U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-QSB

[X] Quarterly Report Pursuant to Section 13 OR 15(d) of the
Securities Exchange Act of 1934
For the Quarter Ended June 30, 1997
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 organization) 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: None

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

Check whether the 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____.

Common stock outstanding at August 12, 1997 - 14,074,167 shares
of $.005 par value Common stock.

DOCUMENTS INCORPORATED BY REFERENCE: NONE

FORM 10-QSB
INTERLINE RESOURCES CORPORATION

TABLE OF CONTENTS

PART I. - FINANCIAL INFORMATION

Item 1 Financial Statements

Condensed Consolidated Balance Sheet at
June 30, 1997 and December 31, 1996
Condensed Consolidated Statement of Operations for
the three and six months ended June 30, 1997 and 1996

Condensed Consolidated Statements of Cash Flows for
six months ended June 30, 1997 and 1996

Notes to Condensed Consolidated Financial Statements

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

PART II. - OTHER INFORMATION

Item 1 Legal Proceedings

Item 2 Changes in the Securities

Item 3 Defaults Upon Senior Securities

Item 4 Submission of Matters to a Vote of Security Holders

Item 5 Other Information

Item 6(a) Exhibits

Item 6(b) Reports on Form 8-K

Signatures

INTERLINE RESOURCES
CORPORATION
AND SUBSIDIARIES

PART I - ITEM 1

FINANCIAL STATEMENTS
(UNAUDITED)

June 30, 1997

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.

The Company has recorded a liability and an asset for the
repurchase of a used oil refinery from the original
purchaser. This liability and asset are a result of the
purchaser exercising the option, provided in the sales
agreement, to require the Company to repurchase the
refinery. Prior to the option being executed, the Company
was a 26% owner of the joint venture which operated the used
oil refinery and accounted for its investment on the equity
method through June 19, 1996. The original purchaser owned
the remaining 74% of the joint venture and operated the
plant. The Company has consolidated the operations of the
refinery and joint venture for the period June 19, 1996
(date the option was executed) through June 30, 1997.

In the opinion of the Company, all adjustments consisting of
only normal recurring adjustments as of June 30, 1997, 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.

INTERLINE RESOURCES CORPORATION
AND SUBSIDIARIES

Condensed Consolidated Balance Sheet
(Unaudited)

June 30, Dec 31,
1997 1996

Assets

Current assets:
Cash and cash equivalents $1,552,033 $1,130,736
Accounts receivable - trade $971,418 898,364
Inventories 110,463 55,748
Note receivable - current portion 55,200 55,200
Net assets of
discontinued operations 487,819 2,087,610
Other current assets 47,826 34,323

Total current assets 3,224,759 4,261,981

Property, plant and equipment 10,141,345 10,211,811
Accumulated depreciation
and depletion (2,077,627) (1,767,661)

Net property, plant & equipment 8,063,718 8,444,150

Note receivable 106,387 122,590
Technology and marketing rights 1,795,163 1,854,021

Total assets $13,190,027 $14,682,742

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

INTERLINE RESOURCES CORPORATION
AND SUBSIDIARIES

Condensed Consolidated Balance Sheet
(Unaudited)

June 30, Dec 31,
1997 1996

Liabilities and Stockholders' Equity

Current liabilities:
Accounts payable $351,714 $1,389,559
Accrued liabilities 633,857 377,109
Accrued interest, related party 128,899 405,314
Accrued interest, used oil refinery 191,805 57,020
Note payable, related party 3,280,089 5,030,089
Note payable, used oil refinery 2,027,911 2,027,911
Current portion of long-term debt 258,022 420,866

Total current liabilities 6,872,297 9,707,868

Long-term debt less current maturities 684,632 815,191
Deferred income 74,369 177,139

Total liabilities 7,631,298 10,700,198

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; 14,074,167 shares and
14,074,167 shares issued and outstanding at
June 30, 1997 and December 31, 1996 70,371 70,371

Additional paid-in capital 9,185,017 9,185,017
Retained earnings (3,696,659) (5,272,844)

Total stockholders' equity 5,558,729 3,982,544

Total liabilities &
stockholders equity $13,190,027 $14,682,742

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

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

Three months ended Six months ended
June 30, June 30,
1997 1996 1997 1996

Revenue $1,421,132 $1,817,898 $3,902,108 $3,241,438

Direct costs $1,294,272 $1,622,678 3,124,150 2,802,606

Gross margin 126,860 195,220 777,958 438,832

Selling, general and
administrative expenses 321,271 471,131 755,401 882,158
Research and development 19,397 12,297 117,156 344,527
Depreciation, depletion
and amortization 249,320 205,327 510,042 389,265

(Loss) from operations (463,128) (493,535) (604,641) (1,177,118)

Other income (expense) net
Interest income (expense) (11,719) (92,378) (27,062) (123,674)
Interest expense, related party (142,396) - (323,583) -
Interest expense, used oil refinery (66,360) - (134,785) -
(Loss) from investment - (47,511) - (157,639)
Gain from sale of assets - 25,719 773,120 25,719

(Loss) before discontinued operations (683,603) (607,705) (316,951) (1,432,712)

Discontinued operations
(Loss) from discontinued operations (6,966) (265,617) (194,581) (331,331)
Gain on disposal of
discontinued operations 2,087,717 - 2,087,717 -

Total discontinued operations 2,080,751 (265,617) 1,893,136 (331,331)

Net Income (loss) $1,397,148 ($873,322) $1,576,185 ($1,764,043)

Earning per share
(Loss) from continuing operations ($0.05) ($0.04) ($0.02) ($0.10)
Income from discontinued operations $0.15 ($0.02) $0.13 ($0.02)

Income (loss) per common share: $0.10 ($0.06) $0.11 ($0.12)

Weighted average shares o/s 14,074,167 13,953,052 14,074,167 13,955,052

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

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

Six months ended

June 30,
1997 1996

Cash flows from operating activities:
Net income (loss) $1,576,185 ($1,764,043)
Adjustment to reconcile net income (loss) to net
cash (used in) provided by operating activities:
Depreciation, depletion and amortization 510,042 593,253
Gain on disposal of asset (773,120) (30,845)
Common Stock issued for services - 4,000
(Increase) decrease in:
Accounts receivable (73,054) (725,691)
Inventories (54,715) (189,022)
Net assets of discontinued operations 1,599,791 -
Other current assets (13,503) -
Note receivable 16,203 23,857
Other assets - 9,615
Increase (decrease) in:
Accounts payable (1,037,845) (1,582,242)
Accrued liabilities 256,748 (309,036)
Accrued interest, related party (276,415) -
Accrued interest, used oil refinery 134,785 -
Deferred income (102,770) 60,407
Other current liabilities - (398,347)

Net cash provided (used) by
operating activities 1,762,332 (4,308,094)

Cash flows from investing activities:
Proceeds from sale of equipment 524,768 -
Proceeds from sale of joint venture 500,000 -
(Increase) decrease in general partnership - (356,735)
Purchase of intangible assets (16,988) 61,755
Purchase of property, plant & equipment (305,412) (825,880)

Net cash (used in) investing activities 702,368 (1,120,860)

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

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

Six months ended

June 30,
1997 1996

Cash flows from financing activities:
Proceeds from debt obligations - 4,053,805
Payment on long-term debt (2,043,403) (544,788)

Net cash provided by financing activities (2,043,403) 3,509,017

Net (increase) in cash 421,297 (1,919,937)

Cash, beginning of year 1,130,736 1,705,219

Cash, end of quarter $1,552,033 ($214,718)

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

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.

INTERLINE RESOURCES CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements

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 June 30, 1997, the
remaining liability on the note was approximately $112,000.

The Company is involved in litigation with Genesis
Petroleum, Inc. ("GPI") for breach of sale and purchase
agreement (refer to Part II, Item 1 - Legal proceedings).
The Court granted GPI a judgment in the litigation and
awarded GPI damages for breach of contract. The Court
awarded GPI damages in the amount of $2,320,836, less an
offset of the value of the plant assets which the Company
had agreed to purchase from GPI under the agreement. The
Company is to present evidence to the Court as to the value
of the plant and the amount of the offset. Due to the
uncertainty to the value of this offset, the financial
statements presented do not reflect any contingencies for
the outcome of this judgment.

INTERLINE RESOURCES CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements

Contingencies (cont.)
The Company's used oil refinery technology was acquired by
it under the terms of an agreement between the Company as
purchaser and Petroleum Systems, Inc. ("PSI") as seller. The
agreement provided for the payment of royalties to PSI
pursuant to the terms of the Agreement. The Company and PSI
became involved in a dispute as to the certain royalty
matters, and in connection therewith, the Company and PSI
were involved in an arbitration proceeding. On July 29,
1997, PSI filed a lawsuit against the Company in the Third
Judicial District Court of the State of Utah seeking to
reacquire all of the technology rights it had previously
assigned to the Company. The Company intends to vigorously
defend this litigation. However, the litigation has been
stayed as a result of a Petition for Involuntary Bankruptcy,
which was filed against the Company on the same day as the
PSI litigation was filed. PSI was one of the two creditors
signing the Petition for Involuntary Bankruptcy. The
financial statements present an amount that management
believes would be payable should the litigation rule in
favor of the plaintiff.

The Company was a partner in several joint ventures. The
joint ventures have incurred debt related to the development
of the project. The Company is contingently liable for the
debt. The debt totals approximately $1,400,000 at June 30,
1997.

Common Stock
During the year ended December 31, 1994, as a condition for
a private placement of the Company's restricted common
stock, the Company entered into an agreement which contains
certain restrictive covenants. The Company may not sell its
restricted common stock for a price less than $4.50 or issue
options or warrants of equal effect. The Company also may
not repay any related party debt during this period. These
covenants may be waived upon obtaining written consent of
the other party in the agreement.

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 $1,095 and $1,644 for the
three months ended June 30, 1997 and 1996, respectively.

INTERLINE RESOURCES CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements

Reclassification
Certain amounts in the prior years financial statements have
been reclassified to conform to the 1997 presentation.

Discontinued Operations
The financial statements for all periods presented reflect
the operations of, and the sale of, the Utah operations as
"discontinued operations" because the sale took place during
the period ended June 30, 1997. These statements also
include Gagon Mechanical's construction and manufacturing
operations as "discontinued operations." The related assets
and liabilities have been presented as "net assets of
discontinued operations."

PART 1 - ITEM 2

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

Interline Resources Corporation (the "Company"), a Utah
corporation, is engaged in continuing areas of business,
each operating as separate subsidiaries: Interline
Hydrocarbon Inc., a Wyoming corporation, which
commercializes the Company's patented used oil refining
technology; and Interline Energy Services, Inc., a Wyoming
corporation, which manages the Company's oil and gas
operations located in Wyoming. In May 1997 the Company
discontinued the operations of Gagon Mechanical, a Utah
corporation, which was engaged in industrial mechanical
systems construction and the manufacture, installation and
start up of the Company's used oil refining facilities. The
Company is currently subcontracting manufacturing work on a
used oil refinery for a company in Australia.

Interline Energy Services - 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, Wyoming,
include the Well Draw Gas Plant, Interline Crude Gathering
Company, a 20.4% interest in the Hatcreek Partnership and
various producing oil and gas wells.

On May 1, 1997, the Company sold its Utah operations to
Questar Gas Management Company, a subsidiary of Questar
Corporation, for $4 million. The Company's Utah operations
were located near Roosevelt, Utah, and included the Monument
Butte Gathering System and Roseland Wells.

Gagon Mechanical - Construction and Manufacturing. As
part of the Company's restructuring plan in an effort to
reduce overhead and increase operating income, on May 1997,
the Company decided to discontinue the operations of Gagon
Mechanical Contractors. Gagon, a wholly owned subsidiary of
the Company, provided expertise and resources necessary for
the construction of used oil refineries, including
mechanical system construction, such as heating,
ventilation, air conditioning and process piping and
plumbing. Gagon had the ability to build each refinery from
design and engineering to start up and operation. Gagon had
built and installed refineries in Salt Lake City, in Stoke-
on-Trent, England, and in Seoul, South Korea.

As a result, LaMar Gagon, president and former owner of
Gagon Mechanical, has formed a private company, VIACON INC.,
to work in the construction business. The Company is
subcontracting with VIACON to finish construction on a
refinery for Transpacific Group of Companies of Australia.

After the refinery has been completed and shipped,
which the Company anticipates will occur by fourth quarter
1997, VIACON will have the option to purchase, at market
value, the Company's assets related to Gagon. These assets
consist of Gagon's building, located in Sandy, Utah, and
equipment associated with the construction industry. If the
assets cannot be sold to VIACON, then the Company will sell
these assets to other companies. In addition, Mr. Gagon has
resigned from the Company's board of directors.

As part of the Company's restructuring plan, this move
reduces overhead and gives the Company more options as to
what companies manufacture refineries and where those plants
are built. The Company anticipates that when it gets an
order for a used oil refinery, it will solicit bids for
refineries from construction companies, including VIACON.

Interline Hydrocarbon - Used Oil Refining. In January
1993, the Company acquired the exclusive license to a
patented reprocessing technology with the right to
exclusively manufacture, market, use, license, sub-license
and fully commercialize the patented technology as it
relates to all areas and facets of the field of
hydrocarbons. The Company subsequently acquired the patent
rights relating to the technology. As of August 12, 1997,
two plants utilizing the Company's technology were in
production trial stage: a refinery located in Salt Lake City
and a refinery in Stoke-on-Trent, England. The Company is in
the process of starting up a refinery for Dukeun Industrial
Company of South Korea and is subcontracting construction of
a refinery for Transpacific Industries of Australia.

On June 21, 1996, the Company announced it had
reacquired the rights to the United States, Canada and
Mexico from Genesis Petroleum, a subsidiary of Quaker State
Corporation. As a result, the Company agreed to purchase
Genesis Petroleum's interest in the joint venture for
$2,027,977. According to the agreement announced on June
21,1997, the Company was required make the payment by
October 17, 1996. As of August 12, 1997, the Company has not
made the payment (and the associated interest). GPI has
instituted suit against the Company for the payment and
received a judgment of $2,320,836 (See Legal Proceedings;
Part II, Item 1).

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. The Company has recorded a liability and an
asset for the repurchase of a used oil refinery from the
original purchaser. This liability and asset is a result of
the purchaser exercising the option, provided in the sales
agreement, to require the Company to repurchase the
refinery. Prior to the option being executed, the Company
was a 26% owner of the joint venture which operated the used
oil refinery and accounted for its investment on the equity
method through June 19, 1996. The original purchaser owned
the remaining 74% of the joint venture and operated the
plant. The Company has consolidated the operations of the
refinery and joint venture for the period June 19, 1996
(date the option was executed) through June 30, 1997.

Effective May 1, 1997 the Company sold all assets of
its Utah operations and discontinued its Gagon Mechanical
operations. The condensed consolidated balance sheet
presented for June 30, 1997 and December 31, 1996 reflect
all assets and liabilities relating to the assets sold or
operations discontinued under the caption "Net assets of
discontinued operations." The condensed consolidated
statement of operations presented for three and six months
ended June 30, 1997 and June 30, 1996 reflect the revenue
and expense relating to the assets sold or discontinued
under the caption "Loss from discontinued operations."

Comparison of six months ending June 30, 1997 and 1996

Total Revenues
Revenues increased $660,607 or 20.38%, to $3,902,108
for the six months ended June 30, 1997 as compared to
$3,241,438 for the six months ended June 30, 1996. This
revenue increase included a $878,777, or 28.41%, decrease in
oil and gas revenues; and a $1,539,446, or 1,040%, increase
in used oil refining revenues. The Company's total revenues,
on a segment basis, for six months ended June 30, 1997 and
1996 were as follows:

The following table excludes any revenues generated
from the assets of the Utah operations and Gagon Mechanical
construction and manufacturing operations. The Utah assets
were sold May 1, 1997. Gagon Mechanical operations were
discontinued in May 1997, although the Company is
subcontracting the construction of the Australia plant. The
results of these operations are reflected in the condensed
consolidated statement of operations under the caption "Loss
from discontinued operations."

Six Month Revenues Ended June 30, 1997 and 1996

1997 % 1996 %

Oil and Gas $2,214,764 56.76% $3,093,541 95.44%
Construction 0 0% 0 0%
Manufacturing 0 0% 0 0%
Used oil refining 1,687,344 43.24% 147,898 4.56%

Total Revenue $3,902,108 100% $3,241,438 100%

Comparison of three months ending June 30, 1997 and 1996

Total Revenues
Revenues decreased $396,766, or 21.83%, to $1,421,132
for the three months ended June 30, 1997 as compared to
$1,817,898 for the three months ended June 30, 1996. This
revenue decrease included a $976,305, or 56.61%, decrease in
oil and gas revenues; and a $579,539, or 621.98%, increase
in used oil refining revenues. The Company's total revenues,
on a segment basis, for three months ended June 30, 1997 and
1996 were as follows:

Three Month Revenues Ended June 30, 1997 and 1996

1997 % 1996 %

Oil and gas $748,417 52.66% $1,724,722 94.87%
Construction 0 0% 0 0%
Manufacturing 0 0% 0 0%
Used Oil Refining 672,715 47.34% 93,176 5.13%

Total Revenue $1,421,132 100% $1,817,898 100%

Oil and Gas Revenues. Oil and gas revenues contributed
approximately 52.66% of total revenues for the three months
ended June 30, 1997, as compared to approximately 94.87% for
the three months ended June 30, 1996. Revenues decreased
$976,305, or 56.61%, to $748,417 for the three months ended
June 30, 1997 as compared to $1,724,722 for three months
ended June 30, 1996.

The revenues presented in the above table are solely
from the Company's Wyoming operations. This revenue decrease
of $976,305, or 56.61% is mainly attributed to several
liquid purchase contracts that expired. The Company tried to
negotiate new terms for these liquids, but after considering
the very low margins and the risk on the structure of the
pricing, the Company did not accept the existing terms.

Construction and Manufacturing Revenues. As part of the
Company's restructuring plan to reduce overhead and increase
operating income, in May 1997, the Company decided to
discontinue the operations of Gagon Mechanical Contractors.
As a result, LaMar Gagon, president and former owner of
Gagon Mechanical, has formed a private company, VIACON INC.,
to work in the construction business. The Company is
subcontracting with VIACON to finish construction on a
refinery for Transpacific Group of Companies of Australia.

The results of Gagon's operations are reflected in the
condensed consolidated statement of operations under the
caption "Loss from discontinued operations."

Used Oil Refining Revenues. Used oil refining revenues
contributed 47.34% of total revenues for the three month
quarter ended June 30, 1997 compared to 5.13% for the three
months ended June 30, 1996. These revenues increased
$579,539, or 621.98%, to $672,715 for the three months ended
June 30, 1997 compared to $93,176 for the three months ended
June 30, 1996. The increase of $579,539 in used oil refining
revenues is mainly attributed the Company consolidating the
operations of the Salt Lake City used oil refinery beginning
June 21, 1996 (See the cover page of Part I, Item 1, Notes
to Consolidated Financial Statements: "Contingencies" and
Part II, Item 1 - Legal Proceedings).

Direct Costs. Direct costs decreased $328,406, or
20.24%, to $1,294,272 for the three months ended June 30,
1997 compared to $1,622,678 for the three months ended June
30, 1996. The decrease of $328,406 for the three months
ended June 30, 1997 was mainly attributed to a decrease in
the Company's total revenues. As a percent of revenues,
direct costs increased to 91.07% for the three months ended
June 30, 1997 compared to 89.26% for the three months ended
June 30, 1996.

Selling, General and Administrative. Selling, general
and administrative expenses decreased $149,860, or 31.81%,
to $321,271 for three months ended June 30, 1997 compared to
$471,131 for three months ended June 30, 1996. As a percent
of revenues, selling, general and administrative expenses
were 22.61% for the three months ended June 30, 1997
compared to 25.92% for the three months ended June 30, 1996.
These expenses consisted principally of salaries and
benefits, travel expenses, legal, information technical
services and administrative personnel of the Company. Also
included are outside legal and accounting fees, and expenses
associated with computer equipment and software used in the
administration of the business.

Research and Development. Research and development
expenses increased $7,100, or 57.74%, to $19,397 for three
months ended June 30, 1997 compared to $12,297 for the three
months ended June 30, 1996. As a percent of revenues,
research and development expenses increased to 1.36% for the
three months ended June 30, 1997 compared to 0.68% for the
three months ended June 30, 1996.

Research and development expenses for the six months
ended June 30, 1997 were $117,156. These expenses were
mainly attributable to development and enhancement of the
Company's new hydrocarbon refining technology. The Company
believes that continued investment in research and
development is critical to its future growth and
profitability. The Company, therefore, expects that research
and development expenses will continue in future periods.

Depreciation and Amortization. Depreciation and
amortization expenses increased $43,993, or 21.43%, to
$249,320 for the three months ended June 30, 1997 compared
to $205,327 for the three months ended June 30, 1996. As a
percent of revenues, depreciation and amortization expenses
increased to 17.54% for the three months ended June 30, 1997
compared to 11.29% for the three months ended June 30, 1996.
The increase of $43,993 is mainly attributed to the
amortization of its refining technology and marketing rights
and depreciation attributed to the Salt Lake City used oil
refinery.

Operating Income (Loss). Operating losses decreased
$30,407, or 6.16%, to $463,128 in operating loss for the
three months ended June 30, 1997 compared to a $493,535
operating loss for the three months ended June 30, 1996. The
$30,407 decrease in operating losses was mainly attributed
to a reduction in selling, general and administrative
expenses.

Loss from Discontinued Operations. Included in loss
from discontinued operations are all revenues and expenses
associated with the Utah operations and the Gagon Mechanical
operations. On May 1, 1997, the Company sold all assets of
its Utah operations to Questar Gas Management. Also in May
1997, the Company decided to discontinue its Gagon
Mechanical operations, however, the Company is
subcontracting work on the Australia used oil refinery to
another company. Losses from discontinued operations
decreased $258,651 to $6,966 in losses for the three months
ended June 30, 1997 compared to $265,617 in losses for the
three months ended June 30, 1996. This decrease of $258,651
is mainly attributed to low margins on commercial
construction contracts and cost overruns incurred in 1996.

Liquidity and Capital Resources

Sources of liquidity for the Company include revenues
from oil and gas operations and revenues from the
hydrocarbon refining technology and rights. Management
believes that the Company's cash from operating activities
is not adequate to meet operating, capital and current debt
needs in the foreseeable future. In an effort to increase
future cash flow from operating activities and minimize
expenses, the Company has undergone some operational
changes, personnel changes and corporate restructuring.

As part of the Company's restructuring plan to reduce
overhead and increase operating income, in May 1997, the
Company decided to discontinue the operations of Gagon
Mechanical Contractors.

Some of these changes have been reflected in the
current report. The full impact of these changes will be
implemented by the end of 1997. Also, the Company signed an
agreement with Transpacific Industries of Australia in
September 1996, and has been subcontracting construction on
a $3.4 million used oil refinery. The cash flow from this
contract will extend into fourth quarter 1997.

On May 1, 1997, the Company sold its Monument Butte gas
pipeline system to Questar Gas Management Company, a
subsidiary of Questar Corporation, for $4 million. The
effective date of the sale is May 1, 1997.

Of the $4 million proceeds from the sale of the
Monument Butte assets, approximately $800,000 was used to
pay off secured debt directly related to the assets sold, $1
million was put in an escrow account and $2.2 million was
paid toward notes payable to a related party, of which
$450,000 was paid toward interest and $1,750,000 was applied
toward the principal on the following four notes due to a
related party of the Company. The $2.2 million payment paid
off the balances of notes I and II, leaving a balance of
$3,280,089 in principal and $128,899 in interest on the two
remaining notes as of June 30, 1997.

As disclosed in previous SEC filings, three of the
following Senior Secured notes to a shareholder totaled
$2,530,089. This amount and the associated interest were due
September 1, 1996. As a result of non-payment by the
Company, the notes are currently in default. (An event of
default under another $2.5 million note (see IV) has
occurred, which permits acceleration of the Company's
obligation to repay the principal and interest.) The lender
has indicated to the Company that he does not currently
intend to take remedial action against the Company.

I. During 1994, the Company issued a $250,000 senior
convertible note payable to a related party. The note
bears interest at 10% and was due on September 1, 1996.
After December 31, 1994, the note is convertible in
full to 67,750 shares of the Company's restricted
common stock at the option of the note holder. As a
result of the default, the interest rate has changed to
12%. The Company has paid this balance in full.

II. On February 29, 1996 the Company obtained $1,500,000 in
a 6% senior secured note from the same related party.
The obligation was due September 1, 1996. In the event
of a default on the note, the principal can be
converted to shares of the Company's common stock at
the price of the lesser of $3.20 per share or 80
percent of the average closing price for the Company's
shares for the five consecutive trading days preceding
the date of conversion. The note was secured by all of
the issued and outstanding stock of two subsidiaries,
Interline Energy Services and Gagon Mechanical
Contractors. As a result of the default, the interest
rate has changed to 12%. The Company has paid this
balance in full.

III. On July 19, 1996, the Company obtained $780,089 in a
9.5% senior secured note from the same related party.
The obligation was due September 1, 1996. The note is
secured by the outstanding shares of Interline Energy
Services, Gagon Mechanical and Interline Hydrocarbon.
As a result of the default, the interest rate has
changed to 16%.

IV. On May 15, 1996, the Company obtained $2,500,000 in a
9.25% senior secured note from the same related party
as above. The note is due January 15, 1998 and is
secured by the outstanding shares of Interline Energy
Services and Gagon Mechanical. Upon default, the loan
may be converted into shares of the Company's common
stock at the lesser of $3.12 per share or 80 percent of
the average closing price for shares of the Company's
common stock for five consecutive trading days
preceding the date of conversion. As additional
consideration for the shareholder making the Loan to
the Company, the Company has issued a Warrant to
purchase up to 250,000 shares of common stock at $3.90
per share. As a result of the default, the interest
rate has changed to 16%.

In an effort to cure the default status on the
remaining two notes, the Company is seeking to restructure
the note obligations with the lender, or raise additional
sums through equity financing. There can be no assurance
that this will be accomplished.

As of August 13, 1997, the Company was unable to pay
the $2,027,911 note and the associated interest that was
required to be paid to GPI on October 17, 1996, as required
by a June 19, 1996 agreement between the companies. Under
this agreement, the Company was to make this payment in
exchange for GPI's interest in the Genesis refinery. GPI
instituted suit against the Company and has received a
judgment of $2,320,826.

If the Company is unable to restructure its past due
obligations or sell sufficient assets or raise additional
financing, then there can be no assurance that the Company
will be able to continue its current operations, and the
Company may be compelled to consider filing under Chapter 11
of the federal bankruptcy laws. The Company may also need to
raise additional financing in order to fund its current
operations, depending upon its operating results, and notes
that it has required financing for such purposes in the
past. In addition, the Company has had a Petition for
Involuntary Bankruptcy filed against it by two parties under
Chapter 7 of the federal bankruptcy laws (See Legal
Proceedings, Part II, Item 1).

In the event management elects to participate in a
joint venture in owning and operating refining plants, the
Company would need to raise additional sums through
borrowing or equity financing. Additionally, it is
Management's intent that when potential purchasers of a
refining plant place an order, the payment terms will be
tailored to provide construction funds to build the plants.
It is not possible to determine whether or not the Company
will be able to receive additional financing.

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.

PART II -- OTHER INFORMATION

Item 1: Legal Proceedings

Genesis Petroleum Inc.
The Company has previously reported a lawsuit that had
been filed against it in the Third Judicial District Court
of Salt Lake County, State of Utah, by Genesis Petroleum
Inc. ("GPI") for a breach of a Sale and Purchase Agreement.
Under the Agreement, the Company agreed to purchase GPI's
interest in the Salt Lake City used oil refinery that had
been operated by a joint venture owned by GPI and a
subsidiary of the Company. In July 1997, the Court granted
GPI a judgment in the litigation and awarded GPI damages for
breach of contract. The Court awarded GPI damages in the
amount of $2,320,836, less an offset of the value of the
assets which the Company had agreed to purchase from GPI
under the Agreement, but as a result of the Company's
default, these assets had been retained by GPI. The Company
was to present evidence to the Court as to the value of the
Plant and the amount of the offset. Prior to the Company
presenting the Court with such evidence, GPI and another
creditor filed a Petition for Involuntary Bankruptcy against
the Company (described further below).

Despite the litigation, the Company and GPI had entered
into a Letter of Intent to resolve the litigation. The
Letter of Intent called for the Company's purchase of GPI's
interests in the Salt Lake City plant pursuant to the terms
set forth in the Letter of Intent. Before the Company
completed review of all the transaction documents, GPI and
another company filed the Petition for Involuntary
Bankruptcy described below.

Petroleum Systems Inc.
The Company's used oil refinery technology was acquired
by it under the terms of an agreement between the Company as
purchaser and Petroleum Systems, Inc. ("PSI") as seller. The
agreement provided for the payment of royalties to PSI
pursuant to the terms of the Agreement. The Company and PSI
became involved in a dispute as to the certain royalty
matters and in connection therewith, the Company and PSI
were involved in an arbitration proceeding. On July 29,
1997, PSI filed a lawsuit against the Company in the Third
Judicial District Court of the State of Utah seeking to
reacquire all of the technology rights it had previously
assigned to the Company. The Company intends to vigorously
defend this litigation. However, the litigation has been
stayed as a result of the Petition for Involuntary
Bankruptcy, which was filed against the Company on the same
day as the PSI litigation was filed. PSI was one of the two
creditors signing the Petition for Involuntary Bankruptcy.

Involuntary Bankruptcy Petition
On July 29, 1997, PSI and GPI (described above) jointly
executed a Petition for Involuntary Bankruptcy ("Petition")
against the Company. As described above, both of such
companies were involved in commercial disputes and
litigation against the Company at the time the Petition was
filed. Prior to the time the Petition was filed, GPI
informed the Company that if it did not execute various
documents relating to the purchase of the Salt Lake City
refinery prior to 4 p.m. on July 29, 1997, it would file the
Petition. The Company did not execute such documents by 4
p.m. on such date and GPI and PSI filed the Petition.

After the Petition was filed, GPI and PSI filed a
Motion to have a Trustee appointed to manage the Company
during the pendency of the Bankruptcy Petition. On August 8,
1997, a hearing on the Motion was held in U.S. Bankruptcy
Court. The Judge dismissed the Motion on the basis that the
bankruptcy law required three creditors to sign the Petition
for Involuntary Bankruptcy, but only GPI and PSI had signed
the Petition against the Company. The Company has filed a
Motion to Dismiss the Petition.

The Company intends to vigorously contest the
Bankruptcy action.

Item 2. Changes in Securities:
None

Item 3. Defaults Upon Senior Securities:
As reported in previous filings, the Company was in
default to the following three Senior Secured notes due to a
related party totaling $2,530,089 and the associated
interest due September 1, 1996. (An event of default under
another $2.5 million note (see IV) has occurred, which
permits acceleration of the Company's obligation to repay
the principal and interest.) The lender has indicated to the
Company that he does not currently intend to take remedial
action against the Company.

On May 1, 1997, the Company sold its Monument Butte gas
pipeline system to Questar Gas Management Company, a
subsidiary of Questar Corporation, for $4 million. Of the $4
million proceeds from the sale of the Monument Butte assets,
approximately $800,000 was used to pay off secured debt
directly related to the assets sold, $1 million was put in
an escrow account and $2.2 million was paid toward the notes
payable to the related party. The Company has informed the
related party that of the $2.2 million, the Company paid
$1.75 million in principal and $450,000 in interest.
Therefore, the Company has paid off the balances of
principal and interest of notes I and II. As of June 30,
1997, the aggregate amount of principal outstanding on the
two remaining notes was $3,280,089,and the aggregate amount
of interest outstanding on the two remaining notes was
$128,899.

II. On February 29, 1996 the Company obtained $1,500,000 in
a 6% senior secured note from the same related party.
The obligation is due September 1, 1996. In the event
of a default on the note the principal can be converted
to shares of the Company's common stock at the price of
the lesser of $3.20 per share or 80 percent of the
average closing price for the Company's shares for the
five consecutive trading days preceding the date of
conversion. The note was secured by all of the issued
and outstanding stock of two subsidiaries, Interline
Energy Services and Gagon Mechanical Contractors. As a
result of the default, the interest rate has changed to
12%. The Company has paid this balance in full.

III. On July 19, 1996, the Company obtained $780,089 in a
9.5% senior secured note from the same related party.
The note is secured by the outstanding shares of
Interline Energy Services, Gagon Mechanical and
Interline Hydrocarbon. As a result of the default, the
interest rate has changed to 16%.

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) has made a final
determination to delist the Company from the AMEX's Emerging
Company Marketplace. After a careful review of this matter
and after discussions with the AMEX, the Company has
determined that it will not appeal the AMEX's decision.

The Company will immediately seek to have a market
develop for its common stock in the over-the-counter market
with price quotations published on the NASD Electronic
Bulletin Board and/or the National Quotation Bureau's Pink
Sheets.

The AMEX halted trading in the Company's common stock
as a result of the Company's July 30, 1997 news release. The
July 30 news release announced the filing of a petition for
involuntary bankruptcy against the Company by two companies
with which the Company is engaged in commercial litigation
and arbitration proceedings. The July 30 news release also
announced the filing of a lawsuit against the Company by one
of the two companies filing the petition for involuntary
bankruptcy. The AMEX has informed the Company that the
trading halt on the AMEX, which was initiated on July 31,
1997, will not be lifted.

As of August 21, 1997 a market was being made of the
Company's common stock on the NASD Bulletin Board under the
symbol "IRCE."

Item 6(a). Exhibits
None

Item 6(b). Form 8-K
As previously reported, the Company filed a Form 8-K concerning
the sale of its Utah oil and gas operations to Questar Gas Management
Company for $4 million. The 8-K was files on May 14, 1997.

SIGNATURES

In accordance with the requirements of the Exchange
Act, the Registrant caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.

Dated: August 21, 1997
INTERLINE RESOURCES CORPORATION
(Registrant)

By:/s/ Michael R. Williams
Michael R. Williams, President
and Chief Executive Officer
Principal Executive Officer
Director

By:/s/ Mark W. Holland
Mark W. Holland, Chief Financial Officer