SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal quarter ended March 31, 1997
Commission File No. 0-9297
CRONUS CORPORATION
a NEVADA corporation
36-3880744
(I.R.S. Employer Identification Number)
7660 E. BROADWAY #210, TUCSON, ARIZONA 85710
Registrant's telephone number, including area code (520) 885-1220
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past
90 days.[X] Yes[ ] No
Indicate the number of shares outstanding of each of the
registrant's classes of common stock, as of the latest
practicable date.
Class Outstanding as of October 1, 1997
$.001 PAR VALUE 14,383,106 SHARES
COMMON STOCK
DOCUMENTS INCORPORATED BY REFERENCE:
1. Audited Financial Statements for the years ended December 31,
1996 and 1995, dated October 2, 1997. 10-KSB October 15, 1997.
PART 1
ITEM 1. Financial Statements
J. Dennis Bartlett, P.C.
Certified Public Accountant
2421 E. 6th Street
Tucson, Arizona 85716
Cronus Corporation
Tucson, Arizona
I have compiled the accompanying balance sheet of Cronus
Corporation as of March 31, 1997 and the related Profit and Loss
statement for the three months then ended, in accordance with
standards established by the American Institute of Certified
Public Accountants.
A compilation is limited to presenting in the form of
financial statements information that is the representation of
management. I have not audited or reviewed the accompanying
financial statements and, accordingly, do not express an opinion
or any other form of assurance on them.
Management has elected to omit substantially all of the
disclosures and the statement of cash flows required by generally
accepted accounting principles. If the omitted disclosures and
statement of cash flows were included with the financial
statements, they might influence the user's conclusions about
the Company's financial position, results of operations, and cash
flows. Accordingly, these financial statements are not designed
for those who are not informed about such
matters.
/s/
J. Dennis Bartlett, P.C.
March 31, 1997
J. Dennis Bartlett, P.C.
Certified Public Accountant
2421 E. 6th Street
Tucson, Arizona 85716
We hereby consent to the inclusion of our report dated March 31,
1997, in the quarter report of Cronus Corporation on Form 10-QSB
for the period ended March 31, 1997.
/s/
J. Dennis Bartlett, P.C.
Tucson, Arizona
March 31, 1997
CRONUS CORPORATION
Balance Sheet
As of March 31, 1997
ASSETS
Current Assets
Checking/Savings
Cash
Bank of America -2,046.69
Checking-JR 1,991.35
Total Cash -55.34
Total Checking/Savings -55.34
Other Current Assets
Prepaid comp 2,000.00
Receivable Subsidiary 3,042.25
Total Other Current Assets 5,042.25
Total Current Assets 4,986.91
Fixed Assets
Accumulated Depreciation -1,094.00
Computer Equipment 3,071.00
Office Equipment/Furniture 5,021.50
Total Fixed Assets 6,998.50
Other Assets
Investments
Mining Claims 137,531.80
Total Investments 137,531.80
Security deposits 1,802.33
Total Other Assets 139,334.13
TOTAL ASSETS 151,319.54
LIABILITIES & EQUITY
Liabilities
Current Liabilities
Accounts Payable 10,062.06
Total Accounts Payable 10,062.06
Other Current Liabilities
Accrued expenses
Accrued interest 24,044.44
Accrued Salaries 249,495.76
Total Accrued expenses 273,540.20
Liabilities not discharged in Bankruptcy 2,930,134.00
Loan Payable
Docu-Form Express 60,000.00
Total Loan Payable 60,000.00
Payroll Liabilities
Arizona Withholding 288.40
Federal Withholding 472.00
Fica 459.00
Futa 80.00
State Unemployment 270.00
Total Payroll Liabilities 1,569.40
Total Other Current Liabilities 3,265,243.60
Total Current Liabilities 3,275,305.66
Long Term Liabilities
Loans payable
Kalav Loan -60,00.00
Sherlock Loan - 1 4,850.00
Sherlock Loan - 2 3,550.00
Sherlock Loan - 3 5,550.00
Sherlock Loan - 4 3,100.00
Sherlock Loan - 5 5,500.00
Total Loans payable -37,500.00
Total Long Term Liabilities -37,500.00
Total Liabilities 3,237,805.66
Equity
Net Income -70,390.56
Stockholders' Equity(Deficit)
Capital Stock 14,568.00
Paid in capital 558,556.52
Retained Earnings -3,585,856.08
Total Stockholders' Equity -3,012,731.56
Treasury Stock -3,364.00
Total Equity -3,086,486.12
TOTAL LIABILITIES & EQUITY 151,319.54
CRONUS CORPORATION
Profit and Loss
January through March 1997
Ordinary Income/Expense
Expense
Bank Service Charge 39.85
Fees 1,359.52
Marketing 90.00
Office 208.00
Payroll Expense
Futa 80.00
Salaries 57,250.00
Social Security Taxes 1,032.75
State Unemployment 270.00
Total Payroll Expenses 58,632.75
Postage 36.00
Printing 233.87
Printing and Reproduction 2,077.15
Professional Fees
Accounting 1,675.00
Consultants 100.00
Legal Fees 2,036.21
Total Professional Fees 3,811.21
Rent-Bldg 1,957.11
Supplies
Office 258.07
Total Supplies 258.07
Telephone 1,118.86
Travel & Entertainment
Meals 21.32
Travel 404.01
Total Travel & Entertainment 425.33
Utilities
Gas and Electric 101.68
Water 41.16
Total Utilities 142.84
Total Expense 70,390.56
Net Ordinary Income -70,390.56
Other Income/Expense 0.00
Total Other Income/Expense 0.00
Other Expense 0.00
Total Other Expenses 0.00
Net Other Income 0.00
Net Income -70,390.56
Please see Audited Financial Statements and Notes for the years
ended December 31, 1996 and 1995, dated October 2, 1997, filed as
an exhibit to the Company's 1996 10-KSB on October 15, 1997.
ITEM 2. Management's Discussion and Analysis or Plan of
Operation.
Disclosure Regarding Forward-Looking Statements.
This report on Form 10-KSQ includes "forward-looking statements"
within the meaning of Section 27A of the Securities Act of 1933,
as amended (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 included
in this report, including, without limitation, statements under
"Management's Discussion and Analysis or Plan of Operations"
regarding the Company's financial position, reserve quantities
and net present values, business strategy, plans and objectives
of management of the Company for future operations and capital
expenditures, are forward-looking statements and the assumptions
upon which such forward-looking statements are based are believed
to be reasonable. The Company can give no assurance that such
expectations and assumptions will prove to have been correct.
Reserve estimates of oil and gas properties are generally
different from the quantities of oil and natural gas that are
ultimately recovered or found. This is particularly true for
estimates applied to exploratory prospects. Additionally, any
statements contained in this report regarding forward-looking
statements are subject to various known and unknown risks,
uncertainties and contingencies, many of which are beyond the
control of the Company. Such things may cause actual results,
performance, achievements or expectations to differ materially
from the anticipated results, performance, achievements or
expectations. Factors that may affect such forward-looking
statements include, but are not limited to, the Company's ability
to generate additional capital, risks inherent in oil and gas
acquisitions, exploration, drilling, development and production,
price volatility of oil and gas, competition, shortages of
equipment, services and supplies, government regulation,
environmental matters, financial condition of the other companies
participating in the exploration, development and production of
oil and gas programs and other matters. All written and oral
forward-looking statements attributable to the Company or persons
acting on its behalf subsequent to the date of this report are
expressly qualified in their entirety by this disclosure.
The Company has had no operational history since 1988. There has
been limited operations this fiscal year. As the Company entered
the natural resources market in March of 1996, and sold AGAA,
PBAA and TGII, the Company has embarked upon a new direction
focusing on the acquisition, development and management of
natural resources. The Company sold AGAA and TGII because
neither subsidiary had became operational, thereby raising
significant doubts about their ability to earn income. The
Company sold the assets of PBAA after the results of their first
quarter of 1996 indicated that PBAA would not likely earn a
profit in 1996 or 1997.
In order to create revenues, and expand on its natural resources
base, the Company acquired PetroSun Exploration & Production,
Incorporated in 1997. As described more fully below, management
expects to begin receiving income from PetroSun oil and gas
leases in Louisiana by the end of 1997.
As can be seen in the financial statements, the Company has
incurred losses from operations and has deficits in working
capital and net worth. The Company has yet to earn income from
its operations, however, it expects to receive income from oil
and gas leases in Louisiana by the end of 1997. The lack of
revenues to date raises a doubt about the Company's ability to
continue as a going concern. Management expects to earn revenues
in late 1997 and also expects to raise additional funding as
needed. There can be no assurance that a cash flow will be
generated or that funding will be raised. The Company currently
has no commitments for any type of funding, and there is no
assurance that the Company will be able to obtain any such
financing or that such financing, if obtainable, will be on terms
necessary to enable the Company to operate profitably.
During 1996, the Company acquired the Gila and Black Diamond
mining claims in southern Arizona for $130,504. The future
realization of the cost of these mining claims is dependent upon
the claims becoming proven reserves. A proven reserve is the
estimated quantity of mineral which geological and engineering
data demonstrates with reasonable certainty to be recoverable in
future years from known reservoirs under existing economic and
operating conditions. Currently, these claims are considered
unproven. Additionally, the claims were transferred to the
Company without warranty or title assurance, and thus, the
Company is uncertain as to the legal status of its interest, if
any, in the claims.
The Company, doing business as TR-3 Industries, Inc. was in
chapter 7 bankruptcy from 1982 through 1992. The Company had no
operations and substantially no assets through November, 1995,
when the Company then acquired AGAA, TGII and PBAA. As noted
above, the Company sold AGAA, TGII and the assets of PBAA in 1996
and then entered the natural resources market, with the
acquisition of the mining claims in 1996, and into the oil and
gas field with the acquisition of PetroSun. As of December 31,
1996, Cronus was possibly subject to a number of lawsuits,
judgments and claims arising out of the conduct of business of
TR-3 Industries, Inc. prior to 1983. Liabilities not discharged
in the bankruptcy totaled $2,930,134.00 which the Company carried
as a liability on its balance sheet. However, in August 15,
1997, fifteen years after the bankruptcy filing, it is the
opinion of management that the statute of limitations has expired
on these possible claims. Accordingly, the Company removed the
liabilities from the balance sheet and recorded an extraordinary
gain of $2,930,134 during 1997.
Future Business Strategy and Operations.
The Company's business strategy is to create and expand its
reserve base and cash flow primarily through the following:
1. Raising significant capital to conduct assessments of the
economical feasibility of extracting minerals from its
properties, and to take advantage of leading edge technologies
such as pulse plasma secondary recovery and 3-D seismic
exploration projects.
2. Position itself with strategic sources of capital and
partners that can react to opportunities in the mining and oil
and gas business when they present themselves.
3. Developing alliances with major mineral and oil and gas
finders that have been trained by the major oil and mineral
companies.
4. Participate in projects that have opportunities involving
relatively small amounts of capital that could potentially
generate significant rates of return. These projects include
areas with large field potentials in Northern Arizona, New
Mexico, Louisiana and Queensland, Australia.
5. Implementing the Company's investment strategy to carefully
consider, analyze, and exploit the potential value of the
Company's existing assets to increase the rate of return to its
shareholders.
6. Reinvesting future operating cash flows into development of
drilling and recompletion activities.
7. Acquiring properties that build upon and enhance the Company's
existing asset base.
8. Developing a long term track record regarding stock price
performance and a reasonable rate of return to the shareholder.
The Company recognizes that the ability to implement its business
strategies is largely dependent on the ability to increase
operating cash flows by raising additional debt or equity capital
to fund future drilling and developmental activities. Management
believes that it will be necessary to raise additional equity or
debt capital to overcome the Company's undercapitalization.
However, the Company currently has no commitments for any type of
funding, and there is no assurance that the Company will be able
to obtain any such financing or that such financing, if
obtainable, will be on terms necessary to enable the Company to
operate profitably.
The steps the Company intends to take to assess the feasibility
of its current projects is described below. There can be no
assurance that the Company will be able to place such oil and gas
assets into production or to conclude such feasibility
assessments, or that if it is able to do so, that it will be able
to engage in oil and gas and/or mining operations profitably.
OIL AND GAS PLAN OF OPERATIONS
The Company's primary objective will be to place the oil and gas
assets of its subsidiary, PetroSun Exploration & Production,
Incorporated into production and thereby generate revenues.
PetroSun controls oil and gas leases on approximately 2,200 acres
of land in Louisiana referred to as Bayou Pierre Project. The
leases contain 18 proven developed oil and gas wells. These
wells have been shut-in since the late 1980's due to the then low
price of oil, so it will be necessary to change the pumps on the
pumping wells and conduct related maintenance work that is normal
for this type operation. The Company estimates that the cost to
rehabilitate the wells will be $20,000. The leases also contain
an additional 105 proven undeveloped locations which the Company
plans to drill if economically feasible.
PetroSun also holds leases on approximately 33,175 acres in
Northern Arizona of undeveloped prospects consisting of the El
Tule, Manuel Seep and Oso Draw, Little Colorado. Oso Draw,
Little Colorado was drilled in Section 15, T14 N, R 25 E during
June and July of 1996, and suffered a blowout. A twelve foot
section of dolomite tested 100% methane by mud logger analysis
and will be completed during late 1997. The Salt River Project
(SRP) and the towns of St. Johns and Concho have expressed a
strong interest to convert their energy consumption to natural
gas if operator can prove commercial reserves.
The following is a summary of the Company's plan to put its
proven leases into production. Such plan involves two phases:
Phase I
Phase One consist of reactivating the 18 proven developed wells
at Bayou Pierre. Four wells have been reactivated and the
remaining 14 wells are expected to be reactivated by November 30,
1997. The total costs of reactivating the wells is estimated to
be $20,000.
Phase II
Phase two will include the testing and drilling of the El Tule,
and Manuel Seep, and redrilling of the Oso Draw, Little Colorado
Prospects. PetroSun will attempt to complete the Oso Draw,
Little Colorado Prospect first as it will cost the least to prove
out. All future drilling will proceed as warranted by research.
The Company estimates that it will cost $900,000 to complete this
Phase II.
MINING
The Company intends to asses the feasibility of potential future
mining projects, involving (1) the TSFP Moapa Claims, (2) the
Gila Gold Placer mining claims, and (3) the Black Diamond group
of claims.
1. TSFP Moapa Claims Project
The TSFP Moapa Claims project is a joint venture with Temple
Summit Financial Projects Inc., ("TSFP"). Cronus and TSFP intend
to form a limited liability company to proceed to prove out and
put into production a permissive area of approximately 1,200
acres.
First, selective surface sampling will be done to get a good
superficial, broad coverage. Samples will be taken to crush and
split the samples in quarters. The samples will be taken to a
national lab, to have conventional fire assay run, then have them
take the pulp and re-run utilizing a proprietary recipe. If
results are positive or encouraging, the slotting and sampling
could continue, defining an area of 100 acre coverage on a 300-
foot interval spacing or 36-sample sites, averaging 75-foot
vertical. If this coverage would prove out a significant reserve
of +/- 5 million tons, there would be more than adequate
justification to proceed with the follow-on phases.
Estimated Costs $147,200
LIMITED EXTRACTION, PILOT PLANT (MILL)
Limited Extraction: This phase of the program will be the
removal of 5000 tons of material from selected sites within the
defined reserve block. This material will be screened (minus
one-eighth) and delivered to the millsite. This will provide
head-feed materials to the plant on a 50-ton per day basis for a
period of 90-days. The Company will rely on the "Small-Miner
Exclusionary" policy relative to mining disturbance, i.e. no more
than a five-acre disturbance in any given year without
reclamation. This policy provides for no bonding, environmental
impact study or permitting, only notification.
Pilot Mill: The mill design and lay-out will be sized to
accommodate the processing of 50-TPD (tons per day) head-feed.
Based on previous metallurgical data, the plant design would
permit expansion to optimum production scale without disturbing
the pilot mill activities. It is anticipated that the existing
mill building and site would be utilized in this phase. This
segment of the outline portrays a production format which is
based upon information and techniques of recovery information
generated by previous participants and TSFP. Therefore should
this proposed program result in a deviation or modification, the
capital structure outlined will vary.
Estimated Costs $1,438,900
TOTAL ESTIMATED COSTS $ 1,744,710
All of these capital purchases will be utilized in a full-
production scenario. This will include the mining sequence for
extraction and screening. It is somewhat premature and
optimistic to estimate or project economic figures relative to an
anticipated return from the testing period, however relying on
the existing knowledge about the current drilled reserve of TSFP,
it may have some validity. It should be noted, however, that
operating under limited production is always more expensive than
production in an optimal setting.
At that juncture a feasibility study will determine the fate of
the project. The information generated will establish cost
parameters relative to a full-scale production facility. These
figures will dictate "an optimum mining/processing range" which
will confirm the project capital structure, i.e., plant sizing
pertaining to efficiency, expediency and thus a TPD projection.
At that point in the venture, the L.L.C. would review the data as
their contribution will be expected in the event a positive,
progress conclusion is reached. This financial contribution to
this point, on the part of Cronus will entitle the Company to a
paid-in-full, 50% interest in the L.L.C. as TSFP will have
contributed the first risk monies and thus would hold all until
this point in the project. In other words, at that point in the
project, the Company and TSFP would be 50-50 partners in the
joint venture project.
2. Gila Association Placer Mine Project.
Gila Gold Placer Project:
The Company plans to verify and confirm the existence, extend and
grade of placer gold located at the Gila Gold Placer claims.
First, it intends to asses the presence and tenor of placer gold
as described in engineering reports of past exploration efforts.
Next, the Company will analyze the economic viability of such
deposit by determining optimal production rate and stripping-
sorting ratios, defining a mining and reclamation technique,
generating a flow sheet, and isolating processing, mining,
capital, reclamation and general overhead cost factors.
The Company plans to conduct a seismic survey consisting of a 5-
line, 25' spacing, 9000 lineal foot, segmented survey. This
survey will be complimented with computer enhanced calculations,
storage, retrieval and printout capabilities. This survey will
provide definitions of the alluvial-bedrock contact. From this
information, cross-sectional views will be generated to define
ore reserve volume, assist in mine planning and describe mining
technique.
The Company also plans to conduct a bulk sampling, intended to
ascertain the following: value recoverable per cubic yard,
concentrating ratio, concentrating technique, and general ground
conditions and boulder contact, nature of interbeds, slope
stability, reject swell and nature of backfill material. The
Company estimates the costs of the assessment to that point to be
$75,000. The accumulation of data from this sampling project
will provide the baseline to confirm ore reserves and feasibility
of the mining project. Due to the current prices of gold, this
project has been placed on hold until late 1998.
3. Black Diamond Mining Project.
Black Diamond Project:
The Company intends to evaluate the Black Diamond mining claims
as follows. First, the Company plans to gather data from Exxon
Corporation regarding past exploration work performed by Humble
Oil. Next, it intends to assess other geological, geophysical
and geochemical data gathered on the subject property. Finally,
it will formulate a development plan and seek a possible joint
venture partner. Other than searching for a joint venture
partner, this project will not be a priority in 1998.
Financial Requirements and Source of Funds.
The Company is currently rehabilitating the shut-in oil and gas
wells by setting compressors and pumps which will allow PetroSun,
to put its revenue producing assets in Louisiana into production
starting in October, 1997. Based on historical production rates,
the Company believes that PetroSun's oil and gas production in
Louisiana should produce net revenues sufficient to cover basic
operating expenses of the Company of $250,000 through its
exploratory period for the next six months.
Thereafter, the Company believes it will need to raise at least
$1,500,000 in order to conduct testing and drilling of its oil
and gas properties, and to conduct testing of the Moapa Project,
the Gila Gold Placer Project, and the Black Diamond Project.
Such funds may be sought through the issuance of additional
shares of the Company's Common Stock or other equity securities,
through debt financing, or through various arrangements,
including joint ventures and/or mergers, with third parties.
However, the Company currently has no commitments for any type of
funding, and there is no assurance that the Company will be able
to obtain any such financing or that such financing, if
obtainable, will be on terms necessary to enable the Company to
operate profitably. If the Company is unsuccessful in completing
a private type placement, or if additional funds are necessary
either before or after such a transaction, it is uncertain at
this time what actions the Company will take. Possibilities
include other debt or equity financings or the sale of existing
assets.
Competition - Oil and Gas
The oil and gas industry is highly competitive in all phases.
The Company will encounter strong competition from other
independent oil and gas companies in acquiring economically
desirable prospects as well as in marketing production therefrom
and obtaining external financing. Substantially all of the
Company's competitors have financial resources, personnel
resources, and facilities substantially greater than those of the
Company.
Competition - Mining
There is considerable competition for mining prospects on federal
lands. Costs of exploration, testing and mining, milling,
transportation, labor and other costs have risen dramatically.
These costs would be a factor in determining whether the
discovery of minerals, if any, would be commercial or not, and
could render a discovery unprofitable, even if made.
In addition to the uncertainty surrounding the eventual
development of commercial mineralization on the Company's
properties, the success of any mining operation which might be
conducted is dependent upon the price of minerals on the domestic
and world markets, which is subject to fluctuations, in part as a
result of actions by central banks and government policies.
PART II
ITEM 1. Legal Proceedings.
Cronus, d.b.a. TR-3 Industries, Inc. was in Chapter 7 bankruptcy
from 1982 through 1991. The Company had no operations and
substantially no assets or liabilities through November 1995.
During 1997, legal counsel informed management that liabilities
previously believed to be discharged in bankruptcy had not been
discharged. These liabilities relate to the operations of the
Company prior to 1982. The Company has recorded a correction of
an error in the accompanying financial statements and,
accordingly has restated retained earnings (accumulated deficit)
at December 31, 1993. The adjustment had no effect on net
income, net income after taxes, or earnings per share for the
years ended December 31, 1996, 1995 or 1994. Additionally, the
Company is subject to a number of lawsuits and claims (some of
which involve substantial amounts) arising out of the conduct of
its business prior to 1982, which, although the Company does not
currently possess sufficient information to reasonably estimate
the amounts of liabilities to be recorded, they may be
significant to the results of operations. However, in August 15,
1997, fifteen years after the bankruptcy filing, it is the
opinion of management that the statute of limitations has expired
on these possible claims. Accordingly, the Company removed the
liabilities from the balance sheet and recorded an extraordinary
gain of $2,930,134 during 1997.
ITEM 2. Changes in Securities.
None
ITEM 3. Defaults Upon Senior Securities.
None
ITEM 4. Submission of Matters to a Vote of Security Holders.
None
ITEM 5. Other Information
None
ITEM 6. Exhibits and Reports on Form 8-K.
During the first quarter of 1997 ending on March 31, 1997, no
form 8-K reports were filed.
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, thereunto duly authorized.
CRONUS CORPORATION
DATE: November 3, 1997 By:
__/s/_________________
Jonathan Roberts,
President and Director
