AS FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION ON



### May 23, 2003



SECURITIES AND EXCHANGE
COMMISSIONWASHINGTON, D.C.  20549



### FORM 10-KSB

(Mark One)

[  X ]          ANNUAL REPORT UNDER
SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934For the fiscal year ended:February
28, 2003



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



Commission file number:333-91191



### INTERMOUNTAIN REFINING CO., INC.

(Name of small business issuer in its
charter)



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



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

Securities registered under Section 12(b) of the Exchange
Act: NoneSecurities registered under
Section 12(g) of the Exchange Act: None

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

Check if there is no disclosure of delinquent filers in
response to Item 405 of Regulation S-B is not contained in this form, and no
disclosure will be contained, to the best of registrant’s knowledge, in
definitive proxy or information statements incorporated by reference in Part III
of this Form 10-KSB or any amendment to this Form 10-KSB. [  ]

-Continued-

10-KSB 1<Page>

State issuer's revenues for its most recent fiscal year:
$593,665

State the aggregate market value of the voting and non-voting
common equity held by non-affiliates computed by reference to the price at which
the common equity was sold, or average bid and asked price of such common
equity, as of a specified date within the past 60 days. (See definition of
affiliate in Rule 12b-2 of the Exchange Act)  N/A as of April 30, 2003. There
presently is no market maker for the Registrant's common stock. As no public
trading market exists for the stock , bid and ask prices are not
available.Note: If determining whether a
person is an affiliate will involve an unreasonable effort and expense, the
issuer may calculate the aggregate market value of the common equity held by
non-affiliates on the basis of reasonable assumption, if the assumptions are
stated.

(ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS
DURING THE PAST FIVE YEARS)

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

(APPLICABLE ONLY TO CORPORATE
REGISTRANTS)



State the number of shares outstanding of each of the issuer's
classes of common equity, as of the latest practicable date: 1,155,609 shares
of common stock, no par value, were outstanding on April 30,
2003.

DOCUMENTS INCORPORATED BY
REFERENCE

If the following documents are incorporated by reference,
briefly describe them and identify the part of the Form 10-KSB (e.g. Part I,
Part II, etc.) into which the document is incorporated: (1) any annual report to
security holders; (2) any proxy or information statement; and (3) any prospectus
filed pursuant to Rule 424(b) or (c) of the Securities Act of 1933 ("Securities
Act"). The list documents should be clearly described for identification
purposes (e.g. annual report to security holders for fiscal year ended December
24, 1990).

Certain exhibits required to be filed in Part IV of
this Form 10-KSB have been incorporated by reference to Intermountain's
registration statement on Form S-1 dated April 9, 2001. See exhibit index on
page 36 of this report.

Transitional Small Business Disclosure Format (check one)
Yes____ No _X_

10-KSB 2<Page>

### Cross Reference Sheet



The Registrant has included all information required to be
provided in Parts I, II and III of Form 10-KSB in its Integrated Annual Report
to Shareholders as of February 28, 2003 as filed herein as part of this report.
The following table provides a cross reference to the specific pages and
sections of the Integrated Annual Report to Shareholders where the information
required by Form 10-KSB may be found:





|Item in Form 10-KSB                                                                          | Section in Integrated Annual Report to
Shareholders                                   | Page
|-------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------- | ----
|Part I                                                                                       |                                                                                       |     
|Item 1. Description of Business                                                              | Intermountain's Business Activities                                                   | 3   
|Item 2. Description of Property                                                              | Description of Properties                                                             | 6   
|Item 3. Legal Proceedings                                                                    | Legal Proceedings                                                                     | 7   
|Item 4. Submission of Matters to a Vote of Security
Holders                                  | Submission of Matters to a Vote of Security
Holders                                   | 7   
|Part II                                                                                      |                                                                                       |     
|Item 5. Market for Common Equity and Related Stockholder
Matters                             | Market for Common Equity and Related Shareholder
Matters                              | 7   
|Item 6. Management's Discussion and Analysis or Plan of
Operation                            | Management's Discussion and Analysis of Financial Condition
and Results of Operations | 8   
|Item 7. Financial Statements                                                                 | Financial Statements of Intermountain                                                 | 8   
|Item 8. Changes In and Disagreements with Accountants on
Accounting and Financial Disclosure | Changes in and Disagreements with Accountants                                         | 8   
|Part III                                                                                     |                                                                                       |     
|Item 9. Directors, Executive Officers, Promoters and Control
Persons;                        | Directors and Executive Officers                                                      | 14  
|Compliance with Section 16(a) of the Exchange
Act                                            | Compliance with Section 16(a) of the Exchange
Act                                     | 16  
|Item 10. Executive Compensation                                                              | Compensation of Directors and Executive
Officers                                      | 15  
|Item 11. Security Ownership of Certain Beneficial Owners and
Management                      | Security Ownership of Certain Beneficial Owners and
Management                        | 16  
|Item 12. Certain Relationships and Related
Transactions                                      | Certain Relationships and Related Party
Transactions                                  | 17  
|Item 13. Exhibits                                                                            | See Page 37 of this Form 10-KSB                                                       | N/A 
|Reports on Form 8-K                                                                          | None                                                                                  | N/A 
|Item 14. Controls and Procedures                                                             | Controls and Procedures                                                               | 17  
|Item 16. Principal Accountant Fees and Services                                              | Principal Accountant Fees and Services                                                | 17  

### 10-KSB 3<Page>

### Intermountain Refining Co., Inc.

### Integrated Annual Report to Shareholders

### February 28, 2003













































The information contained within this report is
intended to provide all information required to comply with the Securities
Exchange Act of 1934 disclosure requirements of Form 10-KSB except for required
exhibits and disclosure about reports filed on Form 8-K for which disclosure has
been included in our Form 10-KSB as filed with the Securities and Exchange
Commission on May 23, 2003. You may obtain a copy of our Form 10-KSB as filed by
submitting a written request to Intermountain Refining Co., Inc., PO Box 35,
Farmington, NM 87499 or you can access our public filings on the internet at
"www.sec.gov" by searching the Edgar Database on "Intermountain
Refining".

10-KSB
4                                                                                   
1<Page>

### Table Of Contents





|                                                                                     | Page
|------------------------------------------------------------------------------------ | ----
|Intermountain's Business Activities                                                  | 3   
|Natural Gas Production                                                               | 3   
|Refining and Asphalt Product Manufacturing and
Storage                               | 3   
|Other Business Activities                                                            | 4   
|Generation of Electric Power                                                         | 5   
|Employees                                                                            | 5   
|Research and Development Activities                                                  | 5   
|Government Regulation, Environmental Laws and
Taxes                                  | 5   
|Competition                                                                          | 5   
|Seasonality                                                                          | 6   
|Description Of Properties                                                            | 6   
|Legal Proceedings                                                                    | 7   
|Submission of Matters to a Vote of Security
Holders                                  | 7   
|Market for Common Equity and Related Shareholder
Matters                             | 7   
|Market for Intermountain Common Stock                                                | 7   
|Shares Eligible for Future Sale                                                      | 7   
|Dividends                                                                            | 7   
|Financial Statements Of Intermountain                                                | 8   
|Changes In And Disagreements With Accountants                                        | 8   
|Managements Discussion And Analysis Of Financial Condition
And Results Of Operations | 8   
|Liquidity and Capital Resources                                                      | 8   
|Cash Requirements as of February 28, 2003                                            | 9   
|Results of Operations                                                                | 10  
|Inflation, Deflation and Changing Prices                                             | 14  
|Directors And Executive Officers                                                     | 14  
|Compensation Of Directors And Executive
Officers                                     | 15  
|Security Ownership Of Certain Beneficial Owners And
Management                       | 16  
|Security Ownership of Certain Owners                                                 | 16  
|Security Ownership of Management                                                     | 16  
|Compliance with Section 16(a) of the Exchange
Act                                    | 16  
|Certain Relationships And Related Party
Transactions                                 | 17  
|Controls and Procedures                                                              | 17  
|Principal Accountant Fees and Services                                               | 17  
|Index To Financial Statements                                                        | 18  

10-KSB
5                                                                                   
2<Page>

### Intermountain's Business Activities

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

- Production of natural gas;
- Manufacture and storage of asphalt paving
products;
- Other business activities including providing management and
consulting services to others, and leasing unused space in Intermountain's
office building.

### Natural Gas Production

Intermountain owns working interests in and operates 20
natural gas producing wells located in Southwestern Kansas. Natural gas and
helium produced is sold, under exclusive contract, to Oneok Field
Services. Day to day operation and maintenance of the wells is performed by
an individual under contract with Intermountain.  Intermountain has no current
plans to drill additional wells on the Kansas leases, but is actively engaged in
reviewing potential acquisitions of oil and gas producing properties in other
areas.

The exclusive contract with Oneok Field Services contains the
following material provisions:

- The original term of the agreement was for one year beginning
on December 1, 1994 and continued on a month-to-month basis until February 1,
2000 when the term was extended for five years until January 31, 2005. The term
will continue on a year-to-year basis after January 31, 2005 unless terminated
by either party on sixty days notice. Oneok has the option to terminate the
agreement on thirty days notice if Oneok determines that the purchase of gas
under the contract is uneconomic;
- The monthly price paid to Intermountain for natural gas
produced and delivered to Oneok is based on the published first of month index
price for natural gas delivered to Panhandle Eastern Pipeline Co. in Texas and
Oklahoma, less $.15 per million Btu, less a minimum gathering fee of $.2029 per
million Btu and less 0.8% charge for fuel, loss and, unaccounted for gas. The
gathering fee is adjusted annually on January 1 based on the change in the gross
domestic product implicit price deflator for the prior 12 months;
- With the exception of small quantities of agricultural use
gas sold to several local land owners, Intermountain is committed to deliver its
entire deliverable capacity from all of its wells for purchase by Oneok at such
times and in such quantities as Oneok may request;
- Payments to Intermountain for gas purchased are due from
Oneok on the 30th day of the month following the month of delivery.
Intermountain does not require any collateral or other security for amounts
receivable from Oneok;
- Intermountain is responsible for the payment of all taxes,
including production, severance, excise, and property taxes, associated with the
production of natural gas. Oneok is responsible for reporting and paying monthly
production and severance taxes to the state of Kansas. Production and severance
taxes paid by Oneok are withheld from payments made to
Intermountain.

Intermountain depends on Oneok
for substantially all of its natural gas sales which represents a significant
portion of Intermountain's total revenues.

### Refining and Asphalt Products Manufacturing and Storage

From 1985 until 1997, Intermountain processed low-cost, heavy
crude oil and other supplemental raw materials at its Fredonia, Arizona refinery
to produce naphtha, diesel fuel, fuel oil and asphalt products which were
generally marketed on a wholesale basis in Utah, Arizona and Nevada.  In
January 1997, crude oil refining operations were discontinued due to a sharp
reduction in the availability of crude oil from traditional sources and the
inability to obtain a continuing supply of suitable raw materials from
alternative sources.  Since that time, Intermountain has periodically
provided asphalt storage services for others. Asphalt storage activities include
the use of storage tanks and loading equipment at the refinery facility to
receive, store, and subsequently ship asphalt products owned by others. 
Intermountain has received fees and expense reimbursements related to the
services provided.

In November 1999, Intermountain entered in an agreement with
Paramount Petroleum Corporation to expand its asphalt storage activities to
include the manufacture of asphalt products including asphalt cements, emulsions
and cut backs for sale to Paramount. These products are used in the
construction, repair and maintenance of highways, streets, and parking
lots.

10-KSB
6                                                                                   
3<Page>

The initial phase of the project provided for Intermountain to
perform the modifications to its asphalt storage facilities necessary to enable
the manufacture of the intended asphalt products. The modifications included
reconfiguration of portions of Intermountain's equipment as well as the
installation of additional equipment owned by Paramount. Under the agreement,
Paramount reimbursed Intermountain for costs incurred in performing the
modifications. The modifications to Intermountain's facilities were completed
during May 2000 and the facility was declared operational as of June 1,
2000.

The November 1999 agreement contained the following material
terms related to the operating phase of the project:

- The primary term of the agreement was for four years
commencing June 1, 2000;
- Intermountain purchased asphalt raw material from Paramount
at a price which was based on published reference prices for the Arizona - Utah
area. Payment for the asphalt raw materials purchased was deferred until the
asphalt products were sold to Paramount;
- Intermountain processed the asphalt raw materials into
various finished products as ordered by Paramount for sales to their
customers;
- All costs associated with its manufacturing activities were
borne by Intermountain;
- Revenues from the sale of finished products to Paramount were
recognized by Intermountain on a monthly basis according to a formula set out in
the agreement. The formula provided for Intermountain to recover, from
Paramount, a portion of the revenues recognized by Paramount from the resale of
products shipped by Intermountain. In general, the amount Intermountain was
entitled to recover included the cost of asphalt raw materials included in the
products shipped, operating costs as allowed under the agreement, and 40% of any
amounts remaining after deduction for a monthly capital cost recovered by
Paramount and deduction for any previously un-recovered amounts;
- Intermountain was obligated to pay Paramount $500 per month
during the term of the agreement as rent of equipment owned by Paramount and
installed at Intermountain's asphalt
facility.

Operations under the November 1999
agreement were not profitable for Intermountain. Effective as of January 1,
2002, Intermountain and Paramount mutually agreed to cancel the agreement and
enter into a new agreement whereby Paramount took over all asphalt storage and
manufacturing activities at the facility. Material provisions of the new
agreement with Paramount include the following:

- Paramount purchased all asphalt, chemicals, additives, and
plant fuel inventories held by Intermountain as of January 1, 2002;
- Paramount is responsible for the operation and maintenance of
the asphalt storage and manufacturing facility and is obligated to reimburse
Intermountain for any direct costs that we may incur with respect to Paramount's
operation of the facility during the term of the agreement;
- The primary term of the agreement is for two years beginning
on January 1, 2002 and expires on December 31, 2003. The agreement will
automatically renew on an annual basis unless cancelled by either party upon 90
days advance notification;
- Paramount pays $3,200 per month for rent of Intermountain's
asphalt products storage and manufacturing equipment;
- In addition to basic equipment rent, Paramount pays a fee of
$5.50 per ton for all asphalt products shipped from the facility. In the event
that total shipments of asphalt products exceeds 10,000 tons during a calendar
year, Paramount will pay a supplemental fee of $4.50 per ton applicable to all
volumes shipped during the year.

### Other Business Activities

On occasion, we have provided management and consulting
services to others. Fees charged for management and consulting services vary
depending on the services performed. Such services were performed for Red Hills
Manufacturing, Inc. during fiscal 2002 and 2003. Red Hills is a related party to
Intermountain. Intermountain currently provides management and accounting
services to Red Hills for a fee of $3,000 per month. While we expect to continue
to provide occasional services to others in the future, there can be no
assurance that such opportunities will be available or that we can maintain any
significant level of revenues from such activities.

We lease unused office space in our Farmington, New Mexico
office building to unrelated third parties and actively manage the building.
Revenues from office leasing varies between $13 and $25 per foot annually
depending on the type of space rented and additional services provided to
tenants such as secretarial, phone answering, cleaning, and office machine use.
Leasing of office space should not be viewed as a material source of revenues
for Intermountain.

10-KSB
7                                                                                   
4<Page>

### Generation of Electric Power

Intermountain's electric generation facility located at its
refinery in Fredonia, Arizona is capable of producing up to 3 megawatts of
electrical energy and in the past has provided steam for use in the refining
process.  From 1986 until 1998, electric power and standby generating
capacity was sold under contracts with local power distributors which have
expired. In early 1999, we concluded that there was little likelihood of
developing a local market for electric power and that using the generators
solely for steam and power use at the refinery facility would not be cost
effective.  In June 1999, we entered into a contract with third parties to
provide for the marketing of the generators and the generators were removed from
the Fredonia facility in October 1999. As of February 2001, Intermountain had
not received any offers on the equipment.

During the fall and winter of 2000/2001, there was a
substantial supply shortage of electricity in California and surrounding western
states which led to a significant increase in wholesale electric prices in the
region. In March 2001, we identified a regional power producer as an interested
party for the sale of electricity produced by Intermountain. In April 2001,
Intermountain and the power producer executed a letter of intent that provided
for Intermountain to generate and sell electricity to the power producer at a
fixed price for an initial term of 16 months beginning in June 2001 with options
to extend the agreement after the initial term. Intermountain promptly
terminated the equipment marketing agreement and began recommissioning the
electric generation facility with the intention of having the facility ready for
operation during June 2001.

Primarily due to a delay in renewing the environmental permit
for the facility with the state of Arizona, Intermountain was not able to place
the facility into operation by June 2001. In the meantime, due to the
significant economic decline and the imposition of artificial price controls,
demand and market prices for wholesale electric power declined drastically
during the spring of 2001 and the regional power producer decided not to enter
into a formal agreement with Intermountain under the terms established in the
letter of intent.

After determining that it was unlikely that a contract to
provide local electric power would be forthcoming, we decided to implement a
parallel strategy and seek a buyer for the newly refurbished generation
equipment. We have contacted several electric generation equipment dealers to
inform them that the equipment is available for sale. Over the past year, we
received several inquiries from "serious buyers", and dealers have provided
proposals to the buyers. We have not received any responses to those
proposals.

### Employees

Intermountain presently employs three people, including
officers, who are salaried and employed on a full time basis in our
administrative offices in Farmington, New Mexico. All full time employees
are eligible to participate in Intermountain's SIMPLE IRA Plan and a group
medical insurance program. None of our employees are represented by a union and
management believes its employee relations to be satisfactory.

### Research and Development Activities

Intermountain has not spent any material amount on research or
development activities since its inception.

### Government Regulations, Environmental Laws and Taxes

Our business is subject to certain national, state and local
laws and regulations relating to the production and transportation of natural
gas and the processing of hydrocarbons, as well as environmental and safety
matters. Many of these laws and regulations have become more stringent in recent
years, imposing greater liability on a larger number of potentially responsible
parties. Intermountain believes it has complied in all material respects with
these laws and regulations. Because the requirements imposed by such laws and
regulations are frequently changed, we are unable to predict the ultimate cost
of compliance with these requirements or their effect on our
operations.

The operation of gas fields and the processing of hydrocarbons
inherently involve environmental risks. These risks can be minimized, but not
eliminated, through the use of various engineering and other technological
methods. Intermountain intends to employ such methods to industry standards.

Severance taxes on natural gas production in Kansas are
collected and paid by Oneok, the first purchaser of the gas.

10-KSB
8                                                                                   
5<Page>

### Competition

The petroleum and natural gas industries are highly
competitive. We encounter competition from other oil and gas and petroleum
companies in all of our operations, including the acquisition of producing
properties, obtaining services, including oil field services, and the sale of
natural gas. Our competitors include integrated petroleum and natural gas
companies and numerous independent oil and gas companies, and individuals. Many
of these competitors are large and well established with substantially larger
operating staffs and greater capital resources and who, in many instances, have
been engaged in the energy business for a much longer time than Intermountain.
Such competitors may be able to develop better information and provide better
analysis of available information, to pay more for raw materials and productive
oil and natural gas properties and exploratory prospects and to define,
evaluate, bid for and purchase a greater number of properties and prospects than
our resources permit.

The market for the asphalt products produced at our asphalt
storage and manufacturing facility in Fredonia, Arizona is generally located in
northwestern Arizona and southwestern Utah. Paramount competes for market share
with various suppliers throughout this region. The long term success of our
equipment lease to Paramount is greatly dependent on Paramount's ability to
compete with the other suppliers in the region.

### Seasonality

Generally, our natural gas wells are produced at a rate
intended to maintain gathering system pressures within an operating range
established by the gathering system operator. Agricultural irrigation users who
are connected to the gathering system tend to have a greater demand for natural
gas during the summer months which in turn lowers gathering system pressures
allowing greater well production. During the winter months, local use is minimal
and the gathering system is operated at higher pressures which lower our
production capability. The amount of local rainfall can affect the demand for
natural gas by local agricultural irrigation users which in turn can affect our
rate of production.

The use of asphalt products for highway construction, repair
and maintenance is usually restricted during winter months where cold weather,
rain and snow are factors. We expect that the majority of fees earned from the
shipment of asphalt products will occur during the months of May through October
and that the asphalt manufacturing facility will normally be idle during the
months of December through March.

### Description of Properties

Except for the mineral leases associated with our Kansas gas
properties which are held by production, all properties used by Intermountain in
the conduct of its businesses are owned in fee.  There are no outstanding
mortgages on any of the properties owned by
Intermountain.Intermountain's
refining and asphalt storage and manufacturing facility is situated on 20 acres
of fee-owned land in Fredonia, Arizona.  The facility includes atmospheric
and vacuum distillation units having daily capacities of 4,000 and 2,000 barrels
respectively; storage tanks; boilers; a cooling tower; various buildings;
loading racks and other ancillary facilities. Intermountain used a portion of
its refining and asphalt storage and manufacturing equipment in the asphalt
paving products manufacturing operations and, effective January 1, 2002, leases
these assets to Paramount. The remainder of the equipment is presently idle and
Intermountain has previously provided a reserve for impairment in value in the
amount of $97,907, representing the entire carrying value of equipment not used
in ongoing operations.

Intermountain owns an average 81.8% working interest in, and
is the operator of 20 producing natural gas wells on 11,241 lease acres in Scott
and Finney Counties in southwest Kansas.  As of February 28, 2003, the
proven producing reserves are estimated to be 1.828 billion cubic feet net to
Intermountain's interest.  For the year ended February 28, 2003,
Intermountain produced 179 million cubic feet gas net to its interest.  No
reserve estimates have been filed with any Federal authorities or agencies.
Additional information relative to Intermountain's natural gas reserves and
activities is included in Note M of its February 28, 2003 financial statements
included on page 30 of this report.

Intermountain owns a 7,000 square foot office building in
Farmington, New Mexico.  Approximately one half of the office building is
used by Intermountain for its corporate office.  The remainder of the space
is leased, or available for lease, to various non-related tenants.

Intermountain owns two Caterpillar Model 3606 diesel powered
electric generators each capable of producing up to 1.5 megawatts. The generator
facility is located at Intermountain's refinery facility in Fredonia Arizona.
Because Intermountain was unable to generate electricity at competitive prices,
the generators were taken out of service in January 1999 and had been for sale
since June 1999. In April 2001, Intermountain executed a letter of intent that
provided for Intermountain to generate and sell power at a fixed price to a
regional power distributor over a 16 month period beginning in June 2001.
Intermountain ordered the reconditioning of the engines and generators and
recommissioning of the facility was substantially completed in July 2001 at a
cost of  $490,006.

10-KSB
9                                                                                   
6<Page>

The facility however was not placed into operation as expected
because the regional power distributor opted not to enter into a formal
agreement with Intermountain under the original terms of the letter of intent.
We held limited negotiations with the power distributor but we where
unsuccessful in developing a mutually acceptable alternative arrangement.
Accordingly, we have been in contact with several electric equipment dealers to
offer the newly refurbished equipment for sale.

As of February 28, 2002, we reclassified our electric
generation equipment, with a combined carrying value of $515,000, net of reserve
for impairment of $75,505, from Property, Plant and Equipment to Electric
generation equipment available for sale. The reserve for impairment in value
reflects our estimate of the amount by which the estimated fair value of the
equipment, net of disposal costs, exceeds the carrying value of the equipment.
The actual amount that may be realized from the future sale of the equipment may
be different.

### Legal Proceedings

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

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

There have been no matters submitted to a vote of security
holders during the past year through the solicitation of proxies or
otherwise.

### Market for Common Equity and Related Shareholder Matters

### Market for Intermountain Common Stock

There is presently no market for Intermountain's common stock.
It is the intent of Intermountain to seek a listing on the OTC Electronic
Bulletin Board and establish a public trading market for its shares. There is no
assurance that a listing will be obtained. While we believe that Intermountain
can reasonably meet the listing requirements for the OTC Electronic Bulletin
Board, thus far, we have not located a market maker for our stock.

There has never been a public market for Intermountain's
common stock, and no prediction can be made as to the effect, if any, that the
sale of shares, or the availability of shares for sale, will have on the market
price prevailing from time to time. Nevertheless, sales of substantial amounts
of the common stock in the public market could adversely affect prevailing
market prices and the ability of Intermountain to raise equity capital in the
future.

### Shares Eligible for Future Sale

There are 1,155,609 shares of Intermountain common stock
outstanding held by approximately 425 shareholders. Of the 1,155,609 shares
outstanding, 442,643 shares are freely tradable in the public market without
restriction, and 712,966 shares are subject to restrictions on future sales as
set forth in Rule 144 of the Securities Act of 1933.

Of the 712,966 restricted, 700,712 shares are held by
affiliates of Intermountain. In general, persons who are affiliates of
Intermountain are entitled to sell, within any three month period, a number of
shares that does not exceed the greater of the following:

- One percent of the then outstanding shares of common stock,
or
- The average weekly reported trading volume of the common
stock during the four calendar weeks immediately preceding the date on which
notice of such sale is filed with the Securities and Exchange Commission,
provided that manner of sale and notice requirements and requirements as to the
availability of current public information concerning Intermountain are
satisfied.

Mr. William N. Hagler, Mr. Rick L.
Hurt and Mr. William Braddock & Mrs. Helen Braddock may be considered
affiliates of Intermountain. See "Security Ownership of Certain Beneficial
Owners and Management".

### Dividends

Intermountain has never paid any dividends on its common stock
and while there are no restrictions on the payment of dividends, Intermountain
does not anticipate paying any dividends in the foreseeable future.

10-KSB
10                                                                                   
7<Page>



### Financial Statements of Intermountain

The audited financial statements of Intermountain as of
February 28, 2003 and for each of the two years in the period ended February 28,
2003 are included beginning on page 18 of this report. Supplemental financial
information relative to Intermountain's natural gas reserves and activities is
included in Notes L and M to Intermountain's audited financial statements as of
February 28, 2003 beginning on page 30 of this report.

### Changes in and Disagreements with Accountants

Atkinson and Co., Ltd., in Albuquerque, New Mexico has
performed the annual audit of Intermountain's financial statements since 1999.
There have been no disagreements between Intermountain and its accountants
regarding financial disclosure issues.

We have been advised by Atkinson and Co., Ltd., that they do
not intend to register with the Public Company Accounting Oversight Board for
the purpose of performing future audits of publicly held companies. Accordingly,
Atkinson will no longer be providing audit and review services on future filings
we make with the SEC. At the time of the filing of this report, Intermountain
has not formally selected a replacement firm to provide such services.

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

The following discussion of our financial condition as of
February 28, 2003 and results of operations for the years ended February 28,
2002 and February 28, 2003, should be read in conjunction with our financial
statements, the notes related thereto, and the other financial data included
elsewhere in this report.

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

### Liquidity and Capital Resources

While our cash flow and working capital positions improved
during the year ended February 28, 2003, Intermountain has sustained substantial
operating losses over the past several years. Such losses were the direct result
of increased costs associated with two failed mergers including the cost of our
Form S-1 registration, valuation losses recognized on long lived assets, and
operating losses associated with the manufacture of asphalt products. These
losses and increased costs historically have resulted in a significant decline
in our cash balances and working capital available to fund ongoing operations.
Management believes that cash flow from ongoing operations will be adequate to
meet cash demands for the coming year.  We recognize that it will be
necessary to develop additional sources of cash flow to avoid further depletion
of cash and working capital in the longer term.

The following table presents selected financial data regarding
cash and working capital for each of the past two fiscal years:



|                                         | Fiscal Year Ended
|---------------------------------------- | -----------------
|                                         | February 28, 2002
|Cash and cash equivalents (unrestricted) | $     252,438    
|                                         |                  
|Working capital                          | $     488,302    
|                                         |                  

During the year ended February 28, 2003, Intermountain
realized $111,000 of cash flow from operating activities. The positive cash flow
was primarily the result of profits realized from natural gas production and
asphalt terminalling activities. There were no significant operating sources or
uses of cash during the year.

Significant non-operating sources of cash during the year
ended February 28, 2003 included the collection of a $199,000 receivable
associated with the sale of Intermountain’s Fredonia refinery facility
building last year, the receipt of $25,000 from the surrender of an officer life
insurance policy, and the receipt of $20,000 from the redemption of a
certificate of deposit previously pledged as security for potential well
plugging liabilities in Kansas.

During the year ended February 28, 2002, Intermountain
realized a $13,000 use of cash by operating activities. The use of cash was
primarily the result of losses sustained in association with the asphalt
products manufacturing operation offset by changes in operating working capital.
Significant or unusual operating cash items included:

- $85,000 net cash used by refining and asphalt products
manufacturing operations;
- $23,000 cash used for professional legal, accounting and
shareholder services directly associated with the registration and distribution
of Intermountain's common stock.

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Significant
non-operating sources and uses of cash included the use of $490,000 in cash to
recommission the electric generation facility during the year. Intermountain
utilized a line of credit provided by Red Hills Manufacturing to supplement cash
requirements of the project. Intermountain received and repaid total advances of
$375,000 during the year.

### Cash requirements as of February 28,
2003

Estimated cash requirements for the next twelve months
include:

- $24,000 per month for normal general and administrative
costs, including costs to operate our Farmington office building;
and,
- $1,000 per month estimated costs associated with the
ownership and maintenance of Intermountain's refinery and asphalt storage and
manufacturing facility.

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

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

- $13,000 per month (net of production costs) from estimated
natural gas operations based on results of operations during the year ended
February 28, 2003 and projected natural gas prices during the next 12
months;
- $1,900 per month from Farmington office space
rental;
- $3,000 per month from management fees charged to Red Hills
Manufacturing;
- $800 per month interest earned on cash balances;
and,
- $3,200 per month from the rental of our asphalt storage and
manufacturing facility to Paramount, plus an estimated average $8,300 per month
in throughput fees based on annual asphalt product shipments of 10,000 tons
during the coming paving season.

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

Effective as of January 1, 2002, the asphalt products
manufacturing agreement with Paramount was cancelled and we are now leasing our
asphalt storage and manufacturing facility to Paramount for a fixed monthly
rental plus a fee based on tons of products shipped. Intermountain is
effectively guaranteed a minimum cash flow over the term of the agreement.

The major components of the electric generation facility are
presently available for sale but there is no assurance that the equipment will
be sold within a reasonable period of time.

In February 2003, Intermountain entered into an agreement to
purchase a 90% working interest (72% net revenue interest) in oil producing
properties in Kimball County Nebraska. The effective date of the acquisition was
March 1, 2003. The property consists of approximately 960 acres with two
producing wells, one water flood injection well, one fresh water well, equipment
and contracts. Initially, the property will be operated by the remaining 10%
working interest owner. Closing on the property took place on March 12, 2003.
Intermountain paid approximately $50,000 for its interest in the property.
Current estimates of future cash flows from the properties, based on the most
recently available production and operating data, indicate that Intermountain
may receive approximately $900 per month. The property was in the process of
being converted to a water flood operation during January and February 2003. It
is anticipated that future production levels will increase due to the water
flood operation, but there is no assurance that the implementation of the water
flood operation will have a significant impact on production levels in the
future.

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It is presently our intent to seek other opportunities to
improve cash flows and operating resources including, but not limited to, the
following:

- the acquisition of one or more producing oil and natural gas
properties;
- the sale of all or major portions of our electric generation
equipment;
- the sale of all or major portions of our refining equipment;
- the participation in, or operating of, petroleum processing
related projects owned by others; and,
- an industry related merger or
acquisition.

Except for the Nebraska oil
producing property acquisition previously discussed, there are presently no
formal plans or agreements in place involving any of these generally defined
opportunities and there is no assurance that Intermountain will enter into any
formal agreements in the near future that would have a significant impact on
Intermountain's financial condition.

### Results of Operations

The following table summarizes the results of Intermountain's
operations for each of the past two fiscal years. All percentage amounts were
calculated using the underlying data.



|                               | Fiscal Year Ended
|------------------------------ | -----------------
|                               | February 28, 2002
|Revenues                       | $  1,307,392     
|Costs and Expenses             | 1,395,197        
|Net income (loss) before taxes | $    (87,805)    
|Income taxes                   | 200              
|Net income (loss)              | $    (88,005)    
|                               |                  

Intermountain has experienced significant operating losses
during the past several years primarily from substantial legal, accounting, and
consulting costs incurred in conjunction with two failed mergers including Form
S-1 registration, operating losses associated with asphalt product storage and
manufacturing operations, and the recognition of impairments in the carrying
value of refining and electrical generation equipment. For the year ended
February 28, 2003, changes in the asphalt manufacturing and storage operations
served to improve overall operating results and cash flows. However, future
growth in revenue sources and/or a reduction in operating costs are required to
achieve additional improvements in earnings and cash flows.



#### Revenues

The decrease in revenues for the year ended February 28, 2003
compared to the year ended February 28, 2002 consisted of:

- $148,000 increase in asphalt equipment rental and
fees;
- $878,000 decrease in asphalt product manufacturing and
refined product sales;
- $3,500 decrease in real estate rental income; and
- $20,000 increase in consulting fee
revenues.

The increase in revenues for the
year ended February 28, 2002 compared to the year ended February 29, 2001
consisted of:

- $154,000 decrease in natural gas revenues;
- $564,000 increase in asphalt product manufacturing and
refined product sales and equipment rental;
- $2,000 decrease in real estate rental revenues;
and,
- $4,000 increase in consulting
revenues.



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Changes in individual components of revenues are discussed
below:

##### Natural gas revenues

There was no significant change in natural gas revenues for
the year ended February 28, 2003 as compared to the year ended February 28,
2002. Intermountain produced 179,360 Mcf at an average price of $2.11 per Mcf
during the year ended February 28, 2003 compared to 194,702 Mcf at an average
price of $1.95 per Mcf during the year ended February 28, 2002. The 15,342 Mcf
(8%) decrease in production was attributed to higher than normal loss of
production due to well equipment failures experienced during the year along with
normal well production declines. The $.16 per Mcf  (8%) increase in natural gas
prices reflected a general upturn in nationwide natural gas prices during the
period.  Due to the complexity of the economic factors affecting energy prices,
we are unable to predict the direction or magnitude of future price changes. It
is expected that the production of natural gas will decline slightly over the
next twelve months consistent with observed decline rates.

The decrease in natural gas revenues for the year ended
February 28, 2002 as compared to the year ended February 28, 2001 was attributed
to a $0.62 per Mcf (24%) decrease in the average natural gas price received
coupled with a 12,800 Mcf (6%), net to Intermountain's interest,  decrease in
natural gas produced. The reduction in natural gas produced was generally
attributed to normal well declines, pipeline operating pressures and weather.
The decrease in natural gas prices was reflective of the general downturn in the
economy during the year ended February 28, 2002.

##### Real estate rental

The decrease in real estate rental revenues during the year
ended February 28, 2003 as compared to the year ended February 28, 2002 was
attributed to a $5,500 increase in rental income from the Farmington office
building offset by a $9,000 decrease in rental income from the Fredonia refinery
building which was sold in February, 2002. As of February 28, 2003,
Intermountain had only one vacant office available for rent in its Farmington
office building. Office building rental income is not expected to change
significantly over the coming year.

The $2,000 decrease in real estate rental revenues during the
year ended February 28, 2002 as compared to February 28, 2001 was attributed to
the termination of a long term lease of space in the Farmington office building.
The subject office space housed internet telecommunications equipment and
Intermountain provided special services for the lessee. The space was remodeled
during the year ended February 28, 2002 and was then rented at a lower rate. As
of February 28, 2002, there were four vacant offices available for rent in the
Farmington office building. The amount received for rent of the refinery
building in Arizona was unchanged from the prior year.

##### Asphalt storage and manufacturing and petroleum product
sales

Effective as of January 1, 2002, the renegotiated agreement
with Paramount provided for Intermountain to receive $3,200 per month in basic
rent for Intermountain's asphalt storage and manufacturing facility. In
addition, Intermountain receives a basic $5.50 per ton fee for all asphalt
products shipped from the facility plus a supplemental fee of $4.50 per ton,
applied retroactively to all tons shipped during the year, in the event that
annual shipments from the facility exceed 10,000 tons. The renegotiation of the
contract resulted in the elimination, during the year ended February 28, 2003,
of all revenues from the processing and sale of asphalt paving products. The
reduction was offset however by equipment rental and fees received under the new
agreement. Intermountain received $155,000 in rent, basic and supplemental fees
from Paramount during the year ended February 28, 2003 compared to $6,800
received during the 2 month period ended February 28, 2002. It is anticipated
that throughput fees will improve slightly during the coming year.

Shipments of asphalt products, prior to the renegotiation of
the contract with Paramount, increased substantially during the ten month period
ended December 31, 2001 compared to shipments during the entire prior year.
Intermountain shipped 4,709 tons of asphalt products at an average selling price
of $168 per ton during the ten month period ended December 31, 2001 compared to
1,619 tons shipped at an average selling price of $191 per ton during the year
ended February 28, 2001. On January 1, 2002, in conjunction with the
renegotiation of the Paramount agreement, Intermountain sold its remaining
inventories, including 382 tons of asphalt, and all chemical, diluents, and
plant fuel inventories, to Paramount for  $72,000. The increase in sales volume
reflected improvements made by Paramount in gaining market share following the
commencement of operations in June 2000. The decrease in the net selling price
received by Intermountain was attributed to a general downward trend in market
prices for asphalt products that had been observed since early 2000. During the
two month period ended February 28, 2002, Intermountain received $6,800 in rent
and fees from Paramount.

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##### Consulting fee revenues

The increase in consulting fee revenue for the year ended
February 28, 2003 compared to the prior year was the direct result of increasing
the monthly accounting and management services fee charged to Red Hills from
$1,000 to $3,000 in January 2002. It is anticipated that Intermountain will
continue to receive $3,000 per month for accounting and management services
provided to Red Hills during the next twelve months. With the exception of Red
Hills, Intermountain currently does not have any plans or agreements to provide
consulting services to others during the next twelve months.

Consulting fee revenues increased $4,000 during the year ended
February 28, 2002 compared to the prior year. Consulting fee revenues during
both of the periods consisted solely of accounting and management fees received
from Red Hills. In January 2002, Intermountain increased the monthly management
fee charged to Red Hills from $1,000 per month to $3,000 per month.

#### Costs and Expenses

The following table presents a summary of Intermountain's
costs and expenses for the last two fiscal years:



|                                              | Fiscal Year Ended
|--------------------------------------------- | -----------------
|                                              | February 28, 2002
|Cost of sales                                 | $  1,102,268     
|General and administrative costs              | 316,418          
|Depletion, depreciation and amortization      | 80,723           
|Bad debt expense                              | 4,000            
|Loss on impairment of equipment               | 75,505           
|Gain on sale of assets                        | (185,051)        
|Interest and investment (income) expense, net | 1,334            
|Total costs and expenses                      | $1,395,197       
|                                              |                  

Costs and expenses decreased overall by $826,000 during the
year ended February 28, 2003 compared to the same period of the prior year. The
decrease in costs and expenses consisted of an $868,000 decrease in cost of
sales, a $33,000 decrease in general and administrative costs, a $23,000
decrease in depreciation and depletion expense, a $4,000 decrease in bad debt
expense, a $7,000 increase in net interest and investment income, and a $76,000
decrease in impairment losses, offset by a $185,000 decrease in gain on the sale
of assets.

Costs and expenses increased overall by $341,000 during the
year ended February 28, 2002 compared to the same period during the prior year.
The increase in costs and expenses consisted of a $542,000 increase in cost of
sales, a $2,000 increase in general and administrative costs, and a $36,000
decrease in investment income (net of interest expense), offset by a $38,000
decrease in depreciation and amortization expense, a $1,000 decrease in bad debt
expense, a $22,000 decrease in impairment losses, and a $178,000 increase in
gain on sales of assets.

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

##### Cost of sales

Cost of sales includes costs incurred in the production of
natural gas, the costs of producing asphalt paving products and maintaining the
refinery.

The decrease in cost of sales during the year ended February
28, 2003 as compared to the year ended February 28, 2002 consisted of a $966,000
decrease in asphalt and refining facility operating costs offset by $98,000
increase in natural gas production costs.

The decrease in cost of sales associated with the asphalt and
refinery facility during the year ended February 28, 2003 was the due to the
elimination of costs associated with Intermountain’s operation of the
facility under the agreement with Paramount which was renegotiated in January
2002. Costs incurred by Intermountain during the year ended February 28, 2003
mainly consisted of property taxes, facility insurance, and ongoing
environmental compliance costs associated with the facility.

The increase in natural gas production costs during the year
ended February 28, 2003 as compared to the same period of the prior year
consisted of a $10,000 increase in property taxes, a $4,000 increase in salt
water disposal costs, and an $86,000 increase in well equipment repairs and
maintenance, offset by a $2,000 overall decrease in all other cost categories.
The increase in well equipment repairs and maintenance was the result of the
occurrence of several significant and unexpected well equipment failures during
the year which also contributed to a noticeable loss of production during the
period. Well pump, production tubing and surface equipment failures occur
randomly and the timing and cost of repairs cannot be accurately predicted. The
increase in property taxes was the result of an increase in property valuations
due to increased natural gas prices received during the corresponding valuation
period. The increase in salt water disposal costs consisted of both an increase
in salt water produced, along with a slight increase in disposal fees. A
substantial portion of salt water disposal costs is associated with one well.
Intermountain is presently evaluating a plan to install pipe and equipment on
this well to pump produced salt water directly to a nearby disposal
well.

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The increase in cost of sales during the year ended February
28, 2002 as compared to the year ended February 28, 2001 consisted of a $564,000
increase in asphalt and refining facility operating costs offset by a $22,000
decrease in natural gas production costs.

The increase in costs of sales associated with the asphalt
and refinery facility during the year ended February 28, 2002 was primarily due
to the increase in shipments of asphalt products. Raw material and operating
costs associated with the activity increased by  $585,000 over the prior year.
Costs associated with maintaining the refinery facility decreased by $20,000
from the prior year.

The decrease in natural gas production costs for the year
ended February 28, 2002 as compared to the year ended February 28, 2001 was
primarily attributed to a $27,000 decrease in well equipment repairs and
maintenance, and a $4,000 decrease in salt water disposal costs, offset by a
$4,000 increase in property taxes and a combined $5,000 increase in all other
cost categories. The decrease in well equipment repairs was attributed to fewer
equipment failures during the current year as compared to the prior year. The
decrease in salt water disposal costs was primarily attributed to a reduction in
produced water from a new well that was completed in February, 2000. The
increase in property taxes was expected due to the significant increase in
natural gas prices experienced during the prior year.

##### General and administrative expenses

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

The decrease in general and administrative expenses during the
year ended February 28, 2003 compared to the prior year consisted mainly of a
$26,000 decrease in legal and professional services, a $5,000 decrease in
officer life insurance expense, and $5,000 decrease in travel expenses, offset
by a $3,000 increase in general office supplies. All other cost items within the
general and administrative cost classification remained relatively unchanged
from those of the prior year.

The decrease in legal and professional services was directly
related to the July 2001 completion of the registration and distribution of
Intermountain’s common stock. The decrease in officer life insurance
expense is related to the August 2002 surrender and cancellation of an officer
life insurance policy that had a base annual premium of $24,000. The decrease in
travel expenses was due to a decrease in travel activities during the year.
General and administrative expenses are expected to remain relatively unchanged
over the next twelve months.

The increase in general and administrative expenses during the
year ended February 28, 2002 compared to the prior year consisted of a number of
increases and decreases in individual line item costs associated with the
Farmington office building and overall administration costs that collectively
amounted to a $2,000 increase in this cost category.  Significant increases and
decreases in individual line item costs during the year ended February 28, 2002
as compared to the prior year included a $2,000 increase in employee benefits, a
$3,000 increase in travel expenses, a $4,000 increase in professional services
including legal, accounting and printing, and a $3,000 decrease in officer life
insurance expense.

##### Depletion, depreciation and
amortization

The decrease in depletion and depreciation for the year ended
February 28, 2003 compared to the prior year consisted of a $16,000 decrease in
depreciation on the Farmington office building and equipment, a $4,000 decrease
in refinery facility depreciation, and a $2,000 decrease in depletion on natural
gas production. The reduction in depreciation on the Farmington office and
equipment was due to the original capitalized cost of the office building
becoming fully depreciated during the prior year. The decrease in depreciation
on the Fredonia refinery facility was due to the sale of the Fredonia refinery
building during the prior year. The reduction in depletion on natural gas
production was the result of lower production than experienced during the prior
year.

The decrease in depletion and depreciation for the year ended
February 28, 2002 compared to the prior year consisted of a $32,000 decrease in
refinery and asphalt storage facility depreciation, a $4,000 decrease in
depreciation on the Farmington office building, and a $2,000 decrease in
depletion expense on natural gas production.  The decrease in refinery facility
depreciation was the result of the prior year impairment of the entire remaining
carrying value of our refining equipment. The Farmington office building reached
its end of life for depreciation purposes during the year ended February 28,
2002.

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##### Gain on sale of assets

Intermountain did not sell any assets during the year ended
February 28, 2003.

During the year ended February 28, 2002, Intermountain sold
its refinery shop building and 0.79 acres of land to Red Hills Manufacturing,
Inc., who has been renting the building for several years. The sales price was
$200,000 less closing costs. Intermountain recognized a gain on the sale of
approximately $185,000 on the sale.

##### Bad debt expense

Intermountain did not experience any bad debt expense during
the year ended February 28, 2003.

During the year ended February 28, 2002, Intermountain wrote
off a $4,000 account receivable which represented the remaining balance due from
a company for the fiscal 2001 sale of a piece of used refinery equipment.
Management does not believe it would be cost effective to pursue collection of
the amount.

##### Net interest and investment income
(expense)

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

Net interest in investment income during the year ended
February 28, 2003 consisted of approximately $11,000 interest and dividends
earned on cash balances and investments in mutual funds and a $15,000 gain
recognized on the receipt of common stock as the result of the demutualization
of an insurance company, offset by a $21,000 loss recognized on the sale of
poorly performing mutual fund investments. Intermountain did not incur any
interest expense during the year ended February 28, 2003. During the past
several years, Intermountain has disposed of mutual fund investments to fund the
premiums on an officer life insurance policy which was surrendered and cancelled
during the year ended February 28, 2003. Due to the poor performance of the
stocks underlying the subject mutual funds, Intermountain had realized
significant losses on such disposals. The proceeds from disposals of mutual
funds during the year ended February 28, 2003 were reinvested in bond funds that
are expected to maintain stable earnings and values over the coming year.

During the year ended February 28, 2002, Intermountain
realized net interest and investment income on mutual fund investments and cash
deposits of $9,000, a $26,000 decrease from the year ended February 28, 2001,
which was offset by $11,000 of interest expense on the credit line utilized
during recommissioning of the electric generation equipment.  Intermountain did
not incur any interest expense during the year ended February 28, 2001. The
substantial decrease in interest and investment income during the year ended
February 28, 2002 included a $7,000 reduction of interest earned on cash
balances and a net $19,000 reduction of mutual fund investment income. The
reduction in interest earned on cash balances was attributed to a decline in
average cash balances during the year coupled with interest rate declines. The
reduction in mutual fund investment earnings was attributed to poor performance
of the stock market as well as an increase in losses on disposal.

### Inflation, Deflation and Changing Prices

The results of operations and capital expenditures will
continue to be affected by inflation, deflation and changing prices.  A
decline in the price of natural gas could have an adverse effect on
Intermountain's operations.  Management is unable to determine the full
impact of inflation, deflation and changing prices on the results of operations
or working capital.

### Directors and Executive Officers



|Name and Address                                                  | Age | Position                                      | Held Since
|----------------------------------------------------------------- | --- | --------------------------------------------- | ----------
|William N. Hagler4421 Bella
Vista Cr.Farmington, New Mexico 87401 | 70  | President and Director                        | 1984      
|                                                                  |     |                                               |           
|Rick L. Hurt5701 Tee
Dr.Farmington, New Mexico 87402              | 50  | Controller, Secretary, Treasurer and Director | 1985      

Background information concerning the Officers and
Directors is as follows:

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William N. Hagler has been the President and a Director
of Intermountain since 1984. Mr. Hagler received a B.S. degree in Industrial
Engineering from North Carolina State University in 1955.  From 1955 to
1968, he was employed by Esso Standard Oil, Cities Service Oil Co. and Riffe
Petroleum Co. in various phases of the petroleum refining and marketing
industry.  In July 1968, he became assistant to the president and later
vice president of Plateau, Inc., Farmington, New Mexico, a regional refining and
marketing firm.  His responsibilities have included refinery management,
marketing, corporate development, economics and planning, crude oil supply,
negotiation and administration of processing arrangements, labor relations,
coordination of refinery acquisition and expansion programs, and relations with
state and federal regulatory bodies.  In 1979, Mr. Hagler organized Unico,
Inc., the former parent company of Intermountain, and served as its President
and as a Director from its inception until June 1998 when he resigned both
positions. In April 1993, Mr. Hagler accepted an appointment as a Director of
Saba Petroleum and from October 1998 until December 1998 also served as its
Management Committee Chairman. He resigned from all Saba Petroleum positions in
March 1999. During 1999, Mr. Hagler accepted an appointment as Chairman of the
Board of Directors of Petrominerals Corporation. Mr. Hagler resigned his
position with Petrominerals during 2002. Mr. Hagler is also a member of the
Farmington, New Mexico Public Utilities Commission.

Rick L. Hurt has been the Secretary, Treasurer and a
Director of Intermountain since May, 1985. Mr. Hurt received a BBA degree in
Accounting from the University of New Mexico in 1979.  From 1979 to 1982,
he was employed as a staff accountant and later as a senior accountant by the
accounting firm of Fox & Company in its Albuquerque, New Mexico
offices.  From 1982 until March 1985, he was employed as chief accountant
for the law firm of Davis and Davis in Austin, Texas.  Mr. Hurt is
certified as a public accountant in the states of New Mexico and Texas;
although, he has not maintained his licenses to practice public accounting in
those states.  Mr. Hurt joined Unico, Inc., the former parent company of
Intermountain, as Assistant Controller in March 1985, and became its Controller,
Secretary, Treasurer, and a Director on May 20, 1985. Mr. Hurt resigned from
these positions in June 1998.

Both Mr. Hagler and Mr. Hurt may be deemed a parent or
promoter of Intermountain as those terms are defined in the rules and
regulations promulgated under the Securities Act of 1933.

No family relationship exists between any officer or director
of Intermountain and no officer or director of Intermountain has been subject,
during the preceding 5 years, to any of the events set forth in paragraph (d) of
Item 401 of Regulation S-B.

### Compensation of Directors and Executive Officers

The following table will inform you about the compensation
earned by all of Intermountain's executive officers for services rendered to
Intermountain during the last three fiscal years:



|Name and Principal
Positions                       | Year         | Salary                   | Bonus       | Other Annual Compensation | Long-Term Compensation Awards - Restricted
Stock Awards | All Other Compensation             
|-------------------------------------------------- | ------------ | ------------------------ | ----------- | ------------------------- | ------------------------------------------------------- | -----------------------------------
|                                                   |              | ($)                      | ($)         | ($)                       | (#)                                                     | ($)                                
|William N. Hagler                                  | 2003         | $101,164                 | $  0        | $  0                      | 0                                                       | $3,035  (1)                        
|Chief Executive Officer and Director               | 20022001     | $101,164$101,164         | $  0$
0     | $  0$
0                   | 00                                                      | $3,035
(1)$3,035     (1)           
|                                                   |              |                          |             |                           |                                                         |                                    
|                                                   |              |                          |             |                           |                                                         |                                    
|                                                   |              |                          |             |                           |                                                         |                                    
|Rick L. Hurt                                       | 2003         | $ 54,889                 | $  0        | $  0                      | 0                                                       | $1,647    (1)                      
|Secretary, Treasurer, and Director                 | 20022001     | $ 54,889$
54,889         | $  0$
0     | $  0$
0                   | 00                                                      | $1,647    (1)$1,647
(1)            
|                                                   |              |                          |             |                           |                                                         |                                    
|All officers and directors as a group ( 2
persons) | 200320022001 | $156,053$156,053$156,053 | $  0$
0$  0 | $  0$
0$  0               | 000                                                     | $4,682    (1)$4,682
(1)$4,682   (1)

(1) Consists of  SIMPLE IRA employer matching contributions of
the lesser of employee elective deferrals or 3% of salary.

Our employees, including officers, may receive such bonuses
and salary increases as the Board of Directors, in its sole discretion, may
award from time to time. Intermountain has not increased officers salaries since
April, 1997 at which time a 2.5% cost of living adjustment was
awarded.

Intermountain provides health insurance benefits to the
officers and all other full time employees.

10-KSB
18                                                                                   
15<Page>

Intermountain maintains a SIMPLE IRA plan for its officers and
all of its full time employees. Participation in the plan is voluntary and
employee contributions are limited by regulations established annually by the
Internal Revenue Service. Intermountain is required to match employee
contributions up to the lesser of 3% of salary or the amount of employee
contributions.

No director has been compensated for attending meetings of the
Board of Directors. However, by resolution of the Board of Directors, a fixed
sum and expenses of attendance, if any, may be allowed for attendance at each
regular and special meeting of the Board of Directors.

We do not currently maintain director and officer liability
insurance.

Intermountain has no employment contracts with any of its
employees. All employees can terminate employment at will.

### Security Ownership of Certain Beneficial Owners and Management

### Security Ownership of Certain Owners

The following table lists the only persons known to
Intermountain who beneficially own five percent (5%) or more of the issued and
outstanding Intermountain common stock, its only voting security:



|Title of Class | Name and address of Beneficial
owner | Amount and nature of Beneficial
ownership | Percent of Class
|-------------- | ------------------------------------ | ----------------------------------------- | ----------------
|Common stock,  | William N. Hagler                    | 560,408 shares of                         | 48.50%          
|no par value   | 4421 Bella Vista Cr.                 | record and beneficially                   |                 
|               | Farmington, NM 87401                 |                                           |                 
|               |                                      |                                           |                 
|Common stock,  | William & Helen Braddock             | 133,400 shares of                         | 11.54%          
|no par value   | P.O. Box 403                         | record and beneficially                   |                 
|               | Dorado, PR 00646                     |                                           |                 

### Security Ownership of Management

The following table lists the ownership of Intermountain
common stock by the management of Intermountain:





|Title of Class | Name and address of Beneficial
owner | Amount and nature of Beneficial
ownership | Percent of Class
|-------------- | ------------------------------------ | ----------------------------------------- | ----------------
|Common stock,  | William N. Hagler                    | 560,408 shares of                         | 48.50%          
|no par value   | 4421 Bella Vista Cr.                 | record and beneficially                   |                 
|               | Farmington, NM 87401                 |                                           |                 
|               |                                      |                                           |                 
|Common stock,  | Rick L. Hurt                         | 6,904 shares of                           | 0.60%           
|no par value   | 5701 Tee Dr.                         | record and beneficially                   |                 
|               | Farmington, NM 87402                 |                                           |                 
|               |                                      |                                           |                 
|Common stock,  | All officers and directors           | 567,312 shares of                         | 49.10%          
|no par value   | (2 people) as a group                | record and beneficially                   |                 
|               |                                      |                                           |                 

### Compliance with Section 16(a) of the Exchange Act

In accordance with Section 16(a) of the Securities Exchange
Act of 1934, any person who, at any time during the last fiscal year, was an
officer, director, or beneficial owner of more than 10% of any securities of an
issuer that have been registered pursuant to Section 12 of the Exchange Act, is
required to file periodic reports with the Securities and Exchange Commission
and provide copies of the reports to the registered issuer. In accordance with
item 405 of Regulation S-B, Intermountain is required to report information
regarding untimely or delinquent filings by such individuals. The following
information is provided to report the apparent untimely or delinquent filing of
periodic reports of individuals based solely upon a review of copies of
documents provided to Intermountain or upon the absence of a written
representation that an individual is exempt from such filing
requirements:

10-KSB
19                                                                                  
16<Page>

|Name                          | Relationship to
Intermountain | Form                                                         | Status    
|----------------------------- | ----------------------------- | ------------------------------------------------------------ | ----------
|Mr. And Mrs. William Braddock | Greater than 10% owner        | Form 5 - Annual Statement of Changes in Beneficial
Ownership | Delinquent

### Certain Relationships and Related Party Transactions

Information relative to certain relationships and related
party transactions is contained in Note H to Intermountain's financial
statements as of February 28, 2003 beginning on page 28 of this
report.

### Controls and Procedures

### Evaluation of Disclosure Controls and
Procedures:

Disclosure controls and procedures are designed and
implemented to insure that all material information relating to a company is
made known to its chief operating officer, chief financial officer, and such
other persons who are responsible for preparing and filing periodic reports with
the Securities and Exchange Commission. On February 21, 2003, William N. Hagler
and Rick L. Hurt, representing all of the officers and directors of
Intermountain, updated their evaluation of Intermountain's disclosure controls
and procedures and concluded that such controls were adequate as of that
date.

### Changes in Internal Controls:

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

### Principal Accountant Fees and Services

Information regarding services and the related fees billed by
Intermountain’s principal accountants during the periods indicated is as
follows:



|                                                                                                                                                                                                       | For the years ended
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ | -------------------
|                                                                                                                                                                                                       | February  28,      
|                                                                                                                                                                                                       | 2002               
|Audit fees: Includes audit and review services applicable to
Intermountain’s annual financial statements, Forms 10-KSB and 10-QSB, and
other filings made with the Securities and Exchange Commission. | $26,939            
|Audit related fees                                                                                                                                                                                     | 0                  
|Tax fees                                                                                                                                                                                               | 0                  
|All other fees                                                                                                                                                                                         | 0                  
|Total fees billed by principal accountants                                                                                                                                                             | $26,939            

Intermountain, due to its small size, does not have an audit
committee. All functions and procedures that would traditionally be performed by
an audit committee are performed by Intermountain’s board of directors.
Intermountain’s board of directors pre-approves all engagements for
services performed by its principal accountants.  Generally, Intermountain does
not engage its principal accountants for services other than those related to
auditing and reviewing of financial statements included in statutory filings
with the Securities and Exchange Commission.

10-KSB
20                                                                                  
17<Page>

### Index to Financial Statements



|                                                                             | Page
|---------------------------------------------------------------------------- | ----
|Report of Independent Auditors,
February 28, 2003                            | 22  
|                                                                             |     
|Balance Sheet as of February
28,2003                                         | 19  
|                                                                             |     
|Statements of Operations and
Comprehensive Income (Loss) for the years ended |     
|February 28, 2002
and February 28, 2003                                      | 20  
|                                                                             |     
|Statements of Cash Flows for the
years ended                                 |     
|February 28, 2002
and February 28, 2003                                      | 21  
|                                                                             |     
|Statements of Changes in
Stockholders' Equity                                |     
|For the
years ended February 28, 2002 and February 28, 2003                  | 22  
|                                                                             |     
|Notes to financial
statements                                                | 23  
|                                                                             |     

10-KSB
21                                                                                  
18<Page>



|Intermountain Refining Co., Inc.                                           |  |            
|-------------------------------------------------------------------------- |  | -----------
|Balance Sheet                                                              |  |            
|February 28, 2003                                                          |  |            
|                                                                           |  |            
|Assets                                                                     |  |            
|Current Assets                                                             |  |            
|Cash and cash equivalents - Note
A                                         |  | $   616,052
|Accounts receivable - Note B                                               |  | 34,153     
|Inventories – Note F                                                       |  | 2,390      
|Prepaid expenses                                                           |  | 633        
|Total Current Assets                                                       |  | 653,228    
|Property, Plant and
Equipment, net of valuation allowances                 |  |            
|Land, buildings and
improvements                                           |  | 384,419    
|Equipment                                                                  |  | 164,930    
|Crude oil refining equipment – Note
A                                      |  | 581,919    
|Oil and gas properties, (successful
efforts method) - Notes L and M        |  | 985,731    
|                                                                           |  | 2,116,999  
|Less accumulated depletion and
depreciation                                |  | (1,746,426)
|                                                                           |  | 370,573    
|Other Assets                                                               |  |            
|Electric generation equipment available for sale–
Note N                   |  | 515,000    
|Available-for-sale investments - Note
E                                    |  | 65,900     
|Other assets - Note C                                                      |  | 34,944     
|                                                                           |  | 615,844    
|Total Assets                                                               |  | $ 1,639,645
|Liabilities and Stockholders' Equity                                       |  |            
|Current Liabilities                                                        |  |            
|Accounts payable                                                           |  | $    39,471
|Taxes other than income
taxes                                              |  | 2,981      
|Income taxes payable - Note
G                                              |  | 100        
|Total Current
Liabilities                                                  |  | 42,552     
|Deferred Taxes -
Note G                                                    |  | 1,000      
|Commitments and
Contingencies - Note I                                     |  | -          
|Stockholders' Equity                                                       |  |            
|Common stock, no par value, authorized
10,000,000 shares,                  |  |            
|issued and outstanding 1,155,609 shares                                    |  | 1,455,314  
|                                                                           |  |            
|Preferred stock, $0.01 par value, authorized 5,000,000
shares,             |  |            
|no shares issued and outstanding.                                          |  | -          
|                                                                           |  |            
|Retained earnings                                                          |  | 138,922    
|Accumulated other comprehensive income - Note
E                            |  | 1,857      
|                                                                           |  | 1,596,093  
|Total Liabilities and Stockholders'
Equity                                 |  | $ 1,639,645
|                                                                           |  |            
|The accompanying notes are an integral part of these
financial statements. |  |            

10-KSB
22                                                                                  
19<Page>



|Intermountain Refining Co., Inc.                                                                                                                               |                     |              
|-------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------- | -------------
|Statements of Operations and Comprehensive Income
(Loss)                                                                                                       |                     |              
|                                                                                                                                                               |                     |              
|                                                                                                                                                               | For the years ended
|                                                                                                                                                               | February  28,       | February  28,
|                                                                                                                                                               | 2002                | 2003         
|Revenues                                                                                                                                                       |                     |              
|Natural gas production
revenues                                                                                                                                | $   379,512         | $   379,222  
|Asphalt equipment rental fees - Note
D                                                                                                                         | 6,803               | 155,217      
|Petroleum product sales – Note
D                                                                                                                               | 878,402             | -            
|Real estate rental income                                                                                                                                      | 26,675              | 23,226       
|Consulting fees - Note H                                                                                                                                       | 16,000              | 36,000       
|                                                                                                                                                               | 1,307,392           | 593,665      
|Costs and Expenses                                                                                                                                             |                     |              
|Cost of sales                                                                                                                                                  | 1,102,268           | 233,720      
|General and administrative                                                                                                                                     | 316,418             | 283,101      
|Depletion, depreciation and
amortization                                                                                                                       | 80,723              | 58,133       
|Bad debt expense                                                                                                                                               | 4,000               | -            
|Loss on impairment of  equipment – Notes A and
N                                                                                                               | 75,505              | -            
|Gain on sale of assets - Note H                                                                                                                                | (185,051)           | -            
|Interest and investment expense/(income),
net                                                                                                                  | 1,334               | (5,545)      
|                                                                                                                                                               | 1,395,197           | 569,409      
|Income (Loss) From Operations Before Income
Taxes                                                                                                              | (87,805)            | 24,256       
|                                                                                                                                                               |                     |              
|Provision (benefit) for income taxes -
Note G                                                                                                                  |                     |              
|Current                                                                                                                                                        | 200                 | 100          
|Deferred                                                                                                                                                       | -                   | -            
|                                                                                                                                                               | 200                 | 100          
|                                                                                                                                                               |                     |              
|Net Income (Loss) - Note A                                                                                                                                     | (88,005)            | 24,156       
|                                                                                                                                                               |                     |              
|Other Comprehensive Income (Loss), net of
tax:                                                                                                                 |                     |              
|Unrealized holding gains/(losses) on investments available
for sale (net of income tax benefit/(expense) of $(1,487) in 2002, and $515 in
2003)- Notes E and G | 2,759               | (954)        
|Reclassification adjustment for realized loss on sale of
investments available for sale net of deferred tax of $7,399 in 2003- Notes E
and G                   | -                   | 13,740       
|                                                                                                                                                               |                     |              
|Comprehensive Income (Loss)                                                                                                                                    | $   (85,246)        | $    36,942  
|                                                                                                                                                               | =========           | =========    
|Weighted Average Number of Shares
Outstanding                                                                                                                  | 1,155,609           | 1,155,609    
|                                                                                                                                                               |                     |              
|Basic and Fully Diluted Earnings Per
Share                                                                                                                     |                     |              
|Net income (loss)                                                                                                                                              | $      
(0.08)      | $      
0.02 
|                                                                                                                                                               | ========            | ========     
|The accompanying notes are an integral part of these
financial statements.                                                                                     |                     |              

10-KSB
23                                                                                  
20<Page>



|Intermountain Refining Co.,
Inc.Statements of Cash Flows                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|Increase (Decrease) in Cash and Cash
Equivalents                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|Cash Flows From Operating Activities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|Net income (loss)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|Adjustments to reconcile net income
(loss) to net cash (used) provided by operating activities:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|Depreciation, depletion and
amortization                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|Bad debt expense                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|Realized loss on disposal of available for sale
investments                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|Gain on receipt of stock from demutualization of
insurance company                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|Loss on impairment of assets                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|Gain on sale of assets                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|Changes in operating assets and
liabilities:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|Decrease in accounts
receivable                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|Decrease in
inventories                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|Decrease in prepaid expenses                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|Increase (decrease) in
accounts payable and accrued expenses                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|Increase in income taxes
accrued                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|Net Cash Flow (Used) Provided by Operating
Activities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|Cash Flows From Investing Activities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|Purchases of available for sale mutual
funds                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|Proceeds from disposal of available for sale mutual
funds                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|(Increase) decrease in cash value of life
insurance polices                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|Proceeds from redemption of certificate of
deposit                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|Purchase of equipment                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|Collection of account receivable from
related party on building sale                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|Net Cash Flow (Used) Provided by Investing
Activities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|Cash Flows From Financing Activities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|Proceeds from credit line payable to related
party                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|Repayments on credit line payable to related
party                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|Net Cash Flow Provided by Financing Activities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|(Decrease) Increase in Cash and Cash
Equivalents                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|Cash and Cash Equivalents at Beginning of
Year                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|Cash and Cash Equivalents at End of Year                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|Supplemental Cash Flow
Disclosures                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|Intermountain paid interest of  $10,632 in 2002 and $0 in
2003.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|Intermountain paid income taxes of  $100 in 2002 and $100 in
2003.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|Supplemental Schedule of Noncash Investing
Activities:In February 2002, Intermountain agreed
to sell a building and land located at its Fredonia AZ refinery for  $200,000
less one half of the closing costs to Red Hills Manufacturing, Inc. As of
February 28, 2002, Intermountain has recorded a receivable of $198,845 from Red
Hills representing the expected net proceeds to be received at closing. The
receivable was collected during 2003.During 2002
Intermountain's available for sale investments increased in value by $2,759, net
of deferred taxes of $1,487.During 2003
Intermountain's available for sale investments increased in value by $12,786,
net of deferred taxes of $6,884. Included in the $12,786 increase was a $13,740,
net of deferred taxes of $7,399, increase due to the reclassification of
previously unrecognized losses to a recognized loss on the sale of available for
sale investments, offset by a $954, net of deferred taxes of $515, decrease in
value of investments available for sale during the year.
|The accompanying notes are an integral part of these
financial statements.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 

10-KSB
24                                                                                  
21<Page>



|Intermountain Refining Co., Inc.                                          
|--------------------------------------------------------------------------
|Statements of Changes in Stockholders'
Equity                             
|                                                                          
|                                                                          
|                                                                          
|                                                                          
|                                                                          
|                                                                          
|                                                                          
|Balance, February 28, 2001                                                
|                                                                          
|Holding gain on available for sale                                        
|investments - Notes E and G                                               
|                                                                          
|Net loss                                                                  
|                                                                          
|Balance, February 28, 2002                                                
|                                                                          
|Holding gain on available for sale                                        
|investments - Notes E and G                                               
|                                                                          
|Net income                                                                
|                                                                          
|Balance, February 28, 2003                                                
|                                                                          
|                                                                          
|                                                                          
|                                                                          
|                                                                          
|                                                                          
|The accompanying notes are an integral part of these
financial statements.

Report of Independent
AuditorsStockholders and Board of
DirectorsIntermountain Refining Co., Inc.

We have audited the accompanying balance sheet of
Intermountain Refining Co., Inc. as of February 28, 2003, and the related
statements of operations and comprehensive income (loss), changes in
stockholders' equity, and cash flows for each of the two years in the period
ended February 28, 2003. These financial statements are the responsibility of
Intermountain's management.  Our responsibility is to express an opinion on
these financial statements based on our audits.We
conducted our audits in accordance with accounting standards generally accepted
in the United States of America.  Those standards require that we plan and
perform the audits to obtain reasonable assurance about whether the financial
statements are free of material misstatement.   An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements.  An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation.  We believe that
our audits provide a reasonable basis for our opinion.In our opinion, the financial statements referred
to above present fairly, in all material respects, the financial position of
Intermountain Refining Co., Inc. as of February 28, 2003, and the results of
operations and cash flows for each of the two years in the period ended February
28, 2003, in conformity with accounting principles generally accepted in the
United States of America.Atkinson & Co., Ltd.

Albuquerque, New MexicoApril 16,
2003

### 10-KSB
 25                                                                                  
 22<Page>

Intermountain Refining Co., Inc.

Notes to Financial Statements, February 28, 2003

### Note A - Summary of Significant Accounting Policies

Business Activity:  Intermountain owns an interest
in 20 natural gas producing wells located in southwestern Kansas and is the
operator of the properties.  Intermountain owns a petroleum products
refinery and asphalt products storage facility in Fredonia, Arizona. In November
1999, Intermountain entered into an agreement with Paramount Petroleum
Corporation to expand asphalt storage activities. Processing and shipment of
asphalt products began in June 2000. Effective January 2002, the asphalt
products manufacturing agreement with Paramount was terminated and Intermountain
now leases its asphalt products storage and processing equipment to Paramount.
Intermountain also owns an office building in Farmington, New Mexico that it
uses for its corporate offices and leases unused space to others.

Intermountain's financial statements for the year ended
February 28, 2003 have been prepared on a going concern basis which contemplates
the realization of assets and the settlement of liabilities and commitments
in the normal course of business. Intermountain's losses during the past several
years are the combined result of increased costs and expenses associated with
two failed merger attempts, the recognition of losses due to impairment in
valuation of investments and electric generation and refining assets, and losses
associated with its asphalt products manufacturing operations.

The asphalt products manufacturing operation was expected to
improve revenues and earnings. However, the operation had not resulted in the
expected improvements primarily because of slower than anticipated asphalt
emulsion product sales growth since beginning operations in June 2000. In
January 2002, Intermountain and Paramount Petroleum renegotiated the asphalt
products manufacturing agreement and Intermountain is no longer responsible for
the operation of the facility. Under the new agreement, Paramount operates the
facility and Intermountain receives fixed monthly lease payments and variable
throughput fees for products shipped from the facility. During fiscal 2003
Intermountain recognized positive earnings and cash flow from its asphalt
storage assets under the new agreement with Paramount.

Management expected to improve revenues and earnings by the
recommissioning of the electric generators which were expected to be in service
by June 1, 2001. Recommissioning of the electric generators was completed in
July 2001; however, the equipment was not returned to service because the
intended electric power customer decided not to enter into a firm contract as
originally contemplated in an April 2001 letter of intent. The refurbished
electric generation equipment is now available and offered for sale to
others.

Management recognizes that Intermountain must generate
additional revenues to replace its depleting resource base. Intermountain has
positive working capital and positive stockholders' equity at February 28, 2003
and has no debt service requirements.  Management believes that the current
revenue stream would allow Intermountain to sustain its operations on an ongoing
basis for at least the next fiscal year.

Intermountain is presently exploring additional means to
improve revenues and cash flows. Additional opportunities may include:  the
disposal, by outright sale or equity contribution, of unutilized and
underutilized petroleum refining and processing equipment; the acquisition of
additional oil and gas operating interests, the participation in petroleum
processing projects; and, participating in an industry related merger and/or
acquisition. However, there can be no assurance that management will be
successful in implementing any of these plans.

Cash and Cash Equivalents:   For purposes of reporting
cash flows, cash and cash equivalents include cash on hand, cash in depository
institutions, and interest bearing over-night cash investments. 
Intermountain maintains its cash balances and certificates of deposit in various
local financial institutions.  The balances maintained are in excess of the
maximum insurance provided by the Federal Deposit Insurance Corporation.
Intermountain does not believe that it has any significant credit risk for
amounts in excess of the Federally insured amounts.

Inventories:Raw materials, refined products,
materials, and supplies inventories of Intermountain are stated at the lower of
cost (first-in, first-out) or market.

Property, Plant and Equipment:   Property,
plant and equipment is stated at cost. Depreciation of property and equipment is
provided on the straight-line method over the following useful lives:

10-KSB
26                                                                                  
23<Page>

Intermountain Refining Co., Inc.

Notes
to Financial Statements, Continued



|Buildings                                   | 15-20
|------------------------------------------- | -----
|Equipment                                   | 3-20 
|Asphalt manufacturing and storage
equipment | 5-20 
|                                            |      

Maintenance, repairs and renewals, which neither materially
add to the value of the property nor appreciably prolong its life, are charged
to expense as incurred. Gains or losses on disposition of property are included
in results of operations.

Long-lived assets to be held and used are reviewed for
impairment whenever events or changes in circumstances indicate that the related
carrying amount may not be recoverable. A review for impairment includes
comparing the current carrying amount of an asset to the estimated future cash
flows expected to result from the use of the asset and its eventual disposition.
If such future estimated cash flows are not sufficient to recover the carrying
cost, then an impairment loss is recognized. When required, impairment losses on
assets to be held are recognized based on the excess of the asset's carrying
amount over the fair value of the asset.

Intermountain's management has reviewed the asphalt storage
asset group for impairment. The approximate carrying value of the asphalt
storage assets, consisting of storage tanks, loading facilities, and related
equipment, was $57,000 as of February 28, 2003. In the opinion of management, no
impairment loss is necessary at this time. In making its determination,
management used combined equipment lease and estimated product throughput fee
revenues of $60,000 per year for two years. Actual cash flows from the project
may be different. Periodic reviews will be performed to determine if impairment
losses on asphalt storage assets may be required in the future. See Note D for
more information regarding this project.

Oil and Gas Properties:The successful efforts method
of accounting for the acquisition, exploration, development and production of
oil and gas properties is utilized. Costs of acquiring undeveloped oil and gas
leases are capitalized. All development costs of proved properties are
capitalized as incurred and all exploration costs are expensed. The capitalized
costs of oil and gas wells and related equipment are amortized by the
units-of-production method based on the estimated proved oil and gas reserves.

Electric Generation Equipment Held For Sale:  While
Intermountain entered into a letter of intent in April 2001 to sell electric
power to a regional electric power distributor, Intermountain has been
unsuccessful in obtaining a formal contract for the sale of electric power or
other suitable standby arrangement. Accordingly, Intermountain does not
anticipate that it will operate its electric generation equipment in the near
future and is actively seeking a buyer for the newly refurbished equipment. As
of February 28, 2002, Intermountain reclassified the equipment, having a book
value of $515,000 net of impairment reserve of $75,505, from property, plant and
equipment to electric generation equipment held for sale. The impairment reserve
provided as of February 28, 2002 represents the excess of the carrying value of
the equipment over its estimated fair value, net of selling costs. Actual
proceeds from disposal of the equipment may be materially different. See Note
N.

Income Taxes:Deferred income tax expense and benefits
are provided on temporary differences arising from the timing of recognition of
income and expenses for financial reporting purposes and recognition for income
tax purposes.  Items that give rise to deferred taxes include differences
between straight line depreciation used for financial reporting purposes and
statutory depreciation used for tax purposes; financial statement recognition of
impairment losses on assets which are not deductible for income tax purposes
until such losses are actually realized; and financial statement recognition of
operating and capital losses which are carried forward to future years for
income tax purposes.

Earnings Per Share:Income (loss) per share is based on
the weighted average number of common shares outstanding during each
period.

Estimates:  The preparation of financial
statements in conformity with generally accepted accounting principles requires
management to make estimates and assumptions that effect certain reported
amounts and disclosures. Accordingly, actual results could differ from those
estimates.

Fair Value of Financial Instruments:   The
carrying amount of cash and cash equivalents, accounts receivable, accounts
payable, and accrued expenses approximate fair value because of the short
maturity of these amounts. None of Intermountain's financial instruments are
held for trading purposes.

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27                                                                                  
24<Page>

Intermountain Refining Co., Inc.

Notes
to Financial Statements, Continued



Available for Sale Investments:Available for sale
investments include investments in mutual funds. The carrying amount of
Intermountain's investment in mutual funds is reflected at fair value.
Unrealized holding gains and losses in the market value of mutual funds is
reported as other comprehensive income (loss) and included in changes in equity.

Concentration of Credit Risk:Intermountain generates
substantially all of its natural gas revenues from one customer, Oneok Field
Services Company. Intermountain generates all of its asphalt manufacturing and
storage revenues from one customer, Paramount Petroleum Corporation.
Intermountain has not experienced any credit losses with respect to its natural
gas or asphalt manufacturing and storage receivables. Accordingly, no provision
for doubtful accounts on such receivables has been recorded by Intermountain.
Collateral is not required on natural gas receivables or asphalt manufacturing
and storage receivables.

Other Comprehensive Gains and Losses: Other
comprehensive income for the years ended February 28, 2003 and February 28, 2002
includes unrealized gains and losses on changes in the value of available for
sale investments and is recorded as changes in equity.  Reclassification
adjustments for realized gains and losses are reflected in earnings on the
statements of operations.

### Note B - Accounts Receivable

Accounts receivable consists of amounts due from customers for
sales of natural gas, equipment rental, office space rental, and services
rendered.  Credit sales are generally made on terms ranging from net 10
days to net 30 days in accordance with normal industry practice. 
Intermountain performs periodic credit evaluations of its customers' financial
condition and generally does not require collateral.  The past due status
of a receivable is determined based on the timeliness of payments as based upon
the agreed-upon credit terms. Management does not believe that an allowance for
bad debts on accounts receivable is necessary.

### Note C - Other Assets

Other assets consist of the following as of February 28, 2003:





|Cash value of life insurance contracts | $  34,669
|-------------------------------------- | ---------
|Utility  deposits                      | 275      
|                                       | $  34,944

### Note D - Asphalt Product Manufacturing and
Storage

Prior to 1999, Intermountain used storage tanks and loading
facilities at its refinery facility in Fredonia, Arizona to provide asphalt
storage services to others on a fee basis. Asphalt storage services include the
receipt, storage, and shipment of asphalt products owned by others.

In November 1999, Intermountain entered into an agreement with
Paramount Petroleum Corporation to manufacture asphalt emulsions and cutback
products for shipment to Paramount's customers. Asphalt emulsions and cutback
products are used for construction, repair, and maintenance of highways,
streets, and parking lots.  The primary term of the agreement was four years
from the first delivery of finished products by Intermountain. Necessary
equipment modifications began in June 1999 and initial processing and shipments
of finished products commenced during June 2000. Effective January 1, 2002,
Intermountain and Paramount mutually agreed to terminate the agreement and
concurrently entered into a new agreement.

As provided under the November 1999 agreement, Paramount paid
for certain modifications made to Intermountain's asphalt storage equipment.
Paramount also installed additional asphalt processing equipment at the facility
that was leased to Intermountain over the term of the agreement for $500 per
month. Total rent expense incurred was $5,000 for the ten month period ended
December 31, 2002. Under the January 2002 agreement, Intermountain is no longer
obligated to pay equipment rental to Paramount.

Under the November 1999 agreement, Intermountain purchased
asphalt raw materials exclusively from Paramount, processed the asphalt raw
material on a batch basis into asphalt emulsions and cutbacks and shipped the
finished products for delivery to Paramount's customers as directed by
Paramount. Title and risk of loss passed to Paramount upon shipment of the
finished products by Intermountain.

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28                                                                                  
25<Page>

Intermountain Refining Co., Inc.

Notes
to Financial Statements, Continued



Under the November 1999 agreement, revenues from the sale of
finished products to Paramount were recognized by Intermountain on a monthly
basis according to a formula set out in the agreement. The formula provided for
Intermountain to recover, from Paramount, a portion of the revenues recognized
by Paramount from the resale of products shipped by Intermountain. In general,
the amount Intermountain was entitled to recover included the cost of asphalt
raw materials included in the products shipped, Intermountain's operating costs
as allowed under the agreement, and 40% of any amounts remaining after deduction
for a monthly capital cost recovered by Paramount and deduction for any
previously un-recovered amounts. Revenues recognized by Intermountain from the
sale of asphalt paving products to Paramount amounted to $791,896 for the 10
month period ended December 31, 2002. Effective with the January 2002 agreement,
Intermountain sold all of its remaining asphalt raw materials, finished asphalt
products, and chemical inventories to Paramount for $72,273 which is included in
petroleum products sales for the year ended February 28, 2002.

Under the new agreement effective January 2002, Paramount
began leasing the asphalt storage and processing equipment from Intermountain
for $3,200 per month and has assumed control over all operations at the
facility. The initial term of the new agreement is two years. Paramount has also
agreed to pay Intermountain a throughput fee of $5.50 per ton for asphalt
products shipped from the facility during the term of the agreement. In
addition, if annual product shipments from the facility exceed 10,000 tons,
Paramount will pay an additional throughput fee $4.50 per ton, applicable to all
tons shipped during the year. For the two months ended February 28, 2002,
Intermountain recognized equipment rental revenues of $6,400 and throughput fees
of $403. For the year ended February 28, 2003, Intermountain recognized
equipment rental revenues of $38,400 and throughput fees of $116,817.



### Note E - Available-For-Sale
Investments

Available-for-sale investments consist of the following at
February 28, 2003:



|Investment in mutual funds, at cost  | $   63,043 
|------------------------------------ | -----------
|Unrealized gain in market value      | 2,857      
|Total investments available for sale | $    65,900
|                                     |            

Investments in mutual funds are stated at their estimated fair
value as of the balance sheet date presented. Unrealized holding gains and
losses in market value of investment securities are classified as comprehensive
gain and loss and included as an increase or reduction of stockholders' equity.
Unrealized holding gains/(losses) in market value of investment securities were
$4,246 for the year ended February 29, 2002 and ($1,470) for the year ended
February 28, 2003. During the year ended February 28, 2003, Intermountain sold
certain of its available for sale investments and recognized a loss on the sale
of $21,139. The sale resulted in a reclassification adjustment to unrealized
loss in market value of $21,139 less deferred tax benefit of $7,399. During the
year ended February 28, 2003, Intermountain received shares of common stock ,
valued at $14,781, from the demutualization of a life insurance company with
which Intermountain previously held an officer life insurance policy. The value
of the stock received was included in results of operations for the year ended
February 28, 2003. Gains and losses on the sale of investment securities (when
incurred) are determined using the first in-first out method. Given that the
investments are mutual funds, no contractual maturities exist that would require
separate disclosure. The fair market value of mutual funds is subject to ongoing
fluctuation. The amount ultimately realized upon disposition will be different
than the amounts reported in these financial statements.



### Note F - Inventories

Inventories, stated at lower of cost or market value, as of
February 28, 2003 consist solely of diesel fuel intended for use in maintaining
the electric generation equipment or for sale to others.

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29                                                                                  
26<Page>

Intermountain Refining Co., Inc.

Notes
to Financial Statements, Continued

### Note G - Income Taxes

Income tax expense (benefit) differs from income tax at the
statutory rate of 34% as follows:



|                                         | February 28, | February 28,
|---------------------------------------- | ------------ | ------------
|                                         | 2002         | 2003        
|                                         |              |             
|Income at statutory rate                 | (34)%        | 34%         
|State income taxes                       | -   %        | -   %       
|Expenses not deductible for tax purposes | 7%           | 19%         
|Other (net)                              | 27%          | (53)%       
|Income tax expense (benefit)             | -  %         | -  %        

Income tax expense (benefit) for the periods indicated
consists of the following:



|                   | For the years ended
|------------------ | -------------------
|                   | February 28,       
|                   | 2002               
|Current            |                    
|Federal            | $      -           
|State              | 200                
|Deferred           |                    
|Federal            | -                  
|State              | -                  
|Total income taxes | $        200       
|                   |                    

As of February 28, 2003, Intermountain has net operating loss
carryforwards for Federal and state income tax purposes as shown in the
following table.  Operating losses can be carried forward generally for 20
years for Federal tax purposes and from 5 to 10 years for state tax purposes.
Intermountain has capital loss carryforwards for Federal and state income tax
purposes as shown in the following table. Capital losses can be carried forward
for 5 years for both Federal and state income tax purposes and can only be used
to offset capital gains. A valuation allowance has been provided on all of the
net operating loss and capital loss carryforwards as realization of the tax
benefit is uncertain.





|Year Generated | Net Operating Loss
Carryforward | Year Expires | Capital Loss Carryforward | Year Expires
|-------------- | ------------------------------- | ------------ | ------------------------- | ------------
|1999           | $   353,615                     | 2019         | $         -               | -           
|2000           | 48,995                          | 2020         | 119,272                   | 2005        
|2002           | 164,220                         | 2022         | 328,296                   | 2007        
|2003           | 83,006                          | 2023         | 21,139                    | 2008        
|Total          | $   649,836                     |              | $    468,707              |             
|               |                                 |              |                           |             

Deferred tax assets/(liabilities) as of February 28, 2003
consist of the following:





|Net deferred tax asset arising from book and tax basis
differences in depreciable assets                                   | $  168,895    
|-------------------------------------------------------------------------------------------------------------------------- | --------------
|Deferred tax asset arising from provision for uncollectible
notes receivable                                               | 37,107        
|Deferred tax asset arising from net operating loss
carryforwards                                                           | 227,442       
|Deferred tax asset arising from capital loss
carryforwards                                                                 | 164,048       
|Deferred tax liability arising from deferral of gain on
receipt of demutualization of life insurance company               | (5,173)       
|Valuation allowance provided for net deferred tax
assets                                                                   | (592,319)     
|Deferred taxes receivable/(payable)                                                                                        | $        -    
|                                                                                                                           |               
|Deferred tax payable from unrealized holding gain on
available for sale investments recorded as other comprehensive
income | $       
1,000
|                                                                                                                           |               

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30                                                                                  
27<Page>

Intermountain Refining Co., Inc.

Notes
to Financial Statements, Continued

### 

### Note H - Related Party Transactions

Following are descriptions of transactions involving
Intermountain and other related parties that occurred during the past two fiscal
years. In the opinion of management, the terms of the transactions discussed are
believed to be at least as favorable to Intermountain as those that could have
been secured in arm's length transactions.

Red Hills Manufacturing:  Red Hills, a New Mexico
Corporation controlled by the current officers and two former employees of
Intermountain, until February 28, 2002, occupied unused building space owned by
Intermountain and located at its refinery facility in Arizona. Red Hills paid
Intermountain rent for the use of the building in the amount of $9,000 for the
year ended February 28, 2002.

On February 12, 2002 and effective as of February 25, 2002,
Intermountain entered into an agreement to sell the building, along with .79
acres of land the building is situated on, to Red Hills for $200,000 cash less
one half of the closing costs. The selling price was determined from an
independent appraisal of the property dated as of November 19, 2001. On February
25, 2002, Red Hills deposited $200,000 cash with the escrow agent handling the
transaction which satisfied the "deemed closed" provision of the real estate
purchase contract. As of February 28, 2002, Intermountain recorded a receivable
from the escrow agent in the amount of $198,845 representing the estimated
proceeds from the transaction, net of Intermountain's share of closing costs,
and recognized a $185,051 gain on the transaction. The receivable from Red Hills
recorded as of February 28, 2002 was collected, in full, during the year ended
February 28, 2003.

Intermountain performs management and accounting services for
Red Hills on an ongoing basis. Fees received from Red Hills were $16,000 for the
year ended February 28, 2002 and $36,000 for the year ended February 28,
2003.

During the year ended February 28, 2002, Red Hills provided a
$400,000, 8.5% line of credit to Intermountain exclusively for  recommissioning
and startup of Intermountain's electric generation facility. The line of credit
was secured by cash, receivables, and equipment owned by Intermountain. During
the year, Intermountain received and repaid a total of $375,400 in advances and
paid interest of $10,632. The maximum amount outstanding under the line of
credit during the year was $267,080. The line of credit agreement was fully
repaid and cancelled by mutual agreement of the parties on January 7,
2002.

### Note I - Commitments and Contingencies

Environmental Matters:  Intermountain has been
involved in the manufacture, storage, and sale of petroleum products since 1984,
which exposes Intermountain to potential claims for environmental remediation
costs, if any, of sites operated by Intermountain. Intermountain is not aware of
any claims pending for such sites.

Plugging and Abandonment Liabilities: 
Intermountain has not established specific reserves for the plugging and
abandonment of its natural gas producing properties in Kansas. Based on past
experience with plugging and abandonment of uneconomic wells in Kansas,
management does not believe that future plugging and abandonment costs, net of
equipment salvage, will be material.

Acquisition of Working Interest in Oil Producing
Properties:  In February 2003, Intermountain entered into an agreement
to purchase a 90% working interest (72% net royalty interest) in a developed oil
producing property in Kimball County, Nebraska. The effective date of the
acquisition was March 1, 2003, and closing was completed on March 12, 2003,
subsequent to year end. The purchase price of the interest was approximately
$50,000. Intermountain is obligated to pay 90% of all operating costs associated
with the property incurred subsequent to February 28, 2003.

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31                                                                                  
28<Page>

Intermountain Refining Co., Inc.

Notes
to Financial Statements, Continued

### 

### Note J - Simple IRA Plan

Intermountain maintains a SIMPLE IRA plan for the benefit of
all of its full time employees.  The plan provides for the elective
deferral of employee wages, subject to annual limits established by the Internal
Revenue Service, and provides a mandatory employer matching contribution. 
Mandatory matching contributions are the lesser of 3% of employee compensation
or the amount of elective deferrals.  Intermountain may elect to reduce the
matching percentage to 1% for two out of five consecutive calendar years. 
Intermountain made matching contributions of $5,385 in 2002 and $5,385 in 2003.

### Note K - Financial Information Relating to Industry
Segments

Intermountain's major industry segments are natural gas
production and petroleum refining and asphalt product manufacturing and storage.
Intermountain also rents office space in its Farmington, New Mexico office
building and, in addition to the overall management of Intermountain, management
occasionally performs management and consulting services for others. All costs
and expenses associated with the overall management of Intermountain and other
miscellaneous activities are included under "Other" in the following segment
information. Selected financial information relating to these segments is as
follows:





|                                                    | Years Ended 
|--------------------------------------------------- | ------------
|                                                    | February 28,
|                                                    | 2002        
|                                                    |             
|Revenues                                            |             
|Refining, asphalt product manufacturing
and storage | $       885 
|Natural gas production                              | 380         
|Other                                               | 43          
|                                                    | $   1,308   
|                                                    |             
|Operating Profit (Loss)                             |             
|Refining, asphalt product manufacturing and
storage | $      66   
|Natural gas production                              | 227         
|Electric generation                                 | (76)        
|Other                                               | (305)       
|                                                    | $    (88)   
|                                                    |             
|                                                    | Year Ended  
|                                                    | February 28,
|                                                    | 2002        
|Identifiable Assets                                 |             
|Refining, asphalt product manufacturing
and storage | $     365   
|Natural gas production                              | 323         
|Electric generation equipment available for
sale    | 515         
|Other                                               | 399         
|                                                    | $  1,602    
|Depreciation and Depletion                          |             
|Refining, asphalt product manufacturing
and storage | $      34   
|Natural gas production                              | 30          
|Electric generation                                 | -           
|Other                                               | 17          
|                                                    | $   
81     



Capital Expenditures - During the year ended February
28, 2002, Intermountain capitalized $490,000 for recommissioning costs on its
electric generation facility. During the year ended February 28, 2003,
Intermountain did not incur any capital expenditures.

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32                                                                                  
29<Page>

Intermountain Refining Co., Inc.

Notes
to Financial Statements, Continued



Major Customers - Intermountain sells substantially all
natural gas produced from the Kansas gas properties to one customer. Natural gas
sales to the customer, net to Intermountain's interest, were approximately
$367,000 for the year ended February 29, 2002, and $364,000 for the year ended
February 28, 2003.

Intermountain sells substantially all of its petroleum
products to one customer. See Note D for more information regarding sales to
this customer.

### Note L - Oil and Gas Properties

Kansas Gas Properties:Intermountain owns and operates
certain proven and developed natural gas reserves and related production
equipment located in Southwestern Kansas.  Intermountain has no current plans to
drill or complete any additional wells on the Kansas gas leases or
elsewhere.





|Capitalized Costs:  Capitalized costs relating
to oil and gas producing activities are as follows at February 28,
2003:                                                
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                       
|Proved gas properties                                                                                                                                                  
|Unproved oil and gas
properties                                                                                                                                        
|Less accumulated depletion                                                                                                                                             
|Net capitalized costs                                                                                                                                                  
|                                                                                                                                                                       
|Results of Operations:Results of operations of oil
and gas producing activities, excluding overhead and interest allocations, for
the periods indicated are as follows:
|                                                                                                                                                                       
|                                                                                                                                                                       
|                                                                                                                                                                       
|Revenues                                                                                                                                                               
|Natural gas
sales                                                                                                                                                      
|Costs and Expenses                                                                                                                                                     
|Operating costs                                                                                                                                                        
|General and
administrative                                                                                                                                             
|Depletion, depreciation and
amortization                                                                                                                               
|                                                                                                                                                                       
|Pre-tax net income                                                                                                                                                     
|Income tax expense                                                                                                                                                     
|Net income                                                                                                                                                             



### Note M - Gas Reserve Data and Supplemental Data
(Unaudited)

In accordance with Statement of Financial Accounting Standards
No. 69, the following unaudited information is presented with regard to
Intermountain's proved gas reserves. Information for gas is presented in million
cubic feet (MMcf) except where otherwise indicated in thousand cubic feet (Mcf).



|Production:  Intermountain's net gas production,
average sales price and production cost for the periods indicated are as
follows:                                                                        
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                          
|                                                                                                                                                                                                          
|Net gas production (Mcf)                                                                                                                                                                                  
|Average sales price ($/Mcf)                                                                                                                                                                               
|Average production cost
($/Mcf)                                                                                                                                                                           
|10-KSB
33                                                                                  
30<Page>
Intermountain Refining Co., Inc.Notes
to Financial Statements, Continued                             
|Reserves:  The gas reserves as of February 28,
2003 are based on an independent reserve report prepared for Intermountain dated
February 25, 2000 updated with data developed internally by Intermountain.
|                                                                                                                                                                                                          
|Estimated net quantities of proved developed and proved
undeveloped gas reserves are as follows at February 28, 2003:                                                                                     
|                                                                                                                                                                                                          
|Proved developed                                                                                                                                                                                          
|Proved undeveloped                                                                                                                                                                                        
|                                                                                                                                                                                                          
|                                                                                                                                                                                                          
|Statement of Changes in Quantities of Proved Developed and
Undeveloped Gas Reserves for the years indicated are as follows:                                                                               
|                                                                                                                                                                                                          
|                                                                                                                                                                                                          
|                                                                                                                                                                                                          
|Proved reserves - beginning of
year                                                                                                                                                                       
|Production                                                                                                                                                                                                
|Proved reserves - end of
period                                                                                                                                                                           
|                                                                                                                                                                                                          
|The Standardized Measure of Discounted Future Net Cash Flows
relating to Proved Gas Reserves are as follows at February 28,
2003:                                                                         
|                                                                                                                                                                                                          
|Future cash inflows                                                                                                                                                                                       
|Future production costs                                                                                                                                                                                   
|Future income tax expense                                                                                                                                                                                 
|Future net cash flow                                                                                                                                                                                      
|Ten percent discount factor                                                                                                                                                                               
|Standardized measure of discounted future
net cash flows                                                                                                                                                  
|                                                                                                                                                                                                          
|Changes in the Standardized Measure of Discounted Future Net
Cash Flows From Proved Gas Reserve Quantities for the periods indicated are as
follows:                                                      
|                                                                                                                                                                                                          
|                                                                                                                                                                                                          
|                                                                                                                                                                                                          
|Standardized measure - beginning of
year                                                                                                                                                                  
|Sales, net of production costs and income
taxes                                                                                                                                                           
|Accretion of discount (including changes in present
value                                                                                                                                                 
|due to price changes)                                                                                                                                                                                     
|Standardized measure - end of
period                                                                                                                                                                      
|                                                                                                                                                                                                          
|Developed and Undeveloped Acreage:  The
following summarizes Intermountain's gross and net undeveloped and developed
acreage at February 28, 2003:                                                        
|                                                                                                                                                                                                          
|Developed Acreage                                                                                                                                                                                         
|Kansas                                                                                                                                                                                                    
|                                                                                                                                                                                                          
|Undeveloped Acreage                                                                                                                                                                                       
|                                                                                                                                                                                                          
|"Gross Acres" refers to the number of acres in which
Intermountain owns a working interest. "Net Acres" refers to the sum of the
fractional working interest owned by Intermountain in gross acres.       
|10-KSB
34                                                                                  
31<Page>
  Intermountain Refining Co., Inc.Notes
  to Financial Statements, Continued                         
|Other:  Intermountain held interests in the
following wells, none of which are multiple completion wells at February 28,
2003:                                                                            
|                                                                                                                                                                                                          
|Producing gas wells                                                                                                                                                                                       
|                                                                                                                                                                                                          

### Note N - Electric Generation
Facilities

Intermountain owns two 1.5 megawatt diesel powered electric
generators and associated electric utility interconnection and distribution
equipment located at its Fredonia Arizona refinery facility. The equipment has
not been operated for several years and the engine/generator units had
previously been transported to an equipment dealer in southern California to be
made available for sale. Due to favorable market conditions for electric power
that had developed in California and other Western states during the winter of
2001, Intermountain held discussions with local and regional power distributors
regarding the prospect of Intermountain supplementing electric power supplies in
the local area.  In April of 2001, Intermountain executed a letter of intent
with a regional electric distribution company to generate and sell electricity
at a fixed price to the distribution company for an initial period of 16 months
beginning in June 2001. Intermountain immediately began recommissioning the
facility.

Intermountain incurred $490,000 to recommission the facility
that included rebuilding and reinstalling the diesel engines, refurbishing the
generators and switchgear, revamping cooling equipment, and re-permitting the
facility with the state of Arizona. Except for re-permitting, the
recommissioning process was completed in July 2001.

Unfortunately, due mainly to a delay in re-permitting the
facility, Intermountain failed to have the facility available for operation by
June 1, 2001 as contemplated in the April 2001 letter of intent. At the same
time, due to the general downturn in the economy, demand for electric power,
along with the associated wholesale price, fell precipitously during the spring
of 2001.  In light of these events, in June 2001, the power distributor informed
Intermountain that it did not intend to enter into a formal agreement under
original terms of the letter of intent.

Intermountain has held discussions with several used equipment
dealers and is actively seeking a buyer for the newly refurbished equipment.
While Intermountain has held discussions with several "serious" buyers, no
formal offers for the equipment have been received to date.

As of February 28, 2002, Intermountain reclassified its
electric generation equipment, including the engine/generator units, switchgear,
transformers, and cooling and fuel systems with a combined book value of
$590,505, net of accumulated depreciation of $184,124, from property plant and
equipment to electric generation equipment available for sale. In addition,
Intermountain has evaluated the individual major components of the equipment for
impairment in value and, as of February 28, 2002, provided a combined reserve
for impairment in value of $75,505. The amount of impairment recognized as of
February 28, 2002 is based on the excess of the carrying cost of the equipment
over its estimated fair value, net of selling costs. Based on a review of the
carrying value of the electric generation equipment as of February 28, 2003,
Intermountain does not believe any additional impairment reserve is necessary at
this time.



(End of Integrated Annual Report to
Shareholders)

10-KSB
35                                                                                  
32<Page>



### Exhibits and Reports on Form 8-K

### Reports on Form 8-K:

There were no reports on Form 8-K filed by Intermountain
during the quarter ended February 28, 2003.

### Exhibits:

Except for exhibits 99.1 and 99.2, which are filed as part of
this report, all of the following exhibits are incorporated herein by reference
to Intermountain's registration statement filed on Form S-1 dated April, 9,
2001:



|Exhibit | Description                                                                          
|------- | -------------------------------------------------------------------------------------
|3.1     | Amended and Restated Articles of Incorporation                                       
|3.2     | Bylaws                                                                               
|10.4    | Oneok / Kinder Morgan / KN Energy Gas Sales
Agreement                                
|10.5    | Paramount Petroleum Agreement - November 1999                                        
|99.1    | Certification of  Chief Executive Officer under Sec.906 of
Sarbanes-Oxley Act of 2002
|99.2    | Certification of  Chief Financial Officer under Sec.906 of
Sarbanes-Oxley Act of 2002



### Signatures

Pursuant to the requirements of the Exchange Act, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Farmington, State of New
Mexico, on May 23, 2003.

Intermountain Refining Co., Inc.

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

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

/s/ William N.
Hagler_________________   Date: May 23,
2003William N. Hagler, Chairman of the Board
ofDirectors, and
President/s/ Rick
L. Hurt _____________________    Date: May 23,
2003Rick L. Hurt, Secretary, Treasurer, Director

10-KSB 36<Page>





### Certifications



I, Rick L. Hurt, certify that:

1. I have reviewed this annual report on Form 10-KSB of
Intermountain Refining Co., Inc.;
2. Based on my knowledge, this annual report does not contain
any untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to the period
covered by the report;
3. Based on my knowledge, the financial statements, and other
financial information included in this annual report, fairly present in all
material respects the financial condition, results of operations and cash flows
of the registrant as of, and for, the periods presented in this annual
report;
4. The registrant's other certifying officers and I are
responsible for establishing and maintaining disclosure controls and procedures
(as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
have:
5. designed such disclosure controls and procedures to ensure
that material information relating to the registrant is made known to us by
others, particularly during the period in which this annual report is being
prepared;
6. evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the filing date of
this annual report (the "Evaluation Date"); and
7. presented is this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on our evaluation
as of the Evaluation Date;
8. The registrant's other certifying officers and I have
disclosed, based on our most recent evaluation, to the registrant's
auditors:
9. all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
10. any fraud, whether or not material, that involves management
or other employees who have a significant role in the registrant's internal
controls; and
11. The registrant's other certifying officers and I have
indicated in this annual report whether or not there were significant changes in
internal controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including any
corrective actions with regard to significant deficiencies and material
weaknesses.



Date:____May 23,2003_________________

/s/__Rick L. Hurt____________________

Rick L. Hurt, Secretary, Treasurer, Director

10-KSB 37<Page>

I, William N. Hagler, certify that:

1. I have reviewed this annual report on Form 10-KSB of
Intermountain Refining Co., Inc.;
2. Based on my knowledge, this annual report does not contain
any untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to the period
covered by the report;
3. Based on my knowledge, the financial statements, and other
financial information included in this annual report, fairly present in all
material respects the financial condition, results of operations and cash flows
of the registrant as of, and for, the periods presented in this annual
report;
4. The registrant's other certifying officers and I are
responsible for establishing and maintaining disclosure controls and procedures
(as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
have:
5. designed such disclosure controls and procedures to ensure
that material information relating to the registrant is made known to us by
others, particularly during the period in which this annual report is being
prepared;
6. evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the filing date of
this annual report (the "Evaluation Date"); and
7. presented is this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on our evaluation
as of the Evaluation Date;
8. The registrant's other certifying officers and I have
disclosed, based on our most recent evaluation, to the registrant's
auditors:
9. all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
10. any fraud, whether or not material, that involves management
or other employees who have a significant role in the registrant's internal
controls; and
11. The registrant's other certifying officers and I have
indicated in this annual report whether or not there were significant changes in
internal controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including any
corrective actions with regard to significant deficiencies and material
weaknesses.



Date:____May 23,2003_______________

/s/__William N. Hagler_______________

William N. Hagler, President, Director

10-KSB 38<Page>

### EXHIBIT 99.1



### Certification of Chief Executive Officer Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002





I, William N. Hagler, President and Chief Executive Officer of
Intermountain Refining Co., Inc. certify that:



1. I have reviewed the annual report on Form 10-KSB of
Intermountain Refining Co., Inc;
2. Based on my knowledge, this annual report does not contain
any untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances under which
such statements were made, not misleading with respect to the period covered by
this annual report;
3. Based on my knowledge, the financial statements, and other
financial information included in this annual report, fairly present in all
material respects the financial condition, results of operations and cash flows
of the registrant as of, and for, the periods presented in this annual
report.





May 23, 2003
/s/ William N. Hagler

-----------------------
--------------------------------------------

Date
William N. Hagler

President and Chief Executive Officer

10-KSB 39<Page>

### EXHIBIT 99.2





### Certification of Chief Financial Officer Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002





I, Rick L. Hurt, Treasurer and Chief Financial Officer of
Intermountain Refining Co., Inc. certify that



1. I have reviewed the annual report on Form 10-KSB of
Intermountain Refining Co., Inc;
2. Based on my knowledge, this annual report does not contain
any untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances under which
such statements were made, not misleading with respect to the period covered by
this annual report;
3. Based on my knowledge, the financial statements, and other
financial information included in this annual report, fairly present in all
material respects the financial condition, results of operations and cash flows
of the registrant as of, and for, the periods presented in this annual
report.





May 23, 2003
/s/ Rick L. Hurt

-----------------------
--------------------------------------------

Date
Rick L. Hurt

Treasurer and Chief Financial Officer

10-KSB 40<Page>