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

[X]         ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
            EXCHANGE ACT OF 1934
For the fiscal year ended November 30, 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.
              ----------------------------------------------------
             (Exact name of registrant as specified in its charter)

           Colorado                                      84-0630863
 ------------------------------                  ------------------------------
(State or other jurisdiction of                 (I.R.S. Employer Identification
 incorporation or organization)                           Number)

                        3400 Bissonnet Street, Suite 135
                              Houston, Texas 77005
                   --------------------------------------
                  (Address of principal executive offices)


Registrant's telephone number, including area code: (713) 669-0932

Securities registered pursuant to Section 12(g) of the Act:

                          $0.10 Par Value Common Stock
                          ----------------------------
                                (Title of Class)

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  [ ]


Indicate by check mark if disclosure of delinquent  filers  pursuant to Item 405
of Regulation  S-K is not contained  herein,  and will not be contained,  to the
best of registrant's  knowledge,  in definitive proxy or information  statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.

             [ ]

     As of April 7, 1997, the aggregate market value of the Registrant's  voting
stock held by nonaffiliates was approximately $24,427,197.

     As of April 7,  1997,  Registrant  had  37,526,517  shares of its $0.10 par
value common stock issued and outstanding.

                                                                Total Pages ___
                                                              Exhibit Index ___

<PAGE>

                                     PART I

ITEM 1.   BUSINESS

     Chaparral  Resources,  Inc.  ("Company"),  which was incorporated under the
laws of the state of Colorado in 1972, is an independent oil and gas exploration
and production company that was based in Denver,  Colorado, until March 1, 1997,
when the Company moved its headquarters to Houston, Texas.

     Until 1994, the Company's oil and gas activities were  concentrated  solely
in the United  States.  During early 1994,  the management of the Company made a
strategic  decision to pursue  international oil and gas projects,  with initial
emphasis on the  Commonwealth  of  Independent  States (the former Soviet Union)
and, in early 1997, the Company  divested itself of all of its remaining oil and
gas properties in the United States.

Karakuduk Project

     The Company  currently owns 90% of the outstanding  common stock of Central
Asian  Petroleum  Guernsey  Limited  ("CAP-G")  which  has  a  50%  interest  in
Karakuduk-Munay,  Inc.  ("KKM"),  which  holds 100% of the right to develop  the
Karakuduk  Oil Field  Project  in  Kazakstan  ("Karakuduk  Field" or  "Karakuduk
Project").

     The  Company  acquired  45% of the  outstanding  stock  of  CAP-G  prior to
December 1, 1995.  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  restricted  common  stock,  up  to  an  additional  55%  of  the
outstanding  stock of CAP-G. The Company  consummated the purchase of 25% of the
outstanding  stock  of  CAP-G in April  1996 by  paying  $2,000,000  in cash and
issuing 685,000 shares of the Company's  common stock.  The Company  acquired an
additional 5% of the outstanding stock of CAP-G in April 1996 for $250,000 cash.

     To acquire an additional 15% of the outstanding  common stock of CAP-G, the
Company  agreed  to pay  $1,975,000  in cash and  issue  900,000  shares  of the
Company's  common stock.  This purchase was  consummated on March 11, 1996, when
the Company paid  $750,000 in cash and issued  900,000  shares of the  Company's
common stock.  The remaining  cash balance of $1,225,000 for the purchase was to
be paid in four quarterly  equal payments of $306,250  between June 11, 1996 and
March 11,  1997.  The first  payment  of  $306,250  was paid in June 1996 and an
additional  $175,000 was paid in September 1996. The agreement was  subsequently
revised so that the Company paid $200,000 in December  1996.  The Company was to
pay $543,750 on or before March 11, 1997.  The Company is currently  negotiating
to obtain an extension of the due date of the  remaining  payment.  In addition,
the Company  has an option to  purchase  the  remaining  10% of the  outstanding
common stock of CAP-G for an  additional  $1,625,000  and 200,000  shares of the
Company's common stock at any time following  completion of the initial purchase
and prior to December 11, 1997.


<PAGE>

Uzbekistan Project

     The Company has been negotiating an agreement pursuant to which the Company
would  acquire  100%  of  the  issued  and  outstanding   capital  stock  of  MD
International   Petroleum,   Inc.  ("MDI"),  a  private  company  of  which  the
shareholders  include two directors of the Company (Messrs.  Dilling and McGee).
At the time of the acquisition, the only asset that MDI would have would be a 5%
interest in a joint venture that Enron Oil & Gas  Uzbekistan  Ltd. is attempting
to negotiate  for the  development  of natural gas fields in  Uzbekistan.  It is
currently contemplated that, if the agreement is consummated,  the Company would
issue  MDI's  shareholders  an as of yet  undetermined  number  of shares of the
Company's  restricted  common stock in exchange  for their MDI shares.  Of these
shares, the Company  anticipates that a percentage of the shares would be issued
at closing and the balance upon the occurrence of certain events.  On January 8,
1997, the Company  agreed to issue 180,000 shares of the Company's  common stock
to Enron Oil & Gas Uzbekistan, Ltd. ("EOGU") to obtain an option to acquire MDI.
The Company also granted  EOGU  registration  rights with respect to the 180,000
shares.  In the interim,  the principal  shareholders of MDI,  including Messrs.
Dilling and McGee, have agreed that if the Company does not acquire MDI within a
specified time period,  the principal  shareholders will transfer 180,000 shares
of the  Company's  common  stock  owned by them to the  Company to  replace  the
180,000 shares issued by the Company to EOGU. Such principal  shareholders  also
agreed to place the  180,000  shares in escrow to ensure  compliance  with their
obligation.  There are no assurances that the Company will be able to consummate
the  agreement  to  acquire  the  shares  of MDI or  that  EOGU  will be able to
consummate  a joint  venture or other  arrangement  for the  development  of the
natural gas fields in Uzbekistan.

Venezuela Project

     In January,  1997 the Company was  pre-qualified  by PDVSA,  the Venezuelan
state oil  company,  to submit a bid with others on certain  oil  fields.  It is
contemplated  that  the  Company  will be part  of a  consortium  of oil and gas
companies  that will  place a bid or bids to  acquire  one or more of the 21 oil
fields that have been put up for  auction.  The auction is expected to be highly
competitive and is expected to be completed by the summer of 1997.  There are no
assurances that the Company will be successful in joining a consortium to bid on
the oil fields or that any such consortium will be a successful bidder.

     Risks of Foreign  Operations.  As a result of the Company's interest in KKM
and the Karakuduk  Field,  the Company will be subject to certain risks inherent
in the  ownership  and  development  of foreign  properties,  including  without
limitation,  cancellation or renegotiation of contracts,  royalty increases, tax
increases,  retroactive tax claims,  expropriation,  adverse changes in currency
values, foreign exchange controls, import and export regulations,  environmental
controls,  and  other  laws and  regulations  which  may  adversely  affect  the
Company's  interest  in  the  Karakuduk  Field.  The  Company's  operations  and
agreements will also be governed by foreign laws. In the event of a dispute, the
Company may be subject to arbitration in a foreign  country or the  jurisdiction
of foreign courts or may not be successful in subjecting  foreign persons to the

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<PAGE>


jurisdiction of courts in the United States.  In addition,  the Company might be
hindered or  prevented  from  enforcing  its rights with respect to a government
instrumentality because of the doctrine of sovereign immunity.

     Although  certain  members  of  management  of the  Company  have had prior
experience  operating in foreign countries,  the Company has no prior experience
operating in any foreign country,  including the Republic of Kazakstan,  and may
encounter unexpected difficulties in conducting foreign operations. Although the
recent and continuing political, social and economic upheavals in Kazakstan have
created  opportunities for foreign  investment,  substantial  uncertainty exists
about the stability of the central Kazakstan government, the status of Kazakstan
law and the autonomy of the parties involved with the Company in Kazakstan.

     The Company has  endeavored  to protect  itself  against the  political and
commercial  risks,  but there is no certainty  that the steps taken will provide
adequate  protection.  In this  regard,  the Company has applied  with  Overseas
Private  Investment  Corporation  ("OPIC") for political  risk  insurance.  OPIC
insurance can cover the following political risks:

o    Currency  Inconvertibility--deterioration  of  the  investor's  ability  to
     convert  profits,  debt service and other  remittances  from local currency
     unto U.S. dollars;

o    Expropriation--loss of an investment due to expropriation,  nationalization
     or confiscation by a foreign government;

o    Political  Violence--loss  of  assets  or  income  due to war,  revolution,
     insurrection or politically motivated civil strife, terrorism and sabotage;
     and

o    Interference With  Operations--loss of assets or income due to cessation of
     operations lasting six months or more caused by political violence.

     The coverage  elections  for each  category of insurance  are computed on a
ceiling  and an active  amount.  The  coverage  ceiling  represents  the maximum
insurance  available for the insured  investment  and future  earnings  under an
insurance  contract.  The  premiums  for each  category  are  based on a maximum
insured amount  ("MIA"),  a current insured amount ("CIA") and a standby amount.
The MIA represents the maximum  insurance  available for the insured  investment
under an insurance contract.  The CIA represents the insurance actually in force
during the contract  period.  The difference  between the CIA and the MIA is the
standby amount. There is a charge for standby coverage.

     The Company has applied with OPIC for all four  political risk coverages on
the Company's  investment in the Karakuduk Field in western Kazakstan.  The MIAs
sought for each coverage range from $23.4 to $40.2 million. The estimated yearly
premium  amounts  for the CIAs  for  each  coverage  range  up to  $84,000.  The
estimated  yearly standby  premiums for each coverage  range up to $88,000.  The

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<PAGE>


actual premium values may be higher or lower  depending on the contract  offered
to the Company by OPIC.

     The  Investment   Committee  of  OPIC  approved  the  Company's   Karakuduk
operations for political  risk insurance  coverage by OPIC on December 19, 1995.
The Company has received an executed Letter of Commitment on September 25, 1996,
from OPIC  binding  issuance  of  Political  Risk  Insurance  for the  Karakuduk
project.  Currently,  the Company has a standby  facility  for which it has made
three  previous  payments of $31,250 and has a fourth  payment of $31,250 due on
June 30, 1997. In July 1997, the Company  expects to receive the actual contract
offered to the Company by OPIC.

     Under the terms of OPIC's  Expropriation  and Interference  With Operations
insurance  coverage,  the Company must be able to transfer to OPIC the shares of
beneficial  interests related to the insured  investment,  free and clear of all
encumbrances.  There are  certain  restrictions  on the  transfer  of shares and
assignment  of the  Company's  beneficial  interests in KKM. At such time as the
Company  obtains  coverage,  the  Company  will  seek a waiver  of the  transfer
restrictions  from the  shareholders  of KKM.  The Company  does not  anticipate
problems in obtaining the waiver.

     On February 1, 1997, the Company was informed that a Kazakstan Presidential
Edict  had  been  issued   announcing   the   liquidation   of   Munaygaz,   the
government-owned  company which holds a 20% interest in KKM. As a result of this
action, KKM was unable to complete its  re-registration as required by Kazakstan
regulations,  resulting  in the  risk  that  applicable  judicial  bodies  could
initiate  legal  proceedings to declare KKM invalid.  On March 4, 1997,  another
Kazakstan  Presidential Edict was issued announcing the formation of "Kazakoil,"
the Kazakstan National Petroleum Company,  which will take over the interests of
the  government  of  Kazakstan in all  hydrocarbon  ventures.  Kazakoil  will be
assigned the shares of KKM held by Munaygaz  within the next few weeks.  At that
time,  the  shareholders  of KKM  will be  complete  and KKM  can  commence  the
re-registration  process, thus avoiding the risk that applicable judicial bodies
could  initiate  legal  proceedings  to declare KKM invalid.  Management  of the
Company has assurances from the appropriate  authorities  that such action would
not be taken.

Markets

     In fiscal 1996, the only customer having  purchases which accounted for 10%
or more of the Company's  revenue was Conoco Inc. which accounted for 32% of the
Company's  revenue.  In early 1997,  the Company  divested  itself of all of its
remaining oil and gas properties in the United States.

     The  Company's  business  is  not  seasonal,  except  that  severe  weather
conditions  could  limit the  Company's  exploration  and  drilling  activities.
However,  severe cold weather increases the demand for oil and natural gas which
are used for heating purposes.


                                        4

<PAGE>


     There is substantial uncertainty as to the prices at which any oil reserves
produced by the Company from the  Karakuduk  Field could be sold. It is possible
that, under the market conditions  prevailing in the future,  the production and
sale of oil from the  Karakuduk  Field  may not be  commercially  feasible.  The
availability  of ready markets and the price  obtained for oil produced  depends
upon numerous factors beyond the control of the Company.  The current market for
oil is characterized by instability  which has caused dramatic  declines as well
as  increases  in world oil prices in recent years and there can be no assurance
of any price stability. See also "Item 2. Properties--The Karakuduk Field."

Competition

     Foreign  oil and gas  exploration  and the  acquisition  of  producing  and
undeveloped  properties is a highly  competitive  and speculative  business.  In
seeking suitable opportunities, the Company competes in all areas of the oil and
gas industry with a number of other  companies,  including large  multi-national
oil and gas companies and other  independent  operators  with greater  financial
resources and, in some cases, with more experience than the Company. The Company
does not hold a significant competitive position in the oil and gas industry.

Regulation

     General.   The  Company's  operations  may  be  subject  to  regulation  by
governments or other regulatory bodies governing the area in which the Company's
overseas  operations  are  located.  Regulations  govern such things as drilling
permits,  production rates, and environmental  protection and pollution control,
royalty  rates  and  taxation  rates  among  others.   These   regulations   may
substantially  increase the costs of doing business and sometimes may prevent or
delay the  starting  or  continuing  of any  given  exploration  or  development
project. Moreover,  regulations are subject to future changes by legislative and
administrative  action and by judicial  decisions which may adversely affect the
petroleum  industry  in general and the  Company in  particular.  At the present
time, it is impossible to predict the effect any current or future  proposals or
changes in existing laws or regulations  will have on the Company's  operations.
Subject to the matter described in the next paragraph, the Company believes that
it complies with all  applicable  legislation  and  regulations  in all material
respects.

     On February 1, 1997, the Company was informed that a Kazakstan Presidential
Edict  had  been  issued   announcing   the   liquidation   of   Munaygaz,   the
government-owned  company which holds a 20% interest in KKM. As a result of this
action, KKM was unable to complete its  re-registration as required by Kazakstan
regulations,  resulting  in the  risk  that  applicable  judicial  bodies  could
initiate  legal  proceedings to declare KKM invalid.  On March 4, 1997,  another
Kazakstan  Presidential Edict was issued announcing the formation of "Kazakoil,"
the Kazakstan National Petroleum Company,  which will take over the interests of
the  government  of  Kazakstan in all  hydrocarbon  ventures.  Kazakoil  will be
assigned the shares of KKM held by Munaygaz  within the next few weeks.  At that
time,  the  shareholders  of KKM  will be  complete  and KKM  can  commence  the
re-registration  process, thus avoiding the risk that applicable judicial bodies

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could  initiate  legal  proceedings  to declare KKM invalid.  Management  of the
Company has written assurances from the appropriate authorities that such action
would not be taken.

     Environmental.  The Company does not believe  that its business  operations
presently impair environmental  quality.  However,  compliance with foreign laws
and regulations  which have been enacted or adopted  regulating the discharge of
materials  into the  environment  could have an adverse effect upon the Company,
the extent of which the Company is unable to assess. Since inception the Company
has not  made  any  material  capital  expenditures  for  environmental  control
facilities and has no plans to do so.

Employees

     The Company operates through its officers, directors and consultants.  Such
persons are not yet  employees  of the  Company  but  certain of such  officers,
directors  and  consultants  may  become  employees  of the  Company in the near
future.  The Company employs one person on a full-time  basis in Kazakstan.  The
Company also has four part-time employees.

ITEM 2.   PROPERTIES

The Karakuduk Field

     The Karakuduk  Field is located in the Mangistau  Region of the Republic of
Kazakstan.  KKM's  license  to develop  the  Karakuduk  Field  covers an area of
approximately  16,922.5  acres  and has been  granted  to KKM for a period of 25
years.  The agreement  granting KKM the right to develop the Karakuduk Field was
approved by the Ministry of Oil and Gas  Industries of the Republic of Kazakstan
on August  30,  1995.  CAP-G's  share of the  initial  capitalization  of KKM is
$100,000, of which the Company's share has been paid.

     On February 1, 1997, the Company was informed that a Kazakstan Presidential
Edict  had  been  issued   announcing   the   liquidation   of   Munaygaz,   the
government-owned  company which holds a 20% interest in KKM. As a result of this
action, KKM was unable to complete its  re-registration as required by Kazakstan
regulations,  resulting  in the  risk  that  applicable  judicial  bodies  could
initiate  legal  proceedings to declare KKM invalid.  On March 4, 1997,  another
Kazakstan  Presidential Edict was issued announcing the formation of "Kazakoil,"
the Kazakstan National Petroleum Company,  which will take over the interests of
the  government  of  Kazakstan in all  hydrocarbon  ventures.  Kazakoil  will be
assigned the shares of KKM held by Munaygaz  within the next few weeks.  At that
time,  the  shareholders  of KKM  will be  complete  and KKM  can  commence  the
re-registration  process, thus avoiding the risk that applicable judicial bodies
could  initiate  legal  proceedings  to declare KKM invalid.  Management  of the
Company has assurances from the appropriate  authorities  that such action would
not be taken.

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<PAGE>


     The Karakuduk  Field is  geographically  located,  approximately  227 miles
northeast of the regional  capital city of Aqtau, on the Ust-Yurt  Plateau.  The
closest  settlement  is the  Say-Utes  Railway  Station  approximately  38 miles
southeast of the field.  The ground  elevation  varies  between 590 and 656 feet
above sea level. The region has a dry, continental  climate,  with fewer than 10
inches of rainfall per year. Mean temperatures range from -25 degrees Fahrenheit
in January to 100 degrees  Fahrenheit  in July.  The  operating  environment  is
similar to that found in northern Arizona and New Mexico in the United States.

     The Karakuduk structure is an asymmetrical anticline located on the Aristan
Uplift in the North Ustyurt Basin.  Oil was discovered on the structure in 1972,
when  Kazakstan  was a republic of the former  Soviet  Union,  from Jurassic age
sediments between 8,500 and 10,000 feet. Twenty-two  exploratory and development
wells were drilled to delineate the field,  however,  none of the wells was ever
placed on  production.  The  productive  area of the  Karakuduk  Field is 11,300
acres,  with a minimum  of seven  separate  productive  horizons  present in the
Jurassic  formation.  Oil has been  recovered  in tests from all seven  horizons
within the Jurassic  formation with flow rates ranging from 3 to 966 barrels per
day. The Company  estimates that the drilling of approximately 90 additional oil
wells and 26 water  injection  wells may be required to fully develop the field.
Peak oil production from the field is expected to occur within seven years after
start-up,  although time or amount of development or production cannot presently
be assured.

     In January 1995, Ryder Scott Company  Petroleum  Engineers ("Ryder Scott"),
an  internationally  recognized  petroleum  engineering  group  retained  by the
Company,  has  stated  that in its  opinion,  after  review,  a  reserve  report
commissioned  by the  Company  which  estimated  that the  Karakuduk  Field  has
estimated recoverable oil of 74 million barrels which could be considered proved
undeveloped,  is  reasonable.  However,  neither the Ryder Scott  opinion or the
reserve report considered the potential adverse impact of marketability on price
of any oil which  might be produced  due to the remote  location of the field or
potential  political  instability  and,  therefore,  none  of the  reserves  can
presently be considered proven. The production and marketing of the oil reserves
will be  subject  to a number  of  political,  economic  and  other  risks.  See
"--Markets and --Competition."

     The Karakuduk Field is approximately 18 miles north of the Mukat-Mangishlak
railroad, the Mangishlak-Astraghan  water pipeline, the Beyneu-Uzen high voltage
utility lines,  and the  Uzen-Atrau-Samara  oil and gas  pipelines.  KKM has the
right  of  priority  to use the  existing  oil and gas  pipeline  facilities  to
transport  produced  oil from the  Karakuduk  Field to the  Baltic  Sea ports of
Kaliningrad and Ventspils and/or the Black Sea port of Novorsiysk, thus offering
a potential  world  market for the  produced  crude oil.  This  priority  use of
existing  facilities is granted  within the guarantee  issued by the Ministry of
Oil and Gas  Industry of the  Republic  of  Kazakstan.  The planned  development
program for the Karakuduk Field will include a secondary recovery operation that
the Company believes could result in additional recoverable reserves.


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     The ability of the Company to realize the  carrying  value of its assets is
dependent  on being able to  extract  and  transport  hydrocarbons  and  finding
appropriate  markets for their sale.  Currently,  exports  from the  Republic of
Kazakstan are restricted  since they are dependent on limited  transport  routes
and, in particular, access to the Russian pipeline system. Access to such routes
is currently restricted. Domestic markets in the Republic of Kazakstan currently
do not permit world market price to be obtained.  Management believes,  however,
that  over  the  life  of  the  project,  transportation  restrictions  will  be
alleviated  and prices will be achievable  for  hydrocarbons  extracted to allow
full recovery of the carrying value of its assets.

     Because of  uncertainties  surrounding  the  Karakuduk  Project,  no proved
reserves have been attributed to the field.  The Karakuduk  Project will require
significant development costs for which the financing is not complete. There can
be no assurance  that the project will be adequately  financed or that the field
will be  successfully  developed.  The license  requires  minimum  work plans of
approximately  $10 million by August 31, 1997, of  approximately  $35 million by
August  31,  1998 and of  approximately  $12  million by August  31,  1999.  The
agreement  provides KKM with the right to defer the minimum  work program  under
certain  conditions.  As part of the minimum work plan requirement,  the Company
has loaned CAP-G more than $4 million to fund KKM's  current  operations.  KKM's
1997 budget, which has not been approved,  would entail a minimum expenditure of
$6  million  through  August 31,  1997.  Subject  to the  receipt of  additional
financing by the Company, this requirement will be funded by the Company through
loans by its subsidiary CAP-G to KKM.

     The  Karakuduk  Field will be  developed  in phases.  Phase I,  expected to
require  at least one year,  began  during  1996.  Phase I  expenditures  are to
include the recompletion of four existing wells. Also, subject to the receipt of
additional  financing by the Company,  a new development well will be drilled in
the Karakuduk Field during 1997.

     Total costs, including engineering design, well recompletions, drilling and
completion costs,  storage tanks and facilities,  oil transport  trucks,  roads,
camp facilities, communication facilities, field transportation, office overhead
and personnel costs, for Phase I are estimated to be $8 million.

     Unless and until the Company  exercises its option to acquire the remaining
10% of the  outstanding  common stock of CAP-G,  the Company will be responsible
for providing 90% of the funding  necessary for the completion of Phase I of the
development of the Karakuduk  Field.  If the Company  exercises the option,  the
Company will be responsible for providing 100% of the funding.

     The Company  anticipates  that produced  crude oil from Phase I development
would be sold beginning  within five to six months after start-up of this phase.
The produced  oil will be  transported  by pipeline  from the field to a storage
terminal to be built at Railroad Station #6 or to a railroad  boarding  facility
at the same location or to both approximately 18 miles from the Karakuduk Field.
The oil will be transported by railroad or via the  Uzen-Atrau-  Samara pipeline

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to the  Black  Sea  ports  described  above  for  sale  to  either  domestic  or
international consumers.

     The Company has established oil production at a rate of  approximately  400
barrels of oil per day from the first well to be re-entered in the Karakuduk Oil
Field.  The well is one of 22 wells  drilled  between 1972 and 1992 to delineate
the  Karakuduk  Oil Field.  None of such wells were then  placed on  production.
Production now has been  established  from one of six zones in the first well to
be reentered and the remaining  five zones will be tested at a later date,  when
additional oil storage and upgraded workover  equipment have been provided.  The
well is now  shut in and  operations  have  been  suspended  because  of  winter
conditions  and lack of ability to market the test oil. It is currently  planned
that recommencement of work-over operations and infrastructure construction will
begin in May, 1997.

     Management  of  the  Company  believes  the  risk-to-reward  considerations
involved with the  development of the Karakuduk  Field are very positive and may
lead to substantial growth of the Company over the next several years.  However,
the Company can provide no assurances  that the Karakuduk Field will produce oil
in any amounts or that the Company will ever realize a profit as a result of the
Company's interest in the field.

     The  exploration  and development of the Karakuduk Field is governed by the
terms of the agreements with the other  shareholders in CAP-G and KKM. There can
be  no  assurance  that  such  shareholders,  or  any  successor  thereto,  will
contribute or will be in a position to  contribute  its  proportionate  share of
costs and expenses for either entity for which it is responsible without raising
additional capital.

     While a majority  of the  permits  and  licenses  required  to develop  the
Karakuduk  Field are in place,  there is no  assurance  that all of them will be
obtained.  Also,  because of  uncertainties  surrounding the project,  no proved
reserves have been attributed to the field. The project will require significant
development  costs  for  which the  financing  is not in place.  There can be no
assurance that the project will be financed or that the Karakuduk  Field will be
successfully developed. Further, the Company will face all of the risks inherent
in attempting to develop an oil and gas property in a foreign country.

     See  also  Item  7--Management's   Discussion  and  Analysis  of  Financial
Condition and Results of Operations.

     In the first quarter of calendar 1997,  the Company  disposed of all of its
remaining interests in oil and gas properties in the United States. Accordingly,
the following is provided for information purposes even though it relates solely
to those properties.

     Reserves.   As  detailed  in  "Disclosures  About  Oil  and  Gas  Producing
Activities"  following the Notes to  Consolidated  Financial  Statements in this
Annual Report on From 10- K,  estimated  quantities of the Company's  proved oil
reserves decreased 100% for the fiscal year ended November 30, 1996, as compared
to the previous fiscal year and natural gas reserves  decreased  100%.  Reserves
decreased  due to  production  during  the  year,  the  sale  of  all  producing

                                        9

<PAGE>


properties  and  the  abandonment  of  certain   properties  which  produced  at
uneconomic  rates. The present value of the Company's proved reserves  decreased
100% as of November  30,  1996,  as compared to the end of the  previous  fiscal
year, due to lower natural gas prices,  production,  the sale of proved reserves
and abandonment of proved reserves.

     In January 1995, Ryder Scott Company  Petroleum  Engineers ("Ryder Scott"),
an  internationally  recognized  petroleum  engineering  group  retained  by the
Company,  has  stated  that in its  opinion,  after  review,  a  reserve  report
commissioned  by the  Company  which  estimated  that the  Karakuduk  Field  has
estimated recoverable oil of 74 million barrels which could be considered proved
undeveloped,  is  reasonable.  However,  neither the Ryder Scott  opinion or the
reserve report considered the potential adverse impact of marketability on price
of any oil which  might be produced  due to the remote  location of the field or
potential  political  instability  and,  therefore,  none  of the  reserves  can
presently be considered proven. The production and marketing of the oil reserves
will be  subject  to a number  of  political,  economic  and  other  risks.  See
"--Markets and --Competition."

     Net  Quantities  of Oil and Gas  Produced.  The  Company's  net oil and gas
production  for each of the last three  years (all of which was from  properties
located in the United States) was as follows:

                                    Year Ended November 30,
                              --------------------------------
                               1996          1995         1994
                               ----          ----         ----

     Oil (Bbls) ...........    1,737        8,224        11,286

     Gas (Mcf)  ...........   96,906      132,924       159,041

     The  average  sales  price per  barrel of oil and Mcf of gas,  and  average
production costs per barrel of oil equivalent  ("BOE")  excluding  depreciation,
depletion and amortization were as follows:

<TABLE>
<CAPTION>
                                      Average                  Average                    Average
          Year Ended                Sales Price              Sales Price                 Production
         November 30                Oil (Bbls)                Gas (Mcf)                 Cost Per BOE
         -----------               ------------              -----------                ------------

             <S>                       <C>                      <C>                         <C> 
             1996 ...............      17.53                    1.17                        2.07

             1995 ...............      14.27                    1.02                        3.78

             1994 ...............      12.75                    1.44                        6.06
</TABLE>

     The  above  table  represents  activities  related  only  to  oil  and  gas
production.

                                       10

<PAGE>


     Productive  Wells and Acreage.  As of November  30,  1996,  the Company had
interests  in 65 gross  productive  oil wells  (1.73 net oil wells) and 62 gross
productive  gas wells  (4.61 net gas wells).  There are no  multiple  completion
wells. Production was from 45,775 gross (2,793) developed acres.

     Undeveloped  Acreage.  The Company on November 30, 1996,  held interests in
2,500 gross (690 net)  undeveloped  oil and gas leases,  all located  within the
State of Wyoming.

     Drilling  Activity.  During the last three fiscal years ended  November 30,
1996,  the Company  participated  in the  drilling of the  following  productive
exploratory  and  development  wells in the United  States.  This table does not
include  any wells in which the  Company  had a carried  or  overriding  royalty
interest, nor any wells that were recompleted.

<TABLE>
<CAPTION>
     Fiscal Year                              Exploratory Wells                         Development Wells
        Ended                        -----------------------------------      ---------------------------------
     November 30,                       Productive              Dry             Productive            Dry
     ------------                    ---------------      --------------      --------------      -------------
                                     Gross       Net      Gross      Net      Gross      Net      Gross      Net
                                     -----       ---      -----      ---      -----      ---      -----      ---
    <S>                                <C>       <C>       <C>       <C>       <C>       <C>       <C>       <C>
     1996 .....................         0         0         0         0         0         0         0         0
     1995 .....................         0         0         0         0         0         0         0         0
     1994 .....................         1       .11         0         0         5       .81         1       .15
</TABLE>

     Present Activities.  As of April 7, 1997, the Company was not participating
in the drilling of any oil or natural gas wells.

     Offices.  The Company's  offices  comprise 1,746 square feet and are rented
for $1,920 per month, under a lease which expires in November 1997.

ITEM 3.   LEGAL PROCEEDINGS

     The Company is not involved in any material pending legal proceedings.

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

     No matter was submitted to a vote of the Company's  security holders during
the Company's fiscal quarter ended November 30, 1996.

                                     PART II

ITEM 5.   MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
          STOCKHOLDER MATTERS

     The  Company's  $0.10  par  value  common  stock is  listed  on the  Nasdaq
Small-Cap Market under the symbol CHAR.

                                       11
<PAGE>


     At March 7, 1997,  the  Company had  approximately  2,061  shareholders  of
record of its $0.10 par value common stock.  No dividends  have been paid on the
Company's  common  stock  and  there  are  no  plans  to  pay  dividends  in the
foreseeable future.

     The  following  table  shows  the range of high and low  "real-time"  trade
prices  for each  quarter  during the  Company's  last two  fiscal  years  ended
November  30,  1996,  as  reported by the  National  Association  of  Securities
Dealers, Inc.

<TABLE>
<CAPTION>
                                                              Price Range
     Trading Range                                        -------------------
     Fiscal Quarter Ended                                 High            Low
     --------------------                                 ----            ---

     <S>                                                  <C>             <C>
     February 28, 1995................................    23/32           5/8
     May 31, 1995.....................................      7/8         21/32
     August 31, 1995..................................    11/16         15/32
     November 30, 1995................................        1           1/2
     February 29, 1996................................  1 11/32         11/16
     May 31, 1996.....................................  1 11/32        1 1/32
     August 31, 1995..................................    1 3/4        1 1/16
     November 30, 1996................................  1 15/32         29/32
</TABLE>

     The following is  information  as to all  securities of the Company sold by
the  Company  during the fiscal year ended  November  30,  1996,  which were not
registered under the Securities Act of 1933, as amended ("Securities Act").

     Between  September 13, 1994 and June 1, 1996, the Company issued  1,448,325
shares of its Common Stock to 37 persons which exercised stock purchase warrants
issued by the  Company in a private  offering  completed  on May 31,  1993.  The
exercise  price  of the  warrants  was  $0.40  per  share,  paid at the  time of
exercise.  The  certificates  evidencing  the  shares  issued  bear  appropriate
restrictive legends under the Securities Act and stop transfer instructions have
been placed with the Company's stock transfer agent. No underwriter was involved
in the  transaction.  The Company issued the shares in reliance upon  exemptions
from  registration  under Section 4(2) of the  Securities  Act and  Regulation D
thereunder.  All of such  persons had  available  to them  material  information
concerning the Company. A Form D was filed in connection with the issuances.

     Between March 8, 1996 and April 5, 1996,  Company issued  14,000,000 shares
of its Common Stock to 32 persons in a private placement. The purchase price for
the shares was $0.50 per share. Allen & Company Incorporated served as placement
agent in the private offering and received the compensation described below. The
Company issued the shares in reliance upon exemptions from registration provided
by Regulation D and Section 4(2) of the Securities  Act. All of such persons had
available to them  material  information  concerning  the Company.  A Form D was
filed in connection  with the issuances.  All purchasers  represented  that they
were  accredited  investors as defined in Regulation D, and that the shares were
being  acquired  for  the  investors'  own  account  and  not  with  a  view  to
distribution.  The  certificates  evidencing the shares issued bear  appropriate

                                       12

<PAGE>


restrictive legends under the Securities Act and stop transfer instructions have
been placed with the Company's stock transfer agent.

     On April 5, 1996,  Company issued 600,000 shares of its Common Stock to two
persons upon conversion of two  outstanding  unsecured  promissory  notes of the
Company in the total principal amount of $300,000.  Allen & Company Incorporated
assisted  the  Company  in  connection  with the  conversion  and  received  the
compensation   described   below.   The  Company  relied  upon  exemptions  from
registration  under Section 4(2) of the Securities  Act. All of such persons had
available to them  material  information  concerning  the  Company.  Each of the
persons  represented  that such  person  acquired  the shares  for the  person's
account  and  not  with a view to  distribution  and  that  the  investor  is an
accredited  investor.  The  certificates   evidencing  the  shares  issued  bear
appropriate  restrictive  legends  under the  Securities  Act and stop  transfer
instructions have been placed with the Company's stock transfer agent.

     On March 4, 1996,  the Company issued 625,000 shares and on March 21, 1996,
the Company issued an additional  60,000 shares to four persons in consideration
for 25% of the  outstanding  shares of CAP-G owned by Darka Petrol  Ticaret Ltd.
Sti.  ("DARKA"),  controlled  by the persons.  The Company  issued the shares in
reliance  upon  the  exemption  from  registration  under  Section  4(2)  of the
Securities  Act. The persons  represented  to the Company that they acquired the
shares for their own accounts and not with a view to distribution.  Such persons
had  available  to  them  material  information   concerning  the  Company.  The
certificates  evidencing the shares issued bear appropriate  restrictive legends
under the  Securities Act and stop transfer  instructions  have been placed with
the  Company's  stock  transfer  agent.  No  underwriter  was  involved  in  the
transaction.

     On March 6, 1996,  the  Company  issued  900,000  shares to two  persons in
consideration  for the  acquisition  by the  Company  of 15% of the  outstanding
shares of CAP-G owned by the persons.  The Company issued the shares in reliance
upon the exemption from  registration  under Section 4(2) of the Securities Act.
The persons  represented  to the Company that they acquired the shares for their
own accounts and not with a view to distribution.  Such persons had available to
them  all  material   information   concerning  the  Company.  The  certificates
evidencing  the shares  issued bear  appropriate  restrictive  legends under the
Securities  Act and  stop  transfer  instructions  have  been  placed  with  the
Company's stock transfer agent. No underwriter was involved in the transaction.

     Effective  April 8,  1996,  the  Company  issued  stock  purchase  warrants
entitling the holder to purchase  1,022,000 shares of the Company's Common Stock
for $10.00 consideration to Allen & Company Incorporated, the placement agent in
the Company's 1996 private  placement  described above and as  compensation  for
assistance by the placement agent in the conversion of $300,000 of the Company's
outstanding  promissory note described above. The Company issued the warrants in
reliance  upon  the  exemption  from  registration  under  Section  4(2)  of the
Securities Act. Allen & Company Incorporated  represented to the Company that it
acquired the  warrants for its own account and not with a view to  distribution.

                                       13

<PAGE>

Such person had available to it all material information concerning the Company.
The certificate evidencing the warrants bears an appropriate  restrictive legend
under the Securities Act. No underwriter was involved in the transaction.

     Between  December 1995 and January 1996,  the Company issued stock purchase
warrants entitling the holders to purchase up to 780,000 shares of the Company's
Common  Stock at an  exercise  price of $0.25 per share to one  individual,  one
pension  plan,  Brae  Group,   Inc.,  and  Allen  &  Company,   Incorporated  in
consideration for the making of loans to the Company by the individual, the plan
and Brae Group,  Inc. and Allen & Company  totaling  $1,050,000  in November and
December  1995.  The Company  issued the warrants in reliance upon the exemption
from  registration  under  Section  4(2)  of the  Securities  Act.  The  persons
represented  to the  Company  that  they  acquired  the  warrants  for their own
accounts and not with a view to distribution. Such persons had available to them
all material information concerning the Company. The certificates evidencing the
warrants bears an appropriate restrictive legend under the Securities Act.

     In November and December, 1996, the Company borrowed $1,850,000 for interim
financing pursuant to unsecured convertible  promissory notes that bear interest
at 8% per annum,  which is payable  monthly,  and that are due and payable on or
before May 29, 1998. The  promissory  notes are  convertible  into the Company's
common  stock at the lower of $0.75 per share or 75% of the market  price of the
common  stock on the date of the  conversion  if the  market  price is less than
$1.00 per share on such  date.  The  proceeds  from the first of such  loans was
received on November 22, 1996.

     In connection  with such  borrowings,  the Company issued the lenders stock
purchase  warrants  that  terminate on November 30, 1999, to purchase a total of
462,500  shares of the  Company's  common stock at $0.25 per share.  The Company
further agreed that the Company would issue the lenders  warrants to purchase an
additional  185,000 shares of the Company's common stock if the promissory notes
are  not  paid or  converted  by May 29,  1997,  and  warrants  to  purchase  an
additional  370,000 shares of the Company's common stock if the promissory notes
are not  paid or  converted  by  November  30,  1997.  Such  warrants  would  be
exercisable  for a period of three years at $0.25 per share.  The Company issued
the notes and warrants in reliance upon the exemption  from  registration  under
Section 4(2) of the Securities Act. The persons  represented to the Company that
they  acquired the notes and warrants for their own accounts and not with a view
to  distribution.  Such persons had  available to them all material  information
concerning the Company. The certificates  evidencing the notes and warrants bear
an appropriate restrictive legend under the Securities Act.

ITEM 6.                 SELECTED FINANCIAL DATA

     The following is selected consolidated financial information concerning the
Company.  This  information  should be read in conjunction with the Consolidated
Financial Statements appearing elsewhere in this Annual Report on Form 10-K.

                                       14

<PAGE>

<TABLE>
<CAPTION>
                                                                             November 30,
                                                   ---------------------------------------------------------------
                                                         1996             1995             1994             1993             1992
                                                         ----             ----             ----             ----             ----
<S>                                                <C>              <C>              <C>              <C>              <C>         
Oil and gas sales .............................    $    147,000     $    255,000     $    374,000     $    414,000     $    492,000
Total revenues* ...............................         147,000          255,000          374,000          414,000          492,000
Noncash write-down of oil 
  and gas properties ..........................           ---            619,000          416,000          230,000            ---  
Loss before extraordinary item ................      (2,179,000)           ---              ---              ---              ---  
Net loss per share before extraordinary 
  item ........................................           (0.07)           ---              ---              ---              ---  
Net (loss) ....................................      (2,416,000)        (704,000)        (474,000)        (123,000)        (121,000)
Net (loss) per common share ...................           (0.08)           (0.04)           (0.02)           (0.01)           (0.01)
Working capital ...............................          52,000          366,000          497,000          709,000          357,000
Total assets ..................................      14,760,000        5,595,000        2,388,000        2,597,000        2,292,000
Long-term obligations .........................       1,106,000          461,000             --            115,000          135,000
Stockholders' equity ..........................      12,114,000        4,920,000        2,035,000        2,167,000        1,880,000
Present value of proved reserves ..............           -0-**          427,000        1,084,000        1,360,000        1,429,000
Proved oil reserves (bbls) ....................           -0-**           66,185          111,690          141,748          105,973
Proved gas reserves (mcf) .....................           -0-**        3,062,417        3,294,730        2,305,142        1,485,556

-------------------
</TABLE>

     *Certain   reclassifications   have  been  made  to  conform  prior  years'
information with the current year presentation.

     **Reflects  the  divestiture by the Company of all of its remaining oil and
gas properties in the United States in early 1997.

ITEM 7.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
          CONDITION AND RESULTS OF OPERATIONS

Liquidity and Capital Resources

     Until 1996, the Company's  primary source of capital  historically had been
from oil and gas sales. The Company had working capital of approximately $52,000
at November 30, 1996.  Total current  assets were  $1,207,000  and total current
liabilities were $1,155,000 for a working capital ratio of approximately 1.05 to
1.

     Net cash and cash equivalents  increased by $299,000 from November 30, 1995
to November 30, 1996,  primarily due to funds  received from the completion of a
private  placement of 14,000,000  shares of the Company's common stock for gross
proceeds of $7,000,000 in April, 1996.

     The Company  currently owns 90% of the outstanding  common stock of Central
Asian  Petroleum  Guernsey  Limited  ("CAP-G")  which  has  a  50%  interest  in
Karakuduk-Munay,  Inc.  ("KKM"),  which  holds 100% of the right to develop  the
Karakuduk Field.

     The  Company  acquired  45% of the  outstanding  stock  of  CAP-G  prior to
December 1, 1995.  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  restricted  common  stock,  up  to  an  additional  55%  of  the

                                       15

<PAGE>

outstanding  stock of CAP-G. The Company  consummated the purchase of 25% of the
outstanding  stock  of  CAP-G in April  1996 by  paying  $2,000,000  in cash and
issuing 685,000 shares of the Company's  common stock.  The Company  acquired an
additional 5% of the outstanding stock of CAP-G in April 1996 for $250,000 cash.

     To acquire an additional 15% of the outstanding  common stock of CAP-G, the
Company  agreed  to pay  $1,975,000  in cash and  issue  900,000  shares  of the
Company's  common stock.  This purchase was  consummated on March 11, 1996, when
the Company paid  $750,000 in cash and issued  900,000  shares of the  Company's
common stock.  The remaining  cash balance of $1,225,000 for the purchase was to
be paid in four quarterly  equal payments of $306,250  between June 11, 1996 and
March 11,  1997.  The first  payment  of  $306,250  was paid in June 1996 and an
additional  $175,000 was paid in September 1996. The agreement was  subsequently
revised so that the Company paid $200,000 in December  1996.  The Company was to
pay $543,750 on or before March 11, 1997.  The Company is currently  negotiating
to obtain an extension of the due date of the  remaining  payment.  In addition,
the Company  has an option to  purchase  the  remaining  10% of the  outstanding
common stock of CAP-G for an  additional  $1,625,000  and 200,000  shares of the
Company's common stock at any time following  completion of the initial purchase
and prior to December 11, 1997.

     The Company does not have any income producing properties and the Karakuduk
Oil Field is  substantially  undeveloped.  The  Karakuduk  Project  will require
significant development costs for which the financing is not complete. There can
be no assurance  that the project will be adequately  financed or that the field
will be  successfully  developed.  The license  requires  minimum  work plans of
approximately  $10 million by August 31, 1997, of  approximately  $35 million by
August  31,  1998 and of  approximately  $12  million by August  31,  1999.  The
agreement  provides KKM with the right to defer the minimum  work program  under
certain  conditions.  As part of the minimum work plan requirement,  the Company
has loaned CAP-G $4 million to fund KKM's current operations. KKM's 1997 budget,
which has not been  approved,  would entail a minimum  expenditure of $6 million
through August 31, 1997.  Subject to the receipt of additional  financing by the
Company,  this  requirement  will be funded by the Company  through loans by its
subsidiary CAP-G to KKM.

     The  Company has  applied  with  Overseas  Private  Investment  Corporation
("OPIC") for four political  risk  coverages on the Company's  investment in the
Karakuduk  Field in western  Kazakstan.  The maximum  insured amounts sought for
each coverage  range from $23.4 to $40.2 million.  The estimated  yearly premium
amounts for the current  insured  amounts for each coverage range up to $84,000.
The estimated yearly standby premiums for each coverage range up to $88,000. The
actual premium values may be higher or lower  depending on the contract  offered
to the Company by OPIC.

     The  Investment   Committee  of  OPIC  approved  the  Company's   Karakuduk
operations for political  risk insurance  coverage by OPIC on December 19, 1995.
The Company has received an executed Letter of Commitment on September 25, 1996,
from OPIC  binding  issuance  of  Political  Risk  Insurance  for the  Karakuduk

                                       16

<PAGE>

project.  Currently,  the Company has a standby  facility  for which it has made
three  previous  payments of $31,250 and has a fourth  payment of $31,250 due on
June 30, 1997. In July 1997, the Company  expects to receive the actual contract
offered to the Company by OPIC.

     The  Company  completed a private  placement  of  14,000,000  shares of the
Company's common stock for gross proceeds of $7,000,000 in April, 1996. To date,
the Company  has used the  approximately  $6,907,000  of net  proceeds  from the
private placement to complete the acquisition of the additional 55% of CAP-G, to
repay  borrowings,  to pay CAP-G's share of the second  quarter budget and third
quarter  budget for the  Karakuduk  Field,  for  working  capital  and for other
corporate purposes.

     In November and December, 1996, the Company borrowed $1,850,000 for interim
financing pursuant to unsecured convertible  promissory notes that bear interest
at 8% per annum,  which is payable  monthly,  and that are due and payable on or
before May 29, 1998. The  promissory  notes are  convertible  into the Company's
common  stock at the lower of $0.75 per share or 75% of the market  price of the
common  stock on the date of the  conversion  if the  market  price is less than
$1.00 per share on such  date.  The  proceeds  from the first of such  loans was
received  on  November  22,  1996.  The  Company  used the funds  from the loans
primarily for the Company's  obligations to provide  financing for the Company's
Karakuduk  Project  in  Kazakstan  and to  make a  payment  of  $200,000  due in
connection with the Company's previous purchase of 15% of the outstanding shares
of CAP-G.

     Without additional financing,  the Company's present cash and other capital
resources  are not  sufficient  to fund  the  obligations  of  CAP-G  to pay the
Karakuduk Field development expenses incurred by KKM for the balance of 1997, to
make the balance of the  payments to complete  the  purchase of 15% of the CAP-G
stock and to provide working capital for the Company.

     The Company has 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. The
Company  plans to meet its  additional  capital  needs  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  interests 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 needed  financing.  There can be no
assurance that debt or equity financing  anticipated to be necessary to continue
to fund the  Company's  operations  and  obligations  will be  available  to the
Company on economically  acceptable terms, if at all. If sufficient funds cannot
be raised to meet the continuing obligations with respect to the Karakuduk Field
development,  the  Company's  interest in such  property may be lost.  Also,  if

                                       17

<PAGE>


sufficient funds cannot be raised to provide additional  working capital,  it is
likely that the Company will not be able to continue operations.

     The Company has no other material  commitments  for cash outlay and capital
expenditures other than for normal operations.

Results of Operations Fiscal 1996 Compared with Fiscal 1995

     The  Company's  operations  during  fiscal  1996  resulted in a loss before
extraordinary  item  of  $2,179,000  primarily  due to the  move  from  domestic
operations  into an  international  operation.  Production  costs were down from
$115,000  in  1995  to  $37,000  in  1996 as a  result  of  continued  decreased
production from the Company's  domestic  operations.  General and administrative
expenses  increased  from  $166,000 in 1995 to $2,336,000 in 1996 as a result of
consulting  fees  to  MDI of  approximately  $500,000,  additional  compensation
recorded of  approximately  $385,000,  consisting of $210,000 for bonuses to the
former Chief  Executive  Officer and the former Chief  Financial  Officer of the
Company and $175,000 for compensation related to 350,000 shares of the Company's
common stock granted to the Chairman of the Board of the Company, and additional
expenses  for  start-up  costs  in  Kazakstan   relating  to  the  proportionate
consolidation  of KKM into the Company,  which began in 1996.  Interest  expense
also increased in relation to the financing of the projects.  In 1996, there was
no write  down of oil and gas  properties  as there  had been in 1995  which had
totaled $619,000.  The result of these changes was a loss of $2,416,000 or $0.08
per  share for 1996 as  compared  to a loss of  $704,000  or $0.04 per share for
1995, before extraordinary loss.

     For 1996, there was a $237,000 or $0.01 extraordinary per share loss on the
extinguishment  of long term debt which  resulted in a net loss of $2,416,000 or
$0.08 per share for 1996.

Results of Operations Fiscal 1995 Compared with Fiscal 1994

     The Company's  operations during fiscal 1995 resulted in a loss of $719,000
primarily due to a noncash  write-down of oil and gas properties of $619,000 for
fiscal  1995.  Due to the noncash  write-down,  the net loss for fiscal 1995 was
$704,000  compared to a net loss of $474,000  during  fiscal  1994.  The noncash
write-down was primarily the result of the decreased  value of estimated  future
net values of proved  reserves due to lower gas prices during the fourth quarter
of fiscal 1995 and the sale of proved reserves during 1995.

     Revenue from oil and gas sales decreased $119,000 or 31.8% from $374,000 in
fiscal 1994 due to lower production,  lower crude oil and natural gas prices and
sale or abandonment of certain producing properties.

     Costs  and  expenses  increased  $91,000,  or  20.4%  during  fiscal  1995,
excluding the noncash  write-down of oil and gas  properties.  Production  costs
decreased  by 50.4%  to  $115,000  in  fiscal  1995  due to the sale of  certain
properties  and shut-in of certain  properties  due to lower natural gas prices.
Depreciation  and  depletion  also  decreased  by 38.3% to $74,000  for the same

                                       18

<PAGE>


reasons that production decreased. General and administrative expenses increased
$72,000, or 76.6% in fiscal 1995 due to the costs related to the acquisition and
operation of the Company's interest in the Karakuduk Field.

     Inflation.  The Company  cannot control prices in its oil and gas sales and
to the extent the Company is unable to pass on increases in operating  costs, it
may be affected by inflation.

Management's Discussion of Changes in Standardized Measure

     Standardized  measure of discounted future net cash flows decreased 100% in
fiscal  1996 as  compared  to  fiscal  1995.  This  decrease  was the  result of
production in 1996, lower oil and gas prices,  the sale of proved reserves,  and
the abandonment of proved reserves during the year.

     The  forward-looking  statements  herein are based on current  expectations
that  involve  a  number  of  risks  and  uncertainties.   Such  forward-looking
statements  are  based  on  assumptions  that the  Company  will  have  adequate
financial  resources  to fund  the  development  of the  Karakuduk  Field,  that
significant  reserves of oil will be developed in the Karakuduk  Field which can
be readily and profitably  marketed,  and that there will be no material adverse
change in the Company's  operations or business.  The foregoing  assumptions are
based on judgment  with  respect to,  among  other  things,  oil and natural gas
reserve information available to the Company,  future economic,  competitive and
market conditions and future business  decisions,  all of which are difficult or
impossible  to predict  accurately  and many of which are  beyond the  Company's
control.  Accordingly,  although  the  Company  believes  that  the  assumptions
underlying the  forward-looking  statements are reasonable,  any such assumption
could prove to be inaccurate  and therefore  there can be no assurance  that the
results contemplated in forward-looking statements will be realized. There are a
number of other risks presented by the Company's  business and operations  which
could cause the  Company's  financial  performance  to vary  markedly from prior
results or results  contemplated by the forward-looking  statements.  Management
decisions,  including  budgeting,  are  subjective in many respects and periodic
revisions must be made to reflect actual  conditions and business  developments,
the impact of which may cause the  Company to alter its capital  investment  and
other  expenditures,  which may also adversely  affect the Company's  results of
operations.  In light of significant  uncertainties  inherent in forward-looking
information  included in this Annual Report on Form 10-K,  the inclusion of such
information  should not be  regarded as a  representation  by the Company or any
other person that the Company's objectives or plans will be achieved.

ITEM 8.   FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

     See Item 14(a) for a list of the Financial Statements and the supplementary
financial information included in this report following the signature page.

                                       19
<PAGE>


ITEM 9.   CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
          ACCOUNTING AND FINANCIAL DISCLOSURE

     On January 16, 1997, the Company engaged Ernst & Young LLP as the Company's
principal  independent  accountant  in place of Grant  Thornton LLP. On July 23,
1996, the Company  requested and received the resignation of Grant Thornton LLP.
There were no disagreements during the Company's two fiscal years ended November
30, 1995, or any interim period subsequent thereto between the Company and Grant
Thornton LLP on any matter of  accounting  principles  or  practices,  financial
statement  disclosure,  or auditing scope or procedure which, if not resolved to
the  satisfaction of Grant Thornton LLP, would have caused Grant Thornton LLP to
make reference in its reports to the subject matter of such  disagreements.  The
opinions of Grant  Thornton LLP on the Company's  financial  statements  for the
fiscal  years ended  November 30, 1995 and 1994,  contain no adverse  opinion or
disclaimer of opinion, nor were such opinions qualified as to uncertainty, audit
scope or  accounting  principles,  except  that  the  opinion  on the  Company's
financial  statements  for the  fiscal  year ended  November  30,  1995,  raised
substantial  doubt about the Company's  ability to continue as a going  concern.
The  decision  to change  accountants  was  approved by the  Company's  Board of
Directors.

                                    PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

     The name,  position  with the Company,  age of each  director and executive
officer and the period during which each  director and executive  officer of the
Company has served are as follows:

<TABLE>
<CAPTION>

Name of Director and Executive              Director                      Principal Occupation
Officer and Position, in the Company         Since             Age        During the last Five Years
------------------------------------        --------           ---        --------------------------

<S>                                           <C>               <C>       <C>        
Howard Karren.......................          1996              66        Chairman  of  the  Board  of the Company since 1996; Chief
                                                                          Executive  Officer of the Company  since  January 1997 and
                                                                          President  since  February  1997.  Senior  Advisor  to the
                                                                          Chairman  and  Chief Executive  Officer of Enron Oil & Gas
                                                                          Co., an oil and gas company,  from 1994 to 1996. President
                                                                          and Vice  Chairman  of Enron Oil & Gas  International  Co.
                                                                          from 1984 until 1994.


                                       20

<PAGE>

<CAPTION>

Name of Director and Executive              Director                      Principal Occupation
Officer and Position, in the Company         Since             Age        During the last Five Years
------------------------------------        --------           ---        --------------------------

<S>                                           <C>               <C>       <C>        
Peter G. Dilling....................          1995              47        Vice  Chairman  of the Board of the  Company  since  March
                                                                          1997;  President  and  a  director  of  M-D  International
                                                                          Petroleum,  Inc., an oil and gas company,  since September
                                                                          1994.  A partner of  M-D International,  an unincorporated
                                                                          oil and gas business, from March 1993 to the present.

Jay W. McGee........................          1995              49        Executive Vice President of Exploration  and Production of
                                                                          the   Company   since   March   1997;   Director   of  M-D
                                                                          International  Petroleum,  Inc.,  an  oil and gas company,
                                                                          since  September 1994.  Manager of  M-D International,  an
                                                                          unincorporated oil and gas entity,  from March 1993 to the
                                                                          present.  Vice President of  Anglo Suisse L.P., an oil and
                                                                          gas company,  from September 1990 to February 1993.  Prior
                                                                          thereto, Director of Exploration of Anglo Suisse, Inc., an
                                                                          oil and gas company.

Alan D. Berlin......................          1997              57        A  partner of  Aitken  Irvin  Lewin Berlin Vrooman & Cohn,
                                                                          LLP since 1995. Engaged in the private practice of law for
                                                                          over five years prior to joining Aitken Irvin Lewin Berlin
                                                                          Vrooman & Cohn LLP. A director of Belco Oil & Gas Corp.

David A. Dahl.......................          1997              35        President  of  Whittier  Energy  Company,  an oil  and gas
                                                                          exploration and production company,  since 1997, President
                                                                          of Whittier  Ventures,  LLC, a private  investment entity,
                                                                          since  January  1996,  and  a Vice  President  of Whittier
                                                                          Trust Company,  a trust company,  since April 1993, a Vice
                                                                          President  of  Merus  Capital  Management,  an  investment
                                                                          manager, from 1990 to 1993.

Arlo G. Sorensen....................          1996              56        Chief Financial  Officer and  Principal Accounting Officer
                                                                          of the Company since March 1997.  Trustee of M.H. Whittier
                                                                          Corporation,  a private  investment  entity,  since  1985.
                                                                          Chairman of  the  Board and  a director  of Whittier Trust
                                                                          Company, a trust company since 1988.


                                       21
<PAGE>

<CAPTION>

Name of Director and Executive              Director                      Principal Occupation
Officer and Position, in the Company         Since             Age        During the last Five Years
------------------------------------        --------           ---        --------------------------

<S>                                           <C>               <C>       <C>        
Charles P. Karren...................           --               30        Vice  President  of  Business  Development  of the Company
                                                                          since March 1997;  Consultant to the Company from May 1996
                                                                          to March  1997;  Consultant  to M-D  International  Petro-
                                                                          leum,  Inc.,  an oil  and gas  company,  since  May  1996;
                                                                          employed  in various  capacities  with  Enron  Development
                                                                          Corp., an energy development  company,  from 1992 to 1996;
                                                                          Associate  with  Hill   Samuel-Middle   East,  an  English
                                                                          merchant bank, from 1990 to 1992.
</TABLE>


     Howard Karren and Charles P. Karren are father and son.

     The present term of office of each  director will expire at the next annual
meeting of shareholders.

     Each executive officer will hold office until his successor duly is elected
and  qualified,  until his  resignation  or until he is  removed  in the  manner
provided by the Company's Bylaws.

     In connection with the Company's acquisition of all of the stock of Central
Asian  Petroleum,  Inc.  ("CAP-D")  in 1994,  the former  shareholders  of CAP-D
acquired certain rights to nominate  directors of their choosing for election to
the  Company's  Board of Directors.  Pursuant to these rights,  the former CAP-D
shareholders  caused the nomination of Jay W. McGee,  who was elected a director
at the 1995 annual meeting of  shareholders.  If by June 30, 2000, the Karakuduk
Field obtains 5,000  barrels of oil  production  per day averaged over any sixty
(60) day period,  or the Company's  beneficial  interest in the field is sold or
the Company and the former shareholders jointly participate in a new exploratory
development project, the former shareholders have the right to cause the Company
to nominate one  additional  director at the  Company's  2000 annual  meeting of
shareholders.

     In  connection  with a loan  to the  Company  from  the  Brae  Group,  Inc.
("Brae"),  in November 1995, the Company was required to appoint Messrs.  Karren
and Dilling as directors of the Company and to appoint Mr. Karren as Chairman of
the Board of Directors of the Company. The Company borrowed $750,000 represented
by an  unsecured  promissory  note with  interest at 8% per annum.  The note was
repaid on April 30, 1996. As a result of the repayment of the note,  the Company
is no longer required to continue to nominate such persons as directors.


                                       22

<PAGE>

     In connection with borrowings in August 1996, the Company agreed to add two
directors  selected by two of the  lenders,  Whittier  Ventures LLC and Whittier
Energy Company (collectively "Whittiers").  In connection with the transactions,
James A. Jeffs resigned from the Company's Board of Directors. At the request of
the Whittiers,  on December 2, 1996, Arlo G. Sorensen  replaced Mr. Jeffs on the
Company's Board of Directors and on January 3, 1997, David A. Dahl was appointed
to the Company's  Board of Directors.  The Whittiers will have the right to have
their two representatives nominated for directors of the Company until the later
of the date their promissory notes are paid in full or the date the Whittiers no
longer have any investment in the Company.

     There are no other  arrangements  or  understandings  between any executive
officer  and any  director  or other  person  pursuant  to which any  person was
selected as a director or an executive officer.

     Except as set forth  above,  no director of the Company is a director of an
entity  that  has  its  securities  registered  pursuant  to  Section  12 of the
Securities Exchange Act of 1934.

Section 16(a) Beneficial Ownership Reporting Compliance

     Based solely upon a review of the Forms 3 and 4 and any amendments  thereto
furnished to the Company  during the  Company's  fiscal year ended  November 30,
1996, and Form 5 and amendments thereto furnished to the Company with respect to
such fiscal year,  during the Company's  fiscal year ended November 30, 1996, no
persons who were  directors,  officers or beneficial  owners of more than 10% of
the  Company's  outstanding  Common  Stock  during  such  fiscal year filed late
reports on Form 3, 4, or 5 except for Howard Karren,  Peter G. Dilling and James
A. Jeffs who did not  timely  file  their  Forms 3 during the fiscal  year ended
November  30,  1996,  Howard  Karren and Peter G. Dilling who have not yet filed
needed amendments to their Forms 3, and Jay W. McGee who did not timely file his
Form 3 during the fiscal year ended November 30, 1995.

ITEM 11.  EXECUTIVE COMPENSATION

     The following  table sets forth for the  Company's  last three fiscal years
ended November 30, 1996, 1995 and 1994, the compensation paid by the Company for
services  rendered in all capacities to the Company by Paul V. Hoovler,  who was
the chief  executive  officer of the Company  during the Company's  three fiscal
years  ended  November  30,  1996.  No other  person who served as an  executive
officer of the Company during the Company's  fiscal year ended November 30, 1996
received  total annual  salary and bonus in excess of $100,000  from the Company
during the Company's fiscal year ended November 30, 1996:

                                       23

<PAGE>

<TABLE>
<CAPTION>

                           SUMMARY COMPENSATION TABLE
                                                                                                       Long Term
                                                                                                     Compensation
                                                               Annual Compensation                      Awards
                                                    -----------------------------------------        ------------
                                  Year                                               Other
                                 Ended                                               Annual           Securities       All Other
Name and                        November                                             Compen-          Underlying       Compen-
Principal Position                 30,               Salary($)        Bonus($)       sation($)        Options(#)       sation($)
------------------              --------             --------         -------        --------         ----------       --------
<S>                               <C>                <C>               <C>          <C>                  <C>          <C>       
Paul V. Hoovler ..............    1996 ..........    $60,000(1)         --          $ 4,937(2)            --          $40,000(3)
 Chief Executive                  1995 ..........    $60,000            --          $ 4,413(2)            --          $40,000(3)
 Officer and Presi-               1994 ..........    $60,000            --          $ 3,518 (2)           --          $40,000(3)
dent until January
1997 and February
1997, respectively

---------------------
</TABLE>

(1)  In addition,  on August 19, 1996, the Company's board of directors  awarded
     Mr.  Hoovler a cash b nus of  $140,000 as  recognition  of past and present
     services  to the  Company  to be used by Mr.  Hoovler to  exercise  certain
     warrants,  granted to Mr.  Hoovler  pursuant  to the  Company's  1989 Stock
     Warrant Plan, to purchase  500,000 shares of the Company's  common stock at
     an exercise  price of $0.28 per share.  This bonus will not become  payable
     until receipt of notice from Mr. Hoovler, which notice may not be given and
     shall not be  effective,  until the earlier of (i)  completion of a sale or
     farmout by the Company of all or a portion of its interest in the Karakuduk
     Project,  or (ii) the date when the Company makes a public  disclosure of a
     sale  or  farmout  of  the  Karakuduk  Project.  At  its  sole  option  and
     discretion, the Company may, in lieu of making payment of such bonus to Mr.
     Hoovler,  use all or a  portion  of such  bonus as a direct  offset  to Mr.
     Hoovler's  obligation  to make any payment due to the Company upon exercise
     of the warrant.  Anything mentioned above to the contrary  notwithstanding,
     in the event Mr.  Hoovler has  exercised  and paid for the warrant prior to
     the date the bonus  becomes  payable,  the  Company  shall  pay such  bonus
     directly to Mr.  Hoovler,  but only upon completion of a sale or farmout of
     all or a portion of its interest in the Karakuduk Project.

(2)  Represents the amounts distributed pursuant to a royalty participation plan
     to Paul V. Hoovler.

(3)  The Company has a Deferred  Compensation and Death Benefit Plan for Paul V.
     Hoovler.  The plan allows for Mr. Hoovler to continue in active  employment
     of the  Company  until age  70.5.  The  Company  pays Mr.  Hoovler  $40,000
     annually  from  this  plan.  If  Mr.  Hoovler  voluntarily  terminates  his
     employment prior to his retirement,  disability, or death, he or his estate
     will receive the remaining residual funds to be disbursed from the plan. If
     Mr.  Hoovler dies prior to retirement or other  termination  of employment,
     Mr.  Hoovler's  estate will  receive  the  remaining  residual  funds to be
     disbursed from the plan.  The plan is funded by a life insurance  policy on
     the life of Mr.  Hoovler which  provides for the major portion of any costs

                                       24

<PAGE>


     to the Company. The plan was fully funded when the Company paid, during the
     Company's  fiscal year ended  November  30,  1991,  the final  payment of a
     premium of $18,000 on a life insurance  policy insuring the life of Paul V.
     Hoovler. See "Termination of Employment Arrangements."

Option Grants in Fiscal Year Ended November 30, 1996

     No options  were  granted  by the  Company  to Paul V.  Hoovler  during the
Company's fiscal year ended November 30, 1996.

FISCAL YEAR-END OPTION VALUES

     The following table sets forth information  concerning  unexercised options
(warrants) held by Paul V. Hoovler at November 30, 1996:

<TABLE>
<CAPTION>
                                  Number of Securities
                                 Underlying Unexercised             Value of Unexercised
                                      Options as of                In-the-Money Options at
                                  November 30, 1996(#)               November 30, 1996($)
                               ---------------------------        --------------------------
Name                           Exercisable/  Unexercisable        Exercisable/ Unexercisable
----                           -----------   -------------        -----------  -------------
<S>                               <C>              <C>             <C>               <C>
Paul V. Hoovler .............     500,000        - 0 -             $406,875(1)     - 0 -

-----------------------
</TABLE>

(1)  The value was determined by multiplying the number of shares underlying the
     warrants by the difference  between the exercise price and the closing sale
     price of the  Company's  Common  Stock on  November  30,  1996.  No options
     (warrants)  were exercised by Paul V. Hoovler  during the Company's  fiscal
     year ended November 30, 1996.

Compensation of Directors

     There were no standard or other  arrangements  for the  compensation of the
Company's  directors in effect for the Company's  fiscal year ended November 30,
1996.  The Board of  Directors  also agreed to pay to Frank H. Gower,  Jr.,  who
served as a director of the Company  from 1972 to 1997,  a cash bonus of $28,000
that was paid in July 1996 and was used by Mr. Gower to purchase  100,000 shares
of the Company's  Common Stock upon exercise of a stock purchase warrant held by
him.

     There are no  employment  contracts  between the Company and any  executive
officer.

Termination of Employment Arrangements

     Paul V. Hoovler,  the former Chief  Executive  Officer and President of the
Company,  entered  into a  severance  agreement  ("Agreement")  with the Company
effective February 12, 1997. Pursuant to the Agreement, Mr. Hoovler receives his
salary and unpaid  vacation time accrued  through  February 12, 1997.  Also, the

                                       25
<PAGE>

Company  agreed to amend the  Company's  1989 Stock  Warrant  Plan to enable Mr.
Hoovler  to  transfer  the  warrants  granted  to him in 1996 to a member of his
family or a trust created by him.

     Further, Mr. Hoovler was granted warrants to purchase 100,000 shares of the
Company's  common stock at an exercise price of $0.85 per share, for a period of
four years and warrants to purchase 100,000 shares of the Company's common stock
at an exercise  price of $1.25 per share that become  exercisable  on January 1,
1998, and remain exercisable for a period of four years from such date.

     Also,  pursuant  to the  Agreement,  the  Company  agreed  to assign to Mr.
Hoovler, or an entity controlled by Mr. Hoovler, the existing overriding royalty
interest  ("ORRI")  that the  Company  holds in  approximately  89  wells.  Such
assignment will be for a three-year period. In exchange for the assignment,  Mr.
Hoovler agreed to pay a former  employee of the Company ten percent (10%) of the
net revenues received from such ORRI during the three-year  period. In addition,
upon Mr.  Hoovler's  request,  the Company  agreed to assign its interest in the
Company's royalty  participation  plan to Mr. Hoovler or an entity controlled by
Mr.  Hoovler.  The Company  also agreed to assign to Mr.  Hoovler the  Company's
ownership  interest in two life insurance  policies that the Company held on Mr.
Hoovler's life. Finally,  pursuant to the Agreement,  Mr. Hoovler was allowed to
bid on or retain certain office furniture and equipment of the Company.

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
          MANAGEMENT.

     The  following  persons  are the only  persons  known to the Company who on
April  2,  1997,  owned  beneficially  5% or  more of the  Company's  37,526,517
outstanding shares of $0.10 par value common stock:

<TABLE>
<CAPTION>

Name and Address of Beneficial Owner                                              Amount and Nature of                Percent
or Name of Officer or Director                                                   Beneficial Ownership(1)              of Class
------------------------------------                                             ----------------------               --------

<S>                                                                                    <C>                              <C> 
Drake and Company ....................................................                 3,000,000                        8.0%
Citibank Performance Portfolio A.A.
c/o Citibank, N.A.
153 E. 53rd Street, 21st Floor
New York, New York 10043

Allen & Company Incorporated .........................................                 2,962,000(2)                     7.7%
711 Fifth Avenue
New York, New York 10022

Crescent Investment ..................................................                 2,000,000                        5.3%
865 Figueroa Street, Suite 1500
Los Angeles, California 90017


                                       26

<PAGE>

<CAPTION>

Name and Address of Beneficial Owner                                              Amount and Nature of                Percent
or Name of Officer or Director                                                   Beneficial Ownership(1)              of Class
------------------------------------                                             ----------------------               --------

<S>                                                                                    <C>                              <C> 
Whittier Ventures, LLC ...............................................                 3,187,000(3)                     8.2%
1600 Huntington Drive
So. Pasadena, California 91030

Howard Karren ........................................................                   350,000(4)                     0.9%

Peter G. Dilling .....................................................                   753,000(5)                     2.0%

Jay W. McGee .........................................................                   930,678(6)                     2.5%

Alan D. Berlin .......................................................                       -0-                         --

David A. Dahl ........................................................                 3,582,833(7)                     9.2%

Arlo G. Sorensen .....................................................                    11,242(8)                     0.03%

Charles P. Karren ....................................................                    75,000                        0.2%

All Directors and Officers as a Group (seven
persons) .............................................................                 5,702,753(9)                    14.9%

----------------------
</TABLE>

(1)  To the knowledge of the Company's management,  the beneficial owners listed
     have sole  voting and  investment  power with  respect to the shares  shown
     unless otherwise indicated.

(2)  Includes 1,022,000 shares underlying unexercised warrants.

(3)  Includes  1,000,000 shares underlying a convertible note and 187,500 shares
     underlying  unexercised  warrants.   Does  not  include  shares  underlying
     additional  warrants that will be issued if the debt to Whittier  Ventures,
     LLC is not repaid by May 31, 1997 or by November 30, 1997.

(4)  The 350,000  shares are reserved to be issued to Mr.  Karren.  See "Certain
     Relationships and Related Transactions."

(5)  All 753,000 shares are owned directly by Spectrum  Development,  Inc. which
     is controlled by Mr.  Dilling,  and the 753,000 shares include 301,618 of a
     total of  1,250,000  shares  being  held in escrow in  connection  with the
     acquisition of Central Asian  Petroleum,  Inc. as described  under "Certain
     Relationships and Related Transactions."

(6)  Includes  272,205 of a total of  1,250,000  shares  being held in escrow in
     connection  with the  acquisition  of  Central  Asian  Petroleum,  Inc.  as
     described  under "Certain  Relationships  and Related  Transactions."  Also
     includes 2,589 shares owned in Mr. McGee's  Individual  Retirement  Account
     and 2,589 shares owned by Mr. McGee's wife.

                                       27
<PAGE>


(7)  Includes  the  shares  beneficially  owned  by  Whittier  Ventures  LLC and
     includes  333,333  shares  underlying a convertible  note and 62,500 shares
     underlying  unexercised warrants owned by Whittier Energy Company. David A.
     Dahl has no  pecuniary  interest in such shares  but, as the  President  of
     each, Mr. Dahl has voting power and investment  power over such shares and,
     thus, may be deemed to beneficially  own such shares pursuant to Rule 13d-3
     adopted under the  Securities  Exchange Act of 1934,  as amended.  Does not
     include shares  underlying  additional  warrants that will be issued if the
     debt to Whittier Ventures, LLC and Whittier Energy Company is not repaid by
     May 29, 1997 or by November 30, 1997.

(8)  The  11,242  shares  are  owned by  Whittier  1982 Oil  Trust for which Mr.
     Sorensen  is the  trustee  and has  voting and  investment  power over such
     shares.

(9)  Includes the shares as described in notes (2) through (8) above.


There are presently no  arrangements  of any kind which may at a subsequent date
result in a change in control of the Company.

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     In early September 1994, the Company signed a letter of intent with Central
Asian Petroleum, Inc., a Delaware corporation ("CAP-D"), and Overseas Consulting
Services  Company,  Inc.  ("OCSCO"),  both private  companies  based in Houston,
Texas,  to jointly  pursue the  registration  and  development  of the Karakuduk
Field, a shut-in oil field in the central Asian Republic of Kazakstan,  that was
discovered in the early 1970s but never placed on production.

     In mid-September 1994, the Company acquired a 25% interest in Central Asian
Petroleum  (Guernsey)  Limited ("CAP-G"),  with headquarters in Ankara,  Turkey,
which holds a 50%  interest in KKM. In April 1995,  the Company  acquired all of
the stock of CAP-D,  which  also  owned an  interest  in  CAP-G.  Following  the
acquisition of CAP-D,  the Company's  beneficial  interest in CAP-G increased to
45%,  giving the Company a 22.5%  beneficial  interest in KKM and the  Karakuduk
Field.  Under terms of the  acquisition,  the former  shareholders of CAP-D have
certain rights to cause the Company to nominate  persons  selected by the former
shareholders  to the  Company's  Board  of  Directors.  Jay W.  McGee,  a former
shareholder of CAP-D,  was first elected at the 1995 Company's Annual Meeting of
Shareholders  under  the  arrangement.  Additionally,  in  connection  with  the
acquisition,  the Company may be required to pay a brokerage fee to Mr. McGee in
the amount of up to $175,000. The Company paid Mr. McGee $50,000 in 1995 and the
balance is payable upon the  occurrence of certain  milestones in development of
the Karakuduk Field.  The Company issued  4,250,000 shares of restricted  common
stock  for  CAP-D  which  will be held in  escrow  and  released  to the  former

                                       28

<PAGE>


shareholders of CAP-D,  including  Messrs.  McGee and Dilling,  or affiliates of
them, from time to time in connection with  development of the Karakuduk  Field.
Of the shares held in escrow,  3,000,000 shares have been released and delivered
to the former shareholders of CAP-D.

     The  Company  has  agreed  to issue a  minimum  of  350,000  shares  of the
Company's  restricted  common stock to Howard Karren, a director of the Company,
or his  designee  at a future  date  selected  by Mr.  Karren.  The  Company  is
negotiating  to acquire  MDI,  and has issued  180,000  shares of the  Company's
restricted  common stock to Enron to facilitate the  participation of MDI in the
Uzbekistan Project.  See "Business." The Company paid Mr. Karren a fee of $4,000
per month for the four month period ending August 31, 1996, for office  expenses
and travel  expenses in  connection  with the  Company's  efforts to satisfy its
funding obligations for the Karakuduk Project.

     Beginning  in May 1996  through  February  1997,  the  Company  paid a base
consulting  fee of  $60,000  per month to MDI for  assistance  by MDI in seeking
means for meeting the Company's funding  obligations for the Karakuduk  Project.
The Company also assumed  obligations of MDI to pay up to $42,000 during the six
month period  ending  September 30, 1996 to two other  unaffiliated  consultants
engaged to assist MDI and the  Company to acquire and review oil and natural gas
exploration  or  development  projects in countries of the former  Soviet Union.
Commencing in March 1997,  the Company began to reimburse MDI for MDI's expenses
incurred in connection with the Karakuduk Project.

     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 gross  proceeds  of
$7,000,000.  In connection with the private placement, the Company issued a five
year warrant to purchase  1,022,000  shares of the Company's common stock for, a
nominal amount,  to Allen & Company  Incorporated  ("Allen") and paid $21,849 of
Allen's expenses. The Company paid additional  miscellaneous expenses related to
the offering of $71,363.  Allen also  purchased  shares of the Company's  common
stock  in the  private  placement  on the same  terms  and  conditions  as other
purchasers  thereof.  The  Company  also  issued  Allen a three year  warrant to
purchase  200,000  shares of the Company's  common stock at $0.25 per share,  in
connection with the $750,000 loan referred to above. Drake and Company, Crescent
Investment and Whittier  Ventures,  LLC also  purchased  shares of the Company's
common stock,  in the above  described  private  placement on the same terms and
conditions  as other  purchasers  thereof.  See  "Security  Ownership of Certain
Beneficial Owners and Management."

     In November and December, 1996, the Company borrowed $1,850,000 for interim
financing pursuant to unsecured convertible  promissory notes that bear interest
at 8% per annum,  which is payable  monthly,  and that are due and payable on or
before May 29, 1998. The  promissory  notes are  convertible  into the Company's
common  stock at the lower of $0.75 per share or 75% of the market  price of the
common  stock on the date of the  conversion  if the  market  price is less than
$1.00 per share on such  date.  The  proceeds  from the first of such  loans was

                                       29

<PAGE>


received on November  22,  1996.  Whittier  Ventures,  LLC and  Whittier  Energy
Company loaned $1,000,000 of the $1,850,000 that was loaned to the Company.

     In connection with such borrowings, the Company agreed to issue the lenders
warrants  that  terminate on November  30, 1999,  to purchase a total of 462,500
shares of the  Company's  common  stock at $0.25 per share and agreed to add two
directors  selected by two of the  lenders,  Whittier  Ventures LLC and Whittier
Energy Company, to the Company's Board of Directors. See "Item 10. Directors and
Executive  Officers  of the  Registrant."  The Company  further  agreed that the
Company  would  issued the lenders  warrants to purchase an  additional  185,000
shares of the  Company's  common stock if the  promissory  notes are not paid or
converted by May 31, 1997, and warrants to purchase an additional 370,000 shares
of the Company's  common stock if the promissory notes are not paid or converted
by November 30, 1997.  Such warrants would be exercisable  for a period of three
years at $0.25 per share.

     Matthew R. Hoovler, the former Vice President and Treasurer of the Company,
was awarded on August 19, 1996 a cash bonus of $70,000 as  recognition  for past
and present  services to the  Company to be used solely and  exclusively  by Mr.
Hoovler to exercise  certain  warrants  granted to him pursuant to the Company's
1989 Stock  Warrant  Plan, to purchase  250,000  shares of the Company's  common
stock at an exercise price of $0.28 per share. The bonus will not become payable
until  receipt of notice  from Mr.  Hoovler,  which  notice may not be given and
shall not be effective  until the earlier of (i) completion of a sale or farmout
by the Company of all or a portion of its interest in the Karakuduk Project,  or
(ii) the date when the Company makes a public disclosure of a sale or farmout of
the Karakuduk  Project.  At its sole option and discretion,  the Company may, in
lieu of making  payment  of such bonus to Mr.  Hoovler,  use all or a portion of
such bonus as a direct  offset to Mr.  Hoovler's  obligation to make any payment
due to the Company upon exercise of the Warrant. Anything mentioned above to the
contrary  notwithstanding,  in the event Mr.  Hoovler has exercised and paid for
the warrant prior to the date the bonus becomes payable, Chaparral will pay such
bonus directly to Mr. Hoovler,  but only upon completion of a sale or farmout of
all or a portion of its  interest in the project.  The Company  amended its 1989
Stock Warrant Plan to enable Mr. Hoovler to transfer the warrants granted to him
in 1996 to a member of his family or a trust created by him.

     See  "Termination  Arrangements  with Previous  Officers and Directors" set
forth in Item 11 for a  description  of the  termination  agreement  between the
Company and Paul V. Hoovler.

                                     PART IV


ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS
          ON FORM 8-K


     (a)(1) Financial Statements.

      Table of Contents
      Reports of Independent Auditors
      Balance Sheets--As of November 30, 1996 and 1995

                                       30

<PAGE>

          Consolidated  Statements of Operations--Years ended November 30, 1996,
             1995 and  1994  
          Consolidated  Statements of Cash Flows--Years ended November 30, 1996,
             1995, and 1994
          Consolidated  Statements  of  Changes in  Stockholders'  Equity--Years
            ended November 30, 1996, 1995 and 1994
          Notes to Consolidated  Financial Statements  
          Supplemental  Information  Disclosures  About  Oil and  Gas  Producing
             Activities (Unaudited)


          (a)(2)  Financial Statement Schedules.

                  None.

          (b) Current Reports on Form 8-K:

     The  Company  filed no reports on Form 8-K during the last  fiscal  quarter
ended November 30, 1996:

          (c)  Exhibits.

          2.1  Stock  Acquisition  Agreement  and Plan of  Reorganization  dated
               April  12,  1995  between  Chaparral  Resources,  Inc.,  and  the
               Shareholders of Central Asian  Petroleum,  Inc.,  incorporated by
               reference  to Exhibit 2.1 to the  Company's  Quarterly  Report on
               Form 10-Q for the quarter ended May 31, 1995.

          2.2  Escrow   Agreement   dated  April  12,  1995  between   Chaparral
               Resources,  Inc., the  Shareholders  of Central Asian  Petroleum,
               Inc. and Barry W. Spector,  incorporated  by reference to Exhibit
               2.2 to the  Company's  Quarterly  Report  on  Form  10-Q  for the
               quarter ended May 31, 1995.

          2.3  Amendment   to   Stock   Acquisition   Agreement   and   Plan  of
               Reorganization  dated March 10, 1996 between Chaparral Resources,
               Inc., and the Shareholders of Central Asian Petroleum, Inc.

          3.1  Restated Articles of Incorporation  and Amendments,  incorporated
               by reference  to Exhibit 3.1 to the  Company's  Annual  Report on
               Form 10-K for the fiscal year ended November 30, 1993.

          3.2  Articles of Amendment to the Restated  Articles of  Incorporation
               dated April 20, 1988, incorporated by reference to Exhibit 3.2 to
               the  Company's  Annual  Report on Form 10-K for the  fiscal  year
               ended November 30, 1993.

          3.3  Bylaws, as amended through January 3, 1997.


                                       31

<PAGE>

          3.4  Articles of Amendment to the Restated  Articles of  Incorporation
               and Amendments dated June 21, 1995,  incorporated by reference to
               Exhibit B to the Company's  Quarterly Report on Form 10-Q for the
               quarter ended May 31, 1995.

          3.5  Articles of Amendment to the Restated  Articles of  Incorporation
               and  Amendments dated  July 17, 1996,  incorporated  by reference
               to  Exhibit  3.5  to the  Company's  Registration  Statement  No.
               333-7779.

          10.1 Royalty  Participation Plan dated June 15, 1982,  incorporated by
               reference to Exhibit 10.1 to the Company's  Annual Report on Form
               10-K for the fiscal year ended November 30, 1993.

          10.2 Chaparral  Resources,  Inc. 1989 Stock Warrant Plan effective May
               1,  1989,  incorporated  by  reference  to  Exhibit  10.3  to the
               Company's  Annual  Report on Form 10-K for the fiscal  year ended
               November 30, 1993.

          10.3 Target Benefit Plan effective  December 1, 1990  incorporated  by
               reference to Exhibit 10.9 to the Company's  Annual Report on Form
               10-K for the fiscal year ended November 30, 1991.

          10.4 Deferred  Compensation and Death Benefit Plan as amended November
               15,  1991  incorporated  by  reference  to  Exhibit  10.10 to the
               Company's  Annual  Report on Form 10-K for the fiscal  year ended
               November 30, 1991.

          10.5 Promissory Note dated November 1, 1995 from Chaparral  Resources,
               Inc., to Brae Group,  Inc.,  incorporated by reference to Exhibit
               10.1 to the Company's  Current  Report on Form 8-K dated November
               1, 1995.

          10.6 Purchase Agreement, dated effective January 12, 1996, between the
               Company  and  Guntekin   Koksal   (purchase   of  CAP-G   shares)
               incorporated by reference to Exhibit 10.6 to the Company's Annual
               Report on Form 10-K for the fiscal year ended November 30, 1995.

          10.7 Letter Agreement,  dated January 3, 1996, between the Company and
               certain  stockholders of Darka Petrol Ticaret Ltd. Sti., together
               with Exhibits A--E,  incorporated by reference to Exhibit 10.7 to
               the  Company's  Annual  Report on From 10-K for the  fiscal  year
               ended November 30, 1995.

          10.8 Amendment,  effective  March 4,  1996,  to the  Letter  Agreement
               revising  the terms  pursuant  to which the Company is to acquire
               all shares of CAP(G)  stock owned by Darka  Petrol  Ticaret  Ltd.
               Sti.,  incorporated by reference to Exhibit 10.8 to the Company's
               Annual Report on From 10-K for the fiscal year ended November 30,
               1995.

                                       32

<PAGE>



         10.9  Warrant  Certificate  entitling Allen & Company to purchase up to
               1,022,000  shares of Common Stock of Chaparral  Resources,  Inc.,
               incorporated  by  reference  to  Exhibit  10.1  to the  Company's
               Current Report on Form 8-K dated April 1, 1996.

         10.10 Consulting  Agreement  dated May 14, 1996 with M-D  International
               Petroleum,  Inc.,  incorporated  by reference to Exhibit 10.10 to
               the Company's Registration Statement No. 333-7779.

         10.11 Promissory   Notes   and   Modification   of   Promissory   Notes
               incorporated by reference to Exhibit (3) to the Company's Current
               Report on Form 8-K dated November 22, 1996.

         10.12 Amendment  effective December 6, 1996 to Purchase Agreement dated
               effective  January  12, 1996  between  the  Company and  Guntekin
               Koksal.

         10.13 Severance  Agreement  dated February 12, 1997 between the Company
               and Paul V. Hoovler.

         10.14 Severance  Agreement  dated February 12, 1997 between the Company
               and Matthew R. Hoovler.

         10.15 Purchase  and Sale  Agreement  effective  January 1, 1997 between
               the Company and Conoco Inc.*

         10.16  Amendments to Chaparral Resources, Inc. Stock Warrant Plan.

         10.17 Agreement dated August 30, 1995 for  Exploration  Development and
               Production of Oil in Karakuduk  Oil Field in Mangistan  Oblast of
               the  Republic  of  Kazakhstan  between  Ministry  of Oil  and Gas
               Industries of the Republic of Kazakhstan for and on Behalf of the
               Government of the Republic of Kazakhstan  and Joint Stock Company
               of Closed Type Karakuduk Munay Joint Venture.

         10.18 License for the Right to Use the  Subsurface  in the  Republic of
               Kazakhstan.

          16   Letter dated July 23, 1996 from Grant Thornton LLP confirming the
               circumstances  pursuant  to  which  Grant  Thornton  resigned  as
               Registrant's principal independent  accountants,  incorporated by
               reference to Exhibit 16 to the Company's  Current  Report on Form
               8-K dated July 23, 1996.

          21   List of Subsidiaries of the Registrant.

          23.1 Consent of Grant Thornton LLP for S-8.

                                       33

<PAGE>


          23.2 Consent of Ernst & Young LLP for S-8.

          27   Financial Data Schedule.

     *The Exhibits to the Purchase and Sale Agreement have been omitted and will
be  provided  to the United  States  Securities  and  Exchange  Commission  upon
request.


                                       34

<PAGE>

                                   SIGNATURES

     Pursuant  to the  requirements  of  Section  13 or 15(d) 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.

                                     CHAPARRAL RESOURCES, INC.
                                     a Colorado corporation


                                     By /s/ Howard Karren
                                        ----------------------------------------
                                        Howard Karren,
                                        President, Principal Executive Officer


                                     By /s/ Arlo G. Sorensen
                                        ----------------------------------------
                                        Arlo G. S rensen,
                                        Chief Financial Officer and
                                        Principal Accounting Officer

                                     Dated: April 11, 1997

     Pursuant to the  requirements of the Securities  Exchange Act of 1934, this
report  has  been  signed  below  by the  following  persons  on  behalf  of the
Registrant and in the capacities and on the dates indicated:


Date                 Name and Title                   Signature

April 11, 1997       Howard Karren,                   /s/ Howard Karren
                     Director                         --------------------------

April 11, 1997       Peter G. Dilling,
                     Director

April 11, 1997       Jay W. McGee,                    /s/ Jay W. McGee
                     Direct                           --------------------------

April 11, 1997       Alan D. Berlin,                  /s/ Alan D. Berlin
                     Director                         --------------------------

April 11, 1997       David A. Dahl,                   /s/ David A. Dahl
                     Director                         --------------------------

April 11, 1997       Arlo G. Sorensen,                /s/ Arlo G. Sorensen
                     Director                         --------------------------


<PAGE>



                                    Contents

Reports of Independent Auditors ...............................................1

Audited Consolidated Financial Statements

Consolidated Balance Sheets ...................................................3
Consolidated Statements of Operations..........................................5
Consolidated Statements of Cash Flows..........................................6
Consolidated Statements of Changes in Stockholders' Equity.....................8
Notes to Consolidated Financial Statements.....................................9


Supplemental Information - Disclosures About Oil and Gas
   Producing Activities - Unaudited...........................................24




<PAGE>






                         Report of Independent Auditors

The Board of Directors and Stockholders
Chaparral Resources, Inc.

We have  audited  the  accompanying  consolidated  balance  sheet  of  Chaparral
Resources, Inc. as of November 30, 1996, and the related consolidated statements
of operations,  cash flows and changes in stockholders' equity for the year then
ended.  These  financial  statements  are the  responsibility  of the  Company's
management.  Our  responsibility  is to express  an  opinion on these  financial
statements based on our audit.

We conducted our audit in accordance with generally accepted auditing standards.
Those standards  require that we plan and perform the audit to obtain reasonable
assurance   about  whether  the  financial   statements  are  free  of  material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.

In our opinion,  the financial  statements  referred to above present fairly, in
all  material  respects,   the  consolidated  financial  position  of  Chaparral
Resources,  Inc. as of November 30, 1996,  and the  consolidated  results of its
operations  and its cash  flows  for the year  then  ended  in  conformity  with
generally accepted accounting principles.

The accompanying  financial  statements have been prepared  assuming the Company
will  continue  as a going  concern.  As  discussed  in Note 2 to the  financial
statements,  the  Company has  incurred  recurring  operating  losses and has no
operating  assets which are presently  generating cash to fund its operating and
capital requirements.  The Company requires significant  additional financing to
meet its financial  requirements through fiscal 1997. In addition,  as discussed
in Note 2, the Company's investee, Karakuduk-Munay,  Inc. (KKM), has been unable
to reregister with the Republic of Kazakstan, which may cause KKM to be declared
invalid and be liquidated.  These conditions raise  substantial  doubt about the
Company's ability to continue as a going concern.  Management's  plans in regard
to these matters are also  described in Note 2. 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.


                                                /s/ Ernst & Young LLP
                                                ERNST & YOUNG LLP
Denver, Colorado
April 8, 1997
                                                                               1
<PAGE>




                              REPORT OF INDEPENDENT
                          CERTIFIED PUBLIC ACCOUNTANTS

The Board of Directors and Stockholders
Chaparral Resources, Inc.

We have  audited  the  accompanying  consolidated  balance  sheet  of  Chaparral
Resources, Inc. as of November 30, 1995, and the related consolidated statements
of operations,  cash flows and changes in  stockholders'  equity for each of the
two years in the period ended November 30, 1995. These financial  statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.

We  conducted  our  audits  in  accordance  with  generally   accepted  auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion,  the financial  statements  referred to above present fairly, in
all  material  respects,   the  consolidated  financial  position  of  Chaparral
Resources,  Inc. as of November 30, 1995,  and the  consolidated  results of its
operations  and its cash  flows  for each of the two years in the  period  ended
November 30, 1995, in conformity with generally accepted accounting principles.

The accompanying  financial  statements have been prepared  assuming the Company
will  continue as a going  concern.  As shown in the financial  statements,  the
Company incurred a net loss of $704,000 during the year ended November 30, 1995.
As  discussed  in  Note 2 to the  financial  statements,  the  Company  requires
significant  additional  financing  to meet its  financial  requirements.  These
factors raise  substantial  doubt about the  Company's  ability to continue as a
going concern.  Management's plans in regard to these matters are also described
in Note 2. The financial  statements do not include any  adjustments  that might
result from the outcome of this uncertainty.


                                             /s/ Grant Thornton LLP
                                             GRANT THORNTON LLP

Denver, Colorado
January 19, 1996
                                                                               2
<PAGE>

<TABLE>
<CAPTION>
                                        Chaparral Resources, Inc.

                                       Consolidated Balance Sheets

                                                                               November 30
                                                                    -------------------------------------
                                                                        1996                    1995
                                                                    -------------------------------------
<S>                                                              <C>                       <C>         
Assets
Current assets:
   Cash and cash equivalents .............................       $    800,000              $    501,000
   Accounts receivable:
     Joint interest participants .........................              8,000                    31,000
     Oil and gas purchasers ..............................             53,000                    46,000
   Prepaid expenses ......................................             40,000                     2,000
   Oil and gas properties under agreement for sale .......            306,000                      --
                                                                 ------------               -----------
Total current assets .....................................          1,207,000                   580,000

Property and equipment--at cost:
   Oil and gas properties--full cost:
     United States:
       Subject to depletion ..............................               --                  16,149,000
       Not subject to depletion ..........................               --                      40,000
     Republic of Kazakstan (Karakuduk Field)--
       not subject to depletion ..........................         11,189,000                      --
     Less accumulated depletion and depreciation
       and impairment ....................................               --                 (15,722,000)
                                                                 ------------               -----------
                                                                   11,189,000                   467,000

   Furniture, fixtures and equipment .....................            441,000                   197,000
   Less accumulated depreciation .........................           (198,000)                 (177,000)
                                                                 ------------               -----------
                                                                      243,000                    20,000
                                                                 ------------               -----------
                                                                   11,432,000                   487,000

Other assets:
   Investment in and advances to affiliates ..............               --                   4,507,000
   Cash value of insurance and annuities .................              8,000                     8,000
   Due from Karakuduk-Munay, Inc. ........................          2,012,000                      --
   Equipment inventory ...................................             27,000                    13,000
   Other .................................................             74,000                      --
                                                                 ------------               -----------
                                                                    2,121,000                 4,528,000
                                                                 ------------               -----------
Total assets .............................................       $ 14,760,000              $  5,595,000
                                                                 ============               ===========


                                                                               3
<PAGE>


<CAPTION>

                                                                                        November 30
                                                                             -------------------------------
                                                                                  1996              1995
                                                                             -------------------------------
<S>                                                                         <C>                <C>         
Liabilities and stockholders' equity Current liabilities:
   Accounts payable:
     Trade ..............................................................   $    278,000       $    102,000
     Joint interest participants--revenue ...............................         42,000             26,000
   Accrued liabilities ..................................................         91,000             86,000
   Accounts payable--CAP-G shares .......................................        744,000               --
                                                                            ------------        -----------
Total current liabilities ...............................................      1,155,000            214,000

Long-term obligations:
   Notes payable (including $1,000,000 to related
     party) .............................................................      1,106,000            461,000
   Accrued compensation .................................................        385,000               --

Stockholders' equity:
   Common stock - authorized, 100,000,000
     shares and 25,000,000 shares at November 30,
     1996 and 1995, respectively, of $.10 par value;
      issued and outstanding, 37,526,517 and
     20,484,192 shares at November 30, 1996 and
     1995, respectively .................................................      3,753,000          2,048,000
   Capital in excess of par value .......................................     20,482,000         12,577,000
   Preferred stock - authorized, 1,000,000
      shares, no shares issued or outstanding ...........................           --                 --
   Retained earnings (deficit) ..........................................    (12,121,000)        (9,705,000)
                                                                            ------------        -----------
Total stockholders' equity ..............................................     12,114,000          4,920,000

                                                                            ------------        -----------
Total liabilities and stockholders' equity ..............................   $ 14,760,000       $  5,595,000
                                                                            ============        ===========
</TABLE>


See accompanying notes.

                                                                               4

<PAGE>

<TABLE>
<CAPTION>
                            Chaparral Resources, Inc.

                      Consolidated Statements of Operations

                                                                                            Year ended November 30
                                                                       ------------------------------------------------------------
                                                                             1996                   1995                     1994
                                                                       ------------------------------------------------------------
<S>                                                                    <C>                     <C>                     <C>         
Revenue:
   Oil and gas sales .......................................           $    147,000            $    255,000            $    374,000

Costs and expenses:
   Production costs ........................................                 37,000                 115,000                 232,000
   Write-down of oil and gas properties ....................                   --                   619,000                 416,000
   Depreciation and depletion ..............................                 25,000                  74,000                 120,000
   General and administrative ..............................              2,336,000                 166,000                  94,000
                                                                       ------------              ----------            ------------
                                                                          2,398,000                 974,000                 862,000
                                                                       ------------              ----------            ------------
Loss from operations .......................................             (2,251,000)               (719,000)               (488,000)

Other income (expense):
   Interest income .........................................                 85,000                  25,000                  13,000
   Interest expense ........................................                (90,000)                (17,000)                 (4,000)
   Exchange loss ...........................................                (12,000)                   --                      --
   Other, net ..............................................                 89,000                   7,000                   5,000
                                                                       ------------              ----------            ------------
                                                                             72,000                  15,000                  14,000
                                                                       ------------              ----------            ------------
Loss before extraordinary item .............................             (2,179,000)               (704,000)               (474,000)

Extraordinary loss on extinguishment of
   long-term debt ..........................................               (237,000)                   --                      --
                                                                       ------------              ----------            ------------
Net loss ...................................................           $ (2,416,000)           $   (704,000)           $   (474,000)
                                                                       ============              ==========            ============
Net loss per share before extraordinary
   item ....................................................           $       (.07)           $       (.04)           $       (.02)

Extraordinary loss per share ...............................           $       (.01)           $       --              $       --

Net loss per share .........................................           $       (.08)           $       (.04)           $       (.02)

Weighted average number of shares
   outstanding .............................................             32,081,382              18,865,454              15,064,856
</TABLE>

See accompanying notes.

                                                                               5
<PAGE>

<TABLE>
<CAPTION>
                                        Chaparral Resources, Inc.

                                  Consolidated Statements of Cash Flows

                                                                                             Year ended November 30
                                                                             -------------------------------------------------------
                                                                                1996                   1995                  1994
                                                                             -------------------------------------------------------
Cash flows from operating activities
Net loss .........................................................          $(2,416,000)          $  (704,000)          $  (474,000)
Adjustments to reconcile net loss to
   net cash provided by (used in) operating
   activities:
     Depreciation and depletion ..................................               25,000                74,000               120,000
     Decrease in deferred compensation ...........................                 --                    --                 (40,000)
     Write-down of oil and gas properties ........................                 --                 619,000               416,000
     Stock issued for services and bonuses .......................                 --                  27,000                 8,000
     Amortization of note discount ...............................                 --                  17,000                  --
     Loss on extinguishment of debt ..............................              237,000                  --                    --
     Changes in assets and liabilities:
       (Increase) decrease in:
         Accounts receivable .....................................               16,000               218,000                22,000
         Prepaid expenses ........................................               10,000                  --                    --
       Increase (decrease) in:
         Accounts payable ........................................              108,000               (64,000)               47,000
         Accrued liabilities .....................................             (355,000)              (59,000)               (9,000)
         Accrued compensation ....................................              385,000                  --                    --
                                                                            -----------            ----------           -----------
Net cash provided by (used in) operating
   activities ....................................................           (1,990,000)              128,000                90,000

Cash flows from investing activities
Additions to property and equipment ..............................             (208,000)              (86,000)             (255,000)
Additions to oil and gas properties ..............................             (652,000)                 --                    --
Acquisition of additional interest in
   CAP-G, net of cash acquired ...................................           (3,269,000)                 --                    --
Investment in foreign oil and gas properties .....................                 --              (1,088,000)             (256,000)
Proceeds from sale of interest in oil and gas
   properties ....................................................              161,000                41,000                71,000
Decrease in cash value of insurance
   and annuities .................................................                 --                  40,000                40,000
Decrease in minority interest ....................................                 --                 (16,000)               (1,000)
(Increase) decrease in equipment inventory .......................              (14,000)                1,000                  --
Sale (purchase) of bonds .........................................                 --                 299,000              (299,000)
Advances to Karakuduk-Munay, Inc. ................................           (1,778,000)                 --                    --
Redemption of certificates of deposit ............................                 --                  20,000               146,000
Increase in other assets .........................................              (74,000)                 --                    --
                                                                            -----------            ----------           -----------
Net cash used in investing activities ............................           (5,834,000)             (789,000)             (554,000)


                                                                               6
<PAGE>

<CAPTION>

                            Chaparral Resources, Inc.

                Consolidated Statements of Cash Flows (continued)




                                                                                            Year ended November 30
                                                                         -----------------------------------------------------------
                                                                             1996                     1995                   1994
                                                                         -----------------------------------------------------------
<S>                                                                      <C>                     <C>                    <C>      
Cash flows from financing activities
Proceeds from notes payable .................................            $ 1,650,000             $   750,000            $      --
Repayment of note payable ...................................               (750,000)                   --                     --
Proceeds from warrant exercise ..............................                316,000                    --                     --
Proceeds from issuance of capital stock .....................                   --                    94,000                260,000
Net proceeds from private placement .........................              6,907,000                    --                     --
                                                                         -----------              ----------            -----------
Net cash provided by financing
   activities ...............................................              8,123,000                 844,000                260,000
                                                                         -----------              ----------            -----------
Net increase (decrease) in cash and
   cash equivalents .........................................                299,000                 183,000               (204,000)
Cash and cash equivalents at beginning
   of year ..................................................                501,000                 318,000                522,000
                                                                         -----------              ----------            -----------
Cash and cash equivalents at end of year ....................            $   800,000             $   501,000            $   318,000
                                                                         ===========              ==========            ===========

Supplemental cash flow disclosure
   Interest paid ............................................            $    36,000             $     5,000            $     4,000

Supplemental schedule of noncash
   investing and financing activities
     Common stock issued for acquisition
       of CAP-G .............................................            $ 1,833,000             $      --              $      --
     Accounts payable--CAP-G shares .........................                744,000                    --                     --
     Common stock issued for investment
       in affiliate .........................................                   --                 3,162,000                   --
     Discount recognized for note issued
       with detachable stock warrants .......................                290,000                 306,000                   --
     Common stock issued upon
       conversion of debentures .............................                264,000                    --                   75,000

</TABLE>

See accompanying notes.

                                                                               7
<PAGE>

<TABLE>
<CAPTION>
                            Chaparral Resources, Inc.

           Consolidated Statements of Changes in Stockholders' Equity

                                                                                        
                                                                                         Capital
                                                             Common Stock               in Excess        Retained
                                                    ----------------------------         of Par          Earnings
                                                       Shares           Amount           Value           (Deficit)        Total
                                                    --------------------------------------------------------------------------------

<S>                                                 <C>            <C>              <C>              <C>               <C>         
Balance at November 30, 1993 ................       14,923,625     $  1,492,000     $  9,202,000     $ (8,527,000)     $  2,167,000
Warrants exercised for capital
   stock ....................................          650,625           65,000          195,000             --             260,000
Conversion of debentures for
   capital stock ............................          200,067           20,000           55,000             --              75,000
Capital stock issued for services ...........            8,000            1,000            6,000             --               7,000
Net loss ....................................             --               --               --           (474,000)         (474,000)
                                                  ------------      -----------      -----------     ------------       -----------
Balance at November 30, 1994 ................       15,782,317        1,578,000        9,458,000       (9,001,000)        2,035,000
Warrants exercised for capital
   stock ....................................          265,375           27,000           67,000             --              94,000
Capital stock issued for
   investment in affiliate ..................        4,400,000          440,000        2,722,000             --           3,162,000
Capital stock issued for services ...........           12,500            1,000            9,000             --              10,000
Capital stock issued for
   employee and director bonuses ............           24,000            2,000           15,000             --              17,000
Debt issuance costs--stock
   warrants issued ..........................             --               --            306,000             --             306,000
Net loss ....................................             --               --               --           (704,000)         (704,000)
                                                  ------------      -----------      -----------     ------------       -----------
Balance at November 30, 1995 ................       20,484,192        2,048,000       12,577,000       (9,705,000)        4,920,000
Warrants exercised for capital
   stock ....................................          857,325           86,000          230,000             --             316,000
Conversion of debentures for
   capital stock ............................          600,000           60,000          204,000             --             264,000
Capital stock issued for
   acquisition of additional
   interest in CAP-G ........................        1,585,000          159,000        1,674,000             --           1,833,000
Capital stock issued in private
   placement ................................       14,000,000        1,400,000        5,507,000             --           6,907,000
Debt issuance costs--stock
   warrants issued ..........................             --               --            290,000             --             290,000
Net loss ....................................             --               --               --         (2,416,000)       (2,416,000)
                                                  ------------      -----------      -----------     ------------       -----------
Balance at November 30, 1996 ................       37,526,517     $  3,753,000     $ 20,482,000     $(12,121,000)     $ 12,114,000
                                                  ============      ===========      ===========     ============       ===========
</TABLE>

See accompanying notes.


                                                                               8
<PAGE>

                            Chaparral Resources, Inc.

                   Notes to Consolidated Financial Statements

                                November 30, 1996


1. Summary of Significant Accounting Policies

Organization

Chaparral  Resources,  Inc. was incorporated in the state of Colorado on January
13, 1972,  principally to engage in the exploration,  development and production
of oil and gas  properties.  During  1996,  Chaparral  Resources,  Inc.  focused
substantially  all of its  efforts on the  exploration  and  development  of the
Karakuduk Field, located in the central Asian Republic of Kazakstan.

Principles of Consolidation and Basis of Presentation

The November 30, 1996 consolidated  financial statements include the accounts of
Chaparral Resources, Inc. and its 90% owned subsidiary,  Central Asian Petroleum
(Guernsey)  Limited ("CAP-G") (see Note 3).  Hereinafter,  Chaparral  Resources,
Inc. and CAP-G are collectively referred to as "the Company." CAP-G has a fiscal
year end of December 31. All  significant  intercompany  transactions  have been
eliminated.

In 1995, the Company's ownership in CAP-G increased from 25% to 45%. The Company
accounted for its  investment in CAP-G on the equity method in the 1994 and 1995
financial statements.

CAP-G owns a 50% interest in  Karakuduk-Munay,  Inc. ("KKM"),  a Kazakstan Joint
Stock  Company,  which is a  participant  in an agreement  for the  exploration,
development and production of oil in the Karakuduk  Field.  CAP-G, and therefore
the Company,  beginning in 1996 when the Company's  ownership in CAP-G  exceeded
50%, accounts for its investment in KKM using proportionate consolidation.

The 1994  consolidated  financial  statements  include the accounts of Chaparral
Resources,  Inc.  and its 87% owned joint  venture,  Reservoir  Creek  Gathering
System. All significant intercompany transactions have been eliminated. On April
15, 1995, Chaparral Resources, Inc. sold its 87% interest in this joint venture.

Cash and Cash Equivalents

Cash  equivalents  are defined as highly liquid  investments  purchased  with an
original maturity of three months or less.


                                                                               9
<PAGE>

                            Chaparral Resources, Inc.

             Notes to Consolidated Financial Statements (continued)


1. Summary of Significant Accounting Policies (continued)

Oil and Gas Property and Equipment

The  Company  uses  the  full  cost  method  of  accounting  for its oil and gas
properties.  All  costs  incurred  directly  associated  with  the  acquisition,
exploration  and  development of oil and gas properties are  capitalized in cost
pools for each country in which the Company  operates.  The  limitation  on such
capitalized  costs is  determined  in  accordance  with rules  specified  by the
Securities  and Exchange  Commission.  Capitalized  costs are depleted using the
units of production method.

Sales of Proved Oil and Gas Property

Sales of oil and gas properties,  whether or not being amortized currently,  are
accounted  for as  adjustments  of  capitalized  costs,  with  no  gain  or loss
recognized unless such adjustments  significantly alter the relationship between
capitalized  costs and proved reserves of oil and gas. A significant  alteration
would not  ordinarily be expected to occur for sales  involving less than 25% of
the reserve  quantities of a given cost center. If gain or loss is recognized on
such a sale,  total  capitalized  costs  within the cost  center  are  allocated
between  the  reserves  sold and  reserves  retained  on the same  basis used to
compute amortization,  unless there are substantial economic differences between
the properties  sold and those  retained,  in which case  capitalized  costs are
allocated on the basis of the relative fair values of the properties.

Oil and Gas Properties Not Subject to Depletion

Costs  associated  with  acquisition  and evaluation of unproved  properties are
excluded  from the  amortization  computation  until it is  determined if proved
reserves can be attributed to the properties.  These unevaluated  properties are
assessed  annually for possible  impairment and the amount impaired,  if any, is
added to the  amortization  base.  Costs of exploratory dry holes and geological
and  geophysical  costs  not  directly  associated  with  specific   unevaluated
properties are added to the amortization base as incurred.

Sales of Unproved Properties

Proceeds  received from drilling  arrangements  are credited to the  appropriate
cost center and  recognized  as a lower  amortization  provision as reserves are
produced.


                                                                              10

<PAGE>

                            Chaparral Resources, Inc.

             Notes to Consolidated Financial Statements (continued)



1. Summary of Significant Accounting Policies (continued)

Depreciation of Other Property and Equipment

Furniture, fixtures and equipment are depreciated using the straight-line method
over estimated useful lives which range from three to ten years.

Administrative Overhead Reimbursement

The Company, as operator of drilling and/or producing properties, was reimbursed
by  the  nonoperators  for  administration,  supervision,  office  services  and
warehousing  costs on an annually  adjusted fixed rate basis per well per month.
These charges are applied as a reduction of general and administrative  expenses
for purposes of the statement of operations.

Income Taxes

The Company  accounts  for income  taxes under the  provisions  of  Statement of
Financial Accounting Standards ("SFAS") Statement No. 109, Accounting for Income
Taxes,  which require that taxes be provided on the liability  method based upon
the tax rate at which items of income and expense are  expected to be settled in
the Company's tax return.

Earnings Per Common Share

Earnings (loss) per common and common  equivalent share is based on the weighted
average number of shares  outstanding.  Fully diluted earnings per share are not
presented because the exercise of stock warrants would be antidilutive.

New Accounting Standards

In  March  1995,  the  Financial  Accounting  Standards  Board  ("FASB")  issued
Statement No. 121,  Accounting for the  Impairment of Long-Lived  Assets and for
Long-Lived  Assets to Be Disposed Of,  which  requires  impairment  losses to be
recorded on long-lived  assets used in operations  when indicators of impairment
are present and the  undiscounted  cash flows estimated to be generated by those
assets  are less  than the  assets'  carrying  amount.  Statement  No.  121 also
addresses the accounting  for  long-lived  assets to be disposed of. The Company
will adopt  Statement No. 121 in the first quarter of 1997 and, based on current
circumstances, does not believe the effect of adoption will be material.


                                                                              11

<PAGE>

                                        Chaparral Resources, Inc.

                          Notes to Consolidated Financial Statements (continued)



1. Summary of Significant Accounting Policies (continued)

In October 1995, the FASB issued  Statement No. 123,  Accounting for Stock-Based
Compensation.  Statement No. 123 is applicable for fiscal years  beginning after
December 15, 1995 and gives the option to follow either fair value accounting or
Accounting  Principles  Board  Opinion No. 25,  Accounting  for Stock  Issued to
Employees ("APB 25"), and related Interpretations.

The Company has elected to continue to follow APB 25 and related Interpretations
in accounting for outstanding stock options.  Under APB 25, because the exercise
price of the Company's  stock options  equals or exceeds the market price of the
underlying  stock on the date of grant, no compensation is recognized.  However,
the Company will be required to provide fair value disclosures relating to stock
options effective with the year ending November 30, 1997.

Fair Value of Financial Instruments

All of the Company's financial instruments, including cash and cash equivalents,
trade receivables,  notes receivable,  and notes payable, have fair values which
approximate  their  recorded  values as they are either  short-term in nature or
carry interest rates which approximate market rates.

Use of Estimates

The preparation of financial  statements in conformity  with generally  accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities,  disclosure of contingent
assets and liabilities at the date of the financial  statements and the reported
amounts of revenues and expenses  during the reporting  period.  Actual  results
could differ from those estimates.

Risks and Uncertainties

The ability of KKM to realize the  carrying  value of its assets is dependent on
being able to extract,  transport and market  hydrocarbons.  Currently,  exports
from the  Republic of  Kazakstan  are  restricted  since they are  dependent  on
limited  transport  routes and, in  particular,  access to the Russian  pipeline
system. Access to such routes is currently  restricted.  Domestic markets in the
Republic of Kazakstan currently do not permit world market price to be obtained.
Management believes, however, that over the life of the project,  transportation
restrictions  will be alleviated and prices will be achievable for  hydrocarbons
extracted to allow full recovery of the carrying value of its assets.


                                                                              12
<PAGE>



                            Chaparral Resources, Inc.

             Notes to Consolidated Financial Statements (continued)


2. 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 November  30,  1996,
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 Kazakstan,
which will require significant additional funding.

The Company has incurred recurring  operating losses and has no operating assets
which  are  presently   generating  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 1997. Should the Company not meet its capital  requirements under
the license agreement to develop the Karakuduk Field, the Company's rights under
the agreement may 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 can be obtained on terms  favorable or
affordable to the Company.

The Company has a 45%  beneficial  interest in KKM, which owns 100% of the right
to develop the Karakuduk Field (Note 4). The Company's  continued existence as a
going concern is dependent upon the success of future  operations,  which is, in
the near term,  dependent on the  successful  financing and  development  of the
Karakuduk Field, of which there is no assurance.

On February 1, 1997,  KKM was informed that a Kazakstan  Presidential  Edict had
been issued announcing the liquidation of Munaygaz, the government-owned company
which holds a 20% interest in KKM. As a result of this action, KKM was unable to
complete its re-registration as required by Kazakstan regulations,  resulting in
the risk that  applicable  judicial  bodies could initiate legal  proceedings to
declare KKM invalid, which could lead to liquidation.  Management of the Company
believes,  based on verbal assurances from Kazakstan authorities,  the Kazakstan
government  will allow the  assignment  of the Munaygaz  interests and allow the
re-registration to occur and that KKM will not be declared invalid.

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.



                                                                              13
<PAGE>


                            Chaparral Resources, Inc.

             Notes to Consolidated Financial Statements (continued)



3. Acquisition of Additional Interest in CAP-G

In  September  1994,  the  Company  acquired  a  25%  interest  in  CAP-G,  with
headquarters in Ankara, Turkey. CAP-G has a 50% interest in KKM, which owns 100%
of the right to develop the Karakuduk Field.

In April 1995, the Company acquired all of the stock of Central Asian Petroleum,
Inc. ("CAP-D"),  in exchange for 4,400,000 shares of the Company's common stock.
Of the 4,400,000  shares issued,  4,250,000 shares were to be held in escrow and
released from time to time in connection  with the  development of the Karakuduk
Field.  Of the shares held in escrow,  3,000,000  shares have been  released and
delivered. As a result of the acquisition,  the Company's beneficial interest in
CAP-G increased to 45%.

During  1996,  the Company  acquired an  additional  45%  interest in CAP-G from
various entities,  increasing the Company's  ownership  interest in CAP-G to 90%
and  its  beneficial  interest  in KKM to  45%.  Total  consideration  for  this
acquisition  was  approximately  $6,058,000,  consisting  of $3,481,000 in cash,
$1,833,000  from the  issuance  of  1,585,000  shares of its common  stock and a
purchase  commitment  for the remaining  $744,000.  The Company paid $200,000 of
this commitment in December 1996. The Company was to pay the remaining amount on
or before March 11,  1997.  The Company is  currently  negotiating  to obtain an
extension of the due date of the  remaining  payment.  The Company has accounted
for this increase in ownership  percentage in CAP-G under the purchase method of
accounting,  and has  allocated  substantially  all the  purchase  price  to the
Karakuduk Field.

The Company has the option to acquire the remaining 10% interest of CAP-G shares
for an additional $1,625,000 and 200,000 shares of the Company's common stock at
any time following completion of the initial purchase, and prior to December 11,
1997.

4. Oil and Gas Properties--Full Cost

KKM has undertaken  certain  appraisal and feasibility  work in 1996 in order to
ascertain the most appropriate  future  development and drilling program for the
Karakuduk Field in Kazakstan.  The results are still being  analyzed.  Until the
future  program  has  been  agreed  upon,  no  additional  development  work  or
hydrocarbon production will occur. The estimated future development  expenditure
is  significant  in  order  to  ascertain  the  quantities  of  proved  reserves
attributable to the Karakuduk Field.

All costs  capitalized  related to the Karakuduk license are included in oil and
gas properties not subject to depletion.


                                                                              14
<PAGE>


                                                       Chaparral Resources, Inc.

                          Notes to Consolidated Financial Statements (continued)


4. Oil and Gas Properties--Full Cost (continued)

Management fees related to salary costs of individuals  directly associated with
exploration activity on the Karakuduk Field have been capitalized along with the
license acquisition costs and geological and geophysical expenditures.  No basis
for  allocation of other  overhead costs has been developed by the management of
KKM and hence such overhead costs are expensed as incurred.

While the future  ability of the Company to export  hydrocarbons  and  therefore
realize world market  prices is uncertain  under  current  restricted  transport
options in the Republic of Kazakstan,  management believes that over the life of
the project as a whole, future cash flows justify the carrying amount of the oil
and gas  properties.  Therefore,  no impairment  provision has been reflected in
these financial statements.

5. Long-Term Debt

Long-term  obligations  at November  30, 1996  consisted  of  convertible  notes
payable to private corporations and individuals in the amount of $1,350,000.  Of
the $1,350,000, $1,000,000 was received from two private companies, one of which
is a beneficial owner of over 5% of the outstanding common stock of the Company.
Under the terms of the notes,  the Company agreed to add two directors  selected
by the private companies to the Company's Board of Directors.  The notes are due
on the earlier of May 31, 1998 or the third  business day  following the receipt
by the Company of any proceeds from one of the following  sources:  (1) the sale
or issuance of its securities,  or (2) any debt financing provided or guaranteed
by the Overseas Private  Investment  Corporation or other  governmental  entity.
Interest is payable monthly at a rate of 8%.

As additional  consideration for these notes, the Company issued to the holders,
warrants to purchase  337,500  shares of the Company's  common stock at $.25 per
share,  exercisable  at any time, but no later than November 30, 1999. The notes
have been  discounted  by the fair value of the  warrants.  The discount will be
amortized  over the life of the notes.  The  following is a summary of the notes
payable at November 30, 1996:

     Notes payable                           $1,350,000
     Less unamortized discount                  244,000
                                             ----------
                                             $1,106,000
                                             ==========

                                                                              15

<PAGE>

                            Chaparral Resources, Inc.

             Notes to Consolidated Financial Statements (continued)


5. Long-Term Debt (continued)

The notes are subject to a provision whereby,  if they are not repaid by May 31,
1997,  the  Company  will issue  135,000  additional  warrants  to the  holders.
Furthermore,  if the notes are not repaid before  November 30, 1997, the Company
is required to issue 270,000 additional warrants to the holders.

Aggregate maturities of long-term debt as of November 30, 1996 are as follows:

1997                                                  $  --
1998                                                  1,350,000

During 1995, the Company  issued a note payable to a private  corporation in the
amount of  $750,000.  As  additional  consideration  for this note,  the Company
issued to the holder warrants to purchase 500,000 shares of the Company's common
stock,  and to a private  corporation,  as a finder's fee,  warrants to purchase
200,000  shares,  at $.25 per share,  exercisable at any time, but no later than
October 30, 1998. The note was  discounted by the difference  between the market
value of the  Company's  common  stock on the date of issuance  and the exercise
price of the  warrants.  During 1996,  the note was repaid by the Company at the
face value of  $750,000.  The Company  has  recorded  an  extraordinary  loss on
extinguishment of debt for the unamortized discount of approximately $237,000.

6. Common Stock and Stock Warrants

Stock Warrant Plan

During  1989,  the Board of  Directors  approved  a stock  warrant  plan for key
employees and directors. The Company has reserved 1,175,000 shares of its common
stock for issuance under the plan. Warrants must be granted and exercised within
a 10-year  period  ending  April 30, 1999.  The exercise  price must be at least
equal to the fair  market  value of the  Company's  common  stock on the date of
grant.

Immediately  following approval of the plan by the Board of Directors,  warrants
for 1,175,000  shares were granted with an exercise price of $.28 per share. The
plan was approved in 1990 by the  Company's  stockholders.  Warrants for 225,000
and 100,000  shares were exercised for values of $63,000 and $28,000 during 1996
and 1995, respectively.


                                                                              16
<PAGE>


                            Chaparral Resources, Inc.

             Notes to Consolidated Financial Statements (continued)


6. Common Stock and Stock Warrants (continued)

Stock Offering

During  1994,  650,625 of the  warrants  issued in the  Company's  1993  private
placement  were  exercised  for the  purchase  of shares of  common  stock.  The
exercise price was $.40 per share, for a total of $260,000.

During  1995,  165,375 of the  warrants  issued in the  private  placement  were
exercised  for the purchase of shares of common  stock.  The exercise  price was
$.40 per share, for a total of $66,000.

During  1996,  632,325 of the  warrants  issued in the  private  placement  were
exercised at an exercise price of $.40 per share, for a total of $252,930. As of
November  30,  1996,  all warrants  issued in  connection  with the 1993 private
placement have been exercised.

During  1996,  the Company sold  14,000,000  shares of common stock in a private
placement  at a price  of  $.50  per  share.  In  connection  with  the  private
placement, the Company issued warrants to purchase 1,022,000 shares to the sales
agent as a commission,  at an exercise  price of $.25 per share.  As of November
30, 1996, no warrants have been exercised.

The following table  summarizes all stock purchase warrant activity for the year
ended November 30, 1996:

<TABLE>
<CAPTION>
                                                     Number of         Exercise
                                                      Stock              Price
                                                     Warrants            Range
                                                    ----------------------------

<S>                                                  <C>              <C>
     Outstanding, November 30, 1995 .............    2,407,325        $.25 - $.40
     Granted ....................................    1,439,500        $.25 - $.40
     Exercised ..................................     (857,325)       $.28 - $.40
                                                    ----------         ----------
     Outstanding, November 30, 1996 .............    2,989,500        $.25 - $.28
                                                    ==========         ==========
</TABLE>


                                                                              17
<PAGE>

                            Chaparral Resources, Inc.

             Notes to Consolidated Financial Statements (continued)



7. Income Taxes

The following is a summary of the provision for income taxes:

<TABLE>
<CAPTION>
                                                  Year ended November 30
                                           -------------------------------------
                                              1996          1995         1994
                                           -------------------------------------

<S>                                       <C>           <C>           <C>       
Income taxes (benefit) computed
  at federal statutory rate ..........    $(762,000)    $(241,000)    $(161,000)
Change in asset valuation
  allowance ..........................      848,000       298,000       256,000
Other ................................      (86,000)      (57,000)      (95,000)
                                          ---------      --------     ---------
Income taxes .........................    $    --       $    --       $    --
                                          =========      ========     =========
</TABLE>

The components of the Company's  deferred tax assets and liabilities  under FASB
No. 109 are as follows:

<TABLE>
<CAPTION>
                                              Year ended November 30
                                       -------------------------------------
                                          1996          1995         1994
                                       -------------------------------------
<S>                                   <C>            <C>            <C>        
Deferred tax assets:
  Net operating loss
     carryforwards ................   $ 4,958,000    $ 4,131,000    $ 3,934,000
  Full cost pool capitalization ...       267,000        246,000        145,000
  Valuation allowance .............    (5,225,000)    (4,377,000)    (4,079,000)
                                      -----------     ----------     ----------
Deferred tax assets ...............   $      --      $      --      $      --
                                      ===========     ==========     ==========
</TABLE>

There  were no  deferred  tax  assets or income  tax  benefits  recorded  in the
financial statements for net deductible  temporary  differences or net operating
loss  carryforwards  due to the fact that the  realization  of the  related  tax
benefits is not considered likely.

At November 30, 1996, the Company has tax loss  carryforwards  of  approximately
$14,500,000  available to offset future taxable income. These carryforwards will
expire  at  various  times  between  1997 and 2011.  The  Company  has  issued a
significant  number of shares of common stock during the year ended November 30,
1996 and has also issued warrants. The Company is also currently negotiating for
additional capital which, if successful, will require additional shares of stock
to be issued. The changes in ownership may significantly restrict the use of net
operating loss  carryforwards.  At November 30, 1996, unused statutory depletion


                                                                              18
<PAGE>


                            Chaparral Resources, Inc.

             Notes to Consolidated Financial Statements (continued)


7. Income Taxes (continued)

carryforwards,  which have unlimited duration,  are approximately  $567,000. The
unused investment tax credit carryover was approximately $86,000 at November 30,
1996 and expires  through 2000. The loss  carryforward  at November 30, 1996 for
financial  reporting  purposes  is  approximately  $11,264,000.  The  difference
between the loss  carryforward  for financial  reporting and income tax purposes
results  principally  from the  difference  in book and tax basis of oil and gas
properties.

8. Related Party Transactions

The Company paid a director  $24,000  during 1995 and 1994 for public  relations
consulting services.

During 1996, the Company paid a basic consulting fee of  approximately  $500,000
to MD Petroleum ("MDI"), a private company of which the stockholders include two
directors  of the  Company,  for  assistance  in seeking  means for  meeting the
Company's funding obligation for the Karakuduk Project.

The Company  leased  office space under a  noncancelable  operating  lease which
expired on March 31, 1997.  Beginning  April 1, 1997,  the Company leases office
space with MDI at a rate of approximately  $2,000 per month.  This lease expires
in November 1997.

Net rent expense was $46,000 for 1996,  $36,000 for 1995,  and $37,000 for 1994.
Related  party  sublease  income  included in rent  expense was $6,000 for 1994.
There was no sublease income in 1995 or 1996.

9. Major Customers

The Company is presently  engaged in exploration  for and development of oil and
gas. The Company sells its production  under contracts with various  purchasers,
with certain domestic purchasers accounting for sales of 10% or more per year as
follows:

          1996                            32%
          1995                            16%
          1994                            15%, 13% and 11%


                                                                              19

<PAGE>

                            Chaparral Resources, Inc.

             Notes to Consolidated Financial Statements (continued)


10. Royalty Participation Plan

During 1982, the Company adopted a Royalty  Participation Plan for the employees
of the  Company.  Under the plan,  the Company may  contribute  to a trust fund,
royalty  interests  acquired  by the  Company  together  with  any  proceeds  of
production  received  by the  Company  which are  attributable  to such  royalty
interests.  The net income of the trust fund will be  distributed  yearly to the
participants   based  on  years  of  service  and   position  in  the   Company.
Distributions were $12,000 for 1996, $12,000 for 1995 and $10,000 for 1994.

In February  1997,  as part of the  severance  agreement  with the former  Chief
Executive  Officer  of the  Company  (see Note 14),  the  Company  assigned  its
interest  in the  Royalty  Participation  Plan  to the  former  Chief  Executive
Officer.

11. Accrued Compensation

On August 19, 1996,  the Company's  Board of Directors  awarded the former Chief
Executive  Officer and the former Vice  President  of the Company  cash  bonuses
totaling  $210,000 as  recognition  for past and present  services to be used to
exercise  certain  warrants  granted in connection with the Company's 1989 Stock
Warrant  Plan.  These  bonuses will not become  payable until the earlier of (i)
completion  of a sale or  farmout  by the  Company  of all or a  portion  of its
interest in the  Karakuduk  Project,  or (ii) the date when the Company  makes a
public disclosure of a sale or farmout of the Karakuduk Project.

In connection  with the  appointment of Mr. Howard Karren as the Chairman of the
Board of Directors of the Company  during  fiscal  1996,  the Company  agreed to
transfer to Mr. Karren,  or his designee,  350,000 shares of restricted stock of
the Company at a future date  selected by Mr.  Karren.  The Company has recorded
accrued compensation for this transaction in the amount of $175,000.

12. Defined Contribution Plans

Effective December 31, 1990, the Company adopted a new defined contribution plan
(the "Plan") which covers all full-time  eligible  employees.  Contributions are
determined  as a percent  of each  covered  employee's  salary and are funded as
accrued.  Plan contributions for the Company were $27,000 in 1995 and $26,000 in
1994,  of which  $20,000  in 1995 and  $20,000 in 1994 was  attributable  to the
President of the Company.


                                                                              20
<PAGE>

                            Chaparral Resources, Inc.

             Notes to Consolidated Financial Statements (continued)



12. Defined Contribution Plans (continued)

The  Company  also  adopted a 401(k)  plan  covering  all  full-time  employees,
effective  January 1,  1991.  Employee  contributions  are in the form of salary
reductions up to the maximum  percentage  allowable  under the Internal  Revenue
Code. There are no employer matching contributions. During 1996, the Plan merged
into the 401(k) plan; as such, there were no  contributions  made by the Company
during 1996.

13. Commitments and Contingencies

Under the terms of the license  agreement,  approved by the  Ministry of Oil and
Gas  Industries of the Republic of Kazakstan,  granting KKM the right to develop
the  Karakuduk  Field,  KKM has  committed to minimum  capital  expenditures  of
approximately $10 million by August 31, 1997, $35 million by August 31, 1998 and
$12 million by August 31, 1999.

14. Subsequent Events

Issuance of Note Payable

On December 6, 1996, the Company entered into a $500,000 note payable  agreement
with a private  company.  The note is due by May 29, 1998, or the third business
day following the Company's  receipt of a minimum of $1,850,000  from one of the
following  sources:  (1) the sale or  issuance of its  securities;  (2) any debt
financing provided or guaranteed by the Overseas Private Investment  Corporation
or other governmental entity; (3) the sale or farmout of assets for cash; or (4)
any other form of  financing.  Interest  is payable  monthly at a rate of 8%. In
connection  with the  issuance  of this note,  the  Company  issued  warrants to
purchase  125,000  shares  of the  Company's  common  stock to the  holder.  The
exercise  price of the warrants is $.25 per share,  exercisable at any time, but
no later  than  November  30,  1999.  The note is also  subject  to a  provision
whereby,  if the note is not repaid by May 31, 1997 and November  30, 1997,  the
Company  is  required  to  issue   50,000  and  100,000   additional   warrants,
respectively, to the holder.

Severance Agreement

Paul V.  Hoovler,  the former  Chief  Executive  Officer  and  President  of the
Company,  entered  into a  severance  agreement  ("Agreement")  with the Company
effective February 12, 1997. Pursuant to the Agreement, Mr. Hoovler receives his
salary and unpaid  vacation time accrued  through  February 12, 1997.  Also, the


                                                                              21
<PAGE>


                            Chaparral Resources, Inc.

             Notes to Consolidated Financial Statements (continued)


14. Subsequent Events (continued)

Company  agreed to amend the  Company's  1989 Stock  Warrant  Plan to enable Mr.
Hoovler  to  transfer  the  warrants  granted  to him in 1996 to a member of his
family or a trust created by him.

Further,  Mr.  Hoovler was granted  warrants to purchase  100,000  shares of the
Company's  common stock at an exercise price of $.85 per share,  for a period of
four years,  and warrants to purchase  100,000  shares of the  Company's  common
stock at an exercise price of $1.25 per share that become exercisable on January
1, 1998, and remain exercisable for a period of four years from such date.

Also, pursuant to the Agreement, the Company agreed to assign to Mr. Hoovler, or
an entity controlled by Mr. Hoovler,  the existing  overriding  royalty interest
("ORRI") that the Company holds in approximately 89 wells.  Such assignment will
be for a three-year  period. In exchange for the assignment,  Mr. Hoovler agreed
to pay a former  employee of the Company 10% of the net revenues  received  from
such ORRI during the three-year period.

Uzbekistan Project

The  Company has been  negotiating  an  agreement  pursuant to which the Company
would  acquire 100% of the issued and  outstanding  capital stock of MDI. At the
time of the  acquisition,  the only  asset  that MDI  would  have  would be a 5%
interest in a joint venture that Enron Oil & Gas Uzbekistan,  Ltd. is attempting
to negotiate  for the  development  of natural gas fields in  Uzbekistan.  It is
currently  contemplated that if the agreement is consummated,  the Company would
issue  MDI's  stockholders  an as of yet  undetermined  number  of shares of the
Company's common stock in exchange for their MDI shares. On January 8, 1997, the
Company  agreed  to  issue  180,000  shares  of the  Company's  common  stock in
consideration  for the exclusive right,  until July 7, 1997, to acquire MDI. The
Company also granted Enron Oil & Gas Uzbekistan,  Ltd.  registration rights with
respect to the 180,000 shares. In the interim, the principal shareholders of MDI
have  agreed  that if the  Company  does not  acquire  MDI by July 7, 1997,  the
principal  stockholders  will transfer  180,000  shares of the Company's  common
stock owned by them to the Company to replace the 180,000  shares  issued by the
Company to Enron Oil & Gas Uzbekistan, Ltd.


                                                                              22

<PAGE>

                            Chaparral Resources, Inc.

             Notes to Consolidated Financial Statements (continued)


14. Subsequent Events (continued)

Sale of Domestic Oil and Gas Properties

Effective  January 1, 1997,  the Company  entered  into an agreement to sell its
domestic oil and gas  properties  for a sales price of  approximately  $270,000.
Accordingly,  the Company's domestic oil and gas properties have been classified
as oil and gas  properties  under  agreement  for sale in the  balance  sheet at
November 30, 1996.





                                                                              23
<PAGE>


            Supplemental Information - Disclosures About Oil and Gas
                        Producing Activities - Unaudited

The following  supplemental  information regarding the oil and gas activities of
the Company is presented pursuant to the disclosure requirements  promulgated by
the  Securities and Exchange  Commission  and Statement of Financial  Accounting
Standards ("SFAS") No. 69, Disclosures About Oil and Gas Producing Activities.

As discussed in Note 14, the Company entered into an agreement effective January
1, 1997 to sell its domestic oil and gas properties.  Accordingly, the Company's
domestic oil and gas properties  have been  classified as oil and gas properties
under an agreement for sale at November 30, 1996 and no  disclosures  for proved
reserves or future cash flows have been made at November 30, 1996.  In addition,
because of the uncertainties surrounding the development of the Karakuduk Field,
no proved reserves have been attributed to the field.

The following estimates of reserve quantities and related  standardized  measure
of discounted  net cash flow are estimates  only,  and do not purport to reflect
realizable values or fair market values of the Company's  reserves.  The Company
emphasizes that reserve estimates are inherently imprecise and that estimates of
new  discoveries  are  more  imprecise  than  those  of  producing  oil  and gas
properties.  Additionally,  the price of oil has been very volatile and downward
changes in prices can  significantly  affect  quantities  that are  economically
recoverable.  Accordingly,  these  estimates  are  expected  to change as future
information  becomes  available and the changes may be  significant.  All of the
Company's proved reserves are located in the United States.

Proved  reserves  are  estimated  reserves  of crude  oil and  natural  gas that
geological and engineering  data  demonstrate  with  reasonable  certainty to be
recoverable in future years from known  reservoirs  under existing  economic and
operating  conditions.  Proved  developed  reserves  are  those  expected  to be
recovered through existing wells, equipment and operating methods.

The  standardized  measure of  discounted  future net cash flows is  computed by
applying  year-end  prices of oil and gas (with  consideration  of price changes
only to the extent provided by contractual arrangements) to the estimated future
production of proved oil and gas reserves,  less estimated  future  expenditures
(based on year-end  costs) to be incurred in developing and producing the proved
reserves,  less estimated  future income tax expenses.  The estimated future net
cash  flows  are  then  discounted  using a rate of 10% a year  to  reflect  the
estimated timing of the future cash flows.



                                                                              24
<PAGE>


            Supplemental Information - Disclosures About Oil and Gas
                  Producing Activities - Unaudited (continued)

<TABLE>
<CAPTION>
                      Proved Oil and Gas Reserve Quantities
                         (All Within the United States)


                                                            Oil          Gas
                                                          reserves     reserves
                                                           (bbls.)      (Mcf.)
                                                         -----------------------

<S>                                                       <C>         <C>      
Balance November 30, 1993 ..........................      141,748     2,305,142
Revisions of previous estimates ....................         (125)     (455,946)
Sales of reserves ..................................      (20,392)      (95,714)
Extensions, discoveries and other additions ........        1,745     1,700,289
Production .........................................      (11,286)     (159,041)
                                                       ----------    ----------
Balance November 30, 1994 ..........................      111,690     3,294,730
Revisions of previous estimates ....................       (1,438)      (98,536)
Sales of reserves ..................................      (36,425)      (10,228)
Extensions, discoveries and other additions ........          582         9,375
Production .........................................       (8,224)     (132,924)
                                                       ----------    ----------
Balance November 30, 1995 ..........................       66,185     3,062,417
Revisions of previous estimates ....................      (58,749)       18,703
Sales of reserves ..................................         (531)      (34,417)
Extensions, discoveries and other additions ........          267         6,638
Production .........................................       (1,737)      (96,906)
Transfer to oil and gas properties under agreement
   for sale ........................................       (5,435)   (2,956,435)
                                                       ----------    ----------
Balance November 30, 1996 ..........................         --            --
                                                       ==========    ==========

Proved developed reserves:
   November 30, 1994 ...............................       52,740     1,103,203
   November 30, 1995 ...............................        7,235       870,890
   November 30, 1996 ...............................         --            --

</TABLE>



                                                                              25
<PAGE>

            Supplemental Information - Disclosures About Oil and Gas
                  Producing Activities - Unaudited (continued)

<TABLE>
<CAPTION>
            Standardized Measure of Discounted Future Net Cash Flows
           and Changes Therein Relating to Proved Oil and Gas Reserves


                                                Year ended November 30
                                       -----------------------------------------
                                           1996          1995           1994
                                       -----------------------------------------

<S>                                  <C>             <C>            <C>        
Future cash inflows ..............   $        --     $ 3,449,000    $ 5,041,000
Future production and development
   costs .........................            --      (2,478,000)    (3,051,000)
Future income tax expenses .......            --            --             --
                                       -----------    ----------     ----------
Future net cash flows ............            --         971,000      1,990,000
10% annual discount for estimated
   timing of cash flows ..........            --        (544,000)      (907,000)
                                       -----------    ----------     ----------
Standardized measure of discounted
   future net cash flows .........   $        --     $   427,000    $ 1,083,000
                                       ===========    ==========     ==========
</TABLE>

The following are the principal  sources of changes in the standardized  measure
of discounted future net cash flows:

<TABLE>
<CAPTION>
                                                  Year ended November 30
                                        ----------------------------------------
                                            1996          1995           1994
                                        ----------------------------------------

<S>                                    <C>            <C>            <C>        
Beginning balance ..................   $   427,000    $ 1,084,000    $ 1,360,000
Expenditures which reduced future
   development costs ...............          --           (3,000)      (146,000)
Acquisition of proved reserves .....          --             --             --
Sale of proved reserves ............       (54,000)       (81,000)      (102,000)
Sales and transfers of oil and gas
   produced, net of production costs      (110,000)      (140,000)      (143,000)
Net increase (decrease) in price ...       860,000       (593,000)      (568,000)
Net decrease in costs ..............          --          247,000          3,000
Extensions and discoveries .........        17,000        165,000        526,000
Revisions of previous quantity
   estimates .......................       (91,000)       (38,000)      (214,000)
Accretion of discount ..............        99,000        108,000        136,000
Effect of change in timing and other       253,000       (322,000)       232,000
Transfer to oil and gas properties
   under agreement for sale ........    (1,401,000)          --             --
                                       -----------     ----------     ----------
Ending balance .....................   $      --      $   427,000    $ 1,084,000
                                       ===========     ==========     ==========
</TABLE>


                                                                              26
<PAGE>


            Supplemental Information - Disclosures About Oil and Gas
                  Producing Activities - Unaudited (continued)

<TABLE>
<CAPTION>

      Standardized Measure of Discounted Future Net Cash Flows and Changes
           Therein Relating to Proved Oil and Gas Reserves (continued)

                                                  Year ended November 30
                                          --------------------------------------
                                              1996           1995          1994
                                          --------------------------------------
<S>                                       <C>           <C>           <C>        
Costs Incurred
Property acquisition costs--
   unproved leases ....................   $      --     $      --     $     7,000
Property acquisition costs--
   proved properties ..................          --          30,000        37,000
Exploration costs .....................                        --            --
Development costs .....................          --          30,000       146,000

Production Costs
Lease operating expense ...............   $    26,000   $    95,000   $   176,000
Production tax ........................        11,000        20,000        56,000
                                          -----------    ----------   -----------
                                          $    37,000   $   115,000   $   232,000
                                          ===========    ==========   ===========

Other Information
Net revenue (revenue less production
   costs, ad valorem and severance
   taxes) .............................   $   110,000   $   140,000   $   142,000
Amortization per equivalent barrel
   of production* .....................          1.40          2.33          3.18
Price per bbl. (oil) ..................         17.53         14.27         12.75
Production cost per bbl. (oil) ........          2.13          6.34          8.21
Price per Mcf. (gas) ..................          1.17          1.02          1.44
Production cost per Mcf. (gas) ........           .34           .47           .86
Price per net equivalent bbl.* ........          8.22          8.33          9.86
Production cost per net equivalent bbl           2.07          3.78          6.06

</TABLE>

*   Natural gas converted to equivalent barrels using conversion ratio of 6:1.


                                                                              27
<PAGE>

            Supplemental Information - Disclosures About Oil and Gas
                  Producing Activities - Unaudited (continued)

<TABLE>
<CAPTION>

      Standardized Measure of Discounted Future Net Cash Flows and Changes
           Therein Relating to Proved Oil and Gas Reserves (continued)

                                                 Year ended November 30
                                          --------------------------------------
                                              1996       1995        1994
                                          --------------------------------------
<S>                                      <C>          <C>          <C>       
Present value of proved reserves:
Proved developed ......................  $     --     $  266,000   $  650,000
Proved undeveloped ....................        --        161,000      433,000
                                          ----------   ---------    ---------
Total .................................  $     --     $  427,000   $1,083,000
                                          ==========   =========    =========

Future net revenues of proved reserves:
  Proved developed ....................  $     --     $  383,000   $  950,000
  Proved undeveloped ..................        --        588,000    1,040,000
                                          ----------   ---------   ----------
  Total ...............................  $     --     $  971,000   $1,990,000
                                          ==========   =========   ==========
</TABLE>



                                                                              28

<PAGE>
                                 EXHIBIT INDEX

Exhibit        Description                                              Page No.
-------        -----------                                              --------

   2.1  Stock  Acquisition  Agreement  and Plan of  Reorganization  dated   N/A
        April  12,  1995  between  Chaparral  Resources,  Inc.,  and  the
        Shareholders of Central Asian  Petroleum,  Inc.,  incorporated by
        reference  to Exhibit 2.1 to the  Company's  Quarterly  Report on
        Form 10-Q for the quarter ended May 31, 1995.

   2.2  Escrow   Agreement   dated  April  12,  1995  between   Chaparral   N/A
        Resources,  Inc., the  Shareholders  of Central Asian  Petroleum,
        Inc. and Barry W. Spector,  incorporated  by reference to Exhibit
        2.2 to the  Company's  Quarterly  Report  on  Form  10-Q  for the
        quarter ended May 31, 1995.

   2.3  Amendment   to   Stock   Acquisition   Agreement   and   Plan  of   N/A
        Reorganization  dated March 10, 1996 between Chaparral Resources,
        Inc., and the Shareholders of Central Asian Petroleum, Inc.

   3.1  Restated Articles of Incorporation  and Amendments,  incorporated   N/A
        by reference  to Exhibit 3.1 to the  Company's  Annual  Report on
        Form 10-K for the fiscal year ended November 30, 1993.

   3.2  Articles of Amendment to the Restated  Articles of  Incorporation   N/A
        dated April 20, 1988, incorporated by reference to Exhibit 3.2 to
        the  Company's  Annual  Report on Form 10-K for the  fiscal  year
        ended November 30, 1993.

   3.3  Bylaws, as amended through January 3, 1997.

   3.4  Articles of Amendment to the Restated  Articles of  Incorporation   N/A
        and Amendments dated June 21, 1995,  incorporated by reference to
        Exhibit B to the Company's  Quarterly Report on Form 10-Q for the
        quarter ended May 31, 1995.

   3.5  Articles of Amendment to the Restated  Articles of  Incorporation   N/A
        and Amendments  dated July  17, 1996,  incorporated  by reference
        to  Exhibit  3.5  to the  Company's  Registration  Statement  No.
        333-7779.

   10.1 Royalty  Participation Plan dated June 15, 1982,  incorporated by   N/A
        reference to Exhibit 10.1 to the Company's  Annual Report on Form
        10-K for the fiscal year ended November 30, 1993.

   10.2 Chaparral  Resources,  Inc. 1989 Stock Warrant Plan effective May   N/A
        1,  1989,  incorporated  by  reference  to  Exhibit  10.3  to the
        Company's  Annual  Report on Form 10-K for the fiscal  year ended
        November 30, 1993.

   10.3 Target Benefit Plan effective  December 1, 1990  incorporated  by   N/A
        reference to Exhibit 10.9 to the Company's  Annual Report on Form
        10-K for the fiscal year ended November 30, 1991.

   10.4 Deferred  Compensation and Death Benefit Plan as amended November   N/A
        15,  1991  incorporated  by  reference  to  Exhibit  10.10 to the
        Company's  Annual  Report on Form 10-K for the fiscal  year ended
        November 30, 1991.

   10.5 Promissory Note dated November 1, 1995 from Chaparral  Resources,   N/A
        Inc., to Brae Group,  Inc.,  incorporated by reference to Exhibit
        10.1 to the Company's  Current  Report on Form 8-K dated November
        1, 1995.

   10.6 Purchase Agreement, dated effective January 12, 1996, between the   N/A
        Company  and  Guntekin   Koksal   (purchase   of  CAP-G   shares)
        incorporated by reference to Exhibit 10.6 to the Company's Annual
        Report on Form 10-K for the fiscal year ended November 30, 1995.
<PAGE>

   10.7 Letter Agreement,  dated January 3, 1996, between the Company and   N/A
        certain  stockholders of Darka Petrol Ticaret Ltd. Sti., together
        with Exhibits A--E,  incorporated by reference to Exhibit 10.7 to
        the  Company's  Annual  Report on From 10-K for the  fiscal  year
        ended November 30, 1995.

   10.8 Amendment,  effective  March 4,  1996,  to the  Letter  Agreement   N/A
        revising  the terms  pursuant  to which the Company is to acquire
        all shares of CAP(G)  stock owned by Darka  Petrol  Ticaret  Ltd.
        Sti.,  incorporated by reference to Exhibit 10.8 to the Company's
        Annual Report on From 10-K for the fiscal year ended November 30,
        1995.

  10.9  Warrant  Certificate  entitling Allen & Company to purchase up to   N/A
        1,022,000  shares of Common Stock of Chaparral  Resources,  Inc.,
        incorporated  by  reference  to  Exhibit  10.1  to the  Company's
        Current Report on Form 8-K dated April 1, 1996.

  10.10 Consulting  Agreement  dated May 14, 1996 with M-D  International   N/A
        Petroleum,  Inc.,  incorporated  by reference to Exhibit 10.10 to
        the Company's Registration Statement No. 333-7779.

  10.11 Promissory   Notes   and   Modification   of   Promissory   Notes   N/A
        incorporated by reference to Exhibit (3) to the Company's Current
        Report on Form 8-K dated November 22, 1996.

  10.12 Amendment  effective December 6, 1996 to Purchase Agreement dated
        effective  January  12, 1996  between  the  Company and  Guntekin
        Koksal.

  10.13 Severance  Agreement  dated February 12, 1997 between the Company
        and Paul V. Hoovler.

  10.14 Severance  Agreement  dated February 12, 1997 between the Company
        and Matthew R. Hoovler.

  10.15 Purchase  and Sale  Agreement  effective  January 1, 1997 between
        the Company and Conoco Inc.*

  10.16  Amendments to Chaparral Resources, Inc. Stock Warrant Plan.

  10.17 Agreement dated August 30, 1995 for  Exploration  Development and
        Production of Oil in Karakuduk  Oil Field in Mangistan  Oblast of
        the  Republic  of  Kazakhstan  between  Ministry  of Oil  and Gas
        Industries of the Republic of Kazakhstan for and on Behalf of the
        Government of the Republic of Kazakhstan  and Joint Stock Company
        of Closed Type Karakuduk Munay Joint Venture.

  10.18 License for the Right to Use the  Subsurface  in the  Republic of
        Kazakhstan.

   16   Letter dated July 23, 1996 from Grant Thornton LLP confirming the   N/A
        circumstances  pursuant  to  which  Grant  Thornton  resigned  as
        Registrant's principal independent  accountants,  incorporated by
        reference to Exhibit 16 to the Company's  Current  Report on Form
        8-K dated July 23, 1996.

   21   List of Subsidiaries of the Registrant.

   23.1 Consent of Grant Thornton LLP for S-8.

   23.2 Consent of Ernst & Young LLP for S-8.

   27   Financial Data Schedule.