AS FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION ON
July 3, 2008
UNITED
STATES
SECURITIES AND EXCHANGE
COMMISSION
WASHINGTON, D.C.
20549
FORM 10-Q
(Mark One)
[ X ] QUARTERLY REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For the quarterly period ended:
May
31, 2008
[ ] TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For the transition period
from_________________ to _________________________
Commission file number:
333-91191
INTERMOUNTAIN REFINING CO., INC.
(Exact name of registrant as specified in its
charter)
NEW MEXICO
|
74-2329327
|
(State or other jurisdiction of incorporation or
organization)
|
(I.R.S. Employer Identification
Number)
|
1921 Bloomfield
Boulevard
Farmington, New Mexico
87401
(Address of principal executive
offices)
(505)
326-2668
(Registrant's telephone number,
including area code)
___________________________________________________________________________________________________
(Former name, former address and former fiscal
year, if changed since last report)
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the Exchange Act
during the preceding 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____
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller
reporting company, See definitions of "large accelerated filer", "accelerated
filer" and "smaller reporting company" in Rule 12b-2 of the Exchange
Act.
Large accelerated filer ______
|
Accelerated filer ______
|
Non-accelerated filer ______ (Do not check if a smaller
reporting company)
|
Smaller reporting company ___
X__
|
Indicate by check mark whether the registrant is a shell
company (as defined in Rule 12b-2 of the Exchange Act) Yes ____ No
__
X
_
APPLICABLE ONLY TO ISSUERS INVOLVED IN
BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Indicate by check mark whether the registrant has filed all
documents and reports required to be filed by Sections 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_____ No _____
APPLICABLE ONLY TO CORPORATE ISSUERS
Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of the latest practicable date:
1,155,609 shares of common stock, no par value, were outstanding on June 30,
2008.
10-Q 1 <Page>
Table of Contents
|
Part I - Financial
Information
|
Page
|
Item 1
|
Financial Statements of Intermountain
|
3
|
Item 2
|
Managements Discussion and Analysis of Financial Condition
and Results of Operations
|
3
|
|
Intermountain's Business Activities
|
3
|
|
Liquidity and Capital Resources
|
3
|
|
Cash Requirements as of May 31, 2008
|
3
|
|
Results of Operations
|
4
|
|
Inflation, Deflation and Changing Prices
|
7
|
|
Critical Accounting Estimates
|
7
|
Item 4
|
Controls and Procedures
|
7
|
|
Part II - Other
Information
|
|
Item 1
|
Legal Proceedings
|
7
|
Item 4
|
Submission of Matters to a Vote of Security
Holders
|
7
|
|
Index To Financial Statements
|
7
|
Item 6
|
Exhibits and Reports on Form 8-K
|
12
|
10-Q 2 <Page>
Financial Statements of Intermountain
The financial statements of Intermountain, including balance
sheets as of February 29, 2008 and May 31, 2008 and statements of operations and
statements of cash flows for the three month periods ended May 31, 2007 and May
31, 2008 are included beginning on page 7 of this report.
Management's Discussion and Analysis of Financial Condition and Results of
Operations
The following discussion of our financial condition as of May
31, 2008 and results of operations for the three month periods ended May 31,
2007 and May 31, 2008, should be read in conjunction with our financial
statements and notes related thereto included elsewhere in this
report.
Some of the statements contained in this report relate to
future expectations, contain projections of results of operations or financial
condition or include other forward-looking information. When used in this
report, the words "estimate", "project", "anticipate", "intend", "believe",
"hope", "may" and similar expressions, as well as "will", "shall" and other
indications of future tense, are intended to identify forward-looking
statements. Those statements are subject to known and unknown risks,
uncertainties and other factors that could cause the actual results to differ
materially from those contemplated by the statements. You are cautioned
not to place undue reliance on the forward-looking statements.
Intermountain's Business Activities
Intermountain was incorporated under the laws of the state of
New Mexico in January 1984 and conducts its business in the following
areas:
-
Production of natural gas
-
Leasing of asphalt paving products manufacturing and storage
facilities
-
Other business activities including leasing of unused space
in Intermountain's office building
The asphalt
paving products manufacturing and storage facility was sold to an unrelated
third party in October 2007. However, Intermountain retained the benefits and
obligations associated with the lease agreement for the facility until December
31, 2010 or sooner at the sole discretion of Intermountain.
Liquidity and Capital Resources:
While current cash balances are adequate to satisfy normal
operating costs, our present forecasts indicate that future cash flows from
current operations will not be sufficient to fully cover normal operating costs.
It is our intent to acquire, through purchase or merger, additional interests in
oil and/or natural gas producing properties or to enter into other lines of
business to replace cash flows lost as the result of the sale of our Kansas
natural gas properties. There are presently no formal plans or agreements in
place and there is no assurance that we will enter into any formal agreements in
the near future that would have a significant impact on Intermountain's
financial condition.
The following table presents selected financial data regarding
cash and working capital:
|
February 29,
2008
|
%
Change
|
May 31,
2008
|
Cash and cash equivalents
|
$ 2,062,887
|
(2)%
|
$ 2, 018,807
|
|
|
|
|
Working capital
|
$ 2,098,041
|
(2)%
|
$ 2,066,079
|
During the three months ended May 31, 2008, Intermountain
realized a $49,000 decrease in cash from operating activities, and a $5,000
increase in cash from non-operating sources. There were no significant or
unusual operating cash items during the period.
During the three months ended May 31, 2007, Intermountain
realized a $47,000 decrease in cash from operating activities and a $178,000
decrease in cash from non-operating sources. There were no significant or
unusual operating cash items during the period.
Cash requirements as of May 31, 2008:
Estimated cash requirements for the next twelve months
include:
-
$24,000 per month in normal general and administrative costs
including costs to operate our Farmington office building
10-Q 3 <Page>
-
$600 estimated monthly costs associated with obligations
associated with the asphalt products manufacturing and storage
lease
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:
-
$4,600 per month (net of production costs and exclusive of
unusual work over costs) from estimated natural gas operations based on results
of operations during the three months ended May 31, 2008 along with projections
of production and prices during the next 12 months
-
$1,300 per month from Farmington office space
rental
-
$3,900 per month dividend and interest earned on cash
balances and investments;
-
$3,200 per month from the rental of asphalt storage and
manufacturing facility plus an average of $8,300 per month in throughput fees
based on estimated annual asphalt product shipments of 10,000 tons during the
2008 paving season.
Under the sale agreement
for the Kansas gas producing properties, Intermountain is entitled to receive an
additional $370,000 from the purchaser if a replacement well (which was
completed in July 2007 at a cost of $219,000) is successful in producing
saleable quantities of natural gas. Initial gas pressures at the wellhead of the
replacement well were not sufficient to produce saleable quantities of natural
gas. At the advise of our consultant, Intermountain has been pumping water from
the well in an effort to dewater the producing zone with the expectation that
gas pressures will eventually improve to the point that natural gas can be
produced in saleable quantities. Ongoing dewatering costs are estimated to be
approximately $600 per month. There is no assurance that Intermountain will be
successful in returning the gas unit to production within a reasonable amount of
time.
Estimates of future sources and uses of cash presented herein
are based on our assumptions and expectations that our operations will continue
at current levels without material interruption and that collection of accounts
will occur under agreed terms. Actual results may be materially
different.
Results of Operations:
The following table summarizes the results of Intermountain's
operations for each of the periods indicated. All percentage amounts were
calculated using the underlying data.
|
Three months ended
|
|
May 31,
2007
|
% Change
|
May 31,
2008
|
Revenues
|
$ 71,913
|
(19)%
|
$ 58,192
|
Costs and expenses
|
112,493
|
7%
|
120,493
|
Net loss before taxes
|
(40,580)
|
(53)%
|
(62,301)
|
Income taxes
|
(14,329)
|
(60)%
|
(23,003)
|
Net Loss
|
$ (26,251)
|
(50)%
|
$ (39,298)
|
Revenues:
The following table presents a summary of our revenues for the
periods indicated. All percentage amounts were calculated using the underlying
data.
|
Three months ended
|
|
May 31,
2007
|
% Change
|
May 31,
2008
|
Natural gas production
|
$ 38,521
|
(2)%
|
$ 37,672
|
Asphalt equipment rental and throughput fees
|
28,382
|
(44)%
|
15,930
|
Real estate rental
|
4,260
|
(10)%
|
3,840
|
Other revenues
|
750
|
0%
|
750
|
Total Revenues
|
$ 71,913
|
(19)%
|
$ 58,192
|
Changes in individual components of revenues are discussed
below:
10-Q 4 <Page>
Natural gas revenues:
The following table contains natural gas production volume,
net to Intermountain's interest, and average sales prices received for the
periods indicated:
|
For the three months
ended
|
|
May 31,
2007
|
% Change
|
May 31,
2008
|
Natural gas produced, net (Mcf)
|
4,408
|
(10)%
|
3,957
|
Average selling price ($/Mcf)
|
$8.74
|
9%
|
$9.52
|
The decrease in natural gas revenues for the three months
ended May 31, 2008 compared to the three months ended May 31, 2008 consisted of
a 451 Mcf (10%) decrease in New Mexico natural gas production offset by a
$0.78/Mcf (8%) increase in average selling prices. 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 Intermountain's
production of natural gas will decline slightly over the next twelve months
consistent with observed decline rates.
The decrease in natural gas revenues for the three months
ended May 31, 2007 compared to the three months ended May 31, 2006 consisted of
a $6,500 decrease in New Mexico natural gas revenues and a $157,000 decrease due
to the sale of Intermountain's Kansas natural gas producing properties in
February, 2007. The reduction in New Mexico gas revenues consisted of a 1,441
Mcf (25%) decrease in production offset by a $1.05/Mcf (14%) increase in average
selling prices.
Leasing of asphalt products manufacturing and storage
facilities:
The decrease in asphalt equipment rental and throughput fees
for the three months ended May 31, 2008 compared to the three months ended May
31, 2007 was attributed to a 2,228 ton decrease in asphalt shipments from the
facility. As the recent substantial increase in crude oil prices has adversely
affected the prices for all refined products, including asphalt, a decline in
asphalt products shipments from the facility could occur in the future. However,
we have not received any specific information in this regard from Paramount,
and, for the time being, we continue to forecast that total shipments from the
facility will amount to approximately 10,000 tons during the calendar 2008
paving season.
The increase in asphalt equipment rental and throughput fees
for the three months ended May 31, 2007 compared to the three month period ended
May 31, 2006 was attributed to a 2,550 ton increase in asphalt shipments from
the facility. The decrease in asphalt equipment rental and throughput fees for
the three months ended May 31, 2006 compared to the three months ended May 31,
2005 was attributed to a 2,600 ton reduction in asphalt shipments from the
facility. We had anticipated that asphalt product shipments would decline due to
a reduction in the amount of paving grade asphalt made available for sale from
the facility by Paramount.
Real estate rental:
The decrease in real estate rental revenues during the three
months ended May 31, 2008 compared to the three months ended May 31, 2007 was
attributed to a decrease in occupancy in the Farmington, NM office building. We
anticipate that rental revenues will remain reasonably constant over the next 12
months.
The decrease in real estate rental revenues during the three
months ended May 31, 2007 compared to the three months ended May 31, 2006 was
attributed to a decrease in occupancy in the Farmington, NM office building. One
tenant moved out during the quarter ended May 31, 2007, which resulted in a
reduction in real estate rental revenues of approximately $885/month.
Costs, Expenses, Investment Income and Other Gains and Losses
:
The following table presents a summary of Intermountain's
costs, expenses, investment income and other gains and losses for the periods
indicated:
|
Three Months Ended
|
|
May 31,
2007
|
% Chang
e
|
May 31,
2008
|
Cost of sales
|
$ 43,060
|
9%
|
$ 46,962
|
General and administrative costs
|
79,572
|
0%
|
79,348
|
Depletion, depreciation and amortization
|
5,490
|
(14)%
|
4,697
|
Accretion of discount on asset retirement
obligations
|
104
|
9%
|
113
|
Bad debt expense
|
11,310
|
(100)%
|
-
|
Salvage of refinery equipment
|
(9,500)
|
100%
|
-
|
Interest and investment income, net
|
(17,543)
|
39%
|
(10,627)
|
Total costs and expenses
|
$ 112,493
|
7%
|
$ 120,493
|
10-Q 5 <Page>
Changes in individual components of costs and expenses are
discussed below.
Cost of sales:
Cost of sales includes costs incurred in the production of
natural gas and normal costs of maintaining the asphalt facility.
The increase in costs of sales for the three months ended May
31, 2008 compared to the three months ended May 31, 2007 consisted substantially
of a $4,000 increase in natural gas production costs. The increase in natural
gas production costs consisted of a $20,000 increase in New Mexico gas
production costs associated with a substantial recompletion of one well that is
expected to increase production from the unit. The increase was offset by a
$16,000 decrease in costs associated with the Kansas properties, which were sold
in February 2007. During the three months ended May 31, 2008, Intermountain
incurred approximately $1,500 in costs associated with dewatering the
replacement Kansas well completed in July 2007. Well pump, production tubing and
surface equipment failures occur randomly and the timing and cost of repairs
cannot be accurately predicted.
The decrease in costs of sales for the three months ended May
31, 2007 compared to the three months ended May 31, 2006 consisted entirely of a
$30,000 decrease in natural gas production costs. The decrease in natural gas
production costs consisted of a $1,000 decrease in New Mexico natural gas
production costs and a $29,000 reduction in costs associated with the Kansas
natural gas producing properties, which were sold on February 28, 2007. During
the three months ended May 31, 2007, Intermountain incurred approximately
$18,000 in costs associated with repair claims made by the purchaser of the
Kansas properties in accordance with provisions of the sale agreement.
General and administrative expenses:
General and administrative expenses include the cost of
Intermountain's officers and administrative employees, costs incurred to operate
and maintain the Farmington office building, and all items of general overhead
required to manage and administer the corporate affairs of
Intermountain.
There were no significant changes in general and
administrative expenses during the three months ended May 31, 2008 compared to
the three months ended May 31, 2007.
There were no significant changes in general and
administrative expenses during the three months ended May 31, 2007 compared to
the three months ended May 31, 2006.
Depreciation and Depletion:
The decrease in depreciation and depletion expense for the
three months ended May 31, 2008 compared to the three months ended May 31, 2008
was attributed to the decrease in New Mexico natural gas production.
The decrease in depreciation and depletion expense for the
three months ended May 31, 2007 compared to the three months ended May 31, 2006
was attributed primarily reductions in depletion expense, including a $2,000
decrease in New Mexico depletion and a $4,000 decrease in Kansas depletion, The
Kansas natural gas properties were sold on February 28, 2007.
Bad debt expense:
During the three months ended May 31, 2007, Intermountain
wrote off, as uncollectible, $11,000 associated with a past due account which
arose from the prior salvage of portions of the equipment and metals salvaged
from the Fredonia refinery facility. The subject account was not related to
on-going operations.
Interest and investment income (net):
Interest and investment income includes earnings on cash
balances and certificates of deposit and net earnings on investments, less
interest expense incurred.
The decrease in interest and investment income during the
three months ended May 31, 2008 compared to the three months ended May 31, 2007
consisted mainly of a $7,800 decrease in interest earned on cash balances due to
lower cash balances and a decrease in money market interest rates.
The increase in interest and investment income during the
three months ended May 31, 2007 compared to the three months ended May 31, 2006
consisted of an $11,500 increase in interest earned on cash balances offset by a
$600 decrease in investment earnings (net of depletion on investments in oil and
gas royalty trusts). Intermountain paid no interest expense during either of the
three month periods.
10-Q 6 <Page>
Inflation, Deflation and Changing Prices:
The results of operations and capital expenditures will
continue to be affected by inflation, deflation and changing prices.
Prices of natural gas could have a materially 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.
Critical Accounting Estimates:
Certain accounting estimates are important to the presentation
of our financial condition and results of operations and require management's
subjective or complex judgments. Such estimates are subject to change based on
future conditions and events that may have a material effect on our financial
condition and results of operations. There have been no significant changes in
our assumptions or underlying factors that may adversely affect our previous
accounting estimates.
Controls and Procedures
Evaluation of Disclosure Controls and
Procedures:
Disclosure controls and procedures are designed and
implemented to ensure that all material information relating to a company is
made known to its chief operating officer, chief financial officer, and such
other persons who are responsible for preparing and filing periodic reports with
the Securities and Exchange Commission. William N. Hagler and Rick L. Hurt,
representing all of the officers and directors of Intermountain, have evaluated
our disclosure controls and procedures and concluded that such controls were
effective as of May 31, 2008.
Changes in Internal Controls:
There has been no change in Intermountain's internal controls
over financial reporting during the last fiscal quarter covered by this report
that could materially affect, or is reasonably likely to materially affect,
Intermountain's internal control over financial reporting.
Legal Proceedings
We are not aware of any pending or threatened legal
proceedings to which Intermountain is a party. We are not aware of any pending
or threatened legal proceedings to which any director, officer, affiliate of
Intermountain, or any owner of more than 5% of Intermountain's common stock, is
an adverse party to, or has a material interest adverse to,
Intermountain.
Submission of Matters to a Vote of Security Holders
There have been no matters submitted to a vote of security
holders during the three months ended May 31, 2008 through the solicitation of
proxies or otherwise.
Index to Financial Statements
|
Page
|
|
|
Balance Sheets as of February 29,
2008 and May 31, 2008
|
8
|
|
|
Statements of Operations and
Comprehensive Loss for the three month periods ended
|
|
May 31, 2007 and
May 31, 2008
|
9
|
|
|
Statements of Cash Flows for the
three month periods ended
|
|
May 31, 2007 and
May 31, 2008
|
10
|
|
|
Notes to financial
statements
|
11
|
|
|
10-Q 7 <Page>
Intermountain Refining Co., Inc.
|
|
|
Balance Sheet
|
|
|
|
February 29,
|
May 31,
|
|
2008
|
2008
|
Assets
|
(Audited)
|
(Unaudited)
|
Current Assets
|
|
|
Cash and cash equivalents
|
$ 2,062,887
|
$ 2,018,807
|
Accounts receivable
|
13,051
|
9,595
|
Current portion of notes
receivable
|
15,731
|
12,863
|
Accrued interest receivable
|
685
|
140
|
Income tax refund receivable
|
11,468
|
34,571
|
Prepaid expenses
|
939
|
8,156
|
Total Current Assets
|
2,104,761
|
2,084,132
|
Property, Plant and
Equipment
, net of valuation allowances
|
|
|
Land, buildings and
improvements
|
343,057
|
343,057
|
Equipment
|
45,990
|
45,990
|
Asphalt equipment
|
4,000
|
4,000
|
Natural gas properties, (successful
efforts method) - Note B
|
658,489
|
658,489
|
|
1,051,536
|
1,051,536
|
Less accumulated depletion and
depreciation
|
(469,077
)
|
(473,774)
|
|
582,459
|
577,762
|
Other Assets
|
|
|
Available-for-sale
investments
|
136,508
|
146,449
|
Notes receivable, net of current
portion
|
23,223
|
19,857
|
Other assets
|
275
|
275
|
|
160,006
|
166,581
|
Total Assets
|
$ 2,847,226
|
$ 2,828,475
|
Liabilities and Stockholders' Equity
|
|
|
Current Liabilities
|
|
|
Accounts payable
|
$ 4,002
|
$ 15,335
|
Taxes other than income
taxes
|
2,618
|
2,618
|
Income taxes payable
|
100
|
100
|
Total Current
Liabilities
|
6,720
|
18,053
|
Deferred
Taxes
|
21,767
|
24,953
|
Asset Retirement Obligations
|
7,187
|
7,300
|
Commitments and
Contingencies
|
-
|
-
|
Stockholders' Equity
|
|
|
Common stock, no par value, authorized
10,000,000 shares,
|
|
|
issued and outstanding 1,155,609 shares
|
1,455,314
|
1,455,314
|
Preferred stock, $0.01 par value, authorized 5,000,000
shares,
|
|
|
no shares issued and outstanding.
|
-
|
-
|
Retained earnings
|
1,315,813
|
1,276,515
|
Accumulated other comprehensive income
|
40,425
|
46,340
|
|
2,811,552
|
2,778,169
|
Total Liabilities and Stockholders'
Equity
|
$ 2,847,226
|
$ 2,828,475
|
|
|
|
The accompanying notes are an integral part of these
financial statements.
|
|
|
10-Q 8 <Page>
Intermountain Refining Co., Inc.
|
|
|
Statements of Operations and Comprehensive
Loss
|
|
|
|
Three months ended
|
|
May 31,
|
May 31,
|
|
2007
|
2008
|
|
(Unaudited)
|
(Unaudited)
|
Revenues
|
|
|
Natural gas production revenues
|
$ 38,521
|
$ 37,672
|
Asphalt equipment rental and throughput fees - Note
C
|
28,382
|
15,930
|
Real estate rental income
|
4,260
|
3,840
|
Other income
|
750
|
750
|
|
71,913
|
58,192
|
Costs, Expenses Investment Income and Other Gains and
Losses
|
|
|
Cost of sales
|
43,060
|
46,962
|
General and administrative
|
79,572
|
79,348
|
Depletion, depreciation and amortization
|
5,490
|
4,697
|
Accretion of discount on asset retirement
obligations
|
104
|
113
|
Bad debt expense
|
11,310
|
-
|
Salvage of refinery equipment
|
(9,500)
|
-
|
Interest and investment income,
net
|
(17,543)
|
(10,627)
|
|
112,493
|
120,493
|
Loss From Operations Before Income Taxes
|
(40,580)
|
(62,301)
|
|
|
|
Provision for income taxes
|
|
|
Current
|
(14,329)
|
(23,003)
|
Deferred
|
-
|
-
|
|
(14,326)
|
(23,003)
|
Net Loss
|
(26,251)
|
(39,298)
|
|
|
|
Other Comprehensive Income
, net of tax:
|
|
|
Unrealized holding gain on investments available for sale
(net of income tax expense of $1,189 for the three months ended May 31, 2007 and
$3,186 for the three months ended May 31, 2008)
|
2,209
|
5,915
|
|
|
|
Comprehensive Loss
|
$ (24,042)
|
$ (33,383)
|
|
=========
|
=========
|
Weighted Average Number of Shares
Outstanding
|
1,155,609
|
1,155,609
|
|
|
|
Basic and Fully Diluted Earnings Per
Share
|
|
|
Net loss
|
$
(0.02)
|
$
(0.03)
|
|
========
|
========
|
The accompanying notes are an integral part of these
financial statements.
|
|
|
10-Q 9 <Page>
Intermountain Refining Co.,
Inc.
Statements of Cash Flows
|
|
Three months ended
|
|
May 31,
|
May 31,
|
|
2007
|
2008
|
|
(Unaudited)
|
(Unaudited)
|
Cash Flows From Operating Activities
|
|
|
Net loss
|
$ (26,251)
|
$ (39,298)
|
Adjustments to reconcile net income
(loss) to net cash provided by operating activities:
|
|
|
Depreciation, depletion and
amortization
|
5,490
|
4,697
|
Accretion of discount on asset retirement
obligations
|
104
|
113
|
Depletion on investments in royalty trusts
|
579
|
611
|
Changes in operating assets and
liabilities:
|
|
|
Decrease in accounts
receivable
|
83,997
|
3,456
|
Decrease in accrued interest receivable
|
20
|
545
|
Increase in income tax refund receivable
|
(18,964)
|
(23,103)
|
Increase in prepaid expenses
|
(5,725)
|
(7,217)
|
Increase in accounts payable
and accrued expenses
|
100,398
|
11,333
|
Decrease in income taxes
accrued/receivable
|
(186,965)
|
-
|
Net Cash Flow Used by Operating
Activities
|
(47,317)
|
(48,863)
|
|
|
|
Cash Flows From Investing Activities
|
|
|
Purchases of available for sale
investments
|
(1,186)
|
(1,451)
|
Collection of notes receivable
|
3,913
|
6,234
|
Natural gas development costs - Note
B
|
(180,174)
|
-
|
Net Cash Flow Provided/(Used) by Investing
Activities
|
(177,447
)
|
4,783
|
|
|
|
|
|
|
Decrease in Cash and Cash Equivalents
|
(224,764)
|
(44,080)
|
|
|
|
Cash and Cash Equivalents at Beginning of
Year
|
2,391,302
|
2,062,887
|
|
|
|
Cash and Cash Equivalents at End of
Period
|
$ 2,166,538 ========
|
$ 2,018,807 ========
|
Intermountain paid interest of $0 during the three month
period ended May 31, 2007.
|
Intermountain paid interest of $314 during the three month
period ended May 31, 2008.
|
|
Intermountain paid income taxes of $191,000 during the three
month period ended May 31, 2007.
|
Intermountain paid income taxes of $100 during the three
month period ended May 31, 2008.
|
|
Supplemental Schedule of Noncash Investing
Activities:
During the three month period ended May
31, 2007, Intermountain's available for sale investments increased in value by
$3,398, net of deferred taxes of $1,189.
During the
three month period ended May 31, 2008, Intermountain's available for sale
investments increased in value by $5,915, net of deferred taxes of $3,186.
|
|
|
|
The accompanying notes are an integral part of these
financial statements.
|
10-Q 10 <Page>
Intermountain Refining Co.,
Inc.
Notes to Financial Statements
May 31, 2008 (Unaudited)
Note A - Interim Financial Statements
The accompanying balance sheet as of May 31, 2008 and the
statements of operations for the three month periods ended May 31, 2007 and May
31, 2008, and the statements of cash flows for the three month periods ended May
31, 2007 and May 31, 2008 have been prepared by Intermountain, without audit. In
the opinion of management, all adjustments (which include only normal recurring
adjustments) necessary to present fairly the financial position, results of
operations and changes in cash at May 31, 2008, and for all periods presented,
have been made.
It is suggested that these unaudited financial statements be
read in conjunction with the audited financial statements for the year ended
February 29, 2008. The results of operations for the three months ended May 31,
2008 are not necessarily indicative of the operating results for the full
year.
Note B - Kansas Natural Gas Producing
Properties
On February 28, 2007, Intermountain sold all of its interest
in the leases, wells and equipment associated with the natural gas producing
properties located in Scott and Finney Counties, Kansas. In accordance with the
sale price provisions of the sale agreement, Intermountain is entitled to
receive additional compensation of $370,000 contingent upon restoration of
production from one gas unit that, due to a significant casing failure, was not
producing natural gas as of the date of sale. Intermountain attempted additional
repair efforts subsequent to February 28, 2007 and ultimately decided to drill a
replacement well on the unit, which was completed in July 2007. The capitalized
development cost associated with the replacement well amounted to approximately
$219,000. Initial gas pressure at the wellhead was not sufficient to produce
saleable quantities and, at the advise of its consultant, Intermountain is
presently attempting to dewater the producing formation in an effort to raise
gas pressure. Management believes there is a reasonable probability that
production from the unit can be restored, however, there is no assurance that
the replacement well will be successful.
Note C - 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. The facility was sold to an unrelated third party on
October 18, 2007, however, the benefits and obligations under the lease
agreement were retained by Intermountain until December 31, 2010, or such
earlier time at the option of Intermountain.
10-Q 11 <Page>
Exhibits and Reports on Form 8-K
Reports on Form 8-K:
There were no reports on Form 8-K filed by Intermountain
during the quarter ended May 31, 2008.
Exhibits:
Exhibit
|
Description
|
3.1
|
Amended and Restated Articles of Incorporation
(1)
|
3.2
|
Bylaws (1)
|
14.1
|
Code of Ethics (2)
|
31.1
|
Certification under Rule 13a-14(a)/15d-14(a) of Rick L.
Hurt, Secretary, Treasurer, Director
|
31.2
|
Certification under Rule 13a-14(a)/15d-14(a) of William N.
Hagler, President, Director
|
32
|
Certification of Periodic Financial Report Pursuant to 18
U.S.C Section 1350
|
(1) Incorporated herein by reference to Intermountain's
registration statement filed on Form S-1 dated April 9, 2001.
(2) Incorporated herein by reference to Intermountain's Form
10-KSB for the year ended February 28, 2006, as filed with the Commission on May
17, 2006.
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 July 3, 2008.
Intermountain Refining Co., Inc.
By:
/s/ William N.
Hagler
William 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: July 3,
2008
William N. Hagler, Chairman of the Board
of
Directors, and
President
/s/ Rick
L. Hurt
____________________ Date: July 3,
2008
Rick L. Hurt, Secretary, Treasurer, Director
10-Q 12 <Page>
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