##### 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 October 31, 2008
 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)
 (575) 464-7000
 þ o
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer þ
    
    Smaller reporting company o(Do not check if a smaller reporting company)
 o þ




---



##### 



INN OF THE MOUNTAIN GODS RESORT AND CASINO AND SUBSIDIARIES
 FORM 10-Q
 FOR THE QUARTER ENDED OCTOBER 31, 2008
 INDEX
 PagesPART I. FINANCIAL INFORMATIONItem 1. Financial Statements:
    
    
    1Consolidated Balance Sheets as of April 30, 2008 and October 31, 2008 (unaudited)
    
    
    1Consolidated Statements of Operations for the Three Month and Six Month Periods Ended October 31, 2007 and 2008 (unaudited)
    
    
    2Consolidated Statements of Cash Flows for the Six Month Period Ended October 31, 2007 and 2008 (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
    
    
    30Item 4. Controls and Procedures
    
    
    30PART II. OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    30Item 1A. Risk Factors
    
    
    30Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    31Item 3. Defaults upon Senior Securities
    
    
    31Item 4. Submission of Matters to a Vote of Security Holders
    
    
    31Item 5. Other Information
    
    
    31Item 6. Exhibits
    
    
    33Signatures
    
    
    34EX-31.1EX-31.2EX-32.1
  i




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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 ofAs of
    
    
    October 31, 2008April 30, 2008
    
    
    (unaudited)Current assetsCash and cash equivalents
    
    $
    14,975,093
    
    
    $
    14,054,560Accounts receivable, net of allwance for doubtful accounts
    
    
    567,236
    
    
    
    454,340Tribal accounts receivable
    
    
    
    
    
    
    166,750Inventories
    
    
    1,040,086
    
    
    
    1,019,394Prepaid expenses and other assets
    
    
    855,754
    
    
    
    824,137Total current assets
    
    
    17,438,169
    
    
    
    16,519,181Non-current assetsProperty plant and equipment
    
    
    299,344,711
    
    
    
    302,155,943Accumulated depreciation
    
    
    (103,333,993
    )
    
    
    (108,938,728
    )Property plant and equipment, net
    
    
    196,010,718
    
    
    
    193,217,215Other assets
    
    
    50,000
    
    
    
    109,950Deferred financing cost
    
    
    4,445,409
    
    
    
    3,632,787Storm recovery receivable (Note 11)
    
    
    
    
    
    
    200,000Total assets
    
    $
    217,944,296
    
    
    $
    213,679,133Liabilites and DeficitCurrent liabilitiesAccounts payable
    
    $
    2,093,653
    
    
    $
    2,291,411Accrued expenses
    
    
    3,298,719
    
    
    
    4,179,693Accrued payroll and benefits
    
    
    2,578,145
    
    
    
    1,724,286Accrued interest
    
    
    11,200,000
    
    
    
    11,200,000Advance deposits
    
    
    357,648
    
    
    
    181,651Current portion of long-term debt
    
    
    3,534,414
    
    
    
    3,781,502Total current liabilities
    
    
    23,062,579
    
    
    
    23,358,543Non-current liabilitiesLong-term debt, net of current portion
    
    
    204,639,002
    
    
    
    202,994,369Total liabilities
    
    
    227,701,581
    
    
    
    226,352,912DeficitContributed capital
    
    
    21,648,939
    
    
    
    17,646,936Accumulated deficit
    
    
    (31,406,224
    )
    
    
    (30,320,715
    )Total deficit
    
    
    (9,757,285
    )
    
    
    (12,673,779
    )Total liabilities and deficit
    
    $
    217,944,296
    
    
    $
    213,679,133
  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
    
    
    Six Months Ended
    
    
    Six Months EndedOctober 31, 2007
    
    
    October 31, 2008
    
    
    October 31, 2007
    
    
    October 31, 2008Revenues:Gaming
    
    $
    21,295,463
    
    
    $
    19,268,105
    
    
    $
    43,296,171
    
    
    $
    40,708,101Hotel
    
    
    3,782,138
    
    
    
    3,530,260
    
    
    
    7,903,496
    
    
    
    7,634,627Food and beverage
    
    
    3,860,663
    
    
    
    3,745,009
    
    
    
    7,869,920
    
    
    
    7,611,709Recreation and other
    
    
    5,306,327
    
    
    
    5,059,484
    
    
    
    9,685,294
    
    
    
    9,292,083Gross revenue
    
    
    34,244,591
    
    
    
    31,602,858
    
    
    
    68,754,881
    
    
    
    65,246,520Less-promotional allowances
    
    
    377,279
    
    
    
    191,393
    
    
    
    1,058,887
    
    
    
    474,706Net revenue
    
    
    33,867,312
    
    
    
    31,411,465
    
    
    
    67,695,994
    
    
    
    64,771,814Operating ExpensesGaming
    
    
    7,103,357
    
    
    
    7,004,572
    
    
    
    14,456,815
    
    
    
    14,351,823Hotel expenses
    
    
    1,158,625
    
    
    
    1,313,491
    
    
    
    2,385,547
    
    
    
    2,735,541Food and beverage
    
    
    3,924,967
    
    
    
    3,827,224
    
    
    
    7,806,853
    
    
    
    7,686,125Recreation and other
    
    
    3,785,478
    
    
    
    3,466,386
    
    
    
    7,534,867
    
    
    
    7,039,264Marketing
    
    
    3,002,705
    
    
    
    2,311,498
    
    
    
    5,214,417
    
    
    
    4,076,007General and administrative
    
    
    2,727,407
    
    
    
    3,574,978
    
    
    
    4,977,674
    
    
    
    6,480,691Health insurance  medical
    
    
    393,362
    
    
    
    607,288
    
    
    
    943,211
    
    
    
    1,155,611401 K
    
    
    220,979
    
    
    
    226,886
    
    
    
    442,265
    
    
    
    453,570Mescalero Apache Telecom
    
    
    50,042
    
    
    
    43,961
    
    
    
    101,044
    
    
    
    95,047Tribal Regulatory Fees
    
    
    600,000
    
    
    
    600,000
    
    
    
    1,200,000
    
    
    
    1,200,000Depreciation and amortization
    
    
    4,149,039
    
    
    
    3,048,904
    
    
    
    8,384,403
    
    
    
    6,125,822Storm costs (Note 11)
    
    
    
    
    
    
    225,898
    
    
    
    
    
    
    
    288,124Insurance reimbursement on storm loss (Note 11)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,100,000
    )Loss on disposal of assets
    
    
    
    
    
    
    
    
    
    
    63,847
    
    
    
    46,118Total Operating Expenses
    
    
    27,115,961
    
    
    
    26,251,086
    
    
    
    53,510,943
    
    
    
    50,633,743Operating Income
    
    
    6,751,351
    
    
    
    5,160,379
    
    
    
    14,185,051
    
    
    
    14,138,071Other IncomeInterest income
    
    
    88,427
    
    
    
    21,666
    
    
    
    136,371
    
    
    
    33,937Interest (expense)
    
    
    (6,628,322
    )
    
    
    (6,546,019
    )
    
    
    (13,251,193
    )
    
    
    (13,105,523
    )Other Income
    
    
    2,307
    
    
    
    18,845
    
    
    
    2,636
    
    
    
    19,024Total Other Expense
    
    
    (6,537,588
    )
    
    
    (6,505,508
    )
    
    
    (13,112,186
    )
    
    
    (13,052,562
    )Net Income (Loss)
    
    $
    213,763
    
    
    $
    (1,345,129
    )
    
    $
    1,072,865
    
    
    $
    1,085,509
  2




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##### Table of Contents



INN OF THE MOUNTAIN GODS RESORT AND CASINO AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 (unaudited)
 Six Months Ended
    
    
    Six Months EndedOctober 31, 2007
    
    
    October 31, 2008Cash flows from operating activities:Net income
    
    $
    1,072,865
    
    
    $
    1,085,509Adjustments to reconcile net income to net cash provided by operating activities:Depreciation and amortization
    
    
    9,197,025
    
    
    
    6,968,326Loss on disposal of assets
    
    
    63,847
    
    
    
    46,118Changes in assets and liabilities:Accounts receivable
    
    
    (216,970
    )
    
    
    112,896Tribal accounts receivable
    
    
    
    
    
    
    (166,750
    )Inventories
    
    
    (218,411
    )
    
    
    20,692Prepaid expenses
    
    
    (129,031
    )
    
    
    31,617Storm Recovery Receivable
    
    
    
    
    
    
    (1,100,000
    )Other long-term assets
    
    
    (155,178
    )
    
    
    (59,950
    )Accounts payable
    
    
    411,054
    
    
    
    197,758Accrued expenses, payroll and benefits
    
    
    (354,869
    )
    
    
    27,115Accrued interest payable
    
    
    
    
    
    
    Deposits and advanced payments
    
    
    (224,639
    )
    
    
    (175,997
    )Net cash provided by operating activities
    
    
    9,445,693
    
    
    
    6,987,334Cash flows from investing activities:Purchase of property, plant and equipment
    
    
    (986,021
    )
    
    
    (2,153,695
    )Net cash used in investing activities
    
    
    (986,021
    )
    
    
    (2,153,695
    )Cash flows from financing activities:Principal payments on long-term debt
    
    
    (2,183,406
    )
    
    
    (1,752,169
    )Distributions to Mescalero Apache Tribe
    
    
    (4,001,998
    )
    
    
    (4,002,003
    )Net cash used in financing activities
    
    
    (6,185,404
    )
    
    
    (5,754,172
    )Net increase (decrease) in cash and cash equivalents
    
    
    2,274,268
    
    
    
    (920,533
    )Cash and cash equivalents, beginning of period
    
    
    16,929,630
    
    
    
    14,975,093Cash and cash equivalents, end of period
    
    $
    19,203,898
    
    
    $
    14,054,560Supplemental cash flow information:Cash paid for interest
    
    $
    12,448,571
    
    
    $
    12,139,708Non-cash investing and financing activities:Property, plant and equipment acquired through capital lease
    
    $
    289,420
    
    
    $
    354,624Property, plant and equipment acquired through reduction in storm recovery receivable
    
    $
    
    
    
    $
    900,000
 3




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##### Table of Contents



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
  Reclassifications
  Use of Estimates
  4




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##### Table of Contents



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 - 39 years
 Deferred Financing Costs
  Impairment of Long Lived Assets
    5




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##### Table of Contents



Fair Value of Financial Instruments
  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 Preproducts, or Services to be delivered in the futur
  Three Months Ended October 31,
    
    
    Six Months Ended October 31,2007
    
    
    2008
    
    
    2007
    
    
    2008Rooms
    
    $
    448,060
    
    
    $
    44,186
    
    
    $
    1,151,228
    
    
    $
    69,979Food and beverage
    
    
    236,696
    
    
    
    172,928
    
    
    
    709,653
    
    
    
    332,832Other
    
    
    7,143
    
    
    
    
    
    
    
    22,021
    
    
    
    20$
    691,899
    
    
    $
    217,114
    
    
    $
    1,882,902
    
    
    $
    402,831
 6




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##### Table of Contents



Marketing
  Tribal Taxes
  Classification of Departmental Costs
  Income Taxes
  New Accounting Pronouncements
 Fair Value
Measurements (SFAS 157).
  The Fair Value Option for Financial Assets
and Financial Liabilities
 7




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##### Table of Contents



NOTE 2ALLOWANCE FOR DOUBTFUL ACCOUNTS
   NOTE 3INVENTORIES
  April 30, 2008
    
    
    October 31, 2008Food and beverage
    
    $
    219,709
    
    
    $
    253,320Golf and pro shop
    
    
    113,058
    
    
    
    48,910Gift shops, fuel and other
    
    
    707,319
    
    
    
    717,164Inventories, net of reserves
    
    $
    1,040,086
    
    
    $
    1,019,394
 NOTE 4PROPERTY, PLANT AND EQUIPMENT, NET
  April 30, 2008
    
    
    October 31, 2008Land
    
    $
    538,894
    
    
    $
    539,215Buildings
    
    
    209,507,247
    
    
    
    209,201,550Lifts and Snowmaking equipment
    
    
    8,421,750
    
    
    
    8,299,100Non-gaming equipment, furniture and other
    
    
    51,819,539
    
    
    
    52,277,442Gaming equipment
    
    
    20,869,501
    
    
    
    21,072,202Leasehold and land improvements, lake and golf course
    
    
    8,072,925
    
    
    
    8,904,724Subtotal
    
    $
    299,229,856
    
    
    $
    300,294,233Less accumulated depreciation and amortization
    
    
    (103,333,993
    )
    
    
    (108,938,728
    )Property, plant and equipment, net
    
    
    195,895,863
    
    
    
    191,355,505Construction in progress (CIP)
    
    
    114,855
    
    
    
    1,861,711Net Property, plant and equipment
    
    $
    196,010,718
    
    
    $
    193,217,216
  NOTE 5LONG-TERM DEBT
 Notes
 8




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##### Table of Contents



(Indenture), (Cash Collateral Agreement)
  April 30, 2008
    
    
    October 31, 2008Senior Notes, bearing interest at a fixed rates 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
    
    
    929,904
    
    
    
    802,875Capital Equipment Loans with Key Equipment. Five (5) year term, interest ranging from
7.55% to 8.18%
    
    
    7,243,512
    
    
    
    5,634,392Capital lease obligations, 9.9% imputed interest
    
    
    
    
    
    
    338,604208,173,416
    
    
    
    206,775,871Less current portion
    
    
    (3,534,414
    )
    
    
    (3,781,502
    )Long-term portion
    
    $
    204,639,002
    
    
    
    $202,994,369
 9




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##### Table of Contents



2009 (six months)
    
    $
    1,8542010
    
    
    3,9312011
    
    
    200,8482012
    
    
    143$
    206,776
  NOTE 6GAMING REVENUE SHARING AND REGULATORY FEES
 Commission
 State " Compact "
 2001 Compact "
  NOTE 7  EMPLOYEE BENEFITS
   10




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##### Table of Contents



NOTE 8  RISK MANAGEMENT
      NOTE 9  COMMITMENTS AND CONTINGENCIES
 Legal Matters
  Occupancy Fee
  11




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##### Table of Contents



Employment Agreements
    NOTE 10RELATED-PARTY TRANSACTIONS
   Shared Services and Cost Allocations
  Employee Benefits Cost Allocations
   Tribal Hunts Accounts Receivable
 MBGH
 12




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##### Table of Contents



NOTE 11STORM RECOVERY
    NOTE 12 SUBSEQUENT EVENT
  NOTE 13OPERATING SEGMENTS
    13




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##### Table of Contents



SELECTED OPERATING SEGMENT FINANCIAL INFORMATION
(unaudited, in thousands)
 Gaming
    
    GamingIMG
    
    Travel Ctr
    
    Ski
    
    Non Gaming
    
    Non Segment
    
    ConsolidatedThree Months ended:October 31, 2008Net Revenue
    
    $
    11,492
    
    
    $
    7,763
    
    
    $
    11
    
    
    $
    12,150
    
    
    $
    (5
    )
    
    $
    31,411Operating Income (Loss)
    
    
    8,565
    
    
    
    6,105
    
    
    
    (25
    )
    
    
    3,536
    
    
    
    (13,021
    )
    
    
    5,160Depreciation Expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,049
    
    
    
    3,049Interest Expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (6,546
    )
    
    
    (6,546
    )Interest Income and Other
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    41
    
    
    
    41Three Months ended:October 31, 2007Net Revenue
    
    $
    12,993
    
    
    $
    8,282
    
    
    $
    19
    
    
    $
    12,420
    
    
    $
    153
    
    
    $
    33,867Operating Income (Loss)
    
    
    10,345
    
    
    
    6,733
    
    
    
    (42
    )
    
    
    3,922
    
    
    
    (14,207
    )
    
    
    6,751Depreciation Expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,149
    
    
    
    4,149Interest Expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (6,628
    )
    
    
    (6,628
    )Interest Income and Other
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    91
    
    
    
    91Six Months ended:October 31, 2008Net Revenue
    
    $
    24,331
    
    
    $
    16,226
    
    
    $
    11
    
    
    $
    24,234
    
    
    $
    (30
    )
    
    $
    64,772Operating Income (Loss)
    
    
    18,469
    
    
    
    12,871
    
    
    
    (26
    )
    
    
    6,746
    
    
    
    (23,922
    )
    
    
    14,138Depreciation Expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,126
    
    
    
    6,126Interest Expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (13,106
    )
    
    
    (13,106
    )Interest Income and Other
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    53
    
    
    
    53Six Months ended:October 31, 2007Net Revenue
    
    $
    26,538
    
    
    $
    16,724
    
    
    $
    32
    
    
    $
    24,537
    
    
    $
    (135
    )
    
    $
    67,696Operating Income (Loss)
    
    
    20,974
    
    
    
    13,512
    
    
    
    (154
    )
    
    
    7,367
    
    
    
    (27,514
    )
    
    
    14,185Depreciation Expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,384
    
    
    
    8,384Interest Expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (13,251
    )
    
    
    (13,251
    )Interest Income and Other
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    139
    
    
    
    139
 NOTE 14CONSOLIDATING INFORMATION
 wholly-owned
Guarantors
   14




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##### Table of Contents



INN OF THE MOUNTAIN GODS RESORT AND CASINO AND SUBSIDIARIES
CONSOLIDATING BALANCE SHEETS
As of October 31, 2008
(unaudited)
 GuarantorIMGRC
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedCash and cash equivalents
    
    $
    9,869,662
    
    
    $
    4,184,898
    
    
    $
    
    
    
    $
    14,054,560Accounts receivable
    
    
    50,751
    
    
    
    403,589
    
    
    
    
    
    
    
    454,340Tribal Accounts receivable
    
    
    166,750
    
    
    
    
    
    
    
    
    
    
    
    166,750Inventories
    
    
    225,463
    
    
    
    793,931
    
    
    
    
    
    
    
    1,019,394Prepaid expenses
    
    
    824,137
    
    
    
    
    
    
    
    
    
    
    
    824,137Total current assets
    
    
    11,136,763
    
    
    
    5,382,418
    
    
    
    
    
    
    
    16,519,181Fixed Assets
    
    
    
    
    
    
    302,155,943
    
    
    
    
    
    
    
    302,155,943Accumulated depreciation
    
    
    
    
    
    
    (108,938,728
    )
    
    
    
    
    
    
    (108,938,728
    )Net fixed assets
    
    
    
    
    
    
    193,217,215
    
    
    
    
    
    
    
    193,217,215Non-CurrentOther assests
    
    
    109,950
    
    
    
    
    
    
    
    
    
    
    
    109,950Deferred financing costs
    
    
    3,632,787
    
    
    
    
    
    
    
    
    
    
    
    3,632,787Storm Revovery Receivable
    
    
    200,000
    
    
    
    
    
    
    
    
    
    
    
    200,000Advances to subsidiaries
    
    
    40,430,192
    
    
    
    7,963,148
    
    
    
    (48,393,340
    )
    
    
    Investment in subsidiaries
    
    
    162,589,913
    
    
    
    
    
    
    
    (162,589,913
    )
    
    
    Total Assets
    
    $
    218,099,605
    
    
    $
    206,562,781
    
    
    $
    (210,983,253
    )
    
    $
    213,679,133Accounts payable
    
    $
    2,291,411
    
    
    $
    
    
    
    $
    
    
    
    $
    2,291,411Accrued expenses
    
    
    1,621,544
    
    
    
    2,558,149
    
    
    
    
    
    
    
    4,179,693Accrued payroll and benefits
    
    
    1,724,286
    
    
    
    
    
    
    
    
    
    
    
    1,724,286Accrued interest
    
    
    11,200,000
    
    
    
    
    
    
    
    
    
    
    
    11,200,000Advanced deposits
    
    
    
    
    
    
    181,651
    
    
    
    
    
    
    
    181,651Current portion of long-term debt
    
    
    3,516,987
    
    
    
    264,515
    
    
    
    
    
    
    
    3,781,502Total current liabilities
    
    
    20,354,228
    
    
    
    3,004,315
    
    
    
    
    
    
    
    23,358,543Non-Current LiabilitiesAdvances from subsidiaries
    
    
    7,963,148
    
    
    
    40,430,192
    
    
    
    (48,393,340
    )
    
    
    Long-term debt, net of current portion
    
    
    202,456,008
    
    
    
    538,361
    
    
    
    
    
    
    
    202,994,369Total liabilities
    
    
    230,773,384
    
    
    
    43,972,868
    
    
    
    (48,393,340
    )
    
    
    226,352,912Contributed Capital
    
    
    17,646,936
    
    
    
    (6,012,897
    )
    
    
    6,012,897
    
    
    
    17,646,936Retained Earnings (accumulated deficit)
    
    
    (30,320,715
    )
    
    
    168,602,810
    
    
    
    (168,602,810
    )
    
    
    (30,320,715
    )Total equity (deficit)
    
    
    (12,673,779
    )
    
    
    162,589,913
    
    
    
    (162,589,913
    )
    
    
    (12,673,779
    )Total liabilities and equity (deficit)
    
    $
    218,099,605
    
    
    $
    206,562,781
    
    
    $
    (210,983,253
    )
    
    $
    213,679,133
 15




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##### Table of Contents



INN OF THE MOUNTAIN GODS RESORT AND CASINO AND SUBSIDIARIES
CONSOLIDATING STATEMENT OF OPERATIONS
For the Three Months Ended October 31, 2008
(Unaudited)
 GuarantorIMGRC
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedRevenues:Gaming
    
    $
    
    
    
    $
    19,268,105
    
    
    $
    
    
    
    $
    19,268,105Hotel
    
    
    
    
    
    
    3,530,260
    
    
    
    
    
    
    
    3,530,260Food and beverage
    
    
    
    
    
    
    3,745,009
    
    
    
    
    
    
    
    3,745,009Recreation and other
    
    
    
    
    
    
    5,059,484
    
    
    
    
    
    
    
    5,059,484Gross revenue
    
    
    
    
    
    
    31,602,858
    
    
    
    
    
    
    
    31,602,858Less -promotional allowances
    
    
    38,637
    
    
    
    152,756
    
    
    
    
    
    
    
    191,393Net revenue
    
    
    (38,637
    )
    
    
    31,450,102
    
    
    
    
    
    
    
    31,411,465Operating ExpensesGaming
    
    
    
    
    
    
    7,004,572
    
    
    
    
    
    
    
    7,004,572Hotel
    
    
    
    
    
    
    1,313,491
    
    
    
    
    
    
    
    1,313,491Food and beverage
    
    
    
    
    
    
    3,827,224
    
    
    
    
    
    
    
    3,827,224Recreation and other
    
    
    
    
    
    
    3,466,386
    
    
    
    
    
    
    
    3,466,386Marketing
    
    
    
    
    
    
    2,311,498
    
    
    
    
    
    
    
    2,311,498General and administrative
    
    
    2,538,234
    
    
    
    1,036,744
    
    
    
    
    
    
    
    3,574,978Health Insurance  Medical
    
    
    
    
    
    
    607,288
    
    
    
    
    
    
    
    607,288Mescalero Apache- 401K
    
    
    
    
    
    
    226,886
    
    
    
    
    
    
    
    226,886Mescalero Apache Telecom
    
    
    
    
    
    
    43,961
    
    
    
    
    
    
    
    43,961Tribal Regulatory Fees
    
    
    
    
    
    
    600,000
    
    
    
    
    
    
    
    600,000Depreciation and amortization
    
    
    
    
    
    
    3,048,904
    
    
    
    
    
    
    
    3,048,904Storm Costs
    
    
    225,898
    
    
    
    
    
    
    
    
    
    
    
    225,898Total Operating Expenses
    
    
    2,764,132
    
    
    
    23,486,954
    
    
    
    
    
    
    
    26,251,086Operating Income (loss)
    
    
    (2,802,769
    )
    
    
    7,963,148
    
    
    
    
    
    
    
    5,160,379Other Income (expense)Interest income
    
    
    21,666
    
    
    
    
    
    
    
    
    
    
    
    21,666Interest
    
    
    (6,546,019
    )
    
    
    
    
    
    
    
    
    
    
    (6,546,019
    )Income from subsidiaries
    
    
    7,963,148
    
    
    
    
    
    
    
    (7,963,148
    )
    
    
    Other income
    
    
    18,845
    
    
    
    
    
    
    
    
    
    
    
    18,845Total other expense
    
    
    1,457,640
    
    
    
    
    
    
    
    (7,963,148
    )
    
    
    (6,505,508
    )Net income (loss)
    
    $
    (1,345,129
    )
    
    $
    7,963,148
    
    
    $
    (7,963,148
    )
    
    $
    (1,345,129
    )
 16




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##### Table of Contents



INN OF THE MOUNTAIN GODS RESORT AND CASINO AND SUBSIDIARIES
CONSOLIDATING STATEMENT OF OPERATIONS
For the Six Months Ended October 31, 2008
(Unaudited)
 GuarantorIMGRC
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedRevenues:Gaming
    
    $
    
    
    
    $
    40,708,101
    
    
    $
    
    
    
    $
    40,708,101Hotel
    
    
    
    
    
    
    7,634,627
    
    
    
    
    
    
    
    7,634,627Food and beverage
    
    
    
    
    
    
    7,611,709
    
    
    
    
    
    
    
    7,611,709Recreation and other
    
    
    
    
    
    
    9,292,083
    
    
    
    
    
    
    
    9,292,083Gross revenue
    
    
    
    
    
    
    65,246,520
    
    
    
    
    
    
    
    65,246,520Less -promotional allowances
    
    
    54,039
    
    
    
    420,667
    
    
    
    
    
    
    
    474,706Net revenue
    
    
    (54,039
    )
    
    
    64,825,853
    
    
    
    
    
    
    
    64,771,814Operating ExpensesGaming
    
    
    
    
    
    
    14,351,823
    
    
    
    
    
    
    
    14,351,823Hotel
    
    
    
    
    
    
    2,735,541
    
    
    
    
    
    
    
    2,735,541Food and beverage
    
    
    
    
    
    
    7,686,125
    
    
    
    
    
    
    
    7,686,125Recreation and other
    
    
    
    
    
    
    7,039,264
    
    
    
    
    
    
    
    7,039,264Marketing
    
    
    
    
    
    
    4,076,007
    
    
    
    
    
    
    
    4,076,007General and administrative
    
    
    4,601,291
    
    
    
    1,879,400
    
    
    
    
    
    
    
    6,480,691Health Insurance  Medical
    
    
    
    
    
    
    1,155,611
    
    
    
    
    
    
    
    1,155,611Mescalero Apache- 401K
    
    
    
    
    
    
    453,570
    
    
    
    
    
    
    
    453,570Mescalero Apache Telecom
    
    
    
    
    
    
    95,047
    
    
    
    
    
    
    
    95,047Tribal Regulatory Fees
    
    
    
    
    
    
    1,200,000
    
    
    
    
    
    
    
    1,200,000Depreciation and amortization
    
    
    
    
    
    
    6,125,822
    
    
    
    
    
    
    
    6,125,822Storm Costs
    
    
    183,732
    
    
    
    104,392
    
    
    
    
    
    
    
    288,124Insurance reimbursement on storm loss
    
    
    (1,100,000
    )
    
    
    
    
    
    
    
    
    
    
    (1,100,000
    )Loss on disposal of assets
    
    
    
    
    
    
    46,118
    
    
    
    
    
    
    
    46,118Total Operating Expenses
    
    
    3,685,023
    
    
    
    46,948,720
    
    
    
    
    
    
    
    50,633,743Operating Income (loss)
    
    
    (3,739,062
    )
    
    
    17,877,133
    
    
    
    
    
    
    
    14,138,071Other IncomeInterest income
    
    
    33,937
    
    
    
    
    
    
    
    
    
    
    
    33,937Interest (expense)
    
    
    (13,105,523
    )
    
    
    
    
    
    
    
    
    
    
    (13,105,523
    )Income from subsidiaries
    
    
    17,877,133
    
    
    
    
    
    
    
    (17,877,133
    )
    
    
    Other income
    
    
    19,024
    
    
    
    
    
    
    
    
    
    
    
    19,024Total other expense
    
    
    4,824,571
    
    
    
    
    
    
    
    (17,877,133
    )
    
    
    (13,052,562
    )Net income
    
    $
    1,085,509
    
    
    $
    17,877,133
    
    
    $
    (17,877,133
    )
    
    $
    1,085,509
 17




---



##### Table of Contents



INN OF THE MOUNTAIN GODS RESORT AND CASINO AND SUBSIDIARIES
CONSOLIDATING STATEMENT OF CASH FLOWS
For the Six Months Ended October 31, 2008
(unaudited)
 GuarantorIMGRC
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedCash flows from operating activities:Net income
    
    $
    1,085,509
    
    
    $
    17,877,133
    
    
    $
    (17,877,133
    )
    
    $
    1,085,509Adjustments to reconcile net income to net cash provided by
(used in) operating activities:Depreciation and amortization
    
    
    812,622
    
    
    
    6,155,704
    
    
    
    
    
    
    
    6,968,326Loss on disposal of fixed assets
    
    
    
    
    
    
    46,118
    
    
    
    
    
    
    
    46,118Changes in assets and liabilities:Accounts receivable
    
    
    (32,305
    )
    
    
    145,201
    
    
    
    
    
    
    
    112,896Tribal accounts receivable
    
    
    (166,750
    )
    
    
    
    
    
    
    
    
    
    
    (166,750
    )Inventories
    
    
    (8,873
    )
    
    
    29,565
    
    
    
    
    
    
    
    20,692Prepaid expenses
    
    
    (141,733
    )
    
    
    173,350
    
    
    
    
    
    
    
    31,617Storm recovery receivable
    
    
    (1,100,000
    )
    
    
    
    
    
    
    
    
    
    
    (1,100,000
    )Other long term assets
    
    
    (109,950
    )
    
    
    50,000
    
    
    
    
    
    
    
    (59,950
    )Accounts payable
    
    
    197,758
    
    
    
    
    
    
    
    
    
    
    
    197,758Accrued expenses, payroll and benefits
    
    
    (1,682,154
    )
    
    
    1,709,269
    
    
    
    
    
    
    
    27,115Deposits and advance payments
    
    
    
    
    
    
    (175,997
    )
    
    
    
    
    
    
    (175,997
    )Net cash provided by (used in) operating activities
    
    
    (1,145,876
    )
    
    
    26,010,343
    
    
    
    (17,877,133
    )
    
    
    6,987,334Cash flows from investing activities:Purchase of property, plant and equipment
    
    
    
    
    
    
    (2,153,695
    )
    
    
    
    
    
    
    (2,153,695
    )Investment in subsidiaries
    
    
    (17,877,133
    )
    
    
    
    
    
    
    17,877,133
    
    
    
    Net cash used by investing activities
    
    
    (17,877,133
    )
    
    
    (2,153,695
    )
    
    
    17,877,133
    
    
    
    (2,153,695
    )Cash flows from financing activities:Advances to (from) affiliates
    
    
    23,436,420
    
    
    
    (23,436,420
    )
    
    
    
    
    
    
    Principal payments on debt
    
    
    (1,625,140
    )
    
    
    (127,029
    )
    
    
    
    
    
    
    (1,752,169
    )Distributions to Mescalero Apache Tribe
    
    
    (4,002,003
    )
    
    
    
    
    
    
    
    
    
    
    (4,002,003
    )Net cash provided by (used in) financing activities
    
    
    17,809,277
    
    
    
    (23,563,449
    )
    
    
    
    
    
    
    (5,754,172
    )Net (decrease) increase in cash and cash equivalents
    
    
    (1,213,732
    )
    
    
    293,199
    
    
    
    
    
    
    
    (920,533
    )Cash and cash equivalents, beginning of period
    
    
    11,083,394
    
    
    
    3,891,699
    
    
    
    
    
    
    
    14,975,093Cash and cash equivalents, end of period
    
    $
    9,869,662
    
    
    $
    4,184,898
    
    
    $
    
    
    
    $
    14,054,560
 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, 2008
 GuarantorIMGRC
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedCash and cash equivalents
    
    $
    11,083,394
    
    
    $
    3,891,699
    
    
    $
    
    
    
    $
    14,975,093Accounts receivable
    
    
    18,446
    
    
    
    548,790
    
    
    
    
    
    
    
    567,236Inventories
    
    
    216,590
    
    
    
    823,496
    
    
    
    
    
    
    
    1,040,086Prepaid expenses
    
    
    682,404
    
    
    
    173,350
    
    
    
    
    
    
    
    855,754Total current assets
    
    
    12,000,834
    
    
    
    5,437,335
    
    
    
    
    
    
    
    17,438,169Fixed assets
    
    
    
    
    
    
    299,344,711
    
    
    
    
    
    
    
    299,344,711Accumulated depreciation
    
    
    
    
    
    
    (103,333,993
    )
    
    
    
    
    
    
    (103,333,993
    )Net fixed assets
    
    
    
    
    
    
    196,010,718
    
    
    
    
    
    
    
    196,010,718Non-current assetsOther assets
    
    
    
    
    
    
    50,000
    
    
    
    
    
    
    
    50,000Deferred financing costs
    
    
    4,445,409
    
    
    
    
    
    
    
    
    
    
    
    4,445,409Advances to subsidiaries
    
    
    60,244,217
    
    
    
    5,595,376
    
    
    
    (65,839,593
    )
    
    
    Investment in subsidiaries
    
    
    144,712,780
    
    
    
    
    
    
    
    (144,712,780
    )
    
    
    Total assets
    
    $
    221,403,240
    
    
    $
    207,093,429
    
    
    $
    (210,552,373
    )
    
    $
    217,944,296Accounts payable
    
    $
    2,093,653
    
    
    $
    
    
    
    $
    
    
    
    $
    2,093,653Accrued expenses
    
    
    2,449,839
    
    
    
    848,880
    
    
    
    
    
    
    
    3,298,719Accrued payroll and benefits
    
    
    2,578,145
    
    
    
    
    
    
    
    
    
    
    
    2,578,145Accrued interest
    
    
    11,200,000
    
    
    
    
    
    
    
    
    
    
    
    11,200,000Advanced deposits
    
    
    
    
    
    
    357,648
    
    
    
    
    
    
    
    357,648Current portion of long-term debt
    
    
    3,280,867
    
    
    
    253,547
    
    
    
    
    
    
    
    3,534,414Total current liabilities
    
    
    21,602,504
    
    
    
    1,460,075
    
    
    
    
    
    
    
    23,062,579Non-current LiabilitiesAdvances from subsidiaries
    
    
    5,595,376
    
    
    
    60,244,217
    
    
    
    (65,839,593
    )
    
    
    Long-term debt, net of current portion
    
    
    203,962,645
    
    
    
    676,357
    
    
    
    
    
    
    
    204,639,002Total liabilities
    
    
    231,160,525
    
    
    
    62,380,649
    
    
    
    (65,839,593
    )
    
    
    227,701,581Contributed capital
    
    
    21,648,939
    
    
    
    (6,012,897
    )
    
    
    6,012,897
    
    
    
    21,648,939Retained earnings (accumulated deficit)
    
    
    (31,406,224
    )
    
    
    150,725,677
    
    
    
    (150,725,677
    )
    
    
    (31,406,224
    )Total equity (deficit)
    
    
    (9,757,285
    )
    
    
    144,712,780
    
    
    
    (144,712,780
    )
    
    
    (9,757,285
    )Total liabilities and equity (deficit)
    
    $
    221,403,240
    
    
    $
    207,093,429
    
    
    $
    (210,552,373
    )
    
    $
    217,944,296
 19




---



##### Table of Contents



INN OF THE MOUNTAIN GODS RESORT AND CASINO AND SUBSIDIARIES
CONSOLIDATING STATEMENT OF OPERATIONS
For the Three Months Ended October 31, 2007
 GuarantorIMGRC
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedRevenues:Gaming
    
    $
    
    
    
    $
    21,295,463
    
    
    $
    
    
    
    $
    21,295,463Hotel
    
    
    
    
    
    
    3,782,138
    
    
    
    
    
    
    
    3,782,138Food and beverage
    
    
    
    
    
    
    3,860,663
    
    
    
    
    
    
    
    3,860,663Recreation and other
    
    
    
    
    
    
    5,306,327
    
    
    
    
    
    
    
    5,306,327Gross revenue
    
    
    
    
    
    
    34,244,591
    
    
    
    
    
    
    
    34,244,591Less-promotional allowances
    
    
    23,610
    
    
    
    353,669
    
    
    
    
    
    
    
    377,279Net revenue
    
    
    (23,610
    )
    
    
    33,890,922
    
    
    
    
    
    
    
    33,867,312Operating expensesGaming
    
    
    
    
    
    
    7,103,357
    
    
    
    
    
    
    
    7,103,357Hotel
    
    
    
    
    
    
    1,158,625
    
    
    
    
    
    
    
    1,158,625Food and beverage
    
    
    
    
    
    
    3,924,967
    
    
    
    
    
    
    
    3,924,967Recreation and other
    
    
    
    
    
    
    3,785,478
    
    
    
    
    
    
    
    3,785,478Marketing
    
    
    
    
    
    
    3,002,705
    
    
    
    
    
    
    
    3,002,705General and administrative
    
    
    1,926,807
    
    
    
    800,600
    
    
    
    
    
    
    
    2,727,407Health insurance - medical
    
    
    
    
    
    
    393,362
    
    
    
    
    
    
    
    393,362Mescalero Apache 401K
    
    
    
    
    
    
    220,979
    
    
    
    
    
    
    
    220,979Mescalero Apache Telecom
    
    
    
    
    
    
    50,042
    
    
    
    
    
    
    
    50,042Tribal regulatory fees
    
    
    
    
    
    
    600,000
    
    
    
    
    
    
    
    600,000Depreciation and amortization
    
    
    
    
    
    
    4,149,039
    
    
    
    
    
    
    
    4,149,039Loss on disposal of assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total operating expenses
    
    
    1,926,807
    
    
    
    25,189,154
    
    
    
    
    
    
    
    27,115,961Operating income (loss)
    
    
    (1,950,417
    )
    
    
    8,701,768
    
    
    
    
    
    
    
    6,751,351Other Income (expense)Interest income
    
    
    88,427
    
    
    
    
    
    
    
    
    
    
    
    88,427Interest expense
    
    
    (6,628,322
    )
    
    
    
    
    
    
    
    
    
    
    (6,628,322
    )Income from subsidiaries
    
    
    8,701,768
    
    
    
    
    
    
    
    (8,701,768
    )
    
    
    Other income
    
    
    2,307
    
    
    
    
    
    
    
    
    
    
    
    2,307Total other income (expense)
    
    
    2,164,180
    
    
    
    
    
    
    
    (8,701,768
    )
    
    
    (6,537,588
    )Net income
    
    $
    213,763
    
    
    $
    8,701,768
    
    
    $
    (8,701,768
    )
    
    $
    213,763
 20




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##### Table of Contents



INN OF THE MOUNTAIN GODS RESORT AND CASINO AND SUBSIDIARIES
CONSOLIDATING STATEMENT OF OPERATIONS
For the Six Months Ended October 31, 2007
 GuarantorIMGRC
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedRevenues:Gaming
    
    $
    
    
    
    $
    43,296,171
    
    
    $
    
    
    
    $
    43,296,171Hotel
    
    
    
    
    
    
    7,903,496
    
    
    
    
    
    
    
    7,903,496Food and beverage
    
    
    
    
    
    
    7,869,920
    
    
    
    
    
    
    
    7,869,920Recreation and other
    
    
    
    
    
    
    9,685,294
    
    
    
    
    
    
    
    9,685,294Gross revenue
    
    
    
    
    
    
    68,754,881
    
    
    
    
    
    
    
    68,754,881Less-promotional allowances
    
    
    23,905
    
    
    
    1,034,982
    
    
    
    
    
    
    
    1,058,887Net revenue
    
    
    (23,905
    )
    
    
    67,719,899
    
    
    
    
    
    
    
    67,695,994Operating expensesGaming
    
    
    
    
    
    
    14,456,815
    
    
    
    
    
    
    
    14,456,815Hotel
    
    
    
    
    
    
    2,385,547
    
    
    
    
    
    
    
    2,385,547Food and beverage
    
    
    
    
    
    
    7,806,853
    
    
    
    
    
    
    
    7,806,853Recreation and other
    
    
    
    
    
    
    7,534,867
    
    
    
    
    
    
    
    7,534,867Marketing
    
    
    
    
    
    
    5,214,417
    
    
    
    
    
    
    
    5,214,417General and administrative
    
    
    3,486,497
    
    
    
    1,491,177
    
    
    
    
    
    
    
    4,977,674Health insurance - medical
    
    
    
    
    
    
    943,211
    
    
    
    
    
    
    
    943,211Mescalero Apache 401K
    
    
    
    
    
    
    442,265
    
    
    
    
    
    
    
    442,265Mescalero Apache Telecom
    
    
    
    
    
    
    101,044
    
    
    
    
    
    
    
    101,044Tribal Regulatory Fees
    
    
    
    
    
    
    1,200,000
    
    
    
    
    
    
    
    1,200,000Depreciation and amortization
    
    
    
    
    
    
    8,384,403
    
    
    
    
    
    
    
    8,384,403Loss on disposal of assets
    
    
    
    
    
    
    63,847
    
    
    
    
    
    
    
    63,847Total operating expenses
    
    
    3,486,497
    
    
    
    50,024,446
    
    
    
    
    
    
    
    53,510,943Operating income (loss)
    
    
    (3,510,402
    )
    
    
    17,695,453
    
    
    
    
    
    
    
    14,185,051Other income (expense)Interest income
    
    
    136,371
    
    
    
    
    
    
    
    
    
    
    
    136,371Interest expense
    
    
    (13,251,193
    )
    
    
    
    
    
    
    
    
    
    
    (13,251,193
    )Income from subsidiaries
    
    
    17,695,453
    
    
    
    
    
    
    
    (17,695,453
    )
    
    
    Other income
    
    
    2,636
    
    
    
    
    
    
    
    
    
    
    
    2,636Total other income (expense)
    
    
    4,583,267
    
    
    
    
    
    
    
    (17,695,453
    )
    
    
    (13,112,186
    )Net income
    
    $
    1,072,865
    
    
    $
    17,695,453
    
    
    $
    (17,695,453
    )
    
    $
    1,072,865
 21




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##### Table of Contents



INN OF THE MOUNTAIN GODS RESORT AND CASINO AND SUBSIDIARIES
CONSOLIDATING STATEMENT OF CASH FLOWS
For the Six Months ended October 31, 2007
(unaudited)
 GuarantorIMGRC
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedCash flows from operating activities:Net income
    
    $
    1,072,865
    
    
    $
    17,695,453
    
    
    $
    (17,695,453
    )
    
    $
    1,072,865Adjustments to reconcile net income to net cash provided
by operating activities:Depreciation and amortization
    
    
    812,622
    
    
    
    8,384,403
    
    
    
    
    
    
    
    9,197,025Loss on disposal of equipment
    
    
    
    
    
    
    63,857
    
    
    
    
    
    
    
    63,857Changes in assets and liabilities:Accounts receivable
    
    
    (22,569
    )
    
    
    (194,401
    )
    
    
    
    
    
    
    (216,970
    )Inventories
    
    
    (137,027
    )
    
    
    (81,384
    )
    
    
    
    
    
    
    (218,411
    )Prepaid expenses
    
    
    (129,031
    )
    
    
    
    
    
    
    
    
    
    
    (129,031
    )Other long term assets
    
    
    (50,000
    )
    
    
    (105,178
    )
    
    
    
    
    
    
    (155,178
    )Accounts payable
    
    
    411,044
    
    
    
    
    
    
    
    
    
    
    
    411,044Accrued expenses, payroll and benefits
    
    
    (359,952
    )
    
    
    5,083
    
    
    
    
    
    
    
    (354,869
    )Deposits and advanced payments
    
    
    
    
    
    
    (224,639
    )
    
    
    
    
    
    
    (224,639
    )Net cash provided by operating activities
    
    
    1,597,952
    
    
    
    25,543,194
    
    
    
    (17,695,453
    )
    
    
    9,445,693Cash flows from investing activities:Purchase of property, plant and equipment
    
    
    
    
    
    
    (986,021
    )
    
    
    
    
    
    
    (986,021
    )Investment in subsidiaries
    
    
    (17,695,453
    )
    
    
    
    
    
    
    17,695,453
    
    
    
    Net cash used by investing activities
    
    
    (17,695,453
    )
    
    
    (986,021
    )
    
    
    17,695,453
    
    
    
    (986,021
    )Cash flows from financing activities:Advances to (from) affiliates
    
    
    24,132,399
    
    
    
    (24,132,399
    )
    
    
    
    
    
    
    Principal payments on long-term debt, net
    
    
    (2,069,668
    )
    
    
    (113,738
    )
    
    
    
    
    
    
    (2,183,406
    )Distributions to Mescalero Apache Tribe
    
    
    (4,001,998
    )
    
    
    
    
    
    
    
    
    
    
    (4,001,998
    )Net cash used by (provided by) financing activities
    
    
    18,060,733
    
    
    
    (24,246,137
    )
    
    
    
    
    
    
    (6,185,404
    )Net increase in cash and cash equivalents
    
    
    1,963,232
    
    
    
    311,036
    
    
    
    
    
    
    
    2,274,268Cash and cash equivalents, beginning of period
    
    
    12,808,711
    
    
    
    4,120,919
    
    
    
    
    
    
    
    16,929,630Cash and cash equivalents, end of period
    
    $
    14,771,943
    
    
    $
    4,431,955
    
    
    $
    
    
    
    $
    19,203,898
 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 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 carefully in evaluating the forward-looking statements
contained in this Form 10-Q . 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
  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 future
 Classification of Departmental Costs
 24




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##### Table of Contents



Deferred Financing Costs
 Results of Operations
 Quarter Ended October 31, 2008 Compared to Quarter Ended October 31, 2007.
 Net Revenues
 Gaming
 Hotel
 Food and Beverage
 Recreation and Other
 Promotional Allowances
 Total Operating Expenses
 Gaming
 Hotel
 Food and Beverage
 25




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##### Table of Contents



Recreation and Other
 Marketing
 General and Administrative.
 Health Insurance
 Mescalero Apache 401K
 Mescalero Apache Telecom
 Tribal Regulatory Fees
 Depreciation
 Storm Costs
 Income from Operations
 Other Income (Expenses)
 Six Months Ended October 31, 2008 Compared to Six Months Ended October 31, 2007.
 Net Revenues
 Gaming
 26




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##### Table of Contents



Hotel
 Food and Beverage
 Recreation and Other
 Promotional Allowances
 Total Operating Expenses
 Gaming
 Hotel
 Food and Beverage
 Recreation and Other
 Marketing
 General and Administrative.
 Health Insurance
 Mescalero Apache 401(K)
 Mescalero Apache Telecom
 Tribal Regulatory Fees
 Depreciation
 27




---



##### Table of Contents



Income from Operations
 Other Income (Expenses)
 Liquidity and Capital Resources
       Description of Indebtedness
 The Notes
    Incurrence of Additional Indebtedness
  28




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##### Table of Contents



General Indebtedness
  Credit Facility
  Credit Rating
   Off-Balance Sheet Arrangements
  Regulation and Taxes
  29




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##### Table of Contents



Item 3. Quantitative and Qualitative Disclosures About Market Risk.
    
 Item 4. Controls and Procedures.
 Disclosure Controls and Procedures
  Changes in Internal Control Over Financial Reporting
  
 PART II OTHER INFORMATION
 
 Item 1. Legal Proceedings.
  
 Item 1A. Risk Factors.
 IMG Resort and Casinos insurance policy may fail to cover all of the storm damage.
  Risks Relating to our Liquidity and Capital Resources
    30




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##### Table of Contents



The downturn in the economy may affect consumer spending on discretionary items such as travel and
leisure, which could have a material adverse effect on our business, financial condition and
results of operations.
  
 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.
    31




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##### Table of Contents



Events related to the operation of Ski Apache
  th
 32




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##### Table of Contents



Item 6. Exhibits.
 Exhibit No.
    
    Description31.1
    
    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.
 33




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##### Table of Contents



SIGNATURES
  INN OF THE MOUNTAIN GODS RESORT AND CASINODate: December 12, 2008
    
    By
    
    /s/ Douglas LentzName:
    
    Douglas LentzIts:
    
    Chief Operating Officer (Principal Executive Officer)Date: December 12, 2008
    
    By
    
    /s/ Daniel McCueName:
    
    Daniel McCueIts:
    
    Chief Financial Officer (Principal Financial Officer)
 34




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##### Table of Contents



INDEX TO EXHIBITS
 Exhibit No.
    
    Description31.1
    
    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.
 35