8-K 1 form8k031405.txt ================================================================================ SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ---------------------------------------------------- FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1933 March 14, 2005 Date of Report (Date of earliest event reported) ---------------------------------------------------- BRONCO ENERGY FUND, INC. (Exact name of registrant as specified in its charter) NEVADA (State or other jurisdiction of incorporation or organization) 000-29541 (Commission File No.) 86-0972709 (IRS Employer Identification Number) 2920 N. SWAN, SUITE 206, TUCSON AZ 85712 (Address of principal executive offices) (ZIP Code) (866) 305-1755 (Registrant's Telephone number, including area code) Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below): [] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) [] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) [] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) [] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) ------------------------------------------------------------- COPY TO: Donald Davis, Esq. Davis & Associates P.O. Box 12009 Marina Del Rey, CA 90295 ITEM 1.01. ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT. FACTORS THAT MAY AFFECT FUTURE RESULTS DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS This Form 8K may include or incorporate by reference "forward-looking statements" within the meaning of Section 27A of the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). All statements, other than statements of historical facts, that address activities, events or developments that we expect or anticipate will or may occur in the future, references to future success and other matters are forward-looking statements, including statements preceded by, followed by or that include the words "may," "will," "would," "could," "should," "believes," "estimates," "projects," "potential," "expects," "plans," "intends," "anticipates," "continues," "forecasts," "designed," "goal" or the negative of those words or other comparable words. These statements are based on our current expectations and assumptions concerning future events, which are subject to a number of risks and uncertainties that could cause actual results to differ materially from those anticipated, including among others: o our failure to locate equity or debt financing in the future sufficient to proceed with our plan of operations; o changes in the price of coal and or other competing commodities, and sources of power, as well as changes in other economic conditions; o changes in the laws, regulations, policies or other activities of governments, agencies and similar organizations where such actions may affect the mining or distribution of coal, and/or the costs thereof or applicable tax rates; o we may face many other risks, including those which may be described from time to time in periodic reports that we file with the SEC. Consequently, all of the forward-looking statements made in this Form 8K and the accompanying documents are qualified by these cautionary statements and there can be no assurance that the actual results or developments that we anticipate will be realized or, even if realized, that they will have the expected consequences to or effects on us. The cautionary statements contained or referred to in this section should be considered in connection with any subsequent written or oral forward-looking statements that we or persons expressly authorized to act on our behalf may issue. We do not, however, undertake any obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. I. OUR WHOLLY OWNED SUBSIDIARY ACQUIRES COLUMBIA MINE On April 21, 2005, Bronco Coal Company (a Utah corporation), a wholly owned subsidiary of Bronco Energy Fund, Inc., organized for this purpose, purchased the Columbia Coal Mine ("Columbia") located in Books Cliff, Carbon County, near Price, Utah consisting of approximately 5,000 acres. The mine has been out of operation since 1966 and will require significant rehabilitation and the addition of capital improvements to meet current mining standards. Bronco Coal Company cannot commence the mining operations until it has secured the proper permitting. Provided it can obtain sufficient capital, Bronco Coal Company believes that it will be able to obtain a preliminary permit to allow for re-opening of portals, rehabilitation and preparation for full mining operations and commencement of surface improvements necessary, during the first half of 2006. It does not expect commercial operations at the mine until the fourth quarter of 2006 at the earliest. There can be no assurances that the Company will be able to obtain the necessary permits or that it will have sufficient capital to commence mining operations. The sellers of the mine, PD Company (a Utah general partnership managed by Brent Davies), executed a contract for the sale of the mine property to GLS Coal Company (a Utah limited liability company managed by Gregory L. Seal) on or about March 4, 2005. That contract called for a total purchase price of $20,000,000 to be paid $900,000 on closing, $900,000 within 60 days after closing, with the balance of $18,200,000 payable pursuant to a non-interest bearing promissory note. The promissory note is contingent upon the Columbia mine being brought back into production. The promissory note has a first scheduled payment of $5,000,000 due two years from the date of closing, a second payment of $7,500,000 three years from the date of closing, and a third and final payment of $5,700,000 four years from the date of closing. The sellers also retained a 1.5% net overriding royalty interest in the gross sales price of ore removed and sold from the Colombia mine. The promissory note is secured by a first deed of trust covering the Columbia mine property. On March 14, 2005, Bronco Coal Company entered into an Assignment Agreement with GLS Coal Company whereby GLS assigned the sale contract for the Columbia mine to Bronco Coal Company for $50,000 payable at closing. Additionally, GLS received a 0.5% net overriding royalty interest in the gross sales price of ore removed and sold from the Colombia mine, to be paid in addition to the 1.5% net overriding royality payable to PD Company. On April 19, 2005, Bronco Coal Company secured a line of credit in the total amount of $3,000,000 from Longview Fund, LP, Longview Equity Fund, LP, and Longview International Equity Fund, LP. The loan is secured by a second deed of trust covering the Columbia mine property. Bronco Coal Company drew $900,000 from the line of credit to fund the April 21, 2005 closing of the Columbia mine acquisition. In June, 2005, Bronco Coal Company drew another $900,000 from the line of credit to make the second payment to the sellers of the Columbia mine pursuant to the purchase agreement. By the end of the third quarter ended September 30, 2005, the $1,200,000 balance of the line of credit was drawn. The line of credit bears interest at a rate of 8% per annum and is due April 21, 2006. The line of credit is secured by a second deed of trust covering the Columbia mine property. As additional consideration to the lenders for extending the line of credit, Bronco Energy Fund guaranteed the repayment of the line of credit. Bronco Energy Fund's chairman, Daniel Hodges, also provided a personal guarantee for the line of credit and made a pledge of personal assets to secure the line of credit. Because of the non-interest bearing nature of the promissory note to the seller, Bronco Coal Company has recorded the total acquisition cost by discounting the future payments by an imputed interest rate of 8%. At the imputed interest rate, the cost of the Columbia mine acquisition was booked at $16,300,632, and the sellers note was booked with an imputed principal amount of $15,203,647, with payments of $4,264,297, $5,906,231 and $4,144,726, respectively due on the 2nd, 3rd and 4th anniversaries of the purchase, plus interest imputed at 8% per annum. The Columbia coal mine is located in the "Books Cliffs" region of Carbon County, Utah (approximately 24 miles east of Price Utah). The Columbia coal mine contains recoverable coal in the Sunnyside seams of high BTU coking coal with the average washed-coal quality as follows: Btu/lb 14,200, Ash 5.1%, SO2 0.5%, and moisture of 6%. The mine was previously operated using the `room and pillar' method of extraction. If the Company can obtain sufficient capital, the sources for which are at this date uncertain, as well as the necessary permits, the Company plans to implement a single longwall mining unit at the Columbia in the first quarter of 2007. The Columbia mine, which was formerly operated by US Steel, ceased coal production in 1966. There is a 9,600 foot concrete-lined tunnel and a 1,000 pound hoist which are considered to be in good condition. The sellers of the mine, PD Company, originally consisted of Mr. Davies and his then father-in-law, R.K. Pepper. Thereafter, in 1998, upon the death of Mr. Peper, Mrs. A.S. Peper became a partner. Currently Brent Davies is a 10% owner and general manager, Mrs. Peper owns 50% and Sarah Davies (the former wife of Brent Davies) owns 40%. Mr. Peper held a professional engineering license for geology and mining, and had accumulated nearly 50 years experience combined with US Steel in mining and engineering and his own business in consulting for mining and engineering. Mrs. Peper was a graduate mineralogist and together with Mr. Peper operated their mining and engineering consulting business. Mr. Davies is an accountant and principal with the firm of Robison, Hill & Co. PC, Certified Public Accountants in Salt Lake City, Utah. Mr. Davies and Robison Hill had acted at the audit firm for Bronco Energy Fund since 2000. On April 18, 2005, in order to avoid any conflicts of interest arising from Bronco Coal Company's acquisition of the Columbia mine, Robison Hill resigned as Bronco Energy Fund's independent auditor. COLUMBIA MINE OPERATIONAL STRATEGY The operational plan provides for 4 phases of activity, shown below as (1) Permitting, (2) Construction of Surface Facilities and Entry Preparation, (3) Entry Completion and Longwall Miner Setup, and (4) Longwall Miner Operations (Full-Scale Mining). Permitting Permitting consists of completing all permit pre-requisites, obtaining appropriate licensure from the Utah Department of Oil, Gas and Minerals ("DOGM") and posting reclamation and insurance bonding for the re-opening of mining operations. This activity is being undertaken by David Stokes, the Columbia Mine Manager. JBR Environmental & Engineering of Salt Lake City, Utah has been engaged by the Bronco Coal Company to provide assistance to the Company in meeting all items conditional to the issuance of a mining permit. JBR Engineering and its subcontractors are working on the engineering studies for the project, including studies on the impact to wildlife, impact to raptors, air quality, surface and underground water quality and, archaeological investigations, plant and surface geologic impact and review of the underground mining engineering. In addition, Bronco Coal Company has completed aerial surveys and contour mapping for the planned surface area of the mine. Ongoing, yet incomplete elements of this phase are (a) completion of the surface engineering plan to be completed by Farnham Engineering, (b) completion of the Cultural Survey Report, (c) completion of the soils study (d) compilation and submission of the formal permit to DOGM, (e) obtaining appropriate reclamation bonding, and (f) obtaining suitable loss and liability insurance. Bronco Coal Company estimates that the permitting may be completed near the end of the first quarter of 2007 at the earliest. However, there are no assurances that Bronco Coal Company will receive all required permitting, or that it will have enough funds to secure all required permitting. Surface Improvements and Mine Preparation From the completed surface engineering plan, Bronco Coal Company will construct surface support facilities to include offices, bath house, maintenance garage, supply warehouse, mine fan, substation, water pump house, water storage tanks, coal storage area, 1 1/2 miles overland belt, tipple, coal loadout facilities, road improvements and improvements to the railroad spur. Additionally, the existing mine portals, ventilation shafts and tunnels must be rehabilitated prior to full-scale use. These activities also include sealing, stopping and protection against re-entry of existing mine rooms and works. These activities may be undertaken upon acquisition of a Portal Exploration NOI permit. Bronco Coal Company anticipates that it would take at least until the first quarter of 2007 to complete the rehabilitation work. Entry Completion and Longwall Miner Setup With the mine rehabilitation and preparation completed, and upon obtaining the mining permit, Bronco Coal Company intends to begin mining operations using two continuous miner units to make two additional parallel main entries alongside an existing tunnel on the northwest side of the mine. These 8 foot tall entries are intended to proceed to the known rear fault-line and then turn southeast to setup a face for the Longwall unit to be installed. The miners are expected to average 150 feet per day of linear progress, although this estimate is highly dependent on geologic conditions to be encountered, and would require at least four months of operation to enable an appropriate face for Longwall operations. Longwall Mining Implementation The implementation of a single Longwall unit of 800 feet face of tall seam face at the Columbia mine should bring the mine into full production. It is intended that the coal will be mined, brought out by conveyor and storage on the surface near the loadout scales and chute, where it will be loaded either to trains or trucks for delivery. COLUMBIA MINE MANAGEMENT TEAM DAN R. BAKER--Mr. Baker, age 55, who also serves as the Company's President and Chief Executive Officer, will be responsible for oversight of all mining operations at this mine. Mr. Baker has more than 35 years of service in the mining industry in both management as well as production. * Executive Vice President-Mining of CONSOL Energy Inc. (Pittsburgh, PA) * Vice President-Fuels of PacifiCorp (Salt Lake City, UT) * Vice President-Operations and later President & C.E.O. of PacifiCorp Interwest Mining Company (Salt Lake City, UT) * Currently Director with several organizations (including Hazelwood Power Company in Australia, Interwest Mining Company, Williams Fork Company, Fairmont Supply Company, Universal Aggregates, L.L.C., National Mining Association, and Utah Mining Association) Education -- He received the B.S. degree in Mining Engineering from the University of Utah (1975), where he was the recipient of a W.C. Browning Academic Scholarship. In 2002 he was honored with the John E. Willson Distinguished Alumnus Award from the University of Utah. Professional Affiliations--Mr. Baker is an officer of a number of professional associations, including Utah Vice President of the Rocky Mountain Coal Mining Institute and Chairman and Vice President of the Utah Mining Association. He is a member of the National Mining Association, the Utah Mining Association, the American Institute of Mining Engineers, the National Mining Association, and the West Virginia Mining Association. Details of Professional Service: * November 1999 to October 2002--Executive Vice President-Mining, CONSOL Energy Inc. (Pittsburgh, PA). He provided overall leadership, strategic direction, and on-going management for all mining operations to ensure the production of quality coal at the lowest cost while preserving high safety standards for all programs and procedures; provided direction to each mining operation regarding productivity, quality, and employee/labor relations and staff development; established and maintained relationships with internal and external customers, the Board of Directors, shareholders, and other constituencies as needed to contribute to the company's success; interfaced with Vice Presidents/General Managers and General Managers to establish goals and objectives, then monitored progress of results. * January 1998 to October 1999--Vice President, Fuels, PacifiCorp (Salt Lake City, UT); President & C.E.O. PacifiCorp Interwest Mining Company (Salt Lake City, UT). He interfaced with mine General Managers and the Director of Fuels to establish goals and objectives; provided direction to each mine regarding cost control, communications, productivity; gave direction to, and monitored, mine safety program; established and monitored mine policies and procedures; interfaced with mine General Managers to provide direction regarding employee and labor relations; responsible for long-term planning, capital investment, mine accounting, and contract administration with the power plants. * July 1987 to December 1997--Vice President, Operations, PacifiCorp Interwest Mining Company (Salt Lake City, UT), responsible for mining the fuel for the company's power plants, including the Utah underground coal mines with a production capability of 8.4 million tons of coal a year; additionally responsible for the Centralia Mining Company surface mine in Washington (with a production capability of 4.6 million tons a year), the Glenrock Coal Company and Jim Bridger Coal Company in Wyoming (with a production capability of 23.0 million tons of coal a year), assisting with the Hazelwood Mine in Australia (with a production capability of 19.0 million tons), and consulting with underground mining operations in Mexico. * March 1969 to July 1987--He worked with the following companies and corporations in such capacities as Manager Underground Operations, Longwall Superintendent, Senior Mining Engineer, Longwall Foreman, Longwall Section Foreman, and labor mining: Kaiser Coal Corporation (Raton, NM), Emery Mining Corporation (Huntington, UT), Utah Power and Light Company (Salt Lake City, UT), Braztah Corporation (Helper, UT), Kaiser Steel Corporation (East Carbon, UT), and U.S. Steel Corporation (East Carbon, UT). Among the accomplishments of this period are the following: managed longwall mine and heavy media preparation plant;, administered a 15 million dollar budget; served as mediator of labor relations, grievances, and negotiations; managed two longwall systems design, moves, and full production; directed maintenance of longwall, supervised personnel, and administered management costs; directed engineering functions, mine planning ventilation, economics, and equipment selection; planned and introduced longwall to Utah Power and Light Company. DAVID STOKES -- Mr. Stokes, age 49, will serve as Columbia Mine Manager. Mr. Stocks has more than 29 years of service in the coal mining industry in maintenance management. Work Experience: * March, 2002 to June, 2004-- Diesel Equipment Compliance Coordinator / Maintenance Superintendent, Energy West Mining Company, (Huntington, UT). Working with equipment manufacturers, MSHA, NIOSH, mining companies, and labor to resolve compliance problems, design problems, safety, cost and other issues; Overseeing machine design modifications and rebuilds as needed; Establish cost analysis and budgets for equipment modifications and up-grades; Plan and schedule equipment cycle from mine through rebuild shops so as not to impact the daily needs of the mine. * November, 1994 to March 2002-- Mine Maintenance Superintendent, Energy West Mining Company, (Huntington, UT). Manage the maintenance of all equipment underground and surface, consisting of 2 continuous miner sections, 1 longwall section, over 9 miles of underground belts, underground pumping and dewatering, underground high voltage distribution, surface coal processing facility, 3 miles of surface belts, 4 mine fans, 2 surface high pressure pump houses, 2 surface high voltage substations, surface water treatment plant, offices and bathhouse, surface shop, surface and underground diesel equipment, and conspec mine monitor system. * February 1985 to March 1991 General Longwall Maintenance Foreman July 1980 to February 1985 Longwall Maintenance Foreman- Utah Power & Light Mining Company, Deer Creek Mine, (Huntington, UT). Responsible for the 24/7 maintenance of the longwall.; Planned and scheduled longwall moves and equipment rebuilds. Mr. Stokes holds the following Certificates: MSHA Certified Electrician Low, Medium, and High Voltage MSHA Certified Fireboss MSHA Certified Surface Foreman MSHA Certified Instructor II. OUR WHOLLY OWNED SUBSIDIARY ACQUIRES C&P COAL CORPORATION On May 31, 2005, Bronco Coal Co. (an Arizona corporation), a wholly owned subsidiary of Bronco Energy Fund, Inc., entered into a contract for the purchase of C&P Coal Corporation (a Utah corporation) ("C&P") from its sole shareholder, Brent Davies. Dan Baker, president and chief executive officer of Bronco Energy Fund, is also the president and chief executive officer of C&P Coal Corporation, but has and has had no equity interest in C&P. C&P has no current operations, no tangible assets and no liabilities. C&P's only asset is its claim as a plaintiff in an action in Federal Court in Utah against Consolidation Coal Company, CNX Land Resources, Inc. and their parent corporation, CONSOL Energy, Inc. C&P has alleged, among other things, that the defendants breached a contract, breached covenants of good faith and fair dealing, were unjustly enriched and tortuously interfered with Plaintiff's contractual interests. C&P has alleged that a contract was formed for it to acquire the Emery Mine located in Emery and Sevier Counties, Utah from defendants for $15,000,000. Additionally, C&P has alleged that a contract was formed granting it rights to sell certain inventory of coal from the Emery Mine Purchase Contract. C&P has requested, among other remedies, specific performance of the terms of the acquisition of the Emery Mine. The lawsuit is currently in the discovery phase. The deposition of Brett Harvey, CEO of defendant CONSOL Energy took place on December 21, 2005. Factual discovery is scheduled to close by April 30, 2006 and expert discovery is scheduled to close by June 30, 2006. Management believes that the claims asserted in the law suit have substantial merit, and have determined that to the extent the Company has funds available, it should fund the pursuit of these claims. However, as in all litigation, ultimate success is uncertain, and there can be no assurance as to whether their will be any recovery in this lawsuit. The acquisition by Bronco Coal Co. of C&P was paid for by Bronco Coal Co.'s issuance of a note which calls for payment to the sole stockholder of C&P (Brent Davies) of $500,000, due and payable 60 days after a successful conclusion of the lawsuit, which is defined as either execution of a final settlement agreement acceptable to C&P, or a final judgment in C&P's favor, in either case which provides for either a payment of not less than $1,000,000 to C&P, or C&P's acquisition of the Emery Mine. In the event that there is no successful conclusion to the lawsuit as defined above, the selling shareholder of the C&P shares is to receive $500,000 worth of common stock of Bronco Energy Fund, Inc., in full payment for 100% of the C&P shares. III. OUR WHOLLY OWNED SUBSIDIARY ACQUIRES THE HAZLETON MINE On July 1, 2005, Bronco Hazelton Co., (an Indiana corporation) a wholly owned subsidiary of Bronco Holdings I, Inc., which is wholly owned by Bronco Coal Co., which in turn is wholly owned by Bronco Energy Fund, entered into a contract for the purchase of three entities which together own and operate the Hazleton coal mine and wash plant in Gibson County, Indiana, approximately 50 miles north of Evansville, Indiana. The Hazleton mine consists of approximately 138 acres of land owned in fee along with coal mineral leases covering approximately 6,200 acres. A 350-ton per hour wash plant has been constructed on the mine site. The Hazleton mine began operations in 2002, with coal shipments commencing in 2003. Hazleton uses continuous miner production units to extract coal. The Hazleton mine is being developed along the Illinois VII Seam, also know as Danville Coal Member within the Upper Pennsylvanian Dugger Formation. The Illinois VII seam has a zone of low sulfur compliance coal. Bronco Hazelton plans to continue operations of the Hazleton mine with one additional continuous miner unit, in an effort to increase total production of the mine. The purchase price to the sellers consists of: (i) $25,000,000 in cash, and (ii) a royalty buyout in the amount of $5,000,000, consisting of $2,000,000 due on or about February 26, 2006, and $3,000,000 evidenced by a promissory note, bearing interest at 8% per annum, compounded monthly, with principle of $750,000 plus accrued compound interest due on January 29, 2007, and the balance of $2,250,000 plus accrued compound interest due on December 27, 2007. The note is secured by a subordinated security interest in the Columbia Mine property in Carbon County, Utah. As part of the consideration, Bronco Hazelton also assumed existing liabilities of the Hazleton Mine and wash plant, estimated to aggregate approximately $5,300,000 at the closing. As further consideration for the acquisition, Bronco Hazelton is also obligated to secure a complete release of certain obligations of Lafayette Coal Company owed to certain Kentucky utilities under certain supply agreements. The exact cost of securing such releases is uncertain at this date, but such costs could be substantial. On September 2, 2005, Bronco Hazelton Co. secured a short term loan in the total amount of $80,000 from Michael Turner. The loan bears an interest rate of 8%. Bronco Hazelton used the funds to pay legal fees for the preparation of loan documents for the funding of the Hazelton mine acquisition. In September 8, 2005, Bronco Hazelton Co. secured a short term loan in the total amount of $55,200 from Helen Marshall, wife of James Marshall, Bronco energy Fund's principal accounting officer. The loan bears an interest rate of 8%. Bronco Hazelton used the funds to pay legal fees related to required title opinions for the acquisition of the Hazelton mine. On October 4, 2005, Bronco Coal Co. secured a short-term loan in the total amount of $390,000 from Longview Equity Fund, LP, and $210,000 from Longview International Equity Fund, LP. The loans bear interest at the rate of eight percent (8%) per annum and were due and payable upon the first event of either 45 days or the closing of the Hazleton mine acquisition. From the funds, Bronco Coal Co. loaned $500,000 on the same terms and conditions to Bronco Hazelton Co which in turn paid $500,000 as a non-refundable deposit which applied toward the purchase price for the Hazleton mine acquisition. On November 3, 2005, Bronco Coal Company secured a short-term loan in the total amount of $104,000 from Brent Davies. The loan was without interest, but bears a default interest at the rate of eight percent (8%) per annum after its maturity date, which was on December 3, 2005. Daniel Hodges and Dan Baker provided personal guarantees for the promissory note. Bronco Coal Company loaned the funds on the same terms and conditions to Bronco Hazelton Co. Bronco Hazelton paid $100,000 for legal fees for the preparation of loan documents for the funding of the Hazelton mine acquisition. On November 10, 2005, Bronco Energy Fund sold 750,000 shares of its restricted common stock at the rate of $1.00 per share, to an accredited investor. Bronco Energy Fund invested the entire proceeds with Bronco Hazelton Co, and Bronco Hazelton used the $750,000 to make a further deposit toward the purchase price for the Hazleton mine. On December 29, 2005, Bronco Hazelton closed on financing with Standard bank, Plc, consisting of $27,500,000 in senior credit and $7,500,000 in subordinated credit for a total amount of $35,000,000 and then closed on the acquisition of Hazleton Mining, LLC, Hazleton Wash Plant, LLC, and White River Coal, Inc. which together own and operate the Hazleton coal mine and wash plant. The terms of the credit facilities carry an interest rate of 10%, are to be repaid in fourteen consecutive quarterly installments commencing in July of 2007 and completed in October of 2009. Bronco Hazelton, Hazleton Mining, Hazleton Wash Plant and White River Coal provided the lender with a security interest covering all of the Hazleton mine assets. Bronco Holdings I, the parent company of Bronco Hazelton, entered into a warrant agreement with the lenders whereby the lender has the right to acquire up to one third of the stock of Bronco Holdings I. The credit facilities also contain various provisions requiring certain debt coverage ratios, restricting the use of credit funds to specified uses, precluding the issuance of additional equity or debt by the operating entity without loan repayment, precluding capital purchases by the operating entity other than as specified in the agreement, and various other provisions designed to protect the lender. Dan R. Baker, the Company's President and Chief Executive Officer, is responsible for oversight of all mining operations, including at the Hazleton coal mine, where he is currently overseeing the transition. Mr. Baker has more than 35 years of service in the mining industry in both management as well as production. ITEM 8.01. OTHER EVENTS. BACKGROUND III. OTHER MATTERS 1. ELECTION TO BE BUSINESS DEVELOPMENT COMPANY; DECISION TO WITHDRAW ELECTION On December 21, 2004, Bronco Energy Fund elected to be regulated as a Business Development Company ("BDC") as that term is defined in Section 54 of the Investment Company Act. As a BDC, the Company was subject to the laws and regulations contained in the Investment Company Act of 1940. As a BDC, the Company became subject to significant regulation of its activities, as described below under "Investment Company Act Provisions Applicable to BDC's." On May 23, 2005, the Board unanimously approved a proposal to withdraw the Company's election to be treated as a BDC as soon as practicable, so that it might again conduct business as a regular public company rather than as a BDC subject to the Investment Company Act. On May 23, 2005, shareholders holding more then 80% of the Company's outstanding Capital Stock, executed "Written Consents of Shareholders", wherein they approved withdrawal of the Company's election to be treated as a BDC. On September 2, 2005, the Company filed a Form N-54C notifying the Securities and Exchange Commission that, pursuant to the provisions of Section 54(c), it withdrew its election to be subject to Sections 55 through 65 of the Investment Company, effective as of the filing date. On September 7, 2005, the Company filed a current report of Form 8K disclosing its reasons for withdrawal and providing disclosure regarding the loss to shareholders of the protections of the Investment Company Act provisions. The Company also disclosed that the election to withdraw the Company as a BDC under the Investment Company Act had resulted in a significant change in the Company's required method of accounting. The Company is of the opinion that it qualified for the immediate withdrawal of its BDC election by virtue of fact that the Company has never made a public offering of its securities, did not and does not have more than 100 shareholders, and had approval from a majority in capital interest of the shareholders to the withdrawal, and that said withdrawal was effective as of September 2, 2005. On September 8, 2005, the Securities and Exchange Commission Staff informed the Company of the SEC's Staff's belief that a consent of shareholders would still be required under section 58a of the Investment Act, "after" the filing of a Form 14C to be filed under the Securities And Exchange Act of 1934 (the 34' Act), and therefore, in the SEC Staff's view, the Company's September 2, 2005, Form N-54C withdrawal was not effective, and the Company remained subject to Sections 55 through 65 of the Investment Company. The Staff has cited not authority for its view, and after consultation with independent securities counsel, Management believes its withdrawal as a BDC was effective on September 2, 2005. However, in order avoid spending scarce resources on this disagreement which for all intents and purposes is moot since management has the backing of 80% of the outstanding shares to withdraw, the Company will file a Schedule 14C, either hold a shareholder's meeting (but without solicitation of proxies) to vote on the issue or accept shareholder written consents to elect to no longer be regulated as a BDC, and then immediately refile Form Notice N-54C to elect to no longer be regulated as a BDC. 2. CANCELLATION OF SHARES AND OPTIONS PREVIOUSLY ISSUED On January 4, 2005, the Company authorized the issuance of a total of 4,300,000 shares of common stock to a total of nine directors for services rendered. Also on January 4, 2005, the Company authorized the issuance of options for a total of 4,300,000 shares of common stock, exercisable at $0.01 per share, to a total of nine directors, for services rendered. On February 9, 2005, the Company authorized the issuance of options for a total of 900,000 shares of common stock, exercisable at $0.01 per share to three directors, for services rendered. Also on February 9, 2004, the Company authorized the issuance of a total of 900,000 shares of common stock to three directors for services rendered. During the first half of 2005, four directors exercised their options and acquired 300,000 shares each at $0.01 per share. The share and option issuances to directors were initially approved on December 16, 2004 by the Company's majority shareholders and board of directors, prior to the Company's filing to become a BDC. Certificates for these shares and options were issued to the individuals after the Company filed its election to be regulated as a BDC. All such stock and option issuances were rescinded in November 2005 at the request of the Board of Directors. 3. ISSUANCE OF HODGES CONVERTIBLE PROMISSORY NOTE; CONVERSION OF NOTE Prior to becoming a Business Development Company, Bronco Energy Fund issued, on December 16, 2004, a promissory note in the amount of $150,000 to its then president, Daniel Hodges, in return for Mr. Hodges tendering his resignation effective December 16, 2004, and for him returning for cancellation his 800,000 shares of common stock of the Company, then representing 80% control of the Company. The terms of the note provided Mr. Hodges with the option to convert the note into common stock in the event that the Company filed a Form 1-E. On January 24, 2005, the Company did file a Form 1-E. Mr. Hodges assigned the note to his children's trust investment arm, Joshua & Grace Investments, LLC, which subsequently converted the note in the Form 1-E offering on February 8, 2005, at the rate of $0.05 per share, resulting in 3,000,000 shares being issued to said trust, then representing approximately 57% of the Company's outstanding common stock of the issuance. On February, 9, 2005, Mr. Hodges was appointed to the Board of Directors of the Company and Chairman. The $150,000 obligation, since it was incurred prior to the company's election to be regulated as a BDC, constituted a valid and binding contractual obligation of the Company at the time of BDC election and thereafter. The Company believes that the subsequent satisfaction of this binding obligation during the Company's tenure as a regulated BDC did not require an approval of shareholders and did not violate other rules and regulations under which a BDC must operate, since it was merely the performance of a pre-existing obligation and no modifications were made in the terms of the convertible note. The Company has imposed a standard restrictive legend on these shares, which precludes their distribution or sale except in compliance with applicable securities laws. 4. ISSUANCE OF 3DI CONVERTIBLE NOTE; CONVERSION OF NOTE Prior to becoming a BDC, the Company entered into a consulting agreement with 3D Intel, Inc. 3D Intel, Inc., located in Austin, Texas, is controlled by its president, Alan Lomax. The consulting agreement provided for 3D Intel to advise and assist Bronco Energy Fund in the general administrative function of managing the document process in electing to become a Business Development Company regulated under the Investment Company Act of 1940. The consulting work was completed and the contract was memorialized on December 21, 2004. Thereafter, the Company filed its election to be treated as a BDC. The contract required payment of $100,000, as consideration for the consulting services rendered. This obligation was evidenced by a promissory note which was issued effective December 21, 2004, prior to the Company becoming a BDC, in the amount of $100,000. The note by its terms was convertible into common stock of the Company at the rate of $0.05 per share, for a total of 2,000,000 shares. On February 8, 2005, 3D converted the note into 2,000,000 shares of the Company's common stock. The $100,000 obligation, since it was incurred prior to the company's election to be regulated as a BDC, constituted a valid and binding contractual obligation of the Company at the time of BDC election and thereafter. The Company believes that the subsequent satisfaction of this binding obligation during the Company's tenure as a regulated BDC did not require an approval of shareholders and did not violate other rules and regulations under which a BDC must operate, since it was merely the performance of a pre-existing obligation and no modifications were made in the terms of the convertible note. The Company has imposed a standard restrictive legend on these shares, which precludes their distribution or sale except in compliance with applicable securities laws. 5. SECOND 3DI CONSULTING CONTRACT After becoming a BDC, the Company entered into a separate consulting agreement with 3D Intel, Inc. This consulting agreement provided that 3D Intel advise and assist Bronco Energy Fund in the creation and construction of a Coal Mining Roll-Up Business Plan which encompassed financial models and economic support documentation. The consulting work was completed and the contract was memorialized on April 2, 2005. The contract required payment of consideration of $100,000 to be evidenced by a promissory note in the amount of $100,000. The terms of the note provided that it was convertible into common stock of the Company at the rate of $0.50 per share, for a total of 200,000 shares. This note was converted by 3D Intel on April 15, 2005 into 200,000 shares of the Company's stock. After a review of these transactions, the Board became concerned that the issuance of restricted common stock to the consultant might not have complied with the rules and regulations of the 40 Act. In November, 2005, the Company canceled these 3D Intel conversion shares, in a reversal of the conversion transaction and reinstated the amount of the 3D Intel note as an obligation of the Company. 6. FORM 1-E EXEMPT OFFERING On January 24, 2005, Bronco Energy Fund filed a Form 1-E exemption from registration form with the SEC, proposing to sell up to $5,000,000 of its common stock at prices between $0.05 and $5.00. From February 28, 2005 through the termination of the offering on April 21, 2005, the Company sold a total of 554,000 shares of common stock at the price of $0.50 to a total of 25 purchasers, for a total of $277,000 in proceeds. On July 1, 2005, the Company filed a Form 2-E with the SEC reporting the results of this offering and termination of the 1-E offering. The Company is now filing an amended Form 2-E to reflect the proceeds from this offering were used as follows: Investments in private companies: Bronco Coal Company (Utah) $37,238 Bronco Coal Co. (AZ) 3,093 Bronco Emerging Technologies, Co. (AZ) 5,060 Bronco Green Power Co. (AZ) 10,579 Bronco Hazelton Co. (Indiana) 56,830 Bronco Petroleum Co. (Nevada) 36,317 C&P Coal Corporation (Utah) 32,000 Total Investments in private companies 181,117 Deposits (utilities, website) 15,501 Operating and administrative expenses 72,686 Working capital (cash) 7,696 ----- $277,000 ITEM 9.01. FINANCIAL STATEMENTS AND EXHIBITS Exhibits. Exhibits included are set forth in the Exhibit Index pursuant to Item 601 of Regulation S-K. SIGNATURES 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. Date: January 9, 2006 BRONCO ENERGY FUND, INC. By /s/ Dan Baker ------------------------------------ Dan Baker, Chief Executive Officer EXHIBIT INDEX Number Description 10.1 March 4, 2005 Real Estate Purchase and Sale Agreement between PD Company and GLS Coal Company for the Columbia mine. 10.2 March 14, 2005 Assignment of Contract between Bronco Coal Company and GLS Coal Company regarding the Columbia mine purchase contract. 10.3 April 21, 2005 Bronco Coal Company promissory note in the amount of $18,200,000 to PD Company. 10.4 April 19, 2005 Bronco Coal Company promissory note in the amount of $3,000,000 to Longview Fund, LP, Longview Equity Fund, LP, and Longview International Equity Fund, LP. 10.5 April 19, 2005 guarantee of Bronco Energy Fund for Bronco Coal Company promissory note in the amount of $3,000,000 to Longview Fund, LP, Longview Equity Fund, LP, and Longview International Equity Fund, LP. 10.6 May 31, 2005 Acquisition Agreement between Bronco Coal Co. and Brent Davies for C&P Coal Corporation. 10.7 July 1, 2005 Acquisition Agreement between Bronco Hazelton Co. and Blankenberger Brothers Holdings, LLC, Hoosier King Coal Company, Black Rush Mining, LLC and White River Coal, Inc. 10.8 Amendments 1, 2, 3, 4 and 5 to the Acquisition Agreement between Bronco Hazelton Co. and Blankenberger Brothers Holdings, LLC, Hoosier King Coal Company, Black Rush Mining, LLC and White River Coal, Inc. 10.9 September 2, 2005 Bronco Hazelton Co promissory note in the amount of $80,000 to Michael Turner. 10.10 September 8, 2005 Bronco Hazelton Co promissory note in the amount of $55,200 to Helen Marshall. 10.11 Dan Hodges Convertible Promissory Note. 10.12 December 21, 2004 consulting contract between Bronco Energy Fund and 3D Intel, Inc., and convertible promissory note. 10.13 April 2, 2005 Consulting Contract between Bronco Energy Fund, Ltd. and 3D Intel, Inc., and convertible promissory note. 10.14 October 4, 2005 Bronco Coal Co. promissory note in the amount of $390,000 to Longview Equity Fund, LP. 10.15 October 4, 2005 Bronco Coal Co. promissory note in the amount of $210,000 to Longview International Equity Fund, LP. 10.16 November 4, 2005 Bronco Hazelton Co. promissory note in the amount of $104,000 to Brent Davies. 10.17 December 29, 2005 Bronco Hazelton Co. Senior Credit Agreement with Standard Bank, Plc. 10.18 December 29, 2005 Bronco Hazelton Co. Subordinated Credit Agreement with Standard Bank, Plc. 10.19 December 29, 2005 Bronco Holdings I, Inc. Warrant Agreement with Standard Bank, Plc.

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

Date of Report (Date of earliest event reported) September 2, 2005

BRONCO ENERGY FUND, INC.

(Exact name of registrant as specified in its charter)

Nevada	000-29541	86-0972709
State or other jurisdiction	Commission	IRS Employer
Of incorporation	File Number	Identification Number

2920 North Swan Road, Suite 206, Tucson, AZ 85712

(Address of principal executive offices) (Zip Code)

Registrant’s telephone number including area code: (866) 305-0485.

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (See General Instruction A.2 below):

o Written communications pursuant to Rule 425 under the Securities Act

(17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act

(17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

ITEM 8.01. Other Events.

Background

On December 21, 2004, Bronco Energy Fund elected to be regulated as a Business Development Company (“BDC”) as that term is defined in Section 54 of the Investment Company Act. As a BDC, the Company was subject to the Investment Company Act, including certain provisions applicable only to BDC’s (the “BDC Provisions”), although it is excepted from certain provisions of the Investment Company Act applicable to registered closed-end investment companies. BDC’s generally are provided greater flexibility with respect to management compensation, capital structure, transactions among affiliates and other matters than registered closed-end investment companies. Nevertheless, as a BDC, the Company was subject to significant regulation of its activities, as described below under “Investment Company Act Provisions Applicable to BDC’s.”

In consideration of the future operations of the Company and its planned acquisitions in the coal and energy industries, the Board has evaluated and discussed the feasibility of the Company continuing as a BDC. The Board believes that, given the nature of the Company’s business and the change in its focus from investing, reinvesting, owning, holding, or trading in investment securities in the coal and energy industries to that of an operating company whose focus will be on acquisitions of controlling investments in operating companies and assets in the target industries, the regulatory regime governing BDC’s is no longer appropriate and will hinder the Company’s future growth.

On May 27, 2005, the Board unanimously approved the proposal to authorize the Board to withdraw the Company’s election to be treated as a BDC as soon as practicable so that it may begin conducting business as an operating company rather than a BDC subject to the Investment Company Act. On September 2, 2005, the Company filed a Form N-54C notifying the Securities and Exchange Commission that, pursuant to the provisions of Section 54(c), it withdrew its election to be subject to Sections 55 through 65 of the Investment Company Act of 1940 (the “Act”). The Company qualified for the immediate withdrawal of its BDC election by virtue of fact that the Company has never made a public offering of its securities and does not have more than 100 shareholders. Upon filing of the Company’s Form N54C, the Company is no longer subject to the regulatory provisions of the Investment Company Act applicable to BDC’s generally, including regulations related to insurance, custody, composition of its Board, affiliated transactions and any compensation arrangements. The Company will continue as a reporting public company and will still be subject to the Securities Exchange Act of 1934; however, it is no longer be subject to the 1940 Act.

Investment Company Act Provisions Applicable to BDC’s

Generally, to be eligible to elect BDC status, a company must engage in the business of furnishing capital and offering significant managerial assistance to companies that do not have ready access to capital through conventional financial channels. More specifically, in order to qualify as a BDC, a company must (a) be a domestic company; (b) have registered a class of its securities or have filed a registration statement with the SEC pursuant to Section 12 of the Exchange Act; (c) operate for the purpose of investing in the securities of certain types of eligible portfolio companies, namely less seasoned or emerging companies and businesses suffering or just recovering from financial distress; (d) offer to extend significant managerial assistance to such eligible portfolio companies; and (e) file a proper notice of election with the SEC.

The Investment Company Act also imposes, among others, the following regulations on BDC’s:

A BDC may not change the nature of its business or fundamental investment policies without the prior approval of the stockholders;

A BDC must carry its investments at value if a public trading market exists for its portfolio securities or fair value if one does not rather than at cost in its financial reports;

The issuance of senior equities and debt securities by a BDC is subject to certain limitations;

A BDC’s right to issue options, rights and warrants to purchase its stock is restricted;

A BDC may not engage in certain transactions with affiliates without obtaining exemptive relief from the SEC;

There are prohibitions and restrictions on investing in certain types of companies, such as brokerage firms, insurance companies and other investment companies;

There are limits on the types of assets that a BDC may acquire. A BDC may not acquire any asset other than “qualifying assets” unless, at the time the acquisition is made, such “qualifying assets” represent at least 70% of the value of the BDC’s total assets. “Qualifying Assets” generally include: (i) securities purchased in transactions not involving any public offering from the issuer of such securities, which issuer is an eligible portfolio company. An eligible portfolio company is defined as any issuer that (a) is organized and has its principal place of business in the United States, (b) is not an investment company other than a small business investment company wholly-owned by the BDC, and (c) does not have any class of publicly-traded securities with respect to which a broker may extend credit; (ii) securities received in exchange for or distributed with respect to securities described above, or pursuant to the exercise of options, warrants or rights relating to such securities; and (iii) cash, cash items, Government securities, or high

quality debt securities maturing in one year or less from the time of investment. A BDC may invest in the securities of public companies and other investments that are not “qualifying assets”, but such investments may not exceed 30% of the BDC’s total asset value at the time of such investment;

A BDC generally may not issue common stock at a per share price less than the then-current net asset value of the common stock without the prior approval of stockholders; and

A BDC is restricted in its ability to repurchase its shares directly from stockholders.

Loss to Shareholders of Investment Company Act Protections

With the filing on September 2, 2005 of the Company’s withdrawal of its election to be treated as a BDC, the Company is no longer subject to regulation under the Investment Company Act, which is designed to protect the interests of investors in investment companies. Specifically, our stockholders no longer have the following protections of the Investment Company Act:

• Asset coverage ratio that is designed to protect stockholders’ value by having security in an asset. Section 61 of the 1940 Act requires that a BDC maintain a ratio of assets to senior securities of at least 200%.

• Inability to change the nature of our business so as to cease to be, or withdraw our election as, a BDC unless authorized by vote of a “majority of the outstanding voting securities,” as defined in the 1940 Act.

• Prohibition from protecting any director or officer against any liability to the Company or our stockholders arising from willful malfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of such person’s office.

• Requirement to provide and maintain a bond issued by a reputable fidelity insurance company to protect us against larceny and embezzlement.

• A majority of our directors must be persons who are not interested persons, as that term is defined in Section 56 of the 1940 Act.

• The protections set forth in Section 57 of the 1940 Act, which requires, in part, the following:

a. Transactions involving controlling or closely affiliated persons. It shall be unlawful for any person who is related to a business development company in a manner described in subsection (b) of this section, acting as principal—

1. knowingly to sell any security or other property to such business development company or to any company controlled by such business development company, unless such sale involves solely (A) securities of which the buyer is the issuer, or (B) securities of which the seller is the issuer and which are part of a general offering to the holders of a class of its securities;

2. knowingly to purchase from such business development company or from any company controlled by such business development company, any security or other property (except securities of which the seller is the issuer);

3. knowingly to borrow money or other property from such business development company or from any company controlled by such business development company (unless the borrower is controlled by the lender), except as permitted in section 21(b) [15 USCS § 80a-21(b)] or section 62 [15 USCS § 80a-61]; or

4. knowingly to effect any transaction in which such business development company or a company controlled by such business development company is a joint or a joint and several participant with such person in contravention of such rules and regulations as the Commission may prescribe for the purpose of limiting or preventing participation by such business development company or controlled company on a basis less advantageous than that of such person, except that nothing contained in this paragraph shall be deemed to preclude any person from acting as manager of any underwriting syndicate or other group in which such business development company or controlled company is a participant and receiving compensation therefor.

b. Controlling or closely affiliated persons. The provisions of subsection (a) of this section shall apply to the following persons:

1. Any director, officer, employee, or member of an advisory board of a business development company or any person (other than the business development company itself) who is, within the meaning of section 2(a)(3)(C) of this title [15 USCS § 80a-2(a)(3)(C)], an affiliated person of any such person specified in this paragraph.

2. Any investment adviser or promoter of, general partner in, principal underwriter for, or person directly or indirectly either controlling, controlled by, or under common control with, a business development company (except the business development company itself and any person who, if it were not directly or indirectly controlled by the business development company, would not be directly or indirectly under the control of a person who controls the business development company), or any person who is, within the meaning of section 2(a)(3)(C) or (D) [15 USCS § 80a-2(a)(3)(C) or (D)], an affiliated person of any such person specified in this paragraph.

c. Exemption orders. Notwithstanding paragraphs (1), (2), and (3) of subsection (a), any person may file with the Commission an application for an order exempting a proposed transaction of the applicant from one or more provisions of such paragraphs. The Commission shall grant such application and issue such order of exemption if evidence establishes that—

1. the terms of the proposed transaction, including the consideration to be paid or received, are reasonable and fair and do not involve overreaching of the business development company or its shareholders or partners on the part of any person concerned;

2. the proposed transaction is consistent with the policy of the business development company as recited in the filings made by such company with the Commission under the Securities Act of 1933, its registration statement and reports filed under the Securities Exchange Act of 1934, and its reports to shareholders or partners; and

3. the proposed transaction is consistent with the general purposes of this title.

d. Transactions involving noncontrolling shareholders or affiliated persons. It shall be unlawful for any person who is related to a business development company in the manner described in subsection (e) of this section and who is not subject to the prohibitions of subsection (a) of this section, acting as principal—

4. knowingly to effect any transaction in which such business development company or a company controlled by such business development company is a joint or a joint and several participant with such affiliated person in contravention of such rules and regulations as the Commission may prescribe for the purpose of limiting or preventing participation by such business development company or controlled company on a basis less advantageous than that of such affiliated person, except that nothing contained in this paragraph shall be deemed to preclude any person from acting as manager of any underwriting syndicate or other group in which such business development company or controlled company is a participant and receiving compensation therefor.

e. Noncontrolling shareholders or affiliated persons; executive officer. The provisions of subsection (d) of this section shall apply to the following persons:

1. Any person (A) who is, within the meaning of section 2(a)(3)(A) [15 USCS § 80a-2(a)(3)(A)], an affiliated person of a business development company, (B) who is an executive officer or a director of, or general partner in, any such affiliated person, or (C) who directly or indirectly either controls, is controlled by, or is under common control with, such affiliated person.

2. Any person who is an affiliated person of a director, officer, employee, investment adviser, member of an advisory board or promoter of, principal underwriter for, general partner in, or an affiliated person of any person directly or indirectly either controlling or under common control with a business development company (except the business development company itself and any person who, if it were not directly or indirectly controlled by the business development company, would not be directly or indirectly under the control of a person who controls the business development company).

For purposes of this subsection, the term “executive officer” means the president, secretary, treasurer, any vice president in charge of a principal business function, and any other person who performs similar policymaking functions.

f. Approval of proposed transactions. Notwithstanding subsection (d) of this section, a person described in subsection (e) may engage in a proposed transaction described in subsection (d) if such proposed transaction is approved by the required majority (as defined in subsection (o)) of the directors of or general partners in the business development company on the basis that—

1. the terms thereof, including the consideration to be paid or received, are reasonable and fair to the shareholders or partners of the business development company and do not involve overreaching of such company or its shareholders or partners on the part of any person concerned;

2. the proposed transaction is consistent with the interests of the shareholders or partners of the business development company and is consistent with the policy of such company as recited in filings made by such company with the Commission under the Securities Act of 1933, its registration statement and reports filed under the Securities Exchange Act of 1934, and its reports to shareholders or partners; and

3. the directors or general partners record in their minutes and preserve in their records, for such periods as if such records were required to be maintained pursuant to section 31(a) [15 USCS § 80a-30(a)], a description of such transaction, their findings, the information or materials upon which their findings were based, and the basis therefor.

g. Transactions in the ordinary course of business. Notwithstanding subsection (a) or (d), a person may, in the ordinary course of business, sell to or purchase from any company merchandise or may enter into a lessor-lessee relationship with any person and furnish the services incident thereto.

h. Inquiry procedures. The directors of or general partners in any business development company shall adopt, and periodically review and update as appropriate, procedures reasonably designed to ensure that reasonable inquiry is made, prior to the consummation of any transaction in which such business development company or a company controlled by such business development company proposes to participate, with respect to the possible involvement in the transaction of persons described in subsections (b) and (e) of this section.

• The protections set forth in Section 61 of the 1940 Act, which requires the following:

a. Exceptions for business development company. Notwithstanding the exemption set forth in section 6(f) [15 USCS § 80a-6(f)], section 18 [15 USCS § 80a-18] shall apply to a business development company to the same extent as if it were a registered closed-end investment company, except as follows:

1. The asset coverage requirements of section 18(a)(1)(A) and (B) [15 USCS § 80a-18(a)(1)(A), (B)] applicable to business development companies shall be 200 per centum.

2. Notwithstanding section 18(c) [15 USCS § 80a-18(c)], a business development company may issue more than one class of senior security representing indebtedness.

3. Notwithstanding section 18(d) [15 USCS § 80a-18(d)]—

A. a business development company may issue warrants, options, or rights to subscribe or convert to voting securities of such company, accompanied by securities, if—

i. such warrants, options, or rights expire by their terms within ten years;

ii. such warrants, options, or rights are not separately transferable unless no class of such warrants, options, or rights and the securities accompanying them has been publicly distributed;

iii. the exercise or conversion price is not less than the current market value at the date of issuance, or if no such market value exists, the current net asset value of such voting securities; and

iv. the proposal to issue such securities is authorized by the shareholders or partners of such business development company, and such issuance is approved by the required majority (as defined in section 57(o) [15 USCS § 80a-56(o)]) of the directors of or general partners in such company on the basis that such issuance is in the best interests of such company and its shareholders or partners;

B. a business development company may issue, to its directors, officers, employees, and general partners, warrants, options, and rights to purchase voting securities of such company pursuant to an executive compensation plan, if—

i. (I) in the case of warrants, options, or rights issued to any officer or employee of such business development company (including any officer or employee who is also a director of such company), such securities satisfy the conditions in clauses (i), (iii), and (iv) of subparagraph (A); or (II) in the case of warrants, options, or rights issued to any director of such business development company who is not also an officer or employee of such company, or to any general partner in such company, the proposal to issue such securities satisfies the conditions in clauses (i) and (iii) of subparagraph (A), is authorized by the shareholders or partners of such company, and is approved by order of the Commission, upon application, on the basis that the terms of the proposal are fair and reasonable and do not involve overreaching of such company or its shareholders or partners;

ii. such securities are not transferable except for disposition by gift, will, or intestacy;

iii. no investment adviser of such business development company receives any compensation described in paragraph (1) of section 205 of title II of this Act except to the extent permitted by clause (A) or (B) of that section; and

iv. such business development company does not have a profit-sharing plan described in section 57(n) [15 USCS § 80a-56(n)]; and

C. a business development company may issue warrants, options, or rights to subscribe to, convert to, or purchase voting securities not accompanied by securities, if—

i. such warrants, options, or rights satisfy the conditions in clauses (i) and (iii) of subparagraph (A); and

ii. the proposal to issue such warrants, options, or rights is authorized by the shareholders or partners of such business development company, and such issuance is approved by the required majority (as defined in section 57(o) [15 USCS § 80a-56(o)]) of the directors of or general partners in such company on the basis that such issuance is in the best interests of the company and its shareholders or partners.

Notwithstanding this paragraph, the amount of voting securities that would result from the exercise of all outstanding warrants, options, and rights at the time of issuance shall not exceed 25 per centum of the outstanding voting securities of the business development company, except that if the amount of voting securities that would result from the exercise of all outstanding warrants, options, and rights issued to such company’s directors, officers, employees, and general partners pursuant to any executive compensation plan meeting the requirements of subparagraph (B) of this paragraph would exceed 15 per centum of the outstanding voting securities of such company, then the total amount of voting securities that would result from the exercise of all outstanding warrants, options, and rights at the time of issuance shall not exceed 20 per centum of the outstanding voting securities of such company.

4. For purposes of measuring the asset coverage requirements of section 18(a) [15 USCS § 80a-18(a)], a senior security created by the guarantee by a business development company of indebtedness issued by another company shall be the amount of the maximum potential liability less the fair market value of the net unencumbered assets (plus the indebtedness which has been guaranteed) available in the borrowing company whose debts have been guaranteed, except that a guarantee issued by a business development company of indebtedness issued by a company which is a wholly-owned subsidiary of the business development company and is licensed as a small business investment company under the Small Business Investment Act of 1958 shall not be deemed to be a senior security of such business development company for purposes of section 18(a) [15 USCS § 80a-18(a)] if the amount of the indebtedness at the time of its issuance by the borrowing company is itself taken fully into account as a liability by such business development company, as if it were issued by such business development company, in determining whether such business development company, at that time, satisfies the asset coverage requirements of section 18(a) [15 USCS § 80a-18(a)].

b. Compliance. A business development company shall comply with the provisions of this section at the time it becomes subject to sections 55 through 65 [15 USCS § § 80a-54-80a-64], as if it were issuing a security of each class which it has outstanding at such time.

• The protections set forth in Section 63 of the 1940 Act, which requires the following:

Notwithstanding the exemption set forth in section 6(f) [15 USCS § 80a-6(f)], section 23 [15 USCS § 80a-23] shall apply to a business development company to the same extent as if it were a registered closed-end investment company, except as follows:

1. The prohibitions of section 23(a)(2) [15 USCS § 80a-23(a)(2)] shall not apply to any company which (A) is a wholly-owned subsidiary of, or directly or indirectly controlled by, a business development company, and (B) immediately after the issuance of any of its securities for property other than cash or securities, will not be an investment company within the meaning of section 3(a) [15 USCS § 80a-3(a)].

2. Notwithstanding the provisions of section 23(b) [15 USCS § 80a-23(b)], a business development company may sell any common stock of which it is the issuer at a price below the current net asset value of such stock, and may sell warrants, options, or rights to acquire any such common stock at a price below the current net asset value of such stock, if—

A. the holders of a majority of such business development company’s outstanding voting securities, and the holders of a majority of such company’s outstanding voting securities that are not affiliated persons of such company, approved such company’s policy and practice of making such sales of securities at the last annual meeting of shareholders or partners within one year immediately prior to any such sale, except that the shareholder approval requirements of this subparagraph shall not apply to the initial public offering by a business development company of its securities;

B. a required majority (as defined in section 57(o) [15 USCS § 80a-56(o)]) of the directors of or general partners in such business development company have determined that any such sale would be in the best interests of such company and its shareholders or partners; and

C. a required majority (as defined in section 57(o) [15 USCS § 80a-56(o)]) of the directors of or general partners in such business development company, in consultation with the underwriter or underwriters of the offering if it is to be underwritten, have determined in good faith, and as of a time immediately prior to the first solicitation by or on behalf of such company of firm commitments to purchase such securities or immediately prior to the issuance of such securities, that the price at which such securities are to be sold is not less than a price which closely approximates the market value of those securities, less any distributing commission or discount.

3. A business development company may sell any common stock of which it is the issuer at a price below the current net asset value of such stock upon the exercise of any warrant, option, or right issued in accordance with section 61(a)(3) [15 USCS § 80a-60(a)(3)].

By withdrawing its election, the Company has returned to a standard operating company with wholly owned subsidiaries. The Company will continue as a reporting public company and will still be subject to the Securities Exchange Act of 1934; however, it will no longer be subject to the 1940 Act.

Reasons for the Withdrawal of the Company as a BDC

Given the investment focus, asset mix, business and operations of the Company that will result from the implementation of its business plan, the Board believed that it was prudent for the Company to withdraw its election as a BDC as soon as practicable to eliminate many of the regulatory, financial reporting and other requirements and restrictions imposed by the Investment Company Act discussed above. For example:

Business Focus. As a result of the business plan, the nature of the Company’s business has changed from simply being in the business of investing, reinvesting, owning, holding, or trading in investment securities in the coal and energy industry to that of an operating company whose focus is on acquiring assets and controlling interests in companies in the coal and energy industry. The Board believes that BDC status would be inappropriate for such activities.

Issuance of Securities other than Common Stock. BDC’s are limited or restricted as to the type of securities other than common stock which they may issue. The issuance of convertible securities and rights to acquire shares of common stock (e.g., warrants and options) is restricted primarily because of the statutory interest in facilitating computation of the Company’s net asset value per share. In addition, issuances of senior debt and senior equity securities require that certain “asset coverage” tests and other criteria be satisfied on a continuing basis. This significantly affects the use of these types of securities because asset coverage continuously changes by variations in market prices of the Company’s investment securities. Operating companies, including holding companies operating through subsidiaries, benefit from having maximum flexibility to raise capital through various financing structures and means. The Board believes that it may be able to maximize shareholder value by having the ability to raise capital through various financing structures and means in order to make further acquisitions.

Issuance of Common Stock. By virtue of its BDC election, the Company may not issue new shares of Common Stock at a per share price less than the then net asset value per share of outstanding Common Stock without prior stockholder approval. Historically, the market prices for BDC stocks have been lower than net asset value, making it much more difficult for BDC’s to raise equity capital. While this restriction provides stockholders of an investment company with appropriate and meaningful protection against dilution of their indirect investment interest in portfolio securities, the Company’s Board believes that this would essentially be irrelevant to the interests of investors in an operating company, who look to its consolidated earnings stream and cash flow from operations for investment value.

Compensation of Executives. The Investment Company Act limits the extent to which and the circumstances under which executives of a BDC may be paid compensation other than in the form of salary payable in cash. For example, the issuance of Restricted Stock is generally prohibited. However, the Board believes that by achieving greater flexibility in the structuring of employee compensation packages, the Company will be able to attract and retain additional talented and qualified personnel and to more fairly reward and more effectively motivate its personnel in accordance with industry practice.

Related Party Transactions. The Investment Company Act significantly restricts among other things (a) transactions involving transfers of property in either direction between the Company and most affiliated persons of the Company (or the affiliated persons of such affiliated persons) and (b) transactions between the Company and such affiliated persons (or the affiliated persons of such affiliated persons) participating jointly on the one hand and third parties on the other. To overcome these investment company restrictions, which are somewhat relaxed as applied to BDC’s, requires SEC approval, which is often a time-consuming and expensive procedure, regardless of the intrinsic fairness of such transactions or the approval thereof by disinterested directors of the Company. The Company believes situations may arise in which a corporation’s best interests are served by such transactions. The Board believes that stockholders are adequately protected by the fiduciary obligations imposed on the Company’s directors under Nevada state corporate law, which generally requires that the disinterested members of the Board determine fairness to the Company of an interested-party transaction (provided full disclosure of all material facts regarding the transaction and the interested party’s relationship with the Company is made), and SEC disclosure rules, which require the Company to include specified disclosure regarding transactions with related parties in its SEC filings.

Eligible Investments. As a BDC, the Company may not acquire any asset other than “Qualifying Assets” unless, at the time the acquisition is made, Qualifying Assets represent at least 70% of the value of the total assets (the “70% test”). Because of the limitations on the type of investments the Company may make, as well as the Company’s total asset composition, the Company may be foreclosed from participating in prudent investment opportunities and otherwise lack diversification.

Moreover, the Company must incur significant general and administrative costs in order to comply with the regulations imposed by the Investment Company Act. Management devoted considerable time to issues relating to compliance with the Investment Company Act and the Company has incurred substantial consulting, legal and accounting fees with respect to such matters. The costs of this

regulation are borne by, and the protections of this regulation are for the benefit of, the stockholders of the Company. The Board believes that resources that were being expended on Investment Company Act compliance matters could be utilized more productively if devoted to the operation of the Company’s business. The Board has determined that the costs of compliance with the Investment Company Act are substantial, especially when compared to the Company’s relative size and net income, and that it therefore is in the financial interests of the stockholders for the Company to cease to be regulated under the Investment Company Act altogether.

The Board believes that the above reasons indicate that the restrictions of the Investment Company Act would have the effect of dampening market interest in the Company and hindering its financial growth in the future. The Board has determined that the most efficacious way to reduce these costs, improve profitability, and eliminate the competitive disadvantages the Company experiences due to compliance with the many requirements and restrictions associated with operating as a BDC under the Investment Company Act is to withdraw the Company’s election to be treated as a BDC.

BDC Qualifying Issues

In addition to the various compliance issues and related expenses noted as reasons for terminating the Company’s BDC status, the Board concluded that the BDC election should be revoked due to several potential issues relating to the Company’s qualifications as a BDC under the Investment Act of 1940. For example, the Board was concerned that some of the Company’s previously disclosed stock and option issuances may not have adhered to the Investment Company Act provisions. Specifically, the issuance of stock and options to officers and directors, which occurred on January 4, 2005 and February 9, 2005 might not have fully complied with the provisions of Section 61(a)3B and/or 61(a)3C of the Investment Company Act in that the shares and options were issued without a shareholder vote of approval and in an amount greater than 20 per centum of the outstanding voting securities of such company, Section 63 of the 1940 Act might also not have been adhered to by the issuance by the Company of stock in fulfillment of consulting contracts and in satisfaction of outstanding promissory notes, along with the issuance of stock at prices possibly below market value. These concerns highlighted for the Company the burdensome nature of the BDC regulations and need for the Company to withdraw its BDC election as soon as possible.

Therefore, on the unanimous recommendation of the Board and with the written consent of a majority of the shareholders of the Company, the Company withdrew its BDC election. The Company qualified for the immediate withdrawal of its BDC election by virtue of fact that the Company has never made a public offering of its securities and does not have more than 100 shareholders. Hence, the Company filed its immediate withdrawal on Form N54C on September 2, 2005.

Effect of Election to Withdrawal as a BDC on the Company’s Financial Statements

With the withdrawal of the Company’s election to be treated as a BDC on September 2, 2005, and its becoming an operating company, the fundamental nature of the Company’s business changed from that of investing in a portfolio of securities, with the goal of achieving gains on appreciation and dividend income, to that of being actively engaged in the ownership and management of operating businesses, with the goal of generating income from the operations of those businesses.

The election to withdraw the Company as a BDC under the Investment Company Act has resulted in a significant change in the Company’s required method of accounting. BDC financial statement presentation and accounting utilizes the value method of accounting used by investment companies, which allows BDC’s to recognize income and value their investments at market value as opposed to historical cost. As an operating company, the required financial statement presentation and accounting for securities held will be either fair value or historical cost methods of accounting, depending on the classification of the investment and the Company’s intent with respect to the period of time it intends to hold the investment. As an operating company, the Company must consolidate its financial statements with subsidiaries, thus eliminating the portfolio company reporting benefits available to BDC’s. However, the Company did not have any assets until the second quarter of 2005, with the acquisition by its subsidiary, Bronco Coal Company (a Utah corporation), on April 21, 2005, of the Columbia Coal Mine (“Columbia”) located in Books Cliff, near Price Utah. The estimated reserves of metallurgical coal at the mine are in excess of 100 million tons. The mine has been out of operation since 1966 and will require significant renovation and improvement to meet current standards and achieve operating efficiency. The Company does not expect significant production operations at the mine until the first quarter of 2006 at the earliest. The Company’s second quarter financial statements were presented in its Form 10-Q filed on August 16, 2005, as consolidated financial statements typical of an operating company.

The Company does not believe that the withdrawal of its election to be treated as a BDC will have any impact on its federal income tax status, since it has never elected to be treated as a regulated investment company under Subchapter M of the Internal Revenue Code. (Electing treatment as a regulated investment company under Subchapter M generally allows a qualified investment company to avoid paying corporate level federal income tax on income it distributes to its stockholders.) Instead, the Company has always been subject to corporate level federal income tax on its income (without regard to any distributions it makes to its stockholders) as a “regular” corporation under Subchapter C of the Code. There will be no change in its federal income tax status as a result of becoming an operating company.

Operating Company

As an operating company, the Company (i) is not limited in the amount of excessive leverage that it could incur, (ii) is permitted to issue Restricted Stock absent an order from the SEC to the contrary, and (iii) is not limited in the amounts or types of compensation that it could pay to executives.

In addition, the withdrawal of the Company’s election to be treated as a BDC does not affect the Company’s registration under Section 12(g) of the Exchange Act. Under the Exchange Act, the Company is still required to file periodic reports on Form 10-KSB, Form 10-QSB, Form 8-K, Information Statements and other reports required under the Exchange Act. The Board is also still subject to customary principles of fiduciary duty with respect to the Company and its stockholders.

SIGNATURES

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.

Date: September 6, 2005 BRONCO ENERGY FUND, INC. By /s/ Dan Baker ------------------------------------ Dan Baker, Chief Executive Officer

Filing Compare · BRONCO ENERGY, INC.