===============================================================================

                     U.S. SECURITIES AND EXCHANGE COMMISSION

                                   FORM 10-QSB
            [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
                         SECURITIES EXCHANGE ACT OF 1934
                    For the fiscal year ended March 31, 1999
                                       or
          [ ] Transition Report Pursuant to Section 13 or 15(d) of the
                         Securities Exchange Act of 1934

                         Commission file number 0-18995

                         INTERLINE RESOURCES CORPORATION
        (Exact name of small business issuer as specified in its charter)


                     Utah                           87-0461653
               -----------------               --------------------
         (State or other jurisdiction of         (I.R.S. employer
          incorporation or organizatio          identification no.)


                  160 West Canyon Crest Road, Alpine, UT 84004
              -----------------------------------------------------
                    (Address of principal executive offices)

       Registrant's telephone number, including area code: (801) 756-3031
     ----------------------------------------------------------------------
      Securities registered pursuant to Section 12(b) of the Exchange Act:

                          Common Stock $.005 Par Value
                       ---------------------------------
                                 Title of Class


  Securities registered pursuant to Section 12(g) of the Exchange Act: None

     Issuer  (1) has filed all  reports  required  to be filed by  Section 13 or
15(d) of the  Exchange  Act of 1934 during the  preceding 12 months (or for such
shorter period that the  registrant was required to file such reports),  and (2)
has been subject to such filing requirements for the past 90 days. Yes X No____.

     Check if there is no disclosure of deliquent filers in response to Item 405
of Regulation S-B contained in this form,  and no disclosure  will be contained,
to the best of Issuer's knowledge, in difinitive proxy or information statements
incorporated  by reference  in Part III of this Form 10-KSB or any  amendment to
this Form 10-KSB. X

     As of May 15, 1999,  14,066,052  shares of the  Issuer's  common stock were
issued and outstanding,  9,169,826 of which were held by  non-affiliates.  As of
May 15, 1999, the aggregate market value of shares held by non-affiliates (based
upon the closing price) was  approximately  $550,190.  The Issuer's revenues for
the three months ending March 31, 1999 were $816,934.

     APPLICABLE  TO  REGISTRANTS  INVOLVED  IN  BANKRUPTCY   PROCEEDINGS  DURING
PRECEDING  FIVE YEARS.  Indicate by check whether the  Registrant  has filed all
documents  and  reports  required  to be file by  Section  12,13 or 15(d) of the
Securities  Exchange Act of 1934  subsequent to the  distribution  of securities
under a plan confirmed by a court. Yes X No____.


                  DOCUMENTS INCORPORATED BY REFERENCE: NONE

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<PAGE>

                                  FORM 10-QSB
                       INTERLINE RESOURCES CORPORATION

                              TABLE OF CONTENTS


PART I. - FINANCIAL INFORMATION

Item 1      Financial Statements                                         Page

            Condensed Consolidated Balance Sheet at
            March 31, 1999                                               5

            Condensed Consolidated Statement of Operations for the
            three ended March 31, 1999 and 1998                          7

            Condensed Consolidated Statements of Cash Flows for the
            three months ended March 31, 1999 and 1998                   8

            Notes to Condensed Consolidated Financial Statements        10

Item 2      Management's Discussion and Analysis of
            Financial Condition and Results of Operations               13


PART II. - OTHER INFORMATION

Item 1      Legal Proceedings                                           23

Item 2      Changes in the Securities                                   24

Item 3      Defaults Upon Senior Securities                             25

Item 4      Submission of Matters to a Vote of Security Holders         25

Item 5      Other Information                                           25

Item 6(a)   Exhibits                                                    25

Item 6(b)   Reports on Form 8-K                                         25

            Signatures                                                  26



                                       2

<PAGE>


                  FORWARD LOOKING INFORMATION AND RISK FACTORS


      Interline Resources Corporation (the "Company") or its representatives may
make forward looking statements,  oral or written,  including statements in this
report's Management's Discussion and Analysis of Financial Condition and Results
of  Operation,  press  release  and filings  with the  Securities  and  Exchange
Commission,  regarding  estimated future net revenues from  operations,  planned
capital expenditures  (including the amount and nature thereof),  the effects of
the Company's Bankruptcy proceeding, the Company's projected financial position,
results of  operations,  business  strategy and other plans and  objectives  for
future operations.  These statements are forward-looking statements,  within the
meaning of Section  27A of the  Securities  Act of 1993 and  Section  21E of the
Securities Exchange Act, which reflect  Management's  current views with respect
to future events and financial performance.

      Although the Company  believes  that the  expectations  reflected in these
forward looking  statements are  reasonable,  there can be no assurance that the
actual results or  developments  anticipated by the Company will be realized or,
even if substantially  realized, that they will have the expected effects on its
business or results of operations. Such forward-looking statements involve known
and unknown  risks,  uncertainties  and other factors which may cause the actual
results,  performance or achievements of the Company to be materially  different
from any future  results,  performance or  achievements  expressed or implied by
such forward-looking statements. Such factors include but are not limited to the
outcome of the Company's current Bankruptcy Proceeding, the timing and extent of
changes  in  commodity   prices,   unforeseen   engineering  and  mechanical  or
technological  difficulties in connection with the Company's business operations
and other risks.

      These  forward-looking   statements  are  subject  to  certain  risks  and
uncertainties  including,  but not limited to, future financial  performance and
future events,  competitive pricing for services,  costs of obtaining capital as
well as national,  regional and local economic conditions.  Actual results could
differ materially from those addressed in the forward-looking statements. Due to
such uncertainties and risks,  readers are cautioned not to place undue reliance
on such forward-looking statements, which speak only as of the date whereof.

     All subsequent oral and written forward-looking  statements attributable to
the Company or persons  acting on its behalf are  expressly  qualified  in their
entirety by these  factors.  The Company  assumes no obligation to update any of
these statements.




                                       3

<PAGE>


               INTERLINE RESOURCES CORPORATION AND SUBSIDIARIES

                               PART I - ITEM 1
                             FINANCIAL STATEMENTS
                                 (UNAUDITED)

                                March 31, 1999

      The  condensed  financial  statements  included  have been prepared by the
Company,  without audit, pursuant to the rules and regulations of the Securities
and Exchange  Commission.  Certain information and footnote disclosures normally
included in financial  statements prepared in accordance with generally accepted
accounting  principles have been condensed or omitted pursuant to such rules and
regulations,  although the Company believes that the disclosures are adequate to
make the  information  presented not misleading.  The Company  presumes that the
user of this interim financial information has read or has access to the audited
financial statements for the preceding fiscal year----and in that context,  this
disclosure  is  adequate  for a fair  presentation  of the  Company's  financial
position.

      In the opinion of the Company,  all adjustments  consisting of only normal
recurring  adjustments  as of March 31,  1999,  have been made.  The  results of
operations for the interim period are not necessarily  indicative of the results
to be expected for the entire year.

                                       4

<PAGE>


                         INTERLINE RESOURCES CORPORATION
                                AND SUBSIDIARIES

                      Condensed Consolidated Balance Sheet
                                   (Unaudited)



                                                   March 31,
                                                     1999
                                                 --------------

Assets

Current assets:
  Cash and cash equivalents                        $413,266
  Accounts receivable - trade                       400,338
  Inventories                                        45,391
  Note receivable - current portion                  20,000
  Other current assets                               33,536
                                               --------------
      Total current assets                          912,531

Property, plant and equipment                     6,294,695
Accumulated depreciation and depletion           (2,373,106)
                                               --------------

     Net property, plant & equipment              3,921,589

Note receivable                                      85,746
Technology and marketing rights                     821,430
                                               --------------
        Total assets                             $5,741,296
                                               ==============




     The accompanying notes are an integral part of these consolidated condensed
financial statements.





                                       5

<PAGE>





                         INTERLINE RESOURCES CORPORATION
                                AND SUBSIDIARIES

                      Condensed Consolidated Balance Sheet
                                   (Unaudited)

                                                       March 31,
                                                         1999
                                                   ---------------
Liabilities and Stockholders' Equity

Current liabilities:
  Accounts payable                                     $257,967
  Accrued liabilities                                   164,471
  Note payable, related party                           750,000
  Current portion of long-term debt                     163,597
                                                   ----------------
     Total current liabilities                        1,336,035
                                                   ----------------

Long-term debt less current maturities                  666,959
Note payable, related party                           2,850,000
Deferred income                                          50,166
                                                   ----------------
     Total liabilities                                4,903,160

Stockholders' equity:
  Preferred stock - $.01 par value. 25,000,000
     shares authorized; 1,000,000 series A shares
     authorized; 0 series A shares issued and o/s         -
  Common stock - $.005 par value. 100,000,000
     shares authorized; 14,066,052 shares
     outstanding at March 31, 1999                       70,330
  Additional paid-in capital                          9,209,058
  Retained earnings                                  (8,441,252)
                                                   ---------------
       Total stockholders' equity                       838,136
                                                   ---------------
       Total liabilities & stockholders' equity      $5,741,296
                                                   ===============

The  accompanying  notes are an integral  part of these  consolidated  condensed
financial statements.


                                       6

<PAGE>



                         INTERLINE RESOURCES CORPORATION
                                AND SUBSIDIARIES
                 Condensed Consolidated Statement of Operations
                                   (Unaudited)

                                                   Three months ended
                                                        March 31,
                                         ------------------------------------
                                                1999                  1998
                                         ------------------------------------
Revenue                                       $816,934              $897,570
Direct costs                                   534,212               670,878
                                         ------------------------------------
Gross margin                                   282,722               226,692

Selling, general and
   administrative expenses                     240,416               316,448
Research and development                        19,678                23,446
Depreciation, depletion and amortization       168,712               170,321
                                          ------------------------------------
 (Loss) from operations                       (146,084)             (283,523)

Other income (expense) net
  Interest income (expense)                    (14,226)              (10,086)
  Interest expense, related party              (63,000)              (88,475)
  Gain from sale of assets                      18,908                   -
                                          ------------------------------------

(Loss) before discontinued operations         (204,402)             (382,084)

Income (loss) from discontinued operations        -                     -
                                          ------------------------------------

Net (loss)                                   ($204,402)            ($382,084)
                                          ====================================
Earning per share
  Loss from continuing operations               ($0.01)               ($0.03)
  Income (loss) from discontinued                $0.00                 $0.00
     operations
                                          ------------------------------------
   (Loss) per common share:                     ($0.01)               ($0.03)
                                          ====================================
Weighted average shares o/s                 14,066,052            14,066,052
                                          ====================================

The  accompanying  notes are an integral  part of these  consolidated  condensed
financial statements.

                                       7

<PAGE>



                       INTERLINE RESOURCES CORPORATION
                               AND SUBSIDIARIES
                Condensed Consolidated Statement of Cash Flows
                                 (Unaudited)

<TABLE>
<CAPTION>
                                                                   Three months ended
                                                                        March 31,
                                                         ------------------------------------
                                                              1999                   1998
                                                         ------------------------------------
<S>                                                         <C>                   <C>
Cash flows from operating activities:
  Net  income (loss)                                        (204,402)             (382,084)
  Adjustment to reconcile net income (loss) to net
    cash (used in) provided by operating activities:
  Depreciation, depletion and amortization                   132,998               170,321
  Gain on disposal of asset                                  (18,908)                 -
  Common Stock issued for services                              -                   24,000
  (Increase) decrease in:
     Accounts receivable                                    (130,618)               (5,554)
     Inventories                                               9,834                (1,170)
     Other current assets                                    (13,041)                3,896
     Note receivable                                           3,975                   -
  Increase (decrease) in:
     Accounts payable                                       (109,200)               50,250
     Accrued liabilities                                     (25,504)             (780,972)
     Other current liabilities                                   -                  88,474
     Deferred income                                          (1,888)                  -
                                                         ------------------------------------


      Net cash (used) by operating activities               (356,754)             (832,839)

Cash flows from investing activities:
  Proceeds from sale of equipment                              3,000                  -
  Proceeds from sale of joint venture                           -                     -
  Purchase of intangible assets                                 -                     -
  Net assets of discontinued operations                         -                   74,799
  Purchase of property, plant & equipment                    (46,410)              (21,948)
                                                         ------------------------------------

  Net cash provided (used in) investing activities           (43,410)               52,851

</TABLE>


The  accompanying  notes are an integral  part of these  consolidated  condensed
financial statements.

                                       8

<PAGE>






                       INTERLINE RESOURCES CORPORATION
                               AND SUBSIDIARIES
                Condensed Consolidated Statement of Cash Flows
                                 (Unaudited)

                                                  Three months ended
                                                       March 31,
                                          ------------------------------------
                                                   1999              1998
                                          ------------------------------------
Cash flows from financing activities:
  Proceeds from debt obligations                  76,280               -
  Payment on long-term debt                      (25,309)          (27,555)
                                          ------------------------------------

  Net cash provided (used) by financing           50,971           (27,555)
      activities                          ------------------------------------

Net increase (decrease) in cash                 (349,193)         (807,543)

Cash, beginning of year                          762,459         1,153,199
                                          ------------------------------------

Cash,  end of  quarter                           413,266           345,656
                                          ====================================



The  accompanying  notes are an integral  part of these  consolidated  condensed
financial statements.



                                       9

<PAGE>


               INTERLINE RESOURCES CORPORATION AND SUBSIDIARIES
                  Notes to Consolidated Financial Statements

Oil and Gas Accounting
      The Company uses the  "successful  efforts"  method to account for oil and
gas operations.  The use of this method results in the  capitalization  of costs
related to acquisition, exploration and development of revenue producing oil and
gas properties.  The costs of unsuccessful  exploration  efforts are expensed in
the  period in which  they are  determined  unrecoverable  by  future  revenues.
Provision for  depreciation  and depletion of oil and gas properties is based on
the units of production method, based on proven oil and gas reserves.

      Segment   information   concerning   oil  and  gas  reserves  and  related
disclosures  are not presented since they are not significant in relation to the
financial statements taken as a whole.


Construction Accounting
      Construction  revenues  are  recognized  on  the  percentage-of-completion
method  of  accounting.  Profits  on  contracts  are  recorded  on the  basis of
"cost-to-cost"   determination   of   percentage  of  completion  on  individual
contracts,  commencing  when  progress  reaches a point where cost and  estimate
analysis and other  evidence of trend are  sufficient to estimate  final results
with  reasonable  accuracy.  That portion of the total  contract  price which is
allocable  to contract  expenditure  incurred  and work  performed is accrued as
earned income. At the time a loss on a contract becomes known, the entire amount
of the estimated  ultimate loss is accrued.  Claims for  additional  revenue are
recognized when settled. The aggregate of cost incurred and income recognized on
uncompleted contracts in excess of related billings is shown as a current asset,
and the  aggregate  of billings on  uncompleted  contracts  in excess of related
costs incurred and income recognized is shown as a current liability.


Cash Equivalents
      For purposes of the  consolidated  statement of cash flows,  cash includes
all cash and investments with original maturities to the Company of three months
or less.


Inventories
      Inventories consisting of supplies and miscellaneous material are recorded
in the  financial  statements  at  their  aggregate  lower  of  cost  (first-in,
first-out) or market.

                                       10

<PAGE>



               INTERLINE RESOURCES CORPORATION AND SUBSIDIARIES
            Notes to Consolidated Financial Statements (Continued)


Investments
      Investments  in less than majority  owned entities are accounted for using
the equity method.  Investments are included in the financial  statements  under
the caption of "Other Assets."


Property, Plant and Equipment 
      Property,  plant  and  equipment  are  carried  at cost.  Depreciation  is
computed using straight-line and accelerated methods. When assets are retired or
otherwise disposed of, the cost and related accumulated depreciation are removed
from the accounts,  and any  resulting  gain or loss is recognized as income for
the  period.  The cost of  maintenance  and  repairs  is  charged  to  income as
incurred;  significant renewals and betterments are capitalized.  Deductions are
made for  retirements  resulting  from  renewals or  betterments.  The estimated
useful lives are as follows:

      Building and equipment  15-25 years
      Equipment and vehicles  3-10 years

Amortization
      The Company has amortized its marketing and technology rights for the used
oil refining process over seventeen years. This period  approximates the assets'
useful lives.

Contingencies
      During 1996, the Company  entered into an agreement to sell certain assets
of the Company. As part of this agreement,  the Company also agreed to guarantee
a note payable  between the purchaser and a third party.  At March 31, 1999, the
remaining liability on the note was approximately $83,465.

      The Company has  executed  license  agreements  with  licensees to utilize
Interlines used oil technology which includes technology received from Petroleum
System,  Inc.  ("PSI") through an assignment  agreement of certain patent rights
(PSI technology). Under the assignment agreement the Company is obligated to pay
royalties to PSI for those Interline plants using PSI technology.

      The Company has now developed a new technology  which does not utilize PSI
technology. As a result, on September 10, 1998 the Company reassigned all of the
intellectual rights it obtained from PSI under the assignment agreement, back to
PSI. The only plants that utilize the PSI  technology  are the Dubai Plant which
has been shut down and essentially  abandoned,  the Genesis Plant which has been
shut  down  and no  longer  operates,  and the  England  Plant  which  currently
operates.  Under the terms of the assignment agreement, the Company is obligated
to assign all royalties  payable from plants  utilizing PSI  technology  back to
PSI. The Company did so on September 10, 1998.

                                       11

<PAGE>



               INTERLINE RESOURCES CORPORATION AND SUBSIDIARIES
            Notes to Consolidated Financial Statements (Continued)


     PSI has made other claims  against the Company  which are described in Part
II, Item 1. Legal Proceeding.

      In April of 1997,  the Company sold its 40% interest in the England  Plant
joint venture to John Wheland for $500,000.  John Wheland has only paid $200,000
of the  purchase  price  and while  the  Company  has  demanded  payment  of the
remaining  purchase  price the  payment  remains in  dispute.  Additionally,  in
connection  with the sale of the  Company"  interest in the joint  venture,  the
joint venture was to pay the Company $100,000 for certain  construction  charges
and services it performed on the England  Plant.  The joint venture has not made
this payment,  and its payment is in dispute.  While the Company believes that a
settlement of the disputed payments is likely, there can be no assurance that an
agreement  will be  reached.  In such an event  the  Company  will  seek a legal
remedy. The Company's financial  statements reflect a doubtful allowance reserve
to cover this money due.


Profit Sharing Plan
      During 1995, the Company commenced a defined contribution retirement plan,
which qualifies under code section 401(k), for all eligible employees. Employees
who work at least 1,000 hours  during a year and are over age 21 are eligible to
participate.  Employees  may  contribute  up to fifteen  percent of their annual
compensation subject to regulatory  limitations.  The Company also contributes a
discretionary amount on behalf of the participating  employees. The Company made
contributions  of $463 and $316 for the three  months  ended  March 31, 1999 and
1998, respectively.


Reclassification
      Certain  amounts  in  the  prior  years  financial  statements  have  been
reclassified to conform to the September 30, 1998 presentation.


Going Concern 
      The Company has sustained  significant  operating losses in 1998 and 1997,
and it has taken longer than  projected to bring the  re-refining  technology to
economic  viability.  This has caused the  Company  to incur more  research  and
development costs than originally projected.  In addition,  the Company filed on
September 26, 1997, a voluntary petition for relief under Chapter 11 of the U.S.
Bankruptcy  Code.  On September  10, 1998,  the  bankruptcy  court  approved the
Company's plan.  Under terms of the confirmed  plan,  certain  obligations  were
restructured.  It is not  known  if  the  Company  will  be  able  to  meet  its
obligations  under the confirmed plan. These factors create an uncertainty about
the Company's ability to continue as a going concern.

      The  Company  has made  continuous  efforts to  negotiate  settlements  to
satisfy claims,  obligations and to obtain profitable operations. The ability of
the  Company  to  continue  as a  going  concern  is  dependent  on the  Company
generating  cash from the sale of technology,  and attaining  future  profitable
operations.  The consolidated financial statements do not include any adjustment
that might be necessary if the Company is unable to continue as a going concern.


                                       12

<PAGE>

                                PART 1 - ITEM 2

                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS

General

      The Company is a Utah corporation with its principal and executive offices
located at 160 West Canyon  Crest Road,  Utah 84004  (801)  756-3031.  Interline
Resources  Corporation (the "Company"),  a Utah  corporation,  is engaged in two
areas  of  business,   each  operating  as  separate   subsidiaries:   Interline
Hydrocarbon Inc., a Wyoming corporation, which commercializes the Company's used
oil  refining  technology;  and  Interline  Energy  Services,  Inc.,  a  Wyoming
corporation,  which  manages the  Company's  oil and gas  operations  located in
Wyoming.

      The Company has invested substantial resources  commercializing a used oil
refining technology and has signed license agreements with companies in England,
South Korea,  Dubia,  Australia and Spain. The Company's first used oil refinery
was  constructed  in Salt Lake City,  Utah in 1996.  The  Company's  oil and gas
operations   consist  of  natural  gas   gathering,   natural  gas   processing,
transportation and oil well production all located in Wyoming.

      On September  26, 1997,  the Company  filed a Petition for  Reorganization
under Chapter 11 (the  "Petition")  of the United States  Bankruptcy  Code.  The
Company continued its operations as a debtor-in-possession  under the Bankruptcy
Code.  The Company's  subsidiaries  did not join the Company in the Petition and
were not directly involved in the Bankruptcy Reorganization Proceeding.

      On  June  18,  1998,  the  Company  filed  a Plan  of  Reorganization  and
Disclosure  Statement  to the  Plan of  Reorganization  with the  United  States
Bankruptcy Court for the District of Utah,  Central Division.  On July 14, 1998,
the Company's Plan of  Reorganization  and  Disclosure  Statement to the Plan of
Reorganization  was approved and  circulation  thereof  authorized by the United
States Bankruptcy Court for the District of Utah, Central Division.

      On September  10, 1998,  the plan of  reorganization  under  Chapter 11 of
Interline  Resources  Corporation was confirmed by the United States  Bankruptcy
Court for the District of Utah.  As a result,  restraints  on the  activities of
Interline  imposed by the Bankruptcy code have been removed.  Interline  reached
agreement  with its major  creditor  during the Chapter 11 case and the terms of
the  agreement  (See Part 1 - Item 2 -  Liquidity  and Capital  Resources)  were
incorporated in the plan. All other creditors were paid in full under the plan.

      The Company's  current  operating  subsidiaries  are (1) Interline  Energy
Services,  Inc.("Interline  Energy") a Wyoming  corporation  which  manages  the
Company's  oil  and  gas  operations   located  in  Wyoming  and  (2)  Interline
Hydrocarbons,  Inc. ("Interline  Hydrocarbons") a Wyoming corporation which owns
and operates the Company's used oil refining technology.



                                       13

<PAGE>



Interline Energy Service - Oil and Gas Operations  

      The Company has been engaged in the oil and gas industry  since 1990.  Its
oil and gas operations  primarily  involve  natural gas  gathering,  natural gas
processing,  a crude  oil  pipeline  operation,  and oil  well  production.  The
Company's  main oil and gas  operations  are  located in  east-central  Wyoming.
Wyoming operations, located near Douglas, include the Well Draw Gas Plant ("Well
Draw"),  a  crude  gathering   pipeline,   a  20.4%  interest  in  the  Hatcreek
Partnership, NGL trucking and four producing oil and gas wells.

Well Draw Gas Plant 
      Well Draw, located near Douglas,  Wyoming, is a natural gas liquids (NGLs)
processing plant which has the capacity to process  approximately 150,000 gallon
of NGLs each day. The Company buys mixed liquids from several  different plants,
transports them to Well Draw,  fractionates the liquids into commercial propane,
butane, and natural gasoline, and re-markets these products for its own account.
Additionally,  the Company enters into agreements for  fractionation  of liquids
from others on a fee basis.  Most of the liquids originate from liquids that are
trucked into the plant from outside sources.  The liquids are then processed and
fractionated  into  commercial  propane,   butane,  and  natural  gasoline,  and
re-marketed into the local market. As part of the plant system, the Company owns
a gathering  pipeline system. The gathering system is connected to the Well Draw
Gas Plant and supplies a small  percentage  of liquids for the plant.  The plant
processed  and  fractionated  a total of  100,007  gallons a day of NGLs for the
three months ended March 31, 1999 compared to 78,100 gallons a day for the three
months ended March 31, 1998. Of the total gallons  fractionated  and  processed,
9,228 gallons per day was for the Company and 90,779 gallons per day for others,
as compared to 9,039 and 69,061 gallons per day respectively in 1998.

Amoco Contract 
      During  1994,  the Company  entered  into a six year  contract  with Amoco
Production  Company to process  NGLs.  The agreement  expires June 1, 2000.  The
Amoco  agreement  is the largest  liquids  contract the Company has entered into
since it purchased the Plant in 1990. To fulfill the contract,  the Company made
modifications  to the Well Draw Gas Plant to increase  its  processing  capacity
from about  90,000 to  approximately  150,000  gallons per day. The Company also
constructed an amine treating unit to reduce sulfur  concentrations  of the NGLs
at Amoco's Bairoil, Wyoming plant where the NGLs are collected. During the three
months ended March 31, 1999, the Company  processed an average of 50,182 gallons
per day of NGLs under the Amoco contract compared to 47,198 for the three months
ended March 31, 1998. The Amoco agreement accounted for 50.17% of the total NGLs
processed  by the Plant for the three  months  ended March 31, 1999  compared to
60.43% for the three months ended March 31, 1998.

      Most of the revenue  earned at the Well Draw Gas Plant is derived from the
Amoco agreement.  The Amoco agreement expires June 1, 2000 and if this agreement
is not renewed it will have a  substantial  impact on the ability of the Company
to continue operations.


                                       14

<PAGE>



KN Gas Gathering Agreement 
      During the first  quarter of 1998,  the Company  entered  into a agreement
with KN Gas Gathering,  Inc. ("KNGG") to process NGLs on a month to month basis.
During the three months ended March 31, 1999 the Company processed an average of
40,599 gallons per day of NGLs under this agreement compared to 20,000 gallons a
day for the three months ended March 31, 1998. The KNGG agreement  accounted for
40.6% of the total NGLs  processed by the plant for the three months ended March
31, 1999  compared to 25.61% for the three months  ended March 31, 1998.  In the
past,  the local market for NGLs has weakened  during the warm months and liquid
prices  decline.  In April 1999,  due to lower NGLs prices in the local  market,
KNGG reduce the amount of NGLs  delivered to the plant to  approximately  10,000
gallons a day.

Conoco Pipeline 
      The Conoco Pipeline, purchased by the Company from Conoco Pipeline Company
in  January  of 1995 is a 180 mile  crude  gathering  and  trunk  pipeline  with
associated pumping stations and storage tanks. The pipeline  transports oil from
oil producing fields in Converse County, Wyoming to Conoco's Lance Creek Station
where it connects  with an  interstate  crude oil pipeline  system.  The Company
receives   revenues  from  operation  of  the  Conoco  Pipeline  by  charging  a
transportation  fee. The pipeline  gathered and  transported  45,041  barrels of
crude during the three months ended March 31, 1999 compared to 67,045 during the
three months ended March 31, 1998.

Hat Creek Partnership 
      The  Hat  Creek  Partnership,  of  which  Interline  Energy  owns a  20.4%
interest,  owns  working  interests  in two  oil  and  gas  wells  and a 13 mile
gathering line  interconnected  to the Well Draw Gas Plant. The Company receives
revenues from the sale of oil and gas from the oil wells.

Oil Well Production 
      The  Company  owns  working  interests  in four wells  located in Converse
County,  Wyoming.  The Company is also the operator of these  wells.  During the
three months ended March 31, 1999 the wells produced  approximately1,358 barrels
of oil and 3,016 Mcf of natural gas compared to  approximately  2,125 barrels of
oil and 4,031 Mcf of natural gas for the three months ended March 31, 1998.

NGL Transportation Operation 
      The Company's NGL  transportation  operation  transported  approximately 9
million gallons of raw and finished products during the three months ended March
31, 1999. The Company  operates five  tractor-trailer-pup  combination  units to
move unprocessed natural gas liquids to Well Draw for fractionation, and then to
take propane,  butane,  and natural gasoline from Well Draw to various refiners,
chemical  plants,  and  end-users.  When time  permits,  these  trucks also move
liquids on a common  carrier  basis for third  parties.  The Company  intends to
continue to emphasize this profitable  business  segment,  and believes that our
reputation  for  flexibility  and  customer  service  will allow us to  maximize
opportunities.

      Management  is  unaware of any  significant  future  capital  expenditures
except for the  addition  to the office  and  control  room at the Well Draw Gas
Plant The total cost of this addition will be  approximately  $60,000.  However,
the very nature of equipment operation, including the wear and

                                       15

<PAGE>



tear and replacement in this type of operation, can be significant.  Further, it
is noted that most of the  revenues  earned by the Well Draw  Plant are  derived
from the Amoco  contract  which will expire in June 1, 2000. If this contract is
not renewed,  it will have a substantial  impact on the ability of the Well Draw
plant to continue operations. Management continues to seek other liquids and gas
connections  to expand and diversify its  operations  in Wyoming,  however,  its
operations are in a limited and well defined area and expansion is difficult.


Interline Hydrocarbon - Used Oil Refining  

     Revenues to the  Company,  from its used oil refining  technology  can come
from five  sources:  1)  profits  made from  constructing  used oil  plants,  2)
granting  exclusive  territories to licensee,  3) receiving  royalties  based on
either  production  or a  flat  yearly  licensing  fee,  4)  taking  partnership
interests in  operating  Plants by either  contributing  the  technology  and/or
making cash  contributions  for partnership  interests and, 5) rather than build
plants,  sell the construction  plans and provide  consultation and expertise so
the customer can then build the Plant.

      Based on the experiences  with the five Plants that have been built by the
Company,  management's  current  feelings  are to  not  be in  the  construction
business.  Further, until the Company gets in better financial condition,  it is
not in a position to take  interests in operating  Plants.  Management  believes
that  the  best  way for it to  capitalize  on the  technology  is to  sell  the
construction  plans  for a  Plant  and  provide  consultation  services  to  the
purchaser.

      On June 10, 1998 the Company signed an engineering and marketing agreement
with Ecolube,  S.A., a subsidiary of Sener Engineering of Madrid,  Spain.  Under
the agreement, the Company provided Ecolube with engineering  specifications and
construction  drawings  for the  building  of a 24,000  gallon per day waste oil
re-refinery.  The plant will be located in Madrid,  Spain.  Under the agreement,
Ecolube will  construct  and operate the plant and produce  lubricant  base oil.
Interline will receive a $534,000  engineering and licensing payment and receive
a running  royalty of $0.0175 on each gallon  produced and sold for 10 years. As
of March 31, 1999, the Company has recorded revenues of $350,000 of the $534,000
based on meeting  certain  criteria  in the  contract.  Ecolube has the right to
build additional plants in the Iberian Peninsula (Spain and Portugal) for a four
year period commencing from the date of plant start up.

      It has also become evident to management that demanding royalties based on
production in many  situations and countries is difficult.  Unless and until the
rerefined  oil produced in a Plant can be sold at higher values based on pricing
similar to base  lubricating  oils,  on-going  royalties  based on production is
difficult to obtain. The most viable opportunities management has discovered are
in countries that have governmental concessions resulting in economic incentives
for  collecting  and  processing  used oil.  This  reality has been seen in both
Korea,  where the royalty was terminated for the first plant, and England where,
as described in previous  filings,  the  royalties  were reduced and not payable
until profitable.

                                       16

<PAGE>



      Management  still believes that there exists  economic  justification  and
interest in the technology. The Company continues to improve the technology, and
on May 28, 1998 filed a patent  application  in the United  States Patent Office
for a new and  alternative  method from the PSI technology  for processing  used
oil. This new  technology  has been  implemented  in the Korean,  Australian and
Spanish  Plants.  While  management  continues  to receive  inquiries  about the
technology,   the  Company  is  selective  as  to  potential  purchasers.   From
experience, management is aware of the complicated nature between the balance of
supply  and  demand.   Management   has  become  much  more   selective  in  its
consideration  of selling the  technology to  prospective  purchasers and unless
favorable conditions exist the Company discourages the purchaser. Management has
become  much more  active in  helping  potential  customers  evaluate  their end
product sales markets.

Results of Operations  

      The  following  analysis  of  the  financial   condition  and  results  of
operations should be read in conjunction with the Financial Statements and Notes
thereto, included elsewhere in this report.

Total Revenues
      Revenues  decreased  $80,636 or 8.98%,  to $816,934  for the three  months
ended March 31, 1999 as compared to $897,570  for the three  months  ended March
31, 1998. The revenue decrease included a $31,949 or 4.07%,  increase in oil and
gas revenues; a $103,885,  or 100% decrease in used oil refining revenues and an
$8,700  decrease in other revenues.  The Company's total revenues,  on a segment
basis, for the three months ended March 31, 1999 and 1998 were as follows:


           Revenues For Three Months Ended March 31, 1999 and 1998 

                            1999            %           1998             %
------------------------------------------------------------------------------


Oil and Gas               $816,934         100%       $784,985        87.46%
Used Oil refining             0              0%        103,885        11.57%
Other                         0              0%          8,700          .97%
------------------------------------------------------------------------------

Total Revenue             $816,934         100%       $897,570          100%


Oil and Gas Revenues 
      Oil and gas  revenues  contributed  100% of total  revenues  for the three
months ended March 31, 1999, as compared to  approximately  87.46% for the three
months ended March 31, 1998.  Revenues  increased  $31,949 or 11.57% to $816,934
for the three  months ended March 31, 1999 as compared to $784,985 for the three
months ended March 31, 1998.

      During the three months ended March 31, 1999 revenues  increased  $31,949,
or 4.07%.  This revenue increase was mainly  attributed to a $82,267,  or 37.42%
increase in fractionation  fees, a $45,989, or 13.58% increase in transportation
fees, offset by a $58,634, or 28.34% decrease in
                                       17

<PAGE>



liquids  (NGLs)  sold to the local  market  under the  account  of the  Company.
Because of low oil prices during the three months  ending March 31, 1999,  crude
oil tariffs fees decreased by $15,276 and crude oil sold decreased by $20,154.

      The  increase  in  fractionation  and   transportation   fees  was  mainly
attributed  to the Company's  agreement  with KNGG to process NGLs at Well Draw.
During the three months ended March 31, 1999 the Company processed an average of
40,599 gallons per day of NGLs under this agreement compared to 20,000 gallons a
day for the three months ended March 31, 1998. In the past, the local market for
NGLs has weakened  during the warm months and liquid  prices  decline.  In April
1999,  due to lower NGLs prices in the local  market,  KNGG reduce the amount of
NGLs delivered to the plant to approximately 10,000 gallons a day.

      The  Company's  Oil & Gas  Operations  revenue for the three  months ended
March 31, 1999 and 1998 were as follows:

   Oil & Gas Operations Revenue For Three Months Ended March 31, 1999 and 1998

                              1999          %          1998            %
------------------------------------------------------------------------------


Liquids (NGL) Sold          $199,853      24.46%     $258,487        32.93%
Fractionation Fees           219,824      26.91%      137,557        17.52%
Transportation Fees          338,752      41.47%      292,763        37.30%
Crude Tariff Fees             33,556       4.11%       48,832         6.22%
Crude Oil Sold                 9,925       1.21%       30,079         3.83%
Residue Gas Sold               9,571       1.17%        7,764          .98%
Other                          5,453        .67%        9,503         1.22%
------------------------------------------------------------------------------

Total Revenue               $816,934        100%     $784,985          100%
==============================================================================


Used Oil Refining Revenues 
      Since it  commenced  operations  in the used oil  refining  business,  the
Company has primarily derived revenues attributed to fees for engineering, plant
design,  license,  exclusively or other services  associated  with the Company's
used oil refining  technology.  The revenue  attributed to the used oil refining
business varies  significantly  from quarter to quarter reflecting the status of
the Company's fees and plant design services.

      Used oil refining revenues  contributed 0% of total revenues for the three
months ended March 31, 1999  compared to 11.57% for the three months ended March
31, 1998. The revenues decreased $103,885, or 100%, to $-0- for the three months
ended March 31, 1999  compared to $103,885  for the three months ended March 31,
1998.  The  $103,885  revenue for three  months  ended March 31, 1998 was mainly
derived from the Australian refinery contract. For the three months


                                       18

<PAGE>



ended  March  31,  1999,  the  Company  received  no  revenues  relating  to the
engineering  and licensing  agreement with Ecolube,  S.A., a subsidiary of Sener
Engineering  of Madrid,  Spain.  Under the Ecolube  agreement,  the Company will
receive a total engineering and licensing  payment of $534,000.  As of March 31,
1999,  the Company has received  $350,000 from Ecolube which was all reported in
1998.  During  the three  months  ended  March 31,  1999 and 1998,  the  Company
received no revenues for royalties for it used oil technology.

Direct Costs
      Direct  costs  decreased  $136,666 or 20.37%,  to  $534,212  for the three
months  ended March 31, 1999  compared to $670,878  for the three  months  ended
March 31, 1998. As a percent of revenues,  direct costs  decreased to 65.39% for
the three  months  ended March 31, 1999  compared to 74.74% for the three months
ended March 31, 1998.  The decrease of $136,666 for the three months ended March
31, 1999 was mainly  attributed to the Company's focus to increase cash flows by
increasing  margins as it relates to its  liquid  purchase  contracts,  reducing
operational personnel and reducing operational expenses.

Selling, General and Administrative
      Selling, general and administrative expenses decreased $76,032, or 24.03%,
to $240,416 for the three  months ended March 31, 1999  compared to $316,448 for
the three months March 31, 1998. As a percent of revenues,  selling, general and
administrative  expenses  were 29.43% for the three  months ended March 31, 1999
compared to 35.26% for the three months ended March 31, 1998.  During 1998,  the
Company's management developed a plan to increase cash flow and reduce expenses.
Part of the plan included a reduction of personnel,  including  both  management
and  operations  personnel.  During the three  months  ended  March 31, 1999 the
Company decrease wages by $26,089,  or 26.87% to $71,014 compared to $97,103 for
three months ended March 31, 1998. The Company also decreased legal,  accounting
and outside  contract  services  by $42,133,  or 49.66% to $42,712 for the three
months ended March 31, 1999 compared to $84,845 for the three months ended March
31,  1998.  These  services  were  mainly  attributed  to  the  Company's  legal
proceedings, patent protection, auditing fees and bankruptcy filing.

Depreciation and Amortization
      Depreciation  and  amortization  expenses  decreased  $1,609  or  .94%  to
$168,712 for the three months ended March 31, 1999  compared to $170,321 for the
three months ended March 31, 1998.  As a percent of revenues,  depreciation  and
amortization  expenses  increased to 20.65% for the three months ended March 31,
1999 compared to 18.98% for the three months ended March 31, 1998.

Research and Development
      Research and development  expenses decreased $3,768, or 16.07%, to $19,678
for the three  months  ended  March 31,  1999  compared to $23,446 for the three
months ended March 31, 1998. As a percent of revenues,  research and development
expenses  increased to 2.41% for the three months ended March 31, 1999  compared
to 2.61% for the three months ended March 31, 1998.
      Research  and  development   expenses  were  mainly  attributable  to  the
development and enhancement of the Company's used oil refining  technology.  The
Company will continue to incur research and development expenses as it continues
to develop its used oil refining technology.


                                       19

<PAGE>



(Loss) from operations
      Loss from operations  decreased  $137,439,  or 48.48%, to $146,084 for the
three  months  ended  March 31, 1999  compared to a $283,523  loss for the three
months ended March 31, 1998. The $137,439  decrease in loss from  operations was
mainly  attributed to an increase in gross margin of $140,796 from the Company's
focus  on  increasing  margins  as it  relates  to  liquid  contracts.  Also the
Company's selling,  general and administrative expenses decreased by $76,032, or
24.03%, which was mainly attributed to decrease in wages, legal,  accounting and
outside contract services

Other income (expenses)
      Net interest income (expense)  increased $4,140, or 41.05%, to $14,226 for
the three  months  ended March 31, 1999  compared to $10,086 for the three month
ended March 31, 1998.  The net increase was mainly  attributed  to a decrease in
interest earned on the Company's money market and interest bearing accounts.

      Interest  expense to a related  party  decreased  $25,475  or  28.79%,  to
$63,000 for the three  months  ended March 31, 1999  compared to $88,475 for the
three months ended March 31, 1998. This $25,475  decrease in interest expense to
a related party was attributed to the Company's new note  agreement.  As part of
the plan of  reorganization  under  Chapter 11 the  Company  executed a new note
agreement for $3,600,000.  The new note agreement bears interest at 7% per annum
compared to the old note agreements of 16%.


Liquidity and Capital Resources

      Sources  of  liquidity  for the  Company  are  revenues  from  oil and gas
operations and revenues from the sale of its  hydrocarbon  refining  technology.
Currently,  the only consistent  ongoing revenue sources to the Company are from
its oil and gas operations in Wyoming.  The Company  receives  revenues from its
used oil  refining  technology  when a sale or  license  is  executed.  On-going
royalty fees will be received  only from the  Australia  Plant,  and the Spanish
Plant,  when  constructed and operational.  While the Company  continues to work
with potential  purchasers of its technology,  such sales and expected  revenues
are uncertain and unpredictable.

      On  September 9, 1998,  the plan of  reorganization  under  Chapter 11 was
confirmed by the United States  Bankruptcy  Court for the District of Utah.  The
Company  reached an agreement with its major creditor during the Chapter 11 case
and the terms of the agreement were  incorporated  in the plan. The terms of the
agreement  included  a  new  trust  deed  note  dated  September  22,  1998  for
$3,600,000,  together  with  interest  at the rate of 7% per annum on the unpaid
principal.  The Company  will make  quarterly  payments of all accrued  interest
beginning on December 22, 1998 and  continuing  until  September  22, 2002.  The
Company will also make  principal  payments of $750,000 on  September  22, 1999;
$1,000,000 on September 22, 2000; $1,000,000 on September 22, 2001; and $850,000
on September  22, 2002.  The note is protected  with Trust Deeds which include a
security  interest in the Company's Alpine office located in Alpine,  Utah and a
security  interest in all assets of Interline Energy Service,  Inc. As obligated
in the previous  agreements,  the Company  executed a new Pledge  Agreement with
this major creditor  pledging stock of the Company and stock of all subsidiaries
of the Company.

                                       20

<PAGE>



      At the time the plan was confirmed, management believed the Company's cash
from the oil and gas  operating  activities,  cash received from the sale of its
hydrocarbon refining technology, and cash retained under the reorganization plan
would be adequate to meet its operating needs and would also provide enough cash
to meet debt  obligations.  Assumptions where made in the plan of reorganization
that the  Company  would  receive  cash from the  marketing  of its  hydrocarbon
refining  technology.  Since  September 10, 1998,  when the Bankruptcy  Plan was
confirmed,  the  Company  has not  receive  any cash  from the  marketing  of it
refining technology.

      As of May 15, 1999, the Company is current on all interest payments due to
its major creditor under the new trust agreement.  On June 22, 1999, the Company
is obligated to make the next quarterly  interest payment of $62,000.  Under the
new trust deed note (see new terms of trust deed above),  on September 22, 1999,
the Company is obligated to pay this major  creditor  $812,000 which consists of
$750,000 of principal and $62,000 of interest.  Based on the  Company's  current
cash position and  anticipated  future cash flow, the Company could be forced to
cease  operations  and liquidate the assets of the Company.  This could occur if
the  Company  is  unable  to  receive  cash from the  marketing  of it  refining
technology or raise  additional  funding through equity or the sale of assets. A
merger could also be a viable option.

      Management has put strict  restraints on all capital  expenditures.  There
are necessary  disbursements  to maintain current  operations.  The Company will
continue to incur research and development  costs as it continues to develop its
refining technology.  At present these activities are being performed by current
Company employees and part time contract consultants.

      The  Company's  net cash used by  operations  was  $356,754  for the three
months ended March 31, 1999  compared to net cash used by operations of $832,839
for the  three  months  ended  March  31,  1998.  Of the  $832,839  cash used in
operations for the three months ended March 31, 1998, $750,000 was attributed to
an one time payment to Genesis Petroleum,  Inc. to settle all claims (See Item 1
- Legal Proceeding).  Without the one time payment to Genesis  Petroleum,  Inc.,
cash used in continuing operations for the three months ended March 31, 1998 was
$82,839. The $273,915 increase in cash used in 1999 by operations  (exclusive of
the $750,000  payment to Genesis  Petroleum,  Inc.) was mainly  attributed to an
increase of $130,618 in accounts  receivable and a $109,200 decrease in accounts
payable.


Year 2000 Compliance

      The Year 2000 (Y2K) issue is the result of computer programs being written
using two digits  rather  than four to define the  applicable  year.  This could
result in a system failure or miscalculations causing disruptions of operations,
including,  but not limited to, a temporary  inability to process  transactions,
including invoices or other similar normal business activities.

      The  Company  is in the  process  of  assessing  its  computer  equipment,
accounting   software,   telephone   systems,   scanning   equipment  and  other
miscellaneous systems. The Company's compliance plan provides for the conversion
of  noncompliant  systems in the second and third  quarter of 1999.  The Company
estimates that the cost to complete these efforts will not exceed $30,000.

                                       21

<PAGE>



      The  Company  has  begun  discussion  with  its  significant  vendors  and
customers  on  the  need  to be  2000  compliant.  The  Company  plans  to  mail
questionnaires  to its significant  vendors,  customers and service providers to
assist in an assessment of whether they will be Year 2000 compliant. If they are
not,  such  failure  could  affect the  Company's  ability  sell its oil and gas
products and receive  payments,  to receive natural gas liquid products from its
customers  to  generate  revenues  and the  ability to get  vendors  and service
providers  to  provide  products  and  services  in  support  of  the  Company's
operations.  The Company  expects to complete this  assessment by June 30, 1999.
Although  the  Company has no reason to believe  that its vendors and  customers
will not be compliant by the year 2000,  the Company is unable to determine  the
extent to which Year 2000 issues will effect its vendors and customers.

      The Company has not yet begun a comprehensive  analysis of the operational
problems and costs that would be reasonable likely to result from failure by the
Company and significant  third parties to complete efforts  necessary to achieve
Year  2000  compliance  on a  timely  basis.  A  contingency  plan  has not been
developed for dealing with most reasonably likely worst case scenario,  and such
scenario has not been clearly  identified.  The Company  plans to complete  such
analysis and contingency planning by June 30, 1999.

      The Company presently does not plan to incur  significant  problems due to
the Year 2000  issue.  However,  if all Year 2000  issues are not  properly  and
timely identified,  assessed,  remediated and tested,  there can be no assurance
that the Year 2000 issue will not  materially  impact the  Company's  results of
operations or adversely  affect its  relationship  with customers,  vendors,  or
others.  Additionally,  there can be no  assurance  that the Year 2000 issues of
other  entities  will not have a  material  impact on the  Company's  results of
operations.


Inflation

      The Company's business and operations have not been materially affected by
inflation  during the past three years and the  current  calendar  quarter.  The
Company  believes that inflation  will not  materially nor adversely  impact its
business plans for the future.






                                       22

<PAGE>


                          PART II - OTHER INFORMATION


ITEM 1.     LEGAL PROCEEDINGS

Bankruptcy Proceedings

      On September  26, 1997,  the Company  filed a Petition for  Reorganization
under Chapter 11 (the  "Petition")  of the United States  Bankruptcy  Code.  The
Company continued its operations as a debtor-in-possession  under the Bankruptcy
Code.  The Company's  subsidiaries  did not join the Company in the Petition and
were not directly involved in the Bankruptcy Reorganization Proceeding.

      On  June  18,  1998,  the  Company  filed  a Plan  of  Reorganization  and
Disclosure  Statement  to the  Plan of  Reorganization  with the  United  States
Bankruptcy Court for the District of Utah,  Central Division.  On July 14, 1998,
the Company's Plan of  Reorganization  and  Disclosure  Statement to the Plan of
Reorganization  was approved and  circulation  thereof  authorized by the United
States Bankruptcy Court for the District of Utah, Central Division.

      On September  10, 1998,  the plan of  reorganization  under  Chapter 11 of
Interline  Resources  Corporation was confirmed by the United States  Bankruptcy
Court for the District of Utah.  As a result,  restraints  on the  activities of
Interline  imposed by the Bankruptcy code have been removed.  Interline  reached
agreement  with its major  creditor  during the Chapter 11 case and the terms of
the agreement were incorporated in the plan. All other creditors will be paid in
full under the plan.

Petroleum Systems Inc.

      The Company has  executed  license  agreements  with  licensees to utilize
Interlines used oil technology which includes technology received from Petroleum
System,  Inc.  ("PSI") through an assignment  agreement of certain patent rights
(PSI technology). Under the assignment agreement the Company is obligated to pay
royalties to PSI for those Interline plants using PSI technology.

      The  Company and PSI have been  involved in a dispute as to what  payments
the Company owes PSI under the  assignment  agreement.  The Company and PSI were
first  involved in an  arbitration  proceeding to determine  the issues  between
them, but PSI discontinued  resolution through  arbitration and on July 29, 1997
filed a lawsuit  against the Company and its wholly owned  subsidiary  Interline
Hydrocarbons  in the Third Judicial  District Court of the State of Utah ("State
Court  Action")  alleging  that the  Company  was in  breach  of the  Assignment
agreement  and that PSI should be allowed to  re-acquire  all of the  technology
rights assigned to the Company through the assignment  agreement.  PSI filed its
complaint  and  the  Company  answered,  but  as  a  result  of  the  bankruptcy
proceeding, and its procedural rules the State Court Action was stayed until the
bankruptcy proceedings were resolved.

      On March 26, 1998,  PSI filed claim against the Company in the  bankruptcy
proceeding  seeking royalties of $420,000,  asserting breaches of the assignment
agreement and requesting the return of a prototype  production device ("Baby M")
held by the Company. The Company filed an objection to the claim, and a trial of
the claims was held on June 5 and 8, 1998. After hearing testimony of witnesses,
receiving exhibits and hearing arguments of counsel, the court entered an

                                       23

<PAGE>



order denying PSI's claim for $420,000,  ordering that the Company return Baby M
to PSI and denying all other  claims  brought by PSI.  The Company has  returned
Baby M to PSI.

      On May 29, 1998,  PSI filed a motion for relief from the automatic stay in
the  bankruptcy  court  seeking the right to proceed with its State Court Action
against the Company and the Company's subsidiary Interline  Hydrocarbons.  After
argument and hearing,  the bankruptcy court requested counsel for PSI to prepare
an order granting  relief from the automatic  stay. The Company  objected to the
proposed  order  granting  relief from the automatic  stay and a hearing was set
before the court on August 13, 1998. After argument, the Court entered its order
granting relief from the automatic stay, but limited PSI cause of action against
the Company by prohibiting any money damage to be assessed against the Company.

      On September 10, 1998, on its own  initiative,  the Third  District  Court
scheduled  an Order to Show Cause for on October  15,  1998.  Its purpose was to
advise the court as to the  progress  of the  action.  The  hearing  was held on
October 15, 1998 and the court entered an order that the case be certified ready
for trail within 90 days - January 13, 1999.  PSI was to amend or otherwise file
a new  complaint  against  the  Company.  PSI took no steps  to  proceed  on its
complaint  against the Company and on January 9, 1999 the Company filed a motion
to dismiss the PSI claim. On January 27, 1999 the court granted the motion,  and
extend its order dismissing the lawsuit

 Interline U.K.

      In April of 1997,  the Company sold its 40% interest in the England  Plant
joint Venture to John Wheland for $500,000.  John Wheland has only paid $200,000
of the purchase  price and while the Company  demanded  payment of the remaining
purchase price the payment remains in dispute.  Additionally, in connection with
the sale of the Company's  interest in the joint venture,  the joint venture was
to pay the Company  $100,000  for certain  construction  charges and services it
performed on the plant.  The joint  venture has not made this  payment,  and its
payment is in dispute.  As a result, on November 19, 1998 the Company instituted
a legal  proceeding  against  John Whelan in the High Court of Justice,  Queen's
Bench Division, Bristol District Registry, Bristol Mercantile Court. This action
is currently pending.


Item 2. Changes in Securities:
            None

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<PAGE>


Item 3. Defaults Upon Senior Securities:
            None

Item 4. Submission of Matters to a Vote of Security Holders:
            None

Item 5. Other Information:

      The Company  announced on August 13, 1997 that the American Stock Exchange
(AMEX) made a final determination to delist the Company from the AMEX's Emerging
Company marketplace.

      As of May 15, 1999, a market is being made of the  Company's  common stock
on the NASD Bulletin Board under symbol "IRCE".

Item 6(a). Exhibits:
            None

Item 6(b) Form 8-K:
            None


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<PAGE>


                                  SIGNATURES 

      In  accordance  with Section 13 or 15(d) of the Exchange  Act, the Company
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.


Dated: May 15, 1999           INTERLINE RESOURCES CORPORATION


                              By /s/ Michael R. Williams
                              -------------------------------------
                                     Michael R. Williams
                                     CEO/President
                                       Principal Executive Officer
                                       Director


                              By /s/ Mark W. Holland
                              -------------------------------------
                                     Mark W. Holland
                                     Chief Financial Officer / Director


      In accordance  with the Exchange Act, this report has been signed below by
the following  persons on behalf of the Company and in the capacities and on the
dates indicated.

            Date              Title             Signature


        May 15, 1999      CEO/President     /s/ Michael R. Williams
                           and Director         Michael R. Williams

        May  15, 1999     Director/         /s/ Laurie Evans
                           Secretary            Laurie Evans



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