AS FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION ON



October 11, 2006



SECURITIES AND EXCHANGE
COMMISSIONWASHINGTON, D.C.  20549



### FORM 10-QSB

(Mark One)

[  X ]          QUARTERLY REPORT UNDER
SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934For the quarterly period ended:August 31, 2006



[   ]           TRANSITION REPORT UNDER
SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934For the transition period
from_________________ to _________________________



Commission file number:333-91191



### INTERMOUNTAIN REFINING CO., INC.

(Name of small business issuer in its
charter)



|NEW MEXICO                                                     | 74-2329327                             
|-------------------------------------------------------------- | ---------------------------------------
|(State or other jurisdiction of incorporation or
organization) | (I.R.S. Employer Identification
Number)



1921 Bloomfield
BoulevardFarmington, New Mexico 
87401Telephone: (505)
326-2668(Address, including zip code, and
telephone number, including area code, of issuer's principal executive
offices)

Check whether the issuer (1) filed all reports required to be
filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or
such shorter period that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days. Yes
X  No __

APPLICABLE ONLY TO ISSUERS INVOLVED IN
BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS

Check whether the issuer has filed all documents and reports
required to be filed by Section 12, 13 or 15(d) of the Exchange Act after the
distribution of securities under a plan confirmed by a court. Yes_____ No
_____

(APPLICABLE ONLY TO CORPORATE
ISSUERS)



State the number of shares outstanding of each of the issuer's
classes of common equity, as of the latest practicable date: 1,155,609 shares
of common stock, no par value, were outstanding on September 30,
2006.Transitional Small Business Disclosure
Format (Check One): Yes[ ] No [X]

10-QSB 1<PAGE>

### Table Of Contents





|                                                                                      | Page
|------------------------------------------------------------------------------------- | ----
|Financial Statements of Intermountain                                                 | 2   
|Management's Discussion and Analysis of Financial Condition
and Results of Operations | 2   
|Intermountain's Business Activities                                                   | 2   
|Liquidity and Capital Resources                                                       | 2   
|Cash Requirements as of August 31, 2006                                               | 3   
|Results of Operations                                                                 | 3   
|Inflation, Deflation and Changing Prices                                              | 8   
|Critical Accounting Estimates                                                         | 8   
|Controls and Procedures                                                               | 8   
|Legal Proceedings                                                                     | 9   
|Submission of Matters to a Vote of Security
Holders                                   | 9   
|Index To Financial Statements                                                         | 9   
|Exhibits and Reports on Form 8-K                                                      | 14  
|Signatures                                                                            | 14  

### 

### Financial Statements of Intermountain

The financial statements of Intermountain as of August 31,
2006 and for the three and six month periods ended August 31, 2005 and August
31, 2006 are included beginning on page 9 of this report.

### Management's Discussion and Analysis of Financial Condition and Results of
Operations

The following discussion of our financial condition as of
August 31, 2006 and results of operations for the three and six month periods
ended August 31, 2005 and August 31, 2006, should be read in conjunction with
our financial statements and notes related thereto included elsewhere in this
report.

Some of the statements contained in this report relate to
future expectations, contain projections of results of operations or financial
condition or include other forward-looking information. When used in this
report, the words "estimate", "project", "anticipate", "intend", "believe",
"hope", "may" and similar expressions, as well as "will", "shall" and other
indications of future tense, are intended to identify forward-looking
statements. Those statements are subject to known and unknown risks,
uncertainties and other factors that could cause the actual results to differ
materially from those contemplated by the statements.  You are cautioned
not to place undue reliance on the forward-looking statements.

### Intermountain's Business Activities

Intermountain was incorporated under the laws of the state of
New Mexico in January 1984 and conducts its business in the following
areas:

Production of natural gas (all crude oil producing properties
were sold in November 2005)

Leasing, on a fee basis, of asphalt paving products
manufacturing and storage facilities in Fredonia, Arizona

Other business activities including leasing unused space in
Intermountain's office building.

### Liquidity and Capital Resources:

Management believes that cash flow from ongoing operations
will be adequate to meet cash demands for the coming year.

10-QSB 2<PAGE>

The following table presents selected financial data regarding
cash and working capital:



|                          | February 28, 2006 | % Change | August 31, 2006
|------------------------- | ----------------- | -------- | ---------------
|Cash and cash equivalents | $     851,102     | 21%      | $   1,028,491  
|                          |                   |          |                
|Working capital           | $     996,963     | 7%       | $   1,070,078  

During the six months ended August 31, 2006, Intermountain
realized a $231,000 increase in cash from operating activities offset by a
$54,000 decrease in cash from non-operating activities. There were no
significant or unusual operating cash items during the period. The $54,000
decrease in cash from non-operating activities included $50,000 cash used for
electrical generation equipment improvements and $8,000 cash used for plugging
and abandonment of one natural gas well in Kansas.

During the six months ended August 31, 2005, Intermountain
realized a $53,000 increase in cash from operating activities offset by a
$32,000 decrease in cash from non-operating activities. Significant or unusual
operating cash items during the period consisted of $163,000 cash used for the
abatement of asbestos containing materials at Intermountain's asphalt products
manufacturing and storage facility. The $32,000 decrease in cash from
non-operating sources consisted mainly of $28,000 cash used to purchase new fuel
tanks and cooling system improvements on the electric generation equipment in
preparation for an anticipated sale.

### Cash requirements as of August 31,
2006:

Estimated cash requirements for the next twelve months
include:

$24,000 per month in normal general and administrative costs
including costs to operate our Farmington office building

$1,000 estimated monthly costs (excluding asbestos abatement
costs) associated with the ownership and maintenance of Intermountain's refinery
and asphalt manufacturing and storage facility

In its efforts to develop additional sources of revenues,
Intermountain may incur some project development costs. We are unable to predict
the level of costs that may be incurred for such additional projects during the
next year.

Expected sources of cash during the next twelve months consist
of cash flows from operating activities estimated as follows:

$30,000 per month (net of production costs) from estimated
natural gas operations based on results of operations during the six months
ended August 31, 2006 along with projections of production and prices during the
next 12 months

$1,900 per month from Farmington office space rental and
consulting services

$2,100 per month interest and dividends earned on cash
balances and other investments

$3,200 per month from the rental of our asphalt storage and
manufacturing facility plus an average of $8,300 per month in throughput fees
based on estimated annual asphalt product shipments of 10,000 tons during the
2006 paving season

$270,000 from the sale of the electric generation facility
which is expected to close in October or November 2006

Estimates of future sources and uses of cash presented herein
are based on our assumptions and expectations that our operations will continue
at current levels without material interruption and that collection of accounts
will occur under agreed terms. Actual results may be materially
different.

### Results of Operations:

The following table summarizes the results of Intermountain's
operations for each of the periods indicated. All percentage amounts were
calculated using the underlying data.



|                                                        | Three months ended
|------------------------------------------------------- | ------------------
|                                                        | August 31, 2005   
|Revenues                                                | $  321,395        
|Costs and Expenses                                      | 316,670           
|Net income (loss) before taxes                          | 4,725             
|Income taxes                                            | -                 
|Net income                                              | $      4,725      
|10-QSB 3<PAGE>                                          |                   
|                                                        | Six months ended  
|                                                        | August 31, 2005   
|Revenues                                                | $   574,614       
|Costs and expenses (excluding asbestos abatement
costs) | 490,723           
|Asbestos abatement costs                                | 175,000           
|Net income (loss) before taxes                          | (91,109)          
|Income taxes                                            | -                 
|Net income (loss)                                       | $  (91,109)       



#### Revenues:

The following table presents a summary of our revenues for the
periods indicated. All percentage amounts were calculated using the underlying
data.



|                                             | Three months ended
|-------------------------------------------- | ------------------
|                                             | August 31, 2005   
|Oil and gas production                       | $  217,929        
|Asphalt equipment rental and throughput fees | 96,746            
|Real estate rental                           | 5,970             
|Other revenues                               | 750               
|Total Revenues                               | $  321,395        
|                                             |                   
|                                             | Six months ended  
|                                             | August 31, 2005   
|Oil and gas production                       | $   430,430       
|Asphalt equipment rental and throughput fees | 127,829           
|Real estate rental                           | 12,105            
|Other revenues                               | 4,250             
|Total Revenues                               | $  574,614        



Changes in individual components of revenues are discussed
below:

##### Oil and Natural gas revenues:

The following table contains oil and natural gas production
volumes, net to Intermountain's interest, and average sales prices received for
the periods indicated:



|                                | For the three months
ended | For the six months ended
|------------------------------- | -------------------------- | ------------------------
|                                | August 31,2005             | August 31,2006          
|Natural gas produced, net (Mcf) | 47,652                     | 47,389                  
|Average selling price ($/Mcf)   | $4.31                      | $3.95                   
|Crude oil produced, net (Bbls)  | 269                        | 0                       
|Average selling price ($/Bbl)   | $46.31                     | N/A                     

The decrease in oil and natural gas revenues for the six
months ended August 31, 2006 compared to the six months ended August 31, 2005
consisted of a $22,000 decrease in natural gas sales and a $19,000 decrease in
crude oil revenues. The decrease in natural gas revenues consisted of a 477 Mcf
(1%) increase in natural gas production offset by an average $0.26/Mcf (6%)
decrease in selling prices. Kansas natural gas revenues declined by $23,000,
which consisted of a 422 Mcf (1%) increase in production offset by a $0.31/Mcf
(8%) decrease in selling price. New Mexico natural gas revenues increased by
$1,000 which included a 55 Mcf  (0.4%) increase in production  and a $.07/Mcf
(1%) increase in selling price.   Intermountain sold its Nebraska crude oil
producing properties in November 2005. Due to the complexity of economic factors
affecting energy prices, we are unable to predict the direction or magnitude of
future price changes. It is expected that Intermountain's production of natural
gas will decline slightly over the next twelve months consistent with observed
decline rates.

10-QSB 4<PAGE>

The increase in oil and natural gas revenues for the six
months ended August 31, 2005 compared to the six months ended August 31, 2004
consisted of an $99,000 increase in natural gas sales and a $1,000 increase in
crude oil revenues. The increase in natural gas revenues consisted of a $1,000
increase in Kansas revenues plus the addition of $98,000 from New Mexico gas
properties, which were acquired in August 2004. Kansas natural gas revenues
consisted of a 12,567 Mcf (14%) decrease in production offset by a $0.53/Mcf
(16%) increase in selling price.  New Mexico natural gas revenues consisted of
the production of 14,524 Mcf at an average selling price of $6.77/Mcf. The
increase in crude oil revenues consisted of a 106 Bbl (21%) decrease in
production offset by a $12.59/Bbl (36%) increase in selling price.

The decrease in oil and natural gas revenues for the three
months ended August 31, 2006 compared to the three months ended August 31, 2005
consisted of an $18,000 decrease in natural gas revenues along with a $12,000
decrease in crude oil revenues. The decrease in natural gas revenues consisted
of a 263 Mcf (0.5%) decrease in natural gas production along with an average
$0.36/Mcf (8%) decrease in selling prices. Kansas natural gas revenues decreased
by $23,000, which consisted of a 1,604 Mcf (4%) decrease in production and a
$0.42/Mcf (11%) decrease in selling price.  New Mexico natural gas revenues
increased by $4,000, which consisted of a 1,341 Mcf (18%) increase in production
offset by a $0.56/Mcf (8%) decrease in selling price. Intermountain sold its
Nebraska crude oil producing properties in November 2005.

The increase in oil and natural gas revenues for the three
months ended August 31, 2005 as compared to the three months ended August 31,
2004 consisted of a $48,000 increase in natural gas revenues along with a $3,000
increase in crude oil revenues. The increase in natural gas revenues consisted
of the addition of $51,000 from the New Mexico properties, which were acquired
in August 2004, offset by a $3,000 decrease in Kansas revenues. Kansas natural
gas revenues consisted of a 3,489Mcf (8%) decrease in production offset by a
$0.25/Mcf (7%) increase in natural gas selling price. New Mexico revenues
consisted of 7,399 Mcf produced at an average selling price of $6.83/Mcf. The
increase in crude oil revenues consisted of a 19 Bbl (8%) increase in production
and a $10.25/Bbl (28%) increase in selling price.

##### Leasing of asphalt products manufacturing and storage
facilities:

The decrease in asphalt equipment rental and throughput fees
for the three and six months ended August 31, 2006 compared to the three and six
months ended August 31, 2005 was the result of an overall 4,745 tons (45%)
decrease in shipments of asphalt products from the facility. We had anticipated
that product shipments would decline due to a reduction in the amount of paving
grade asphalt made available for sale from the facility by Paramount and we
previously downgraded our 2006 asphalt product shipment projections from 15,000
tons to 10,000 tons. There is no assurance that asphalt shipments for the 2006
calendar year will reach 10,000 tons, the point at which the $4.50/ton
supplemental throughput fee is triggered.

The increase in asphalt equipment rental and throughput fees
for the three and six months ended August 31, 2005 as compared to the three and
six months ended August 31, 2004 was the result of a slight increase in
quantities shipped from the facility along with the fact that total annual
shipments exceeded 10,000 tons as of August 31, 2005, which triggered the
recognition of supplemental throughput fees under the agreement with Paramount.
The supplemental throughput fee provision of the contract had not been triggered
during the six month period ended August 31, 2004.

##### Real estate rental:

The decrease in real estate rental revenues for the three and
six months ended August 31, 2006 compared to the three and six months ended
August 31, 2005 was due to a slight decrease in occupancy at the Farmington, NM
office building. There are presently four small office spaces available for rent
in the building.

The decrease in real estate rental revenues for the six months
ended August 31, 2005 as compared to the six months ended August 31, 2004
consisted of an average $66 per month decrease primarily due to a slight
decrease in occupancy at the Farmington, NM office building. Occupancy at the
facility did however rebound slightly during the three month period ended August
31, 2005 as compared to the three month period ended August 31, 2004 which
resulted in a $15 per month increase.



10-QSB 5<PAGE>



#### Costs and Expenses:

The following table presents a summary of Intermountain's
costs and expenses for the periods indicated:





|                                                      | Three Months Ended
|----------------------------------------------------- | ------------------
|                                                      | August 31, 2005   
|Cost of sales                                         | $    208,933      
|General and administrative costs                      | 67,931            
|Depletion, depreciation and amortization              | 13,556            
|Accretion of discount on asset retirement
obligations | 672               
|Salvage of refinery equipment                         | -                 
|Impairment of electrical generation equipment         | 30,303            
|Interest and investment (income) loss, net            | (4,725)           
|Total costs and expenses                              | $  316,670        
|                                                      |                   
|                                                      | Six Months Ended  
|                                                      | August 31, 2005   
|Cost of sales                                         | $    289,513      
|General and administrative costs                      | 151,589           
|Depletion, depreciation and amortization              | 26,739            
|Accretion of discount on asset retirement
obligations | 1,343             
|Settlement of asset retirement obligations            | -                 
|Asbestos abatement obligations                        | 175,000           
|Salvage of refinery equipment                         | -                 
|Impairment of electrical generation equipment         | 30,303            
|Interest and investment income, net                   | (8,764)           
|Total costs and expenses                              | $  665,723        
|                                                      |                   



Changes in individual components of costs and expenses are
discussed below.

##### Cost of sales:

Cost of sales includes costs incurred in the production of oil
and natural gas and certain costs of maintaining the asphalt and refinery
facility.

The decrease in cost of sales for the six months ended August
31, 2006 compared to the six months ended August 31, 2005 consisted of a $97,000
decrease in oil and natural gas production costs and a $1,500 decrease in
asphalt facility maintenance costs (excluding asbestos abatement costs). The
decrease in oil and natural gas production costs consisted primarily of an
$87,000 decrease in Kansas well equipment repair costs along with the
elimination of $9,000 in Nebraska crude oil production costs. The Nebraska crude
oil properties were sold in November 2005. Well pump, production casing and
tubing, and surface equipment failures occur randomly and the timing and cost of
repairs cannot be accurately predicted.

The increase in cost of sales for the six months ended August
31, 2005 compared to the six months ended August 31, 2004 consisted of a
$184,000 increase in oil and natural gas production costs offset by an $11,000
decrease in asphalt facility maintenance costs (excluding asbestos abatement
costs). The increase in oil and natural gas production costs consisted of a
$139,000 increase in Kansas natural gas production costs along with the addition
of $45,000 in production costs associated with the New Mexico natural gas
properties that were acquired in August 2004. Production costs associated with
the Nebraska oil properties were relatively unchanged. The significant increase
in Kansas production costs was attributed to several major well equipment
failures including three production casing failures.

The decrease in cost of sales for the three months ended
August 31, 2006 compared to the three months ended August 31, 2005 consisted of
an $89,000 decrease in oil and natural gas production costs and a $1,400
decrease in asphalt facility maintenance costs. The decrease in oil and natural
gas production costs primarily consisted of an $80,000 decrease in Kansas well
equipment repair costs along with the elimination of $4,000 in Nebraska crude
oil production costs.

10-QSB 6<PAGE>

The increase in cost of sales for the three months ended
August 31, 2005 compared to the three months ended August 31, 2004 consisted of
a $157,000 increase in oil and natural gas production costs offset by an $8,000
decrease in asphalt facility maintenance costs (excluding asbestos abatement
costs). The increase in oil and natural gas production costs consisted of a
$133,000 increase in Kansas production costs and the addition of $24,000
production costs associated with the New Mexico gas properties that were
acquired in August 2004. Production costs associated with the Nebraska
properties were relatively unchanged. The significant increase in Kansas
production costs was the result of three production casing failures.

##### General and administrative expenses:

General and administrative expenses include the cost of
Intermountain's officers and administrative employees, costs incurred to operate
and maintain the Farmington office building, and all items of general overhead
required to manage and administer the corporate affairs of
Intermountain.

There were no significant changes in general and
administrative expenses during the three and six months ended August 31, 2006
compared to the three and six months ended August 31, 2005.

The increase in general and administrative expenses during the
six months ended August 31, 2005 as compared to the six months ended August 31,
2004 was primarily the result of a $4,000 increase in group insurance costs.
General and administrative costs during the three months ended August 31, 2005
compared to the three months ended August 31, 2004 were relatively
unchanged.

##### Asbestos abatement obligation and salvage of refining
equipment:

In April 2005, we initiated the process of dismantling the
portions of our Fredonia refining equipment that were no longer used for ongoing
operations and were not expected to be used in the future. As part of the
process, the presence of asbestos containing materials was identified in
portions of the equipment. The abatement of asbestos containing materials at the
facility was substantially completed during the year ended February 28, 2006 and
we do not believe that we will incur any significant future costs associated
with asbestos abatement at the facility. During the three months ended August
31, 2006, we recognized $11,000 from the salvage of metals from the equipment
being dismantled. We anticipate that we will incur some additional costs
associated with normal debris removal from the facility. We believe that the
dismantling process will be fully completed this fall.

During the six months ended August 31, 2005, we estimated and
accrued $175,000 for asbestos abatement at the Fredonia facility. During that
same period, we incurred approximately $163,000 of consulting and abatement
costs associated with the obligation.

##### Impairment of electric generation
equipment:

During 2005, Intermountain entered into a memorandum of
understanding to sell its electric generation facility (including land,
building, equipment and fuel inventory) to a regional electric power distributor
for approximately $274,000.  The memorandum of understanding required that the
equipment be operational with closing contingent on completion of a 24-48 hour
test run under full load conditions. In August, 2006, the full load test run was
successfully completed and we are currently in the process of completing the
sale contract and real property subdivisions necessary to close the sale.

During the six months ended August 31, 2006, as part of
restoring the electrical generation equipment to full operational capability, we
incurred approximately $50,000 in previously estimated improvement costs. As
these costs were previously estimated and included in our provision for
impairment in value of the equipment, there was no need to provide any
additional impairment in value as of August 31, 2006. As of August 31, 2006, the
carrying cost of the electric generation facility was $262,508 net of impairment
in value of $440,935. We presently estimate that we will receive approximately
$270,000 in proceeds from the sale, net of improvement costs incurred by the
buyer that are the responsibility of Intermountain. We anticipate that we will
incur some additional improvement costs and selling expenses associated with
completion of the sale but we do not expect such costs to be
material.

As of August 31, 2005, Intermountain reclassified fuel
inventory, valued at $2,390, and land and generator building, valued at $3,178
(net of accumulated depreciation of $26,149), to electric generation equipment.
In addition, during the six months ended August 31, 2005, Intermountain
capitalized $28,378 for new fuel tanks and certain cooling system improvements
to the electric generation equipment as provided by the memorandum of
understanding. As of August 31, 2005, Intermountain recognized an additional
impairment in value on the electric generation equipment of $30,303 representing
the excess of the then carrying value of the facility over the expected sale
proceeds.

##### Depreciation and Depletion:

There were no significant changes in depreciation and
depletion costs during the three and six months ended August 31, 2006 compared
to the three and six months ended August 31, 2005.

10-QSB 7<PAGE>

Depreciation and depletion costs during the three and six
months ended August 31, 2005 as compared to the three and six months ended
August 31, 2004 were relatively unchanged but consisted of an increase in
depletion expense (attributed mainly to the addition of the New Mexico gas
properties) offset by a $1,000 per month decrease in asphalt facility
depreciation.

##### Loss on settlement of asset retirement
obligations:

During the six months ended August 31, 2006, we recognized a
$7,100 loss on the settlement of asset retirement obligations associated with
the plugging and abandonment of one of our Kansas natural gas wells. At the time
of plugging, the present value of the well's estimated asset retirement
obligation was $2,700. The actual plugging cost for the well was
$9,800.

##### Interest and investment income (net):

Interest and investment income includes earnings on cash
balances and certificates of deposit, and net earnings on investments, less
interest expense incurred.

The increase in interest and investment income for the six
months ended August 31, 2006 compared to the six months ended August 31, 2005
consisted of a $6,000 increase in interest earned on cash balances offset by a
$1,000 decrease in investment earnings (net of depletion on investments in oil
and gas royalty trusts). The increase in interest and investment income for the
three months ended August 31, 2006 compared to the six months ended August 31,
2005 consisted of a $3,000 increase in interest earned on cash balances offset
by an $800 decrease in investment earnings (net of depletion on investments in
oil and gas royalty trusts). Intermountain incurred no interest expense during
the three and six months ended August 31, 2006 and August 31, 2005.

The increase in interest and investment income for the six
months ended August 31, 2005 as compared to the six months ended August 31, 2004
consisted of a $1,900 increase in interest earned on cash balances along with a
$2,600 increase in investment income. The increase in interest and investment
income for the three months ended August 31, 2005 as compared to the three
months ended August 31, 2004 consisted of a $2,200 increase in interest earned
on cash balances offset by a $300 decrease in investment income. Intermountain
incurred no interest expense during the three and six months ended August 31,
2005 and August 31, 2004.

### Inflation, Deflation and Changing Prices:

The results of operations and capital expenditures will
continue to be affected by inflation, deflation and changing prices. 
Prices of oil and natural gas could have a material effect on Intermountain's
operations.  Management is unable to determine the full impact of
inflation, deflation and changing prices on the results of operations or working
capital.

### Critical Accounting Estimates:

Certain accounting estimates are important to the presentation
of our financial condition and results of operations and require management's
subjective or complex judgments. Such estimates are subject to change based on
future conditions and events that may have a material effect on our financial
condition and results of operations. There have been no significant changes in
our assumptions or underlying factors that may adversely affect our previous
accounting estimates.



### Controls and Procedures

### Evaluation of Disclosure Controls and
Procedures:

Disclosure controls and procedures are designed and
implemented to insure that all material information relating to a company is
made known to its chief operating officer, chief financial officer, and such
other persons who are responsible for preparing and filing periodic reports with
the Securities and Exchange Commission. William N. Hagler and Rick L. Hurt,
representing all of the officers and directors of Intermountain, have evaluated
our disclosure controls and procedures and concluded that such controls were
effective as of August 31, 2006.

### Changes in Internal Controls:

There have been no significant changes in Intermountain's
internal controls or in other factors that could significantly affect these
controls subsequent to the date of Management's last evaluation, including any
corrective actions with regard to significant deficiencies and material
weaknesses.

10-QSB 8<PAGE>

### Legal Proceedings

We are not aware of any pending or threatened legal
proceedings to which Intermountain is a party. We are not aware of any pending
or threatened legal proceedings to which any director, officer, affiliate of
Intermountain, or any owner of more than 5% of Intermountain's common stock, is
an adverse party to, or has a material interest adverse to,
Intermountain.

### 

### Submission of Matters to a Vote of Security Holders

There have been no matters submitted to a vote of security
holders during the three months ended August 31, 2006 through the solicitation
of proxies or otherwise.

### 

### Financial Statements of Intermountain Refining Co., Inc.

### Index to Financial Statements



|                                                                                           | Page
|------------------------------------------------------------------------------------------ | ----
|                                                                                           |     
|Balance Sheet as of August 31,
2006                                                        | 10  
|                                                                                           |     
|Statements of Operations and
Comprehensive Income/Loss for the three and six month periods |     
|ended August 31,
2005 and August 31, 2006                                                  | 11  
|                                                                                           |     
|Statements of Cash Flows for the
six month periods ended                                   |     
|August 31, 2005
and August 31, 2006                                                        | 12  
|                                                                                           |     
|Notes to financial
statements                                                              | 13  
|                                                                                           |     

10-QSB 9<PAGE>



|Intermountain Refining Co., Inc.                                           |  |            
|-------------------------------------------------------------------------- |  | -----------
|Balance Sheet – Unaudited                                                  |  |            
|August 31, 2006                                                            |  |            
|                                                                           |  |            
|Assets                                                                     |  |            
|Current Assets                                                             |  |            
|Cash and cash equivalents                                                  |  | $ 1,028,491
|Accounts receivable                                                        |  | 88,718     
|Notes receivable                                                           |  | 14,903     
|Accrued interest receivable                                                |  | 80         
|Prepaid expenses                                                           |  | 5,562      
|Total Current Assets                                                       |  | 1,137,754  
|Property, Plant and
Equipment, net of valuation allowances                 |  |            
|Land, buildings and improvements                                           |  | 355,092    
|Equipment                                                                  |  | 45,990     
|Crude oil refining equipment                                               |  | 581,919    
|Oil and gas properties, (successful
efforts method)                        |  | 1,432,308  
|                                                                           |  | 2,415,309  
|Less accumulated depletion and
depreciation                                |  | (1,793,741)
|                                                                           |  | 621,568    
|Other Assets                                                               |  |            
|Electric generation equipment available for
sale                           |  | 262,508    
|Available-for-sale
investments                                             |  | 127,581    
|Other assets                                                               |  | 275        
|                                                                           |  | 390,364    
|Total Assets                                                               |  | $ 2,149,686
|                                                                           |  |            
|Liabilities and Stockholders' Equity                                       |  |            
|Current Liabilities                                                        |  |            
|Accounts payable                                                           |  | $    62,460
|Taxes other than income
taxes                                              |  | 2,681      
|Income taxes payable                                                       |  | 2,535      
|Total Current
Liabilities                                                  |  | 67,676     
|Deferred
Taxes                                                             |  | 19,900     
|Asset Retirement Obligations                                               |  | 30,736     
|Commitments and
Contingencies                                              |  | -          
|Stockholders'
Equity                                                       |  |            
|Common stock, no par value, authorized
10,000,000 shares,                  |  |            
|issued and outstanding 1,155,609 shares                                    |  | 1,455,314  
|                                                                           |  |            
|Preferred stock, $0.01 par value, authorized 5,000,000
shares,             |  |            
|0 shares issued and outstanding.                                           |  | -          
|Retained earnings                                                          |  | 539,102    
|Accumulated other comprehensive gain                                       |  | 36,958     
|                                                                           |  | 2,031,374  
|Total Liabilities and Stockholders'
Equity                                 |  | $ 2,149,686
|                                                                           |  |            
|The accompanying notes are an integral part of these
financial statements. |  |            

10-QSB 10<PAGE>



|Intermountain Refining Co., Inc.                                                                                                                                                                                                                                                        |                    |                  |               |            
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------ | ---------------- | ------------- | -----------
|Statements of Operations and Comprehensive Income
(Loss)                                                                                                                                                                                                                                |                    |                  |              
|                                                                                                                                                                                                                                                                                        |                    |                  |               |            
|                                                                                                                                                                                                                                                                                        | Three months ended | Six months ended
|                                                                                                                                                                                                                                                                                        | August 31,         | August 31,       | August 31,    | August 31, 
|                                                                                                                                                                                                                                                                                        | 2005               | 2006             | 2005          | 2006       
|                                                                                                                                                                                                                                                                                        | (Unaudited)        | (Unaudited)      | (Unaudited)   | (Unaudited)
|Revenues                                                                                                                                                                                                                                                                                |                    |                  |               |            
|Oil and natural gas production revenues - Note
B                                                                                                                                                                                                                                        | $   217,929        | $   187,294      | $   430,430   | $   389,180
|Asphalt equipment rental and throughput
fees                                                                                                                                                                                                                                            | 96,746             | 36,853           | 127,829       | 51,218     
|Real estate rental income                                                                                                                                                                                                                                                               | 5,970              | 5,535            | 12,105        | 11,878     
|Other income                                                                                                                                                                                                                                                                            | 750                | 750              | 4 ,250        | 1,500      
|                                                                                                                                                                                                                                                                                        | 321,395            | 230,432          | 574,614       | 453,776    
|Costs and Expenses                                                                                                                                                                                                                                                                      |                    |                  |               |            
|Cost of sales - Note B                                                                                                                                                                                                                                                                  | 208,933            | 118,362          | 289,513       | 191,007    
|General and administrative                                                                                                                                                                                                                                                              | 67,931             | 67,413           | 151,589       | 150,159    
|Asbestos abatement costs                                                                                                                                                                                                                                                                | -                  | -                | 175,000       | -          
|Salvage of refinery equipment                                                                                                                                                                                                                                                           | -                  | (11,141)         | -             | (11,141)   
|Impairment in value of electric generation
equipment                                                                                                                                                                                                                                    | 30,303             | -                | 30,303        | -          
|Depletion, depreciation and amortization                                                                                                                                                                                                                                                | 13,556             | 14,496           | 26,739        | 26,029     
|Accretion of discount on asset retirement
obligations                                                                                                                                                                                                                                   | 672                | 533              | 1,343         | 1,066      
|Loss on settlement of asset retirement
obligations                                                                                                                                                                                                                                      | -                  | -                | -             | 7,112      
|Interest and investment (income),
net                                                                                                                                                                                                                                                   | (4,725)            | (7,090)          | (8,764)       | (13,754)   
|                                                                                                                                                                                                                                                                                        | 316,670            | 182,573          | 665,723       | 350,478    
|Income (Loss) From Operations Before Income
Taxes                                                                                                                                                                                                                                       | 4,725              | 47,859           | (91,109)      | 103,298    
|Provision (benefit) for income
taxes                                                                                                                                                                                                                                                    |                    |                  |               |            
|Current                                                                                                                                                                                                                                                                                 | -                  | 2,800            | -             | 2,800      
|Deferred                                                                                                                                                                                                                                                                                | -                  | -                | -             | -          
|                                                                                                                                                                                                                                                                                        | -                  | 2,800            | -             | 2,800      
|Net Income (Loss)                                                                                                                                                                                                                                                                       | 4,725              | 45,059           | (91,109)      | 100,498    
|                                                                                                                                                                                                                                                                                        |                    |                  |               |            
|Other Comprehensive Income, net of tax:                                                                                                                                                                                                                                                 |                    |                  |               |            
|Unrealized gains (losses) on available for sale
securities:                                                                                                                                                                                                                             |                    |                  |               |            
|Unrealized holding gains on investments available for sale
(net of deferred income tax expense of  $8,101 and $6,055 for the three and six
month periods ended August 31, 2005 respectively and $1,534 and $162 for the
three and six month periods ended August 31, 2006 respectively. | 15,047             | 2,850            | 11,247        | 301        
|                                                                                                                                                                                                                                                                                        |                    |                  |               |            
|Comprehensive Income (Loss)                                                                                                                                                                                                                                                             | $   19,772         | $   47,909       | $   (79,862)  | $   100,799
|                                                                                                                                                                                                                                                                                        | =========          | =========        | =========     | =========  
|Weighted Average Number of Shares
Outstanding                                                                                                                                                                                                                                           | 1,155,609          | 1,155,609        | 1,155,609     | 1,155,609  
|                                                                                                                                                                                                                                                                                        |                    |                  |               |            
|Basic and Fully Diluted Earnings Per
Share                                                                                                                                                                                                                                              |                    |                  |               |            
|Net income (loss)                                                                                                                                                                                                                                                                       | $      
0.00       | $      
0.04     | $      (0.08) | $    
0.09 
|                                                                                                                                                                                                                                                                                        | ========           | ========         | ========      | ========   
|The accompanying notes are an integral part of these
financial statements.                                                                                                                                                                                                              |                    |                  |               |            

10-QSB 11<PAGE>



|Intermountain Refining Co.,
Inc.Statements of Cash Flows                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|Cash Flows From Operating Activities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|Net income (loss)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|Adjustments to reconcile net loss to net
cash provided (used) by operating activities:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|Depreciation, depletion and
amortization                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|Accretion of discount on asset retirement obligations                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|Loss on settlement of asset retirement
obligations                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|Depletion on investments in oil and gas royalty
trusts                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|Increase in asbestos abatement obligation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|Impairment in value of electric generation
equipment                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|Changes in operating assets and
liabilities:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|(Increase) decrease in
accounts receivable                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|Increase in prepaid expenses                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|Decrease in accrued interest receivable                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|Increase in accounts payable
and accrued expenses                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|(Increase) decrease in
income taxes payable                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|Net Cash Flow Provided by Operating
Activities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|Cash Flows From Investing Activities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|Settlement of asset retirement obligations                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|Collection of notes receivable                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|Purchases of available for sale
investments                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|Purchase of improvements to electric generation
equipment available for sale                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|(Increase) decrease in cash value of life
insurance polices                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|Net Cash Flow Used by Investing Activities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|Increase in Cash and Cash Equivalents                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|Cash and Cash Equivalents at Beginning of
Year                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|Cash and Cash Equivalents at End of
Period                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|Intermountain paid interest of $0 during the six month
period ended August 31, 2005.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|Intermountain paid interest of $0 during the six month
period ended August 31, 2006.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|Intermountain paid income taxes of  $430 during the six
month period ended August 31, 2005.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|Intermountain paid income taxes of  $491 during the six
month period ended August 31, 2006.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|Supplemental Schedule of Noncash Investing
Activities:During the six month period ended
August 31, 2005, Intermountain’s available for sale investments increased
in value by $11,247, net of deferred taxes of
$6,055.During the six month period ended August 31,
2006, Intermountain's available for sale investments increased in value by $301,
net of deferred taxes of $162.During the six month
period ended August 31, 2005, Intermountain reclassified fuel inventory valued
at $2,390, and land and building valued at $3,178 (net of accumulated
depreciation of $26,149), to electric generation equipment available for
sale.
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|The accompanying notes are an integral part of these
financial statements.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 

10-QSB 12<PAGE>

### Note A - Interim Financial Statements (Unaudited)

The accompanying balance sheet as of August 31, 2006 and the
statements of operations for the three and six month periods ended August 31,
2005 and August 31, 2006, and the statements of cash flows for the six month
periods ended August 31, 2005 and August 31, 2006 have been prepared by
Intermountain, without audit. In the opinion of management, all adjustments
(which include only normal recurring adjustments) necessary to present fairly
the financial position, results of operations and changes in cash at August 31,
2006, and for all periods presented, have been made.

It is suggested that these unaudited financial statements be
read in conjunction with the audited financial statements for the year ended
February 28, 2006. The results of operations for the six months ended August 31,
2006 are not necessarily indicative of the operating results for the full
year.

### Note B - Reclassifications

Oil and natural gas revenues and Costs of sales presented in
the Statement of Operations and Comprehensive Income (Loss) for the three and
six month periods ended August 31, 2005 have been restated from the prior year
presentation to reflect the reclassification of production taxes and gathering
costs that were previously included as reductions of gross revenues. The amounts
were reclassified to allow for comparability with the current year presentation.

10-QSB 13<PAGE>

### Exhibits and Reports on Form 8-K

### Reports on Form 8-K:

There were no reports on Form 8-K filed by Intermountain
during the quarter ended August 31, 2006.

### Exhibits:





|Exhibit | Description                                                                                 
|------- | --------------------------------------------------------------------------------------------
|3.1     | Amended and Restated Articles of Incorporation
(1)                                          
|3.2     | Bylaws (1)                                                                                  
|10.4    | Oneok / Kinder Morgan / KN Energy Gas Sales Agreement
(1)                                   
|10.5    | Paramount Petroleum Agreement (1)                                                           
|31.1    | Certification under Rule 13a-14(a)/15d-14(a) of Rick L.
Hurt, Secretary, Treasurer, Director
|31.2    | Certification under Rule 13a-14(a)/15d-14(a) of William N.
Hagler, President, Director      
|99.1    | Certification of Chief Executive Officer under Sec.906 of
Sarbanes-Oxley Act of 2002        
|99.2    | Certification of Chief Financial Officer under Sec.906 of
Sarbanes-Oxley Act of 2002        



(1) Incorporated herein by reference to Intermountain's
registration statement filed on Form S-1 dated April 9, 2001.

### Signatures

Pursuant to the requirements of the Exchange Act, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Farmington, State of New
Mexico, on October 11, 2006.

Intermountain Refining Co., Inc.

By:/s/ William N.
HaglerWilliam N. Hagler, President

Pursuant to the requirements of the Exchange Act, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.

/s/ William N.
Hagler_________________ Date: October 11,
2006William N. Hagler, Chairman of the Board
ofDirectors, and
President/s/ Rick
L. Hurt______________________ Date: October 11,
2006Rick L. Hurt, Secretary, Treasurer, Director

10-QSB 14<PAGE>