SECURITIES AND EXCHANGE COMMISSION Washington D.C. 25049 FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended August 31, 1995 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ________ to ________ Commission file number 0-7261 CHAPARRAL RESOURCES, INC. 621 - 17th Street, Suite 1301 Denver, Colorado 80293 Phone: (303) 293-2340 Colorado 84-0630863 (State of Incorporation) (I.R.S. Employer Identification No.) Indicate by check mark whether Registrant (1) has filed all reports required to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] As of October 13, 1995, the Registrant had 20,396,692 shares of its $0.10 par value common stock issued and outstanding. Total Pages 9 PART I - SUMMARIZED FINANCIAL INFORMATION CHAPARRAL RESOURCES, INC. Consolidated Statements of Operations Unaudited For the three months ended For the nine months ended -------------------------- ------------------------- August 31, August 31, August 31, August 31, 1995 1994 1995 1994 ---- ---- ---- ---- Revenue: Oil and gas sales $ 64,000 $ 95,000 $ 200,000 $ 292,000 --------- ---------- ----------- ---------- 64,000 95,000 200,000 292,000 Costs and expenses: Production costs 22,000 37,000 89,000 184,000 Depreciation and depletion 24,000 44,000 85,000 128,000 General and administrative (5,000) 8,000 55,000 94,000 ---------- --------- --------- ---------- 41,000 89,000 229,000 406,000 ---------- ---------- ---------- ----------- Earnings (loss from operations) 23,000 6,000 (29,000) (114,000) Other income (expenses): Interest income 1,000 2,000 4,000 11,000 Interest expense - - - (4,000) Other, net 3,000 25,000 42,000 60,000 Minority interest in net income of consolidated joint venture - - - 2,000 --------- --------- --------- --------- 4,000 27,000 46,000 69,000 --------- ---------- ---------- --------- Net income (loss) $ 27,000 $ 33,000 $ 17,000 $ (45,000) ========= ========== ========== ============ Earnings (loss) per common share $ 0.001 $ 0.002 $ 0.001 $ (0.003) ========== ========== ========== =========== Average number of outstanding shares 20,296,692 14,945,855 18,319,817 14,945,855 =========== ========== ========== =========== See accompanying notes to financial statements 2 CHAPARRAL RESOURCES, INC. Consolidated Balance Sheets August 31, 1995 November 30, (Unaudited) 1994 ---------- ----------- ASSETS CURRENT ASSETS Cash and cash equivalents $ 77,000 $ 318,000 Certificates of deposit - 20,000 Investment in U.S. Treasury securities (at cost) 135,000 199,000 Accounts receivable Joint interest participants 27,000 231,000 Oil and gas purchasers 41,000 64,000 Prepaid expenses - 2,000 --------- ---------- Total current assets 280,000 834,000 PROPERTY AND EQUIPMENT AT COST: Oil and gas properties - full cost United States Subject to depletion 16,320,000 16,115,000 Not subject to depletion 60,000 40,000 Foreign Not subject to depletion 3,826,000 256,000 Less accumulated depletion and impairment (15,114,000) (15,032,000) ----------- ----------- 5,092,000 1,379,000 Furniture and fixtures and equipment 198,000 337,000 Less accumulated depreciation (177,000) (324,000) ---------- ----------- 21,000 13,000 ---------- ----------- 5,113,000 1,392,000 OTHER ASSETS Long-term investments in U.S. Treasury securities (at cost) - 100,000 Cash value of insurance and annuities 8,000 48,000 Equipment inventory 13,000 14,000 ---------- ----------- 21,000 162,000 ----------- ----------- $ 5,414,000 $ 2,388,000 =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable: Trade $ 58,000 $ 151,000 Joint interest participants - revenue 25,000 41,000 Accrued liabilities 80,000 145,000 ----------- ------------ Total current liabilities 163,000 337,000 Minority interest in joint venture - 16,000 3 STOCKHOLDERS' EQUITY: Common stock authorized 50,000,000 shares of $.10 par value; issued and outstanding, 20,396,692 and 15,782,317 shares at August 31, 1995 and November 30, 1994 2,030,000 1,572,000 Capital in excess of par value 12,205,000 9,464,000 Preferred stock - authorized, 1,000,000 shares, no shares issued or outstanding at August 31, 1995 or November 30, 1994 Retained earnings (deficit) (8,984,000) (9,001,000) ------------- ----------- Total stockholders' equity 5,251,000 2,035,000 ------------- ----------- Total liabilities and stockholders' equity $ 5,414,000 $ 2,388,000 ============= ========== See accompanying notes to financial statements 4 CHAPARRAL RESOURCES, INC. Consolidated Statements of Cash Flows Unaudited For the Nine Months Ended ---------------------------- August 31, August 31, 1995 1994 --------- --------- Increase (decrease) in cash and cash equivalents: Cash flows from operating activities Net income (loss) $ 17,000 $ (45,000) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and depletion 85,000 128,000 Changes in assets and liabilities: (Increase) decrease in: Accounts receivable 227,000 - Prepaid expenses 2,000 2,000 Other assets 140,000 40,000 Equipment inventory 1,000 - Increase (decrease) in: Accounts payable (109,000) 136,000 Accrued liabilities (65,000) (62,000) ----------- -------- Net cash provided from (used in) operating activities 298,000 199,000 Cash flows from investing activities: Additions to property and equipment - U.S. (225,000) (238,000) Additions to property and equipment - Foreign (3,570,000) - Change in certificate of deposit 20,000 147,000 Increase (decrease) in minority interest (16,000) (3,000) Investment in stocks & bonds 64,000 (300,000) ------------- --------- Net cash provided from (used in) investing activities (3,727,000) (394,000) Cash flows from financing activities: Proceeds from stock acquisition of CAP(D) 3,188,000 - -------------- -------- Net cash provided from (used in) financing activities 3,188,000 - Net increase (decrease) in cash (241,000) (195,000) Cash and cash equivalents at beginning of year 318,000 522,000 -------------- -------- Cash and cash equivalents at end of 3rd quarter $ 77,000 $ 327,000 ============= ======== See accompanying notes to financial statements 5 CHAPARRAL RESOURCES, INC. Notes to Consolidated Financial Information Unaudited (1) The information furnished in this Quarterly Report on Form 10-Q reflects all adjustments, all of which are of a normal recurring nature, which, in the opinion of management, are necessary to a fair statement of the results for the interim periods presented. (2) Non-cash Financing and Investment Activities a) There was no interest paid for the period ended August 31, 1995. 6 MANAGEMENT'S' DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (1) Liquidity and Capital Resources Net cash and cash equivalents decreased $241,000 from November 30, 1994 to August 31, 1995. The decrease was due to additions to property and equipment, both foreign and domestic. At August 31, 1995, the Company's working capital position was positive with total current assets of $280,000 and total current liabilities of $163,000 for a working capital ratio of 1.7 to 1. The Company's primary source of capital is from oil and gas sales. The Company has a 45% beneficial ownership interest in Central Asian Petroleum Guernsey Limited ("CAP-G"). CAP-G has a 50% beneficial ownership interest in Karakuduk-Munay, Inc. ("KKM"), the operating company for the development of the Karakuduk Field. On August 30, 1995, the Ministry of Oil and Gas Industries of the Republic of Kazakstan signed the Agreement approving the development of the Karakuduk Field. The Company, through its 45% beneficial ownership interest in CAP-G, has a 22.5% beneficial ownership interest in the Karakuduk Field. CAP-G's share of the initial capitalization of KKM is $100,000. The Company's share, $45,000, has been paid. By November 28, 1995, the Company, in order to retain its 45% beneficial ownership interest in CAP-G, must commit to fund $4,000,000 to be used for the Company's share of KKM's operating budget for the remainder of 1995 ($695,000) and 1996 (estimated to be $5,385,000). The Company is working with a New York investment banking firm that has expressed its intention to obtain for the Company funding for this commitment. However, there are no assurances the Company will obtain the necessary funding. The Company's share of the 1995 budget for CAP-G is $136,125, of which $135,000 has been paid to CAP-G to date. The 1996 budget for CAP-G has not been submitted as of this time. If, by November 28, 1995, the Company is unable to commit to fund the $4,000,000, then the Company's beneficial ownership interest in CAP-G would be reduced to 25% and the Company's beneficial ownership interest in the Karakuduk Field would be reduced to 12.5%. The Company's share of the operating budget for KKM for the remainder of 1995 would then be $173,750 and the Company's estimated share of the 1996 KKM operating budget would be $2,992,000. If the Company is unable to meet these reduced financial requirements, it would relinquish the balance of its beneficial ownership interest in CAP-G and the Karakuduk Field. The Company has substantially depleted its working capital resources to obtain its beneficial ownership interests in CAP-G and KKM. Should the Company be unable to meet the financial requirements described above, it will be necessary for the Company to reduce its overhead, staff, and other expenses in order to remain in operation. There are no assurances that if such reductions in the Company's operating costs occur that it will be able to remain in operation. 7 As a result of the signing of the Agreement for the development of the Karakuduk Field, the former shareholders of Central Asian Petroleum, Inc. ("CAP-D") are entitled to have released from escrow 1,000,000 of the 4,250,000 shares of the Company's restricted common stock placed in escrow in April, 1995 when the Company acquired all of the outstanding stock of CAP-D in a tax free exchange. CAP-D has a 20% beneficial ownership interest in CAP-G. The 1,000,000 shares will be released to the former shareholders of CAP-D at such time as they agree upon the number of shares each is to receive. The remaining 3,250,000 shares will be held in escrow pending the occurrence of certain events relative to the funding and development of the Karakuduk Field. The Company has no other material commitments for cash outlay or capital expenditures other than for normal operations. (2) Results of Operations Nine Months Ended August 31, 1995 vs. August 31, 1994 The Company's operations resulted in net income of $17,000 for the nine months ended August 31, 1995 compared to a net loss of $45,000 during the same period in 1994. Revenues from oil and gas sales decreased 31.5% due to lower natural gas prices and certain producing properties being shut-in due to pricing. Costs and expenses decreased 43.6%. Production costs decreased 51.6% as certain producing properties were shut-in due to lower natural gas prices. Depreciation and depletion decreased 33.6% due to reduced depletion expenses as a result of the write-down of oil and gas properties at fiscal year end November 30, 1994. General and administrative costs decreased 41.5% due to increased capitalization of costs related to foreign activities during the nine months ended August 31, 1995 compared to the same period during 1994. Three Months Ended August 31, 1995 vs. August 31, 1995 The Company's operations resulted in net income of $27,000 for the three months ended August 31, 1995 compared to net income of $33,000 during the same period in 1994. Revenues from oil and gas sales decreased 32.6% due to lower natural gas prices and certain producing properties being shut-in due to pricing. Costs and expenses decreased 53.9%. Production costs decreased 40.5%, depreciation and depletion decreased 45.5% and general and administrative costs decreased 162.5% for the same reasons cited for the nine month period ending August 31, 1995. 8 PART II - OTHER INFORMATION Item 5. Other Information SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant duly has caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Dated: October 10, 1995 CHAPARRAL RESOURCES, INC. A Colorado Corporation /s/ Paul V. Hoovler ------------------------------ Paul V. Hoovler President /s/ Matthew R. Hoovler ------------------------------ Matthew R. Hoovler Principal Financial Officer 9