to stockholders under Rule 30e-1
under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may
use the information provided on Form N-CSR in its regulatory, disclosure review,
inspection and policymaking roles. A registrant is required to disclose the
information specified by Form N-CSR, and the Commission will make this
information public. A registrant is not required to respond to the collection of
information contained in Form N-CSR unless the Form displays a currently valid
Office of Management and Budget ("OMB") control number.
Please direct comments concerning the accuracy of the information collection
burden estimate and any suggestions for reducing the burden to Secretary,
Securities and Exchange Commission, 450 Fifth Street, NW, Washington, DC
20549-0609. The OMB has reviewed this collection of information under the
clearance requirements of 44 U.S.C. ss. 3507.
ITEM 1. REPORTS TO STOCKHOLDERS
Combined Penny Stock Fund, Inc.
2004 Semi-Annual Report
The Company
Combined Penny Stock Fund, Inc. (the Fund) is registered under the Investment
Company Act of 1940 as a closed-end investment company.
Shares of the Fund are bought and sold over-the-counter on the Bulletin Board
under the symbol "PENY". All, or nearly all, capital gains and dividends are
reinvested in the Fund.
To Our Shareholders
The two year period since our last Annual Statement has been a difficult period
for all Combined stakeholders - its employees and shareholders alike. The Board
placed before the Shareholders a proxy that would have brought about substantial
changes to the Fund including a change of the name and investment policy.
Unfortunately, after several attempts, we were unsuccessful in our efforts as we
only received 43% of the votes needed to approve the proxy.
Subsequently, the Fund has reduced operating expenses to a bare minimum and has
converted a majority of the holdings to cash. We have also explored several
strategic alternatives to enhance shareholder value through the possible merger
or change in control of the Fund, but to no avail. In the near future we will
explore the alternative of liquidating the Fund and closing the doors.
The Board and I have been and continue to be committed to do the right thing -
to do what is best for the long term interests of the shareholders of Combined
Penny Stock Fund, Inc.
Thanks to our shareholders for their patience and continued support of the Fund.
Sincerely
John R. Overturf, Jr.
President
Combined Penny Stock Fund, Inc.
September 30, 2004
Corporate Information
Officers and Directors Independent Auditors
John R. Overturf, Jr., President/Director EKS&H, PC
Dr. A. Leonard Nacht, Secretary and Director 7979 E. Tufts Avenue, Suite 400
Jeffrey J. Kormos, Director Denver, CO 80237-2843
Rolf Lichtenberg, Director
Stock Transfer Agent Custodian of Portfolio Securities
Computershare Trust Company, Inc. US Bank
P.O. Box 1596
Denver, CO 80201
Corporate Headquarters Counsel
Combined Penny Stock Fund, Inc. Clifford L. Neuman, P.C.
6180 Lehman Drive, Suite 103 Temple-Bowron House
Colorado Springs, CO 80918-3415 1507 Pine Street
Boulder, CO 80302
Statement of Assets and Liabilities In Liquidation as of March 31, 2004
Assets
Investments at Liquidation value:
Investments in securities of unaffiliated issuers
(identified cost $685,863) $ 19,349
Cash and Equivalents 567,727
A/R Securities sold 454
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Total Assets 587,530
Liabilities
Payables:
Accounts Payable 977
------
Total Liabilities 977
Contingencies
Net Assets in Liquidation $ 586,553
=========
Net Asset Value per Share $ .013
====
Capital Stock and Accumulated Loss as of March 31, 2004
Common Stock, $.001 par value, 100,000,000
shares authorized, 46,342,000 $ 45,687
issued and outstanding
Additional paid-in capital 5,854,490
-----------
Net capital paid-in on shares of capital stock $ 5,900,177
Accumulated loss:
Net investment loss (3,586,323)
Accumulated realized loss (1,061,516)
Net unrealized depreciation of investments (665,785)
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Total accumulated loss (5,313,624)
Net Assets in Liquidation $ 586,553
=========
See notes to financial statements
Statement of Investments in Unaffiliated Issuers available for liquidation
as of March 31, 2004
Units,
Shares or
Warrants Value (a)
Common Stocks - 3.30%
Capital Goods - .0%
20,000 International Airline Support Group, Inc. $ 0
Data Processing\Computer - .46%
10,000 Infotech USA, Inc. $ 2,700
Statement of Investments in Unaffiliated Issuers Avaiable for Liquidation
as of March 31, 2004
Units,
Shares or
Warrants Value (a)
Common Stocks - 3.30% (Continued)
Entertainment - .46%
120,000 Global Casinos $ 1,800
60,210 Global Casinos, Inc. 903
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Group Subtotal 2,703
Finance - .00%
2,075 Milestone Capital, Inc. $ 2
---
Group Subtotal: 2
Food & Beverage - .00%
184 Charlie O' Beverage, Inc. $ 0
---
Group Subtotal: 0
Manufacturing - .05%
600 Sooner Holdings, Inc. $ 2
10,000 Grip Technologies, Inc 0
417 Zapworld.com 267
135,000 Cable & Co Worldwide, Inc. 0
3,333 Training Devices, Inc. (b). 0
-----
Group Subtotal: $ 269
Statement of Investments in Unaffiliated Issuers Avalable for Liquidation
as of March 31, 2004
Units,
Shares or
Warrants Value (a)
Common Stocks - 3.3% (Continued)
Medical Services & Research - 1.70%
5,000 Medical CV, Inc. - units $ 10,000
------
Group Subtotal: 10,000
Mining - .63%
7,500 Globex Mining Enterprises, Inc. $ 3,675
800 Exprofuels, Inc. 0
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Group Subtotal: $ 3,675
Retail - .00%
928 Premier Concepts, Inc. $ 0
893 9A Investment Holding Corp. 0
4,000 House 2 Home 0
27,000 Product Express com EBusiness 0
Group Subtotal: $ 0
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TOTAL COMMON STOCKS (Cost $685,863) $ 19,349
Total Investments in Securities of
Unaffiliated Issuers (Cost $685,863) $ 19,349
Total Investments in Securities of Unaffiliated
Issuers (Cost $685,863) 3.30% $19,349
Other Assets, Net of Liabilities 96.70% 567,204
------ -------
Net Assets 100.00% $ 586.553
(a) See Note 1 and 2 of notes to financial statements.
(b) Restricted security, see Note 2 of notes to financial statements.
See notes to financial statements
Statement of Operations in Liquidationfor the Six Months Ended March 31, 2004
Investment Loss:
Interest income 1,542
------
Total income 1,542
Expenses:
Accounting services and administration 11,000
Professional fees 5,000
Director's fees 4,000
Transfer fees 3,906
Legal 1,764
Custodian fees 972
Other 667
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Total expenses (27,309)
Net Investment Loss Before Net Realized and Unrealized Gain(Loss)
on Investments (25,767)
======
Net Realized Loss and Unrealized Appreciation on Investments:
Net realized loss from investment transactions (573,088)
Net unrealized appreciation of investments 624,789
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Net Gain on Investments 51,701
Net Increase in Net Assets from Operations in Liquidation $ 25,934
=======
Statement of Changes in Net Assets in Liquidation for the Six Months Ended
March 31, 2004 and for the Years Ended September 30, 2003 and 2002
For the Unaudited
Six Months Ended
March 31, 2004 2003 2002
From Operations:
Net investment loss $ (25,767) $ (191,428) $ (138,260)
Net realized gain/loss from investment
transactions (573,088) 11,822 10,621
Net unrealized appreciation of investments 624,789 63,856 (73,999)
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Net increase in net assets from operations 25,934 (115,750) (201,638)
From Capital Stock Transactions:
Purchase of treasury stock (300,000 shares
for the Six Months Ended March 31, 2004
and 2,374,000 and 1,755,000 shares in
Years 2003 and 2002, respectively) (3,667) (8,705) (37,999)
Net Assets - beginning of period 564,286 688,741 928,378
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Net Assets - end of period $ 586,553 $ 564,286 $ 688,741
See notes to financial statements
Financial Highlights
For the Unaudited For the Years Ended
Six Months Ended September 30...
March 31, 2004 2003 2002 2001 2000
Per Share:
Income from Investments $.000 $ .000 $.000 $.001 $.001
Expenses (.002) (.002) (.003) (.003) (.003)
Net Investment Loss (.002) (.002) (.003) (.002) (.002)
Net Realized Gain and unrealized
appreciation(depreciation) of
investments .000 .000 (.001) (.007) .004
Net increase (decrease) in net
asset value (.002) (.002) (.004) (.009) .002
Net Asset Value:
Beginning of year .015 .015 .019 .028 .026
---- ----- ---- ----- -----
End of Year $ .013 $ .013 $ .015 $ .019 $ .028
Total investment return\(loss)(1)(13.33%) (13.33%)(21.05%) (32.14%) 7.69%
Ratios:
Expenses to average net assets 12.84% 12.84% 17.42% 12.24% 11.81%
Net investment loss to average
net assets 12.40% 12.40% 15.79% 8.69% 7.25%
Portfolio turnover rate (2) 0% 0% 35.57% 114.47% 95.72%
(1) Based on the change in net asset value considering there has been no
distributions during the period presented. The Fund does not believe that a
presentation based on changes in the market value of the Fund's common stock is
appropriate considering the limited market for the Fund's stock.
(2) The lesser of purchases or sales of portfolio securities for a period
divided by the monthly average of the market value of portfolio securities owned
during the period. Securities with a maturity or expiration date at the time of
acquisition of one year or less are excluded from the calculation. Purchases and
sales of investment securities for the six months ended March 31, 2003 were $0
and $39,949, respectively.
See notes to financial statements
Notes to Financial Statements
1. Summary of Significant Accounting Policies
Combined Penny Stock Fund, Inc. (the Fund) was incorporated September 7, 1983
and is registered under the Investment Company Act of 1940, as amended, as a
closed-end investment company. The Fund invests in a broad range of small,
speculative stocks traded in the over-the-counter market and is being managed by
the Board of Directors of the Fund. The following is a summary of significant
accounting policies followed by the Fund in the preparation of its financial
statements.
Securities and Exchange Commission Examination and Liquidation Basis of
Accounting
Pursuant to an examination of the Fund by the Securities and Exchange Commission
(SEC), the SEC has issued a letter to the Fund identifying various asserted
deficiencies and violations of rules and regulations. The Fund has responded to
the SEC and does not believe that the outcome of this matter will have a
material impact on the Fund's financial condition or operations beyond the
liquidation of its assets. However, the ultimate outcome of this matter is not
determinable at this time.
During 2003, the Board of Directors determined after being advised by legal
council that the Company was administratively dissolved, as a result of its
failure to file its corporate report and pay annual fees as required by C.R.S
ss.7-114-201. The effective date of the administrative dissolution was July 1,
2000. As a result of that administrative dissolution, the corporate existence of
the Company continued but the corporation was not lawfully able to carry on
business except such business as is appropriate to wind up and liquidate its
business and affairs in accordance with applicable law. The Company has been
engaged in such process of converting all of its assets to cash for the purpose
of doing a liquidating distribution to its shareholders. The actions are
appropriate and authorized under applicable law notwithstanding the Company's
administrative dissolution. The Board of Directors believes the Company has
complied with all laws and regulations relating to becoming administratively
dissolved, however, if there were violations unknown to the Board of Directors,
the impact, if any, on the accompanying financial statements cannot be
determined at this time.
Basis of Accounting - As a result of the administrative dissolution described
above, the Company changed its basis of accounting for the periods after 2002
from the going concern basis to the liquidation basis which had no material
impact on the accompanying financial statements.
Investment Valuation - Investments in securities traded on national exchanges
and NASDAQ are valued at last reported sales prices. Investments in securities
traded in the over-the-counter market on the Electronic Bulletin Board or Pink
sheets are valued at the quoted bid as obtained from NASDAQ or at the quoted bid
prices from the brokers that make markets in such securities, on the last
business day of the period. Investments in restricted securities, as well as
certain thinly traded securities and corporate notes, are valued at their fair
value as determined in good faith under procedures established by and under the
direction of the Fund's Board of Directors.
Federal Income Taxes - The Fund has not elected to be treated for Federal tax
purposes as a "regulated investment company" under Subchapter M of the Internal
Revenue Code. Consequently, investment income and realized capital gains are
taxed to the Fund at tax rates applicable to corporations.
The Fund accounts for income taxes in accordance with the Statement of Financial
Accounting Standards (SFAS) No 109, "Accounting for Income Taxes." Under SAFS
No. 109, a current or deferred income tax liability or asset is recognized for
timing differences which exist in the recognition of certain income and expense
items for financial statement reporting purposes in periods different than for
income tax reporting purposes. The provision for income taxes is based on the
amount of current and deferred income taxes payable or refundable at the date of
the financial statements as measured by the provisions of current tax laws.
Other- Investment transactions are accounted for on the date the investments are
purchased or sold (trade date). Realized gains and losses from investment
transactions and unrealized appreciation and depreciation of investments are
reported on a first-in, first-out basis.
All of the Fund's equity securities as of March 31, 2004, are non-income
producing securities.
Concentration of Cash - As of March 31, 2004, the Fund had a money market
deposit at a bank of $552,286 which is in excess of the federally insured limit.
Use of Estimates - The preparation of the Fund's financial statements in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of income and expenses during
the reporting period. Actual results could differ from those estimates.
2. Restricted and Thinly-traded Securities
Restricted securities are those securities which have been acquired from an
issuer without registration under the Securities Act of 1933. Restricted
securities generally cannot be sold by the Fund except pursuant to an effective
registration statement or in compliance with Rule 144 of the Securities Act of
1933. The following schedule provides certain information with respect to
restricted securities held by the Fund as of March 31, 2004. These securities
comprised approximately 1% of the Fund's net assets at such time.
Description Date of Acquisition Cost Value
Training Devices, Inc. February 20, 1997 $ 12,500 $ 0
Global Casinos, Inc. August 1, 2001 59,800 1,800
The Fund has no right to require registration of the above restricted security.
Valuations for the restricted securities, as well as certain thinly-traded
securities and corporate notes, have been determined in good faith by the Fund's
Board of Directors, in the absence of readily ascertainable market values. Such
investments were valued at $26,202 as of March 31, 2004, representing 4.35% of
the Fund's net assets. Because of the inherent subjectivity of these valuations,
it is reasonably possible that a change in such valuations could occur in the
near term.
3. Unrealized Gains and Losses
At March 31, 2004, the net unrealized depreciation of investments of $665,785
was comprised of gross appreciation of $3 for those investments having an excess
of value over cost and gross depreciation of $665,788 for those investments
having an excess of cost over value.
4. Income Taxes
There was no income tax provision as of March 31, 2004 as the deferred tax
assets relating to accumulated losses and unrealized depreciation of $822,000
continue to be fully reserved. The deferred tax assets related valuation
allowance each increased $11,000 during the six months ended March 31, 2004 due
to the utilization of operating loss carryovers. Accumulated net investment loss
carryovers for income tax purposes total $1,870,000 at March 31, 2004, and will
expire in varying amounts through 2008.
5. Purchase and Retirement of Treasury Stock
During the period ended March 31, 2004, the Fund purchased 300,000 shares of its
common stock at a cost of $3,667 for the purpose of reducing the number of
outstanding shares.
6. Securities and Exchange Commission Examination
Pursuant to an examination of the Fund by the Securities and Exchange
Commission(SEC), the SEC has issued a letter to the Fund identifying various
asserted deficiencies and violations of rules and regulations. The Fund has
responded to the SEC and does not believe that the outcome of this matter will
have a material impact on the Fund's financial condition or operations. However,
the ultimate outcome of this matter is not determinable at this time.
End of notes to financial statements
ITEM 2. CODE OF ETHICS. Not applicable
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT. Not applicable
ITEM 4.PRINCIPAL ACCOUNTANT FEES AND SERVICES. Not applicable
ITEM 5. AUDIT COMMITTEE OF LISTED COMPANIES. Not applicable.
ITEM 6. SCHEDULE OF INVESTMENTS. Not applicable - schedule filed with Item 1.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END FUNDS.
Not applicable.
ITEM 8. PURCHASES OF EQUITY SECURITIES BY CLOSED-END FUNDS. Not applicable.
ITEM 9. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
ITEM 10. CONTROLS AND PROCEDURES. (a) Based on an evaluation of the registrant's
disclosure controls and procedures within 90 days of filing date of this Form
N-CSR, the disclosure controls and procedures are reasonably designed to ensure
that the information required in filings on Forms N-CSR is recorded, processed,
summarized, and reported on a timely basis. (b) There were no significant
changes in the registrant's internal control over financial reporting that
occurred during the registrant's last fiscal half-year that have materially
affected, or are reasonably likely to materially affect, the registrant's
internal control over financial reporting.
ITEM 11. EXHIBITS.
(a)(1) Not Applicable
(a)(2) Certifications by the registrant's principal executive officer and
principal financial officer, pursuant to Section 302 of the Sarbanes- Oxley Act
of 2002 and required by Rule 30a-2under the Investment Company Act of 1940 are
filed herewith.
(a)(3)Not Applicable
(b) Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002 is filed herewith.
SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934
and the Investment Company Act of 1940, the registrant has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant) Combined Penny Stock Fund, Inc. By * /s/ John R Overturf
John R Overturf, President Date 03/04/05
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Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By * /s/ John R Overturf
John R Overturf President Date 03/04/05
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Fund Directors
Name, Positions Term of Office Principal Number of Other
Address Held with and Length of Occupation(s) Portfolios Director
and Age Fund time served during the in Fund ships
*see(1) *see(2)below past 5 years Complex held
below Overseen for
By each
Director officer
Or or
Nominee nominee
*see (3) for
below Director
- -------- -------- -------------- ------------------- ---------- --------
John R. Overturf*(42) President, Mr. Overturf serves as President
6180 Lehman Dr 103 since of the Combined Penny Stock Fund,
Colorado Springs, August 1996 Inc., a closed-end stock fund, a
Colorado 80918 Director position he has since August 1996.
From March From September 1993 until September
1996 1996, Mr. Overturf served as Vice-
President of the Rockies Fund, Inc.
A closed-end stock market fund. Mr.
Overturf serves as the President
Of R.O.I., Inc., a private
Investment company, a position he
Has held since 1993. From June 1984
until February 1992, Mr. Overturf
served as Vice-President of Colorado
National Bank. Mr. Overturf holds a
Bachelor of Science degree in
Finance from the University of
Northern Colorado. Mr. Overturf
also is a director of BioSource
International, Inc. a California
Corporation.
A. Leonard Nacht*(74) Secretary From April 1990 to October 1991,
P.O. Box 1679 since April Dr. Nacht was Secretary of Redwood
Edwards, CO 81632 1990 MicroCap Fund, Inc. ("RWCF"). From
Director 1957 to 1994, Dr. Nacht was in the
since private practice of denistry. Dr.
February Nacht is currently retired as a
1990 dentist. Dr. Nacht has a DDS degree
from the University of Washington
and is a member of the American and
Colorado Dental Asociations.
Jeffrey J. Kormos (62) Director From August, 2001 until present, Mr.
8751 N 51st Ave 115 since Kormos has been employed as an
Glendale, Az 85302 July 1997 account executive with Samco
Financial Services, Inc. From
August 1994 to August 2002, he was
employed as an account executive
with Yee, Desmond, Schroeder & Allen
Inc., an NASD member stockbrokerage
firm. From March 1993 to August
1994, he was employed as an account
executive with G. R. Stuart &
Company, Inc. From December 1992 to
March 1993, Mr. Kormos was employed
as an account executive with
Financial Securities Network, Inc.,
and from April 1987 to December 1992
he was employed as an account
executive with Affiliated Securities
Rolf L. Lichtenberg (54)Director Mr. Lichtenberg joined the Portland
956 SE Ankeny St. #1 since staff of Cascadia Revolving Fund in
Portland, OR 97214 August October 2000. Cascadia is a private
2002 non-profit community development financial
institution making loans and providing
technical assistance to small businesses
unable to access credit from traditional
sources. From 1998 to the summer of 2000 He
worked in the Mortgage Loan Department of
Vectra Bank of Colorado in Colorado Springs.
His background consists of seventeen years of
banking knowledge including 12 years as a
commercial lender, loan department head and
branch manager. Mr. Lichtenberg's lending
background began at Security Pacific Bank's
Los Angeles headquarters and continued at
banks in Washington DC, Canada and Colorado.
He also spent five years as a small business
owner/manager in Colorado and several years
as an account executive in the securities
industry. Mr. Lichtenberg received Master of
Business Administration from the University
of Colorado in Boulder in 1976 and a
Bachelor's Degree in Finance also from the
University of Colorado in 1974. He has served
as the president of the Colorado Springs
chapter of the National Kidney Foundation and
as treasurer of the Chamber of Commerce in
Fountain, Colorado.
* Mr. Overturf and Dr. Nacht may be deemed interested persons as that term is
defined under Section 2(a)(19) of the Investment Company Act of 1940, as
amended, by virtue of their being officers as well as directors of the Fund.
The Fund Statement of Additional Information includes additional information
about Fund directors and is available by calling the Fund's phone number, at
719-593-2111.
A description of the policies and procedures that the Fund uses to determine how
to vote proxies relating to portfolio securities is available calling the Fund
phone number, (719-593-2111.
The Fund has adopted a code of ethics applicable to its principal executive
officer and principal financial officer. A copy of this code is available by
calling the Fund phone number, (719)593-2111.
Combined Penny Stock Fund, Inc
6180 Lehman Drive, Suite 103
Colorado Springs, CO 80918
Phone: (719) 593-2111
Fax: (719) 593-2342
Board of Directors
John R. Overturf
A. Leonard Nacht
Jeffrey J. Kormos
Rolf L. Lichtenberg
Officers
John R Overturf, President
A. Leonard Nacht, Secretary
PRSRT STD
U.S. POSTAGE
PAID
Co. Spgs., CO
Permit No. 440
Combined Penny Stock Fund, Inc.
6180 Lehman Drive, Suite 103
Colorado Springs, Colorado 80918-3415