AS FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION ON



### May 20, 2004



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
29, 2004



[   ]           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-

<Page> 10-KSB 1

State issuer's revenues for its most recent fiscal year:
$818,732

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, 2004. 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 assumptions, 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,
2004.

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 35 of this report.

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

<Page> 10-KSB 2

### 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 29, 2004 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                                                             | 5   
|Item 3. Legal Proceedings                                                                    | Legal Proceedings                                                                     | 6   
|Item 4. Submission of Matters to a Vote of Security
Holders                                  | Submission of Matters to a Vote of Security
Holders                                   | 6   
|Part II                                                                                      |                                                                                       |     
|Item 5. Market for Common Equity and Related Stockholder
Matters                             | Market for Common Equity and Related Shareholder
Matters                              | 6   
|Item 6. Management's Discussion and Analysis or Plan of
Operation                            | Management's Discussion and Analysis of Financial Condition
and Results of Operations | 7   
|Item 7. Financial Statements                                                                 | Financial Statements of Intermountain                                                 | 7   
|Item 8. Changes In and Disagreements with Accountants on
Accounting and Financial Disclosure | Changes in and Disagreements with Accountants                                         | 7   
|Item 8A. Controls and Procedures                                                             | Controls and Procedures                                                               | 17  
|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 35 of this Form 10-KSB                                                       | N/A 
|Reports on Form 8-K                                                                          | None                                                                                  | N/A 
|Item 16. Principal Accountant Fees and Services                                              | Principal Accountant Fees and Services                                                | 17  

<Page> 10-KSB 3

### Intermountain Refining Co., Inc.

### Integrated Annual Report to Shareholders

### February 29, 2004













































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 20, 2004. 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".<Page> 10-KSB
4                          
AR 1

### Table Of Contents





|                                                                                     | Page
|------------------------------------------------------------------------------------ | ----
|Intermountain's Business Activities                                                  | 3   
|Natural Gas Production                                                               | 3   
|Crude Oil Production                                                                 | 3   
|Leasing of Asphalt Products Manufacturing and Storage
Facilities                     | 3   
|Other Business Activities                                                            | 4   
|Employees                                                                            | 4   
|Research and Development Activities                                                  | 4   
|Government Regulation, Environmental Laws and
Taxes                                  | 4   
|Competition                                                                          | 5   
|Seasonality                                                                          | 5   
|Description Of Properties                                                            | 5   
|Legal Proceedings                                                                    | 6   
|Submission of Matters to a Vote of Security
Holders                                  | 6   
|Market for Common Equity and Related Shareholder
Matters                             | 6   
|Market for Intermountain Common Stock                                                | 6   
|Shares Eligible for Future Sale                                                      | 6   
|Dividends                                                                            | 7   
|Financial Statements Of Intermountain                                                | 7   
|Changes In And Disagreements With Accountants                                        | 7   
|Managements Discussion And Analysis Of Financial Condition
And Results Of Operations | 7   
|Liquidity and Capital Resources                                                      | 8   
|Cash Requirements as of February 29, 2004                                            | 8   
|Results of Operations                                                                | 9   
|Changes in Accounting Principles                                                     | 14  
|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  

<Page> 10-KSB
5                          
AR 2

### 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 oil and natural gas
- Leasing of asphalt products manufacturing and storage
facilities
- Other business activities including providing management and
consulting services to others, and leasing unused space in Intermountain's
office building

### Natural Gas Production

We own working interests in and operate 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.  We have no current plans to drill additional wells
on the Kansas leases, but we are 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, we are committed to deliver our entire
deliverable capacity from all of our 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.
We do not require any collateral or other security for amounts receivable from
Oneok.
- We are responsible for the payment of all taxes, including
production, severance, excise, and property taxes, associated with the
production of natural gas. Oneok reports and pays monthly production and
severance taxes to the state of Kansas on our behalf and withholds such amounts
from payments made to us.

We depend on Oneok
for substantially all of our natural gas sales, which represents a significant
portion of our total revenues.

### Crude Oil Production

Effective as of March 1, 2003, we acquired a 90% working
interest (72% net revenue interest) in oil producing properties in Kimball
County, Nebraska. The property consists of approximately 461 acres, net to our
interest, with two producing wells, two water flood injection wells, one fresh
water well, equipment and contracts. We do not presently operate the property
but we have the option to do so at our sole discretion.  This property does not
currently provide a significant source of revenues for Intermountain.

We have the option to participate and/or earn working
interests in additional wells that may be drilled on our lease in the future. We
will earn a 5% carried working interest in a horizontal drilling development
currently underway on the leased property in the event the well is completed as
a producing well. There is no assurance that the well, if completed, will result
in significant additional revenues for Intermountain.

### Leasing of Asphalt Products Manufacturing and Storage
Facilities

From 1985 until 1997, we processed low-cost, heavy crude oil
and other supplemental raw materials at our 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, we have periodically provided asphalt products
manufacturing and storage services for others. Asphalt storage activities
include the use of storage tanks and loading equipment at the facility to
receive, store, and subsequently ship asphalt products owned by others.  We
have received fees and expense reimbursements related to the services
provided.

<Page> 10-KSB
6                          
AR 3

Effective as of January 1, 2002, Intermountain and Paramount
Petroleum Corporation entered into an agreement whereby Paramount leases a
portion of our asphalt facilities. Material provisions of the agreement with
Paramount include the following:

- 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 was for two years beginning
on January 1, 2002 and expired on December 31, 2003. The agreement was
automatically renewed on January 1, 2004 and will continue on a year to year
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.

For the two
years prior to entering into the present lease agreement with Paramount, we
operated the facility directly by purchasing raw materials from Paramount,
processing the raw materials into finished paving products, and selling the
finished products to Paramount under a profit sharing agreement.

### 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 2003 and 2004. Red Hills is a related party to
Intermountain. We currently provide 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 square 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.

### Employees

We presently employ 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

We have not spent any material amount on research or
development activities since our 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 oil,
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. We believe we have 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.

<Page> 10-KSB
7                          
AR 4

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. We intend to employ such methods to industry standards.

Severance taxes on oil and natural gas production are
collected and paid by the first purchaser of the production.

### 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 and
Nebraska oil and gas properties, which are held by production, all properties
used in the conduct of our businesses are owned in fee.  There are no
outstanding mortgages on any our
properties.Our
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. A portion of our asphalt storage
and manufacturing equipment is presently leased to Paramount. Portions of the
asphalt products manufacturing equipment located at the facility are owned by
Paramount. The remainder of the equipment is presently idle and we have
previously provided a $97,907 impairment of the entire carrying value of
equipment not used in ongoing operations.

We own an average 100% working interest (average 79.7% net
revenue interest) in 20 producing natural gas wells on 11,241 lease acres in
Scott and Finney Counties in southwest Kansas.  As of February 29, 2004,
the proven producing reserves are estimated to be 2,457 million cubic feet net
to our interest.  For the year ended February 29, 2004, we produced 183
million cubic feet of natural gas net to our interest.

On March 1, 2003, we acquired a 90% working interest (72% net
revenue interest) in 2 producing oil wells on 640 gross lease acres in Kimball
County in southwest Nebraska. As of February 29, 2004, the proven producing
reserves are estimated to be 14,862 barrels net to our interest. For the year
ended February 29, 2004, we produced 538 barrels of oil net to our
interest.

<Page> 10-KSB
8                          
AR 5

No reserve estimates on any of our oil and gas properties have
been filed with any Federal authorities or agencies.

Additional information relative to our oil and natural gas
reserves and activities is included in Note M of our February 29, 2004 financial
statements included on page 29 of this report. Estimates of reserves are based
on independent reserve studies and internal data prepared by us and should not
be construed as exact quantities. Estimates of reserves are subject to future
changes based on numerous factors, including, but not limited to, changes in
future market prices, changes in transportation and gathering system operating
conditions and arrangements, changes in operating and production costs, changes
in production characteristics of individual wells, and changes in regulatory
requirements. Many of the factors affecting changes in reserve estimates are
unpredictable and beyond our control.

We own a 7,000 square foot office building in Farmington, New
Mexico.  Approximately one half of the office building is used for our
corporate offices.  The remainder of the space is leased, or available for
lease, to several non-related tenants.

We own two Caterpillar Model 3606 diesel powered electric
generators each capable of producing up to 1.5 megawatts. The generator facility
is located at our facility in Fredonia Arizona. The generators were taken out of
service in January 1999 because we were no longer able to generate electricity
at competitive prices. The generators have been for sale since June 1999.

As of February 28, 2002, we reclassified our electric
generation equipment, with a combined carrying value of $515,000, net of
impairment of $75,505, from Property, Plant and Equipment to Electric generation
equipment available for sale. Due to the longer than expected marketing time and
a perceived softness in the market for our unique equipment we provided an
additional impairment in value of $245,000 that resulted in a combined carrying
value of $270,000 as of February 29, 2004. The impairment in value reflects our
estimate of the amount by which the estimated fair value of the equipment, less
selling 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 public market for our common stock.
Accordingly, we are unable to provide any historical information regarding sales
prices for our common stock. 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 our ability 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.

<Page> 10-KSB
9                          
AR 6

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.

### Financial Statements of Intermountain

The audited financial statements of Intermountain as of
February 29, 2004 and for each of the two years in the period ended February 29,
2004 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 29, 2004 beginning on page 28 of this report.

### Changes in and Disagreements with Accountants

Atkinson and Co., Ltd., in Albuquerque, New Mexico had
performed the annual audit of Intermountain's financial statements since 1999.
Atkinson and Co., Ltd. had verbally advised us that it did not intend to
register with the Public Company Accounting Oversight Board for the purpose of
performing future audits of publicly held companies. Atkinson did however agree
to perform reviews of Intermountain’s interim reports on Form 10-QSB until
we found a replacement certifying accountant but no later than the deadline for
registration with the Public Company Accounting Oversight Board. On September
17, 2003, we formally advised Atkinson that we had found a replacement
certifying accountant.

Atkinson’s report on the financial statements of
Intermountain for the years ended February 28, 2002 and February 28, 2003 did
not contain an adverse opinion, a disclaimer of opinion, or a qualification or
modification as to uncertainty, audit scope or accounting principles.

During the last two fiscal years and subsequent interim
periods ending prior to September 17, 2003, there have been no disagreements
between Intermountain and Atkinson on any matter of accounting principles or
practices, financial statement disclosure, or auditing scope or procedure, which
disagreement(s), if not resolved to the satisfaction of Atkinson, would have
caused it to make reference to the subject matter of the disagreement(s) in
connection with its reports.

On September 17, 2003, Intermountain’s board of
directors approved the engagement of Richey, May & Co., LLP, in Englewood,
Colorado to perform Intermountain’s annual audit for the year ended
February 29, 2004 and to review Intermountain’s interim period reports
beginning with the quarterly report on Form 10Q-SB filed with the Securities and
Exchange Commission for the quarter ended August 31, 2003. We had not previously
consulted with Richey, May & Co. on any accounting, auditing or financial
reporting issues.

Since the engagement of Richey, May & Co. in September
2003, there have been no disagreements between Intermountain and its accountants
regarding financial disclosure issues.

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

The following discussion of our financial condition as of
February 29, 2004 and results of operations for the years ended February 28,
2003 and February 29, 2004, 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.

<Page> 10-KSB
10                          
AR 7

### Liquidity and Capital Resources

Cash flow and working capital positions improved during the
year ended February 29, 2004 and we believe that cash flow from ongoing
operations will be adequate to meet cash demands for the coming
year.

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, 2003
|Cash and cash equivalents (unrestricted) | $     616,052    
|                                         |                  
|Working capital                          | $     610,676    
|                                         |                  

During the year ended February 29, 2004, we realized $332,675
of cash flow from operating activities. The positive cash flow was primarily the
result of profits realized from natural gas production and leasing of our
asphalt products manufacturing and storage facilities. There were no other
significant operating sources or uses of cash during the year.

Significant non-operating uses of cash during the year ended
February 29, 2004 included:

- $50,000 for the acquisition of the oil producing properties
in Nebraska

During the year ended February
28, 2003, we 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 leasing of our asphalt products manufacturing and storage
facilities. There were no other significant operating sources or uses of cash
during the year.

Significant non-operating sources of cash during the year
ended February 28, 2003 included:

- $199,000 from the collection of a receivable associated with
the sale of Intermountain’s Fredonia refinery facility building in
2002
- $25,00 received from the surrender of an officer life
insurance policy
- $20,000 received from the redemption of a certificate of
deposit previously pledged as security for potential well plugging liabilities
in Kansas

### Cash requirements as of February 29,
2004

Estimated cash requirements for the next twelve months
include:

- $23,000 per month for normal general and administrative
costs, including costs to operate our Farmington office building
- $1,600 per month estimated costs associated with the
ownership and maintenance of Intermountain's asphalt products manufacturing and
storage facility

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

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

- $29,000 per month (net of production costs) from estimated
oil and natural gas operations based on results of operations during the year
ended February 29, 2004 and projected natural gas prices over 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
- $750 per month interest earned on cash balances
- $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

<Page> 10-KSB
11                          
AR 8

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.

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.

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 participation in, or operating of, petroleum processing
related projects owned by others
- the participation in an industry related merger or
acquisition

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, 2003
|Revenues                                                                   | $    593,665     
|Costs and Expenses                                                         | 569,409          
|Net income before taxes                                                    | 24,256           
|Income taxes                                                               | 100              
|Net income before cumulative effect of change in accounting
principle      | 24,156           
|Cumulative effect of change in accounting for asset
retirement obligations | ____-___         
|Net income                                                                 | $   24,156       



#### Revenues

The increase in revenues for the year ended February 29, 2004
compared to the year ended February 28, 2003 consisted of:

- $17,000 increase in asphalt equipment rental and
fees
- $206,000 increase in oil and natural gas revenues
- $2,000 increase in real estate rental income

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 sales;
- $3,500 decrease in real estate rental income; and
- $20,000 increase in consulting fee
revenues.



Changes in individual components of revenues are discussed
below:

<Page> 10-KSB
12                          
AR 9

##### Oil and natural gas revenues

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





|                                | For the year ended
|------------------------------- | ------------------
|                                | February 28,2003  
|Natural gas produced, net (Mcf) | 179,360           
|Average selling price ($/Mcf)   | $2.11             
|Crude oil produced, net (Bbls)  | 0                 
|Average selling price ($/Bbl)   | N/A               

The increase in oil and natural gas revenues for the year
ended February 29, 2004 as compared to the year ended February 28, 2003
consisted of a $192,000 increase in natural gas revenues in Kansas and the
addition of $14,000 from oil production in Nebraska that was acquired in March,
2003. The $192,000 increase in natural gas revenues included a one time
recognition of  $22,000 from the resolution of a previously disputed payment.
The remaining $172,000 increase consisted of an $0.88 per Mcf (42%) increase in
the average natural gas price received along with a 4,000 Mcf (2%) increase in
natural gas produced. The increase in natural gas prices was generally
attributed to industry wide concern of projected long term supply and demand
imbalances coupled with comparatively low natural gas storage levels recorded at
the end of the 2002/2003 heating season. 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 our natural gas
production will decline slightly over the next twelve months consistent with
observed decline rates.

The oil producing properties in Nebraska were acquired on
March 1, 2003, accordingly, there are no comparable operations for this activity
during the year ended February 28, 2003. The oil producing properties were
placed on a water flood operation during August 2003. Prior to implementation of
the water flood operation, estimated daily oil production of the properties was
approximately 2.3 barrels per day. Since implementation of the enhanced oil
recovery operation, we have not noted an appreciable change in production. There
is no assurance that any improvement in production rates will be realized in the
future as a direct result of the water flood operation. There is currently a
horizontal drilling effort being carried out on the lease under a farm-out
agreement. We are entitled to receive a carried 5% working interest in the event
the well is completed as a producing well. We have no obligation to share in any
costs incurred in completing or equipping the well. There is no assurance that
the well will be successfully completed, or if successfully completed, will
result in any significant new revenues. We have the option, but not the
obligation, to participate in additional farm-out projects in the future. There
are currently no plans for any additional farm-out projects.

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.

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

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 increase in asphalt equipment rental fees during the year
ended February 29, 2004 as compared to the year ended February 28, 2003 was
attributed to a slight increase in product shipments from the facility. While
the initial term of the agreement with Paramount expired in January 2004, the
agreement was extended to December 31, 2004 under the automatic extension
provisions of the agreement. Paramount has not expressed any intention to cancel
or renegotiate the agreement at the end of the current term. However, there is
no assurance that the current agreement will be continued beyond its current
term. Revenues associated with this activity are expected to remain level over
the next year.

<Page> 10-KSB
13                          
AR 10

The reduction in revenues during the year ended February 28,
2003 as compared to the year ended February 28, 2002 was directly the result of
our discontinuation of directly operating the asphalt products manufacturing
facility on January 1, 2002. 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, and basic and supplemental fees from Paramount during
the year ended February 28, 2003 compared to $6,800 received during the two
month period ended February 28, 2002.

##### Real estate rental

The increase in real estate rental revenues during the year
ended February 29, 2004 as compared to the year ended February 28, 2003 was
attributed to an increase in average occupancy plus a slight increase in some
rental rates for space in our Farmington office building. As of February 29,
2004, there were no vacant office spaces available for rent. Rental income is
not expected to change significantly over the coming year.

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.

##### Consulting fee revenues

There was no change in consulting fee revenue during the year
ended February 29, 2004 as compared to the year ended February 28, 2003. It is
anticipated that we 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, we currently do not have any plans or agreements to
provide consulting services to others during the next twelve months.

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.

#### 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, 2003
|Cost of sales                                         | $    233,720     
|General and administrative costs                      | 283,101          
|Depletion, depreciation and amortization              | 58,133           
|Loss on impairment of equipment                       | -                
|Accretion of discount on asset retirement
obligations | -                
|Interest and investment (income) expense, net         | (5,545)          
|Total costs and expenses                              | $  569,409       
|                                                      |                  

Costs and expenses increased overall by $189,000 during the
year ended February 29, 2004 compared to the year ended February 28, 2003. The
increase in costs and expenses consisted of:

- $43,000 reduction in cost of sales
- $14,000 reduction in general and administrative
costs
- $5,000 increase in interest and investment income
- $245,000 loss on impairment in value of equipment
- $3,000 increase in depletion, depreciation and
amortization
- $3,000 for accretion of the discount on asset retirement
obligations

Costs and expenses decreased
overall by $826,000 during the year ended February 28, 2003 compared to the year
ended February 28, 2002. The decrease in costs and expenses consisted
of:

- $868,000 reduction in cost of sales
- $33,000 reduction in general and administrative
costs
- $23,000 reduction in depreciation and depletion
expense
- $4,000 reduction in bad debt expense

<Page> 10-KSB
14                          
AR 11

- $7,000 increase in net interest and investment
income
- $76,000 reduction in impairment losses
- $185,000 reduction in gain on the sale 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 oil
and natural gas, and costs of maintaining the asphalt facility.

The decrease in cost of sales during the year ended February
29, 2004 compared to the year ended February 28, 2003 consisted of a $49,000
reduction in oil and natural gas production costs offset by a $6,000 increase in
asphalt facility maintenance costs.

The reduction in oil and natural gas production costs included
a $66,000 reduction in production costs associated with the Kansas natural gas
properties offset by the addition of $18,000 in production costs associated with
the newly acquired Nebraska oil properties.

Significant changes in Kansas production costs during the year
ended February 29, 2004 compared to the year ended February 28, 2003 included a
$49,000 reduction in well equipment repairs, a $12,000 reduction in property
taxes and a $4,000 reduction in salt water disposal costs. The reduction in well
equipment repairs was mainly attributed to the occurrence of fewer well
equipment failures, which also contributed to the slight increase in gas
production. Well pump, production tubing, surface equipment, and well casing
failures occur randomly and the timing and cost of repairs cannot be accurately
predicted. In addition, future repair costs may be material and become a
critical factor in the assessing the economic viability of individual wells. The
reduction in property taxes was attributed to a reduction of natural gas prices
and a slight reduction in natural gas produced during the corresponding
valuation period. The reduction in salt water disposal costs is attributed to
the connection of a direct disposal well pipeline to one of our wells during the
middle of the year. The well was identified as our biggest producer of salt
water and the addition of the disposal line is expected to result in savings of
approximately $7,000 per year over the life of the well.

Significant oil production costs, net to our interest,
associated with the newly acquired Nebraska properties included $7,000 for
ongoing utility and pumping services, and $9,000 for equipment repairs. Most of
the equipment repair costs were attributed to unexpected onetime costs
associated with the repair of equipment used in the water flood operation. As
with the Kansas properties, well equipment failures occur randomly and the
timing and cost of repairs, which may be material, cannot be accurately
predicted.

Ongoing costs associated with the asphalt facility mainly
consist of property taxes, facility insurance, and environmental compliance
costs including annual permit renewals. The increase in asphalt facility
maintenance costs during the year ended February 29, 2004 compared to the year
ended February 28, 2003 consisted mainly of a $5,000 increase in costs
associated our water quality permit.

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 facility operating costs offset by $98,000 increase in
natural gas production costs.

The decrease in cost of sales associated with the asphalt
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 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. 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.

<Page> 10-KSB
15                          
AR 12

##### General and administrative expenses

General and administrative expenses include the cost of our
officers and administrative employees, costs incurred to operate and maintain
our 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 29, 2004 compared to the year ended February 28, 2003
consisted mainly of an $11,000 reduction in officer life insurance expense. All
other cost items within the general and administrative cost classification
remained relatively unchanged from those from the prior year. The reduction in
officer life insurance expense was related to the August 2002 surrender and
cancellation of an officer life insurance policy that had a base annual premium
of $24,000. Normal ongoing general and administrative costs are expected to
remain relatively unchanged over the next twelve months.

The decrease in general and administrative expenses during the
year ended February 28, 2003 compared to the year ended February 28, 2002
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 for year ended
February 28, 2003 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.

##### Depletion, depreciation and
amortization

The increase in depletion and depreciation for the year ended
February 29, 2004 compared to the year ended February 28, 2003 consisted of a
$1,000 increase in depletion on Kansas natural gas production associated with a
slight increase in production over the prior year and the addition of $2,000 in
depletion on the newly acquired Nebraska oil production. Depreciation expense on
all other property and equipment was relatively unchanged from the prior year.
It should be noted that there was slight increase in depletion expense during
the current year associated with the change in accounting for asset retirement
obligations, specifically future well plugging costs, that was implemented
effective as of March 1, 2003.

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 asphalt 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 asphalt facility was due to the sale of the facility maintenance
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.

##### Loss on impairment of equipment

As of February 29, 2004, we recognized an additional $245,000
impairment in value of our electric generation equipment that is currently for
sale.

We did not recognize any impairment losses during the year
ended February 28, 2003.

##### 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 and investment income during the year ended
February 29, 2004 of $11,000 consisted entirely of interest and dividends earned
on cash balances and investments in mutual funds. There were no investment
purchase or sale transactions during the year. We did not incur any interest
expense during the year. Interest and investment income is expected to remain
relatively unchanged over the next twelve months.

Net interest and 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.

<Page> 10-KSB
16                          
AR 13

### Changes in Accounting Principles

Effective as of March 1, 2003, we implemented the provisions
of Financial Accounting Standards Board Statement No. 143 "Accounting for Asset
Retirement Obligations". The Statement addresses financial accounting and
reporting for obligations associated with the retirement of tangible long-lived
assets and the associated asset retirement costs. The Statement is applicable to
all entities that have legal obligations to settle costs associated with the
future retirement of such assets. The operation of oil and gas wells is governed
by state regulations that include a requirement to properly plug a well when it
becomes no longer capable of economic production. Accordingly, we are obligated
to incur costs in the future to plug and abandon our gas wells in Kansas and our
oil wells in Nebraska.

Statement No. 143, as it applies to our future oil and gas
well plugging obligations, requires the amount of future plugging costs to be
estimated and recorded, at its present value as of the date of acquisition, as a
liability in our balance sheet with a corresponding increase in the capitalized
cost of the oil and gas assets.  Subsequently, the additional capitalized cost
of the oil and gas assets is amortized to expense using the units of production
method, and the discount on the present value of the liability is amortized to
accretion expense based on the increase in the present value of the obligation
over time. Actual costs incurred for plugging and abandonment activities are
charged against the liability instead of being charged directly to results of
operations, as was the case before implementation of the change.

As we acquired our Kansas natural gas assets prior to March 1,
2003, it was necessary to recognize the cumulative effect of the accounting
change as it related to those assets as if the new accounting principle had been
in effect when the assets were originally acquired. The cumulative effect of the
change resulted in an $18,593 charge to results of operations for the year ended
February 29, 2004.

Additional discussion of this change in accounting principle
is contained in our financial statements beginning on page 18 of this
report.

### 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 | 71  | President and Director                        | 1984      
|                                                                  |     |                                               |           
|Rick L. Hurt5701 Tee
Dr.Farmington, New Mexico 87402              | 51  | Controller, Secretary, Treasurer and Director | 1985      

Background information concerning the Officers and
Directors is as follows:

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.

<Page> 10-KSB
17                          
AR 14

Rick L. Hurt has been the Secretary, Treasurer and a
Director of Intermountain since 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 in May 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 our executive officers for services rendered 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                                  | 2004         | $101,164                 | $  0        | $  0                      | 0                                                       | $3,035    (1)                      
|Chief Executive Officer and Director               | 20032002     | $101,164$101,164         | $  0$
0     | $  0$
0                   | 00                                                      | $3,035
(1)$3,035     (1)           
|                                                   |              |                          |             |                           |                                                         |                                    
|                                                   |              |                          |             |                           |                                                         |                                    
|                                                   |              |                          |             |                           |                                                         |                                    
|Rick L. Hurt                                       | 2004         | $ 54,889                 | $  0        | $  0                      | 0                                                       | $1,647    (1)                      
|Secretary, Treasurer, and Director                 | 20032002     | $ 54,889$
54,889         | $  0$
0     | $  0$
0                   | 00                                                      | $1,647    (1)$1,647
(1)            
|                                                   |              |                          |             |                           |                                                         |                                    
|All officers and directors as a group ( 2
persons) | 200420032002 | $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
amounting to 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. We have not increased officers salaries since April,
1997 at which time a 2.5% cost of living adjustment was awarded.

We provide health insurance benefits to the officers and all
other full time employees.

We maintain a SIMPLE IRA plan for our officers and all of our
full time employees. Participation in the plan is voluntary and employee
contributions are limited by regulations established annually by the Internal
Revenue Service. We are 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.

We have no employment contracts with any of our employees. All
employees can terminate employment at will.

<Page> 10-KSB
18                          
AR 15

### Security Ownership of Certain Beneficial Owners and Management

### Security Ownership of Certain Owners

The following table lists the only persons known to us 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:





|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, we are 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 us or upon the absence of a written representation that an
individual is exempt from such filing requirements:



|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

<Page> 10-KSB
 19                          
 AR 16

### 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 29, 2004 beginning on page 27 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 April 14, 2004, William N. Hagler and
Rick L. Hurt, representing all of the officers and directors of Intermountain,
updated their evaluation of our 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 our 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
our current and previous principal accountants during the periods indicated is
as follows:



|                                                                                                                                                                                                       | For the years ended
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ | -------------------
|                                                                                                                                                                                                       | February 28,       
|                                                                                                                                                                                                       | 2003               
|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. | $   22,683         
|Audit related fees                                                                                                                                                                                     | 0                  
|Tax fees                                                                                                                                                                                               | 0                  
|All other fees                                                                                                                                                                                         | 0                  
|Total fees billed by principal accountants                                                                                                                                                             | $   22,683         

We, due to our small size, do not have an audit committee. All
functions and procedures that would traditionally be performed by an audit
committee are performed by our board of directors.  Our board of directors
pre-approves all engagements for services performed by our principal
accountants.  Generally, we do not engage our 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.

<Page> 10-KSB
20                          
AR 17

### Index to Financial Statements



|                                                                   | Page
|------------------------------------------------------------------ | ----
|Report of Independent Auditors,
February 29, 2004                  | 22  
|                                                                   |     
|Balance Sheet as of February
29,2004                               | 19  
|                                                                   |     
|Statements of Income and
Comprehensive Income  for the years ended |     
|February 28, 2003
and February 29, 2004                            | 20  
|                                                                   |     
|Statements of Cash Flows for the
years ended                       |     
|February 28, 2003
and February 29, 2004                            | 21  
|                                                                   |     
|Statements of Changes in
Stockholders' Equity                      |     
|for the
years ended February 28, 2003 and February 29, 2004        | 22  
|                                                                   |     
|Notes to financial
statements                                      | 23  
|                                                                   |     

<Page> 10-KSB
21                          
AR 18



|Intermountain Refining Co., Inc.                                           |  |            
|-------------------------------------------------------------------------- |  | -----------
|Balance Sheet                                                              |  |            
|February 29, 2004                                                          |  |            
|                                                                           |  |            
|Assets                                                                     |  |            
|Current Assets                                                             |  |            
|Cash and cash equivalents - Note
A                                         |  | $   895,373
|Accounts receivable - Note B                                               |  | 78,736     
|Inventories – Note F                                                       |  | 2,390      
|Prepaid expenses                                                           |  | 887        
|Total Current Assets                                                       |  | 977,386    
|Property, Plant and
Equipment, net                                         |  |            
|Land, buildings and
improvements                                           |  | 384,419    
|Equipment                                                                  |  | 164,930    
|Asphalt equipment – Note
A                                                 |  | 581,919    
|Oil and gas properties, (successful
efforts method) - Notes L, M and N     |  | 1,055,361  
|                                                                           |  | 2,186,629  
|Less accumulated depletion and
depreciation                                |  | (1,811,827)
|                                                                           |  | 374,802    
|Other Assets                                                               |  |            
|Electric generation equipment available for sale–
Note A                   |  | 270,000    
|Available-for-sale investments - Note
E                                    |  | 72,139     
|Other assets - Note C                                                      |  | 36,120     
|                                                                           |  | 378,259    
|Total Assets                                                               |  | $ 1,730,447
|Liabilities and Stockholders' Equity                                       |  |            
|Current Liabilities                                                        |  |            
|Accounts payable                                                           |  | $    47,984
|Taxes other than income
taxes                                              |  | 2,818      
|Income taxes payable - Note
G                                              |  | 149        
|Total Current
Liabilities                                                  |  | 50,951     
|Deferred Taxes -
Note G                                                    |  | 2,458      
|Asset Retirement Obligations - Notes A and
N                               |  | 36,384     
|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                                                          |  | 180,775    
|Accumulated other comprehensive income - Note
E                            |  | 4,565      
|                                                                           |  | 1,640,654  
|Total Liabilities and Stockholders'
Equity                                 |  | $ 1,730,447
|                                                                           |  |            
|The accompanying notes are an integral part of these
financial statements. |  |            

<Page> 10-KSB
22                          
AR 19



|Intermountain Refining Co., Inc.                                                                                                                              |                     |              
|------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------- | -------------
|Statements of Income and Comprehensive Income                                                                                                                 |                     |              
|                                                                                                                                                              | For the years ended
|                                                                                                                                                              | February  28,       | February  29,
|                                                                                                                                                              | 2003                | 2004         
|Revenues                                                                                                                                                      |                     |              
|Oil and natural gas production
revenues                                                                                                                       | $   379,222         | $   584,997  
|Asphalt equipment rental and throughput
fees - Note D                                                                                                         | 155,217             | 172,233      
|Real estate rental income                                                                                                                                     | 23,226              | 25,502       
|Consulting fees - Note H                                                                                                                                      | 36,000              | 36,000       
|                                                                                                                                                              | 593,665             | 818,732      
|Costs and Expenses                                                                                                                                            |                     |              
|Cost of sales                                                                                                                                                 | 233,720             | 191,173      
|General and administrative                                                                                                                                    | 283,101             | 269,107      
|Depletion, depreciation and
amortization                                                                                                                      | 58,133              | 60,821       
|Loss on impairment of equipment – Note
A                                                                                                                      | -                   | 245,000      
|Accretion of discount on asset retirement obligations -
Note N                                                                                                | -                   | 2,846        
|Interest and investment expense/(income),
net                                                                                                                 | (5,545)             | (10,810)     
|                                                                                                                                                              | 569,409             | 758,137      
|Income From Operations Before Income
Taxes                                                                                                                    | 24,256              | 60,595       
|Provision (benefit) for income taxes -
Note G                                                                                                                 |                     |              
|Current                                                                                                                                                       | 100                 | 149          
|Deferred                                                                                                                                                      | -                   | -            
|                                                                                                                                                              | 100                 | 149          
|                                                                                                                                                              |                     |              
|Income Before Cumulative Effect of Change in Accounting
Principle - Note A                                                                                    | 24,156              | 60,446       
|Cumulative effect on prior years of change in accounting for
asset retirement obligations - Note N                                                            | -                   | (18,593)     
|Net Income                                                                                                                                                    | 24,156              | 41,853       
|                                                                                                                                                              |                     |              
|Other Comprehensive Income (Loss), net of
tax:                                                                                                                |                     |              
|Unrealized holding gains/(losses) on investments available
for sale (net of income tax benefit/(expense) of  $515 in 2003 and $(1458) in
2004)- Notes E and G | (954)               | 2,708        
|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                                                                                                                                          | $    36,942         | $    44,561  
|                                                                                                                                                              | =========           | =========    
|Weighted Average Number of Shares
Outstanding                                                                                                                 | 1,155,609           | 1,155,609    
|Basic and Fully Diluted Earnings Per
Share                                                                                                                    |                     |              
|Income before cumulative effect of change
in accounting principle                                                                                             | $      
0.02        | $      
0.05 
|Cumulative effect of change in accounting for asset
retirement obligations                                                                                    | 0.00                | (0.02)       
|                                                                                                                                                              | $      
0.02        | $      
0.03 
|                                                                                                                                                              | ========            | ========     
|Pro forma amounts assuming the change in accounting for
asset retirement obligations is applied retroactively:                                                |                     |              
|Net Income                                                                                                                                                    | $  22,377           | $   60,446   
|Basic and fully diluted earning per
share                                                                                                                     | $     
0.02         | $      
0.05 
|                                                                                                                                                              |                     |              
|The accompanying notes are an integral part of these
financial statements.                                                                                    |                     |              

<Page> 10-KSB
23                          
AR 20



|Intermountain Refining Co.,
Inc.Statements of Cash Flows                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|Increase (Decrease) in Cash and Cash
Equivalents                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|Cash Flows From Operating Activities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|Net income                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|Adjustments to reconcile net income to
net cash provided by operating activities:                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|Cumulative effect on prior years of change in accounting
for asset retirement obligations                                                                                                                                                                                                                                                                                                                                                                                                                                         
|Depreciation, depletion and
amortization                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|Accretion of discount on asset retirement
obligations                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|Realized loss on disposal of available for sale
investments                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|Gain on receipt of stock from demutualization of
insurance company                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|Loss on impairment of assets                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|Changes in operating assets and
liabilities:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|(Increase) decrease in
accounts receivable                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|(Increase) decrease in prepaid expenses                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|Increase in accounts payable
and accrued expenses                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|Increase in income taxes
accrued                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|Net Cash Flow 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 oil producing properties                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|Collection of account receivable from
related party on building sale                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|Net Cash Flow Provided (Used) by Investing
Activities                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|Increase in Cash and Cash Equivalents                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|Cash and Cash Equivalents at Beginning of
Year                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|Cash and Cash Equivalents at End of Year                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|Supplemental Cash Flow
Disclosures                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|Intermountain paid interest of  $0 in 2003 and $0 in
2004.                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|Intermountain paid income taxes of  $100 in 2003 and $100 in
2004.                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|Supplemental Schedule of Noncash Investing
Activities: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.
|During 2004 Intermountain's available for sale investments
increased in value by $2,708, net of deferred taxes of  $1,458.                                                                                                                                                                                                                                                                                                                                                                                                        
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|During 2004, as a result of a change in accounting for asset
retirement obligations, Intermountain recognized estimated asset retirement
obligations of $33,538 and increased its investment in oil and gas producing
properties by the present value (as of the date of acquisition) of the estimated
future obligations of $14,945, net of prior accumulated depletion of $4,580.                                                                                                                                               
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|The accompanying notes are an integral part of these
financial statements.                                                                                                                                                                                                                                                                                                                                                                                                                                                        

<Page> 10-KSB
24                          
AR 21



|Intermountain Refining Co., Inc.                                          
|--------------------------------------------------------------------------
|Statements of Changes in Stockholders'
Equity                             
|                                                                          
|                                                                          
|                                                                          
|                                                                          
|                                                                          
|                                                                          
|                                                                          
|Balance, February 28, 2002                                                
|                                                                          
|Holding gain on available for sale                                        
|investments - Notes E and G                                               
|                                                                          
|Net income                                                                
|                                                                          
|Balance, February 28, 2003                                                
|                                                                          
|Holding gain on available for sale                                        
|investments - Notes E and G                                               
|                                                                          
|Net income                                                                
|                                                                          
|Balance, February 29, 2004                                                
|                                                                          
|                                                                          
|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 29, 2004, and the related
statements of income and comprehensive income, changes in stockholders' equity,
and cash flows for the year then ended. These financial statements are the
responsibility of Intermountain's management.  Our responsibility is to
express an opinion on these financial statements based on our audit.  The
financial statements for the year ended February 28, 2003 were audited by other
auditors, whose report dated April 16, 2003, expressed an unqualified opinion on
those statements.We conducted our audit in
accordance with auditing standards generally accepted in the United States of
America.  Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement.   An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements.  An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation.  We believe that our audit
provides a reasonable basis for our opinion.In
our opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of Intermountain Refining Co., Inc. as
of February 29, 2004, and the results of operations and cash flows for the year
then ended, in conformity with accounting principles generally accepted in the
United States of America.Richey, May & Co., LLPEnglewood, ColoradoApril 22,
2004

<Page> 10-KSB
 25                          
 AR 22

#### Intermountain Refining Co., Inc.

#### Notes to Financial Statements

#### February 29, 2004

### 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.  Effective as of March 1, 2003, Intermountain
acquired a 90% working interest (72% net royalty interest) in two oil producing
wells located in Kimball County, Nebraska. Intermountain owns a petroleum
products refinery and asphalt products storage facility in Fredonia, Arizona.
Intermountain 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 29, 2004 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 has positive working capital and
positive stockholders' equity at February 29, 2004 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's asphalt products storage facility has been
leased to Paramount Petroleum Corporation. Intermountain receives fixed monthly
lease payments and variable throughput fees for products shipped from the
facility.

Intermountain additionally owns two diesel powered electric
generators, and related equipment, located at its refinery facility in Fredonia,
Arizona. The electric generation equipment is not in operation and is currently
available and offered for sale to others.

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:



|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.

<Page> 10-KSB
 26                          
 AR 23

#### Intermountain Refining Co., Inc.

#### Notes to Financial Statements -Continued

Asset Retirement Obligations: Financial Accounting
Standards Board Statement No. 143 requires the recognition of a liability for
legal obligations associated with the retirement of long-lived assets such as
plugging and abandonment costs on oil or natural gas wells. Under the provisions
of the statement, asset retirement obligations are recognized based on the
present value of the future retirement costs as of the date an asset is acquired
and capitalized as part of the cost of the asset. The capitalized cost is
amortized to expense and the discount on the future obligation is amortized to
accretion expense over the life of the asset. Actual costs associated with asset
retirement activities are charged against the asset retirement obligation.
Effective as of March 1, 2003, Intermountain implemented the provisions of the
statement. See Note N

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:  Due to
market limitations on the sale of electric power, Intermountain does not
anticipate that it will operate its electric generation equipment in the near
future and is actively seeking a buyer for the equipment. As of February 28,
2002, Intermountain reclassified the equipment, having a book value of $515,000
net of impairment of $75,505, from property, plant and equipment to electric
generation equipment held for sale. As of February 29, 2004, Intermountain
provided an additional impairment of $245,000 bringing the net carrying value of
the equipment to $270,000 as of that date. The impairment provided as of
February 29, 2004 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.

Revenue Recognition:Oil and natural gas production
revenues are recognized upon delivery. Real estate rental income, asphalt
equipment rental fees, and consulting fees are recognized on a monthly basis as
services are provided. Asphalt product throughput fees are recognized on a
monthly basis as asphalt products are shipped. The additional throughput fees
are recognized if and when annual calendar shipments exceed 10,000
tons.

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; cost depletion used for financial
reporting purposes and statutory depletion used for tax purposes; and financial
statement recognition of operating and capital losses which are carried forward
to future years for income tax purposes. Deferred tax assets are limited to
amounts considered to be realizable in future periods.

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.

Available for Sale Investments:Available for sale
investments include investments in mutual funds, equities, and brokerage money
market accounts. The carrying amount of Intermountain's available for sale
investments is reflected at fair value. Unrealized holding gains and losses in
the market value of the investments are 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.

<Page> 10-KSB
 27                          
 AR 24

#### Intermountain Refining Co., Inc.

#### Notes to Financial Statements -Continued

Other Comprehensive Gains and Losses: Other
comprehensive income for the years ended February 28, 2003 and February 29, 2004
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 income.

### 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 of 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 29, 2004:





|Cash value of life insurance contracts | $  35,845
|-------------------------------------- | ---------
|Utility  deposits                      | 275      
|                                       | $  36,120

### Note D - Asphalt Product Storage
Services

Effective January 1, 2002, Intermountain leased its asphalt
storage and processing equipment to Paramount Petroleum Corporation for $3,200
per month plus 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 of $4.50 per ton, applicable to all tons shipped
during the year. The initial term of the agreement expired on January 1, 2003
but has been automatically extended on a year to year basis under the extension
terms of the agreement. For the year ended February 28, 2003, Intermountain
recognized equipment rental revenues of $38,400 and throughput fees of $116,817.
For the year ended February 29, 2004, Intermountain recognized equipment rental
revenues of $38,400 and throughput fees of $133,833.

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

Available-for-sale investments consist of the following at
February 29, 2004:



|Description                          | Cost        | Unrealized gain/(loss) | Estimated Fair Value
|------------------------------------ | ----------- | ---------------------- | --------------------
|Investment in mutual funds           | $   49,174  | $  (1,111)             | $ 48,063            
|Investment in common stock equities  | 14,781      | 8,134                  | 22,915              
|Brokerage money market accounts      | 1,161       | 0                      | 1,161               
|Total investments available for sale | $    65,116 | $    7,023             | $ 72,139            
|                                     |             |                        |                     

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
$4,166 for the year ended February 29, 2004 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.

<Page> 10-KSB
 28                          
 AR 25

#### Intermountain Refining Co., Inc.

#### Notes to Financial Statements -Continued

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 and common stock equities, no contractual
maturities exist that would require separate disclosure. The fair market values
of the investments are subject to ongoing fluctuation. The amount ultimately
realized upon disposition will be different from the amounts reported in these
financial statements.

### Note F - Inventories

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

### Note G - Income Taxes

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



|                                         | February 28, | February 29,
|---------------------------------------- | ------------ | ------------
|                                         | 2003         | 2004        
|Income at statutory rate                 | 34%          | 34%         
|State income taxes                       | -   %        | -   %       
|Expenses not deductible for tax purposes | 19%          | 1%          
|Other (net)                              | (53)%        | (35)%       
|Income tax expense (benefit)             | -  %         | -  %        

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



|                              | For the years ended
|----------------------------- | -------------------
|                              | February 28,       
|                              | 2003               
|Current                       |                    
|Federal                       | $      -           
|State                         | 100                
|Deferred                      |                    
|Federal                       | -                  
|State                         | -                  
|Change in
valuation allowance | -                  
|Total income taxes            | $        100       
|                              |                    



As of February 29, 2004, 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           | $   302,396                     | 2019         | $         -               | -           
|2000           | 48,995                          | 2020         | 119,272                   | 2005        
|2002           | 164,220                         | 2022         | 328,296                   | 2007        
|2003           | 83,006                          | 2023         | 21,139                    | 2008        
|Total          | $   598,617                     |              | $    468,707              |             

<Page> 10-KSB
 29                          
 AR 26

#### Intermountain Refining Co., Inc.

#### Notes to Financial Statements -Continued

Deferred tax assets/(liabilities) as of February 29, 2004
consist of the following:



|Net deferred tax asset arising from book and tax basis
differences in depreciable assets                                     | $  41,938       
|---------------------------------------------------------------------------------------------------------------------------- | ----------------
|Deferred tax asset arising from book accrual of asset
retirement obligations                                                 | 7,720           
|Deferred tax asset arising from net operating loss
carryforwards                                                             | 209,516         
|Deferred tax asset arising from capital loss
carryforwards                                                                   | 164,048         
|Deferred tax liability arising from deferral of gain on
receipt of stock from demutualization of a life insurance company    | (5,173)         
|Deferred tax liability arising from using percentage
depletion for tax purposes in excess of cost depletion                  | (21,144)        
|Valuation allowance provided for net deferred tax
assets                                                                     | (396,905)       
|Deferred taxes receivable/(payable)                                                                                          | $        -      
|                                                                                                                             |                 
|Deferred tax liability from unrealized holding gain on
available for sale investments recorded as other comprehensive
income | $       
(2,458)
|                                                                                                                             |                 

### 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:  During the year ended
February 28, 2003, Intermountain received $198,845 from Red Hills Manufacturing
Inc., a New Mexico Corporation controlled by the current officers and two former
employees of Intermountain, representing the proceeds on the sale of a building
in February 2002.

Intermountain performs management and accounting services for
Red Hills on an ongoing basis. Fees received from Red Hills were $36,000 for the
year ended February 29, 2004 and $36,000 for the year ended February 28,
2003.

### 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.

### 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 2004 and $5,385 in 2003.

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

Intermountain's major industry segments are oil and natural
gas production and the leasing of asphalt product manufacturing and storage
facilities. 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:

<Page> 10-KSB
 30                          
 AR 27

#### Intermountain Refining Co., Inc.

#### Notes to Financial Statements -Continued

|                                                     | Years Ended   
|---------------------------------------------------- | --------------
|                                                     | February 28,  
|                                                     | 2003          
|Revenues                                             |               
|Asphalt product manufacturing and storage
facilities | $     155,217 
|Oil and natural gas
production                       | 379,222       
|Other                                                | 59,226        
|                                                     | $  
593,665   
|                                                     | Year Ended    
|                                                     | February 28,  
|                                                     | 2003          
|Operating Profit (Loss)                              |               
|Asphalt product manufacturing and storage
facilities | $  112,911    
|Oil and natural gas
production                       | 130,628       
|Electric generation                                  | -             
|Other                                                | (219,283)     
|                                                     | $   24,256    
|Identifiable Assets                                  |               
|Asphalt product manufacturing and storage
facilities | $       72,775
|Oil and natural gas
production                       | 314,120       
|Electric generation equipment available for
sale     | 515,000       
|Other                                                | 737,750       
|                                                     | $  1,639,645  
|Depreciation and Depletion                           |               
|Asphalt product manufacturing and storage
facilities | $      29,684 
|Oil and natural gas
production                       | 27,496        
|Electric generation                                  | -             
|Other                                                | 953           
|                                                     | $   
58,133   



Capital Expenditures - During the year ended February
28, 2003, Intermountain did not incur any capital expenditures. During the year
ended February 29, 2004, Intermountain capitalized a total of $69,630 associated
with its oil and natural gas production assets which included $50,105 for the
purchase of a working interest in oil producing properties in Nebraska and the
capitalization of $19,525 associated with a change in accounting for future
plugging and abandonment costs for oil and gas properties. See Note
N.

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
$576,000 for the year ended February 29, 2004, and $364,000 for the year ended
February 28, 2003. Intermountain leases its asphalt products manufacturing and
storage equipment to one customer. Equipment lease and fees revenues received
from the customers were approximately $172,000 for the year ended February 29,
2004 and $155,000 for the year ended February 28, 2003

### Note L - Oil and Gas Properties

Intermountain owns and operates certain proven and developed
natural gas reserves and related production equipment located in Southwestern
Kansas.  Intermountain owns a working interest in, but does not operate, certain
proven and developed oil reserves in Southwestern Nebraska. Intermountain has no
current plans to drill or complete any additional wells on the Kansas or
Nebraska leases or elsewhere.

<Page> 10-KSB
 31                          
 AR 28

#### Intermountain Refining Co., Inc.

#### Notes to Financial Statements -Continued

|Capitalized Costs:  Capitalized costs relating
to oil and gas producing activities are as follows at February 29,
2004:                                                
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Proved oil and 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                                                                                                                                                               
|Oil and natural gas
sales                                                                                                                                              
|Other                                                                                                                                                                  
|                                                                                                                                                                       
|Costs and Expenses                                                                                                                                                     
|Operating costs                                                                                                                                                        
|General and
administrative                                                                                                                                             
|Accretion of discount on future plugging and
abandonment costs                                                                                                         
|Depletion, depreciation and
amortization                                                                                                                               
|                                                                                                                                                                       
|Income before taxes                                                                                                                                                    
|Deferred income tax expense                                                                                                                                            
|Net income before cumulative effect of change in
accounting principle                                                                                                  
|Cumulative effect on prior years of change in accounting
for asset retirement obligations, net of income tax benefit of
$6,508                                         
|Net income                                                                                                                                                             

### Note M - Oil and 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 oil and gas reserves. Information for gas is presented in
million cubic feet (MMcf) except where otherwise indicated in thousand cubic
feet (Mcf). Information for oil is presented in barrels (Bbls).



|Production:  Intermountain's oil and 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)                                                                                                                                                                                                                                                                   
|                                                                                                                                                                                                                                                                                                  
|Net oil production (Bbls)                                                                                                                                                                                                                                                                         
|Average sales price ($/Bbl)                                                                                                                                                                                                                                                                       
|Average production cost ($/Bbl)                                                                                                                                                                                                                                                                   
|<Page> 10-KSB
 32                          
 AR 29
Intermountain Refining Co., Inc.
Notes to Financial Statements -Continued                                                                                                                                                                      
|Reserves:  Gas reserves as of February 29, 2004
are based on an independent reserve report prepared for Intermountain dated
January 1, 2004 updated with data developed internally by Intermountain. Oil
reserves as of February 29, 2004 are based on data developed internally by
Intermountain.
|                                                                                                                                                                                                                                                                                                  
|Estimated net quantities of proved developed and proved
undeveloped oil and gas reserves are as follows at February 29,
2004:                                                                                                                                                                     
|                                                                                                                                                                                                                                                                                                  
|Proved developed                                                                                                                                                                                                                                                                                  
|Proved undeveloped                                                                                                                                                                                                                                                                                
|                                                                                                                                                                                                                                                                                                  
|                                                                                                                                                                                                                                                                                                  
|Statement of Changes in Quantities of Proved Developed and
Undeveloped Oil and Gas Reserves for the years indicated are as
follows:                                                                                                                                                               
|                                                                                                                                                                                                                                                                                                  
|                                                                                                                                                                                                                                                                                                  
|                                                                                                                                                                                                                                                                                                  
|                                                                                                                                                                                                                                                                                                  
|Proved reserves - beginning of
year                                                                                                                                                                                                                                                               
|Acquisition of reserves                                                                                                                                                                                                                                                                           
|Adjustments to reserves                                                                                                                                                                                                                                                                           
|Production                                                                                                                                                                                                                                                                                        
|Proved reserves - end of period                                                                                                                                                                                                                                                                   
|                                                                                                                                                                                                                                                                                                  
|                                                                                                                                                                                                                                                                                                  
|                                                                                                                                                                                                                                                                                                  
|The Standardized Measure of Discounted Future Net Cash Flows
relating to Proved Oil and Gas Reserves are as follows at February 29,
2004:                                                                                                                                                         
|                                                                                                                                                                                                                                                                                                  
|Future cash inflows                                                                                                                                                                                                                                                                               
|Future production costs                                                                                                                                                                                                                                                                           
|Future plugging and abandonment 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                                                                                                                                                                                                                                                          
|Acquisition of reserves in place                                                                                                                                                                                                                                                                  
|Adjustment to reserves                                                                                                                                                                                                                                                                            
|Sales, net of production costs and income
taxes                                                                                                                                                                                                                                                   
|Changes in present value due to price and production
cost changes                                                                                                                                                                                                                                 
|(Including accretion of
discount)                                                                                                                                                                                                                                                                 
|Standardized measure - end of
period                                                                                                                                                                                                                                                              
|<Page> 10-KSB
 33                          
 AR 30
Intermountain Refining Co., Inc.
Notes to Financial Statements -Continued                                                                                                                                                                      
|Developed and Undeveloped Acreage:  The
following summarizes Intermountain's gross and net undeveloped and developed
acreage at February 29, 2004:                                                                                                                                                
|                                                                                                                                                                                                                                                                                                  
|Developed Acreage                                                                                                                                                                                                                                                                                 
|Kansas                                                                                                                                                                                                                                                                                            
|Nebraska                                                                                                                                                                                                                                                                                          
|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.                                                                                               
|                                                                                                                                                                                                                                                                                                  
|Other:  Intermountain held interests in the
following wells, none of which are multiple completion wells at February 29,
2004:                                                                                                                                                                    
|                                                                                                                                                                                                                                                                                                  
|Producing gas wells                                                                                                                                                                                                                                                                               
|Producing oil wells                                                                                                                                                                                                                                                                               
|                                                                                                                                                                                                                                                                                                  

### Note N - Asset Retirement Obligations

During the year ended February 29, 2004, Intermountain
implemented a change in accounting principle to comply with the Financial
Accounting Standards Board Statement No. 143 regarding accounting for legal
obligations associated with the retirement of long lived assets. Intermountain
has a legal obligation to incur plugging and abandonment costs associated with
its oil and gas operations in Kansas and Nebraska.

Changes in Intermountain's asset retirement obligations for
the year ended February 29, 2004 are as follows:



|Asset retirement obligation - beginning
of year                         | $         -
|----------------------------------------------------------------------- | -----------
|Implementation of change in accounting for asset
retirement obligations | 20,616     
|Acquisition of oil producing properties in
Nebraska                     | 12,922     
|Settlement of asset retirement obligations                              | -          
|Accretion of discount                                                   | 2,846      
|Asset retirement obligation - end of
period                             | $   36,384 
|                                                                        |            

Pro Forma changes in Intermountain's asset retirement
obligations for the periods indicated assuming the change in accounting
principle was made prior to March 1, 2002 are as follows:



|                                                    | For the years ended
|--------------------------------------------------- | -------------------
|                                                    | February 28,2003   
|Asset retirement obligation - beginning
of year     | $     18,993       
|Acquisition of oil producing properties in
Nebraska | -                  
|Accretion of discount                               | 1,623              
|Asset retirement obligation - end of
period         | $    20,616        
|                                                    |                    

The cumulative effect on prior years of the change in
accounting for asset retirement obligations recognized as of March 1, 2003
consisted of the following:



|Prior depletion of capitalized asset
retirement obligations of $6,603 | $     4,580
|--------------------------------------------------------------------- | -----------
|Prior accretion of discount on future retirement
obligations          | 14,013     
|Cumulative effect on prior years                                      | $  18,593  

(End of Integrated Annual Report to
Shareholders)

<Page> 10-KSB
 34                          
 AR 31

### 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 29, 2004.

### 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 20, 2004.

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 20,
2004William N. Hagler, Chairman of the Board
ofDirectors, and
President/s/ Rick
L. Hurt _____________________    Date: May 20,
2004Rick L. Hurt, Secretary, Treasurer, Director

<Page> 10-KSB 35

### 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 20, 2004_________________

/s/__Rick L. Hurt____________________

Rick L. Hurt, Secretary, Treasurer, Director

<Page> 10-KSB 36

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 20, 2004_______________

/s/__William N. Hagler_______________

William N. Hagler, President, Director

<Page> 10-KSB 37

### 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.





Date: May 20, 2004

/s/ William N. Hagler

William N. Hagler, President and Chief Executive Officer

<Page> 10-KSB 38

### 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.





Date: May 20, 2004

/s/ Rick L. Hurt

Rick L. Hurt, Treasurer and Chief Financial Officer

<Page> 10-KSB 39