UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

----------

FORM 10-Q

----------

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934

----------

FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2005

COMMISSION FILE NUMBER 0-6247

ARABIAN AMERICAN DEVELOPMENT COMPANY
(Exact name of registrant as specified in its charter)

DELAWARE 75-1256622
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)

10830 NORTH CENTRAL EXPRESSWAY, SUITE 175 75231
DALLAS, TEXAS (Zip code)
(Address of principal executive offices)

Registrant's telephone number, including area code: (214) 692-7872

Former name, former address and former fiscal year, if
changed since last report.
NONE

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days.

YES X NO
----- -----

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Act).

YES NO X
----- -----

Indicate by check mark whether the registrant is a shell company (as
defined in Rule 12b-2 of the Exchange Act).

YES NO X
----- -----

Number of shares of the Registrant's Common Stock (par value $0.10 per share),
outstanding at September 30, 2005: 22,731,994.

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS.

ARABIAN AMERICAN DEVELOPMENT COMPANY AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS (UNAUDITED)

SEPTEMBER 30, DECEMBER 31,
2005 2004
------------- ------------

ASSETS
CURRENT ASSETS
Cash $ 3,277,386 $ 623,202
Trade Receivables, Net 7,597,402 3,198,081
Financial Contracts 3,095,952 --
Inventories 643,325 1,243,693
----------- ------------
Total Current Assets 14,614,065 5,064,976

PLANT, PIPELINE AND EQUIPMENT 17,650,030 14,536,618
Less: Accumulated Depreciation (9,526,445) (9,044,884)
----------- ------------
Net Plant, Pipeline and Equipment 8,123,585 5,491,734

AL MASANE PROJECT 36,581,813 36,420,565
OTHER INTERESTS IN SAUDI ARABIA 2,431,248 2,431,248
MINERAL PROPERTIES IN THE UNITED STATES 1,057,921 1,058,102
OTHER ASSETS 798,837 581,258
----------- ------------
TOTAL ASSETS $63,607,469 $ 51,047,883
=========== ============

LIABILITIES
CURRENT LIABILITIES
Accounts Payable $ 1,419,471 $ 2,649,899
Accrued Interest 321,400 4,133,964
Accrued Liabilities 2,211,424 1,145,399
Accrued Liabilities in Saudi Arabia 2,527,751 2,749,128
Notes Payable 11,025,833 11,025,833
Notes Payable to Stockholders 565,000 718,000
Current Portion of Long-Term Debt 1,227,065 3,071,161
----------- ------------
Total Current Liabilities 19,297,944 25,493,384

LONG-TERM DEBT 5,995,424 4,915,534
DEFERRED REVENUE 146,001 175,141
MINORITY INTEREST IN CONSOLIDATED SUBSIDIARIES 809,932 816,879

STOCKHOLDERS' EQUITY
COMMON STOCK-authorized 40,000,000
shares of $.10 par value; issued and
outstanding, 22,431,994 shares in 2005
and 2004 2,243,199 2,243,199
ADDITIONAL PAID-IN CAPITAL 36,512,206 36,512,206
ACCUMULATED DEFICIT (1,397,237) (19,108,460)
----------- ------------
Total Stockholders' Equity 37,358,168 19,646,945
----------- ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $63,607,469 $ 51,047,883
=========== ============

See notes to consolidated financial statements.

ARABIAN AMERICAN DEVELOPMENT COMPANY AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
------------------------- -------------------------
2005 2004 2005 2004
----------- ----------- ----------- -----------

REVENUES
Petrochemical Product Sales $19,521,900 $13,927,710 $55,608,233 $35,409,335
Processing Fees 1,211,825 967,277 3,100,040 2,783,845
----------- ----------- ----------- -----------
20,733,725 14,894,987 58,708,273 38,193,180

OPERATING COSTS AND EXPENSES
Cost of Petrochemical Product
Sales and Processing 12,826,547 11,476,771 42,690,272 32,751,269
General and Administrative 1,125,042 965,040 3,251,672 2,733,080
Depreciation 170,231 160,537 481,561 597,988
----------- ----------- ----------- -----------
14,121,820 12,602,348 46,423,505 36,082,337
----------- ----------- ----------- -----------
OPERATING INCOME 6,611,905 2,292,639 12,284,768 2,110,843

OTHER INCOME (EXPENSE)
Interest Income 23,519 6,268 42,018 20,736
Interest Expense (230,560) (172,769) (659,052) (584,356)
Minority Interest 3,314 3,100 6,948 7,700
Miscellaneous Income (Expense) (194) 46,142 50,617 109,229
----------- ----------- ----------- -----------
(203,921) (117,259) (559,469) (446,691)
----------- ----------- ----------- -----------
INCOME FROM CONTINUING
OPERATIONS BEFORE INCOME TAXES 6,407,984 2,175,380 11,725,299 1,664,152

INCOME TAXES 481,000 -- 829,600 --
----------- ----------- ----------- -----------
INCOME FROM CONTINUING OPERATIONS 5,926,984 2,175,380 10,895,699 1,664,152

DISCONTINUED OPERATIONS
Income (Loss) from Operations of Coin -- (272,407) 989,856 (841,350)
Gain on Disposal of Coin -- -- 5,825,668 --
----------- ----------- ----------- -----------
GAIN (LOSS) FROM DISCONTINUED OPERATIONS -- (272,407) 6,815,524 (841,350)
----------- ----------- ----------- -----------
NET INCOME $ 5,926,984 $ 1,902,973 $17,711,223 $ 822,802
=========== =========== =========== ===========
Basic and Diluted Earnings
per Common Share
Income from Continuing Operations $ 0.261 $ 0.096 $ 0.479 $ 0.073
Discontinued Operations -- (0.012) 0.300 (0.037)
----------- ----------- ----------- -----------
Net Income $ 0.261 $ 0.084 $ 0.779 $ 0.036
=========== =========== =========== ===========
Basic and Diluted Weighted Average Number
of Common Shares Outstanding 22,731,994 22,731,994 22,731,994 22,731,994
=========== =========== =========== ===========

See notes to consolidated financial statements.

ARABIAN AMERICAN DEVELOPMENT COMPANY AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (UNAUDITED)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2005

COMMON STOCK ADDITIONAL
----------------------- PAID-IN ACCUMULATED
SHARES AMOUNT CAPITAL DEFICIT TOTAL
---------- ---------- ----------- ------------ -----------

DECEMBER 31, 2004 22,431,994 $2,243,199 $36,512,206 $(19,108,460) $19,646,945
Net Income -- -- -- 17,711,223 17,711,223
---------- ---------- ----------- ------------ -----------
SEPTEMBER 30, 2005 22,431,994 $2,243,199 $36,512,206 $ (1,397,237) $37,358,168
========== ========== =========== ============ ===========

See notes to consolidated financial statements.

ARABIAN AMERICAN DEVELOPMENT COMPANY AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

NINE MONTHS ENDED
SEPTEMBER 30,
-------------------------
2005 2004
----------- -----------

OPERATING ACTIVITIES
Net Income $17,711,223 $ 822,804
Adjustments to Reconcile Net Income
To Net Cash Provided by Operating Activities:
Depreciation 481,561 859,258
(Decrease) Increase in Deferred Revenue (29,140) 23,013
Unrealized Gain on Financial Contracts (3,269,202) (1,657,294)
Gain on Disposal of Coin (5,825,668) --
Minority Interest/Other (6,947) (16,682)
Changes in Operating Assets and Liabilities:
Increase in Trade Receivables (4,399,321) (531,576)
(Increase) Decrease in Inventories 600,368 (818,639)
Increase in Other Assets (261,860) (10,015)
Increase in Accounts Payable and Accrued Liabilities 601,095 1,293,330
Increase (Decrease) in Accrued Interest (578,959) 630,882
Increase (Decrease) in Accrued Liabilities in Saudi Arabia (221,377) 124,302
----------- -----------
NET CASH PROVIDED BY OPERATING ACTIVITIES 4,801,773 719,383
----------- -----------

INVESTING ACTIVITIES
Additions to Al Masane Project (161,248) (276,055)
Additions to Plant, Pipeline and Equipment (3,113,412) (593,850)
Reduction in Mineral Properties in the United States 181 153,685
----------- -----------
NET CASH USED IN INVESTING ACTIVITIES (3,274,479) (716,220)
----------- -----------

FINANCING ACTIVITIES
Additions to Notes Payable and Long-Term Obligations 1,379,890 --
Reduction of Notes Payable and Long-Term Obligations (253,000) (17,423)
----------- -----------
NET CASH PROVIDED (USED) IN FINANCING ACTIVITIES 1,126,890 (17,423)
----------- -----------
NET INCREASE (DECREASE) IN CASH 2,654,184 (14,260)
CASH AT BEGINNING OF PERIOD 623,202 177,716
----------- -----------
CASH AT END OF PERIOD $ 3,277,386 $ 163,456
=========== ===========

See notes to consolidated financial statements.

ARABIAN AMERICAN DEVELOPMENT COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

1. BASIS OF PRESENTATION

The consolidated financial statements reflect all adjustments (consisting
only of normal and recurring adjustments) which are, in the opinion of
management, necessary for a fair presentation of Arabian American
Development Company and Subsidiaries financial position and operating
results for the interim period. Interim period results are not necessarily
indicative of the results for the calendar year. For additional information
please refer to the consolidated financial statements and footnotes thereto
and to Management's Discussion and Analysis of Financial Condition and
Results of Operations included in the Company's December 31, 2004 Annual
Report on Form 10-K/A-1.

These financial statements include the accounts of Arabian American
Development Company (the "Company") and its wholly-owned subsidiary,
American Shield Refining Company (the "Petrochemical Company"or "ASRC"),
which owns all of the capital stock of Texas Oil and Chemical Company II,
Inc. ("TOCCO"). TOCCO owns all of the capital stock of South Hampton
Resources, Inc., formerly known as South Hampton Refining Co. ("South
Hampton"), and, until June 9, 2005, approximately 99.9% of the capital
stock of Productos Quimicos Coin, S.A. de C.V. ("Coin"), a specialty
petrochemical products company located near Coatzacoalcos, Mexico. South
Hampton owns all of the capital stock of Gulf State Pipe Line Company, Inc.
("Gulf State"). The Company also owns approximately 55% of the capital
stock of a Nevada mining company, Pioche-Ely Valley Mines, Inc. ("Pioche"),
which does not conduct any substantial business activity. The Petrochemical
Company and its subsidiaries constitute the Company's Specialty
Petrochemicals Segment. Pioche and the Company's mineral properties in
Saudi Arabia constitute its Mining Segment.

2. INVENTORIES

Inventories include the following:

SEPTEMBER 30, 2005 DECEMBER 31, 2004
------------------ -----------------

Petrochemical products $643,325 $1,243,693
======== ==========

Inventories are recorded at the lower of cost, determined on the last-in,
first-out method (LIFO), or market, for inventory in the United States. At
September 30, 2005, current cost exceeded LIFO value by approximately
$651,000. At December 31, 2004, current cost exceeded the LIFO value by
approximately $344,000.

3. NET INCOME (LOSS) PER COMMON SHARE

The following table (in thousands, except per share amounts) sets forth the
computation of basic and diluted net income (loss) per share for the three
and nine months ended September 30, 2005 and 2004, respectively.

THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------ -----------------
2005 2004 2005 2004
------- ------- ------- -------

Continuing Operations
Income from Continuing Operations $ 5,927 $ 2,175 $10,896 $ 1,664
======= ======= ======= =======
Weighted Average Shares Outstanding:
Basic and Diluted 22,732 22,732 22,732 22,732
======= ======= ======= =======
Income Per Share from Continuing
Operations:
Basic and Diluted $ 0.261 $ 0.096 $ 0.479 $ 0.073
======= ======= ======= =======

THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------ -----------------
2005 2004 2005 2004
------- ------- ------- -------

Discontinued Operations (Productos Quimicos Coin)
Gain (Loss) from Discontinued Operations $ -- $ (272) $ 6,816 $ (841)
======= ======= ======= =======
Weighted Average Shares Outstanding:
Basic and Diluted 22,732 22,732 22,732 22,732
======= ======= ======= =======
Gain (Loss) Per Share from Discontinued
Operations:
Basic and Diluted $ 0.000 $(0.012) $ 0.300 $(0.037)
======= ======= ======= =======

THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------ -----------------
2005 2004 2005 2004
------- ------- ------- -------

Total Operations
Net Income $ 5,927 $ 1,903 $17,711 $ 823
======= ======= ======= =======
Weighted Average Shares Outstanding:
Basic and Diluted 22,732 22,732 22,732 22,732
======= ======= ======= =======
Net Income Per Share:
Basic and Diluted $ 0.261 $ 0.084 $ 0.779 $ 0.036
======= ======= ======= =======

For the three and nine months ended September 30, 2005 and 2004, options
for 400,000 shares were excluded from diluted shares outstanding because
their effect was anti-dilutive.

4. SEGMENT INFORMATION

As discussed in Note 1, the Company has two business segments. The Company
measures segment profit or loss as operating income (loss), which
represents income (loss) before interest, minority interest, miscellaneous
income and foreign exchange transaction gain or loss. Information on the
segments is as follows:

THREE MONTHS ENDED SEPTEMBER 30, 2005 PETROCHEMICAL MINING TOTAL
- ------------------------------------- ------------- ----------- -----------

Continuing operations:
Revenue from external customers $20,733,725 $ -- $20,733,725
Depreciation 170,231 -- 170,231
Operating income (loss) 6,764,647 (152,742) 6,611,905
Total assets $23,374,655 $40,232,814 $63,607,469

THREE MONTHS ENDED SEPTEMBER 30, 2004 PETROCHEMICAL MINING TOTAL
- ------------------------------------- ------------- ----------- -----------

Continuing operations
Revenue from external customers $14,894,987 $ -- $14,894,987
Depreciation 160,435 102 160,537
Operating income (loss) 2,448,508 (155,869) 2,292,639

Discontinued operations (Productos Quimicos Coin)
Revenue from external customers $ 1,065,624 $ -- $ 1,065,624
Depreciation 87,090 -- 87,090
Operating loss (26,425) -- (26,425)

Total assets $15,673,677 $39,995,922 $55,669,599

NINE MONTHS ENDED SEPTEMBER 30, 2005 REFINING MINING TOTAL
- ------------------------------------ ----------- --------- -----------

Continuing operations
Revenue from external customers $58,708,273 $ -- $58,708,273
Depreciation 481,561 -- 481,561
Operating income (loss) 12,731,951 (447,183) 12,284,768

Discontinued operations (Productos Quimicos Coin)
Revenue from external customers $ 2,042,676 $ -- $ 2,042,676
Depreciation -- -- --
Operating income 497,730 -- 497,730

NINE MONTHS ENDED SEPTEMBER 30, 2004 REFINING MINING TOTAL
- ------------------------------------ ----------- --------- -----------

Continuing operations
Revenue from external customers $38,193,180 $ -- $38,193,180
Depreciation 597,682 306 597,988
Operating income (loss) 2,587,385 (476,542) 2,110,843

Discontinued operations (Productos Quimicos Coin)
Revenue from external customers $ 2,141,670 $ -- $ 2,141,670
Depreciation 261,270 -- 261,270
Operating loss (226,337) -- (226,337)

Information regarding foreign operations for the three and nine months ended
September 30, 2005 and 2004 follows (in thousands). Revenues are attributed to
countries based upon the origination of the transaction.

THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------ -----------------
2005 2004 2005 2004
------- ------- ------- -------

REVENUES
United States $20,734 $14,895 $58,709 $38,193
Mexico -- 1,066 2,042 2,142
Saudi Arabia -- -- -- --
------- ------- ------- -------
$20,734 $15,961 $60,751 $40,335
======= ======= ======= =======
LONG-LIVED ASSETS
United States $ 9,182 $ 5,371
Mexico -- 4,305
Saudi Arabia 39,013 38,872
------- -------
$48,195 $48,548
======= =======

5. LEGAL PROCEEDINGS

As of September 30, 2005, South Hampton was a defendant in one lawsuit. The
lawsuit, which was filed in Madison County, Illinois, and which includes up
to 70 other defendants, primarily claims illness and disease resulting from
alleged exposure to chemicals, including benzene, butadiene and/or
isoprene, during employment at various occupations. The plaintiff claims
that the companies engaged in the business of manufacturing, selling and/or
distributing these chemicals in a manner which subjected it to liability
for unspecified actual and punitive damages. In October 2005 the plaintiff
non-suited South Hampton.

A second lawsuit filed in Jefferson County, Texas, in September 2001,
alleges that the plaintiff became ill from exposure to asbestos while
employed by South Hampton from 1961 through 1975. Due to the time period in
which the claimant was allegedly injured, the Company was unable to locate
insurance coverage for this particular suit. In July 2005 South Hampton
entered into a settlement agreement with the plaintiff in order to
eliminate its risk in this matter. The settlement was not material to
financial position or results of operations.

In August 1997 the Executive Director of the Texas Commission on
Environmental Quality (TCEQ) filed a preliminary report and petition with
the TCEQ alleging that South Hampton violated various TCEQ rules, TCEQ
permits issued to South Hampton, a TCEQ order issued to South Hampton, the
Texas Water Code, the Texas Clean Air Act and the Texas Solid Waste
Disposal Act. The violations generally relate to the management of volatile
organic compounds in a manner that allegedly violates the TCEQ's air
quality rules and the storage, processing and disposal of hazardous waste
in a manner that allegedly violates the TCEQ's industrial and hazardous
waste rules. The TCEQ's Executive Director recommended that the TCEQ enter
an order assessing administrative penalties against South Hampton in the
amount of $709,408 and order South Hampton to undertake such actions as are
necessary to bring its operations at its facility and its bulk terminal
into compliance with Texas Water Code, the Texas Health and Safety Code,
TCEQ rules, permits and orders. Appropriate modifications were made by
South Hampton where it appeared there were legitimate concerns. A
preliminary hearing was held in November 1997, but no further action was
taken at that time. On February 2, 2000, the TCEQ amended its pending
administrative enforcement action against South Hampton to add allegations
dating through May 21, 1998 of 35 regulatory violations relating to air
quality control and industrial solid waste requirements. The TCEQ proposed
that administrative penalties be increased to approximately $765,000 and
that certain corrective action be taken. Again, appropriate modifications
were made by South Hampton where it appeared there were legitimate
concerns. In April 2003 South Hampton received a revised Notice of
Violation from the TCEQ. Various claims of alleged violation were dropped,
modified and added in the revised report and the total dollar amount of the
proposed administrative penalty was reduced to approximately $690,000. On
May 25, 2003, a settlement hearing with the TCEQ was held and additional
information was submitted on June 2, 2003, October 2, 2003 and November 4,
2003. South Hampton believes that the revised notice contains incorrect
information and erroneously delineates as ongoing problems matters that
were corrected immediately upon discovery several years ago. South Hampton
has continued to communicate with the TCEQ concerning ongoing emission
control facility upgrades which are being implemented independently of this
action and the Company intends to continue to vigorously defend itself
against the outstanding Notice of Violation. Negotiations between South
Hampton and the TCEQ are expected to continue in order to reach a final
settlement.

For comparison purposes, in the only settlement by the Company in recent
history, the TCEQ notified South Hampton on December 13, 2001, that it
found several alleged violations of TCEQ rules during a record review in
October 2001 and proposed a settlement for $59,375. South Hampton settled
this particular claim in April 2002 for approximately $5,900. There is no
assurance the outcome of this incident is reflective of the potential
outcome of the currently outstanding allegations.

On February 23, 2004, by court order, a creditor was awarded Coin's plant
facilities as a result of a mortgage foreclosure proceeding. The
foreclosure proceedings were brought about by the lack of activity at the
facility during the 2000-2003 time periods when market conditions did not
allow the Coin facility to be competitive. When the market appeared to be
changing in early 2004, Coin immediately took legal steps to delay and, if
possible, prevent seizure of the plant. Coin remained in control of the
facility and continued its legal challenge to the foreclosure. On May 19,
2005, Coin, with agreement from the bank, transferred the facility in
Coatzacoalcos to a third party for a combination of cash and relief from
certain liabilities relating to bank debt and employee severance
liabilities. The transfer of the facility satisfied all liability to the
foreclosing bank. On June 9, 2005, the Company sold the stock in the
Mexican corporation (Coin) for a minor amount. As a result of the matters
discussed in Note 8, management recorded a loss on the foreclosure of the
facility with a charge to consolidated operations of $2,900,964 during the
fourth quarter of 2004 and a gain on the sale of the stock of $5,825,668 in
the second quarter of 2005.

6. LONG-TERM DEBT

The Company has an interest-free loan of $11,000,000 from the Saudi Arabia
Ministry of Finance and National Economy, the proceeds of which were used
to finance the development phase of the Al Masane project. The loan was
repayable in ten equal annual installments of $1,100,000, with the initial
installment payable on December 31, 1984. None of the ten scheduled
payments have been made. Pursuant to the mining lease agreement covering
the Al Masane project, the Company intends to repay the loan in accordance
with a repayment schedule to be agreed upon with the Saudi Arabian
government from its share of cash flows. The loan is collateralized by all
of the Company's "movable and immovable" assets in Saudi Arabia.

On June 30, 2005, South Hampton signed a $2,000,000 loan agreement with The
Catalyst Fund, Ltd. & Southwest/Catalyst Capital, Ltd. ("Catalyst") to
provide funds for the expansion of one of the toll processing units. The
loan will be repaid over five years with payments to begin the first
quarter after the commencement of operations of the new facilities or no
later than January 2006. Payments are due quarterly and the note carries an
interest rate of 12% per annum. The agreement carries certain limits on
distributions to the parent Company and any deviations from the listed
amounts must be pre-approved by Catalyst. The contract with the toll
processing customer contains provision for capital recovery to be paid
monthly and South Hampton intends to apply those payments to retirement of
the debt. The loan is collateralized by the proceeds of the toll processing
contract, and by a second lien on most of South Hampton's plant and
equipment. At September 30, 2005, all of the loan commitment had been drawn
with $200,000 classified as current and $1,800,000 as long term. The
process was operational in October 2005 and capital payments by the
customer have commenced.

On July 29, 2003, a Purchase and Sale Agreement was negotiated with a bank
whereby the bank would purchase the accounts receivable of South Hampton at
a 15% discount. The discounted amount is returned to South Hampton, less
fees, when the invoice is collected. Under this agreement, the bank agreed
to purchase up to $4.5 million of invoices. For the first nine months of
2005, the average effective interest rate was approximately 15%. In July
2004 the limit of purchases was raised to $6.0 million by the bank, and in
January 2005 it was raised again to $8.5 million. At September 30, 2005,
approximately $1,657,000 of receivables have been sold and, due to the
revolving nature of the agreement, also remain outstanding. The original
agreement restricts the payment of any dividends to the Company by South
Hampton to an amount not to exceed $50,000 a month, provided that South
Hampton is not in default under the agreement. The Company adhered to this
agreement until December 2004 when the first installment of the mining
lease payment was due. South Hampton advanced to the parent Company in the
form of a dividend, $260,000, which was used to pay the mining lease
installment. The Bank waived default on this excess 2004 dividend by letter
dated April 6, 2005. The Bank also approved an amendment raising the total
dividends allowed during 2005 to $1,000,000. At September 30, 2005, South
Hampton was in compliance with the provisions of the agreement. This
agreement was replaced in October 2005 by an asset-based lending agreement
with the same bank. See Note 9.

A contract was signed on June 1, 2004 between South Hampton and a supplier
for the purchase of 65,000 barrels per month of natural gasoline on open
account for the period from June 1, 2004 through May 31, 2006 and year to
year thereafter with 30 days written notice of termination by either party.
The contract requires South Hampton to begin reducing its current debt to
the supplier by $250,000 per quarter beginning July 1, 2004. Therefore,
$1.0 million of the balance of approximately $5.11 million has been
classified as current at September 30, 2005. The supplier is currently the
sole provider of the facility's feedstock supply. On June 1, 2005, the
contract was extended to May 31, 2007 and in November 2005 the contract was
amended to cover 80,000 barrels per month.

On August 1, 2004, South Hampton entered into a $164,523 capital lease with
Silsbee Trading and Transportation, which is owned by a Company officer,
for the purchase of a diesel powered man-lift. The lease is for five years
with title transferring to South Hampton at term end. At September 30,
2005, approximately $18,000 represents unpaid interest, resulting in a
present value of $115,860 of which $27,065 is classified as current.

At March 31, 2005, Coin had a loan to a Mexican bank in the amount of
$2,044,096, payable in quarterly payments through March 2007, bearing
interest at the LIBOR rate plus seven points (LIBOR was 3.34% at June 30,
2005) and collateralized by a second lien on the plant facilities. The note
balance and unpaid interest of $2,601,587 was extinguished when the stock
of Coin was sold on June 9, 2005. See Note 8.

TOCCO recorded a loss on foreclosure in the fourth quarter of 2004 related
to a loan from a Mexican bank holding a first lien on the plant facilities.
Unpaid interest on this loan of $529,797 was extinguished by the negotiated
transfer of the Coin facility on May 19, 2005. See Note 8.

In June 2005 TOCCO paid dividends to ASRC in amounts sufficient to repay a
$53,000 loan owed the President, a $100,000 loan owed his spouse, and a
$100,000 loan owed a stockholder. The dividend was sufficient to also pay
$110,018 of accrued interest due on the loans. A loan of $565,000 with a
stockholder remains outstanding. At September 30, 2005, the Company has a
liability to its President and Chief Executive Officer of approximately
$1,241,000 for accrued salary and termination benefits which are included
in Accrued Liabilities in Saudi Arabia in the Consolidated Balance Sheet.

7. DERIVATIVE INSTRUMENTS

Statement of Financial Accounting Standard (SFAS) No. 133, "Accounting for
Derivative Instruments and Hedging Activities," as amended by SFAS Nos. 138
and 149, establishes accounting and reporting standards for derivative
instruments and hedging activities. SFAS No. 133 establishes accounting and
reporting standards requiring that every derivative instrument be recorded
in the balance sheet as either an asset or liability measured at its fair
value. The statement requires that changes in the derivative instrument's
fair value be recognized currently in earnings unless specific hedge
accounting criteria are met. Special accounting for qualifying hedges
allows a derivative instrument's gains and losses to offset related results
on the hedged item in the income statement, to the extent effective, and
requires that a company must formally document, designate and assess the
effectiveness of transactions that receive hedge accounting treatment.

On January 30, 1992, the Board of Directors of TOCCO adopted a resolution
authorizing the establishment of a commodities trading account to take
advantage of opportunities to lower the cost of feedstock and natural gas
for its subsidiary, South Hampton. The policy adopted by the Board
specifically prohibits the use of the account for speculative transactions.
The operating guidelines adopted by management generally limit exposures to
50% of the monthly feed volumes to the facility for up to six months
forward and up to 100% of the natural gas requirements. Except in rare
cases, the account uses options and financial swaps to meet the targeted
goals. These derivative agreements are not designated as hedges per SFAS
133, as amended. TOCCO had option contracts outstanding as of September 30,
2005 covering various natural gas price movement scenarios through October
of 2006 and covering from 50% to 100% of the natural gas requirements for
each month. As of the same date, TOCCO had committed to financial swap
contracts for up to 50% of its required monthly feed stock volume with
settlement dates through March of 2006. For the nine months ended September
30, 2005 and 2004, the net realized gain from the derivative agreements was
approximately $760,000 and $686,000, respectively. There was an estimated
unrealized gain for the nine months ended September 30, 2005 and 2004 of
approximately $3,269,000 and $1,657,000, respectively. The realized and
unrealized gains are recorded in Cost of Petrochemical Product Sales and
Processing for the periods ended September 30, 2005 and 2004.

8. DISCONTINUED OPERATIONS

A creditor (bank) of Coin, holding a first lien, initiated a mortgage
foreclosure proceeding that resulted in the court ordered public auction of
the plant facilities in Mexico on February 23, 2004. As a result, the court
awarded the plant facilities to the creditor in partial settlement of the
outstanding debt owed by Coin. The court order required legal transfer of
the assets to the creditor within three days; however, the transfer was
delayed by the legal filings of the Company. Ultimately, management and
Coin's legal counsel were unable to determine if or when the legal transfer
of ownership would occur. As a result, management recorded the loss on the
foreclosure of the facility with a charge to consolidated operations of
$2,900,964 during the fourth quarter of 2004. In April 2005, management
ceased operating the plant and shut down the facility. In late April, 2005,
management met with a third party who had a contract with the Mexican bank
to take over the Coin facility in the event the foreclosure proceedings
were completed. An agreement was reached whereby the Company would sign
appropriate documentation transferring title to the facility in exchange
for relief from certain outstanding liabilities. In exchange for an orderly
and clean transfer of title, the Company received relief from the remaining
outstanding bank interest and penalties of approximately $530,000, was
relieved of severance liabilities of approximately $160,000 due the
remaining employees at the Coatzacoalcos location, and received $100,000
cash with which to satisfy miscellaneous expenses associated with closing
the Mexico City office. Documentation was completed and signed on May 19,
2005.

On June 9, 2005, the Company sold the stock in the Mexican corporation to
an independent third party in Mexico and essentially ceased all operations
in the country. The stock was sold for an immaterial amount and the sale
was designed to allow the third

party to make use of the accumulated tax losses. The Company recorded a
gain on disposal of Coin of approximately $5.9 million. There are no
material continuing liabilities associated with the Company's prior
ownership of the Coin operation.

9. SUBSEQUENT EVENTS

In July 2005 South Hampton entered into discussions with their bank to
replace the Purchase and Sale Agreement (see Note 6) with a line of credit.
Documentation was completed in October 2005 and is valid for two years. The
new agreement has a borrowing limit of up to $6,000,000 or 85% of eligible
Accounts Receivable and provides an interest rate of Prime Rate plus .25%.
Distributions to the parent Company are limited to approximately 50% of
cash flow as long as certain financial covenants are met.

On September 22, 2005 South Hampton suspended operations at its
petrochemical facility in Silsbee, Texas so that its employees could
evacuate ahead of the incoming Hurricane Rita. The storm passed over the
area on Saturday, September 24, and by Monday employees and management
began returning to assess damage and to make preparations for repair and
operations. Power was restored within a week, and employees resumed regular
work shifts. On October 5, the facility resumed operations and within three
days, production was at pre-storm levels. The repairs to the facility are
estimated to cost approximately $500,000, most of which we anticipate will
be covered by insurance. South Hampton lost approximately two weeks of
sales and production, which is split between September and October
reporting periods. The total reduction in Gross Income is estimated at
approximately $3,000,000. No long term effects of the outage are expected,
and no market share was lost.

In October 2005 Catalyst agreed to allow additional dividends to the parent
company in amounts sufficient to repay the remainder of shareholder loans
and partially retire the debt to the President of the Company.
Documentation of this amendment to the loan agreement is expected to be
completed in November 2005.

In October 2005 South Hampton signed a long term feedstock transportation
agreement with its supplier whereby the supplier would build a tank near
Beaumont, TX to receive natural gasoline from the TEPPCO pipeline system.
The supplier will maintain sufficient inventory on hand to meet South
Hampton's needs. South Hampton guaranteed a minimum throughput and will be
liable for repayment of the cost of the tank in the event of default. South
Hampton believes this arrangement solidifies feedstock availability year
round and improves the current means of transportation. Additionally, South
Hampton signed a pipeline use agreement whereby South Hampton will
transport natural gasoline in its Gulf State subsidiary pipeline for the
benefit of the feedstock supplier. The supplier will pay a fee based upon
throughput which will offset up to 50% of the cost of operating the line.
South Hampton granted a Right of First Refusal to the supplier for the
purchase of some unused Rights of Way in the event the Gulf State pipeline
is not suitable for the movements required and the supplier wished to build
their own line. The potential sale of the Rights of Way would be at market
price. Construction of the tank and initial operation of the two agreements
are expected to take place in the second quarter of 2006.

In October 2005 South Hampton received a notice of cancellation from the
smaller of its two toll processing customers. The contract with the
customer requires a two year notification prior to cancellation by either
party. The customer has indicated it wishes to utilize the unit in a
different fashion than covered by the current contract and is starting
negotiation for future activity. South Hampton believes the hydro-treating
unit involved is readily marketable and will be kept in service either with
the current customer or with another party.

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.

GENERAL

Statements in Part 1, Item 2 as well as elsewhere in, or incorporated by
reference in, this Quarterly Report on Form 10-Q regarding the Company's
financial position, business strategy and plans and objectives of the
Company's management for future operations and other statements that are
not historical facts, are "forward-looking statements" as that term is
defined under applicable Federal securities laws. In some cases,
"forward-looking statements" can be identified by terminology such as
"may," "will," "should," "expects," "plans," "anticipates," "contemplates,"
"proposes," believes," "estimates," "predicts," "potential" or "continue"
or the negative of such terms and other comparable terminology.
Forward-looking statements are subject to risks, uncertainties and other
factors that could cause actual results to differ materially from those
expressed or implied by such statements. Such risks, uncertainties and
factors include, but are not limited to, general economic conditions
domestically and internationally; insufficient cash flows from operating
activities; difficulties in obtaining financing; outstanding debt and other
financial and legal obligations; competition; industry cycles; feedstock,
specialty petrochemical product and mineral prices; feedstock availability;
technological developments; regulatory changes; environmental matters;
foreign government instability; foreign legal and political concepts; and
foreign currency fluctuations, as well as other risks detailed in the
Company's filings with the U.S. Securities and Exchange Commission,
including this Quarterly Report on Form 10-Q, all of which are difficult to
predict and many of which are beyond the Company's control.

On August 25, 2005, South Hampton legally changed its name from South
Hampton Refining Co. to South Hampton Resources, Inc. The former name had
been used by South Hampton since the late 1970's when it was involved in
the processing of crude oil and the production of motor fuels. Since South
Hampton had emphasized the petrochemical and specialty product business for
the past twenty years and no longer produced motor fuels of any nature, it
was felt the name was misleading and needed to be changed.

LIQUIDITY AND CAPITAL RESOURCES

The Company operates in two business segments, specialty petrochemicals
(which is composed of the entities owned by the Petrochemical Company) and
mining. Its corporate overhead needs are minimal. A discussion of each
segment's liquidity and capital resources follows.

SPECIALTY PETROCHEMICALS SEGMENT. Historically, this segment has
contributed all of the Company's internally generated cash flows.
Throughout the 1990's the Petrochemical Company enjoyed the benefits of
economic expansion in the US and relatively low and stable energy prices.
In 2000 energy prices became more volatile and the economy slowed, and the
Company suffered operating losses as the petrochemical industry struggled
to adjust to the new environment. Beginning in February 2001 the decline of
feedstock and natural gas prices returned the Petrochemical Company to a
positive cash flow, which it maintained for the remainder of 2001 and
throughout 2002. Demand for specialty solvents, while not enough to justify
operating the plant at capacity, was strong enough to cover fixed and
variable costs. The toll processing segment of the business remained strong
throughout 2001 and 2002 and contributed to the Petrochemical Company's
steady performance. The Petrochemical Company also was able to successfully
hedge its feedstock and a portion of its fuel gas to dampen the effects of
the new volatility in the energy markets. During 2003 the industry again
experienced tighter margins resulting from the rise in feedstock prices and
unfortunately, due to increased scrutiny of the industry after the Enron
failure, several of TOCCO's trading partners in the hedging program dropped
out of the business. Consequently, the Petrochemical Company was again at
the mercy of rising petroleum costs. Feedstock prices remained at
historically higher prices throughout 2003 and flat demand would not allow
accompanying rises in selling prices. This resulted in operating losses for
the segment in 2003. After January 2004 feedstock prices temporarily began
to fall back to more moderate levels and at the same time TOCCO was able to
establish a trading relationship with an international integrated oil
concern. When oil prices began their dramatic rise in 2004, the TOCCO had
financial swaps in place which protected it against sudden and volatile
price swings in feedstock prices and to a lesser extent, fuel gas costs.
Product demand also grew in 2004 and has continued into 2005. These
conditions allowed the Petrochemical Company to report significant earnings
and to prepare to meet continued volatility of the markets in the future.

South Hampton obtains its feedstock requirements from a sole source vendor.
On May 7, 2004, South Hampton and the supplier signed a letter of intent
whereby the supplier would assist with the capital required to expand a
toll processing unit for a large customer. As security for the funds used
to purchase capital equipment and to secure outstanding debts for feedstock
purchased

from the supplier, South Hampton executed a mortgage in June 2004 covering
most of the existing facility's equipment. South Hampton elected not to
take advantage of the equipment financing portion of the agreement but
continues to purchase feedstock from the vendor and to secure those
purchases with a lien on fixed assets.

A contract was signed on June 1, 2004 between South Hampton and the
supplier for the purchase of 65,000 barrels per month of natural gasoline
on open account for the period from June 1, 2004 through May 31, 2006 and
year to year thereafter with thirty days written notice of termination by
either party. On June 1, 2005, the contract was extended through May 31,
2007. A provision of the contract states that South Hampton will begin
reducing the current debt to the supplier by $250,000 per quarter beginning
July 1, 2004. Therefore, $1 million of this debt has been classified as
current at September 30, 2005. The supplier is currently the sole provider
of feedstock. At September 30, 2005, South Hampton owed the supplier
approximately $5.11 million. No payments were made to the supplier during
the last week of September or the first ten days of October due to the
disruptions from Hurricane Rita in the area. The account balance was
subsequently reduced as operations and banking returned to normal.

On August 1, 2004, South Hampton entered into a capital lease with Silsbee
Trading and Transportation, which is owned by an officer of the Company,
for the purchase of a diesel powered manlift. The lease is for five years
with title transferring to South Hampton at the end of the term.

As mentioned in Note 6 to the consolidated financial statements, Coin was
not in compliance with certain covenants contained in its loan agreements
at March 31, 2005, and therefore, its creditors had the right to declare
the debt to be immediately due and payable. If this occurred, Coin would
have been unable to pay the entire amount due. On February 23, 2004, the
Coin plant facilities were awarded to a creditor in a foreclosure hearing.
The foreclosure was contested successfully until early 2005. On May 19,
2005, through a negotiated settlement, the facility was transferred to the
acquirer and on June 9, 2005 the stock in Coin was sold. See Note 8 to the
consolidated financial statements.

MINING SEGMENT. This segment is in the development stage. Its most
significant asset is the Al Masane mining project in Saudi Arabia, which is
a net user of the Company's available cash and capital resources.
Implementation of the project has been delayed over the last five years
because open market prices for metals were insufficient to attract
additional investment required to achieve production. As world economy and
metal prices have improved over the last year, investment viability has
improved and steps are being taken to take advantage of the improved
investment climate.

On February 23, 2004, the Company's President received a letter from the
Deputy Minister of Petroleum and Mineral Resources of the Kingdom of Saudi
Arabia stating that the Council of Ministers had issued a resolution, dated
November 17, 2003, which directed the Minister, or whomever he may
designate, to discuss with the President of the Company the implementation
of a work program, similar to that which is attached to the Company's
mining lease, to start during a period not to exceed two years and also the
payment of the past due surface rentals. If agreeable, a document is to be
signed to that effect. The resolution stated further that, if no agreement
is reached, the Ministry of Finance will give the Council of Ministers its
recommendation regarding the $11 million loan granted to the Company.

After discussions with the Deputy Minister, the Company President responded
in a letter to the Minister dated, March 23, 2004, that the Company will
agree to abide by the resolution and will start implementing the work
program to build the mine, treatment plant and infrastructure within two
years from the date of the signed agreement. The work program was prepared
by the Company's technical consultants and attached to the letter. The
Company also agreed to pay past due surface rentals, which totaled
approximately $586,000, in two equal installments, the first on December
31, 2004 and the second on December 31, 2005, and to continue to pay
surface rentals as specified in the Mining Lease Agreement. On May 15,
2004, an agreement was signed with the Ministry covering these provisions.
If the Company does not implement the program during the two-year period,
the matter will be referred to the Ministry to seek direction in accordance
with the Mining Code and other concerned codes. The Company is currently in
the preliminary stages of negotiations with a viable joint venture partner
and feels that sufficient progress will be made by the May deadline to
justify an extension of time, if necessary, on agreement with the Ministry.
The Company paid $266,000 of the back lease payments on January 3, 2005,
and is scheduled to pay the remaining $320,000 on December 31, 2005.

The Company is making preparations to implement the work program. After
initialization, the program will take approximately twenty-two months to
complete, after which commercial production would begin. The Company, on
April 20, 2005, signed an agreement with SNC-Lavalin Engineering and
Construction Company of Toronto, Canada ("SNC-Lavalin"), to update the

feasibility study. The updated study will allow the Company to pursue
potential joint venture partners to manage the project and to obtain
acceptable financing to commercially develop the program. The prices of
zinc, copper, gold and silver have increased significantly over the last
two years. The updated study was completed in August of 2005. The study by
SNC-Lavalin updated the estimated capital cost and operating expenses of
the project. The firm concluded that capital expenditure of approximately
$115 million is needed to bring the mine into production with an additional
$6.7 million for a cyanide leach process for gold recovery. The study was
then turned over to a separate and independent consultant for further
analysis and to allow the economic feasibility to be reviewed. The
consultant, Molinari and Associates, Inc. of Toronto, Canada, ("Molinari")
concluded that the study by SNC-Lavalin was conservative and there were
many opportunities for cost savings and improvements in the projections as
presented. Based on average pricing for gold, silver, zinc and copper
during the last three years, Molinari determined the project's Internal
Rate of Return to be negative 1.68%. However, if current metals prices are
used, Molinari concluded that the project should produce an Internal Rate
of Return of 7.28% for the conservative case, and 13.0% if operating and
capital cost reductions are achieved. Molinari also believes that
increasing demand for zinc and copper from China and India will support
metal prices in the foreseeable future. The following chart illustrates the
change from the low prices of 2003 and 2004 to current levels:

AVERAGE PRICE SPOT PRICE AS OF
FOR 2003-2005 09/2005 INCREASE
----------------- ----------------- ----------------

GOLD $404.00 per ounce $453.00 per ounce $49.00 per ounce
SILVER $6.21 per ounce $7.15 per ounce $0.94 per ounce
COPPER $1.25 per pound $1.75 per pound $0.50 per pound
ZINC $0.50 per pound $0.63 per pound $0.13 per pound

There is no assurance that even with favorable economic reports, a joint
venture partner can be located, a joint venture formed or, if it is formed,
that the joint venture would be able to obtain acceptable financing for the
project. Without a joint venture, the work program cannot be accomplished
as planned. Financing for the updated feasibility study was provided by an
advance from a major shareholder.

The Minister of Petroleum and Mineral Resources announced on April 2, 2002
that a new revised Saudi Arabian Mining Code would be issued, which would
expedite the issuance of licenses and has new incentives to encourage
investment by the private Sector, both Saudi and foreign, in the
development of mineral resources in Saudi Arabia. The mining code was
revised, approved by the Council of Ministers, and issued by Royal Decree
prior to the end of 2004.

The Company has communicated to the Minister of Petroleum and Mineral
Resources that the unreasonable delay in granting of the mining lease from
1983 to 1993 and the unreasonable threat of cancellation during 2000 to
2003, which was lifted in 2004, were the underlying reasons for the
Company's losses while maintaining its legal position in Saudi Arabia, and
which further caused the severe drop in the share price of its stock. A
request for fair compensation was made by the Company and denied by the
Ministry, as was a request for arbitration. The Company is consulting with
counsel on further steps which might be taken; however, any such action
will not affect the Company's right to implement the Al Masane project.

On June 22, 1999, the Company submitted a formal application for a
five-year exclusive mineral exploration license for the Greater Al Masane
Area of approximately 2,850 square kilometers, which surrounds the Al
Masane mining lease area and includes the Wadi Qatan and Jebel Harr areas.
The Company previously worked in the Greater Al Masane Area after obtaining
written authorization from the Saudi Ministry of Petroleum and Mineral
Resources, and has expended over $3 million in exploration work.
Geophysical, geochemical and geological work and diamond core drilling on
the Greater Al Masane area has revealed mineralization similar to that
discovered at Al Masane. The application for the new exploration license is
still pending and may be acted upon now that the new Saudi Arabian Mining
Code is issued; however, as is frequently the case when making such
applications with the Ministry, there is no timetable for action on our
application.

Management is also addressing two other significant financing issues within
this segment. These issues are the $11 million note payable to the Saudi
Arabian government and accrued salaries and termination benefits of
approximately $947,000 due employees working in Saudi Arabia (this amount
does not include any amounts due the Company's President and Chief
Executive Officer who also primarily works in Saudi Arabia and is owed
approximately $1,241,000).

Regarding the note payable, this loan was originally due in ten annual
installments beginning in 1984. The Company has neither made any repayments
nor received any payment demands or other communications regarding the note
payable from the Saudi government. By memorandum to the King of Saudi
Arabia in 1986, the Saudi Ministry of Finance and National Economy
recommended that the $11 million note be incorporated into a loan from the
Saudi Industrial Development Fund ("SIDF") to finance 50% of the cost of
the Al Masane project, repayment of the total amount of which would be made
through a mutually agreed upon repayment schedule from the Company's share
of the operating cash flows generated by the project. The Company remains
active in Saudi Arabia and received the Al Masane mining lease at a time
when it had not made any of the agreed upon repayment installments. Based
on its experience to date, management believes that as long as the Company
diligently attempts to explore and develop the Al Masane project no
repayment demand will be made. Based on its interpretation of the Al Masane
mining lease and other documents, management believes the government is
likely to agree to link repayment of this note to the Company's share of
the operating cash flows generated by the commercial development of the Al
Masane project and to a long-term installment repayment schedule. In the
event the Saudi government was to demand immediate repayment of this
obligation, which management considers unlikely, the Company would be
unable to pay the entire amount due.

With respect to the accrued salaries and termination benefits due employees
working in Saudi Arabia, the Company plans to continue employing these
individuals until it is able to generate sufficient excess funds to begin
payment of this liability. Management believes it will be able to maintain
sufficient cash to allow the payment of its obligations as any affected
employees leave the Company's employment. Consideration is being given to
establishment of a Reserve Fund to manage these obligations.

As noted previously, the Company's mineral interests in the United States
are its ownership interest in Pioche, which has been inactive for many
years. Its properties include 48 patented and 5 unpatented claims totaling
approximately 1,500 acres in Lincoln County, Nevada. There are prospects
and mines on these claims that previously produced silver, gold, lead, zinc
and copper. There is also a 300-ton-a-day processing mill on property owned
by Pioche. The mill is not currently in use and a significant expenditure
would be required in order to put the mill into continuous operation, if
commercial mining is to be conducted on the property. In August 2004, the
Company exercised its option to purchase 720,000 shares of the common stock
of Pioche at $0.20 a share for a total amount of $144,000. Pioche agreed to
accept payment for the stock purchase by the cancellation of $144,000 of
debt it owed to the Company. This purchase increased the Company's
ownership interest in Pioche to approximately 55%.

At this time, the Company has no definitive plans for the development of
its domestic mining assets. It periodically receives proposals from outside
parties who are interested in possibly developing or using certain assets.
Management will continue to review these proposals as they are received,
but at this time does not anticipate making any significant domestic mining
capital expenditures or receiving any significant proceeds from the sale or
use of these assets.

If the Company seeks additional outside financing to proceed with the
development of the mining segment, either foreign or domestic, there is no
assurance that sufficient funds could be obtained. It is also possible that
the terms of any additional financing that the Company would be able to
obtain would be unfavorable to the Company and its existing shareholders.

The Company's management and Board of Directors have many years of
experience in the exploration for, and development of, mineral prospects in
various parts of the world. Two members of the Board are geologists, and a
third is a petroleum engineer. Neither management nor the Board members
have personally operated a mine on a day to day basis, nor have they
marketed the product of a mining operation. The Company intends to hire
qualified and experienced managers for the operation at the appropriate
time. In addition, the Company has from time to time employed various
respected engineering and financial advisors to assist in development and
evaluation of the project. The consultants employed to update the
feasibility of the project were SNC-Lavalin of Toronto, Canada. The
consulting group employed to review the feasibility study and to develop
current economic analysis is Molinari and Associates, Inc. of Toronto,
Canada. Company management may not be totally aware in detail of the
specific requirements related to working within this industry. Therefore,
there is risk the decisions and choices may not take into account standard
engineering or management approaches mineral exploration companies commonly
use. If these issues are not correctly handled, the operations, earnings
and ultimate financial success of the Mining Segment could suffer
irreparable harm due to management's lack of experience in this portion of
the development of the project. The amount of risk will ultimately depend
upon the Company's skill in using consultants and in hiring experienced
personnel to manage the operation.

RESULTS OF OPERATIONS

SPECIALTY PETROCHEMICALS SEGMENT. In the quarter ended September 30, 2005,
total petrochemical product sales and processing fees from continuing
operations increased approximately $5,839,000 or 39%, while the cost of
petrochemical sales and processing (excluding depreciation) increased
approximately $1,350,000 or 12% from the same period in 2004. Consequently,
the total gross profit margin on revenue in the third quarter of 2005
increased approximately $4,489,000 or 131% compared to the same period in
2004.

Sales from discontinued operations (the Productos Quimicos Coin subsidiary)
for the quarter decreased approximately $1,066,000 or 100%, while its cost
of sales (excluding depreciation) decreased approximately $906,000 or 100%.
Discontinued operations had no effect on gross profit margin on product
sales in this quarter, compared to a positive gross profit margin of
approximately $160,000 in the same quarter in 2004.

In the nine months ended September 30, 2005, total petrochemical product
sales and processing fees from continuing operations increased
approximately $20,515,000 or 54%, while the cost of petrochemical sales and
processing (excluding depreciation) increased approximately $9,939,000 or
30% from the same period in 2004. Consequently, the total gross profit
margin on petrochemical product sales and processing in the first nine
months of 2005 increased approximately $10,576,000 compared to the same
period in 2004. The cost of petrochemical product sales and processing and
gross profit margin for the nine months ended September 30, 2005 and 2004
include an estimated unrealized gain of approximately $3,269,000 and
$1,657,000 respectively on the derivative agreements.

Sales from discontinued operations (the Productos Quimicos Coin subsidiary)
for the nine months decreased approximately $99,000 or 5%, while its cost
of sales (excluding depreciation) decreased approximately $702,000 or 38%.
Therefore, discontinued operations had a gross profit margin on product
sales for the nine months of approximately $886,000, compared to a gross
profit margin of approximately $282,000 for the same period in 2004.

The Petrochemical segment completed a de-bottlenecking project on the
solvents unit during the later part of the first quarter of 2005. The
project added two new, larger fractionation towers and divided the solvent
production into two trains. Total capacity of the unit was increased by
approximately 30% and functional by March 31, 2005. The Company experienced
typical mechanical reliability issues since the startup with the increased
volume. These issues were resolved as they arose and the Company is
generally satisfied with the performance of the additional equipment.
Consistent operation at full capacity of the expanded equipment was
attained in the early part of the third quarter 2005. The project cost
approximately $1.5 million and was accomplished using current maintenance
department employees. No reportable injuries were recorded during the
effort.

During first nine months of 2005 the Company has generally experienced high
feedstock prices that fluctuated within a range, rather than continuing the
steady increase experienced in 2004--the exception being late August when
Hurricane Katrina hit the Gulf Coast. The damage in the Gulf producing
regions from Hurricane Katrina, followed by Hurricane Rita, spiked the
prices of all petroleum related materials. The Company has been able to
maintain sufficient cash flow to cover increased natural gas and
transportation costs by keeping its product pricing at sufficient levels
coupled with the positive contribution from the hedging program.
Importantly, sales demand has remained high during the last eighteen months
despite constant price increases to customers. Management attributes the
strong sales demand to improved general economic activity during the past
year and to growth in the industries served by the petrochemical product
lines. Growth of markets served has generally been 2% to 3% annually over
the last ten years.

For comparison, the first half of 2004 was a difficult period for the
Company and the petrochemical industry in general. Feedstock prices rose to
record highs and the Company was unable to raise product prices quickly
enough to cover the increased costs. This resulted in severe losses in
January 2004 and to a lesser extent, February 2004. By March, 2004, the
Company had raised its product prices and adjusted its business to cover
the increases, which enabled it to regain a positive cash flow position.
Feedstock prices moderated early in the second quarter of 2004 but by the
end of the quarter and throughout the third and fourth quarters prices were
again on the upswing.

Since late 2003 the Company has entered into derivative agreements to
dampen sudden price spikes and provide feedstock price protection.
Management believes that if the derivative agreements can moderate rate of
change in the overall cost of feedstock, product prices can be raised
sufficiently as needed to avoid the large losses experienced in the past.
Approximately 50% of the Company's monthly feedstock requirements are
covered at any one time. This ratio cushions price increases and allows the

Company to experience partial benefit when the price drops. In the third
quarter of 2005 the natural gasoline derivative agreements had a realized
gain of approximately $731,000 and an estimated unrealized gain of
approximately $1,625,000 for a total positive effect of approximately
$2,356,000.

The price of natural gas (fuel gas), which is the petrochemical operation's
largest single expense, continued to be high during the first quarter of
2005 as compared to historical levels. The Company has option contracts in
place for fuel gas through the first quarter of 2006 in order to minimize
the impact of price fluctuations in the market. The Company has also been
able to pass through price increases as they have occurred. In the third
quarter of 2005, the natural gas derivative agreements had a realized gain
of approximately $29,000 and an estimated unrealized gain of approximately
$1,644,000 for a total positive effect of approximately $1,673,000.

Toll processing fee revenue for the third quarter of 2005 of approximately
$1,212,000 represents an increase of approximately $245,000 or 25% above
the fees for the same period in 2004. The toll processing customers are
very active and remain on long-term contracts. While there are some
fluctuations in tolling volumes handled, toll processing has developed into
a stable business and the Company intends to continue to develop
opportunities when available. Toll processing fees are expected to rise in
the fourth quarter of 2005 as expanded facilities for a major customer were
completed in October 2005. The revised contract with this customer will
generate additional processing fees and contains a capital repayment
feature. The project began operations on schedule (considering the
hurricane caused delay) and is producing high quality products in the
volumes requested by the customer.

Interest expense decreased primarily due to the reduction in notes payable.
South Hampton's largest supplier of feedstock asked for security on the
account because of the large increase in the amounts owed for feedstock
purchases. While the volume of feedstock purchased is rising because of
expanded capacity, significant price changes in the petroleum markets have
also increased the dollar amount of such purchases. South Hampton's
successful negotiation of a security agreement with the supplier,
solidified supply of feedstock to the Company at favorable terms as
compared to what is otherwise available in the market. Under the security
agreement, the supplier has a first lien on most of South Hampton's fixed
assets.

MINING SEGMENT AND GENERAL CORPORATE EXPENSES. None of the Company's other
operations generate significant operating or other revenues. The minority
interest amount represents the Pioche minority stockholders' shares of the
losses from the Pioche operations. Pioche losses are primarily attributable
to the costs of maintaining the Nevada mining properties.

The Company assesses the carrying values of its assets on an ongoing basis.
Factors which may affect the carrying values of the mining properties
include, but are not limited to, mineral prices, capital cost estimates,
estimated operating costs of any mines and related processing, ore grade
and related metallurgical characteristics, design of any mines and the
timing of any mineral production. Prices currently used to assess the
recoverability of the Al Masane project costs for 2005 are $1.55 per pound
for copper and $.57 per pound for zinc for the projected life of the mine.
Copper and zinc comprise in excess of 80% of the expected value of
production. Using these price assumptions, there were no asset impairments
at September 30, 2005. There are no assurances that, particularly in the
event of a prolonged period of depressed mineral prices, the Company will
not be required to take a material write-down of its mineral properties in
the future.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK.

Other than as disclosed, there have been no material changes in the
Company's exposure to market risk from the disclosure included in the
Company's Annual Report on Form 10-K/A-1 for the fiscal year ended December
31, 2004.

ITEM 4. CONTROLS AND PROCEDURES.

The Company carried out an evaluation, under the supervision and with the
participation of Company management, including the Company's President and
Chief Executive Officer and Treasurer, of the effectiveness of the
Company's disclosure controls and procedures, as of the end of the period
covered by this report. Based upon that evaluation, the President and Chief
Executive Officer and Treasurer concluded that, as of the end of the period
covered by this report, the Company's disclosure controls and procedures
were effective such that information relating to the Company (including its
consolidated subsidiaries) required to be disclosed in the Company's
Securities and Exchange Commission reports (i) is recorded, processed,
summarized and reported within the time periods specified in the Securities
and Exchange Commission rules and forms and (ii) is accumulated and

communicated to the Company's management, including the President and Chief
Executive Officer and Treasurer, as appropriate, to allow timely decisions
regarding required disclosure.

During the period covered by this report, there were no changes in the
Company's internal control over financial reporting that have materially
affected, or are reasonably likely to materially affect, the Company's
internal control over financial reporting.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS.

Reference is made to Note 5 to the consolidated financial statements
contained in this Report for a discussion of material pending legal
proceedings.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

ISSUER PURCHASES OF EQUITY SECURITIES

The following table sets forth information about the Company's Common Stock
repurchases during the three months ended September 30, 2005:

(c) (d)
Total Number of Shares Maximum Number of
(a) (b) Purchased as Part of Shares that May Yet be
Total Number of Average Price Publicly Announced Purchased Under the
Period Shares Purchased Paid Per Share Plans or Programs Plans or Programs
- ------ ---------------- -------------- ---------------------- ----------------------

July 1, 2005 through
July 31, 2005 -- $-- -- --

August 1, 2005 through
August 31, 2005 -- $-- -- --

September 1, 2005 through
September 30, 2005 -- $-- -- --
--- --- --- ---

Total -- $-- -- --
=== === === ===

ITEM 3. DEFAULTS ON SENIOR SECURITIES.

Reference is made to Notes 5, 6 and 8 to the consolidated financial
statements and Part I. Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations contained in this Report for
a discussion of the $11 million note payable to the Saudi Arabian
government.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

NONE.

ITEM 5. OTHER INFORMATION.

A shareholder of the Company who is interested in submitting a proposal for
inclusion in the Company's proxy materials for the annual meeting of
shareholders, which is tentatively scheduled sometime in May 2006, must
submit the proposal to the Company at its principal executive office no later
than March 1, 2006. Any such proposal must also comply with the other
requirements of the proxy solicitation rules of the Securities and Exchange
Commission. The Company intends to exercise discretionary voting authority
granted under any proxy, which is executed and returned to the Company on any
matter that may properly come before the annual meeting of shareholders,
unless written notice of the matter is delivered to the Company at its
principal executive office no later than March 1, 2006.

ITEM 6. EXHIBITS.

The following documents are filed or incorporated by reference as exhibits to
this Report. Exhibits marked with an asterisk (*) are management contracts or
a compensatory plan, contract or arrangement.

EXHIBIT
NUMBER DESCRIPTION
- ------- -----------

3(a) - Certificate of Incorporation of the Company as amended through the
Certificate of Amendment filed with the Delaware Secretary of State on
July 19, 2000 (incorporated by reference to Exhibit 3(a) to the
Company's Annual Report on Form 10-K for the year ended December 31,
2000 (File No. 0-6247)).

3(b) - Bylaws of the Company, as amended through March 4, 1998 (incorporated
by reference to Exhibit 3(b) to the Company's Annual Report on Form
10-K for the year ended December 31, 1999 (File No. 0-6247)).

10(a) - Contract dated July 29, 1971 between the Company, National Mining
Company and Petromin (incorporated by reference to Exhibit 10(a) to
the Company's Annual Report on Form 10-K for the year ended December
31, 1999 (File No. 0-6247)).

10(b) - Loan Agreement dated January 24, 1979 between the Company, National
Mining Company and the Government of Saudi Arabia (incorporated by
reference to Exhibit 10(b) to the Company's Annual Report on Form 10-K
for the year ended December 31, 1999 (File No. 0-6247)).

10(c) - Mining Lease Agreement effective May 22, 1993 by and between the
Ministry of Petroleum and Mineral Resources and the Company
(incorporated by reference to Exhibit 10(c) to the Company's Annual
Report on Form 10-K for the year ended December 31, 1999 (File No.
0-6247)).

10(d) - Stock Option Plan of the Company, as amended (incorporated by
reference to Exhibit 10(d) to the Company's Annual Report on Form 10-K
for the year ended December 31, 1999 (File No. 0-6247)).*

10(e) - Letter Agreement dated May 3, 1991 between Sheikh Kamal Adham and the
Company (incorporated by reference to Exhibit 10(j) to the Company's
Annual Report on Form 10-K for the year ended December 31, 1999 (File
No. 0-6247)).

10(f) - Promissory Note dated February 17, 1994 from Hatem El-Khalidi to the
Company (incorporated by reference to Exhibit 10(k) to the Company's
Annual Report on Form 10-K for the year ended December 31, 1999 (File
No. 0-6247)).

10(g) - Letter Agreement dated August 15, 1995 between Hatem El-Khalidi and
the Company (incorporated by reference to Exhibit 10(l) to the
Company's Annual Report on Form 10-K for the year ended December 31,
1999 (File No. 0-6247)).

10(h) - Letter Agreement dated August 24, 1995 between Sheikh Kamal Adham and
the Company (incorporated by reference to Exhibit 10(m) to the
Company's Annual Report on Form 10-K for the year ended December 31,
1999 (File No. 0-6247)).

10(i) - Letter Agreement dated October 23, 1995 between Sheikh Fahad Al-Athel
and the Company (incorporated by reference to Exhibit 10(n) to the
Company's Annual Report on Form 10-K for the year ended December 31,
1999 (File No. 0-6247)).

EXHIBIT
NUMBER DESCRIPTION
- ------- -----------

10(j) - Letter Agreement dated November 30, 1996 between Sheikh Fahad Al-Athel
and the Company (incorporated by reference to Exhibit 10(o) to the
Company's Annual Report on Form 10-K for the year ended December 31,
2001 (File No. 0-6247)).

10(k) - Purchase and Sale Agreement/Security Agreement dated July 29, 2003
between Southwest Bank of Texas, N.A. and South Hampton Refining
Company, together with related Restricted Payments Letter Agreement
and Guaranty of Texas Oil & Chemical Co. II, Inc. (incorporated by
reference to Exhibit 10(s) to the Company's Annual Report on Form 10-K
for the year ended December 31, 2002 (File No. 0-6247)).

10(l) - Equipment Lease Agreement dated November 14, 2003, between Silsbee
Trading and Transportation Corp. and South Hampton Refining Company
(incorporated by reference to Exhibit 10(o) to the Company's Annual
Report on Form 10-K for the year ended December 31, 2003 (File No.
0-6247)).

10(m) - Pledge Agreement dated as of May 15, 2001, by Arabian American
Development Company, American Shield Refining Company, Fahad Al-Athel,
Hatem El-Khalidi, Ingrid El-Khalidi and Preston Peak (incorporated by
reference to Exhibit 10(p) to the Company's Annual Report on Form 10-K
for the year ended December 31, 2003 (File No. 0-6247)).

10(n) - Security Agreement and Deed of Trust dated June 1, 2004 between South
Hampton Refining Company and Martin Operating Partnership, L.P.
(incorporated by reference to Exhibit 10(p) to the Company's Quarterly
Report on Form 10-Q for the quarter ended June 30, 2004 (File No.
0-6247)).

10(o) - Addendum to Equipment Lease Agreement dated August 1, 2004, between
Silsbee Trading and Transportation Corp. and South Hampton Refining
Company (incorporated by reference to Exhibit 10(q) to the Company's
Quarterly Report on Form 10-Q for the quarter ended September 30, 2004
(file No. 0-6247)).

10(p) - Letter Agreement dated May 7, 2005 between Sheikh Fahad Al-Athel and
the Company (incorporated by reference to Exhibit 10(p) to the
Company's Quarterly Report on Form 10-Q for the quarter ended March
31, 2005 (file No. 0-6247)).

10(q) - Loan Agreement dated June 30, 2005 between Texas Oil & Chemical Co.
II/South Hampton Refining Co. and The Catalyst Fund,
LTD/Southwest/Catalyst Capital, LTD. (incorporated by reference to
Exhibit 10(q) to the Company's Quarterly Report on Form 10-Q for the
quarter ended June 30, 2005 (file No. 0-6247)).

10(r) - Judicial Agreement dated May 19, 2005 between Fabricante Y
Comercializadora Beta, S.A. de C.V. and Productos Coin, S.A.de C.V.
(incorporated by reference to Exhibit 10(r) to the Company's Quarterly
Report on Form 10-Q for the quarter ended June 30, 2005 (file No.
0-6247)).

10(s) - Agreement dated June 6, 2005 between Fabricante Y Comercializadora
Beta, S.A. de C.V. and Productos Quimicos Coin, S.A. de C.V.
(incorporated by reference to Exhibit 10(s) to the Company's Quarterly
Report on Form 10-Q for the quarter ended June 30, 2005 (file No.
0-6247)).

EXHIBIT
NUMBER DESCRIPTION
- ------- -----------

10(t) - Mercantile Shares Purchase and Sale Agreement dated June 9, 2005
between Texas Oil & Chemical Co. II. Inc. and Ernesto Javier Gonzalez
Castro and Mauricio Ramon Arevalo Mercado. (incorporated by reference
to Exhibit 10(t) to the Company's Quarterly Report on Form 10-Q for
the quarter ended June 30, 2005 (file No. 0-6247)).

10(u) - Natural Gasoline Feedstock Handling Agreement dated September 21, 2005
between South Hampton Resources, Inc. and Martin Gas Sales.

10(v) - Pipeline Use, Right of Way Option and Right of First Refusal Agreement
dated September 21, 2005 between Gulf State Pipe Line Co., Inc. and
Martin Gas Sales.

31.1 - Certification of Chief Executive Officer pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002.

31.2 - Certification of Chief Financial Officer pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002.

32.1 - Certification of Chief Executive Officer pursuant to 18 U.S.C. Section
1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.

32.2 - Certification of Chief Financial Officer pursuant to 18 U.S.C. Section
1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.

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.

DATE: November 14, 2005 ARABIAN AMERICAN DEVELOPMENT COMPANY
(Registrant)

By: /s/ NICHOLAS CARTER
------------------------------------
Nicholas Carter Secretary/Treasurer
(Authorized Officer and Principal
Financial Officer)

Exhibit Index

EXHIBIT
NUMBER DESCRIPTION
- ------- -----------

10(d) - Stock Option Plan of the Company, as amended (incorporated by
reference to Exhibit 10(d) to the Company's Annual Report on Form 10-K
for the year ended December 31, 1999 (File No. 0-6247)).*

EXHIBIT
NUMBER DESCRIPTION
- ------- -----------

10(u) - Natural Gasoline Feedstock Handling Agreement dated September 21, 2005
between South Hampton Resources, Inc. and Martin Gas Sales.

10(v) - Pipeline Use, Right of Way Option and Right of First Refusal Agreement
dated September 21, 2005 between Gulf State Pipe Line Co., Inc. and
Martin Gas Sales.

31.1 - Certification of Chief Executive Officer pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002.

31.2 - Certification of Chief Financial Officer pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002.

32.1 - Certification of Chief Executive Officer pursuant to 18 U.S.C. Section
1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.

32.2 - Certification of Chief Financial Officer pursuant to 18 U.S.C. Section
1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.