##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 FORM 10-Q
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 FOR THE QUARTERLY PERIOD ENDED JANUARY 31, 2007
 OR
 o
    
    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 333-113140
 INN OF THE MOUNTAIN GODS RESORT AND CASINO AND SUBSIDIARIES
  Not Applicable
    
    75-3158926(State or other jurisdiction
    
    (I.R.S. Employerof incorporation or organization)
    
    Identification Number)287 Carrizo Canyon RoadMescalero, New Mexico
    
    88340(Address of principal executive offices)
    
    (Zip Code)
 (505) 464-7004
 þ o
  o o þ
 o þ




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##### 



INN OF THE MOUNTAIN GODS RESORT AND CASINO AND SUBSIDIARIES
 FORM 10-Q
 FOR THE QUARTER ENDED JANUARY 31, 2007
 INDEX
 PagesPART I. FINANCIAL INFORMATIONItem 1. Consolidated Financial Statements:
    
    
    1Consolidated Balance Sheets as of January 31, 2007 (unaudited) and April 30, 2006
    
    
    1Consolidated Statements of Operations for the three month and nine month periods ended
January 31,2007 (unaudited) and January 31, 2006 (unaudited)
    
    
    2Consolidated Statements of Cash Flows for the nine month periods ended January 31, 2007
(unaudited) and January 31, 2006 (unaudited)
    
    
    3Notes to Consolidated Financial Statements (unaudited)
    
    
    4Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    23Item 3. Quantitative and Qualitative Disclosures about Market Risk
    
    
    33Item 4. Controls and Procedures
    
    
    33PART II. OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    37Item 1A. Risk Factors
    
    
    37Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    37Item 3. Defaults Upon Senior Securities
    
    
    37Item 4. Submission of Matters to a Vote of Security Holders
    
    
    37Item 5. Other Information
    
    
    37Item 6. Exhibits
    
    
    37Signatures
    
    
    39EX-31.1EX-31.2EX-32.1
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##### Table of Contents



PART I FINANCIAL INFORMATION
 
 Item 1. Financial Statements.
 INN OF THE MOUNTAIN GODS RESORT AND CASINO AND SUBSIDIARIES
 
 CONSOLIDATED BALANCE SHEETS
 As of
    
    
    As ofJanuary 31, 2007
    
    
    April 30, 2006(Unaudited)ASSETSCURRENT ASSETS:Cash and cash equivalents
    
    $
    9,334,076
    
    
    $
    16,768,372Restricted cash and cash equivalents
    
    
    
    
    
    
    18,171,534Accounts receivable, net of allowance for doubtful accounts
    
    
    240,437
    
    
    
    565,420Inventories
    
    
    861,975
    
    
    
    809,789Prepaid expenses
    
    
    514,281
    
    
    
    372,774Total current assets
    
    
    10,950,769
    
    
    
    36,687,889NON CURRENT ASSETS:Property, plant and equipment
    
    
    299,461,313
    
    
    
    300,320,136Accumulated depreciation and amortization
    
    
    (83,338,287
    )
    
    
    (71,385,662
    )Property, plant and equipment, net
    
    
    216,123,026
    
    
    
    228,934,474Deferred financing cost, net
    
    
    6,476,964
    
    
    
    7,695,897Other long-term assets
    
    
    130,356
    
    
    
    42,003Total assets
    
    $
    233,681,115
    
    
    $
    273,360,263LIABILITIES AND EQUITYCURRENT LIABILITIES:Accounts payable and other short-term liabilities
    
    $
    253,203
    
    
    $
    2,606,670Construction accounts payable
    
    
    1,382,638
    
    
    
    2,274,874Accrued expenses
    
    
    6,774,603
    
    
    
    10,760,344Accrued interest
    
    
    5,200,000
    
    
    
    11,200,000Deposits and advance payments
    
    
    63,773
    
    
    
    372,470Current portion of long-term debt
    
    
    3,804,532
    
    
    
    3,250,329Total current liabilities
    
    
    17,478,749
    
    
    
    30,464,687NON CURRENT LIABILITIES:Long-term debt, net of current portion
    
    
    209,101,906
    
    
    
    211,530,149Total liabilities
    
    
    226,580,655
    
    
    
    241,994,836COMMITMENTS AND CONTINGENCIES (Note 9)EQUITY:Contributed capital
    
    
    31,653,936
    
    
    
    52,633,096Accumulated deficit
    
    
    (24,553,476
    )
    
    
    (21,267,669
    )Total equity
    
    
    7,100,460
    
    
    
    31,365,427Total liabilities and equity
    
    $
    233,681,115
    
    
    $
    273,360,263
  1




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##### Table of Contents



INN OF THE MOUNTAIN GODS RESORT AND CASINO AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF OPERATIONS
 (unaudited)
 Three Months Ended
    
    
    Three Months Ended
    
    
    Nine months Ended
    
    
    Nine months EndedJanuary 31, 2007
    
    
    January 31, 2006
    
    
    January 31, 2007
    
    
    January 31, 2006Revenues:Gaming
    
    $
    17,067,099
    
    
    $
    17,172,786
    
    
    $
    59,213,625
    
    
    $
    58,870,770Hotel
    
    
    2,866,620
    
    
    
    2,263,179
    
    
    
    10,442,796
    
    
    
    8,439,212Food and Beverage
    
    
    3,282,789
    
    
    
    2,721,114
    
    
    
    10,482,813
    
    
    
    9,618,398Recreation and other
    
    
    7,184,094
    
    
    
    4,084,469
    
    
    
    16,742,031
    
    
    
    12,970,970Gross Revenue
    
    
    30,400,602
    
    
    
    26,241,548
    
    
    
    96,881,265
    
    
    
    89,899,350Less-Promotional Allowances
    
    
    1,779,543
    
    
    
    558,207
    
    
    
    2,756,729
    
    
    
    2,331,207Net Revenue
    
    
    28,621,059
    
    
    
    25,683,341
    
    
    
    94,124,536
    
    
    
    87,568,143Operating ExpensesGaming
    
    
    3,782,341
    
    
    
    3,799,063
    
    
    
    12,274,414
    
    
    
    12,788,582Hotel expenses
    
    
    1,006,331
    
    
    
    1,180,401
    
    
    
    3,442,752
    
    
    
    3,916,389Food and beverage
    
    
    3,251,831
    
    
    
    2,962,554
    
    
    
    10,618,119
    
    
    
    12,410,024Recreation and other
    
    
    3,167,961
    
    
    
    3,043,533
    
    
    
    10,117,010
    
    
    
    9,368,203Marketing and Advertising
    
    
    2,259,640
    
    
    
    1,899,078
    
    
    
    7,650,629
    
    
    
    6,658,771General and administrative
    
    
    5,204,468
    
    
    
    4,155,574
    
    
    
    16,239,325
    
    
    
    17,831,382Health Insurance  Medical
    
    
    617,657
    
    
    
    804,660
    
    
    
    1,704,953
    
    
    
    2,174,101401 K
    
    
    99,183
    
    
    
    
    
    
    
    99,183
    
    
    
    Mescalero Apache Telecom
    
    
    47,539
    
    
    
    33,877
    
    
    
    151,134
    
    
    
    109,887Tribal Regulatory Fees
    
    
    600,000
    
    
    
    600,000
    
    
    
    1,800,000
    
    
    
    2,338,697Depreciation and amortization
    
    
    4,502,354
    
    
    
    4,455,568
    
    
    
    13,576,720
    
    
    
    13,288,219Total Operating Expenses
    
    
    24,539,305
    
    
    
    22,934,308
    
    
    
    77,674,239
    
    
    
    80,884,255Operating Income
    
    
    4,081,754
    
    
    
    2,749,033
    
    
    
    16,450,297
    
    
    
    6,683,888Other Income (Expense)Interest Income
    
    
    36,810
    
    
    
    84,243
    
    
    
    217,392
    
    
    
    346,377Interest Expense
    
    
    (6,655,336
    )
    
    
    (7,409,193
    )
    
    
    (20,012,919
    )
    
    
    (21,048,073
    )Other Income (expense)
    
    
    
    
    
    
    (39,844
    )
    
    
    59,423
    
    
    
    (339,057
    )Total Other Income
(expense)
    
    
    (6,618,526
    )
    
    
    (7,364,794
    )
    
    
    (19,736,104
    )
    
    
    (21,040,753
    )Net Loss
    
    $
    (2,536,772
    )
    
    $
    (4,615,761
    )
    
    $
    (3,285,807
    )
    
    $
    (14,356,865
    )
  2




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INN OF THE MOUNTAIN GODS RESORT AND CASINO AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
 For the nine months ended January 312007
    
    
    2006Cash flows from operating activities:Net loss
    
    $
    (3,285,807
    )
    
    $
    (14,356,865
    )Adjustments to reconcile net loss to net cash used in operating activities:Depreciation and amortization
    
    
    15,575,980
    
    
    
    13,288,220Changes in assets and liabilities:Accounts receivable, net of allowance
    
    
    324,983
    
    
    
    186,184Inventories
    
    
    282,474
    
    
    
    372,354Prepaid expenses
    
    
    (476,167
    )
    
    
    322,876Other long-term assets
    
    
    (88,353
    )
    
    
    118,533Accounts payable
    
    
    (2,353,467
    )
    
    
    (1,320,915
    )Accrued expenses
    
    
    (4,294,438
    )
    
    
    (7,693,413
    )Accrued interest payable
    
    
    (6,000,000
    )
    
    
    312,780Net cash used by operating activities
    
    
    (314,795
    )
    
    
    (8,770,246
    )Cash flows from investing activities:Purchase of property, plant and equipment
    
    
    (374,579
    )
    
    
    (10,382,551
    )Construction accounts payable
    
    
    (892,236
    )
    
    
    (2,870,860
    )Net cash used in investing activities
    
    
    (1,266,815
    )
    
    
    (13,253,411
    )Cash flows from financing activities:Cash held for construction payments
    
    
    18,171,534
    
    
    
    14,763,247Principal borrowings (payments) on long-term debt
    
    
    (3,045,060
    )
    
    
    14,286,180Distributions to Mescalero Apache Tribe
    
    
    (20,979,160
    )
    
    
    (6,944,896
    )Net cash provided (used)by financing activities
    
    
    (5,852,686
    )
    
    
    22,104,531Net increase (decrease) in cash and cash equivalents
    
    
    (7,434,296
    )
    
    
    80,874Cash and cash equivalents, beginning of period
    
    
    16,768,372
    
    
    
    13,718,521Cash and cash equivalents, end of period
    
    $
    9,334,076
    
    
    $
    13,799,395Supplemental cash flow information:Cash paid for interest
    
    $
    24,094,305
    
    
    $
    21,048,073Non-cash investing and financing activities:Property, plant and equipment acquired through capital leases
    
    $
    1,171,020
    
    
    $
    422,500
 3




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INN OF THE MOUNTAIN GODS RESORT AND CASINO AND SUBSIDIARIES
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
 NOTE 1BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 Reporting Entity and Operations
 IMG Resort and Casino Tribe Resort Casino Apache Enterprise Travel Center Travel Center Casino Ski Apache Ski Apache Resort Inn Inn Hotel
 Inn of the Mountain Gods Casino IGRA
 SEC
 Principles of Consolidation
  Use of Estimates
  Cash and Cash Equivalents
  4




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##### Table of Contents



Restricted Cash and Cash Equivalents
  Accounts Receivable
  Inventories
  Property, Plant and Equipment
   Non-gaming equipment, furniture and other
    
    3 - 15 yearsGaming equipment
    
    5 - 7 yearsLeasehold and land improvements, lake and golf course
    
    5 - 30 yearsBuildings, lifts and snowmaking equipment
    
    10 - 50 years
 Deferred Financing Costs
  Impairment of Long Lived Assets
 Accounting for the Impairment or Disposal of Long-Lived
Assets SFAS 144
 Fair Value of Financial Instruments
  5




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##### Table of Contents



Contributed Capital
  Revenues
   Promotional Allowances
   EITF Accounting for Certain Sales Incentives Accounting for Points and Certain Other Time-Based or Volume-Based Sales Incentive Offers, and
Offers for Reproduces, or Services to be delivered in the futur
  Quarter Ended Jan. 31,
    
    
    Nine Months Ended Jan. 312007
    
    
    2006
    
    
    2007
    
    
    2006Rooms
    
    $
    150,534
    
    
    $
    (22,026
    )
    
    $
    687,332
    
    
    $
    (294,952
    )Food and beverage
    
    
    94,641
    
    
    
    377,515
    
    
    
    435,228
    
    
    
    373,137Other
    
    
    (16,680
    )
    
    
    (221
    )
    
    
    (10,277
    )
    
    
    (14,575
    )$
    228,495
    
    
    $
    355,268
    
    
    $
    1,112,283
    
    
    $
    63,610
 Compensated Absences
  6




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##### Table of Contents




    
    20 days or 160 hours for team members with one to three years of employment.
    
    27 days or 216 hours for team members with four to fifteen years of employment.
    
    33 days or 264 hours for team members with sixteen or more years of employment.
    
    
    One week of annual leave after one year of employment.
    
    Two weeks of annual leave after two years of employment.
    
    Three weeks of annual leave after three years of employment.
    
    Four weeks of annual leave after fifteen years of employment.
   Marketing and Advertising Costs
   Tribal Taxes
  7




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##### Table of Contents



Classification of Departmental Costs
  Income Taxes
  New Accounting Pronouncements
 SFAS 154
 Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in
Current Year Financial Statements ( SAB 108 ),
 NOTE 2ALLOWANCE FOR DOUBTFUL ACCOUNTS
   8




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NOTE 3RESTRICTED CASH AND CASH EQUIVALENTS
  January 31, 2007
    
    
    April 30, 2006Interest reserve
    
    $
    
    
    
    $
    22,881Construction reserve
    
    
    
    
    
    
    15,818,236Construction retainage
    
    
    
    
    
    
    2,330,417Total restricted cash
    
    $
    
    
    
    $
    18,171,534
 NOTE 4INVENTORIES
  January 31, 2007
    
    
    April 30, 2006Food and beverage
    
    $
    288,440
    
    
    $
    259,580Golf and pro shop
    
    
    112,591
    
    
    
    134,377Gift shops, fuel and other
    
    
    460,944
    
    
    
    567,577Reserves
    
    
    
    
    
    
    (151,745
    )Inventories
    
    $
    861,975
    
    
    $
    809,789
 NOTE 5PROPERTY, PLANT AND EQUIPMENT, NET
  January 31, 2007
    
    
    April 30, 2006Land
    
    $
    538,894
    
    
    $
    538,894Buildings, lifts and snowmaking equipment
    
    
    217,928,997
    
    
    
    217,928,997Non-gaming equipment, furniture and other
    
    
    50,518,663
    
    
    
    51,167,661Gaming equipment
    
    
    21,026,275
    
    
    
    21,469,769Leasehold and land improvements, lake and golf course
    
    
    6,842,477
    
    
    
    6,842,477Subtotal
    
    
    296,855,306
    
    
    
    297,947,798Less accumulated depreciation and amortization
    
    
    (83,338,287
    )
    
    
    (71,385,662
    )Property, plant and equipment, net
    
    
    213,517,019
    
    
    
    226,562,136Construction in progress (CIP)
    
    
    2,606,007
    
    
    
    2,372,338Net Property, plant and equipment
    
    $
    216,123,026
    
    
    $
    228,934,474
 NOTE 6LONG-TERM DEBT
 Notes
   9




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##### Table of Contents



Long-term debt is summarized as follows:
 January 31, 2007
    
    
    April 30, 2006Senior Notes, bearing interest at a fixed rate of 12%, maturing in 2010
    
    $
    200,000,000
    
    
    $
    200,000,000Bureau of Indian Affairs, unsecured notes payable with payments of $27,100
per month, including interest at 8.5%, maturing in 2011
    
    
    1,221,589
    
    
    
    1,457,501Capital Equipment Loans. Five (5) year term, 7.65% interest
    
    
    11,007,502
    
    
    
    13,099,354Short-Term Notes, up to 8% imputed interest
    
    
    677,347
    
    
    
    223,623212,906,438
    
    
    
    214,780,478Less current portion
    
    
    (3,804,532
    )
    
    
    (3,250,329
    )Long-term portion
    
    $
    209,101,906
    
    
    $
    211,530,149
  2007 (nine months)
    
    $
    1,4582008
    
    
    3,2732009
    
    
    3,5342010
    
    
    203,8172011
    
    
    7222012+
    
    
    102$
    212,906
  10




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##### Table of Contents



NOTE 7GAMING REVENUE SHARING AND REGULATORY FEES
    NOTE 8RISK MANAGEMENT
     NOTE 9  COMMITMENTS AND CONTINGENCIES
 Legal Matters
  Occupancy Fee
 11




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##### Table of Contents



Construction Agreement
  Employment Agreements
   NOTE 10RELATED-PARTY TRANSACTIONS
   Shared Services and Cost Allocations
  Employee Benefits Cost Allocations
  12




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NOTE 11OPERATING SEGMENTS
    13




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##### Table of Contents



SELECTED OPERATING SEGMENT FINANCIAL INFORMATION
 $(000s)Three Months ended:
    
    IMG
    
    Travel Ctr
    
    Ski
    
    Non Gaming
    
    Non Segment
    
    ConsolidatedJanuary 31, 2007Net Revenue
    
    $
    10,065
    
    
    $
    6,006
    
    
    $
    4,107
    
    
    $
    8,616
    
    
    $
    (173
    )
    
    $
    28,621Operating Income (Loss)
    
    
    7,495
    
    
    
    4,549
    
    
    
    2,111
    
    
    
    1,821
    
    
    
    (11,894
    )
    
    
    4,082Depreciation Expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,502
    
    
    
    4,502Interest Expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,655
    
    
    
    6,655Interest Income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (37
    )
    
    
    (37
    )January 31, 2006Net Revenue
    
    $
    10,295
    
    
    $
    6,901
    
    
    $
    330
    
    
    $
    7,059
    
    
    $
    1,098
    
    
    $
    25,683Operating Income (Loss)
    
    
    7,678
    
    
    
    5,517
    
    
    
    (135
    )
    
    
    970
    
    
    
    (11,281
    )
    
    
    2,749Depreciation Expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,456
    
    
    
    4,456Interest Expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,409
    
    
    
    7,409Interest Income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (84
    )
    
    
    (84
    )
 GamingNine months ended
    
    IMG
    
    Travel Ctr
    
    Ski
    
    Non Gaming
    
    Non Segment
    
    ConsolidatedJanuary 31, 2007Net Revenue
    
    $
    35804
    
    
    $
    22,401
    
    
    $
    4,110
    
    
    $
    32,738
    
    
    $
    (928
    )
    
    $
    94,125Operating Income (Loss)
    
    
    27,437
    
    
    
    17,863
    
    
    
    468
    
    
    
    9,121
    
    
    
    (38,439
    )
    
    
    16,450Depreciation Expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    13,577
    
    
    
    13,577Interest Expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    20,013
    
    
    
    20,013Interest Income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (217
    )
    
    
    (217
    )January 31, 2006Net Revenue
    
    $
    36,048
    
    
    $
    22,580
    
    
    $
    322
    
    
    $
    29,005
    
    
    $
    (387
    )
    
    $
    87,568Operating Income (Loss)
    
    
    25,558
    
    
    
    17,991
    
    
    
    (322
    )
    
    
    4,828
    
    
    
    (41,371
    )
    
    
    6,684Depreciation Expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    13,288
    
    
    
    13,288Interest Expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    21,048
    
    
    
    21,048Interest Income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (346
    )
    
    
    (346
    )
 NOTE 12CONSOLIDATING INFORMATION
 wholly-owned Guarantors
   14




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INN OF THE MOUNTAIN GODS RESORT AND CASINO AND SUBSIDIARIES
CONSOLIDATING BALANCE SHEETS
As of January 31, 2007
 GuarantorIMGRC
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedCash and cash equivalents
    
    $
    5,838,618
    
    
    $
    3,495,458
    
    
    $
    
    
    
    $
    9,334,076Accounts receivable
    
    
    971
    
    
    
    239,466
    
    
    
    
    
    
    
    240,437Inventories
    
    
    140,165
    
    
    
    721,810
    
    
    
    
    
    
    
    861,975Prepaid expenses
    
    
    509,376
    
    
    
    4,905
    
    
    
    
    
    
    
    514,281Total current assets
    
    
    6,489,130
    
    
    
    4,461,639
    
    
    
    
    
    
    
    10,950,769Fixed Assets
    
    
    2,606,007
    
    
    
    296,855,306
    
    
    
    
    
    
    
    299,461,313Depreciation
    
    
    (383,225
    )
    
    
    (82,955,062
    )
    
    
    
    
    
    
    (83,338,287
    )Net fixed assets
    
    
    2,222,782
    
    
    
    213,900,244
    
    
    
    
    
    
    
    216,123,026Non-Current Assets Other Assets
    
    
    50,000
    
    
    
    80,356
    
    
    
    
    
    
    
    130,356Deferred financing costs
    
    
    6,476,964
    
    
    
    
    
    
    
    
    
    
    
    6,476,964Advances to Subsidiaries
    
    
    140,545,365
    
    
    
    58,251,938
    
    
    
    (198,797,303
    )
    
    
    Investment in Subsidiaries
    
    
    102,328,020
    
    
    
    
    
    
    
    (102,328,020
    )
    
    
    Total Assets
    
    $
    258,112,261
    
    
    $
    276,694,177
    
    
    $
    (301,125,323
    )
    
    $
    233,681,115Accounts Payable and other short term liabilities
    
    $
    253,203
    
    
    $
    
    
    
    $
    
    
    
    $
    253,203Construction accounts payable
    
    
    1,382,638
    
    
    
    
    
    
    
    
    
    
    
    1,382,638Accrued expenses
    
    
    5,451,402
    
    
    
    1,323,201
    
    
    
    
    
    
    
    6,774,603Accrued interest
    
    
    5,200,000
    
    
    
    
    
    
    
    
    
    
    
    5,200,000Advanced deposits
    
    
    
    
    
    
    63,773
    
    
    
    
    
    
    
    63,773Current portion of long-term debt
    
    
    3,576,457
    
    
    
    228,075
    
    
    
    
    
    
    
    3,804,532Total current liabilities
    
    
    15,863,700
    
    
    
    1,615,049
    
    
    
    
    
    
    
    17,478,749Non-Current LiabilitiesAdvances from subsidiaries
    
    
    27,039,711
    
    
    
    171,757,592
    
    
    
    (198,797,303
    )
    
    
    Long-term debt, net of current portion
    
    
    208,108,390
    
    
    
    993,516
    
    
    
    
    
    
    
    209,101,906Total liabilities
    
    
    251,011,802
    
    
    
    174,366,157
    
    
    
    (198,797,303
    )
    
    
    226,580,655Contributed Capital
    
    
    31,653,936
    
    
    
    (19,109,994
    )
    
    
    19,109,994
    
    
    
    31,653,936Retained Earnings (deficit)
    
    
    (24,553,476
    )
    
    
    121,438,014
    
    
    
    (121,438,014
    )
    
    
    (24,553,476
    )Total equity
    
    
    7,100,460
    
    
    
    102,328,020
    
    
    
    (102,238,020
    )
    
    
    7,100,460Total liabilities and equity
    
    $
    258,112,261
    
    
    $
    276,694,177
    
    
    $
    (301,125,323
    )
    
    $
    233,681,115
 15




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##### Table of Contents



INN OF THE MOUNTAIN GODS RESORT AND CASINO AND SUBSIDIARIES
CONSOLIDATING STATEMENT OF OPERATIONS
For the Quarter Ended January 31, 2007
 IMG Resort
    
    
    Guarantorand Casino
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedRevenues:Gaming
    
    $
    
    
    
    $
    17,067,099
    
    
    $
    
    
    
    $
    17,067,099Hotel
    
    
    
    
    
    
    2,866,620
    
    
    
    
    
    
    
    2,866,620Food and Beverage
    
    
    
    
    
    
    3,282,789
    
    
    
    
    
    
    
    3,282,789Recreation and other
    
    
    
    
    
    
    7,184,094
    
    
    
    
    
    
    
    7,184,094Gross Revenue
    
    
    
    
    
    
    30,400,602
    
    
    
    
    
    
    
    30,400,602Less -Promotional Allowances
    
    
    355
    
    
    
    1,779,188
    
    
    
    
    
    
    
    1,779,543Net Revenue
    
    
    (355
    )
    
    
    28,621,414
    
    
    
    
    
    
    
    28,621,059Operating ExpensesGaming
    
    
    
    
    
    
    3,782,341
    
    
    
    
    
    
    
    3,782,341Hotel expenses
    
    
    
    
    
    
    1,006,331
    
    
    
    
    
    
    
    1,006,331Food and beverage
    
    
    
    
    
    
    3,251,831
    
    
    
    
    
    
    
    3,251,831Recreation and other
    
    
    
    
    
    
    3,167,961
    
    
    
    
    
    
    
    3,167,961Marketing
    
    
    
    
    
    
    2,259,640
    
    
    
    
    
    
    
    2,259,640General and administrative
    
    
    3,319,102
    
    
    
    1,885,366
    
    
    
    
    
    
    
    5,204,468Health Insurance  Medical
    
    
    
    
    
    
    617,657
    
    
    
    
    
    
    
    617,657Mescalero Apache- 401K
    
    
    
    
    
    
    99,183
    
    
    
    
    
    
    
    99,183Mescalero Apache Telecom
    
    
    
    
    
    
    47,539
    
    
    
    
    
    
    
    47,539Tribal Regulatory Fees
    
    
    
    
    
    
    600,000
    
    
    
    
    
    
    
    600,000Depreciation and amortization
    
    
    
    
    
    
    4,502,354
    
    
    
    
    
    
    
    4,502,354Total Operating Expenses
    
    
    3,319,102
    
    
    
    21,220,203
    
    
    
    
    
    
    
    24,539,305Operating Income (Loss)
    
    
    (3,319,457
    )
    
    
    7,401,211
    
    
    
    
    
    
    
    4,081,754Other Income (Expense)Interest Income
    
    
    36,810
    
    
    
    
    
    
    
    
    
    
    
    36,810Interest(Expense)
    
    
    (6,655,336
    )
    
    
    
    
    
    
    
    
    
    
    (6,655,336
    )Income from subsidiaries
    
    
    7,401,211
    
    
    
    
    
    
    
    (7,401,211
    )
    
    
    Total Other Income (expense)
    
    
    782,685
    
    
    
    
    
    
    
    (7,401,211
    )
    
    
    (6,618,526
    )Net Income (Loss)
    
    $
    (2,536,772
    )
    
    $
    7,401,211
    
    
    $
    (7,401,211
    )
    
    $
    (2,536,772
    )
 16




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##### Table of Contents



INN OF THE MOUNTAIN GODS RESORT AND CASINO AND SUBSIDIARIES
CONSOLIDATING STATEMENT OF OPERATIONS
For the Nine Months Ended January 31, 2007
 IMG Resort
    
    
    Guarantorand Casino
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedRevenues:Gaming
    
    $
    
    
    
    $
    59,213,625
    
    
    $
    
    
    
    $
    59,213,625Hotel
    
    
    
    
    
    
    10,442,796
    
    
    
    
    
    
    
    10,442,796Food and Beverage
    
    
    
    
    
    
    10,482,813
    
    
    
    
    
    
    
    10,482,813Recreation and other
    
    
    
    
    
    
    16,742,031
    
    
    
    
    
    
    
    16,742,031Gross Revenue
    
    
    
    
    
    
    96,881,265
    
    
    
    
    
    
    
    96,881,265Less -Promotional Allowances
    
    
    398
    
    
    
    2,756,331
    
    
    
    
    
    
    
    2,756,729Net Revenue
    
    
    (398
    )
    
    
    94,124,934
    
    
    
    
    
    
    
    94,124,536Operating ExpensesGaming
    
    
    
    
    
    
    12,274,414
    
    
    
    
    
    
    
    12,274,414Hotel expenses
    
    
    
    
    
    
    3,442,752
    
    
    
    
    
    
    
    3,442,752Food and beverage
    
    
    
    
    
    
    10,618,119
    
    
    
    
    
    
    
    10,618,119Recreation and other
    
    
    
    
    
    
    10,117,010
    
    
    
    
    
    
    
    10,117,010Marketing
    
    
    
    
    
    
    7,650,629
    
    
    
    
    
    
    
    7,650,629General and administrative
    
    
    10,577,184
    
    
    
    5,662,141
    
    
    
    
    
    
    
    16,239,325Health Insurance  Medical
    
    
    
    
    
    
    1,704,953
    
    
    
    
    
    
    
    1,704,953Mescalero Apache 401K
    
    
    11,832
    
    
    
    87,351
    
    
    
    
    
    
    
    99,183Mescalero Apache Telecom
    
    
    
    
    
    
    151,134
    
    
    
    
    
    
    
    151,134Tribal Regulatory Fees
    
    
    
    
    
    
    1,800,000
    
    
    
    
    
    
    
    1,800,000Depreciation and amortization
    
    
    
    
    
    
    13,576,720
    
    
    
    
    
    
    
    13,576,720Total Operating Expenses
    
    
    10,589,016
    
    
    
    67,085,223
    
    
    
    
    
    
    
    77,674,239Operating Income (Loss)
    
    
    (10,589,414
    )
    
    
    27,039,711
    
    
    
    
    
    
    
    16,450,297Other Income (Expense)Interest Income
    
    
    217,392
    
    
    
    
    
    
    
    
    
    
    
    217,392Interest (Expense)
    
    
    (20,012,919
    )
    
    
    
    
    
    
    
    
    
    
    (20,012,919
    )Income from subsidiaries
    
    
    27,039,711
    
    
    
    
    
    
    
    (27,039,711
    )
    
    
    Other income (expense)
    
    
    59,423
    
    
    
    
    
    
    
    
    
    
    
    59,423Total Other Income (expense)
    
    
    7,303,607
    
    
    
    
    
    
    
    (27,039,711
    )
    
    
    (19,736,104
    )Net Income (Loss)
    
    $
    (3,285,807
    )
    
    $
    27,039,711
    
    
    $
    (27,039,711
    )
    
    $
    (3,285,807
    )
 17




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##### Table of Contents



INN OF THE MOUNTAIN GODS RESORT AND CASINO AND SUBSIDIARIES
CONSOLIDATING STATEMENT OF CASH FLOWS
Nine Months Ended January 31, 2007
 GuarantorIMGRC
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedCash flows from operating activities:Net income (loss)
    
    $
    (3,285,807
    )
    
    $
    27,039,711
    
    
    $
    (27,039,711
    )
    
    $
    (3,285,807
    )Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:Depreciation and amortization
    
    
    1,350,352
    
    
    
    14,225,628
    
    
    
    
    
    
    
    15,575,980Changes in assets and liabilities:Restricted cash and cash equivalents
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Accounts receivable, net of allowance
    
    
    3,450
    
    
    
    321,533
    
    
    
    
    
    
    
    324,983Inventories
    
    
    194,495
    
    
    
    87,979
    
    
    
    
    
    
    
    282,474Prepaid expenses
    
    
    (509,376
    )
    
    
    33,209
    
    
    
    
    
    
    
    (476,167
    )Other long term assets
    
    
    
    
    
    
    (88,353
    )
    
    
    
    
    
    
    (88,353
    )Accounts payable
    
    
    (2,353,467
    )
    
    
    
    
    
    
    
    
    
    
    (2,353,467
    )Accrued expenses
    
    
    (5,640,148
    )
    
    
    1,345,710
    
    
    
    
    
    
    
    (4,294,438
    )Interest payable
    
    
    (6,000,000
    )
    
    
    
    
    
    
    
    
    
    
    (6,000,000
    )Net cash provided by (used in) operating activities
    
    
    (16,240,501
    )
    
    
    42,965,417
    
    
    
    (27,039,711
    )
    
    
    (314,795
    )Cash flows from investing activities:Construction Payable
    
    
    (892,236
    )
    
    
    
    
    
    
    
    
    
    
    (892,236
    )Purchase of property, plant and equipment
    
    
    (234,696
    )
    
    
    (139,883
    )
    
    
    
    
    
    
    (374,579
    )Investment in subsidiaries
    
    
    (27,039,711
    )
    
    
    
    
    
    
    27,039,711
    
    
    
    Net cash used by investing activities
    
    
    (28,166,643
    )
    
    
    (139,883
    )
    
    
    27,039,711
    
    
    
    (1,266,815
    )Cash flows from financing activities:Cash held from construction payments
    
    
    18,171,534
    
    
    
    
    
    
    
    
    
    
    
    18,171,534Advances to (from) affiliates
    
    
    43,580,290
    
    
    
    (43,580,290
    )
    
    
    
    
    
    
    Principal borrowings (payments) on debt
    
    
    (1,638,131
    )
    
    
    (1,460,929
    )
    
    
    
    
    
    
    (3,045,060
    )Distributions to Mescalero Apache Tribe
    
    
    (20,979,160
    )
    
    
    
    
    
    
    
    
    
    
    (20,979,160
    )Net cash provided by (used in) financing activities
    
    
    39,134,533
    
    
    
    (44,987,219
    )
    
    
    
    
    
    
    (5,852,686
    )Net decrease in cash and cash equivalents
    
    
    (5,272,611
    )
    
    
    (2,161,685
    )
    
    
    
    
    
    
    (7,434,296
    )Cash and cash equivalents, beginning of period
    
    
    11,111,229
    
    
    
    5,657,143
    
    
    
    
    
    
    
    16,768,372Cash and cash equivalents, end of period
    
    $
    5,838,618
    
    
    $
    3,495,458
    
    
    $
    
    
    
    $
    9,334,076
 18




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##### Table of Contents



INN OF THE MOUNTAIN GODS RESORT AND CASINO AND SUBSIDIARIES
CONSOLIDATING BALANCE SHEETS
As of April 30, 2006
 IMG Resort
    
    
    Wholly-ownedand Casino
    
    
    Guarantors
    
    
    Eliminations
    
    
    ConsolidatedCash and cash equivalents
    
    $
    11,111,229
    
    
    $
    5,657,143
    
    
    $
    
    
    
    $
    16,768,372Restricted cash and cash equivalents
    
    
    18,171,534
    
    
    
    
    
    
    
    
    
    
    
    18,171,534Accounts receivable
    
    
    4,421
    
    
    
    560,999
    
    
    
    
    
    
    
    565,420Inventories
    
    
    
    
    
    
    809,789
    
    
    
    
    
    
    
    809,789Prepaid expenses
    
    
    334,660
    
    
    
    38,114
    
    
    
    
    
    
    
    372,774Total current assets
    
    
    29,621,844
    
    
    
    7,066,045
    
    
    
    
    
    
    
    36,687,889Fixed Assets
    
    
    2,371,311
    
    
    
    297,948,825
    
    
    
    
    
    
    
    300,320,136Depreciation
    
    
    (251,806
    )
    
    
    (71,133,856
    )
    
    
    
    
    
    
    (71,385,662
    )Net fixed assets
    
    
    2,119,505
    
    
    
    226,814,969
    
    
    
    
    
    
    
    228,934,474Non Current AssetsOther Assets
    
    
    50,000
    
    
    
    (7,997
    )
    
    
    
    
    
    
    42,003Deferred financing costs
    
    
    7,695,897
    
    
    
    
    
    
    
    
    
    
    
    7,695,897Advances to Subsidiaries
    
    
    186,971,842
    
    
    
    42,824,251
    
    
    
    (229,796,093
    )
    
    
    Investment in Subsidiaries
    
    
    75,288,309
    
    
    
    
    
    
    
    (75,288,309
    )
    
    
    Total Assets
    
    $
    301,747,397
    
    
    $
    276,697,268
    
    
    $
    (305,084,402
    )
    
    $
    273,360,263Accounts Payable and other short term liabilities
    
    $
    2,606,670
    
    
    $
    
    
    
    $
    
    
    
    $
    2,606,670Construction in progress accounts payable
    
    
    2,274,874
    
    
    
    
    
    
    
    
    
    
    
    2,274,874Accrued expenses
    
    
    11,090,735
    
    
    
    (330,391
    )
    
    
    
    
    
    
    10,760,344Accrued interest
    
    
    11,200,000
    
    
    
    
    
    
    
    
    
    
    
    11,200,000Advanced deposits
    
    
    815
    
    
    
    371,655
    
    
    
    
    
    
    
    372,470Current portion of long-term debt
    
    
    3,039,808
    
    
    
    210,521
    
    
    
    
    
    
    
    3,250,329Total current liabilities
    
    
    30,212,902
    
    
    
    251,785
    
    
    
    
    
    
    
    30,464,687Non Current Liabilities:Advances from subsidiaries
    
    
    29,885,898
    
    
    
    199,910,195
    
    
    
    (229,796,093
    )
    
    
    Long-term debt, net of current portion
    
    
    210,283,170
    
    
    
    1,246,979
    
    
    
    
    
    
    
    211,530,149Total liabilities
    
    
    270,381,970
    
    
    
    201,408,959
    
    
    
    (229,796,093
    )
    
    
    241,994,836Contributed Capital
    
    
    52,633,096
    
    
    
    (19,109,994
    )
    
    
    19,109,994
    
    
    
    52,633,096Retained earnings (deficit)
    
    
    (21,267,669
    )
    
    
    94,398,303
    
    
    
    (94,398,303
    )
    
    
    (21,267,669
    )Total equity
    
    
    31,365,427
    
    
    
    75,288,309
    
    
    
    (75,288,309
    )
    
    
    31,365,427Total liabilities and equity
    
    $
    301,747,397
    
    
    $
    276,697,268
    
    
    $
    (305,084,402
    )
    
    $
    273,360,263
 19




---



##### Table of Contents



INN OF THE MOUNTAIN GODS RESORT AND CASINO AND SUBSIDIARIES
CONSOLIDATING STATEMENT OF OPERATIONS
For the Quarter Ended January 31, 2006
 IMG Resort
    
    
    Wholly-ownedand Casino
    
    
    Guarantors
    
    
    Eliminations
    
    
    ConsolidatedRevenues:Gaming
    
    $
    
    
    
    $
    17,172,786
    
    
    $
    
    
    
    $
    17,172,786Food and Beverage
    
    
    
    
    
    
    2,263,179
    
    
    
    
    
    
    
    2,263,179Hotel
    
    
    
    
    
    
    2,721,114
    
    
    
    
    
    
    
    2,721,114Recreation and other
    
    
    
    
    
    
    4,084,469
    
    
    
    
    
    
    
    4,084,469Gross Revenue
    
    
    
    
    
    
    26,241,548
    
    
    
    
    
    
    
    26,241,548Less -Promotional Allowances
    
    
    
    
    
    
    558,207
    
    
    
    
    
    
    
    558,207Net Revenue
    
    
    
    
    
    
    25,683,341
    
    
    
    
    
    
    
    25,683,341Operating ExpensesGaming
    
    
    54,116
    
    
    
    3,744,947
    
    
    
    
    
    
    
    3,79,063Hotel expenses
    
    
    
    
    
    
    1,180,401
    
    
    
    
    
    
    
    1,180,401Food and beverage
    
    
    20,602
    
    
    
    2,941,952
    
    
    
    
    
    
    
    2,962,554Recreation and other
    
    
    595
    
    
    
    3,042,938
    
    
    
    
    
    
    
    3,043,533Marketing and advertising
    
    
    544,882
    
    
    
    1,354,196
    
    
    
    
    
    
    
    1,899,078General and administrative
    
    
    2,753,484
    
    
    
    1,402,090
    
    
    
    
    
    
    
    4,155,574Health Insurance  Medical
    
    
    (334,343
    )
    
    
    1,139,003
    
    
    
    
    
    
    
    804,660Mescalero Apache Telecom
    
    
    33,877
    
    
    
    
    
    
    
    
    
    
    
    33,877Tribal Regulatory Fees
    
    
    
    
    
    
    600,000
    
    
    
    
    
    
    
    600,000Depreciation and amortization
    
    
    
    
    
    
    4,455,568
    
    
    
    
    
    
    
    4,455,568Total Operating Expenses
    
    
    3,073,213
    
    
    
    19,861,095
    
    
    
    
    
    
    
    22,934,308Operating Income (Loss)
    
    
    (3,073,213
    )
    
    
    5,822,246
    
    
    
    
    
    
    
    2,749,033Other Income (Expense) Interest Income
    
    
    84,070
    
    
    
    173
    
    
    
    
    
    
    
    84,243Interest Expense
    
    
    (7,478,821
    )
    
    
    69,628
    
    
    
    
    
    
    
    (7,409,193
    )Income from subsidiaries
    
    
    5,851,364
    
    
    
    
    
    
    
    (5,851,364
    )
    
    
    Other income (expense)
    
    
    839
    
    
    
    (40,683
    )
    
    
    
    
    
    
    (39,844
    )Total Other Income (expense)
    
    
    (1,542,548
    )
    
    
    29,118
    
    
    
    (5,851,364
    )
    
    
    (7,364,794
    )Net Income (Loss)
    
    $
    (4,615,761
    )
    
    $
    5,851,364
    
    
    $
    (5,851,364
    )
    
    $
    (4,615,761
    )
 20




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##### Table of Contents



INN OF THE MOUNTAIN GODS RESORT AND CASINO AND SUBSIDIARIES
CONSOLIDATING STATEMENT OF OPERATIONS
For the Nine months ended January 31, 2006
 IMG Resort
    
    
    Wholly-ownedand Casino
    
    
    Guarantors
    
    
    Eliminations
    
    
    ConsolidatedRevenues:Gaming
    
    $
    
    
    
    $
    58,870,770
    
    
    $
    
    
    
    $
    58,870,770Hotel
    
    
    
    
    
    
    8,439,212
    
    
    
    
    
    
    
    8,439,212Food and Beverage
    
    
    
    
    
    
    9,618,398
    
    
    
    
    
    
    
    9,618,398Recreation and other
    
    
    
    
    
    
    12,970,970
    
    
    
    
    
    
    
    12,970,970Gross Revenue
    
    
    
    
    
    
    89,899,350
    
    
    
    
    
    
    
    89,899,350Less -Promotional Allowances
    
    
    55
    
    
    
    2,331,152
    
    
    
    
    
    
    
    2,331,207Net Revenue
    
    
    (55
    )
    
    
    87,568,198
    
    
    
    
    
    
    
    87,568,143Operating ExpensesGaming
    
    
    170,884
    
    
    
    12,617,698
    
    
    
    
    
    
    
    12,788,582Hotel expenses
    
    
    
    
    
    
    3,916,389
    
    
    
    
    
    
    
    3,916,389Food and beverage
    
    
    105,142
    
    
    
    12,304,882
    
    
    
    
    
    
    
    12,410,024Recreation and other
    
    
    1,116
    
    
    
    9,367,087
    
    
    
    
    
    
    
    9,368,203Marketing and advertising
    
    
    2,775,836
    
    
    
    3,882,935
    
    
    
    
    
    
    
    6,658,771General and administrative
    
    
    11,825,078
    
    
    
    6,006,304
    
    
    
    
    
    
    
    17,831,382Health Insurance  Medical
    
    
    240,220
    
    
    
    1,933,881
    
    
    
    
    
    
    
    2,174,101Mescalero Apache Telecom
    
    
    109,887
    
    
    
    
    
    
    
    
    
    
    
    109,887Tribal Regulatory Fees
    
    
    
    
    
    
    2,338,697
    
    
    
    
    
    
    
    2,338,697Depreciation and amortization
    
    
    
    
    
    
    13,288,219
    
    
    
    
    
    
    
    13,288,219Total Operating Expenses
    
    
    15,228,163
    
    
    
    65,656,092
    
    
    
    
    
    
    
    80,884,255Operating Income (Loss)
    
    
    (15,228,218
    )
    
    
    21,912,106
    
    
    
    
    
    
    
    6,683,888Other Income (Expense) Interest Income
    
    
    343,471
    
    
    
    2,906
    
    
    
    
    
    
    
    346,377Interest Expense
    
    
    (21,048,073
    )
    
    
    
    
    
    
    
    
    
    
    (21,048,073
    )Income from subsidiaries
    
    
    21,876,767
    
    
    
    
    
    
    
    (21,876,767
    )
    
    
    Other income (expense)
    
    
    (300,812
    )
    
    
    (38,245
    )
    
    
    
    
    
    
    (339,057
    )Total Other Income (expense)
    
    
    871,353
    
    
    
    (35,339
    )
    
    
    (21,876,767
    )
    
    
    (21,040,753
    )Net Income (Loss)
    
    $
    (14,356,865
    )
    
    $
    21,876,767
    
    
    $
    (21,876,767
    )
    
    $
    (14,356,865
    )
 21




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##### Table of Contents



INN OF THE MOUNTAIN GODS RESORT AND CASINO AND SUBSIDIARIES
CONSOLIDATING STATEMENTS OF CASH FLOWS
Nine months ended January 31, 2006
 GuarantorIMGRC
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedCash flows from operating activities:Net income (loss)
    
    $
    (14,356,865
    )
    
    $
    21,876,767
    
    
    $
    (21,879,767
    )
    
    $
    (14,356,865
    )Adjustments to reconcile net income (loss) to net
Cash (used in) operating activities:Depreciation and amortization
    
    
    
    
    
    
    13,288,220
    
    
    
    
    
    
    
    13,288,220Changes in assets and liabilities:Accounts receivable, net of allowance
    
    
    334,712
    
    
    
    (148,528
    )
    
    
    
    
    
    
    186,184Inventories
    
    
    
    
    
    
    372,354
    
    
    
    
    
    
    
    372,354Prepaid expenses
    
    
    765,487
    
    
    
    (442,611
    )
    
    
    
    
    
    
    322,876Other long term assets
    
    
    54,991
    
    
    
    63,542
    
    
    
    
    
    
    
    118,533Accounts payable
    
    
    (1,320,915
    )
    
    
    
    
    
    
    
    
    
    
    (1,320,915
    )Accrued expenses
    
    
    (4,743,810
    )
    
    
    (2,949,603
    )
    
    
    
    
    
    
    (7,693,413
    )Accrued interest payable
    
    
    313,230
    
    
    
    (450
    )
    
    
    
    
    
    
    (312,780
    )Net cash provided (used in) by operating activities
    
    
    (18,953,170
    )
    
    
    32,059,691
    
    
    
    (21,876,767
    )
    
    
    (8,770,246
    )Cash flows from investing activities:Investment in subsidiaries
    
    
    (20,234,967
    )
    
    
    
    
    
    
    20,234,967
    
    
    
    Purchase of property, plant and equipment
    
    
    
    
    
    
    (12,024,351
    )
    
    
    (1,641,800
    )
    
    
    (10,382,551
    )Construction in progess accounts payable
    
    
    (2,870,860
    )
    
    
    
    
    
    
    
    
    
    
    (2,870,860
    )Net cash used in by investing activities
    
    
    (23,105,827
    )
    
    
    (12,024,351
    )
    
    
    (21,876,767
    )
    
    
    (13,253,411
    )Cash flows from financing activities:Cash held for construction payments
    
    
    14,763,247
    
    
    
    
    
    
    
    
    
    
    
    14,763,247Advances to (from) affiliates
    
    
    28,265,619
    
    
    
    (28,265,619
    )
    
    
    
    
    
    
    Principal borrowings (payments) on long-term debt, net
    
    
    14,198,236
    
    
    
    87,944
    
    
    
    
    
    
    
    14,286,180Distributions to Mescalero Apache Tribe
    
    
    (6,944,896
    )
    
    
    
    
    
    
    
    
    
    
    (6,944,896
    )Net cash used in (provided by) financing activities
    
    
    50,282,206
    
    
    
    (28,177,675
    )
    
    
    
    
    
    
    22,104,531Net increase in cash and cash equivalents
    
    
    8,223,209
    
    
    
    (8,142,335
    )
    
    
    
    
    
    
    80,874Cash and cash equivalents, beginning of period
    
    
    524,959
    
    
    
    13,193,562
    
    
    
    
    
    
    
    13,718,521Cash and cash equivalents, end of period
    
    $
    8,748,168
    
    
    $
    5,051,227
    
    
    $
    
    
    
    $
    13,799,395
 22




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##### Table of Contents



Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations.
 Reference in this Quarterly Report on Form 10-Q (this Form 10-Q or this Report) to (a) the
Tribe refers to the Mescalero Apache Tribe, a federally recognized Indian tribe, (b) IMG Resort
and Casino refers to Inn of the Mountain Gods Resort and Casino, a business enterprise of the
Tribe, (c) Casino Apache refers to Casino Apache, a business enterprise of the Tribe, (d) the
Inn refers to Inn of the Mountain Gods, a business enterprise of the Tribe, (e) the Travel
Center refers to Casino Apache Travel Center, a business enterprise of the Tribe and (f) Ski
Apache refers to Ski Apache, a business enterprise of the Tribe. Each of Casino Apache, the Inn,
the Travel Center and Ski Apache is a wholly-owned subsidiary of IMG Resort and Casino. Reference
in this Form 10-Q to we, our, and us refer to IMG Resort and Casino.
 FORWARDLOOKING STATEMENTS
 This Form 10-Q includes forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995. Statements regarding our expected financial condition,
results of operations, business, strategies and financing plans under the heading Managements
Discussion and Analysis of Financial Condition and Results of Operations and elsewhere in this
Form 10-Q are forward-looking statements. In addition, in those Sections and other portions of this
Form 10-Q, the words anticipate, expect, plan, intend, will, designed, estimate,
adjust and similar expressions, as they relate to us or our management, indicate forward-looking
statements. These forward-looking statements may prove to be incorrect. Important factors that
could cause actual results to differ materially from these forward-looking statements disclosed in
this Form 10-Q include, without limitation, risks relating to the following: (a) our levels of
leverage and ability to meet our debt service obligations; (b) our financial performance; (c)
restrictive covenants in our debt instruments; (d) realizing the benefits of our business plan and
business strategies; (e) changes in gaming laws or regulations, including potential legalization of
gaming in certain jurisdictions; (f) the impact of competition in our markets; (g) our ability to
attract increasing numbers of customers; and (h) general local, domestic and global economic
conditions.
 You are urged to consider these factors, and those identified from time to time in our reports
and filing with the SEC carefully in evaluating the forward-looking statements contained in this
Form 10-Q and for information about the risks and uncertainties that may affect our future results.
All subsequent written and oral forward-looking statements attributable to us or persons acting on
our behalf are expressly qualified in their entirety by our cautionary statements. The
forward-looking statements included in this Form 10-Q are made only as of the date of this Form
10-Q. We do not intend, and undertake no obligation, to update these forward-looking statements.
 Overview
  Gaming Travel Center Casino
 Food and Beverage
 Rooms
 23




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##### Table of Contents



Recreation and Other
 Critical Accounting Policies
  Revenue Recognition
 Promotional Allowances
 Classification of Departmental Costs
 Deferred Financing Costs
 24




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##### Table of Contents



Results of Operations
 Quarter Ended January 31, 2007 Compared to Quarter Ended January 31, 2006.
 Net Revenues
 Gaming
 Hotel
 Food and Beverage
 Recreation and Other
 Promotional Allowances
 Total Operating Expenses
 Gaming
 Hotel
 Food and Beverage
 Recreation and Other
 25




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##### Table of Contents



Marketing and Advertising
 General and Administrative
 Depreciation
 Income from Operations
 Other Income (Expenses)
 Nine Months Ended January 31, 2007 Compared to Nine months ended January 31, 2006.
 Net Revenues
 Gaming
 Hotel
 Food and Beverage
 Recreation and Other
 Promotional Allowances
 26




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##### Table of Contents



Total Operating Expenses
 Gaming
 Hotel
 Food and Beverage
 Recreation and Other
 Marketing and Advertising
 General and Administrative
 Depreciation
 Income from Operations
 Other Income (Expenses)
 Liquidity and Capital Resources
     27




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##### Table of Contents



Description of Indebtedness
 The Notes
  
    
    an interest reserve account, which was funded at the time the notes were sold with
approximately $36.4 million, which, together with interest earned thereon, was used to make
the first three (3) interest payments on the notes. As of January 31, 2007, the balance in
the interest reserve account was $0;
    
    a construction disbursement account, which was funded at the time the Notes were sold
with approximately $94.3 million and was used to fund completion of the Resort. As of
January 31, 2007, the balance in the construction disbursement account was $0;
    
    a construction reserve account, which was funded at the time the Notes were sold
approximately $53.6 million and was to be used to (i) fund contingencies related to the
construction of the Resort and (ii) fund a resolution relating to a disagreement over the
Tribes prior gaming compact. As of January 31, 2007, the balance in the construction
reserve account was $0; and
    
    a construction retainage account. As of January 31, 2007, the balance the construction
retainage accounts was $0
   General Indebtedness
  Credit Facility
  28




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##### Table of Contents



Credit Rating
   Off-Balance Sheet Arrangements
  Regulation and Taxes
  RISK FACTORS
  Risks Relating to Our Business
 We have a substantial amount of indebtedness, which could adversely affect our financial condition.
 29




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##### Table of Contents




    
    make it more difficult for us to satisfy our debt service obligations;
    
    increase our vulnerability to general adverse economic and industry conditions or a downturn in our business;
    
    limit our ability to fund future working capital, capital expenditures and other general operating requirements;
    
    require us to dedicate a substantial portion of our cash flow from operations to service
our outstanding indebtedness, thereby reducing the availability of our cash flow to fund
working capital, capital expenditures, the Resort and other general operating requirements;
    
    place us at a competitive disadvantage compared to our competitors that have less debt; and
limit our ability to borrow additional funds.
 Our indebtedness could result in a material adverse effect on our business, financial condition and
results of operations. If we incur additional debt in the future, these adverse consequences could
intensify.
   
    
    unlike non-governmental businesses, we are prohibited by law from generating cash through
an offering of equity securities;
    
    our ability to incur additional debt is limited by the covenants of the indenture governing the notes; and
    
    the indenture governing the notes includes covenants which limit our ability to create liens on or sell our assets.
  Restrictive covenants in the indenture governing the notes may limit our ability to expand our
operations and capitalize on our business opportunities.
  We may not be able to realize the benefits of our business strategy.
  30




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##### Table of Contents



Federal, state and Tribal laws and regulations, and our gaming compact, regulate our gaming
operations and noncompliance with these laws and regulations by us or the Tribe, as well as changes
in these laws and regulations (which are susceptible to changes in public policy) or future
interpretations thereof, could have a material adverse effect on our ability to conduct gaming, and
thus on our ability to meet our debt service obligations.
   We compete with casinos, other forms of gaming and other resort properties. If we are not able to
successfully compete, we will not be able to generate sufficient cash flow to meet our debt service
obligations.
  We are highly dependent on our surrounding market area. As a result, we face greater risks than a
geographically diverse company.
  31




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##### Table of Contents




    
    a decline in the economies of our primary market area or a decline in the number of
gaming customers from these areas for any reason;
    
    an increase in competition in our primary market area or the surrounding area;
    
    a significant increase in automotive fuel prices;
    
    inaccessibility due to closures of primary access routes; and
    
    natural and other disasters in the surrounding area including forest fires and floods.
  Our business is subject to contingencies beyond our control, including the aftermath of terrorist
acts and wars, which may significantly and adversely affect our business, financial condition,
results of operations and ability to meet our debt service obligations.
 We may face difficulties in recruiting, training and retaining qualified employees.
  A change in our current non-taxable status could have a material adverse effect on our cash flow
and our ability to fulfill our debt service obligations.
   The terms of four of the eight voting members of the Tribal Council expire each year and the terms
of the Tribes President and Vice President expire every two years; changes in the Tribal Council
or its policies could affect the Resort or other aspects of our business.
  We have material weaknesses in our internal controls over financial reporting that may prevent us
from being able to accurately report our financial results or prevent fraud, which could harm our
business and operating results.
 32




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##### Table of Contents




    
    our system of entering transactions into our general and subsidiary ledgers, including the time for entering transactions;
    
    timely and effective documentation of transactions to be entered into our accounting system;
    
    timely reconciliation of general ledger to appropriate underlying subsidiary records;
    
    implementation of an appropriate checks and balances system with respect to documentation and recording of transactions;
    
    provision of adequate education to our finance staff with respect to our accounting and
financial reporting policies and procedures; and
    
    maintenance of a comprehensive written accounting policies and procedures manual.
   
 Item 3. Quantitative and Qualitative Disclosures About Market Risk.
    
 Item 4. Controls and Procedures.
 Disclosure Controls and Procedures
   33




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##### Table of Contents



Internal Control Over Financial Reporting
  
    
    developing a comprehensive policies and procedures manual that is accessible and
understood by all members of our finance staff;
    
    specifically defining and documenting the responsibilities of our financial reporting personnel;
    
    improved training of our financial reporting personnel; and
    
    retaining Protiviti, Inc., an independent advisory firm, to assist in evaluating our
internal controls, including the identification, documentation and testing of significant
controls, policies and procedures.
  
    
    implementation of a focused and detailed review and cross-checking of prior financial
statements by internal audit personnel, supervised and cross-checked by senior management,
outside advisors and our audit committee;
    
    increase in number of internal and external accounting and financial personnel;
    
    frequent reviews and cross-checking of this Report by senior management, internal audit personnel and Protiviti, Inc.;
    
    extensive research, review, cross-checking and documentation of material transactions
with focus on reporting for revenue recognition, cash transactions and balances,
receivables, fixed assets, payroll, inventory, payables and accrued expenses, and payments
to affiliates; and
    
    utilization of existing financial management software, reports for ledger and sub-ledger
details for financial transactions.
  Managements Report on Internal Control Over Financial Reporting
  34




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##### Table of Contents




    
    our system of entering transactions into our general and subsidiary ledgers, including the time for entering transactions;
    
    timely and effective documentation of transactions to be entered into our accounting system;
    
    timely reconciliation of general ledger to appropriate underlying subsidiary records;
    
    implementation of an appropriate checks and balances system with respect to documentation and recording of transactions;
    
    provision of adequate education to our finance staff with respect to our accounting and
financial reporting policies and procedures; and
    
    maintenance of a comprehensive written accounting policies and procedures manual.
  
    
    developing a comprehensive policies and procedures manual that is accessible and
understood by all members of our finance staff;
    
    specifically defining and documenting the responsibilities of our financial reporting personnel;
    
    improved training of our financial reporting personnel; and
    
    retaining Protivit, Inc., an independent advisory firm, to assist in evaluating our
internal controls, including the identification, documentation and testing of significant
controls, policies and procedures.
  
    
    implementation of a focused and detailed review and cross-checking of prior financial
statements by internal audit personnel, supervised and cross-checked by senior management,
outside advisors and our audit committee;
 35




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##### Table of Contents




    
    increase in number of internal and external accounting and financial personnel;
    
    frequent reviews and cross-checking of the data used to create this Report by senior
management, internal audit personnel and consultants;
    
    extensive research, review, cross-checking and documentation of material transactions
with focus on reporting for revenue recognition, cash transactions and balances,
receivables, fixed assets, payroll, inventory, payables and accrued expenses, and payments
to affiliates; and
    
    utilization of existing financial management software, reports for ledger and sub-ledger
details for financial transactions.
  Changes in Internal Control over Financial Reporting
   36




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##### Table of Contents



PART II OTHER INFORMATION
 
 Item 1. Legal Proceedings.
  
 Item 1A. Risk Factors.
  
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
  
 Item 3. Defaults Upon Senior Securities.
  
 Item 4. Submission of Matters to a Vote of Security Holders.
  
 Item 5. Other Information.
  
 Item 6. Exhibits.
 Exhibit No.
    
    Description3.1*
    
    Mescalero Apache Tribe Resolutions 03-05, 03-28 and 03-29 establishing and governing the Inn of the
Mountain Gods Resort and Casino adopted and approved April 2, 2003, July 15, 2003 and July 15, 2003,
respectively.3.2*
    
    Charter of the Management Board of Inn of the Mountain Gods Resort and Casino.4.1*
    
    Indenture, dated as of November 3, 2003, among the Mescalero Apache Tribe, Inn of the Mountain Gods
Resort and Casino, Casino Apache, Inn of the Mountain Gods, Casino Apache Travel Center, Ski Apache
and U.S. Bank National Association, as Trustee, relating to the 12% Senior Notes due 2010 of the Inn
of the Mountain Gods Resort and Casino.4.2*
    
    Form of 12% Senior Note Due 2010 of the Inn of the Mountain Gods Resort and Casino.4.3*
    
    Registration Rights Agreement, dated as of November 3, 2003, among the Mescalero Apache Tribe, Inn of
the Mountain Gods Resort and Casino, Casino Apache, Inn of the Mountain Gods, Casino Apache Travel
Center, Ski Apache and Citigroup Global Markets Inc, as the Initial Purchaser.10.1*
    
    Second Amended Design/Build Construction Contract, by and among Inn of the Mountain Gods Resort and
Casino, Centex/WorthGroup, LLC, as Design/Builder, and Rider Hunt Levett & Bailey, as Construction
Manager, dated as of September 6, 2003, and Change Order No. 9 thereto, dated January 24, 2003.10.2*
    
    Cash Collateral and Disbursement Agreement, dated as of November 3, 2003, among Inn of the Mountain
Gods Resort and Casino, Casino Apache, Inn of the Mountain Gods, Casino Apache Travel Center, Ski
Apache, U.S. Bank National Association, as Disbursement Agent, Professional Associates Construction
Services, Inc., as Independent Construction Consultant and U.S. Bank National Association, as Trustee.
 37




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##### Table of Contents



Exhibit No.
    
    Description10.3*
    
    Ski Apache Special Use Permit received from the United States Department of Agriculture, Forest
Service dated April 23, 1985.10.4**
    
    Employment Agreement dated December 12, 2002 between the Mescalero Apache Tribe and Brian Parrish.10.5***
    
    Employment Agreement dated September 12, 2005 between the Mescalero Apache Tribe and Lance Kintz.10.6**
    
    2001 Compact between the Mescalero Apache Tribe and the State of New Mexico, entered into June 1, 2004.31.1
    
    Certification of Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.31.2
    
    Certification of Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.32.1
    
    Certification of Principal Executive Officer and Principal Financial Officer Pursuant to Section 906
of the Sarbanes-Oxley Act of 2002.
 
 *
    
    Incorporated by reference to Inn of the Mountain Gods Resort and
Casinos Registration Statement on Form S-4 filed with the SEC on
February 27, 2004 (SEC File No. 333-113140).**
    
    Incorporated by reference to Inn of the Mountain Gods Resort and
Casinos Annual Report on Form 10-K filed with the SEC on July 29,
2004.***
    
    Incorporated by reference to Inn of the Mountain Gods Resort and
Casinos Annual Report on Form 10-K filed with the SEC on August 15,
2006. 38




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##### Table of Contents



SIGNATURES
  INN OF THE MOUNTAIN GODS RESORT AND CASINODate: March 12, 2007
    
    By
    
    /s/ Brian D. ParrishName:
Its:
    
    Brian D. Parrish
Chief Operating Officer (Principal Executive Officer)Date: March 12, 2007
    
    By
Name:
Its:
    
    /s/ Lance Kintz

Lance Kintz
Chief Financial Officer (Principal Financial Officer)
 39




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##### Table of Contents



INDEX TO EXHIBITS
 Exhibit No.
    
    Description3.1*
    
    Mescalero Apache Tribe Resolutions 03-05, 03-28 and 03-29 establishing and governing the Inn of the
Mountain Gods Resort and Casino adopted and approved April 2, 2003, July 15, 2003 and July 15, 2003,
respectively.3.2*
    
    Charter of the Management Board of Inn of the Mountain Gods Resort and Casino.4.1*
    
    Indenture, dated as of November 3, 2003, among the Mescalero Apache Tribe, Inn of the Mountain Gods
Resort and Casino, Casino Apache, Inn of the Mountain Gods, Casino Apache Travel Center, Ski Apache
and U.S. Bank National Association, as Trustee, relating to the 12% Senior Notes due 2010 of the Inn
of the Mountain Gods Resort and Casino.4.2*
    
    Form of 12% Senior Note Due 2010 of the Inn of the Mountain Gods Resort and Casino.4.3*
    
    Registration Rights Agreement, dated as of November 3, 2003, among the Mescalero Apache Tribe, Inn of
the Mountain Gods Resort and Casino, Casino Apache, Inn of the Mountain Gods, Casino Apache Travel
Center, Ski Apache and Citigroup Global Markets Inc, as the Initial Purchaser.10.1*
    
    Second Amended Design/Build Construction Contract, by and among Inn of the Mountain Gods Resort and
Casino, Centex/WorthGroup, LLC, as Design/Builder, and Rider Hunt Levett & Bailey, as Construction
Manager, dated as of September 6, 2003, and Change Order No. 9 thereto, dated January 24, 2003.10.2*
    
    Cash Collateral and Disbursement Agreement, dated as of November 3, 2003, among Inn of the Mountain
Gods Resort and Casino, Casino Apache, Inn of the Mountain Gods, Casino Apache Travel Center, Ski
Apache, U.S. Bank National Association, as Disbursement Agent, Professional Associates Construction
Services, Inc., as Independent Construction Consultant and U.S. Bank National Association, as Trustee.10.3*
    
    Ski Apache Special Use Permit received from the United States Department of Agriculture, Forest
Service dated April 23, 1985.10.4**
    
    Employment Agreement dated December 12, 2002 between the Mescalero Apache Tribe and Brian Parrish.10.5***
    
    Employment Agreement dated September 12, 2005 between the Mescalero Apache Tribe and Lance Kintz.10.6**
    
    2001 Compact between the Mescalero Apache Tribe and the State of New Mexico, entered into June 1, 2004.31.1
    
    Certification of Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.31.2
    
    Certification of Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.32.1
    
    Certification of Principal Executive Officer and Principal Financial Officer Pursuant to Section 906
of the Sarbanes-Oxley Act of 2002.
 
 *
    
    Incorporated by reference to Inn of the Mountain Gods Resort and Casinos Registration
Statement on Form S-4 filed with the SEC on February 27, 2004
(SEC File No. 333-113140).**
    
    Incorporated by reference to Inn of the Mountain Gods Resort and Casinos Annual Report on Form 10-K filed
with the SEC on July 29, 2004.***
    
    Incorporated by reference to Inn of the Mountain Gods Resort and Casinos Annual Report on Form 10-K filed with the SEC on August 15, 2006.