Item 1. Business.
General ------- Intermountain Resources, Inc. (the "Company"), was organized under Nevada law on May 12, 1980, for the primary purpose of acquiring, developing, and if economically warranted achieving production of precious minerals, primarily silver and gold. As of this date the Company has no quantifiable ore reserves. Because of a lack of working capital (see Items 7 and 8 herein) and because of the capital intensive nature of mining, the Company must attract funds for exploration, testing and development (if warranted) of its property interests via leases to third parties of the Company's prospects, operating agreements or the formation of joint ventures with others who agree to provide the funds required in order to earn an interest in a particular property or prospect.
The Company's operations have been oriented toward the acquisition of possessory, leasehold, or fee simple interests in nonproducing mineral prospects. In light of the Company's limited financial resources, there are no present plans to acquire interests in additional nonproducing mineral properties.
Recent Activities ----------------- During the years from 1982 to 1988, the Company conducted a grass roots reconnaissance exploration program in portions of the Western United States. This program identified several precious metals prospects which were acquired (see Item 2). Since 1988 the Company's limited resources have precluded significant new exploration and activities have been limited to the maintenance and leasing of existing prospects. Significant amounts of exploratory work and capital would be required with respect to existing prospects before a decision to conduct mining operations could be made.
The Company attempts to lease its exploration prospects to large companies actively engaged in exploration for, development and production of precious metals. The Company's leases generally provide for an initial cash payment to the Company with additional amounts due periodically if the lessee desires to maintain the lease prior to the commencement of production. In the event production is commenced, the Company would be entitled to production royalties of varying percentages of the "net smelter returns" as defined by the particular lease. The leases are typically subject to cancellation by the lessee upon thirty days' notice. It has been the Company's experience that a lessee usually cancels its lease shortly after completion of any
contracted work commitment. At April 30, 1996, the only property under lease was the Sonrisa claim block.
The Company's Sonrisa claims in Kern County, California, are leased to a wholly owned subsidiary of Glamis Gold Ltd. This claim group is located within the confines of an old mining district with complex and conflicting land ownership positions. (See Item 2). Glamis has announced a write-down of $1.8 million because unoxidized ore placed on the Baltic heap leach pad did not respond at the anticipated recovery rate. They have suspended mining at the Baltic Pit. Consequently, the Company expects to receive little or no additional production royalty income from this source in the near term.
Other Matters ------------- The Company anticipates that future revenues, if any, would be derived from rent or advance minimum royalty payments or production royalty payments earned as a result of leasing its mineral prospects to other entities. Various recent proposals for a Federal royalty on mineral production could result in diminution or elimination of production royalty payments which might otherwise be attainable by the Company.
The existence of precious metals in commercial quantities is integral to the realization of value from the Company's properties. See Management's Discussion and Analysis of Financial Condition and Results of Operations in Item 7 hereof. Hence, precious metals may be considered raw materials essential to the Company's business. However, the acquisition, exploration, development, production and sale of precious metals is subject to many factors which are outside of the Company's control. These factors include national and international economic conditions, availability of milling facilities, availability of water, the supply and price of other precious metals and the regulation of prices, production, transportation and marketing by federal, state, and local governmental authorities.
The Company has engaged in only one industry segment, the exploration and development of mineral prospects for silver and gold. The Company has no plans to enter into any new industry segment.
The Company's business in the areas in which it holds property is generally not seasonal in nature although operations are subject to periodic interruptions due to weather conditions.
The Company is not dependent upon a single customer or a few customers, the loss of any one or more of whom would have an adverse effect on the Company's business.
The exploration for, and development and production of, precious metals is subject to intense competition. The principal methods of competition in the mining industry for the acquisition of mineral leases are payment of bonus payments at the time of acquisition of leases, payment of delay rentals and advance royalties, use of differential royalty rates, and amounts of annual rental payments and stipulations requiring exploration and production commitments by the lessee. Companies with greater financial resources, larger existing staffs and labor forces, greater equipment for exploration and vast experience are in a significantly better position than the Company to compete for mineral leases and explore and develop the leases. There are many of these larger companies and the Company is at a distinct disadvantage in competing against and negotiating with such entities. There are also many small mining entities, who, because of their particular area of expertise, may have an advantage over the Company in competing for mineral leases in certain areas in which the Company has or may have an interest.
All operations of the Company involving the exploration for, or the production of, any minerals are subject to existing laws and regulations relating to exploration procedures, employee health and safety, air quality standards, pollution of stream and fresh water sources, odor, noise, dust and other environmental protection controls adopted by federal, state, and local governmental authorities as well as the rights of adjoining property owners. Although not deemed likely by management, the Company may be required to prepare and present to federal, state or local authorities data pertaining to the effect or impact of any proposed exploration for or production of minerals upon the environment. Requirements imposed by such authorities may be costly and time consuming and could delay commencement or continuation of exploration or production operations. Such laws and regulations may require substantial increases in equipment and operating costs to the Company and delays, interruptions or termination of operations, the extent of which cannot now be predicted. This may have a substantial impact upon the capital expenditures required by the Company to deal with such problems and could substantially reduce earnings or increase losses. To date, however, the Company has not been required to expend significant funds or efforts in connection with such activities.
Various amendments to the Mining Law of 1872 and related laws and regulations have been proposed or enacted at the Federal level which increased the cost to hold an unpatented claim. As a result, the Company reduced the number of claims included in certain prospects and relinquished certain prospects in their entirety during fiscal 1994.
Practices with respect to working capital items are not material to an understanding of the Company's business. The
Company does, however, require working capital to maintain an adequate inventory of suitable mineral prospects.
The Company does not currently engage in any research and development activities. The Company does not own any patents, trademarks, licenses, franchises or concessions. Backlog is not material to an understanding of the Company's business. No portion of the Company's business is subject to renegotiation of profits or termination of contracts at the election of the federal government. The Company has no operations in foreign countries and no sales or revenues derived from customers in foreign countries. The Company has no full time employees.
Item 2.

Item 2. Properties.
The Company's significant property interests are as set forth below. The properties were acquired and are held because they are believed to be prospective for precious metals. See Item 7 herein for a discussion of the Company's limited working capital which may result in the dropping of all or portions of certain prospects.
The Company owns eleven unpatented lode claims (the Sonrisa claims) located in Kern County, California. These claims are within the confines of an old mining district. In some cases the claims overlap onto senior claims and in other instances claims junior to the claims overlap onto them. As a result of these complex land ownership positions, the Company can not provide definitive information on the net acreage of the Sonrisa claims or their relationship to the ore bodies that have been defined by the lessee of the claims.
The Company owns twelve patented lode mining claims in the Aurora Mining District, Mineral County, Nevada. The Wildcard Prospect consisting of five unpatented lode claims owned by the Company is also located in Mineral County.
The Iron Point Prospect consisting of some 31 full or fractional unpatented claims owned by the Company is located in Humboldt County, Nevada.
Four unpatented claims at the MD Prospect owned by the Company are located in Esmeralda County, Nevada.
Substantial additional work on the prospects and outside capital would be required before the Company, a lessee, or venture partner would be in a position to proceed with a plan of development on any of the prospects other than the Sonrisa.
Each of the prospects is burdened with overriding royalty interests (ORRI's) granted to consulting geologists instrumental
in identifying and locating the prospects. The ORRI's generally provide that, in the event of commercial production from a Prospect, the geologist would be entitled to a specified "net smelter return" interest (generally 1%) in production from the Prospect.
Item 3.

Item 3. Legal Proceedings.
By letter dated March 10, 1994, the Forest Service notified the Company that the Forest Service has determined a release of hazardous substances covered under the Comprehensive Environmental Response, Compensation, and Liability Act occurred at Siskon Mine, located on the Klamath National Forest. The Company was named as a potentially responsible party along with six other corporations or individuals. By letter dated March 31, 1994, the Company advised the Forest Service that the Company at one time had an option to lease the property and during the option period performed assessment work required by the 1872 Mining Law. However, at no time did the Company have an ownership interest (or even an interest as lessee) in either the Siskon Mine or the mining claims that covered the subject lands nor had the Company ever attempted to operate the property.
In a letter dated May 24, 1994, the Forest Service stated, ". . . we believe it is possible a court of law could find such activities to be "operations" within the liability provisions of CERCLA 107(a)." That letter transmitted a series of questions concerning the activities of the Company and other entities and individuals with respect to the property. The Company responded to the questions of the Forest Service by letter dated July 7, 1994, and has had no further contact from the Forest Service or any of the other six named potentially responsible parties.
The Company knows of no other pending legal proceedings or governmental investigations or proceedings to which the Company is or may be a party or of which any of its properties may be subject.
Item 4.

Item 4. Submission of Matters to a Vote of Security Holders.
No matter was submitted during the fourth quarter of the Company's fiscal year ended April 30, 1996 to a vote of shareholders, through the solicitation of proxies or otherwise.
Part II ------- Item 5.

Item 5. Market for the Registrant's Common Equity and Related Stockholder Matters.
The Company's common stock, $.01 par value, is traded sporadically in the over-the-counter market. There is no active market for the stock and so far as is known to management all trades during the last two fiscal years were at $.01 per share or less.
The Company has not, since inception, paid dividends on its common stock, nor does the Company contemplate paying dividends in the foreseeable future. The Company intends to utilize any profits it may generate for its business operations.
As of April 30, 1996, there were approximately 800 shareholders of record of the Company's common stock.
Item 6.

Item 6. Selected Financial Data.
(1) Consists solely of amounts due to officer except in 1995.
Item 7.

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion should be read in conjunction with the Company's financial statements contained in Item 8

Item 8. Financial Statements and Supplementary Data.
Index to Financial Statements and Supplemental Schedules
Page Financial Statements for the Years Ended ---- April 30, 1996, 1995, and 1994 (unaudited): Balance Sheets 11 Statements of Operations and Accumulated Deficit 12 Statements of Cash Flows 13 Notes to Financial Statements 14
The Registrant meets the requirements of Rule 3-11 of Regulation S-X for the years ended April 30, 1996, 1995, and 1994. Therefore, the financial statements for such years are not required to be audited.
INTERMOUNTAIN RESOURCES, INC.
NOTES TO UNAUDITED FINANCIAL STATEMENTS For the years ended April 30, 1996, 1995, and 1994 (Unaudited) - ----------------------------------------------------------------------------- 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
General - The Company has a substantial investment in mineral properties. Existence of mineral reserves in commercial quantities on these properties has not been determined. Recovery of the investment is dependent on the discovery of minerals in commercial quantities. The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. As shown in the financial statements, the Company has achieved minimal earnings or incurred operating losses for several years and has minimal working capital at April 30, 1996. These factors among others may indicate that the Company may be unable to continue as a going concern. The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amount and classification of liabilities that might be necessary should the Company be unable to continue as a going concern. The Company's continuation as a going concern is dependent upon its ability to generate sufficient cash flow to meet its obligations on a timely basis and, ultimately, to attain successful operations. Significant activity beyond property maintenance would be contingent on generating additional funds through sales or leases of existing mineral prospects or through production on a property currently under lease. There is no assurance that leases can be negotiated on existing prospects and production royalties to be received during fiscal 1997, if any, are expected to be minimal. Therefore, the Company's activities may continue to be essentially limited to property maintenance and compliance with regulatory matters during fiscal 1997.
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results may differ from those estimates.
Cash and Cash Equivalents - For purposes of the statement of cash flows, the Company considers money market funds and certificates of deposit with a maturity of three months or less to be cash equivalents.
Mineral Properties - Acquisition and exploration costs are initially capitalized and will be, in general, amortized ratably over production or will be charged to expense upon disposition of the properties.
Unallocated Exploration Expenses - Expenses incurred in general exploration and evaluation of properties for potential acquisition and cost of completing required assessment work as well as Federal delay rentals are charged to expense unless a property is actually acquired.
2. MINERAL PROPERTIES
The following tabulation shows the mineral prospect inventory of the Company and the capitalized cost associated with each prospect:
1996 1995 ---- ---- Sonrisa $ 1 $ 1 Aurora 73,742 73,742 Iron Point 1 1 MD 36 36 Wildcard 1 1 ------ ------ Total $73,781 $73,781 ====== ====== As with most natural resource prospects, the economic worth of the above assets bears no particular relationship to their recorded cost.
3. INCOME TAXES
The Company's operations for 1995 and 1994 resulted in net income of $32,442 and $9,946 respectively, which were offset by a net operating loss carryforward resulting in no Federal tax liability for the year.
The Company has approximately $1,370,000 of net operating loss carryforwards which are available to offset future Federal taxable income. These carryforwards begin to expire in 1997.
4. CONTINGENCY
By letter dated March 10, 1994, the Forest Service notified the Company that the Forest Service has determined a release of hazardous substances covered under the Comprehensive Environmental Response, Compensation, and Liability Act occurred at Siskon Mine, located on the Klamath National Forest. The Company was named as a potentially responsible party along with six other corporations or individuals. By letter dated March 31, 1994, the Company advised the Forest Service that the Company at one time had an option to lease the property and during the option period performed assessment work required by the 1872 Mining Law. However, at no time did the Company have an ownership interest (or even an interest as lessee) in either the Siskon Mine or the mining claims that covered the subject lands nor had the Company ever attempted to operate the property.
In a letter dated May 24, 1994, the Forest Service stated, ". . . we believe it is possible a court of law could find such activities to be "operations" within the liability provisions of CERCLA 107(a)." That letter transmitted a series of questions concerning the activities of the Company and other entities and individuals with respect to the property. The Company responded to the questions of the Forest Service by letter dated July 7, 1994, and has had no further contact from the Forest Service or any of the other six named potentially responsible parties.
_______________________________________________________________
Item 9.

Item 9. Disagreements on Accounting and Financial Disclosure.
The Company's financial statements for each of the two most recent fiscal years are unaudited pursuant to the exemption provided by Rule 3-11 of Regulation S-X. Therefore this item is not applicable.
Part III -------- Item 10.

Item 10. Directors and Executive Officers of the Registrant.
The following table sets forth certain information with respect to the directors and executive officers of the Company:
Period of Service as Position(s) an Officer Name Age With the Company or Director Term Expires - ---- --- ---------------- ----------- ------------ Lewis W. Watson(1 54 Pres., Treas. May, 1980 to Next Annual and Director date Meeting
Thomas C. Pool 54 Sec. and Director May, 1980 to Next Annual date Meeting
Gary E. Butts 50 Asst. Secretary October, 1982 Next Annual and Director to date Meeting
Maurice O. Reiber(1) 65 Director May, 1980 to Next Annual August, 1982; Meeting and June, 1984 to date
Gerald G. Reiber(1) 59 Director May, 1980 to Next Annual August, 1982; Meeting and June, 1984 to date (1) May be deemed a "parent" or "founder" of the Company
All directors of the Company will hold office until the next annual meeting of shareholders and until their successors have been elected and qualified. The officers of the Company, who are elected at the annual meeting of the Board of Directors, hold office until their successors are chosen and qualified, or until their death, resignation or removal.
There is no family relationship between or among directors and officers of the Company, except that Maurice O. Reiber and Gerald G. Reiber are brothers.
The following are brief accounts of the business experience of each director and officer of the Company:
Lewis W. Watson has been President, Treasurer and a director of the Company since its inception. He is a certified public accountant. Mr Watson also serves as a director of OEA, Inc., a company with a class of equity securities registered under the Securities Exchange Act of 1934. OEA, Inc. is engaged in the manufacture of automobile air bag components and also designs and manufactures explosive-actuated devices utilized in personnel escape systems in high speed aircraft, separation and release devices for space vehicles, missiles and aircraft.
Thomas C. Pool has been a director of the Company since October, 1982. He is a registered professional engineer in the State of Colorado who has worked in various capacities in the mining industry since his graduation from Colorado School of Mines in 1968. Mr. Pool has advised the Company that Colorado does not register engineering specialties.
Gary E. Butts has been a director of the Company since October, 1982. He has been a consulting metallurgical engineer from 1987 to 1993 when he was employed as regional manager of minerals for Inchcape Testing Services.
Maurice O. Reiber was employed by the City and County of Denver Building Inspection Division from 1966 to his retirement in February, 1988.
Gerald G. Reiber was employed by Adolph Coors Company as a metal worker from 1969 until his retirement May 1, 1995.
Other than Mr. Watson, no director of the Company serves as a director of any other company with a class of securities registered pursuant to the Securities Exchange Act of 1934 or subject to the requirements of Section 15(d) of that Act or any company registered as an investment company under the Investment Company Act of 1940.
Item 11.

Item 11. Executive Compensation.
Compensation paid to Lewis W. Watson during the three years ended April 30, 1996 is set forth in the following tabulation.
Year For Current Services For Old Unpaid Contract 1996 $40,000 $ -- 1995 20,000 1,000 1994 5,100 12,500
The Company had an employment agreement with Lewis W. Watson under which Mr. Watson agreed to serve as President and Chief Executive Officer until December 31, 1986. That contract provided for an annual salary of $75,000 with an inflation cost of living adjustment. Mr. Watson voluntarily waived the cost of living adjustments and has accepted payments from time to time on the base amount based on the Company's ability to pay. The Company's liability under this agreement was fully accrued during the fiscal year ended April 30, 1987. Mr. Watson has continued to serve on a part time basis since the expiration of his contract. Services performed by the president during the three fiscal years ended in 1996 included performing or supervising required assessment work on unpatented claims; quarterly, annual and other periodic filings with Federal and state tax and regulatory authorities; and presentation of data on properties and lease negotiations with prospective lessees.
Mr. Watson's compensation during the past three fiscal years has been based on the Company's ability to pay and is deemed by the board of directors to be reasonable for the time and effort expended by him.
There is no line graph comparing yearly percentage changes in total shareholder return with other benchmark indices because the Company has paid no dividends during its existence and there has been no active trading market in the stock during the past five years.
None of the officers or directors are paid any fees for attending board of directors meetings. However, all of the officers and directors are reimbursed for any out-of-pocket expenses incurred in connection with the Company's business including travel expenses.
The Company has no retirement, pension or profit-sharing programs. However, the Company, at its discretion, may adopt one or more of such programs or may adopt health insurance or term life insurance at some time in the future.
Other than as set forth above, no director or officer of the Company, or any 5% or more security holder or any relative or
spouse of any of the foregoing persons, has had any material transactions since the beginning of the Company's last fiscal year or has any presently proposed material transactions with the Company.
Item 12.

Item 12. Security Ownership of Certain Beneficial Owners and Management.
Set forth below is certain information as of April 30, 1996 concerning the beneficial ownership of the Company's common stock by those persons known to the Company to be the beneficial owner of more than five percent of the common stock, by its directors and by its officers and directors as a group:
Name, Address of Beneficial Owner/ Number Type of % of Title of Class Number of Persons of Shares Ownership Class - -------------- ----------------- --------- --------- ----- Common Stock Lewis W. Watson 3,233,000 Direct(1) 23.6% $.01 par value P. O. Box 51600 Sparks, NV 89435
Common Stock Maurice O. Reiber 1,250,000 Direct(1) 9.1% $.01 par value 5051 W. Geddes Cir. Littleton, CO 80123
Common Stock Gerald G. Reiber 1,250,000 Direct(1) 9.1% $.01 par value 1860 24th Ave. Greeley, CO 80631
Common Stock Thomas C. Pool 108,000 Direct(1) .8% $.01 par value 2024 Golden Vue Dr. Golden, CO 80401
Common Stock Gary E. Butts -- $.01 par value 8262 Ammons Circle Arvada, CO 80005
Common Stock All officers and $.01 par value directors as a group (five persons) 5,841,000 42.6% (1) Includes shares over which the named individual exercises sole voting and investment powers.
The Company knows of no arrangements, including any pledge of securities, which might at a subsequent date result in a change of control of the Company.
Item 13.

Item 13. Certain Relationships and Related Transactions. The information required by this item is contained in Item 11 above.
Part IV ------- Item 14.

Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.
(a) (1) Financial Statements The following financial statements of the Company are included in Part II, Item 8 of this Report:
Financial Statements for the Years Ended April 30, 1996, 1995, and 1994 (unaudited): Balance Sheets Statements of Operations and Accumulated Deficit Statements of Cash Flows Notes to Financial Statements
(2) Exhibits The following exhibits are filed herewith pursuant to Item 601 of Regulation S-K or are incorporated by reference to previous filings: Exhibit Table No. Document Reference - --------- -------- --------- ( 3) Articles of Incorporation and Bylaws (1) ( 4) Instruments defining the rights of security holders, including indentures None ( 9) Voting Trust Agreement None (10) Material Contracts None (11) Stmt re: Computation of per share earnings (2) (12) Statement re: Computation of ratios None (13) Annual Report to security holders, Form 10-Q or quarterly report to security holders None (18) Letter re: Changes in accounting principles None (19) Previously unfiled documents None (22) Subsidiaries of the Registrant None (23) Published report regarding matters submitted to vote of security holders None (24) Consents of experts and counsel None (25) Power of Attorney None (28) Additional exhibits None (1) Filed with Registration Statement No. 2-69700 (under the Securities Act of 1933) as Exhibits 3.1 and 3.2, respectively and incorporated herein by reference.
(2) Not required since information is ascertainable from financial statements. (b) No reports on Form 8-K were filed by the Company during the three months ended April 30, 1996. (c) See subitem (a) (3) above.
SIGNATURES
Pursuant to the requirements of Section 13 of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
INTERMOUNTAIN RESOURCES, INC.
July 15, 1996 By /s/ L. W. Watson L. W. Watson, President
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of Intermountain Resources, Inc. and in the capacities and on the dates indicated.
July 15, 1996 /s/ L. W. Watson L. W. Watson, President and Director (PrincipalExecutive Officer, Principal Financial and Accounting Officer)
July 17, 1996 /s/ Gary E. Butts Gary E. Butts, Director
July 16, 1996 /s/ Thomas C. Pool Thomas C. Pool, Director
July 16, 1996 /s/ Maurice O. Reiber Maurice O. Reiber, Director
July 17, 1996 /s/ Gerald G. Reiber Gerald G. Reiber, Director