FORM 10-Q
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

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

For the quarterly period ended June 30, 1998

                                       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.
              ----------------------------------------------------
             (Exact name of registrant as specified in its charter)

            Colorado                                     84-0630863
 ------------------------------              ----------------------------------
(State or other jurisdiction of             (I.R.S. Employer Identification No.)
 incorporation or organization)

                            2211 Norfolk, Suite 1150
                              Houston, Texas 77098
                     --------------------------------------
                    (Address of principal executive offices)


Registrant's telephone number, including area code: (713) 807-7100


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 and,  (2) has been subject to such filing  requirements
for the past 90 days.

                       YES  |X|                   NO  |_|



     As of August 18, 1998  Registrant  had  57,882,123  shares of its $0.10 par
value common stock issued and outstanding.

<PAGE>
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<CAPTION>

                    Part I - Summarized Financial Information

Item 1 - Financial Statements

                                     Chaparral Resources, Inc.
                                     Consolidated Balance Sheets
                                             (Unaudited)


                                                                     June 30,       December 31,
                                                                      1998               1997
                                                                 -------------------------------
<S>                                                             <C>                <C> 
Assets
Current assets:
   Cash and cash equivalents                                     $     46,000       $  3,423,000
   Restricted cash                                                    800,000               --
   Accounts receivable:
      Other                                                            33,000            102,000
   Prepaid expenses                                                    48,000             62,000
                                                                 ------------       ------------
Total current assets                                                  927,000          3,587,000

Notes Receivable                                                      300,000               --
Oil and gas properties and investments - full cost method
     Republic of Kazakhstan (Karakuduk Field)--
       not subject to depletion :                                  25,018,000         19,922,000

Furniture, fixtures and equipment                                      76,000             13,000
Less accumulated depreciation                                          (9,000)            (3,000)
                                                                 ------------       ------------
                                                                       67,000             10,000
                                                                 ------------       ------------

Total assets                                                     $ 26,312,000       $ 23,519,000
                                                                 ============       ============

                              See accompanying notes to financial statements

                                                    2

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<PAGE>
<TABLE>
<CAPTION>
                                                    Chaparral Resources, Inc.
                                              Consolidated Balance Sheets (continued)
                                                            (Unaudited)


                                                                        June 30,               December 31,
                                                                         1998                    1997
                                                                    ---------------------------------------
<S>                                                                 <C>                        <C>  
Liabilities and stockholders' equity
Current liabilities:
   Accounts payable:
     Trade                                                          $    257,000              $    177,000
   Accrued liabilities                                                   413,000                    54,000
   Notes payable (net of discount)                                       764,000                      --
                                                                    ------------              ------------
Total current liabilities                                              1,434,000                   231,000

Long-term obligations:
   Accrued compensation                                                  210,000                   210,000
Redeemable preferred stock - cumulative, convertible:
   Series A, 50,000 shares issued and outstanding,
   at stated value, includes $5.00 cumulative annual
   dividend, less $500,000 cost of issuance, $5,000,000
   redemption value                                                    4,550,000                 4,500,000

Stockholders' equity:
   Common stock - authorized, 100,000,000
     shares at June 30, 1998 and
     December 31, 1997, of
     $.10 par value; issued and outstanding,
     51,215,456 and 49,720,456 shares at
     June 30, 1998 and December 31, 1997, respectively                 5,121,000                 4,971,000
   Capital in excess of par value                                     33,518,000                30,340,000
   Unearned portion of restricted stock awards                          (161,000)                 (109,000)
   Stock subscription receivable                                      (1,517,000)               (1,770,000)
   Accumulated Deficit                                               (16,843,000)              (14,854,000)
                                                                    ------------              ------------
Total stockholders' equity                                            20,118,000                18,578,000
                                                                    ------------              ------------
Total liabilities and stockholders' equity                          $ 26,312,000              $ 23,519,000
                                                                    ============              ============




                               See accompanying notes to financial statements

                                                     3

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<PAGE>
<TABLE>
<CAPTION>
                                                     Chaparral Resources, Inc.
                                               Consolidated Statements of Operations
                                                            (Unaudited)



                                                For the Three Months Ended            For the Six Months Ended
                                               June 30,             June 30,          June 30,            June 30,
                                                1998                 1997              1998                1997
                                            -------------------------------------------------------------------------

<S>                                         <C>                 <C>                 <C>                 <C>   
Revenue:
   Oil and gas sales                        $       --          $       --          $       --          $       --

Costs and expenses:
   Depreciation and depletion                      4,000                --                 6,000               1,000
   General and administrative                    750,000             487,000           1,630,000             742,000
                                            ------------        ------------        ------------        ------------
                                                 754,000             487,000           1,636,000             743,000
                                            ------------        ------------        ------------        ------------

Loss from operations                            (754,000)           (487,000)         (1,636,000)           (743,000)

Other income (expense):
   Interest income                               248,000              88,000             450,000             162,000
   Interest expense                              (63,000)            (60,000)            (63,000)           (130,000)
   Equity in loss from investment               (357,000)           (114,000)           (690,000)           (289,000)
                                            ------------        ------------        ------------        ------------
                                                (172,000)            (86,000)           (303,000)           (257,000)
                                            ------------        ------------        ------------        ------------

Net loss                                    $   (926,000)       $   (573,000)       $ (1,939,000)       $ (1,000,000)
                                            ------------        ------------        ------------        ------------

Basic and diluted earnings per share:
Net loss per share                          $      (.018)       $      (.014)       $      (.038)       $      (.025)
Weighted average number of shares
   Outstanding                                51,192,214          40,948,384          50,546,373          39,311,769




                                        See accompanying notes to financial statements

                                                             4

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<PAGE>
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<CAPTION>



                                              Chaparral Resources, Inc.
                                        Consolidated Statements of Cash Flows
                                                     (Unaudited)


                                                                        For the Six Months Ended
                                                                     June 30,                June 30,
                                                                       1998                    1997
                                                                   ------------------------------------
<S>                                                                <C>                      <C> 
Cash flows from operating activities
Net loss                                                           $(1,939,000)             $(1,000,000)
Adjustments to reconcile net loss to
   Net cash used in operating activities:
     Equity loss from investment                                       690,000                  289,000
     Depreciation and depletion                                          6,000                    1,000
     Loss on the sale of oil and gas properties                           --                     30,000
     Write-down of oil and gas properties                                 --                      3,000
     Stock issued for services and bonuses                             662,000                     --
     Amortization of note discount                                      56,000                   62,000
     Changes in assets and liabilities:
         Restricted cash                                              (800,000)                    --
         Accounts receivable                                            69,000                  (43,000)
         Prepaid expenses                                               14,000                  (90,000)
         Notes receivable                                             (300,000)                    --
         Accounts payable & accrued  liabilities                       439,000                 (403,000)
                                                                   -----------              -----------
Net cash used in operating activities                               (1,103,000)              (1,151,000)

Cash flows from investing activities
Additions to property and equipment                                    (63,000)                    --
Proceeds from sale of interest in oil & gas properties                    --                    273,000
Investment in and advances to foreign oil and gas
       properties                                                   (5,786,000)              (1,785,000)
                                                                   -----------              -----------
   Net cash used in investing activities                            (5,849,000)              (1,512,000)


Cash flows from financing activities
Proceeds from notes payable                                          1,075,000
Proceeds from warrant exercise                                                                    7,000
Proceeds from sale of stock                                          2,500,000                2,000,000
                                                                   -----------              -----------
Net cash provided by financing
   activities                                                        3,575,000                2,007,000
                                                                   -----------              -----------

Net decrease in cash and
   cash equivalents                                                 (3,377,000)                (656,000)
Cash and cash equivalents at beginning
   of period                                                         3,423,000                  920,000
                                                                   -----------              -----------
Cash and cash equivalents at end of period                         $    46,000              $   264,000
                                                                   ===========              ===========


                                 See accompanying notes to financial statements
                                                        5 

</TABLE>

<PAGE>





                            Chaparral Resources, Inc.
                   Notes to Consolidated Financial Statements
                                   (Unaudited)

1.  General

     Management  has elected to omit  substantially  all notes to the  Company's
financial  statements.  Reference  should be made to the notes to the  financial
statements in the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1997.

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,
which are, in the opinion of  management,  necessary to a fair  statement of 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.

3. Going Concern

     The Company's financial statements have been presented on the basis that it
is a going  concern,  which  contemplates  the  realization  of  assets  and the
satisfaction  of  liabilities  in the normal course of business.  As of June 30,
1998,  substantially all of the Company's assets are invested in the development
of the Karakuduk  Field,  a shut-in oil field in the central  Asian  Republic of
Kazakhstan, which will require significant additional funding.

     The Company has incurred  recurring  operating  losses and has no operating
assets presently generating cash to fund its operating and capital requirements.
The Company's  current cash reserves and cash flow from  operations  will not be
sufficient to meet the capital  spending  requirements  to develop the Karakuduk
Field through fiscal 1998. Should the Company not meet its capital requirements,
the  Company's  rights to the  Karakuduk  Field can be  terminated.  The Company
believes  that  additional  financing  will be available;  however,  there is no
assurance that additional financing will be available, or if available,  that it
will be timely or on terms  favorable to the Company.  The  Company's  continued
existence as a going concern is dependent upon the success of future operations,
which  are,  in the  near  term,  dependent  on  the  successful  financing  and
development of the Karakuduk Field, of which there is no assurance.

     These conditions  raise  substantial  doubt about the Company's  ability to
continue  as a going  concern.  The  financial  statements  do not  include  any
adjustments  to reflect the possible  future effects on the  recoverability  and
classification  of assets or the amounts and  classification of liabilities that
may result from the outcome of this uncertainty.

                                       6

<PAGE>



                            Chaparral Resources, Inc.
             Notes to Consolidated Financial Statements (continued)
                                   (Unaudited)

4.  Restricted Cash

     As of June 30, 1998,  the Company held $800,000 cash on hand, as collateral
for loans made by a financial institution to KKM for the acquisition of tangible
equipment used in the Karakuduk Field.

5.  Notes Payable

     On June 4, 1998, the Company borrowed  $1,000,000 from two related parties,
one of  which  is a  director  of the  Company.  In  connection  with  the  debt
obligation,  on June 4, 1998, the Company issued warrants to purchase  1,000,000
shares of the Company's  Common Stock at an exercise price of $3.50 per share to
the related party  creditors.  The note was  discounted by the fair value of the
warrants  ($367,000),  with the discount  being  amortized  over the life of the
note. The Company repaid the entire principal balance of $1,000,000 plus accrued
interest on August 5, 1998.

     The fair market  value of the  warrants  was  estimated as of June 4, 1998,
using the Black-Scholes option pricing model with the following weighted average
assumptions: risk free interest rates of 5.53%, dividend yield of 0%, volatility
factors of the expected market price of the Company's  common Stock of .593, and
a weighted average life expectancy of the warrants of 4.5 years.

     The  warrants  are further  described  in Note 6, Common  Stock and Related
Common Stock Warrants.

6.  Common Stock and Related Common Stock Warrants

     Effective  on April 3,  1998,  the  Company  sold  1,250,000  shares of the
Company's  Common  Stock for $2.00  per  share for at total of  $2,500,000  to a
private  investor.  Allen & Company,  Incorporated  acted as placement  agent in
connection with the sale of the 1,250,000 shares. As a result,  Allen & Company,
Incorporated's  warrants  to  purchase  shares of the  Company's  Common  Stock,
originally  issued as commission in connection  with the Preferred Stock sale on
November 24, 1997,  became  exercisable for an additional  100,000 shares of the
Company's Common Stock. As of June 30, 1998, warrants to purchase 600,000 shares
remain unexercisable and is reflected as a stock subscription  receivable in the
financial statements.

     In connection  with the  $1,000,000  loan referred to in Note 5, on June 4,
1998, the Company issued warrants to purchase  1,000,000 shares of the Company's
Common Stock to two related parties,  one of which is a director of the Company.
The warrants are exercisable  through November 25, 2002, at an exercise price of
$3.50  per  share.  

     The Company recorded the fair market value of the warrants  ($367,000) as a
discount of notes payable,  amortizable as interest expense over the life of the
loan.  The fair market value of the  warrants was  estimated as of June 4, 1998,
using the Black-Scholes option pricing model with the following weighted average
assumptions: risk free interest rates of 5.53%, dividend yield of 0%, volatility
factors of the expected  market price of the  Company's  common Stock of .593,
and a weighted average life expectancy of the warrants of 4.5 years.



                                       7

<PAGE>
                            Chaparral Resources, Inc.
             Notes to Consolidated Financial Statements (continued)
                                   (Unaudited)


7.  Subsequent Events

     On  July  3,  1998,  the  Company   borrowed   $975,000  from  a  financial
institution.  The note  accrues  interest  at an  adjustable  prime  rate and is
payable in quarterly  principal  installments of $250,000  beginning December 3,
1998, with a final payment of all unpaid  principal and interest due on December
3, 1999.

     The $975,000  loan was fully  guaranteed  with a stand-by  letter of credit
from an investor in the Company.  In return for issuing the loan guarantee,  the
Company  paid the  guarantor  $10,000  plus related  costs,  issued  warrants to
purchase  20,000  shares of the Company's  Common Stock at an exercise  price of
$.01 per share,  and granted the guarantor a security  interest in the Company's
Common Stock of Central Asian Petroleum (Guernsey) (CAP-G).

     In the event of the Company's default on the $975,000 note, the guarantor's
security interest in the Company's Common Stock in CAP-G cannot be perfected for
at least 30 days after  notification  of such default.  In the event of default,
the Company may make full payment of any  outstanding  principal and interest on
the note plus any  additional  charges  incurred by the  guarantor to completely
remove any security  interest held by the guarantor in the Company's  investment
in CAP-G.

     Effective on July 28 and July 29, 1998, the Company sold  6,666,667  shares
of the Company's Common Stock for $1.50 per share for at total of $10,000,002.50
to  certain  accredited  investors.  Allen  &  Company,  Incorporated  acted  as
placement  agent  in  connection  with the sale of the  6,666,667  shares.  As a
result, Allen & Company,  Incorporated's  warrants to purchase 900,000 shares of
the Company's Common Stock,  originally  issued as commission in connection with
the  Preferred  Stock sale on  November  24,  1997,  became  exercisable  for an
additional  400,000  shares of the  Company's  Common  Stock.  The  warrants  to
purchase  the  additional  400,000  shares  of the  Company's  Common  Stock are
exercisable  through November 25, 2002, at an exercise price of $0.01 per share.
Of the total warrants to purchase 900,000 shares of Common Stock issued to Allen
& Company,  Incorporated  on November  24,  1997,  warrants to purchase  700,000
shares of the Company's Common Stock are currently exercisable.

     Due to the fact the sales price of the  6,666,667  shares was below a price
of $2.00 per share, the Company will be required to issue an additional  416,667
shares to the investor who purchased  1,250,000  shares of the Company's  common
stock for $2,500,000 in April 1998 in order to satisfy  certain price  probation
agreements the Company has with such investor.

     On August 5, 1998, the Company  repaid the  $1,000,000  note payable to two
related creditors, one of which is a director of the Company, at the note's face
value. The Company recorded an extraordinary  loss on  extinguishment of debt of
approximately $235,000.

     
                                       8

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<CAPTION>

                                           Karakuduk-Munay Inc
                              Statement of Expenses and Accumulated Deficit
                          For the Six Month Periods Ended June 30, 1998 and 1997
                                         (Amounts in US Dollars)
                                               (Unaudited)

8.  Investments

     The results from operations of the Company's equity-based investment in KKM are summarized below:


                                                   For The Three Months Ended             For The Six Months Ended
                                                   June 30,          June 30,           June 30,           June 30,
                                                     1998              1997              1998               1997
                                                     ----              ----              ----               ----

<S>                                              <C>                <C>                <C>                <C>       
Management Service Fee                           $  154,000         $   90,000         $  274,000         $  180,000
General and Administrative Expenses                 182,000             53,000            545,000            242,000
Depreciation of Fixed Assets                        150,000               --              150,000               --
Interest Expense                                    230,000             85,000            411,000            155,000
                                                 ----------         ----------         ----------         ----------

Net Loss                                            716,000            228,000          1,380,000            577,000

Accumulated deficit, beginning of period          4,680,000          2,700,000          4,016,000          2,351,000
                                                 ----------         ----------         ----------         ----------

Accumulated deficit, end period                  $5,396,000         $2,928,000         $5,396,000         $2,928,000
                                                 ----------         ----------         ----------         ----------





                                                         9

</TABLE>

<PAGE>


Item 2. Management's Discussion and Analysis of Financial Condition and 
        Results of Operations


1.  Liquidity and Capital Resources

     Prior to 1997, the Company's primary source of capital was from oil and gas
sales  from  domestic  properties.  All  domestic  properties  have been sold or
otherwise disposed. The only oil and gas interest of the Company at this time is
as a result of the Company's  investment in Karakuduk-Munay,  Inc. (KKM) through
Central Asian Petroleum  (Guernsey) (CAP-G). KKM is a closed joint stock company
in Kazakhstan.

     The  Company  has  previously  raised  capital  to finance a portion of its
obligations in connection  with the acquisition of its interest in CAP-G and the
development of the Karakuduk  Field and to satisfy  working capital needs in the
short term.  Since January 1, 1998, the Company raised  $12,500,000  through the
sale of Common Stock and $2,070,000 through debt obligations. The Company repaid
notes  payable of $95,000 to Howard  Karren on July 30,  1998,  and repaid notes
payable to two related  parties,  one of which is a director of the Company,  on
August 5. 1998 using proceeds raised from the sale of Common Stock.

     As of August 18, 1998, the Company's only debt  obligation  outstanding was
$975,000,  borrowed by the Company from a financial institution on July 3, 1998.
The  note  accrues  interest  at an  adjustable  prime  rate and is  payable  in
quarterly principal  installments of $250,000 beginning December 3, 1998, with a
final payment of all unpaid  principal and interest due on December 3, 1999. The
proceeds  of the  loan  were  used  by the  Company  for the  winterization  and
refurbishment  of a drilling rig to be used by KKM in  Kazakhstan,  expansion of
KKM's existing camp facilities,  and partial construction of an 18-mile pipeline
between the camp and the existing export pipeline.

     The $975,000  loan was fully  guaranteed  with a stand-by  letter of credit
from an investor in the Company.  In return for issuing the loan guarantee,  the
Company  paid the  guarantor  $10,000  plus related  costs,  issued  warrants to
purchase  20,000  shares of the Company's  Common Stock at an exercise  price of
$.01 per share,  and granted the guarantor a security  interest in the Company's
Common Stock of CAP-G.  There are no other  material  negative  covenants in the
loan agreement.

     In the event of the Company's default on the $975,000 note, the guarantor's
security interest in the Company's Common Stock in CAP-G cannot be perfected for
at least 30 days after  notification  of such default.  In the event of default,
the Company may make full payment of any  outstanding  principal and interest on
the note plus any  additional  charges  incurred by the  guarantor to completely
remove any security  interest held by the guarantor in the Company's  investment
in CAP-G.

     The Company may seek to obtain  additional  capital  through debt or equity
offerings,  encumbering  properties,  entering into arrangements whereby certain
costs  of  development  will be  paid by  others  to  earn  an  interest  in the
properties,  or sale of a portion of the  Company's  interest  in the  Karakuduk
Field.  The present  environment  for financing the  acquisition  of oil and gas
properties or the ongoing  obligations  of the oil and gas business is uncertain
due,  in part,  to  instability  in oil and gas  pricing  in recent  years.  The
Company's  small size and the early stage of development of the Karakuduk  Field
may also increase the  difficulty in raising any financing that may be needed in
the future.  There can be no assurance  that the debt or equity  financing  that
might be required to fund the Company's operations and obligations in the future
will be available to the Company on economically acceptable terms if at all.

                                       10

<PAGE>


     The Company's financial statements have been presented on the basis that it
is a going  concern,  which  contemplates  the  realization  of  assets  and the
satisfaction  of liabilities  in the normal course of business.  The Company has
incurred  recurring  operating  losses  and has no  operating  assets  presently
generating sufficient cash to fund its operating and capital  requirements.  The
Company does not  anticipate  that its current cash  reserves and cash flow from
operations  will be sufficient to meet its capital  requirements  through fiscal
1998.

     As of June 30, 1998, substantially all of the Company's assets are invested
in the development of the Karakuduk  Field.  Since the Karakuduk Field is in the
early stage of  development,  the  Karakuduk  Field does not  currently  produce
revenues  sufficient  to meet its cash outflow  needs.  The  development  of the
Karakuduk  Field,  through KKM, will require  substantial  amounts of additional
capital.  The  terms of the KKM  revised  license  require  a work plan from the
commencement of operations  through December 31, 1997, of at least  $10,000,000,
which has been  satisfied.  Additional  requirements  of $34.5  million  and $12
million exist for the years ending December 31, 1998 and 1999, respectively. The
capital requirements  required under the license will be primarilly used to fund
KKM's drilling  operations for the Karakuduk  Field, to build the required Field
infrastructure and camp facilities  necessary to support drilling and production
operations,  to construct an 18-mile  pipeline  between the field and the export
pipeline,  and to  construct  a central  processing  unit (cpu) to  process  oil
production from the Field.  Without additional funding and significant  revenues
from oil sales,  of which there are no assurances,  the Company will not be able
to provide  sufficient  funds to satisfy  these  requirements  and the Company's
interest in the Karakuduk Field may be lost.

     As of August 18, 1998, KKM has not recognized any revenue, although KKM has
placed approximately 3,000 tons of oil production into the export pipeline. When
KKM has placed  oil  production  of a minimum  of 5,000 tons into the  pipeline,
Munay-Impex,  a subsidiary of  KazakhOil,  is obligated to purchase oil from KKM
under an existing one year  contract.  KKM will record oil revenues  when a sale
has been completed.

     The Company requested and received an additional extension to September 30,
1998, from the Overseas  Private  Investment  Corp.  ("OPIC") for political risk
insurance.  OPIC granted the Company a binding  executed letter of commitment on
September  25,  1996.  The Company has a standby  facility for which it has made
eight  payments of $31,250.  The Company  expects to execute the  contract on or
before  September 30, 1998.  The Company has no other material  commitments  for
cash outlay and capital expenditures other than for normal operations.

2.  Results of Operations

     In 1996,  the Company  accounted  for its  investment in KKM using pro rata
consolidation.  In 1997,  the Company  changed to the equity  method in order to
reflect  the  legal  ownership  right  of the  other  shareholders  in KKM.  The
consolidated  financial  statements for the quarter ended June 30, 1997 reported
herein have been reclassified to reflect the equity method.  There was no impact
on previously reported earnings.

Three Months Ended June 30, 1998 Compared with the Three Months
    Ended June 30, 1997

     The  Company's  operations  during the three  months  ended June 30,  1998,
resulted  in a net loss of $926,000  compared to a net loss of $573,000  for the
three months ended June 30, 1997.

     Interest income  increased by $160,000 from the three months ended June 30,
1997, due to increased  financing  provided by CAP-6 to KKM for KKM's operations
in Kazakhstan.

                                       11

<PAGE>


     General and  administrative  costs  increased by $263,000  during the three
months  ended June 30, 1998 as compared to the three months ended June 30, 1997.
Without consideration of the stock based compensation,  a non-cash item, general
and administrative costs increased by $51,000 due to increased overhead incurred
by the  Company  in  connection  with the  expanding  workover  and  exploration
operations in Kazakhstan.  Also,  the Company's  equity loss in KKM increased by
$243,000  during the three  months  ended June 30, 1998 as compared to the three
months ended June 30, 1997, due to increased  operational costs directly related
to development of oil and gas properties held by KKM.

     Interest expense increased by $3,000 during the three months ended June 30,
1998 as compared to the three months ended June 30, 1997, almost entirely due to
interest  expense from  amortization  of the discount of notes payable.  Without
consideration of the discount amortization, the Company's interest expense would
have   decreased   by  $53,000   due  to  the   Company's   retirement   of  all
interest-bearing  obligations  during  the last six  months of 1997 and the fact
that the  Company  did not  borrow  any  additional  funds  until May 27,  1998.
Therefore,  the Company's $1,075,000 in outstanding notes payable as of June 30,
1998 had only accrued interest for approximately one month as of June 30, 1998.


Six Months Ended June 30, 1998 Compared with the Six Months Ended June 30, 1997

     The  Company's  operations  during  the six  months  ended  June 30,  1998,
resulted in a net loss of $1,939,000  compared to a net loss of  $1,000,000  for
the six months ended June 30, 1997.

     Interest  income  increased by $288,000  from the six months ended June 30,
1997, due to increased  financing  provided by CAP-6 to KKM for KKM's operations
in Kazakhstan.

     General and  administrative  costs  increased  by  $888,000  during the six
months  ended June 30, 1998 as compared to the six months  ended June 30,  1997.
Without consideration of the stock based compensation,  a non-cash item, general
and  administrative  costs  increased  by  $292,000  due to  increased  overhead
incurred  by  the  Company  in  connection  with  the  expanding   workover  and
exploration  operations in Kazakhstan.  Also,  the Company's  equity loss in KKM
increased  by $401,000  during the six months ended June 30, 1998 as compared to
the six months ended June 30, 1997, due to increased  operational costs directly
related to development of oil and gas properties held by KKM.

     Interest expense  decreased by $67,000 during the six months ended June 30,
1998 as compared to the six months ended June 30, 1997. The Company  retired all
interest-bearing  obligations  during  the last six  months  of 1997 and did not
borrow any additional funds until May 27, 1998. The Company's  outstanding notes
payable of  $1,075,000 as of June 30, 1998,  however,  are subject to a $311,000
discount, fully amortizable during the 1998 fiscal year.

                                       12

<PAGE>


3.  Quantitative and Qualitative Disclosures About Market Risks

     Not Applicable.







                                       13
<PAGE>

                           Part II - Other Information

Item 2 - Changes in Securities and Use of Proceeds

     (c) On April 3, 1998,  the Company sold  1,250,000  shares of the Company's
Common  Stock  for  $2.00  per  share  for at total of  $2,500,000  to a private
investor.  The  Company  sold the shares in  reliance  upon the  exemption  from
registration  under Section 4(2) of the Securities Act of 1933, as amended.  The
investor had available to the investor all material  information  concerning the
Company. The certificate evidencing the shares bears an appropriate  restrictive
legend  under  the  Securities  Act  of  1933,  as  amended.  Allen  &  Company,
Incorporated  acted  as  placement  agent  in  connection  with  the sale of the
1,250,000  shares.  As a result,  Allen & Company,  Incorporated's  warrants  to
purchase  900,000  shares of the Company's  Common Stock,  originally  issued as
commission  in connection  with the  Preferred  Stock sale on November 24, 1997,
became  exercisable  for an additional  100,000  shares of the Company's  Common
Stock.  The warrants to purchase the additional  100,000 shares of the Company's
Common Stock are exercisable  through November 25, 2002, at an exercise price of
$0.01 per share.

     During the quarter ended June 30, 1998, the Company  granted 5-year options
to purchase  56,500  shares of the  Company's  Common Stock to employees of, and
consultants  to, the  Company.  The Company  also  granted  5,000  shares of the
Company's  Common  Stock to a consultant  to the  Company.  The Company made the
grants in reliance upon the exemption  from  registration  under Section 4(2) of
the Securities Act. Such persons had available to them all material  information
concerning the Company. The options will have an appropriate  restrictive legend
under the Securities Act of 1933, as amended.  Due to terminations of employment
or  consulting  relationships,  options  to  purchase  35,000  shares  have been
cancelled and the 5,000 shares were never issued when vesting  provisions of the
options and share grant were not satisfied.  No underwriter  was involved in the
transactions.

     In connection with a $1,000,000  loan, on June 4, 1998, the Company granted
warrants to  purchase  1,000,000  shares of the  Company's  Common  Stock to two
related  parties,  one of which is a director of the  Company.  The  warrants to
purchase  the  additional  1,000,000  shares of the  Company's  Common Stock are
exercisable  through November 25, 2002, at an exercise price of $3.50 per share.
The Company made the grants in reliance  upon the  exemption  from  registration
under Section 4(2) of the Securities Act of 1933, as amended..  Such persons had
available to them all material  information  concerning the Company. The warrant
certificates bear an appropriate  restrictive legend under the Securities Act of
1933, as amended. No underwriter was involved in the transaction.

Item 4 - Submission of Matters to a Vote of Security Holders

     On January 26, 1998, the Company held its Annual  Meeting of  Stockholders.
The Company's  stockholders  elected the  following  seven persons as directors,
each to serve  until  the next  Annual  Meeting  of  Stockholders  or until  his
successor is elected or appointed:  Howard Karren, John G. McMillian, J. Michael
Muckleroy,  Ted E. Collins,  Richard Grant, David A. Dahl, and Arlo G. Sorensen.
The Company's stockholders also voted to adopt,  separately,  the Company's 1998
Incentive and  Nonstatutory  Stock Option Plan and the selection by the Board of
Directors  of Ernst & Young LLP as the  independent  auditors of the Company for
the fiscal year ended December 31, 1998.

     The number of shares voted and withheld  with respect to each director were
as follows:

 Election of Directors                 For               Withheld
 ---------------------                 ---               --------
Howard Karren                       35,330,140            777,183
John G. McMillian                   35,806,190            301,133
J. Michael Muckleroy                35,710,490            396,833
Ted Collins, Jr.                    35,828,730            278,593
Richard L. Grant                    35,827,720            279,603
David A. Dahl                       35,566,880            540,443
Arlo G. Sorensen                    35,548,780            558,543

                                       14

<PAGE>



     The number of shares  voted (and  broker  non  votes)  with  respect to the
adoption of the Company's 1998 Incentive and Nonstatutory  Stock Option Plan was
as follows:

      For            Against           Abstain          Broker Non Votes
      ---            -------           -------          ----------------
  25,445,753        1,209,747          537,967              8,937,056


     The number of shares  voted with  respect to the  approval of Ernst & Young
LLP as the Company's independent auditors was as follows:

      For            Against           Abstain
      ---            -------           -------
  35,789,991         187,922           129,410


Item 5 - Other Information

     Effective  June  29,  1998,  the  United  States  Securities  and  Exchange
Commission   adopted  new  rules   relating  to  stockholder   proposals   which
stockholders  do not request be included in the Company's  proxy statement to be
used in connection  with the Company's  Annual  Meeting of  Stockholders.  Under
these new rules, proxies that confer discretionary authority will not be able to
be voted on a  stockholder  proposal to be  presented  at the Annual  Meeting of
Stockholders if the stockholder provides the Company with advance written notice
of the  stockholder  proposal on a date in the current  year that is at least 45
days  prior to the date the prior  year's  proxy  materials  were  mailed to the
Company's stockholders. If a stockholder fails to so notify the Company, proxies
that confer  discretionary  authority will be able to be voted when the proposal
is presented at the Annual Meeting of Stockholders.

     In  accordance  with the new  rules,  proxies  which  confer  discretionary
authority  will  be  able  to  be  voted  on  stockholder   proposals  that  the
stockholders  do not request be included in the  Company's  proxy  statement but
plan to present at the Company's next Annual Meeting of Stockholders  unless the
Company receives notice of the proposals by no later than April 14, 1999.

     On May 27, 1998 and July 1, 1998, the Company  borrowed $75,000 and $20,000
from Howard  Karren,  the Chairman and Chief  Executive  Officer of the Company,
respectively.  The notes were  payable 180 days after the date of issuance at an
interest  rate of 7%.  The notes were  fully  repaid by the  Company on July 30,
1998.

Item 6 - Exhibits and Reports on Form 8-K

Exhibits

         10.1     Subordinated Loan Agreement date as of June 4, 1998 between 
                  the Company and Allen & Company, Incorporated

         10.2     Warrants issued to Allen & Company, Incorporated and 
                  John G. McMillian

         10.3     Loan agreements between the Company and Howard Karren
                  dated May 27, 1998 and July 1, 1998, respectively

         27       Financial Data Schedule


Reports on Form 8-K

     On April 14,  1998,  the Company  filed a Current  Report on Form 8-K dated
April 3, 1998,  reporting  under Item 5 thereof the sale of 1,250,000  shares of
the  Company's  Common Stock to one  investor for a purchase  price of $2.00 per
share or an  aggregate  purchase  price of  $2,500,000  and filing  the  related
Subscription Agreement under Item 7.


                                       15



<PAGE>

                                   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:            August 18, 1998



                                Chaparral Resources, Inc.,
                                a Colorado corporation



                                By:  /s/  Howard Karren
                                     -----------------------------------------
                                     Howard Karren
                                     President and Chief Executive Officer



                                By:  /s/  Michael B. Young
                                     -----------------------------------------
                                     Michael B. Young, Treasurer and Controller
                                     And Principal Accounting Officer


                                       16

<PAGE>

                                  Exhibit Index

         10.1     Subordinated Loan Agreement date as of June 4, 1998 between
                  the Company and Allen & Company, Incorporated

         10.2     Warrants issued to Allen & Company, Incorporated and
                  John G. McMillian

         10.3     Loan agreements between the Company and Howard Karren dated
                  May 27, 1998 and July 1, 1998, respectively

         27       Financial Data Schedule


                                       17