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 February 29, 1996
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.
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621 - 17th Street, Suite 1301
Denver, Colorado 80293
Phone: (303) 293-2340
Colorado 84-0630863
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(State of Incorporation) (I.R.S. Employer Identification No.)
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. __
As of April 15, 1996, the Registrant had 36,744,192 shares of its $0.10 par
value common stock issued and outstanding.
Total Pages 9
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<CAPTION>
Part I - FINANCIAL INFORMATION
CHAPARRAL RESOURCES, INC.
Consolidated Statements of Operations
Unaudited
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For the Three Months Ended
--------------------------------
February 29, February 28,
1996 1995
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<S> <C> <C>
Revenue:
Oil and gas sales ............... $ 34,000 $ 84,000
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Costs and expenses:
Production costs ................ -- 39,000
Depreciation and depletion ...... 16,000 30,000
General and administrative ...... 84,000 22,000
--------- -------
100,000 91,000
--------- -------
Earnings (loss) from operations .......... (66,000) (7,000)
Other income (expenses):
Interest income ................. 2,000 1,000
Interest expense ................ (19,000) --
Other, net ...................... 1,000 (3,000)
-------- -------
(16,000) (2,000)
-------- ------
Net income (loss) ...... $ (82,000) $ (9,000)
======== ======
Earnings (loss) per common share ......... $ (0.004) $ (0.001)
======== =======
Average number of outstanding shares ..... 20,692,525 15,828,150
========== ==========
</TABLE>
See accompanying notes to financial statements
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<CAPTION>
CHAPARRAL RESOURCES, INC.
Consolidated Balance Sheets
February 29,
1996 November 30,
(Unaudited) 1995
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ASSETS
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents ................................... $ 219,000 $ 501,000
Accounts receivable
Joint interest participants ............................. 17,000 31,000
Oil and gas purchasers .................................. -- 46,000
Prepaid expenses ............................................ 1,000 2,000
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Total current assets .................................. 237,000 580,000
PROPERTY AND EQUIPMENT - AT COST
Oil and gas properties - full cost
Subject to depletion .................................. 16,089,000 16,149,000
Not subject to depletion .............................. 47,000 40,000
Less accumulated depletion and depreciation and
impairment ................................................ (15,738,000) (15,722,000)
----------- -----------
398,000 467,000
Furniture, fixtures and equipment ........................... 202,000 197,000
Less accumulated depreciation ............................... (178,000) (177,000)
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24,000 20,000
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422,000 487,000
OTHER ASSETS
Investments in and advances to affiliate ................... 5,851,000 4,507,000
Cash value of insurance and annuities ...................... 8,000 8,000
Equipment inventory ........................................ 13,000 13,000
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5,872,000 4,528,000
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$ 6,531,000 $ 5,595,000
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable
Trade .................................................. $ 71,000 $ 102,000
Joint interest participants - revenue .................. 1,000 26,000
Accrued liabilities ............................................. 38,000 86,000
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Total current liabilities ......................... 110,000 214,000
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LONG TERM OBLIGATIONS:
Note Payable .................................................... 793,000 461,000
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STOCKHOLDERS' EQUITY
Common stock - authorized, 50,000,000 shares of $.10 par
value; issued and outstanding, 21,109,192 and
20,484,192 shares at February 29, 1996 and November
30, 1995, respectively ....................................... 2,111,000 2,048,000
Capital in excess of par value .................................. 13,305,000 12,577,000
Preferred stock - authorized, 1,000,000 shares as of
February 29, 1996 and November 30, 1995
Retained earnings (deficit) ..................................... (9,788,000) (9,705,000)
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Total stockholders equity ....................................... 5,628,000 4,920,000
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Total liabilities and stockholders equity ....................... $ 6,531,000 $ 5,595,000
=========== ===========
</TABLE>
See accompanying notes to financial statements
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<CAPTION>
CHAPARRAL RESOURCES, INC.
Consolidated Statements of Cash Flows
Unaudited
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For the Three Months Ended
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February 29, February 28,
1996 1995
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<S> <C> <C>
Increase (decrease) in cash and cash equivalents:
Cash flows from operating activities
Net income (loss) ................................. $ (82,000) $ (9,000)
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Depreciation and depletion .................... 16,000 30,000
Amortization of note discount ................. 32,000 --
Changes in assets and liabilities:
(Increase) decrease in:
Accounts receivable .................... 60,000 153,000
Prepaid expenses ....................... 1,000 1,000
Other assets ........................... -- 1,000
Increase (decrease) in:
Accounts payable ....................... (56,000) (55,000)
Accrued liabilities .................... (48,000) (41,000)
-------- --------
Net cash provided from (used in) operating
activities .................................. (77,000) 80,000
Cash flows from investing activities:
Additions to property and equipment ............... 60,000 (50,000)
Investment in foreign oil and gas properties ...... (616,000) --
Change in certificate of deposit .................. -- (107,000)
Proceeds from sale of interest in oil & gas
properties ..................................... 19,000 --
-------- ---------
Net cash provided from (used in) investing
activities .................................. (537,000) (157,000)
Cash flows from financing activities:
Proceeds from notes payable ....................... 332,000 --
Proceeds from sale of stock ....................... -- 51,000
-------- --------
Net cash provided from (used in) financing
activities .................................. 332,000 51,000
-------- --------
Net increase (decrease) in cash and cash
equivalants ................................ (282,000) (26,000)
Cash and cash equivalents at beginning of year ........ 501,000 318,000
-------- -------
Cash and cash equivalents at end of 1st quarter ....... $ 219,000 $ 292,000
======= ========
</TABLE>
See accompanying notes to financial statements
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CHAPARRAL RESOURCES, INC.
Notes to Consolidated Financial Information
Unaudited
---------
(1) GENERAL
Management has elected to omit substantially all notes to the Company's
financial statements. Reference should be made to the Company's Annual Report on
Form 10-K for the fiscal year ended November 30, 1995, for notes to the
Company's year-end financial statements.
(2) UNAUDITED INFORMATION
The information furnished herein was taken from the books and records of
the Company without audit. However, such information reflects all adjustments
(consisting only of normal recurring adjustments) which are, in the opinion of
management, necessary to reflect properly the results for the interim periods
presented. The results of operations for the interim periods are not necessarily
indicative of the results to be expected for the year.
The November 30, 1995 balance sheet data is derived from the audited
financial statements but does not include all disclosures required by generally
accepted accounting principles.
(3) NON-CASH FINANCING AND INVESTMENT ACTIVITIES
a) The Company paid $19,000 in interest during the period ended February
29, 1996.
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MANAGEMENT'S' DISCUSSION AND ANALYSIS
OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(1) Liquidity and Capital Resources
The Company's primary source of capital is from oil and gas sales. The
Company's working capital position was positive at February 29, 1996. Total
current assets were $237,000 and total current liabilities were $110,000 for a
working capital ratio of 2.2 to 1.
Net cash and cash equivalents decreased $282,000 from November 30, 1995 to
February 29, 1996. The decrease was primarily due to investment in foreign oil
and gas properties. In January 1996, the Company received proceeds from two
private unsecured loans represented by notes payable in the aggregate amount of
$300,000.
In January and February 1996, the Company entered into agreements to
acquire, for a total of $5,850,000 cash and 1,785,000 shares of the Company's
common stock, an additional 55% interest in Central Asian Petroleum Guernsey
Limited ("CAP-G"). The acquisitions will increase the Company's ownership in
CAP-G to 100%, thus increasing to 50% the Company's beneficial ownership
interest in Karakuduk Munay Inc. ("KKM") and the Karakuduk Oil Field ("Karakuduk
Field"). The other 50% ownership in the Karakuduk Field is owned by a Kazakstan
regional government group.
The additional 55% of CAP-G is to be acquired in three separate
transactions, the first two of which include the purchase of all of the CAP-G
shares owned by Darka Petrol Ticaret Limited Sirketi, a private Turkish company
("Darka"), and by Guntekin Koksal, an individual CAP-G shareholder ("Koksal"),
each of which owns 25% of the CAP-G shares outstanding.
The Company was required to pay $2,000,000 in cash and issue 685,000 shares
of the Company's common stock to Darka for all of Darka's CAP-G shares. The
Company paid $600,000 of the cash purchase price and delivered 625,000 shares of
the Company's common stock on March 8, 1996. On April 1, 1996, the Company
completed the purchase of Darka's CAP-G shares by paying the $1,400,000 cash
balance and by delivering the balance of 60,000 shares of the Company's common
stock.
The Company was required to pay $1,975,000 in cash and issue 900,000 shares
of the Company's common stock to Koksal for 60% of his CAP-G shares (15% of
CAP-G). The Company has an option, after completion of the initial purchase, to
acquire the remaining 40% of Koksal's CAP-G shares for an additional $1,625,000
cash and 200,000 shares of the Company's common stock. The initial purchase from
Koksal was consummated on March 11, 1996, when $750,000 cash and 900,000 shares
of the Company's common stock were delivered to Koksal. The remaining cash
balance of $1,225,000, for the initial purchase, will be paid in four equal
quarterly payments of $306,250 between June 11, 1996 and March 11, 1997. The
Company has the option to purchase the remaining 40% of Koksal's CAP-G shares
(10% of CAP-G) at any time following completion of the initial purchase and
prior to December 11, 1997.
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Under the third agreement, the Company acquired the remaining 5% of the
outstanding CAP-G shares from a private US corporation ("OCSCO") for $250,000
cash. The purchase from OCSCO was completed on April 11, 1996.
With the completion of the foregoing transactions the Company's beneficial
ownership interest in CAP-G is 90% and its beneficial ownership interest in KKM
and the Karakuduk Field is 45%.
The Company does not have significant income producing properties and the
Karakuduk Field is substantially undeveloped. The development of the Karakuduk
Field, through KKM, will require substantial amounts of additional capital. The
Company's share of the 1996 budget for the Karakuduk Field development is
anticipated to be at least $4,000,000, of which approximately $490,000 has been
paid and $420,000 is to be paid by the Company prior to the end of April, 1996.
The terms of the KKM license, from the Republic of Kazakstan, require a 1996
work plan of approximately $10,000,000, a portion of which may be deferred by
KKM under certain conditions. KKM will notify the Company of KKM's additional
capital requirements on an as needed basis.
On April 5, 1996, the Company completed a private placement of 14,000,000
shares of the Company's common stock at $0.50 a share for a gross amount of
$7,000,000. In connection with the private placement, the Company issued a
warrant to purchase 1,022,000 shares of the Company's common stock, for a
nominal amount, to the placement agent and paid $21,849 of the placement agent's
expenses. To date, the Company has used the $6,978,151 of net proceeds from the
private placement to complete the acquisition of 25% of the outstanding stock of
CAP-G owned by Darka ($1,700,000), to complete the initial acquisition of 15% of
the outstanding stock of CAP-G owned by Koksal ($750,000), to complete the
acquisition of 5% of the outstanding stock of CAP-G owned by OCSCO ($250,000),
to pay the principal amount of a promissory note ($750,000) and to pay a portion
of the Company's share of the second quarter budget for the Karakuduk Field
($400,000). The Company estimates that the balance of the net proceeds will be
used to make the 1996 payments due Koksal to complete the initial purchase of
15% of the outstanding stock of CAP-G ($918,750), to pay the Company's remaining
portion of the second quarter budget for the Karakuduk Field ($420,000) and for
working capital ($1,939,401).
In addition, effective April 5, 1996, two holders of promissory notes in
the aggregate amount of $300,000 converted their promissory notes into 600,000
shares of the Company's common stock.
The Company has raised additional capital to finance a portion of its
obligations in connection with the acquisition of its interest in and the
development of the Karakuduk Field and to satisfy working capital needs in the
short term. The Company plans to seek to raise its additional capital needs
through debt or equity offerings, encumbering properties or entering into
arrangements whereby certain costs of exploration and development will be paid
by others to earn an interest in the properties. The present environment for
financing the acquisition of oil and gas properties or the ongoing obligations
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of an oil and gas business is uncertain due, in part, to the substantial
instability in oil and gas prices in recent years. There can be no assurance
that the debt or equity financing expected to be necessary to continue to fund
the Company's operations and obligations will be available to the Company on
economically acceptable terms. If sufficient funds cannot be raised to meet the
Company's continuing obligations with respect to the Karakuduk Field, its
interest in such property might be adversely affected.
The Company has no other material commitments for cash outlay and capital
expenditures other than for normal operations.
(2) Results of Operations Three Months Ended February 29, 1996 vs. February 28,
1995
The Company's operations resulted in a net loss of $82,000 for the three
months ended February 29, 1996 compared to a net loss of $9,000 during the same
period in 1995.
Revenues from oil and gas sales decreased $50,000 or 59.5% due to lower
natural gas prices, certain producing properties being shut-in due to pricing
and sale or abandonment of certain producing properties during 1995.
Costs and expenses increased $9,000 or 9.9%. Production costs for the
period were offset by reimbursement of production taxes from certain natural gas
producing properties. Depreciation and depletion decreased by 46.7% to $16,000
as a result of the write-down of oil and gas properties in fiscal year-end 1995,
sale of certain producing properties and shut-in of certain producing properties
due to lower natural gas prices. General and administrative expenses increased
$62,000 or 281.8% due to costs related to the acquisition and operation of the
Company's interest in the Karakuduk Field. Interest expense increased to $19,000
due to interest paid by the Company on certain promissory notes.
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PART II - OTHER INFORMATION
Item 1 through 5 not applicable.
Item 6 - Exhibits and Reports on Form 8-K
(a) Exhibits - none.
(b) Reports on Form 8-K - none.
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: April 17, 1996
CHAPARRAL RESOURCES, INC.
A Colorado Corporation
/s/ Paul V. Hoovler
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Paul V. Hoovler
President
/s/ Matthew R. Hoovler
-----------------------------
Matthew R. Hoovler
Principal Financial Officer
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