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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



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FORM 10-Q



(Mark One)

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



FOR THE QUARTERLY PERIOD ENDED NOVEMBER 30, 2007



or



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



For the transition period from  to



|     |  |                                                                            
|---- |  | ---------------------------------------------------------------------------
|LOGO |  | Commission File No. 001-06198  ___________________  UNITED REFINING COMPANY
|     |  | (Exact name of registrant as specified in its charter)                     



|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|Pennsylvania                                                   |  | 25-1411751                          
|(State or other jurisdiction of incorporation or organization) |  | (I.R.S. Employer Identification No.)
|                                                               | 
|15 Bradley Street                                              |  |                                     
|Warren, Pennsylvania                                           |  | 16365                               
|(Address of principal executive office)                        |  | (Zip Code)                          





814-723-1500

(Registrants
telephone number, including area code)



---



Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90
days.    Yes x    No ̈



Indicate by check mark whether the registrant is a large accelerated filer,
an accelerated filer, or a non-accelerated filer. See definition of accelerated filer and large accelerated filer in Rule 12b-2 of the Exchange Act.



|                         |  |                    |  |                         
|------------------------ |  | ------------------ |  | ------------------------
|Large accelerated filer ̈ |  | Accelerated filer ̈ |  | Non-accelerated filer  x



Indicate by check mark
whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes ̈No
x



Number of shares
outstanding of Registrants Common Stock as of January 14, 2008: 100.



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TABLE OF ADDITIONAL REGISTRANTS



|                                                   |  |                                            |  |                                  |  |                      
|-------------------------------------------------- |  | ------------------------------------------ |  | -------------------------------- |  | ---------------------
|Name                                               |  | State of OtherJurisdiction ofIncorporation |  | IRS EmployerIdentificationNumber |  | CommissionFile Number
|Kiantone Pipeline Corporation                      |  | New York                                   |  | 25-1211902                       |  | 333-35083-01         
|Kiantone Pipeline Company                          |  | Pennsylvania                               |  | 25-1416278                       |  | 333-35083-03         
|United Refining Company of Pennsylvania            |  | Pennsylvania                               |  | 25-0850960                       |  | 333-35083-02         
|United Jet Center, Inc.                            |  | Delaware                                   |  | 52-1623169                       |  | 333-35083-06         
|Kwik-Fill Corporation                              |  | Pennsylvania                               |  | 25-1525543                       |  | 333-35083-05         
|Independent Gas and Oil Company of Rochester, Inc. |  | New York                                   |  | 06-1217388                       |  | 333-35083-11         
|Bell Oil Corp.                                     |  | Michigan                                   |  | 38-1884781                       |  | 333-35083-07         
|PPC, Inc.                                          |  | Ohio                                       |  | 31-0821706                       |  | 333-35083-08         
|Super Test Petroleum, Inc.                         |  | Michigan                                   |  | 38-1901439                       |  | 333-35083-09         
|Kwik-Fil, Inc.                                     |  | New York                                   |  | 25-1525615                       |  | 333-35083-04         
|Vulcan Asphalt Refining Corporation                |  | Delaware                                   |  | 23-2486891                       |  | 333-35083-10         
|Country Fair, Inc.                                 |  | Pennsylvania                               |  | 25-1149799                       |  | 333-35083-12         



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FORM 10-Q  CONTENTS



|           |  |                                                                                                   |  |        
|---------- |  | ------------------------------------------------------------------------------------------------- |  | -------
|           |  |                                                                                                   |  | PAGE(S)
|PART I.    |  | FINANCIAL INFORMATION                                                                             |  | 4      
|           |  |                                                                                                  
|Item 1.    |  | Financial Statements.                                                                             |  | 4      
|           |  |                                                                                                  
|           |  | Consolidated Balance Sheets  November 30, 2007 (unaudited) and August 31, 2007                   |  | 4      
|           |  |                                                                                                  
|           |  | Consolidated Statements of Operations  Three Months Ended November 30, 2007 and 2006 (unaudited) |  | 5      
|           |  |                                                                                                  
|           |  | Consolidated Statements of Cash Flows  Three Months Ended November 30, 2007 and 2006 (unaudited) |  | 6      
|           |  |                                                                                                  
|           |  | Notes to Consolidated Financial Statements (unaudited)                                            |  | 7      
|           |  |                                                                                                  
|Item 2.    |  | Managements Discussion and Analysis of Financial Condition and Results of Operations.            |  | 14     
|           |  |                                                                                                  
|Item 3.    |  | Quantitative and Qualitative Disclosures about Market Risk.                                       |  | 21     
|           |  |                                                                                                  
|Item 4.    |  | Controls and Procedures.                                                                          |  | 21     
|           |  |                                                                                                  
|PART II.   |  | OTHER INFORMATION                                                                                 |  | 22     
|           |  |                                                                                                  
|Item 1.    |  | Legal Proceedings.                                                                                |  | 22     
|           |  |                                                                                                  
|Item 1A.   |  | Risk Factors.                                                                                     |  | 22     
|           |  |                                                                                                  
|Item 2.    |  | Unregistered Sales of Equity Securities and Use of Proceeds.                                      |  | 23     
|           |  |                                                                                                  
|Item 3.    |  | Defaults Upon Senior Securities.                                                                  |  | 23     
|           |  |                                                                                                  
|Item 4.    |  | Submission of Matters to a Vote of Security Holders.                                              |  | 23     
|           |  |                                                                                                  
|Item 5.    |  | Other Information.                                                                                |  | 23     
|           |  |                                                                                                  
|Item 6.    |  | Exhibits.                                                                                         |  | 23     
|           | 
|Signatures |  | 24                                                                                               



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|PART I. | FINANCIAL INFORMATION
|------- | ---------------------



|ITEM 1. | FINANCIAL STATEMENTS.
|------- | ---------------------



UNITED REFINING COMPANY AND SUBSIDIARIES



CONSOLIDATED BALANCE SHEETS

(in thousands, except share amounts)



|                                                                                           |  |                             |         |   |                |   |         |  
|------------------------------------------------------------------------------------------ |  | --------------------------- | ------- | - | -------------- | - | ------- | -
|                                                                                           |  | November 30,2007(Unaudited) |         |   | August 31,2007 |  
|Assets                                                                                     |  |                             |         |   |                |   |         |  
|Current:                                                                                   |  |                             |         |   |                |   |         |  
|Cash and cash equivalents                                                                  |  | $                           | 104,516 |   |                | $ | 135,441 |  
|Marketable securities                                                                      |  |                             | 61,100  |   |                |   | 75,854  |  
|Accounts receivable, net                                                                   |  |                             | 85,830  |   |                |   | 79,703  |  
|Inventories                                                                                |  |                             | 144,630 |   |                |   | 166,024 |  
|Prepaid expenses and other assets                                                          |  |                             | 49,844  |   |                |   | 16,957  |  
|                                                                                           |  |                             |         |   |                |   |         |  
|Total current assets                                                                       |  |                             | 445,920 |   |                |   | 473,979 |  
|Property, plant and equipment, net                                                         |  |                             | 225,522 |   |                |   | 217,837 |  
|Investment in affiliated company                                                           |  |                             | 4,196   |   |                |   | 3,510   |  
|Deferred financing costs, net                                                              |  |                             | 5,440   |   |                |   | 5,635   |  
|Goodwill                                                                                   |  |                             | 1,349   |   |                |   | 1,349   |  
|Tradename                                                                                  |  |                             | 10,500  |   |                |   | 10,500  |  
|Amortizable intangible assets, net                                                         |  |                             | 2,071   |   |                |   | 2,191   |  
|Deferred turnaround costs and other assets, net                                            |  |                             | 11,498  |   |                |   | 9,252   |  
|Deferred income taxes                                                                      |  |                             | 8,264   |   |                |   | 7,313   |  
|                                                                                           |  |                             |         |   |                |   |         |  
|                                                                                           |  | $                           | 714,760 |   |                | $ | 731,566 |  
|                                                                                           |  |                             |         |   |                |   |         |  
|Liabilities and Stockholders Equity                                                       |  |                             |         |   |                |   |         |  
|Current:                                                                                   |  |                             |         |   |                |   |         |  
|                                                                                           |  |                             |         |   |                |   |         |  
|Current installments of long-term debt                                                     |  | $                           | 1,860   |   |                | $ | 1,808   |  
|Accounts payable                                                                           |  |                             | 52,576  |   |                |   | 69,806  |  
|Accrued liabilities                                                                        |  |                             | 24,811  |   |                |   | 15,643  |  
|Income tax payable                                                                         |  |                             | 18,072  |   |                |   | 36,514  |  
|Sales, use and fuel taxes payable                                                          |  |                             | 18,970  |   |                |   | 20,725  |  
|Deferred income taxes                                                                      |  |                             | 7,218   |   |                |   | 7,218   |  
|Amounts due to affiliated companies, net                                                   |  |                             | 2,126   |   |                |   | 2,177   |  
|                                                                                           |  |                             |         |   |                |   |         |  
|Total current liabilities                                                                  |  |                             | 125,633 |   |                |   | 153,891 |  
|Long term debt: less current installments                                                  |  |                             | 356,839 |   |                |   | 357,144 |  
|Deferred gain on settlement of pension plan obligations                                    |  |                             | 216     |   |                |   | 270     |  
|Deferred retirement benefits                                                               |  |                             | 75,718  |   |                |   | 77,305  |  
|Other noncurrent liabilities                                                               |  |                             | 31      |   |                |   | 46      |  
|                                                                                           |  |                             |         |   |                |   |         |  
|Total liabilities                                                                          |  |                             | 558,437 |   |                |   | 588,656 |  
|                                                                                           |  |                             |         |   |                |   |         |  
|Commitments and contingencies                                                              |  |                             |         |   |                |   |         |  
|Stockholders equity:                                                                      |  |                             |         |   |                |   |         |  
|Common stock; $.10 par value per share  shares authorized 100; issued and outstanding 100 |  |                             |        |   |                |   |        |  
|Additional paid-in capital                                                                 |  |                             | 22,031  |   |                |   | 22,031  |  
|Retained earnings                                                                          |  |                             | 154,968 |   |                |   | 141,555 |  
|Accumulated other comprehensive loss                                                       |  |                             | (20,676 | ) |                |   | (20,676 | )
|                                                                                           |  |                             |         |   |                |   |         |  
|Total stockholders equity                                                                 |  |                             | 156,323 |   |                |   | 142,910 |  
|                                                                                           |  |                             |         |   |                |   |         |  
|                                                                                           |  | $                           | 714,760 |   |                | $ | 731,566 |  
|                                                                                           |  |                             |         |   |                |   |         |  



See accompanying notes
to consolidated financial statements.



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UNITED REFINING COMPANY AND SUBSIDIARIES



CONSOLIDATED STATEMENTS OF OPERATIONS(Unaudited)

(in thousands)



|                                                  |  |                                |         |   |      |   |         |  
|------------------------------------------------- |  | ------------------------------ | ------- | - | ---- | - | ------- | -
|                                                  |  | Three Months EndedNovember 30, |        
|                                                  |  | 2007                           |         |   | 2006 |  
|Net sales                                         |  | $                              | 693,568 |   |      | $ | 584,596 |  
|Costs of goods sold                               |  |                                | 625,023 |   |      |   | 546,777 |  
|                                                  |  |                                |         |   |      |   |         |  
|Gross profit                                      |  |                                | 68,545  |   |      |   | 37,819  |  
|                                                  |  |                                |         |   |      |   |         |  
|Expenses:                                         |  |                                |         |   |      |   |         |  
|Selling, general and administrative expenses      |  |                                | 35,431  |   |      |   | 34,842  |  
|Depreciation and amortization expenses            |  |                                | 4,039   |   |      |   | 3,497   |  
|                                                  |  |                                |         |   |      |   |         |  
|Total operating expenses                          |  |                                | 39,470  |   |      |   | 38,339  |  
|                                                  |  |                                |         |   |      |   |         |  
|Operating income (loss)                           |  |                                | 29,075  |   |      |   | (520    | )
|                                                  |  |                                |         |   |      |   |         |  
|Other income (expense):                           |  |                                |         |   |      |   |         |  
|Interest expense, net                             |  |                                | (6,681  | ) |      |   | (5,155  | )
|Other, net                                        |  |                                | (346    | ) |      |   | (227    | )
|Equity in net earnings of affiliate               |  |                                | 686     |   |      |   | 495     |  
|                                                  |  |                                |         |   |      |   |         |  
|                                                  |  |                                | (6,341  | ) |      |   | (4,887  | )
|                                                  |  |                                |         |   |      |   |         |  
|Income (loss) before income tax expense (benefit) |  |                                | 22,734  |   |      |   | (5,407  | )
|Income tax expense (benefit)                      |  |                                | 9,321   |   |      |   | (2,217  | )
|                                                  |  |                                |         |   |      |   |         |  
|Net income (loss)                                 |  | $                              | 13,413  |   |      | $ | (3,190  | )
|                                                  |  |                                |         |   |      |   |         |  













See accompanying notes to consolidated financial statements.



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UNITED REFINING COMPANY AND SUBSIDIARIES



CONSOLIDATED STATEMENTS OF CASH FLOWS(Unaudited)

(in thousands)



|                                                                                                   |  |                    |         |   |                  |   |         |  
|-------------------------------------------------------------------------------------------------- |  | ------------------ | ------- | - | ---------------- | - | ------- | -
|                                                                                                   |  | Three Months Ended |        
|                                                                                                   |  | November 30,2007   |         |   | November 30,2006 |  
|Cash flows from operating activities:                                                              |  |                    |         |   |                  |   |         |  
|Net income (loss)                                                                                  |  | $                  | 13,413  |   |                  | $ | (3,190  | )
|Adjustments to reconcile net income (loss) to net cash (used in) provided by operating activities: |  |                    |         |   |                  |   |         |  
|Depreciation and amortization                                                                      |  |                    | 5,184   |   |                  |   | 4,420   |  
|Equity in net earnings of affiliate                                                                |  |                    | (686    | ) |                  |   | (495    | )
|Deferred income taxes                                                                              |  |                    | (951    | ) |                  |   | 285     |  
|Gain on asset dispositions                                                                         |  |                    |        |   |                  |   | (7      | )
|Cash (used in) provided by working capital items                                                   |  |                    | (45,930 | ) |                  |   | 3,879   |  
|Change in operating assets and liabilities:                                                        |  |                    |         |   |                  |   |         |  
|Deferred retirement benefits                                                                       |  |                    | (1,587  | ) |                  |   | 2,288   |  
|Other assets                                                                                       |  |                    | 1       |   |                  |   | 8       |  
|Other noncurrent liabilities                                                                       |  |                    | (15     | ) |                  |   | (135    | )
|                                                                                                   |  |                    |         |   |                  |   |         |  
|Total adjustments                                                                                  |  |                    | (43,984 | ) |                  |   | 10,243  |  
|                                                                                                   |  |                    |         |   |                  |   |         |  
|Net cash (used in) provided by operating activities                                                |  |                    | (30,571 | ) |                  |   | 7,053   |  
|                                                                                                   |  |                    |         |   |                  |   |         |  
|Cash flows from investing activities:                                                              |  |                    |         |   |                  |   |         |  
|Additions to property, plant and equipment                                                         |  |                    | (11,580 | ) |                  |   | (6,433  | )
|Additions to deferred turnaround costs                                                             |  |                    | (3,336  | ) |                  |   | (55     | )
|Proceeds from asset dispositions                                                                   |  |                    |        |   |                  |   | 7       |  
|                                                                                                   |  |                    |         |   |                  |   |         |  
|Net cash used in investing activities                                                              |  |                    | (14,916 | ) |                  |   | (6,481  | )
|                                                                                                   |  |                    |         |   |                  |   |         |  
|Cash flows from financing activities:                                                              |  |                    |         |   |                  |   |         |  
|Proceeds from sale of investment securities                                                        |  |                    | 14,754  |   |                  |   |        |  
|Proceeds from issuance of long term debt                                                           |  |                    | 178     |   |                  |   | 461     |  
|Principal reductions of long term debt                                                             |  |                    | (262    | ) |                  |   | (206    | )
|Deferred financing costs                                                                           |  |                    | (108    | ) |                  |   |        |  
|                                                                                                   |  |                    |         |   |                  |   |         |  
|Net cash provided by financing activities                                                          |  |                    | 14,562  |   |                  |   | 255     |  
|                                                                                                   |  |                    |         |   |                  |   |         |  
|Net (decrease) increase in cash and cash equivalents                                               |  |                    | (30,925 | ) |                  |   | 827     |  
|Cash and cash equivalents, beginning of year                                                       |  |                    | 135,441 |   |                  |   | 59,197  |  
|                                                                                                   |  |                    |         |   |                  |   |         |  
|Cash and cash equivalents, end of period                                                           |  | $                  | 104,516 |   |                  | $ | 60,024  |  
|                                                                                                   |  |                    |         |   |                  |   |         |  
|Cash (used in) provided by in working capital items:                                               |  |                    |         |   |                  |   |         |  
|Accounts receivable, net                                                                           |  | $                  | (6,127  | ) |                  | $ | 11,743  |  
|Inventories                                                                                        |  |                    | 21,394  |   |                  |   | 40,657  |  
|Prepaid expenses and other assets                                                                  |  |                    | (32,887 | ) |                  |   | (10,015 | )
|Accounts payable                                                                                   |  |                    | (17,230 | ) |                  |   | (30,625 | )
|Accrued liabilities                                                                                |  |                    | 9,168   |   |                  |   | (177    | )
|Income taxes payable                                                                               |  |                    | (18,442 | ) |                  |   | (9,431  | )
|Sales, use and fuel taxes payable                                                                  |  |                    | (1,755  | ) |                  |   | (2,058  | )
|Amounts due to affiliated companies, net                                                           |  |                    | (51     | ) |                  |   | 3,785   |  
|                                                                                                   |  |                    |         |   |                  |   |         |  
|Total change                                                                                       |  | $                  | (45,930 | ) |                  | $ | 3,879   |  
|                                                                                                   |  |                    |         |   |                  |   |         |  
|Cash paid during the period for:                                                                   |  |                    |         |   |                  |   |         |  
|Interest                                                                                           |  | $                  | 109     |   |                  | $ | 105     |  
|Income taxes                                                                                       |  | $                  | 28,829  |   |                  | $ | 6,930   |  
|                                                                                                   |  |                    |         |   |                  |   |         |  
|Non cash investing and financing activities:                                                       |  |                    |         |   |                  |   |         |  
|Property addition and capital leases                                                               |  | $                  | 25      |   |                  | $ |        |  
|                                                                                                   |  |                    |         |   |                  |   |         |  



See accompanying notes
to consolidated financial statements.





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UNITED REFINING COMPANY AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)



|1. | Description of Business and Basis of Presentation
|-- | -------------------------------------------------



The consolidated financial statements include the accounts of United Refining Company and its subsidiaries, United Refining Company of Pennsylvania and
its subsidiaries, and Kiantone Pipeline Corporation (collectively, the Company). All significant intercompany balances and transactions have been eliminated in consolidation.



The Company is a petroleum refiner and marketer in its primary market area of Western New York and Northwestern
Pennsylvania. Operations are organized into two business segments: wholesale and retail.



The wholesale segment is responsible for the acquisition of crude oil, petroleum refining,
supplying petroleum products to the retail segment and the marketing of petroleum products to wholesale and industrial customers. The retail segment sells petroleum products under the Kwik Fill®, Citgo® and Keystone® brand names through a network of Company-operated retail units and convenience and grocery items
through gasoline stations and convenience stores under the Red Apple Food Mart® and Country Fair® brand names.



The Company is a wholly-owned subsidiary of United Refining, Inc., a
wholly-owned subsidiary of United Acquisition Corp., which in turn is a wholly-owned subsidiary of Red Apple Group, Inc. (the Parent).



The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United
States of America for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted
in the United States of America for complete financial statements. In the opinion of management, all adjustments (consisting of only normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for
the three months ended November 30, 2007 are not necessarily indicative of the results that may be expected for the year ending August 31, 2008. For further information, refer to the consolidated financial statements and footnotes thereto
included in the Companys Form 10-K for the fiscal year ended August 31, 2007.



|2. | Recent Accounting Pronouncements
|-- | --------------------------------



In September 2006, the FASB issued Staff Position No. AUG AIR-1, Accounting for Planned Major Maintenance Activities (Position No. AUG
AIR-1). Position No. AUG AIR-1 prohibits the use of the accrue-in-advance method of accounting for planned major maintenance activities.



The provisions of Position No. AUG AIR-1 are effective for fiscal years beginning after December 15, 2006. The adoption of AUG AIR-1 by the Company
effective September 1, 2007 had no impact on the Companys financial position, results of operations or cash flows.



In December 2007, the FASB issued Statement No. 141 (revised 2007), Business Combinations (Statement 141R), which replaces
Statement No. 141. Statement 141R establishes principles and requirements for how an acquirer recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, any non controlling interest in the
acquiree and the goodwill acquired. Statement 141R also establishes disclosure requirements which will enable users to evaluate the nature and financial effects of the business combination. Statement 141R is effective for fiscal years beginning
after December 15, 2008. The Company is currently evaluating the potential impact, if any, of the adoption of Statement 141R on the Companys consolidated financial position, results of operations and cash flows.



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UNITED REFINING COMPANY AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(Unaudited)



In December 2007, the FASB issued Statement No. 160, Noncontrolling Interests in
Consolidated Financial Statements  an Amendment of Accounting Research Bulletin No. 51 (Statement 160), which establishes accounting and reporting standards for ownership interests in subsidiaries held by parties other
than the parent, the amount of consolidated net income attributable to the parent and to the noncontrolling interest, changes in a parents ownership interest and the valuation of retained noncontrolling equity investments when a subsidiary is
deconsolidated. Statement 160 also establishes reporting requirements that provide sufficient disclosures that clearly identify and distinguish between the interest of the parent and the interests of the noncontrolling owner. Statement 160 is
effective for fiscal years beginning after December 15, 2008. The Company is currently evaluating the potential impact, if any, of the adoption of Statement 160 on the Companys consolidated financial position, results of operations and
cash flows.



In June 2006, the FASB issued Interpretation
No. 48, Accounting for Uncertainty in Income Taxes  An Interpretation of FASB Statement No. 109 (FIN No. 48). FIN No. 48 clarifies the accounting for uncertainty in income taxes recognized in an
enterprises financial statements in accordance with Statement No. 109, Accounting for Income Taxes. FIN No. 48 prescribes a recognition threshold and measurement attribute for the financial statement recognition and
measurement classification, accounting for interest and penalties and accounting in interim periods and disclosure. The Company adopted FIN No. 48 effective September 1, 2007, with no cumulative effect adjustment required, and the adoption
has no effect on the Companys financial position, results of operations and cash flows.



The Companys results of operations are included in the consolidated Federal tax return of the Parent and separately in various state jurisdictions. The Company is open to examination for tax years 2002 through
2006. There is currently one state tax audit in process and there are no unsettled income tax assessments outstanding.



The Companys policy is to recognize interest and penalties accrued on any unrecognized tax positions as a component of interest expense, net and
other, net, respectively. No amounts of such expenses are currently accrued.



|3. | Reclassification
|-- | ----------------



Certain amounts in the prior years consolidated financial statements have been reclassified to conform with the presentation in the current year.



|4. | Inventories
|-- | -----------



As of November 30, 2007 and August 31, 2007, the replacement cost of LIFO inventories exceeded their LIFO carrying values by approximately
$79,811,000 and $63,209,000, respectively. The November 30, 2007 LIFO calculation was computed using quantities and prices which are not necessarily indicative of the actual quantities and prices which will exist at fiscal year-end. Due to
anticipated fluctuations in inventory levels and the many factors which enter into the LIFO calculation which are beyond managements control, it is the policy of the Company to record the LIFO inventory adjustment only at fiscal year-end.



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UNITED REFINING COMPANY AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(Unaudited)



|5. | Subsidiary Guarantors
|-- | ---------------------



Certain of United Refining Companys (the issuer) subsidiaries function as guarantors under the terms of the $350,000,000 Senior
Unsecured Note Indenture due August 15, 2012. Financial information for the issuer and its wholly owned subsidiary guarantors is as follows:



CONDENSED CONSOLIDATING BALANCE SHEETS

(in thousands)



|                                                                                         |  |                   |         |   |                 |   |         |              |  |   |              |   |  |        |         |   |            |   |         |              |  |   |              |   |  |   |          |   |  |   |         |  
|---------------------------------------------------------------------------------------- |  | ----------------- | ------- | - | --------------- | - | ------- | ------------ |  | - | ------------ | - |  | ------ | ------- | - | ---------- | - | ------- | ------------ |  | - | ------------ | - |  | - | -------- | - |  | - | ------- | -
|                                                                                         |  | November 30, 2007 |         |   | August 31, 2007 |  
|                                                                                         |  | Issuer            |         |   | Guarantors      |   |         | Eliminations |  |   | Consolidated |   |  | Issuer |         |   | Guarantors |   |         | Eliminations |  |   | Consolidated |  
|Assets                                                                                   |  |                   |         |   |                 |   |         |              |  |   |              |   |  |        |         |   |            |   |         |              |  |   |              |   |  |   |          |   |  |   |         |  
|Current:                                                                                 |  |                   |         |   |                 |   |         |              |  |   |              |   |  |        |         |   |            |   |         |              |  |   |              |   |  |   |          |   |  |   |         |  
|Cash and cash equivalents                                                                |  | $                 | 93,931  |   |                 | $ | 10,585  |              |  | $ |             |   |  | $      | 104,516 |   |            | $ | 123,858 |              |  | $ | 11,583       |   |  | $ |         |   |  | $ | 135,441 |  
|Marketable securities                                                                    |  |                   | 61,100  |   |                 |   |        |              |  |   |             |   |  |        | 61,100  |   |            |   | 75,854  |              |  |   |             |   |  |   |         |   |  |   | 75,854  |  
|Accounts receivable, net                                                                 |  |                   | 54,120  |   |                 |   | 31,710  |              |  |   |             |   |  |        | 85,830  |   |            |   | 49,577  |              |  |   | 30,126       |   |  |   |         |   |  |   | 79,703  |  
|Inventories                                                                              |  |                   | 115,553 |   |                 |   | 29,077  |              |  |   |             |   |  |        | 144,630 |   |            |   | 139,382 |              |  |   | 26,642       |   |  |   |         |   |  |   | 166,024 |  
|Prepaid expenses and other assets                                                        |  |                   | 44,400  |   |                 |   | 5,444   |              |  |   |             |   |  |        | 49,844  |   |            |   | 12,660  |              |  |   | 4,297        |   |  |   |         |   |  |   | 16,957  |  
|Intercompany                                                                             |  |                   | 144,991 |   |                 |   | 16,775  |              |  |   | (161,766     | ) |  |        |        |   |            |   | 135,343 |              |  |   | 17,374       |   |  |   | (152,717 | ) |  |   |        |  
|                                                                                         |  |                   |         |   |                 |   |         |              |  |   |              |   |  |        |         |   |            |   |         |              |  |   |              |   |  |   |          |   |  |   |         |  
|Total current assets                                                                     |  |                   | 514,095 |   |                 |   | 93,591  |              |  |   | (161,766     | ) |  |        | 445,920 |   |            |   | 536,674 |              |  |   | 90,022       |   |  |   | (152,717 | ) |  |   | 473,979 |  
|Property, plant and equipment, net                                                       |  |                   | 149,423 |   |                 |   | 76,099  |              |  |   |             |   |  |        | 225,522 |   |            |   | 141,955 |              |  |   | 75,882       |   |  |   |         |   |  |   | 217,837 |  
|Investment in affiliated company                                                         |  |                   | 4,196   |   |                 |   |        |              |  |   |             |   |  |        | 4,196   |   |            |   | 3,510   |              |  |   |             |   |  |   |         |   |  |   | 3,510   |  
|Deferred financing costs, net                                                            |  |                   | 5,440   |   |                 |   |        |              |  |   |             |   |  |        | 5,440   |   |            |   | 5,635   |              |  |   |             |   |  |   |         |   |  |   | 5,635   |  
|Goodwill and other non-amortizable assets                                                |  |                   |        |   |                 |   | 11,849  |              |  |   |             |   |  |        | 11,849  |   |            |   |        |              |  |   | 11,849       |   |  |   |         |   |  |   | 11,849  |  
|Amortizable intangible assets, net                                                       |  |                   |        |   |                 |   | 2,071   |              |  |   |             |   |  |        | 2,071   |   |            |   |        |              |  |   | 2,191        |   |  |   |         |   |  |   | 2,191   |  
|Deferred turnaround costs & other assets                                                 |  |                   | 11,376  |   |                 |   | 1,293   |              |  |   | (1,171       | ) |  |        | 11,498  |   |            |   | 9,079   |              |  |   | 1,344        |   |  |   | (1,171   | ) |  |   | 9,252   |  
|Deferred income taxes                                                                    |  |                   | 12,672  |   |                 |   | (4,408  | )            |  |   |             |   |  |        | 8,264   |   |            |   | 13,063  |              |  |   | (5,750       | ) |  |   |         |   |  |   | 7,313   |  
|                                                                                         |  |                   |         |   |                 |   |         |              |  |   |              |   |  |        |         |   |            |   |         |              |  |   |              |   |  |   |          |   |  |   |         |  
|                                                                                         |  | $                 | 697,202 |   |                 | $ | 180,495 |              |  | $ | (162,937     | ) |  | $      | 714,760 |   |            | $ | 709,916 |              |  | $ | 175,538      |   |  | $ | (153,888 | ) |  | $ | 731,566 |  
|                                                                                         |  |                   |         |   |                 |   |         |              |  |   |              |   |  |        |         |   |            |   |         |              |  |   |              |   |  |   |          |   |  |   |         |  
|Liabilities and Stockholders Equity                                                     |  |                   |         |   |                 |   |         |              |  |   |              |   |  |        |         |   |            |   |         |              |  |   |              |   |  |   |          |   |  |   |         |  
|Current:                                                                                 |  |                   |         |   |                 |   |         |              |  |   |              |   |  |        |         |   |            |   |         |              |  |   |              |   |  |   |          |   |  |   |         |  
|Current installments of long-term debt                                                   |  | $                 | 1,010   |   |                 | $ | 850     |              |  | $ |             |   |  | $      | 1,860   |   |            | $ | 1,003   |              |  | $ | 805          |   |  | $ |         |   |  | $ | 1,808   |  
|Accounts payable                                                                         |  |                   | 38,208  |   |                 |   | 14,368  |              |  |   |             |   |  |        | 52,576  |   |            |   | 54,421  |              |  |   | 15,385       |   |  |   |         |   |  |   | 69,806  |  
|Accrued liabilities                                                                      |  |                   | 19,478  |   |                 |   | 5,333   |              |  |   |             |   |  |        | 24,811  |   |            |   | 10,474  |              |  |   | 5,169        |   |  |   |         |   |  |   | 15,643  |  
|Income taxes payable                                                                     |  |                   | 19,451  |   |                 |   | (1,379  | )            |  |   |             |   |  |        | 18,072  |   |            |   | 38,215  |              |  |   | (1,701       | ) |  |   |         |   |  |   | 36,514  |  
|Sales, use and fuel taxes payable                                                        |  |                   | 15,251  |   |                 |   | 3,719   |              |  |   |             |   |  |        | 18,970  |   |            |   | 16,736  |              |  |   | 3,989        |   |  |   |         |   |  |   | 20,725  |  
|Deferred income taxes                                                                    |  |                   | 7,870   |   |                 |   | (652    | )            |  |   |             |   |  |        | 7,218   |   |            |   | 9,041   |              |  |   | (1,823       | ) |  |   |         |   |  |   | 7,218   |  
|Amounts due to affiliated companies, net                                                 |  |                   | 2,258   |   |                 |   | (132    | )            |  |   |             |   |  |        | 2,126   |   |            |   | 1,107   |              |  |   | 1,070        |   |  |   |         |   |  |   | 2,177   |  
|Intercompany                                                                             |  |                   |        |   |                 |   | 161,766 |              |  |   | (161,766     | ) |  |        |        |   |            |   |        |              |  |   | 152,717      |   |  |   | (152,717 | ) |  |   |        |  
|                                                                                         |  |                   |         |   |                 |   |         |              |  |   |              |   |  |        |         |   |            |   |         |              |  |   |              |   |  |   |          |   |  |   |         |  
|Total current liabilities                                                                |  |                   | 103,526 |   |                 |   | 183,873 |              |  |   | (161,766     | ) |  |        | 125,633 |   |            |   | 130,997 |              |  |   | 175,611      |   |  |   | (152,717 | ) |  |   | 153,891 |  
|Long term debt: less current installments                                                |  |                   | 353,173 |   |                 |   | 3,666   |              |  |   |             |   |  |        | 356,839 |   |            |   | 353,407 |              |  |   | 3,737        |   |  |   |         |   |  |   | 357,144 |  
|Deferred gain on settlement of pension plan obligations                                  |  |                   | 216     |   |                 |   |        |              |  |   |             |   |  |        | 216     |   |            |   | 270     |              |  |   |             |   |  |   |         |   |  |   | 270     |  
|Deferred retirement benefits                                                             |  |                   | 76,381  |   |                 |   | (663    | )            |  |   |             |   |  |        | 75,718  |   |            |   | 77,298  |              |  |   | 7            |   |  |   |         |   |  |   | 77,305  |  
|Other noncurrent liabilities                                                             |  |                   |        |   |                 |   | 31      |              |  |   |             |   |  |        | 31      |   |            |   |        |              |  |   | 46           |   |  |   |         |   |  |   | 46      |  
|                                                                                         |  |                   |         |   |                 |   |         |              |  |   |              |   |  |        |         |   |            |   |         |              |  |   |              |   |  |   |          |   |  |   |         |  
|Total liabilities                                                                        |  |                   | 533,296 |   |                 |   | 186,907 |              |  |   | (161,766     | ) |  |        | 558,437 |   |            |   | 561,972 |              |  |   | 179,401      |   |  |   | (152,717 | ) |  |   | 588,656 |  
|                                                                                         |  |                   |         |   |                 |   |         |              |  |   |              |   |  |        |         |   |            |   |         |              |  |   |              |   |  |   |          |   |  |   |         |  
|Commitment and contingencies                                                             |  |                   |         |   |                 |   |         |              |  |   |              |   |  |        |         |   |            |   |         |              |  |   |              |   |  |   |          |   |  |   |         |  
|Stockholders equity                                                                     |  |                   |         |   |                 |   |         |              |  |   |              |   |  |        |         |   |            |   |         |              |  |   |              |   |  |   |          |   |  |   |         |  
|Common stock, $.10 par value per shareshares authorized 100; issued and outstanding 100 |  |                   |        |   |                 |   | 18      |              |  |   | (18          | ) |  |        |        |   |            |   |        |              |  |   | 18           |   |  |   | (18      | ) |  |   |        |  
|Additional paid-in capital                                                               |  |                   | 12,533  |   |                 |   | 10,651  |              |  |   | (1,153       | ) |  |        | 22,031  |   |            |   | 12,533  |              |  |   | 10,651       |   |  |   | (1,153   | ) |  |   | 22,031  |  
|Retained earnings                                                                        |  |                   | 172,198 |   |                 |   | (17,230 | )            |  |   |             |   |  |        | 154,968 |   |            |   | 156,236 |              |  |   | (14,681      | ) |  |   |         |   |  |   | 141,555 |  
|Accumulated other comprehensive loss                                                     |  |                   | (20,825 | ) |                 |   | 149     |              |  |   |             |   |  |        | (20,676 | ) |            |   | (20,825 | )            |  |   | 149          |   |  |   |         |   |  |   | (20,676 | )
|                                                                                         |  |                   |         |   |                 |   |         |              |  |   |              |   |  |        |         |   |            |   |         |              |  |   |              |   |  |   |          |   |  |   |         |  
|Total stockholders equity                                                               |  |                   | 163,906 |   |                 |   | (6,412  | )            |  |   | (1,171       | ) |  |        | 156,323 |   |            |   | 147,944 |              |  |   | (3,863       | ) |  |   | (1,171   | ) |  |   | 142,910 |  
|                                                                                         |  |                   |         |   |                 |   |         |              |  |   |              |   |  |        |         |   |            |   |         |              |  |   |              |   |  |   |          |   |  |   |         |  
|                                                                                         |  | $                 | 697,202 |   |                 | $ | 180,495 |              |  | $ | (162,937     | ) |  | $      | 714,760 |   |            | $ | 709,916 |              |  | $ | 175,538      |   |  | $ | (153,888 | ) |  | $ | 731,566 |  
|                                                                                         |  |                   |         |   |                 |   |         |              |  |   |              |   |  |        |         |   |            |   |         |              |  |   |              |   |  |   |          |   |  |   |         |  



9



---

##### Table of Contents

UNITED REFINING COMPANY AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(Unaudited)



CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS

(in thousands)



|                                                  |  |                                      |         |   |                                      |   |         |              |  |   |              |   |  |        |         |   |            |   |         |              |  |   |              |   |  |   |          |   |  |   |         |  
|------------------------------------------------- |  | ------------------------------------ | ------- | - | ------------------------------------ | - | ------- | ------------ |  | - | ------------ | - |  | ------ | ------- | - | ---------- | - | ------- | ------------ |  | - | ------------ | - |  | - | -------- | - |  | - | ------- | -
|                                                  |  | Three Months Ended November 30, 2007 |         |   | Three Months Ended November 30, 2006 |  
|                                                  |  | Issuer                               |         |   | Guarantors                           |   |         | Eliminations |  |   | Consolidated |   |  | Issuer |         |   | Guarantors |   |         | Eliminations |  |   | Consolidated |  
|Net sales                                         |  | $                                    | 528,579 |   |                                      | $ | 339,114 |              |  | $ | (174,125     | ) |  | $      | 693,568 |   |            | $ | 426,860 |              |  | $ | 268,923      |   |  | $ | (111,187 | ) |  | $ | 584,596 |  
|Costs of goods sold                               |  |                                      | 488,171 |   |                                      |   | 310,977 |              |  |   | (174,125     | ) |  |        | 625,023 |   |            |   | 419,494 |              |  |   | 238,470      |   |  |   | (111,187 | ) |  |   | 546,777 |  
|                                                  |  |                                      |         |   |                                      |   |         |              |  |   |              |   |  |        |         |   |            |   |         |              |  |   |              |   |  |   |          |   |  |   |         |  
|Gross profit                                      |  |                                      | 40,408  |   |                                      |   | 28,137  |              |  |   |             |   |  |        | 68,545  |   |            |   | 7,366   |              |  |   | 30,453       |   |  |   |         |   |  |   | 37,819  |  
|                                                  |  |                                      |         |   |                                      |   |         |              |  |   |              |   |  |        |         |   |            |   |         |              |  |   |              |   |  |   |          |   |  |   |         |  
|Expenses:                                         |  |                                      |         |   |                                      |   |         |              |  |   |              |   |  |        |         |   |            |   |         |              |  |   |              |   |  |   |          |   |  |   |         |  
|Selling, general and administrative expenses      |  |                                      | 6,127   |   |                                      |   | 29,304  |              |  |   |             |   |  |        | 35,431  |   |            |   | 5,677   |              |  |   | 29,165       |   |  |   |         |   |  |   | 34,842  |  
|Depreciation and amortization expenses            |  |                                      | 2,632   |   |                                      |   | 1,407   |              |  |   |             |   |  |        | 4,039   |   |            |   | 2,291   |              |  |   | 1,206        |   |  |   |         |   |  |   | 3,497   |  
|                                                  |  |                                      |         |   |                                      |   |         |              |  |   |              |   |  |        |         |   |            |   |         |              |  |   |              |   |  |   |          |   |  |   |         |  
|Total operating expenses                          |  |                                      | 8,759   |   |                                      |   | 30,711  |              |  |   |             |   |  |        | 39,470  |   |            |   | 7,968   |              |  |   | 30,371       |   |  |   |         |   |  |   | 38,339  |  
|                                                  |  |                                      |         |   |                                      |   |         |              |  |   |              |   |  |        |         |   |            |   |         |              |  |   |              |   |  |   |          |   |  |   |         |  
|Operating income (loss)                           |  |                                      | 31,649  |   |                                      |   | (2,574  | )            |  |   |             |   |  |        | 29,075  |   |            |   | (602    | )            |  |   | 82           |   |  |   |         |   |  |   | (520    | )
|                                                  |  |                                      |         |   |                                      |   |         |              |  |   |              |   |  |        |         |   |            |   |         |              |  |   |              |   |  |   |          |   |  |   |         |  
|Other income (expense):                           |  |                                      |         |   |                                      |   |         |              |  |   |              |   |  |        |         |   |            |   |         |              |  |   |              |   |  |   |          |   |  |   |         |  
|Interest expense, net                             |  |                                      | (4,917  | ) |                                      |   | (1,764  | )            |  |   |             |   |  |        | (6,681  | ) |            |   | (2,454  | )            |  |   | (2,701       | ) |  |   |         |   |  |   | (5,155  | )
|Other, net                                        |  |                                      | (626    | ) |                                      |   | 280     |              |  |   |             |   |  |        | (346    | ) |            |   | (446    | )            |  |   | 219          |   |  |   |         |   |  |   | (227    | )
|Equity in net earnings of affiliate               |  |                                      | 686     |   |                                      |   |        |              |  |   |             |   |  |        | 686     |   |            |   | 495     |              |  |   |             |   |  |   |         |   |  |   | 495     |  
|                                                  |  |                                      |         |   |                                      |   |         |              |  |   |              |   |  |        |         |   |            |   |         |              |  |   |              |   |  |   |          |   |  |   |         |  
|                                                  |  |                                      | (4,857  | ) |                                      |   | (1,484  | )            |  |   |             |   |  |        | (6,341  | ) |            |   | (2,405  | )            |  |   | (2,482       | ) |  |   |         |   |  |   | (4,887  | )
|                                                  |  |                                      |         |   |                                      |   |         |              |  |   |              |   |  |        |         |   |            |   |         |              |  |   |              |   |  |   |          |   |  |   |         |  
|Income (loss) before income tax expense (benefit) |  |                                      | 26,792  |   |                                      |   | (4,058  | )            |  |   |             |   |  |        | 22,734  |   |            |   | (3,007  | )            |  |   | (2,400       | ) |  |   |         |   |  |   | (5,407  | )
|Income tax expense (benefit)                      |  |                                      | 10,830  |   |                                      |   | (1,509  | )            |  |   |             |   |  |        | 9,321   |   |            |   | (1,475  | )            |  |   | (742         | ) |  |   |         |   |  |   | (2,217  | )
|                                                  |  |                                      |         |   |                                      |   |         |              |  |   |              |   |  |        |         |   |            |   |         |              |  |   |              |   |  |   |          |   |  |   |         |  
|Net income (loss)                                 |  | $                                    | 15,962  |   |                                      | $ | (2,549  | )            |  | $ |             |   |  | $      | 13,413  |   |            | $ | (1,532  | )            |  | $ | (1,658       | ) |  | $ |         |   |  | $ | (3,190  | )
|                                                  |  |                                      |         |   |                                      |   |         |              |  |   |              |   |  |        |         |   |            |   |         |              |  |   |              |   |  |   |          |   |  |   |         |  



10



---

##### Table of Contents

UNITED REFINING COMPANY AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(Unaudited)



CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS

(in thousands)



|                                                     |  |                                      |         |   |                                      |   |        |              |  |              |   |  |        |         |   |            |   |        |              |  |              |        |   |  |   |   |  |   |        |  
|---------------------------------------------------- |  | ------------------------------------ | ------- | - | ------------------------------------ | - | ------ | ------------ |  | ------------ | - |  | ------ | ------- | - | ---------- | - | ------ | ------------ |  | ------------ | ------ | - |  | - | - |  | - | ------ | -
|                                                     |  | Three Months Ended November 30, 2007 |         |   | Three Months Ended November 30, 2006 |  
|                                                     |  | Issuer                               |         |   | Guarantors                           |   |        | Eliminations |  | Consolidated |   |  | Issuer |         |   | Guarantors |   |        | Eliminations |  | Consolidated |       
|Net cash (used in) provided by operating activities  |  | $                                    | (31,114 | ) |                                      | $ | 543    |              |  | $            |  |  | $      | (30,571 | ) |            | $ | 4,680  |              |  | $            | 2,373  |   |  | $ |  |  | $ | 7,053  |  
|                                                     |  |                                      |         |   |                                      |   |        |              |  |              |   |  |        |         |   |            |   |        |              |  |              |        |   |  |   |   |  |   |        |  
|Cash flows from investing activities:                |  |                                      |         |   |                                      |   |        |              |  |              |   |  |        |         |   |            |   |        |              |  |              |        |   |  |   |   |  |   |        |  
|Additions to property, plant and equipment           |  |                                      | (10,075 | ) |                                      |   | (1,505 | )            |  |              |  |  |        | (11,580 | ) |            |   | (4,680 | )            |  |              | (1,753 | ) |  |   |  |  |   | (6,433 | )
|Proceeds from asset dispositions                     |  |                                      |        |   |                                      |   |       |              |  |              |  |  |        |        |   |            |   |       |              |  |              | 7      |   |  |   |  |  |   | 7      |  
|Additions to deferred turnaround costs               |  |                                      | (3,326  | ) |                                      |   | (10    | )            |  |              |  |  |        | (3,336  | ) |            |   | 1      |              |  |              | (56    | ) |  |   |  |  |   | (55    | )
|                                                     |  |                                      |         |   |                                      |   |        |              |  |              |   |  |        |         |   |            |   |        |              |  |              |        |   |  |   |   |  |   |        |  
|Net cash used in investing activities                |  |                                      | (13,401 | ) |                                      |   | (1,515 | )            |  |              |  |  |        | (14,916 | ) |            |   | (4,679 | )            |  |              | (1,802 | ) |  |   |  |  |   | (6,481 | )
|                                                     |  |                                      |         |   |                                      |   |        |              |  |              |   |  |        |         |   |            |   |        |              |  |              |        |   |  |   |   |  |   |        |  
|Cash flows from financing activities:                |  |                                      |         |   |                                      |   |        |              |  |              |   |  |        |         |   |            |   |        |              |  |              |        |   |  |   |   |  |   |        |  
|Proceeds from sale of investment securities          |  |                                      | 14,754  |   |                                      |   |       |              |  |              |  |  |        | 14,754  |   |            |   |       |              |  |              |       |   |  |   |  |  |   |       |  
|Proceeds from issuance of long-term debt             |  |                                      |        |   |                                      |   | 178    |              |  |              |  |  |        | 178     |   |            |   |       |              |  |              | 461    |   |  |   |  |  |   | 461    |  
|Principal reductions of long-term debt               |  |                                      | (58     | ) |                                      |   | (204   | )            |  |              |  |  |        | (262    | ) |            |   | (55    | )            |  |              | (151   | ) |  |   |  |  |   | (206   | )
|Deferred financing costs                             |  |                                      | (108    | ) |                                      |   |       |              |  |              |  |  |        | (108    | ) |            |   |       |              |  |              |       |   |  |   |  |  |   |       |  
|                                                     |  |                                      |         |   |                                      |   |        |              |  |              |   |  |        |         |   |            |   |        |              |  |              |        |   |  |   |   |  |   |        |  
|Net cash provided by (used in) financing activities  |  |                                      | 14,588  |   |                                      |   | (26    | )            |  |              |  |  |        | 14,562  |   |            |   | (55    | )            |  |              | 310    |   |  |   |  |  |   | 255    |  
|                                                     |  |                                      |         |   |                                      |   |        |              |  |              |   |  |        |         |   |            |   |        |              |  |              |        |   |  |   |   |  |   |        |  
|Net (decrease) increase in cash and cash equivalents |  |                                      | (29,927 | ) |                                      |   | (998   | )            |  |              |  |  |        | (30,925 | ) |            |   | (54    | )            |  |              | 881    |   |  |   |  |  |   | 827    |  
|Cash and cash equivalents, beginning of year         |  |                                      | 123,858 |   |                                      |   | 11,583 |              |  |              |  |  |        | 135,441 |   |            |   | 52,375 |              |  |              | 6,822  |   |  |   |  |  |   | 59,197 |  
|                                                     |  |                                      |         |   |                                      |   |        |              |  |              |   |  |        |         |   |            |   |        |              |  |              |        |   |  |   |   |  |   |        |  
|Cash and cash equivalents, end of period             |  | $                                    | 93,931  |   |                                      | $ | 10,585 |              |  | $            |  |  | $      | 104,516 |   |            | $ | 52,321 |              |  | $            | 7,703  |   |  | $ |  |  | $ | 60,024 |  
|                                                     |  |                                      |         |   |                                      |   |        |              |  |              |   |  |        |         |   |            |   |        |              |  |              |        |   |  |   |   |  |   |        |  



11



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##### Table of Contents

UNITED REFINING COMPANY AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(Unaudited)



|6. | Segments of Business
|-- | --------------------



Intersegment revenues are calculated using estimated market prices and are eliminated upon consolidation. Summarized financial information regarding the
Companys reportable segments is presented in the following tables (in thousands):



|                              |  |                                |         |   |      |   |         |  
|----------------------------- |  | ------------------------------ | ------- | - | ---- | - | ------- | -
|                              |  | Three Months EndedNovember 30, |        
|                              |  | 2007                           |         |   | 2006 |  
|Net Sales                     |  |                                |         |   |      |   |         |  
|Retail                        |  | $                              | 338,040 |   |      | $ | 267,654 |  
|Wholesale                     |  |                                | 355,528 |   |      |   | 316,942 |  
|                              |  |                                |         |   |      |   |         |  
|                              |  | $                              | 693,568 |   |      | $ | 584,596 |  
|                              |  |                                |         |   |      |   |         |  
|Intersegment Sales            |  |                                |         |   |      |   |         |  
|Wholesale                     |  | $                              | 173,051 |   |      | $ | 109,918 |  
|                              |  |                                |         |   |      |   |         |  
|Operating Income              |  |                                |         |   |      |   |         |  
|Retail                        |  | $                              | (2,660  | ) |      | $ | 1,078   |  
|Wholesale                     |  |                                | 31,735  |   |      |   | (1,598  | )
|                              |  |                                |         |   |      |   |         |  
|                              |  | $                              | 29,075  |   |      | $ | (520    | )
|                              |  |                                |         |   |      |   |         |  
|Depreciation and Amortization |  |                                |         |   |      |   |         |  
|Retail                        |  | $                              | 1,309   |   |      | $ | 1,156   |  
|Wholesale                     |  |                                | 2,730   |   |      |   | 2,341   |  
|                              |  |                                |         |   |      |   |         |  
|                              |  | $                              | 4,039   |   |      | $ | 3,497   |  
|                              |  |                                |         |   |      |   |         |  



|                                          |  |                  |         |                |   |        
|----------------------------------------- |  | ---------------- | ------- | -------------- | - | -------
|                                          |  | November 30,2007 |         | August 31,2007
|Total Assets                              |  |                  |         |                |   |        
|Retail                                    |  | $                | 150,526 |                | $ | 158,164
|Wholesale                                 |  |                  | 564,234 |                |   | 573,402
|                                          |  |                  |         |                |   |        
|                                          |  | $                | 714,760 |                | $ | 731,566
|                                          |  |                  |         |                |   |        
|Capital Expenditures (including non-cash) |  |                  |         |                |   |        
|Retail                                    |  | $                | 1,454   |                | $ | 7,783  
|Wholesale                                 |  |                  | 10,151  |                |   | 35,831 
|                                          |  |                  |         |                |   |        
|                                          |  | $                | 11,605  |                | $ | 43,614 
|                                          |  |                  |         |                |   |        



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##### Table of Contents

UNITED REFINING COMPANY AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(Unaudited)



|7. | Employee Benefit Plans
|-- | ----------------------



For the periods ended November 30, 2007 and November 30, 2006, net pension and other postretirement benefit costs were comprised of the
following:



|                                      |  |                                |        |   |                                |   |        |      |  |      |       |  |   |      
|------------------------------------- |  | ------------------------------ | ------ | - | ------------------------------ | - | ------ | ---- |  | ---- | ----- |  | - | -----
|                                      |  | Pension Benefits               |        |   | Other Post-Retirement Benefits
|                                      |  | Three Months EndedNovember 30, |        |   | Three Months EndedNovember 30,
|                                      |  | 2007                           |        |   | 2006                           |   |        | 2007 |  | 2006
|                                      |  | (in thousands)                
|Service cost                          |  | $                              | 615    |   |                                | $ | 657    |      |  | $    | 632   |  | $ | 565  
|Interest cost on benefit obligation   |  |                                | 1,049  |   |                                |   | 1,053  |      |  |      | 1,027 |  |   | 848  
|Expected return on plan assets        |  |                                | (1,107 | ) |                                |   | (1,066 | )    |  |      |      |  |   |     
|Amortization of transition obligation |  |                                | 35     |   |                                |   | 35     |      |  |      | 149   |  |   | 149  
|Amortization and deferral of net loss |  |                                | 81     |   |                                |   | 186    |      |  |      | 316   |  |   | 250  
|                                      |  |                                |        |   |                                |   |        |      |  |      |       |  |   |      
|Net periodic benefit cost             |  | $                              | 673    |   |                                | $ | 865    |      |  | $    | 2,124 |  | $ | 1,812
|                                      |  |                                |        |   |                                |   |        |      |  |      |       |  |   |      



As of
November 30, 2007, $3,600,000 of contributions have been made to the Company pension plans for the fiscal year ended August 31, 2008.



|8. | Derivative Financial Instruments
|-- | --------------------------------



At November 30, 2007, the Company has net open future positions of 1,200,000 barrels of crude oil, which were purchased at a cost of $3,016,150
during the quarter ended November 30, 2007. The Company recorded realized and unrealized losses of $502,000 and $2,198,000, respectively, on these net future positions for the quarter ending November 30, 2007 which is recorded in cost of
sales.



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##### Table of Contents

|ITEM 2. | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
|------- | --------------------------------------------------------------------------------------



Forward Looking Statements



This Quarterly Report on Form 10-Q contains certain statements that constitute forward looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995. These forward looking statements may include, among other things, United Refining Company and its subsidiaries current expectations with respect to future operating results, future performance of its
refinery and retail operations, capital expenditures and other financial items. Words such as expects, intends, plans, projects, believes, estimates, may,
will, should, shall, anticipates, predicts, and similar expressions typically identify such forward looking statements in this Quarterly Report on Form 10-Q.



By their nature, all forward looking statements involve risk and
uncertainties. All phases of the Companys operations involve risks and uncertainties, many of which are outside of the Companys control, and any one of which, or a combination of which, could materially affect the Companys results
of operations and whether the forward looking statements ultimately prove to be correct. Actual results may differ materially from those contemplated by the forward looking statements for a number of reasons.



Although we believe our expectations are based on reasonable assumptions
within the bounds of its knowledge, investors and prospective investors are cautioned that such statements are only projections and that actual events or results may differ materially depending on a variety of factors described in greater detail in
the Companys filings with the SEC, including quarterly reports on Form 10-Q, annual reports on Form 10-K, reports on Form 8-K, etc. In addition to the factors discussed elsewhere in this Quarterly Report on Form 10-Q, the Companys actual
consolidated quarterly or annual operating results have been affected in the past, or could be affected in the future, by additional factors, including, without limitation:



| |  |  | the demand for and supply of crude oil and refined products;
| | - |  | ------------------------------------------------------------



| |  |  | the spread between market prices for refined products and market prices for crude oil;
| | - |  | --------------------------------------------------------------------------------------



| |  |  | repayment of debt;
| | - |  | ------------------



| |  |  | general economic, business and market conditions;
| | - |  | -------------------------------------------------



| |  |  | risks and uncertainties with respect to the actions of actual or potential competitive suppliers of refined petroleum products in our markets;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the possibility of inefficiencies or shutdowns in refinery operations or pipelines;
| | - |  | -----------------------------------------------------------------------------------



| |  |  | the availability and cost of financing to us;
| | - |  | ---------------------------------------------



| |  |  | environmental, tax and tobacco legislation or regulation;
| | - |  | ---------------------------------------------------------



| |  |  | volatility of gasoline prices, margins and supplies;
| | - |  | ----------------------------------------------------



| |  |  | merchandising margins;
| | - |  | ----------------------



| |  |  | labor costs;
| | - |  | ------------



| |  |  | level of capital expenditures;
| | - |  | ------------------------------



| |  |  | customer traffic;
| | - |  | -----------------



| |  |  | weather conditions;
| | - |  | -------------------



| |  |  | acts of terrorism and war;
| | - |  | --------------------------



| |  |  | business strategies;
| | - |  | --------------------



| |  |  | expansion and growth of operations;
| | - |  | -----------------------------------



| |  |  | future projects and investments;
| | - |  | --------------------------------



14



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##### Table of Contents

| |  |  | future exposure to currency devaluations or exchange rate fluctuations;
| | - |  | -----------------------------------------------------------------------



| |  |  | expected outcomes of legal and administrative proceedings and their expected effects on our financial position, results of operations and cash flows;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | future operating results and financial condition; and
| | - |  | -----------------------------------------------------



| |  |  | the effectiveness of our disclosure controls and procedures and internal control over financial reporting.
| | - |  | ----------------------------------------------------------------------------------------------------------



All subsequent written and oral forward looking statements attributable to
the Company or persons acting on its behalf are expressly qualified in their entirety by the foregoing. We undertake no obligation to update any information contained herein or to publicly release the results of any revisions to any such forward
looking statements that may be made to reflect events or circumstances that occur, or which we become aware of, after the date of this Quarterly Report on Form 10-Q.



Recent Developments



The Company continues to be impacted by the volatility of the petroleum market in fiscal year 2008. Crude prices have increased to record highs during the
first quarter of fiscal year 2008. The average NYMEX crude price for the second quarter based on values published on January 4, 2008 was $94.76/bbl, $15.54/bbl or 19.6% above the average price for the first fiscal quarter of 2008.



Industry-wide margins on gasoline and distillate products, as indicated by
the difference between the prices of crude oil contracts traded on the NYMEX and the prices of NYMEX gasoline and heating oil contracts, commonly referred to as the 3/2/1 crackspread, have also been affected during the second quarter of
fiscal year 2008. Margins for the second quarter of fiscal year 2008 as calculated on January 4, 2008, averaged $9.53 as compared to $8.49 for the first fiscal quarter of 2008, a $1.04 or 12.2% increase.



The Company conducted a scheduled maintenance turnaround. The turnaround
began on October 15, 2007 and was completed on November 7, 2007. During this turnaround the Company completed the work required to produce 30 ppm low sulfur gasoline as required under the Federal Clean Air Act. The refinery is currently
producing gasoline that meets this requirement.



Results of Operations



The Company is a petroleum refiner and marketer in its
primary market area of Western New York and Northwestern Pennsylvania. Operations are organized into two business segments: wholesale and retail.



The wholesale segment is responsible for the acquisition of crude oil, petroleum refining,
supplying petroleum products to the retail segment and the marketing of petroleum products to wholesale and industrial customers. The retail segment sells petroleum products under the Kwik Fill®, Citgo® and Keystone® brand names through a network of Company-operated retail units and convenience and grocery items
through gasoline stations and convenience stores under the Red Apple Food Mart® and Country Fair® brand names.



A discussion and analysis of the factors contributing to the Companys
results of operations are presented below. The accompanying Consolidated Financial Statements and related Notes, together with the following information, are intended to supply investors with a reasonable basis for evaluating the Companys
operations, but should not serve as the only criteria for predicting the Companys future performance.



15



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##### Table of Contents

Retail Operations:



|                                       |  |                                |         |   |      |   |         |  
|-------------------------------------- |  | ------------------------------ | ------- | - | ---- | - | ------- | -
|                                       |  | Three Months EndedNovember 30, |        
|                                       |  | 2007                           |         |   | 2006 |  
|                                       |  | (dollars in thousands)         |        
|Net Sales                              |  |                                |         |   |      |   |         |  
|Petroleum                              |  | $                              | 284,128 |   |      | $ | 216,945 |  
|Merchandise and other                  |  |                                | 53,912  |   |      |   | 50,709  |  
|                                       |  |                                |         |   |      |   |         |  
|Total Net Sales                        |  |                                | 338,040 |   |      |   | 267,654 |  
|Costs of Goods Sold                    |  |                                | 310,239 |   |      |   | 236,386 |  
|                                       |  |                                |         |   |      |   |         |  
|Gross Profit                           |  |                                | 27,801  |   |      |   | 31,268  |  
|Operating Expenses                     |  |                                | 30,461  |   |      |   | 30,190  |  
|                                       |  |                                |         |   |      |   |         |  
|Segment Operating Income               |  | $                              | (2,660  | ) |      | $ | 1,078   |  
|                                       |  |                                |         |   |      |   |         |  
|Petroleum Sales (thousands of gallons) |  |                                | 94,889  |   |      |   | 89,010  |  
|                                       |  |                                |         |   |      |   |         |  
|Gross Profit                           |  |                                |         |   |      |   |         |  
|Petroleum (a)                          |  | $                              | 13,396  |   |      | $ | 17,602  |  
|Merchandise and other                  |  |                                | 14,405  |   |      |   | 13,666  |  
|                                       |  |                                |         |   |      |   |         |  
|                                       |  | $                              | 27,801  |   |      | $ | 31,268  |  
|                                       |  |                                |         |   |      |   |         |  
|Petroleum margin ($/gallon) (b)        |  |                                | .1412   |   |      |   | .1978   |  
|Merchandise margin (percent of sales)  |  |                                | 26.7    | % |      |   | 26.9    | %

---

|(a) | Includes the effect of intersegment purchases from the Companys wholesale segment at prices which approximate market.
|--- | ----------------------------------------------------------------------------------------------------------------------

|(b) | Company management calculates petroleum margin per gallon by dividing petroleum gross margin by petroleum sales volumes. Management uses fuel margin per gallon calculations to
compare profitability to other companies in the industry. Petroleum margin per gallon may not be comparable to similarly titled measures used by other companies in the industry.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Comparison of Fiscal Quarters Ended November 30, 2007 and November 30, 2006



Net Sales



Retail sales increased during the fiscal quarter ended November 30,
2007 by $70.4 million or 26.3% from $267.6 million to $338.0 million over the comparable period in fiscal 2007. The retail sales increase resulted from a $67.2 million increase in petroleum sales and a $3.2 million increase in merchandise sales. The
petroleum sales increase resulted from a 22.9% increase in retail selling prices per gallon, and a 6.9 million gallon or 6.6% increase in retail petroleum volume. Merchandise sales increase is primarily due to increased prepared food, beverages
and cigarette sales due to promotional campaigns and increased selling prices.



Costs of Goods Sold



Retail costs of goods
sold increased during the fiscal quarter ended November 30, 2007 by $73.8 million or 31.2% for the comparable period in fiscal 2007 from $236.4 million to $310.2 million. The increase of $73.8 million is due to the following increases:
petroleum purchases of $67.4 million due to an increase in prices and volume, fuel taxes of $3.9 million and merchandise costs of $2.5 million.



Gross Profit



Retail gross profit decreased during the fiscal quarter ended November 30, 2007 by $3.5 million or 11.1% over the comparable period in fiscal 2007.
The Companys petroleum margins decreased by $4.2 million, due to higher product costs, offset by a merchandise margin increase of $.7 million.



16



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##### Table of Contents

Operating Expenses



Retail operating expenses increased during the fiscal quarter ended November 30, 2007 by $.3 million or .9% over the comparable period in fiscal
2007, which is relatively consistent from quarter to quarter.



Wholesale
Operations:



|                                            |  |                                |         |      |   |         |  
|------------------------------------------- |  | ------------------------------ | ------- | ---- | - | ------- | -
|                                            |  | Three Months EndedNovember 30, |        
|                                            |  | 2007                           |         | 2006 |  
|                                            |  | (dollars in thousands)         |        
|Net Sales (a)                               |  | $                              | 355,528 |      | $ | 316,942 |  
|Costs of Goods Sold                         |  |                                | 314,784 |      |   | 310,391 |  
|                                            |  |                                |         |      |   |         |  
|Gross Profit                                |  |                                | 40,744  |      |   | 6,551   |  
|                                            |  |                                |         |      |   |         |  
|Operating Expenses                          |  |                                | 9,009   |      |   | 8,149   |  
|                                            |  |                                |         |      |   |         |  
|Segment Operating Income (Loss)             |  |                                | 31,735  |      |   | (1,598  | )
|                                            |  |                                |         |      |   |         |  
|Crude throughput (thousand barrels per day) |  |                                | 57.8    |      |   | 67.3    |  
|                                            |  |                                |         |      |   |         |  



Refinery Product
Yield

(thousands of barrels)





|                                                                       |  |                                          |   |  |       |  
|---------------------------------------------------------------------- |  | ---------------------------------------- | - |  | ----- | -
|                                                                       |  | Three Months Ended          November 30, |  
|                                                                       |  | 2007                                     |   |  | 2006  |  
|Gasoline and gasoline blendstock                                       |  | 2,120                                    |   |  | 2,770 |  
|Distillates                                                            |  | 1,279                                    |   |  | 1,588 |  
|Asphalt                                                                |  | 1,686                                    |   |  | 1,720 |  
|Butane, propane, residual products, internally produced fuel and other |  | 579                                      |   |  | 525   |  
|                                                                       |  |                                          |   |  |       |  
|Total Product Yield                                                    |  | 5,664                                    |   |  | 6,603 |  
|                                                                       |  |                                          |   |  |       |  
|% Heavy Crude Oil of Total Refinery Throughput (b)                     |  | 63                                       | % |  | 55    | %
|                                                                       |  |                                          |   |  |       |  



Product Sales

(dollars in thousands) (a)





|                                 |  |                                |         |      |   |        
|-------------------------------- |  | ------------------------------ | ------- | ---- | - | -------
|                                 |  | Three Months EndedNovember 30,
|                                 |  | 2007                           |         | 2006
|Gasoline and gasoline blendstock |  | $                              | 136,154 |      | $ | 115,360
|Distillates                      |  |                                | 113,211 |      |   | 102,757
|Asphalt                          |  |                                | 99,187  |      |   | 93,743 
|Other                            |  |                                | 6,976   |      |   | 5,082  
|                                 |  |                                |         |      |   |        
|                                 |  | $                              | 355,528 |      | $ | 316,942
|                                 |  |                                |         |      |   |        



17



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##### Table of Contents

Product Sales

(thousand of barrels) (a)





|                                 |  |                               |  |      
|-------------------------------- |  | ----------------------------- |  | -----
|                                 |  | Three MonthsEndedNovember 30,
|                                 |  | 2007                          |  | 2006 
|Gasoline and gasoline blendstock |  | 1,434                         |  | 1,699
|Distillates                      |  | 1,076                         |  | 1,337
|Asphalt                          |  | 2,413                         |  | 1,816
|Other                            |  | 135                           |  | 139  
|                                 |  |                               |  |      
|                                 |  | 5,058                         |  | 4,991
|                                 |  |                               |  |      

---

|(a) | Sources of total product sales include products manufactured at the refinery located in Warren, Pennsylvania and products purchased from third parties.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------

|(b) | The Company defines heavy crude oil as crude oil with an American Petroleum Institute specific gravity of 26 or less.
|--- | -----------------------------------------------------------------------------------------------------------------------



Comparison of Fiscal Quarters Ended November 30, 2007 and November 30, 2006



Net Sales



Wholesale sales increased during the three months ended November 30,
2007 by $38.6 million or 12.2% over the comparable period in fiscal 2007 from $316.9 million to $355.5 million. The wholesale sales increase was due to a 10.7% increase in wholesale prices and a 1.3% increase in wholesale volume.



Costs of Goods Sold



Wholesale costs of goods sold increased during the three months ended November 30, 2007 by $4.4 million or 1.4% over
the comparable period in fiscal 2007 from $310.4 million to $314.8 million. The increase in wholesale costs of goods sold during this period was primarily due to an increase in refinery expenses and losses on the Companys hedging program of
$2.7 million.



Gross Profit



Wholesale gross profit increased $34.2 million from $6.5 million for the
fiscal quarter ended November 30, 2006 to $40.7 million for the fiscal quarter ended November 30, 2007. The increase was due to increases in sales volume and selling prices.



Operating Expenses



Operating expenses increased during the three months ended November 30, 2007 by $.9 million over such expenses for the comparable period in fiscal
2007. This increase was primarily due to an increase in legal / professional services and depreciation expenses.



Consolidated Expenses:



Interest Expense, net



Net interest expense (interest expense less interest income) for the three months ended November 30, 2007 increased $1.5 million or 29.6% to $6.7 million from $5.2 million for the comparable period in fiscal 2007, primarily due to
increased debt offset by increased interest income.



18



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##### Table of Contents

Income Tax Expense / (Benefit)



The Companys effective tax rate remained consistent at approximately 41% for the three months ended November 30,
2007 and November 30, 2006.



Liquidity and Capital Resources



We operate in an environment where our liquidity and
capital resources are impacted by changes in the price of crude oil and refined petroleum products, availability of credit, market uncertainty and a variety of additional factors beyond our control. Included in such factors are, among others, the
level of customer product demand, weather conditions, governmental regulations, worldwide political conditions and overall market and economic conditions.



The following table summarizes selected measures of liquidity and capital sources (in thousands):



|                          |  |                  |         |                |   |        
|------------------------- |  | ---------------- | ------- | -------------- | - | -------
|                          |  | November 30,2007 |         | August 31,2007
|Cash and cash equivalents |  | $                | 104,516 |                | $ | 135,441
|Working capital           |  | $                | 320,287 |                | $ | 320,088
|Current ratio             |  |                  | 3.5     |                |   | 3.1    
|Debt                      |  | $                | 358,699 |                | $ | 358,952



Primary sources of
liquidity have been cash and cash equivalents, cash flows from operations and borrowing availability under a revolving line of credit. We believe available capital resources will be adequate to meet our working capital, debt service, and capital
expenditure requirements for existing operations.





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##### Table of Contents

Our cash and cash equivalents consist of bank balances and investments in money market funds. These
investments have staggered maturity dates, none of which exceed three months. They have a high degree of liquidity since the securities are traded in public markets. During the three months ended November 30, 2007, significant uses of cash are
summarized in the following table:



|                                                 |  |                                  |       |  
|------------------------------------------------ |  | -------------------------------- | ----- | -
|                                                 |  | ThreeMonthsEndedNovember 30,2007 |      
|                                                 |  | (dollars inmillions)             |      
|Significant uses of cash                         |  |                                  |       |  
|Cash used in investing activities                |  |                                  |       |  
|Property, plant and equipment                    |  | $                                | (11.6 | )
|Refinery turnaround costs                        |  |                                  | (3.3  | )
|                                                 |  |                                  |       |  
|Total                                            |  | $                                | (14.9 | )
|                                                 |  |                                  |       |  
|Cash provided by financing activities            |  |                                  |       |  
|Proceeds from sale of investment securities      |  | $                                | 14.8  |  
|Other                                            |  |                                  | (0.2  | )
|                                                 |  |                                  |       |  
|Total                                            |  | $                                | 14.6  |  
|                                                 |  |                                  |       |  
|Working capital items                            |  |                                  |       |  
|Prepaid expense increase                         |  | $                                | (32.9 | )
|Income taxes payable decrease                    |  |                                  | (18.4 | )
|Accounts payable decrease                        |  |                                  | (17.2 | )
|Accounts receivable increase                     |  |                                  | (6.1  | )
|Other                                            |  |                                  | (1.9  | )
|Decrease in inventory due to decrease in volumes |  |                                  | 21.4  |  
|Accrued liabilities increase                     |  |                                  | 9.2   |  
|                                                 |  |                                  |       |  
|Total                                            |  | $                                | (45.9 | )
|                                                 |  |                                  |       |  



We require a
substantial investment in working capital which is susceptible to large variations during the year resulting from purchases of inventory and seasonal demands. Inventory purchasing activity is a function of sales activity and turnaround cycles for
the different refinery units.



Maintenance and
non-discretionary capital expenditures have averaged approximately $6.0 million annually over the last three years for the refining and marketing operations. Management does not foresee any increase in these maintenance and non-discretionary capital
expenditures during fiscal year 2008.



Future liquidity, both
short and long-term, will continue to be primarily dependent on realizing a refinery margin sufficient to cover fixed and variable expenses, including planned capital expenditures. We expect to be able to meet our working capital, capital
expenditure, contractual obligations, letter of credit and debt service requirements out of cash flow from operations, cash on hand and borrowings under our Revolving Credit Facility with PNC Bank, N.A. as Agent Bank. Under the amended Revolving
Credit Facility, interest is calculated as follows: (a) for base rate borrowings, at the greater of the Agent Banks prime rate less an applicable margin of .5% to 0% or federal funds rate plus 1%; (b) for euro-rate borrowings, at the
LIBOR rate plus an applicable margin of 1.25% to 1.75%. The applicable margin will vary depending on a formula calculating our average unused availability under the facility. The applicable margin varied with our
facility leverage ratio calculation.



The Revolving Credit
Facility is secured primarily by certain cash accounts, accounts receivable and inventory. Until maturity, we may borrow on a borrowing base formula as set forth in the facility.



We had outstanding letters of credit of $432,000 as of November 30, 2007. As of November 30, 2007, there were no
outstanding borrowings under the Revolving Credit Facility resulting in net availability of $99,568,000.



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Although we are not aware of any pending circumstances which would change our expectation, changes in the
tax laws, the imposition of and changes in federal and state clean air and clean fuel requirements and other changes in environmental laws and regulations may also increase future capital expenditure levels. Future capital expenditures are also
subject to business conditions affecting the industry. We continue to investigate strategic acquisitions and capital improvements to our existing facilities.



Federal, state and local laws and regulations relating to the environment affect nearly all of our operations. As is the case with all the companies
engaged in similar industries, we face significant exposure from actual or potential claims and lawsuits involving environmental matters. Future expenditures related to environmental matters cannot be reasonably quantified in many circumstances due
to the uncertainties as to required remediation methods and related clean-up cost estimates. We cannot predict what additional environmental legislation or regulations will be enacted or become effective in the future or how existing or future laws
or regulations will be administered or interpreted with respect to products or activities to which they have not been previously applied.



Seasonal Factors



Seasonal factors affecting the Companys business may cause variation in the prices and margins of some of the Companys products. For example,
demand for gasoline tends to be highest in spring and summer months, while demand for home heating oil and kerosene tends to be highest in winter months.



As a result, the margin on gasoline prices versus crude oil costs generally tends to increase in the spring and summer, while margins on home heating oil
and kerosene tend to increase in winter.



Inflation



The effect of inflation on the Company has not been significant during the
last five fiscal years.



|ITEM 3. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
|------- | -----------------------------------------------------------



The Company uses its revolving credit facility to finance a portion of its operations. These on-balance sheet financial instruments, to the extent they
provide for variable rates, expose the Company to interest rate risk resulting from changes in the PNC Prime rate, the Federal Funds or LIBOR rate.



The Company has exposure to price fluctuations of crude oil and refined products. The Company does not manage the price risk related to all of its
inventories of crude oil and refined products with a permanent formal hedging program, but does manage its risk exposures by managing inventory levels.The Company had open future positions of 1,200,000 barrels of crude all on
November 30, 2007. For the three months ended November 30, 2007, the Company realized losses of $502,000 and has unrealized losses of $2,198,000.



See also Recent Developments section of Item 2Managements Discussion and Analysis of Financial Condition and Results of Operations.



|ITEM 4. | CONTROLS AND PROCEDURES.
|------- | ------------------------



|(a) | Based on an evaluation by management of the Companys disclosure controls and procedures (as defined in Rules 13(a)  15(e) and 15(d)  15(e) of the Securities
Exchange Act of 1934, as amended), as of the end of the Companys fiscal quarter ended November 30, 2007, (the Evaluation Date) the Companys Chief Executive Officer and Chief Financial Officer (its principal executive
officer and principal financial officer, respectively) have concluded that the Companys disclosure controls and procedures were effective as of the Evaluation Date.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(b) | There have not been any changes in the Companys internal controls over financial reporting that occurred during the Companys fiscal quarter ended November 30, 2007
that has materially affected, or is reasonably likely to materially affect, the Companys internal controls over financial reporting.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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|PART II. | OTHER INFORMATION
|-------- | -----------------



|ITEM 1. | LEGAL PROCEEDINGS.
|------- | ------------------



| | None.
| | -----



|ITEM 1A. | RISK FACTORS.
|-------- | -------------



| | In connection with information set forth in this Form 10-Q, the factors discussed under Risk Factors in our Form 10-K for the fiscal year ended August 31, 2007
should be considered. In addition, the factors discussed herein should be considered. Other than the factors listed below, there have been no material changes to the factors previously disclosed in our Form 10-K.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | Certain of our executive officers may allocate a portion of their time to the business of our affiliate, United Refining Energy Corp., thereby
causing potential conflicts of interest in their determination of how much time to devote to our affairs.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | Certain of our executive officers are also executive officers of our affiliate, United Refining Energy Corp., a blank check company with a particular focus on target businesses
in the energy industry and specifically businesses or assets involved in the refining of petroleum products. United Refining Energy Corp. consummated its initial public offering on December 11, 2007 and is in the process of evaluating
appropriate acquisition targets, which requires certain of our executive officers to allocate a portion of their time to such business. If such executive officers become required to devote substantial amounts of time to the
business of United Refining Energy Corp., it could limit their ability to devote time to our affairs. We cannot assure you that these conflicts will be resolved in our favor.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | We have entered into a right of first refusal and corporate opportunities agreement with United Refining Energy Corp. pursuant to which we granted to United Refining Energy
Corp. a right of first refusal with respect to certain investment or acquisition opportunities, thereby possibly impairing our ability to pursue valuable opportunities and raising the potential for conflicts of interest in determining whether a
particular opportunity first must be presented to United Refining Energy Corp.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | Commencing on December 11, 2007 and expiring on the earlier of the date on which United Refining Energy Corp. consummates its initial business combination or dissolves and
liquidates pursuant to its Amended and Restated Certificate of Incorporation, we have agreed to share business opportunities with United Refining Energy Corp. as follows:
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | We will have the first opportunity to consider any business opportunities with respect to transactions primarily involving the purchase of retail operations or the
sale or lease of real estate in connection therewith.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | United Refining Energy Corp. will have the first opportunity to consider any business opportunity, meeting its initial business combination thresholds in any
industry or business except with respect to transactions primarily involving the purchase of retail operations or the sale or lease of real estate in connection therewith.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | Such agreement may limit our ability to pursue valuable business opportunities and it may create conflicts of interest as our executive officers determine whether particular
opportunities must first be offered to United Refining Energy Corp. We cannot assure you that these conflicts will be resolved in our favor.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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



| | None.
| | -----



|ITEM 3. | DEFAULTS UPON SENIOR SECURITIES.
|------- | --------------------------------



| | None.
| | -----



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



| | None.
| | -----



|ITEM 5. | OTHER INFORMATION.
|------- | ------------------



| | None.
| | -----



|ITEM 6. | EXHIBITS.
|------- | ---------



|             |  |                                                                                                                                                                              
|------------ |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|             | 
|Exhibit 31.1 |  | Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                                                                           
|             | 
|Exhibit 31.2 |  | Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                                                                           
|             | 
|Exhibit 32.1 |  | Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002



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##### Table of Contents

SIGNATURES



Pursuant to the
requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



Date: January 14, 2008



UNITED REFINING COMPANY(Registrant)/s/  Myron L. TurfittMyron L. Turfitt President


/s/  James E. MurphyJames E. Murphy Chief Financial Officer




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SIGNATURES



Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.



Date:
January 14, 2008



KIANTONE PIPELINE CORPORATION(Registrant)/s/  Myron L. TurfittMyron L. Turfitt President


/s/  James E. MurphyJames E. Murphy Chief Financial Officer




25



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##### Table of Contents

SIGNATURES



Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.



Date:
January 14, 2008



UNITED REFINING COMPANY OF PENNSYLVANIA(Registrant)/s/  Myron L. TurfittMyron L. Turfitt President


/s/  James E. MurphyJames E. Murphy Chief Financial Officer




26



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##### Table of Contents

SIGNATURES



Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.



Date:
January 14, 2008



KIANTONE PIPELINE COMPANY (Registrant)/s/ Myron L. TurfittMyron L. TurfittPresident/s/ James E. MurphyJames E. Murphy Chief Financial Officer




27



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SIGNATURES



Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.



Date:
January 14, 2008



UNITED JET CENTER, INC. (Registrant)/s/ Myron L. TurfittMyron L. TurfittPresident/s/ James E. MurphyJames E. Murphy Chief Financial Officer




28



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SIGNATURES



Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.



Date:
January 14, 2008



KWIK-FILL CORPORATION(Registrant)/s/  Myron L. TurfittMyron L. TurfittPresident/s/  James E. MurphyJames E. MurphyChief Financial Officer




29



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SIGNATURES



Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.



Date:
January 14, 2008



INDEPENDENT GASOLINE AND OIL COMPANY OF ROCHESTER, INC.(Registrant)/s/  Myron L. TurfittMyron L. TurfittPresident/s/  James E. MurphyJames E. MurphyChief Financial Officer




30



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SIGNATURES



Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.



Date:
January 14, 2008



BELL OIL CORP.(Registrant)/s/  Myron L. TurfittMyron L. TurfittPresident/s/  James E. MurphyJames E. MurphyChief Financial Officer




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SIGNATURES



Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.



Date: January 14, 2008



PPC, INC.(Registrant)/s/  Myron L. TurfittMyron L. TurfittPresident/s/  James E. MurphyJames E. MurphyChief Financial Officer




32



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SIGNATURES



Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.



Date:
January 14, 2008



SUPER TEST PETROLEUM, INC.(Registrant)/s/  Myron L. TurfittMyron L. TurfittPresident/s/  James E. MurphyJames E. MurphyChief Financial Officer




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SIGNATURES



Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.



Date:
January 14, 2008



KWIK-FIL, INC.(Registrant)/s/  Myron L. TurfittMyron L. TurfittPresident/s/  James E. MurphyJames E. MurphyChief Financial Officer




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SIGNATURES



Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.



Date:
January 14, 2008



VULCAN ASPHALT REFINING CORPORATION(Registrant)/s/  Myron L. TurfittMyron L. TurfittPresident/s/  James E. MurphyJames E. MurphyChief Financial Officer




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SIGNATURES



Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.



Date:
January 14, 2008



COUNTRY FAIR, INC.(Registrant)/s/  Myron L. TurfittMyron L. TurfittPresident and Chief Operating Officer/s/  James E. MurphyJames E. MurphyVice President  Finance




36