UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-Q

     [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
                              EXCHANGE ACT OF 1934

                 FOR THE QUARTERLY PERIOD ENDED JANUARY 31, 2006

                                       OR


     [ ] 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
             (Exact name of registrant as specified in its charter)

                NOT APPLICABLE                                75-3158926
         (State or other jurisdiction                      (I.R.S. Employer
       of incorporation or organization)                Identification Number)

            287 CARRIZO CANYON ROAD
             MESCALERO, NEW MEXICO                               88340
   (Address of principal executive offices)                   (Zip Code)


                                 (505) 464-7004
              (Registrant's telephone number, including area code)


Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports); and (2) has been subject to such
filing requirements for the past 90 days.

Yes      [X]      No       [_]

Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer, or a non-accelerated filer. See definition of "accelerated
filer and large accelerated filer" in Rule 12b-2 of the Exchange Act. (Check
one):

Large accelerated filer [_]  Accelerated filer [_]   Non-accelerated filer  [_]

Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act).

Yes      [_]     No       [X]


<PAGE>


           INN OF THE MOUNTAIN GODS RESORT AND CASINO AND SUBSIDIARIES

                                    FORM 10-Q

                     FOR THE QUARTER ENDED JANUARY 31, 2006



                                                       INDEX

<TABLE>
<CAPTION>
<S>           <C>                                                                                                  <C>
                                                                                                                     PAGES

PART I.       FINANCIAL INFORMATION
   Item 1.    Consolidated Financial Statements:

              Consolidated Balance Sheets as of
              January 31, 2006 (unaudited) and April 31, 2005..........................................................1

              Consolidated Statements of Income (Loss) for Each of the Three and Nine
              Month Periods Ended January 31, 2006 (unaudited) and January 31, 2005 (unaudited)........................2

              Consolidated Statements of Cash Flows for the Nine Month Periods Ended
              January 31, 2006 (unaudited) and January 31, 2005 (unaudited)............................................3

              Notes to Consolidated Financial Statements (unaudited)...................................................4

   Item 2.    Management's Discussion and Analysis of Financial
              Condition and Results of Operations.....................................................................25

   Item 3.    Quantitative and Qualitative Disclosures about Market Risk..............................................38

   Item 4.    Controls and Procedures.................................................................................38


PART II.      OTHER INFORMATION

   Item 1.    Legal Proceedings.......................................................................................41

   Item 1A.   Risk Factors............................................................................................41

   Item 2.    Unregistered Sales of Equity Securities and Use of Proceeds.............................................41

   Item 3.    Defaults upon Senior Securities.........................................................................41

   Item 4.    Submission of Matters to a Vote of Security Holders.....................................................41

   Item 5.    Other Information.......................................................................................41

   Item 6.    Exhibits................................................................................................42

</TABLE>


                                       i
<PAGE>
<TABLE>
<CAPTION>

PART I FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS.

                            INN OF THE MOUNTAIN GODS RESORT AND CASINO AND SUBSIDIARIES
                                            CONSOLIDATED BALANCE SHEETS

<S>                                                                                 <C>                   <C>
                                                                                   As of                  As of
                                                                              January 31, 2006       April 30, 2005
                                                                             -------------------    ------------------
                                                                                (UNAUDITED)

                                 ASSETS
CURRENT ASSETS:
   Cash and cash equivalents                                                        $13,799,395           $13,718,521
   Restricted cash and cash equivalents                                              21,107,439            35,870,686
   Accounts receivable, net of allowance for doubtful accounts                          391,292               577,476
   Inventories                                                                        1,057,152             1,429,506
   Prepaid expenses                                                                     537,313               860,189
                                                                             -------------------    ------------------
     Total current assets                                                            36,892,591            52,456,378

NON CURRENT ASSETS:
   Property, plant and equipment, net                                               230,035,153           231,721,074
   Deferred financing cost, net                                                       8,102,208             9,321,141
   Other long-term assets                                                                76,680               195,213
                                                                             -------------------    ------------------
     Total assets                                                                  $275,106,632          $293,693,806
                                                                             ===================    ==================

                         LIABILITIES AND EQUITY
CURRENT LIABILITIES:
   Accounts payable and other short-term liabilities                                 $1,352,592            $2,673,507
   Construction  accounts payable                                                     5,274,874             8,145,734
   Accrued expenses                                                                   9,786,251            11,005,212
   Accrued interest                                                                   6,000,000            11,200,450
   Deposits and advance payments                                                         36,960               997,365
   Current portion of long-term debt                                                  3,397,348               254,007
                                                                             -------------------    ------------------
     Total current liabilities                                                       25,848,025            34,276,275

NON CURRENT LIABILITIES:
   Long-term debt, net of current portion                                           212,417,020           201,274,181
                                                                             -------------------    ------------------

     Total liabilities                                                              238,265,045           235,550,456
                                                                             -------------------    ------------------

COMMITMENTS AND CONTINGENCIES (Note 10)

EQUITY:
  Contributed capital                                                                51,198,452            58,143,350
  Retained earnings (deficit)                                                       (14,356,865)                    -
                                                                             -------------------    ------------------
      Total equity                                                                   36,841,587            58,143,350
                                                                             -------------------    ------------------

     Total liabilities and equity                                                  $275,106,632          $293,693,806
                                                                             ===================    ==================

                         The accompanying notes are an integral part of these statements.

</TABLE>


                                       1
<PAGE>

<TABLE>
<CAPTION>
                            INN OF THE MOUNTAIN GODS RESORT AND CASINO AND SUBSIDIARIES
                                     CONSOLIDATED STATEMENTS OF INCOME (LOSS)
                                                    (UNAUDITED)


                                                         For the Three Months                      For the Nine Months
                                                                 Ended                                    Ended
                                                              January 31,                              January 31,
                                                        2006              2005                  2006                2005
                                                     ---------------    --------------      ----------------    -------------------
Revenues:
<S>                                                    <C>               <C>                    <C>                  <C>
   Gaming                                              $17,172,786       $13,060,621            $58,870,770          $48,004,383
   Hotel                                                 2,263,179                 -              8,439,212                    -
   Food and beverage                                     2,721,114         1,424,581              9,618,398            4,199,124
   Recreation and other                                  4,084,469         7,373,459             12,970,970           15,179,218
                                                     ---------------    --------------      ----------------    -------------------
     Gross revenue                                      26,241,548        21,858,661             89,899,350           67,382,725
         Less Promotional Allowances                       558,207           186,833              2,331,207              335,068
                                                     ---------------    --------------      ----------------    -------------------
          Net Revenue                                   25,683,341        21,671,828             87,568,143           67,047,657
                                                     ---------------    --------------      ----------------    -------------------
Operating costs and expenses:
   Gaming                                                3,799,063         5,740,266             12,788,582           16,075,804
   Hotel                                                 1,180,401                 -              3,916,389                    -
   Food and beverage                                     2,962,554         1,548,027             12,410,024            5,084,449
   Recreation and other                                  3,043,533         4,427,120              9,368,203           11,190,021
   Marketing and Advertising                             1,899,078           489,574              6,658,771            1,961,039
   General and administrative                            4,155,574         2,344,385             17,831,382            5,533,508
   Insurance (allocated by related party)                  804,660           513,094              2,174,101              918,057
   Pension (allocated by related party)                          -           776,111                      -            1,788,796
   Telecomm (charged by related party)                      33,877            53,944                109,887              180,101
   Fees (charged by related party)                         600,000           719,117              2,338,697            1,621,918
   Pre-opening costs and expenses                                -         2,541,453                      -            4,315,665
   Depreciation                                          4,455,568         2,021,766             13,288,219            5,042,042
                                                     ---------------    --------------      ----------------    -------------------
      Total operating expenses                          22,934,308        21,174,857             80,884,255           53,711,400
                                                     ---------------    --------------      ----------------    -------------------

Income from operations                                   2,749,033           496,971              6,683,888           13,336,257

Other income (expenses):
   Interest income                                          84,243           160,746                346,377              513,363
   Interest expense, net of amounts capitalized         (7,409,193)       (1,969,830)           (21,048,073)          (7,385,686)
   Other income (expense)                                  (39,844)           (1,855)              (339,057)              99,214
                                                     ---------------    --------------      ----------------    -------------------
     Total other expenses                               (7,364,794)       (1,810,939)           (21,040,753)          (6,773,109)
                                                     ---------------    --------------      ----------------    -------------------

     Net income (loss)                                 $(4,615,761)      $(1,313,968)          $(14,356,865)          $6,563,148
                                                     ===============    ==============      ================    ===================

                         The accompanying notes are an integral part of these statements.

</TABLE>

                                       2
<PAGE>

<TABLE>
<CAPTION>

                            INN OF THE MOUNTAIN GODS RESORT AND CASINO AND SUBSIDIARIES

                                       CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                    (UNAUDITED)

                                                                                 For the nine months ended
                                                                                         January 31
                                                                               2006                     2005
                                                                       ---------------------    ----------------------

Cash flows from operating activities:
<S>                                                                           <C>                         <C>
     Net income (loss)                                                        $(14,356,865)               $ 6,563,148
     Adjustments to reconcile net income (loss)
      to net
        cash used in operating activities:
        Depreciation and amortization                                            13,288,220                 5,042,042
        Changes in assets and liabilities:
           Accounts receivable, net of allowance                                    186,184                 (122,921)
           Inventories                                                              372,354                 (297,504)
           Prepaid revenue sharing fees                                                   -                 3,119,029
           Prepaid expenses                                                         322,876                 (345,826)
           Interest receivable                                                            -                  (48,563)
           Other long term assets                                                   118,533               (3,353,450)
           Accounts payable                                                     (1,320,915)                 2,568,320
           Construction accounts payable                                        (2,870,860)                 (893,758)
           Accrued expenses                                                     (7,693,413)                 4,047,607
           Accrued revenue sharing and regulatory fees                                    -              (23,000,000)
           Accrued interest                                                         312,780               (6,848,378)
           Deposits                                                                       -                 (442,995)
                                                                       ---------------------    ----------------------
           Net cash used in operating activities                               (11,641,106)              (14,013,249)

Cash flows from investing activities:
     Purchase of property, plant and equipment                                 (10,382,551)              (71,515,498)
                                                                       ---------------------    ----------------------
        Net cash used in investing activities                                  (10,382,551)              (71,515,498)

Cash flows from financing activities:
     Deferred financing costs                                                             -                 1,302,041
     Cash held for construction payments                                         14,763,247                62,710,825
     Payment of compact settlement                                                        -                23,000,000
     Principal borrowings (payments) on long term debt, net                      14,286,180                 (354,003)
     Distributions to Mescalero Apache Tribe                                    (6,944,896)              (11,650,680)
     Contributions from Mescalero Apache Tribe                                            -                10,000,000
                                                                       ---------------------    ----------------------
Net cash provided by financing activities                                        22,104,531                85,008,183

Net increase (decrease) in cash and cash equivalents                                 80,874                 (520,564)

Cash and cash equivalents, beginning of period                                   13,718,521                15,794,943
                                                                       ---------------------    ----------------------

Cash and cash equivalents, end of period                                        $13,799,395               $15,274,379
                                                                       =====================    ======================
Supplemental cash flow information:
     Cash paid for interest                                                     $21,048,073               $ 6,085,005
                                                                       =====================    ======================

Non-cash investing and financing activities:

     Property, plant and equipment acquired through capital leases              $   422,500               $         -
                                                                       =====================    ======================

                The accompanying notes are an integral part of these statements

</TABLE>


                                       3
<PAGE>

           INN OF THE MOUNTAIN GODS RESORT AND CASINO AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)

                FOR THE QUARTERS ENDED JANUARY 31, 2006 AND 2005

NOTE 1 - BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

REPORTING ENTITY AND OPERATIONS

The Inn of the Mountain Gods Resort and Casino ("IMG RESORT AND CASINO"), an
unincorporated enterprise of the Mescalero Apache Tribe (the "TRIBE"), was
established April 30, 2003 by the Tribe and manages and owns all resort, hotel
and gaming enterprises of the Tribe including the Inn of the Mountain Gods
Resort and Casino (the "RESORT"), a gaming, hotel and resort complex opened on
March 15, 2005, and its wholly owned subsidiaries, each of which is an
unincorporated enterprise of the Tribe: Casino Apache (the "CASINO APACHE
ENTERPRISE"), which owned and operated the Tribe's former casino, Casino Apache,
closed in February 2005; Casino Apache Travel Center (the "TRAVEL CENTER"),
which owns the Tribe's second casino facility opened in May 2003 (the "TRAVEL
CENTER CASINO"); Ski Apache (the "SKI APACHE"), which owns the Tribe's ski
resort, Ski Apache (the "THE SKI APACHE RESORT"); and Inn of the Mountain Gods
(the "INN"), which owned the Tribe's former resort hotel, Inn of the Mountain
Gods (the "INN HOTEL"). The Tribe is the sole owner of IMG Resort and Casino.
IMG Resort and Casino is a separate legal entity from the Tribe and is managed
by a separate management board.

The Resort, which opened for commercial business on March 15, 2005, is located
on tribal land in Mescalero, New Mexico and consists of a casino offering Class
III gaming as defined by the Indian Gaming Regulatory Act ("IGRA") and a 273
luxury room resort hotel. The Travel Center Casino, which opened for business on
May 22, 2003, also offers Class III gaming as defined by IGRA, on tribal land in
Mescalero. Ski Apache operates the Ski Apache Resort, a ski resort located
within the Tribe's reservation in Mescalero and on the U.S. Forest Service land.

The accompanying financial statements have been prepared by IMG Resort and
Casino without audit. In the opinion of management, all adjustments necessary to
present fairly the financial position, results of operation and cash flows at
January 31, 2006 and for all periods presented have been made. Certain
information and disclosures required by generally accepted accounting principles
have been condensed or omitted for purposes of filing interim financial
statements with the Securities and Exchange Commission (the "SEC"). These
interim condensed consolidated financial statements should be read in
conjunction with the audited financial statements and notes thereto included in
IMG Resort and Casino's Annual Report on Form 10-K as of and for the year ended
April 30, 2005. The results for the three and nine month periods ended January
31, 2006 are not necessarily indicative of the results to be expected for the
entire fiscal year ending April 30, 2006.

PRINCIPLES OF CONSOLIDATION

The accompanying consolidated financial statements include the accounts of IMG
Resort and Casino and its wholly-owned subsidiaries. All significant
intercompany accounts have been eliminated in consolidation. These consolidated
financial statements present only the consolidated financial position, results
of operations and cash flows of IMG Resort and Casino and its subsidiaries and
are not intended to present fairly the financial position of the Tribe and the
results of its operations and cash flows.

USE OF ESTIMATES

The preparation of consolidated financial statements in conformity with
accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the consolidated financial statements and the
reported amounts of revenues and expenses during the reporting period.
Significant estimates included in the accompanying financial statements relate
to the liability associated with the unredeemed Apache Spirit Club points, the
estimated lives of depreciable assets, the determination of bad debt, inventory
reserves, asset impairment and the capitalization of construction bond interest
costs. Actual results could differ from those estimates.



                                       4
<PAGE>

NOTE 1 - BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
         (CONTINUED)

CASH AND CASH EQUIVALENTS

Cash includes cash on hand for change drawers and in the vault for daily casino
activities and cash on deposit with financial institutions in demand accounts,
savings accounts and short-term certificates of deposit. For purposes of the
statement of cash flows all cash accounts that are not subject to withdrawal
restrictions or penalties and all highly liquid debt instruments purchased with
an original maturity of three months or less are considered to be cash
equivalents.

RESTRICTED CASH AND CASH EQUIVALENTS

Restricted cash and cash equivalents includes cash on deposit with financial
institutions in demand accounts, savings accounts and short-term certificates of
deposit that are subject to withdrawal restrictions (see Note 3).

ACCOUNTS RECEIVABLE

Accounts receivable consists primarily of hotel and other non-gaming
receivables. IMG Resort and Casino maintains an allowance for doubtful accounts
which is based on management's estimate of the amount expected to be
uncollectible considering historical experience and the information management
obtains regarding the creditworthiness of the non-gaming customer. The
collectibility of these receivables could be affected by future business or
economic trends.

INVENTORIES

Inventories consist of food and beverage items, fuel, retail merchandise in the
golf and pro shop, ski shop, gift shops and other miscellaneous items, parts and
supplies. All inventories are stated at the lower of cost or market. Casino
Apache and Ski Apache inventories are determined using the first-in, first-out
method. IMG Resort and Casino maintains an inventory reserve which is based on
management's estimate of the reduction in carrying value of inventory due to
obsolescence, shrinkage and other reductions.

PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment are presented at historical cost, less accumulated
depreciation and amortization. Expenditures for additions, improvements and
replacements, including interest incurred during construction of new facilities,
are capitalized while maintenance and repairs, which do not improve or extend
the service lives of the respective assets, are expensed as incurred. Interest
incurred during the construction period is capitalized at the borrowing rate for
the related loan and is amortized over the life of the related asset. Equipment
sold, or otherwise disposed of, is removed from the accounts with gains or
losses on disposal recorded in the statements of income.

Depreciation and amortization is provided over the estimated service lives of
the respective assets, using the straight-line method based on the following
useful lives:

<TABLE>
<CAPTION>
<S>                                                                      <C> <C>
           Non-gaming equipment, furniture and other                     3 - 15  years
           Gaming equipment                                              5 - 7   years
           Leasehold and land improvements, lake and golf course         5 - 30  years
           Buildings, lifts and snowmaking equipment                     10 - 50 years

</TABLE>


                                       5
<PAGE>


NOTE 1 - BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
        (CONTINUED)

DEFERRED FINANCING COSTS

Debt issuance costs incurred in connection with the issuance of IMG Resort and
Casino's financing are capitalized and amortized to interest expense using the
straight-line method over the stated maturity of the debt, which approximates
the effective interest method. Unamortized deferred financing costs totaled $8.1
million as of January 31, 2006 and $9.3 million as of April 30, 2005.

IMPAIRMENT OF LONG LIVED ASSETS

Management reviews long-lived assets for impairment whenever events or changes
in circumstances indicate the carrying amount of such assets may not be
recoverable. Under the provisions of Statement of Accounting Standards No. 144,
ACCOUNTING FOR THE IMPAIRMENT OR DISPOSAL OF LONG-LIVED ASSETS ("SFAS 144"), a
long-lived asset to be abandoned is disposed of when it ceases to be used. If an
entity commits to a plan to abandon a long-lived asset before the end of its
previously estimated useful life, depreciation estimates shall be revised to
reflect the use of the asset over its shortened useful life.

FAIR VALUE OF FINANCIAL INSTRUMENTS

The carrying amount of cash and cash equivalents, restricted cash, accounts
receivable, accounts payable and accrued expenses, bank financing facilities and
capital lease obligations approximate fair value. IMG Resort and Casino's senior
notes, and capital leases, fair value at January 31, 2006 was approximately
$215.8 million and $201.9 million at April 30, 2005.

CONTRIBUTED CAPITAL

Contributed capital represents contributions from the Tribe and consists of (i)
cash to fund certain construction and development of the Travel Center Casino
and the Resort, (ii) forgiveness of debt from the Inn to the Tribe and (iii)
allocated pension costs related to the Mescalero Apache Tribe Defined Benefit
Plan (see Note 8).

REVENUES

In accordance with gaming industry practice, IMG Resort and Casino recognizes
casino revenue as the net win from gaming activities, which is the difference
between gaming wins and losses. Gaming revenues are net of accruals for
anticipated payouts of progressive slot jackpots and table games. Such
anticipated jackpot payments are reflected as current liabilities in the
accompanying consolidated balance sheets.

Revenues from food and beverage, rooms, recreation and other are recognized at
the time the related service or sale is completed. Revenues include the retail
value of food and beverages and other items which are provided to customers on a
reward basis.


                                       6
<PAGE>


NOTE 1 - BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
        (CONTINUED)

PROMOTIONAL ALLOWANCES

IMG Resort and Casino periodically rewards rooms and other promotions, including
Apache Spirit Club points and gift certificates, to its customers. The retail
value of these player rebates are recognized by IMG Resort and Casino as a
reduction from gross revenue. The total rebates recognized by IMG Resort and
Casino were approximately $558,207 and $2.3 million for the three and nine
months ended January 31, 2006 compared to $186,833 and $335,068 for the three
and nine months ended January 31, 2005.

The Apache Spirit Club program allows customers to earn "points" based on the
volume of their gaming activity. These points are redeemable for certain
complimentary services or merchandise. Points are accrued based upon their
historical redemption rate multiplied by the cash value or the cost of providing
the applicable complimentary services. The related liability is included in
accrued expenses and totaled approximately $110,000 at January 31, 2006 and
$79,940 at January 31, 2005.

Emerging Issues Task Force ("EITF") Issue No. 00-14, ACCOUNTING FOR CERTAIN
SALES INCENTIVES requires that discounts which result in a reduction in or
refund of the selling price of a product or service in a single exchange
transaction be recorded as a reduction of revenues. IMG Resort and Casino
adopted EITF 00-14 on April 30, 2001. IMG Resort and Casino's accounting policy
related to free or discounted food and beverage and other services already
complies with EITF 00-14, and those free or discounted services are generally
deducted from gross revenues as "promotional allowances." In January 2001, the
EITF reached a consensus on certain issues related to Issue No. 00-22,
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
FUTURE. Effective October 1, 2001, IMG Resort and Casino, through its
wholly-owned subsidiaries adopted EITF 00-22, which requires that cash or
equivalent amounts provided or returned to customers as part of a transaction
not be shown as an expense, but instead as an offset to the related revenue. IMG
Resort and Casino offers cash equivalent rewards in certain circumstances and
has reflected approximately $44,000 and $186,833 for the three months ended
January 31, 2006 and 2005, respectively and approximately $225,000 and $335,068
for the nine months ended January 31, 2006 and 2005, in player rebates as an
offset to gaming revenues for these incentives.

The estimated cost of providing such complimentary allowances, as they relate to
IMG Resort and Casino, are, as follows:

<TABLE>
<CAPTION>
                                                          For the Three Months             For the Nine Months
                                                                  Ended                           Ended
                                                               January 31,                     January 31,
                                                       ---------------------------- -- ----------------------------
                                                          2006            2005            2006            2005
                                                       ------------     ----------     -----------     -----------

<S>                                               <C>                <C>            <C>             <C>
Room and Services                                 $       (22,026)   $         -   $   (294,952)   $          -
Food and Beverage                                         377,515         66,407        373,137         (79,940)
Retail and Recreation                                        (221)             -        (14,575)              -
                                                       ------------     ----------     -----------     -----------
Total                                             $       355,268   $     66,407   $    (63,610)   $    (79,940)
                                                       ============     ==========     ===========     ===========

</TABLE>

                                       7
<PAGE>


NOTE 1 - BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
        (CONTINUED)

COMPENSATED ABSENCES

Compensated absences are included in accrued expenses. The personnel policies
allow the workforce to accrue annual leave as follows:

o        One week of annual leave after one year of employment.
o        Two weeks of annual leave after two years of employment.
o        Three weeks of annual leave after three years of employment.
o        Four weeks of annual leave after fifteen years of employment.

Except for personnel at the Ski Apache Resort, annual leave may be accumulated
by all personnel up to a maximum of 120 hours or 160 hours for fifteen-year
employees. Any annual leave accrued above these limits is forfeited. Personnel
may be compensated for accrued annual leave only upon termination.

Sick leave is accrued at 2.1 hours per pay period after 90 days of employment
and 3.1 hours after three years of employment. Personnel are not compensated for
accrued sick leave on termination. Accordingly, the compensated absence accrual
does not include a provision for sick leave.

PRE-OPENING COSTS AND EXPENSES

Pre-opening costs and expenses consist principally of direct incremental
personnel costs, training costs and payroll costs for retaining the employees of
the Inn Hotel during the construction period of the Resort. In accordance with
the American Institute of Certified Public Accountants' Statement of Position
98-5, Reporting on the Costs of Start-Up Activities, pre-opening costs and
expenses are expensed as incurred.

MARKETING AND ADVERTISING COSTS

IMG Resort and Casino's marketing and advertising costs are expensed as incurred
and for the three months ended January 31, 2006 and 2005 were $1.9 million and
$0.5 million respectively and for the nine months ended January 31, 2006 and
2005 were $6.7 million and $2.0 million, respectively. Marketing's promotional
event revenue/ticket sales offset the expenses incurred.

TRIBAL TAXES

IMG Resort and Casino is subject to tribal taxes as long as its enterprises are
not subject to New Mexico Gross Receipts Tax. Ski Apache is subject to New
Mexico Gross Receipts Tax. A tribal tax charge of 10.75% of room revenue, 6.75%
of food and beverage revenue, and 6.5% of other revenue is accrued monthly and
is payable to the Tribe. IMG Resort and Casino has recorded $600,000 and
$719,117 in expenses for taxes payable to the Tribe for the three months ended
January 31, 2006 and January 31, 2005, respectively and $2.3 million and $1.6
million in expenses for taxes payable to the Tribe for the nine months ended
January 31, 2006 and January 31, 2005, respectively.

INCOME TAXES

As unincorporated enterprises of the Tribe, IMG Resort and Casino and its
subsidiaries are exempt from federal and state income taxes.


                                       8
<PAGE>


NOTE 1 - BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
        (CONTINUED)

NEW ACCOUNTING PRONOUNCEMENTS

     In December 2004, the FASB issued SFAS No. 153, "Exchanges of Nonmonetary
Assets - An Amendment of APB Opinion No. 29, Accounting for Nonmonetary
Transactions" ("SFAS 153"). SFAS 153 eliminates the exception from fair value
measurement for nonmonetary exchanges of similar productive assets in paragraph
21(b) of APB Opinion No. 29, "Accounting for Nonmonetary Transactions," and
replaces it with an exception for exchanges that do not have commercial
substance. SFAS 153 specifies that a nonmonetary exchange have commercial
substance if the future cash flows of the entity are expected to change
significantly as a result of the exchange. SFAS 153 is effective for fiscal
periods beginning after June 15, 2005. IMG Resort and Casino does not believe
that the adoption of SFAS 153 will have a material effect on its results of
operations or consolidated financial position.

     In May 2005, the Financial Accounting Standards Board, issued Statement of
Financial Accounting Standards SFAS No. 154, "Accounting Changes and Error
Corrections"("SFAS 154"). SFAS 154 replaces APB No. 20, "Accounting Changes" and
SFAS No. 3, "Reporting Accounting Changes in Interim Financial Statements" and
establishes retrospective application as the required method for reporting a
change in accounting principle. SFAS 154 provides guidance for determining
whether retrospective application of a change in accounting principle is
impracticable and for reporting a change when retrospective application is
impracticable. The reporting of a correction of an error by restating previously
issued financial statements is also addressed. SFAS 154 is effective for
accounting changes and corrections of errors made in fiscal years beginning
after December 15, 2005. IMG Resort and Casino does not believe that the
adoption of SFAS 154 will have a material effect on its results of operations or
consolidated financial position.

NOTE 2 - ALLOWANCE FOR DOUBTFUL ACCOUNTS

IMG Resort and Casino maintains an allowance for doubtful accounts for estimated
losses resulting from the inability of customers to make required payments,
which results in bad debt expense. IMG Resort and Casino determines the adequacy
of this allowance by periodically evaluating individual non-gaming customer
receivables and considering its non-gaming customers financial condition, credit
history and current economic conditions. If the financial condition of
non-gaming customers were to deteriorate, resulting in an impairment of their
ability to make payments, IMG Resort and Casino may increase the allowance. For
banquet functions and room revenue, the allowance for bad debt consists of
approximately 50% of all receivables in excess of 60 days past due and 100% of
all receivables in excess of 90 days past due.

The allowance for bad debt expense was $114,612 as of January 31, 2006 and $0 as
of April 30, 2005.

NOTE 3 - RESTRICTED CASH AND CASH EQUIVALENTS

Restricted cash and equivalents consists of the following :
<TABLE>
<CAPTION>
                                                                       January 31, 2006          April 30, 2005
                                                                     -------------------       ------------------
<S>                                                                   <C>                        <C>
     Interest reserve                                                 $       22,548             $    11,919,101
     Construction reserve                                                 15,771,526                  15,628,691
     Construction retainage                                                5,313,100                   8,238,351
     Construction funding                                                        265                      84,543
                                                                     -------------------       ------------------
     Total restricted cash                                            $   21,107,439             $    35,870,686
                                                                     ===================       ==================

                                       9
<PAGE>

NOTE 4 - INVENTORIES

Inventories consist of the following as of,
                                                                       January 31, 2006          April 30, 2005
                                                                     -------------------       ------------------
     Food and beverage                                                $      242,939             $       370,924
     Golf and pro shop                                                       295,868                     547,802
     Gift shops, fuel and other,                                             644,204                     510,780
     Reserves                                                               (125,859)                          -
                                                                     -------------------       ------------------
     Inventories-Net of Reserves                                      $   $1,057,152             $     1,429,506
                                                                     ===================       ==================

NOTE 5 - PROPERTY, PLANT AND EQUIPMENT, NET

Property, plant and equipment is summarized as follows as of ,
                                                                       January 31, 2006           April 30, 2005
                                                                     -------------------       ------------------
     Land                                                             $      538,894             $       538,894
     Buildings, lifts and snowmaking equipment                           215,013,576                 221,150,464
     Non-gaming equipment, furniture and other                            52,352,122                  42,975,371
     Gaming equipment                                                     21,246,147                  14,490,064
     Leasehold and land improvements, lake and golf course                 6,842,477                   6,163,235
                                                                     -------------------       ------------------
     Subtotal                                                           $295,993,216                 285,318,028

     Less accumulated depreciation and amortization                     (67,059,669)                (53,641,404)
                                                                     -------------------       ------------------
     Property, plant and equipment, net                                  228,933,546                 231,676,624
     Construction in progress (CIP)                                        1,101,608                      44,450
                                                                     -------------------       ------------------
     Net Property, plant and equipment                                  $230,035,153                $231,721,074
                                                                     ===================       ==================
</TABLE>

     IMG Resort and Casino capitalized $14.3 million $0.0, and $0.0, of interest
cost related to construction of the Travel Center Casino and the Resort during
the fiscal year ended April 30, 2005 and the three and nine month periods ended
January 31, 2006.

NOTE 6 - LONG-TERM DEBT

On November 3, 2003, IMG Resort and Casino issued $200.0 million of its 12%
Senior Notes (the "NOTES"). The Notes bear interest at 12% per year, payable on
May 15 and November 15 of each year, beginning on May 15, 2004. The Notes will
mature on November 15, 2010. The Notes may be redeemed at any time on or after
November 15, 2007 at fixed redemption prices plus accrued and unpaid interest,
if any. If a change in control occurs, holders of the notes will have the right
to require the repurchase of their Notes at a price equal at 101% of the
principal amount thereof, plus accrued and unpaid interest, if any. The Notes
are guaranteed by all of IMG Resort and Casino's subsidiaries.

Until the issuance of a final certificate of completion of the Resort, the Notes
and guarantees are secured by a first priority security interest in certain
collateral accounts and bank accounts of IMG Resort and Casino and the
guarantors, which had an aggregate balance of approximately $21.1 million at
January 31, 2006. The Notes will, after issuance of a final certificate of
completion of the Resort, be the general unsecured obligations of IMG Resort and
Casino and will rank equal in rights of payment to all of its existing future
and senior unsecured obligations and senior in right of payment to any
obligations that are by their terms subordinated to the Notes and are
effectively subordinated to its secured obligations to the extent of the assets
securing those obligations. The Resort opened on March 15, 2005 and is
substantially complete, pending final certification by the contractor and an
independent construction consultant that all amounts necessary to complete the
Resort, including final punch list items, have been provided for and all liens
have been released, as required by the indenture governing the notes. IMG Resort
and Casino is in the process of seeking issuance of this final certificate of
completion.


                                       10
<PAGE>


NOTE 6 - LONG-TERM DEBT (CONTINUED)

The indenture governing the Notes contains covenants that limit, among other
things, IMG Resort and Casino and the guarantors' ability to pay dividends and
make distributions to the Tribe; make investments; incur additional debt or
types of debt; create liens; sell equity interests in subsidiaries; enter into
transactions with affiliates; enter into sale and leaseback transactions; engage
in other businesses; transfer or sell assets; and merge or consolidate with or
into other entities. Other than with respect to the late filing of its Report on
Form 10-Q for the period ended July 31, 2006, for the three and nine months
ended January 31, 2006, IMG Resort and Casino was in compliance with all
covenants required in the Notes.

On June 15, 2004, IMG Resort and Casino entered into a $15.0 million credit
facility with Key Equipment Finance, a Division of Key Corporate Capital Inc.
The fixed credit facility is fully amortizable over five years and bears an
interest rate indexed off the 3-year Treasury Interest Rate Swaps. Proceeds from
the loan were used to fund furniture, fixtures and equipment for the Resort. As
of January 31, 2006, $13.8 million had been drawn against this facility to
finance the purchases of furniture, fixtures and equipment.

<TABLE>
<CAPTION>
Long-term debt is summarized as follows:
                                                                    January 31, 2006              April 30, 2005
                                                                   ------------------           -------------------
<S>                                                                     <C>                         <C>
     Senior Notes, bearing interest at a fixed rate
     of  12%, maturing in 2010                                          $200,000,000                $200,000,000

     Bureau of Indian Affairs, unsecured notes payable
     with payments of $27,100 per month, including
     interest at 8.5%, maturing in 2011                                    1,615,033                   1,528,188

     Capital Equipment Loans with Key Equipment.
     Five (5) year term, 7.65% interest                                   13,776,486                           -

     Short-Term Capital Leases, 8% imputed interest                          422,849                           -
                                                                   ------------------           -------------------
                                                                         215,814,368                 201,528,188

     Less current portion                                                 (3,397,348)                   (254,007)
                                                                   ------------------           -------------------
     Long-term portion                                                  $212,417,020                $201,274,181
                                                                   ==================           ===================

The maturities of long-term debt as of January 31, 2006 are as follows (in thousands):

              2006 (three months remaining)                                                         $        718
              2007 - 2009                                                                                  9,784
              2010 - 2011                                                                                204,495
              Thereafter                                                                                     395
                                                                                                       -----------
                                                                                                    $    215,392
                                                                                                       ===========
</TABLE>

Total interest incurred for the three months ended January 31, 2006 and 2005 was
$7.4 million and $6.0 million, respectively, of which $0.0 and $4.5 million was
capitalized. Total interest incurred for the nine months ended January 31, 2006
and 2005 was $21.0 million and $18.0 million, respectively, of which $0.0 and
$11.9 million was capitalized.


                                       11
<PAGE>



NOTE 7 - GAMING REVENUE SHARING AND REGULATORY FEES

The Tribe regulates IMG Resort and Casino's gaming activities through the
Mescalero Apache Tribe Gaming Regulatory Commission, an agency of the Tribe (the
"COMMISSION"). The Commission reports directly to the Tribal Council. A
regulatory fee is paid to the Tribe as reimbursement for the cost of regulating
the gaming activities. IMG Resort and Casino also pays a federal regulatory fee.
All tribal and federal regulatory fees due and payable have been paid.

On August 29, 1997, the Tribe and the State of New Mexico (the "STATE") entered
into a Tribal-State Compact (the "1997 COMPACT") to govern gaming on the
Mescalero Apache Reservation. The terms of the 1997 Compact subjected IMG Resort
and Casino to various regulatory fees and revenues sharing payable to the State.
Among the provisions of the 1997 Compact were requirements for quarterly
revenues sharing payments consisting of 16% of the "net win" from gaming
machines and quarterly regulatory fees assessed on the number of gaming
facilities, the number of gaming machines and the number of gaming tables and
other devices. The Tribe challenged the legality of these fee arrangements,
claiming them to be an illegal tax on Indian gaming under IGRA. On April 20,
2004, the Tribe and the State of New Mexico entered into a settlement agreement
which resolved all of their disputes regarding the 1997 Compact. Under the
settlement agreement, the State of New Mexico and the Tribe agreed that they
would enter into a new gaming compact, and that the Tribe would pay the State of
New Mexico $25.0 million in full settlement of all revenue sharing and
regulatory fees payable under the 1997 Compact as well as all revenue sharing
fees payable under the new gaming compact through March 2005. All amounts
payable under this settlement agreement had been paid at January 31, 2006.

On June 1, 2004, the Tribe and the State of New Mexico entered into a new
Tribal-State Compact (the "2001 Compact"). On July 22, 2004, the Department of
Interior approved the 2001 Compact. The 2001 Compact provides for a revenue
sharing amount equal to 8% of "net win" from gaming machines, payable no later
than 25 days after the last day of each calendar quarter and an annual
regulatory fee of $100,000, paid in quarterly installments of $25,000 on the
first day of each calendar quarter. Pursuant to the terms of the settlement
agreement, IMG Resort and Casino began incurring revenue sharing payments to the
State of New Mexico at the rate of 8% of "net win" pursuant to the 2001 Compact
in March 2005, with the first revenue sharing payment under the 2001 Compact due
in July 2005. Revenue sharing payments and regulatory fees paid are recognized
as a current period expense.

NOTE 8 - DEFINED BENEFIT PENSION PLAN

Until November 8, 2004, IMG Resort and Casino participated in the Mescalero
Apache Tribe Defined Benefit Plan (the "PLAN"), a defined benefit pension plan
that covers substantially all full-time employees of the Tribe. Although IMG
Resort and Casino employees participated in the Plan, they are not employees of
the Tribe and were not employees of the Tribe for all periods during which they
participated in the plan. The Tribe is the Plan sponsor and handles all
administration and funding of the Plan. The Tribe reserves the right to amend
any or all provisions of the Plan. The Plan provides retirement, disability and
death benefits to plan members and beneficiaries.

The Tribe, upon advice from legal counsel, has determined that the Plan is a
"governmental plan" as described in Section 414(d) of the Internal Revenue Code
("IRC"). As such, the Plan is exempt from many of the requirements placed on
qualified plans, including (but not limited to) the reporting and disclosure
requirements of ERISA, coverage under the Pension Benefit Guaranty Corporation
("PBGC") and the minimum and maximum funding requirements of IRC Sections 412
and 404.

Under the terms of an agreement with the Tribe executed in 2003, IMG Resort and
Casino paid a fixed amount of 9.75% of salaries and wages as a fixed
contribution to the Plan. The total pension expenses under this agreement were
$0 and $776,111 for the three months ended January 31, 2006 and 2005,
respectively and were $0 and $1,788,796 for the nine months ended January 31,
2006 and 2005, respectively.


                                       12
<PAGE>


NOTE 8 - DEFINED BENEFIT PENSION PLAN (CONTINUED)

The Tribe curtailed the Plan as of November 30, 2004, and will pay benefits in
the future only on the services that had been rendered by that date. IMG Resort
and Casino has made contributions to the Plan for employee services through
November 30, 2004, and IMG Resort and Casino will not be required to make any
further payments to the Plan in the future. No gain or loss was recorded because
there were no pension assets or liabilities related to the Plan recorded on the
financial statements of IMG Resort and Casino and no future payments will be
made or credits received by IMG Resort and Casino. IMG Resort and Casino has not
instituted any other pension arrangement with its employees and the Tribe has
not established and alternative pension plan.

NOTE 9 - RISK MANAGEMENT

IMG Resort and Casino manages the exposure to the risk of most losses through
various commercial insurance policies. There have been no reductions in
insurance coverage. Settlement amounts have not exceeded insurance coverage for
the three and nine months ended January 31, 2006 and 2005, respectively.

The Tribe is self-insured for employee health and accident insurance. IMG Resort
and Casino's employees are covered by the Tribe's policy and remit amounts to
the Tribe for their share of the self-insurance costs. The total amounts
reimbursed to the Tribe were approximately $0.8 million and $0.5 million for the
three months ended January 31, 2006 and 2005, respectively, and $2.1 million for
the nine months ended January 31, 2006, and $0.9 million for the nine months
ended January 31, 2005.

The Tribe maintains worker's compensation insurance coverage under a
retrospective rated policy whereby premiums are accrued based on the loss
experience of the Tribe and its various enterprises. IMG Resort and Casino's
employees are covered under the Tribe's worker's compensation insurance policy.
Under this policy, premiums may be adjusted at the end of the coverage period
based on loss experience for the coverage period. Management of the Tribe, IMG
Resort and Casino has not provided an estimate for losses that may result in
premium adjustments at the end of the coverage period.

NOTE 10 - COMMITMENTS AND CONTINGENCIES

LEGAL MATTERS

IMG Resort and Casino is involved in various legal actions incident to their
operations that, in the opinion of management, will not materially affect IMG
Resort and Casino's financial position or the results of its operations.

OCCUPANCY FEE

A special use permit was obtained from the United States Department of
Agriculture Forest Service for the Ski Apache Resort's use of 80 acres of land
in Lincoln National Forest. The permit is dated April 23, 1985, and has a term
of 30 years.

CONSTRUCTION AGREEMENT

In February 2002, the Tribe entered into a construction agreement for the
development of the Travel Center Casino and the Resort on behalf of IMG Resort
and Casino. Construction costs under the contract were approximately $149.7
million. In March 2005, the contractor issued a certificate of substantial
completion and the Resort started commercial operation on March 15, 2005. A
final certificate of completion and acceptance will be issued following the
successful completion of identified incomplete items. At January 31, 2006, $5.3
million in construction retainage and $15.8 million in construction reserve was
being held in restricted accounts securing the Notes. Upon issuance of the final
completion certificate, monies remaining in the construction retainage and
construction reserve accounts will become unrestricted (subject to the terms of
the indenture governing the Notes) and will no longer secure the Notes.


                                       13
<PAGE>


NOTE 11 - RELATED-PARTY TRANSACTIONS

The Tribe operates other entities and enterprises in various industries,
including telecommunication, timber and forest products, gas and convenience
store; in addition, the Tribe has a housing authority, school and nursing
facility. Financial results of the Tribe and its other enterprises and entities
are not included in these consolidated financial statements.

The Tribe provides certain shared services which it administers for all of its
enterprises. IMG Resort and Casino currently receives shared self-insuring
health insurance and workers' compensation insurance, as well as
telecommunication services. Previously, IMG Resort and Casino's pension plan was
a shared service as is described in detail in Note 8. IMG Resort and Casino uses
Mescalero Apache Telecommunications for some its telecommunications related
services. IMG Resort and Casino paid Mescalero Apache Telecommunications
approximately $34,000 and $54,000 for the three months ended January 31, 2006
and 2005, respectively, and approximately $110,000 for the nine months ended
January 31, 2006, and $180,000 for the nine months ended January 31, 2005, for
such services.

In addition, IMG Resort and Casino is subject to tribal taxes as long as its
enterprises are not subject to New Mexico Gross Receipts Tax. Refer to Note 1
above.

NOTE 12 - OPERATING SEGMENTS

IMG Resort and Casino has five operating segments. Gaming, Hotel, Ski, Resort
Management and Travel Center. The Gaming segment information includes the gaming
activities of the Resort. The Hotel segment information includes the lodging,
retail and recreation activities of the Resort, including hotel, food and
beverage, hunting, golf, fishing and horseback riding. The Ski Operations
segment includes the activities of the Ski Apache Resort. The Resort/Holding
Company Operations segment includes the management activities of IMG Resort and
Casino, including the pre-opening activities of the Resort and the Travel
Center. The Travel Center Operations segment includes the activities of the
Travel Center Casino, including its gaming and retail activities. These
operating segments represent distinct business activities.

Prior to the fiscal quarter ended October 31, 2005, each operating segment was
managed separately. Commencing with the fiscal quarter ended October 31, 2005,
IMG Resort and Casino initiated a more efficient operational plan for its
operating segments, which included refining the use of seasonal staff and
increased the use of shared and central services among the operating segments to
respond to the seasonality of its business. Direct costs for operating the Hotel
segment are defined and separate from the other operating segments, other than
costs for room-service. Costs for room-service, banquets, golf and recreation
beverages are included among IMG Resort and Casino's centralized food and
beverage operations. Seasonal services now utilized by the Gaming, Hotel, Ski
and Travel Center operations, include cleaning, food and beverage, security,
accounting, human resources, and staff training. The cost of these shared
services, as well as facility costs, insurance, depreciation, interest, and
utility costs are now centralized and reflected as part of the Resort Management
operating segment.

<TABLE>
<CAPTION>
                                                  (in thousands)
<S>                      <C>           <C>            <C>         <C>                <C>            <C>              <C>
    Three Months                                                      Resort/         Travel
        Ended             Gaming         Hotel          Ski.        Holding Co.       Center.
  January 31, 2006      Operations     Operations    Operations      Operations     Operations     Eliminations      Total
--------------------   ------------   ------------  ------------   --------------  ------------   --------------   -------------
     Net revenue         $12,322       $ 2,261        $2,002      $           -      $  9,098       $       -        $25,683

 Income (loss) from
     operations          $15,778       $(1,500)       $(416)      $     (15,897)     $  4,784       $       -        $ 2,749



                                       14
<PAGE>

                                                                      Resort/         Travel
 Three Months ended       Gaming         Hotel           Ski        Holding Co.       Center
  January 31, 2005      Operations     Operations    Operations      Operations     Operations    Eliminations       Total
--------------------   ------------   ------------  ------------   --------------  ------------   --------------   -------------
     Net revenue         $ 5,805         $ -           $5,526           $(3)          $10,344       $        -      $21,672

 Income (loss) from
   Operations            $(3,038)        $(9)          $2,122         $(1,985)         $3,407       $        -      $   497
(in thousands)


     Nine Months                                                      Resort/        Travel
        Ended             Gaming         Hotel          Ski.        Holding Co.     Center.
  January 31, 2006      Operations     Operations    Operations     Operations     Operations    Eliminations      Total
--------------------   ------------   ------------  ------------   --------------  ------------   --------------   -------------
     Net revenue         $33,987       $21,439        $ 1,994        $      -        $30,148       $       -       $  87,568

 Income (loss) from
     operations          $25,558      $(15,246)      $(2,913)        $(15,828)       $15,113       $       -       $   6,684


                                                                      Resort/        Travel
  Nine Months ended       Gaming         Hotel           Ski        Holding Co.      Center
  January 31, 2005      Operations     Operations    Operations     Operations     Operations   Eliminations       Total
--------------------   ------------   ------------  ------------   --------------  ------------   --------------   -------------
     Net revenue         $23,379        $  -          $5,527            ($5)         $38,147       $       -        $ 67,048

 Income (loss) from
     operations          $ 1,299        $(9)          $(53)         $(5,906)         $18,005       $       -        $ 13,336

</TABLE>

                                       15
<PAGE>


NOTE 13 - CONSOLIDATING INFORMATION

In connection with IMG Resort and Casino's issuance in November 2003 of $200.0
million of 12% senior notes, IMG Resort and Casino's subsidiaries, Casino
Apache, the Inn, the Travel Center and Ski Apache (the "WHOLLY-OWNED
GUARANTORS") have, jointly and severally, fully and unconditionally guaranteed
the 12% senior notes. These guarantees are secured only until the completion of
the Resort and thereafter unsecured and subordinated in right of payment to all
existing and future indebtedness outstanding and any other indebtedness
permitted to be incurred by IMG Resort and Casino under the terms of the
indenture agreement for the 12% senior subordinated notes.

Pursuant to Rule 3-10 of Regulation S-X, the following consolidating information
is for IMG Resort and Casino and the wholly owned Guarantors of the 12% senior
notes. This consolidating financial information has been prepared from the books
and records maintained by IMG Resort and Casino and the wholly-owned Guarantors.
The consolidating financial information may not necessarily be indicative of
results of operations or financial position had the wholly owned Guarantors
operated as independent entities. The separate financial statements of the
wholly-owned Guarantors are not presented because management has determined they
would not be material to investors.

The following consolidating information is presented as of January 31, 2006 and
as of April 30, 2005 and for the three and nine months ended January 31, 2006
and 2005.


                                       16
<PAGE>

                                           CONSOLIDATING BALANCE SHEETS
                                                    (UNAUDITED)

                                              AS OF JANUARY 31, 2006

<TABLE>
<CAPTION>

                                                         IMG Resort        Wholly-owned
                                                         and Casino         Guarantors       Eliminations      Consolidated
                                                      -----------------   ---------------  ----------------   ------------------
<S>                                                      <C>                 <C>              <C>              <C>
Cash and cash equivalents                                $    8,748,168      $  5,051,227     $           -    $   13,799,395
Restricted cash and cash equivalents                         21,107,439                 -                 -        21,107,439
Accounts receivable                                              46,155           345,137                 -           391,292
Inventories                                                           -         1,057,152                 -         1,057,152
Prepaid expenses                                                512,057            25,256                 -           537,313
                                                      -----------------   ---------------  ----------------   ------------------
Total current assets                                         30,413,819         6,478,772                 -        36,892,591

NON CURRENT ASSETS
Property, plant and equipment, net                                    -       230,035,153                         230,035,153
Other Assets                                                     70,000             6,680                 -            76,680
Deferred financing costs                                      8,102,208                 -                 -         8,102,208
Advances to Subsidiaries                                    190,313,030        36,154,699     (226,467,729)                 -
Investment in Subsidiaries                                   64,332,840                 -      (64,332,840)                 -
                                                      -----------------   ---------------  ----------------   ------------------
 Total Assets                                               293,231,897       272,675,304     (290,800,569)    $  275,106,632
                                                      =================   ===============  ================   ==================

Accounts Payable and other short term liabilities        $    1,352,592      $          -     $           -    $    1,352,592
Construction in progress accounts payable                     5,274,874                 -                 -         5,274,874
Accrued expenses and accrued interest                        13,685,927         2,100,324                 -        15,786,251
Advanced deposits                                                   815            36,145                 -            36,960
Current portion of long-term debt                             3,191,922           205,426                 -         3,397,348
                                                      -----------------   ---------------  ----------------   ------------------
Total current liabilities                                    23,506,130         2,341,895                          25,848,025

NON CURRENT LIABILITIES:
Advances from subsidiaries                                   21,876,767       204,590,962     (226,467,729)                 -
Long-term debt, net of current portion                      211,007,413         1,409,607                 -       212,417,020
                                                      -----------------   ---------------  ----------------   ------------------

Total liabilities                                           256,390,310       208,342,464     (226,467,729)       238,265,045
                                                      -----------------   ---------------  ----------------   ------------------

Contributed Capital                                          51,198,452        19,542,508      (19,542,508)        51,198,452
Retained earnings (deficit)                                 (14,356,865)       44,790,332      (44,790,322)       (14,356,865)
                                                      -----------------   ---------------  ----------------   ------------------
 Total equity                                                36,841,587        64,332,840      (64,332,840)        36,841,587
                                                      -----------------   ---------------  ----------------   ------------------

Total liabilities and equity                            $   293,231,897    $  272,675,304   $ (290,800,569)     $ 275,106,632
                                                      =================   ===============  ================   ==================

</TABLE>


                                       17
<PAGE>

                                           CONSOLIDATING BALANCE SHEETS

                                               AS OF APRIL 30, 2005

<TABLE>
<CAPTION>
                                                          IMG Resort       Wholly-owned
                                                          and Casino        Guarantors       Eliminations      Consolidated
                                                      -------------------  --------------   ----------------  ----------------
<S>                                                       <C>               <C>               <C>               <C>
Cash and cash equivalents                                 $      524,959    $  13,193,562     $           -     $  13,718,521
Restricted cash and cash equivalents                          35,870,686                -                 -        35,870,686
Accounts receivable, net                                         380,867          196,609                             577,476
Inventories                                                            -        1,429,506                 -         1,429,506
Prepaid expenses                                                 765,487           94,702                 -           860,189
                                                      -------------------  --------------   ----------------  ----------------
Total current assets                                          37,541,999       14,914,379                 -        52,456,378

 Advances to Affiliates                                      205,038,001       32,516,495     (237,554,496)
Property, plant and equipment, net                                     -      231,721,074                         231,721,074
Long-term deferred financing expenses                          9,321,141                -                 -         9,321,141
Other long term assets                                           124,991           70,222                 -           195,213
Investment in subsidiaries                                    44,097,873                -      (44,097,873)                 -
                                                      -------------------  --------------   ----------------  ----------------
Total Assets                                              $  296,124,005     $279,222,170    $(281,652,369)      $293,693,806
                                                      ===================  ==============   ================  ================

Accounts Payable and other short term liabilities         $    2,673,507     $          -    $            -      $  2,673,507
Construction in progress accounts payable                      8,145,734                -                 -         8,145,734
Accrued expenses                                               6,916,507        4,088,705                 -        11,005,212
Accrued interest                                              11,200,000              450                 -        11,200,450
Deposits and advance payments                                          -          997,365                 -           997,365
Current portion of long-term debt                                      -          254,007                 -           254,007
                                                      -------------------  --------------   ----------------  ----------------
Total current liabilities                                     28,935,748        5,340,527                 -        34,276,275

Advances from affiliates                                       9,043,808      228,510,688     (237,554,496)                 -
Long-term debt, net of current portion                       200,001,099        1,273,082                 -       201,274,181
                                                      -------------------  --------------   ----------------  ----------------
Total liabilities                                            237,980,655      235,124,297     (237,554,496)       235,550,456

 Contributed Capital                                          58,143,350       20,166,161      (20,166,161)        58,143,350
Current Year Net income (Loss)                                 2,139,792       21,141,156      (21,141,156)         2,139,792
 Retained equity                                             (2,139,792)        2,790,556       (2,790,556)       (2,139,792)
                                                      -------------------  --------------   ----------------  ----------------
 Total equity                                                 58,143,350       44,097,873      (44,097,873)        58,143,350
                                                      -------------------  --------------   ----------------  ----------------

Total liabilities and equity                             $   296,124,005     $279,222,170    $(281,652,369)      $293,693,806
                                                      ===================  ==============   ================  ================

</TABLE>

                                       18
<PAGE>



                                        CONSOLIDATING STATEMENTS OF INCOME
                                                    (UNAUDITED)

                                          QUARTER ENDED JANUARY 31, 2006

<TABLE>
<CAPTION>
                                                      IMG Resort     Wholly-owned
                                                      and Casino      Guarantors      Eliminations     Consolidated
                                                    --------------   --------------  ---------------  ----------------
<S>                                                 <C>                 <C>          <C>                <C>
          Revenues:
             Gaming                                 $            -      $17,172,786  $             -    $  17,172,786
             Hotel                                               -        2,263,179                -        2,263,179
             Food and Beverage                                   -        2,721,114                -        2,721,114
             Recreation and other                                -        4,084,469                -        4,084,469
               Gross Revenue                                     -       26,241,548                -       26,241,548

          Less -Promotional Allowances                           -          558,207                -          558,207
               Net Revenue                                       -       25,683,341                        25,683,341

          Operating Expenses
             Gaming                                         54,116        3,744,947                -        3,799,064
             Hotel expenses                                      -        1,180,401                -        1,180,401
             Food and beverage                              20,602        2,941,952                         2,962,554
             Recreation and other                              595        3,042,938                -        3,043,533
             Marketing and advertising                     544,882        1,354,196                         1,899,078
             General and administrative                  2,753,484        1,402,090                -        4,155,574
             Health Insurance - Medical                  (334,343)        1,139,003                -          804,660
             Mescalero Apache Telecom                       33,877                -                -           33,877
             Tribal Regulatory Fees                              -          600,000                -          600,000
             Depreciation and amortization                       -        4,455,568                -        4,455,568
                                                    --------------   --------------  ---------------  ----------------
               Total Operating Expenses                  3,073,213       19,861,095                -       22,934,308

          Operating Income (Loss)                       (3,073,213)       5,822,246                -        2,749,033

          Other Income (Expense)
             Interest Income                                84,070              173                -           84,243
             Interest Expense                           (7,478,821)          69,628                -       (7,409,193)
             Income from subsidiaries                    5,851,364                -       (5,851,364)               -
             Other income (expense)                            839          (40,683)               -          (39,843)
                                                    --------------   --------------  ---------------  ----------------
               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)
                                                    ==============   ==============  ===============  ================

</TABLE>

                                       19
<PAGE>

<TABLE>
<CAPTION>
                                            CONSOLIDATING STATEMENTS OF INCOME
                                                        (UNAUDITED)

                                              QUARTER ENDED JANUARY 31, 2005

                                                      IMG Resort         Wholly-owned
                                                      and Casino          Guarantors       Eliminations       Consolidated
                                                    ----------------    ---------------    --------------    ---------------
Revenues:
<S>                                                   <C>                <C>                <C>               <C>
   Gaming                                             $           -      $  13,060,621      $          -      $  13,060,621
   Food and beverage                                              -          1,424,581                 -          1,424,581
   Recreation and other                                           -          7,373,459                 -          7,373,459
                                                    ----------------    ---------------    --------------    ---------------
     Gross revenues                                               -         21,858,661                 -         21,858,661
     Less - promotional allowances                            2,976            183,857                 -            186,833
                                                    ----------------    ---------------    --------------    ---------------
       Net revenue                                          (2,976)         21,674,804                 -         21,671,828
                                                    ----------------    ---------------    --------------    ---------------

Operating costs and expenses:
   Gaming                                                    67,874          5,672,392                 -          5,740,266
   Food and beverage                                         44,311          1,503,716                 -          1,548,027
   Recreation and other                                                      4,427,120                 -          4,427,120
   General and administrative                               450,528          2,383,431                 -          2,833,959
   Health insurance - Medical                                63,136            449,958                 -            513,094
   Pension                                                  112,208            663,903                 -            776,111
   Mescalero Apache Telecommunication                        53,944                  -                 -             53,944
   Tribal Regulatory Fees                                         -            719,117                 -            719,117
   Pre-opening costs                                      1,209,697          1,331,756                 -          2,541,453
   Depreciation                                             (19,487)         2,041,253                 -          2,021,766
                                                    ----------------    ---------------    --------------    ---------------
     Total operating expenses                             1,982,211         19,192,646                 -         21,174,857
                                                    ----------------    ---------------    --------------    ---------------

(Loss) income from operations                            (1,985,187)         2,482,158                 -            496,971
                                                    ----------------    ---------------    --------------    ---------------

Other income:
   Interest income                                          159,909                837                 -            160,746
   Interest expense                                      (1,911,858)           (57,972)                -         (1,969,830)
   Income from subsidiaries                               2,424,629                  -        (2,424,629)
   Other income (expense)                                    (1,461)              (394)                -             (1,855)
                                                    ----------------    ---------------    --------------    ---------------
     Total other income                                     671,219            (57,529)       (2,424,629)        (1,810,939)
                                                    ----------------    ---------------    --------------    ---------------

     Net Income (Loss)                                $  (1,313,968)      $  2,424,629      $ (2,424,629)      $ (1,313,968)
                                                    ================    ===============    ==============    ===============

</TABLE>


                                       20
<PAGE>

<TABLE>
<CAPTION>

                                            CONSOLIDATING STATEMENTS OF INCOME
                                                        (UNAUDITED)

                                            NINE-MONTHS ENDED JANUARY 31, 2006

                                                     IMG Resort         Wholly-owned
                                                     and Casino          Guarantors        Eliminations       Consolidated
                                                   ----------------    ----------------   ---------------    ---------------
<S>                                               <C>                  <C>                <C>                 <C>
Revenues:
   Gaming                                            $           -       $  58,870,770     $           -      $  58,870,770
   Hotel                                                         -           8,439,212                 -          8,439,212
   Food and beverage                                                         9,618,398                 -          9,618,398
   Recreation and other                                          -          12,970,970                 -         12,970,970
                                                   ----------------    ----------------   ---------------    ---------------
     Gross revenues                                              -          89,899,350                 -         89,899,350
     Less - promotional allowances                              55           2,331,152                 -          2,331,207
                                                   ----------------    ----------------   ---------------    ---------------
       Net revenue                                             (55)         87,568,198                 -         87,568,143
                                                   ----------------    ----------------   ---------------    ---------------

Operating costs and expenses:
   Gaming                                                  170,884          12,617,698                 -         12,788,582
   Hotel                                                                     3,916,389                            3,916,389
   Food and beverage                                       105,142          12,304,882                 -         12,410,024
   Recreation and other                                      1,116           9,367,087                 -          9,368,203
   Marketing and advertising                             2,775,836           3,882,935                            6,658,771
   General and administrative                           11,825,078           6,006,304                 -         17,831,382
   Health insurance - Medical                              240,220           1,933,881                 -          2,174,101
   Mescalero Apache Telecommunication                      109,887                   -                 -            109,887
   Tribal Regulatory Fees                                        -           2,338,697                 -          2,338,697
   Depreciation                                                  -          13,288,219                 -         13,288,219
                                                   ----------------    ----------------   ---------------    ---------------
     Total operating expenses                           15,228,163          65,656,092                 -         80,884,255
                                                   ----------------    ----------------   ---------------    ---------------

(Loss) income from operations                          (15,228,218)         21,912,106                 -          6,683,888
                                                   ----------------    ----------------   ---------------    ---------------

Other income:
   Interest income                                         343,471               2,906                 -            346,377
   Interest expense                                    (21,048,073)                  -                 -        (21,048,073)
   Income (Loss) from subsidiaries                      21,876,767                   -       (21,876,767)                 -
   Other income (expense)                                 (300,812)            (38,245)                -           (339,057)
                                                   ----------------    ----------------   ---------------    ---------------
     Total other expenses                                  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)
                                                   ================    ================   ===============    ===============

</TABLE>


                                       21
<PAGE>

<TABLE>
<CAPTION>
                                            CONSOLIDATING STATEMENTS OF INCOME
                                                        (UNAUDITED)

                                            NINE-MONTHS ENDED JANUARY 31, 2005

                                                      IMG Resort        Wholly-owned
                                                      and Casino         Guarantors        Eliminations       Consolidated
                                                    ---------------    ----------------    --------------    ---------------
Revenues:
<S>                                                       <C>              <C>                   <C>            <C>
   Gaming                                             $          -         $48,004,383      $          -      $  48,004,383
   Food and beverage                                         1,608           4,197,516                 -          4,199,124
   Recreation and other                                          -          15,179,218                 -         15,179,218
                                                    ---------------    ----------------    --------------    ---------------
     Gross revenues                                          1,608          67,381,117                 -         67,382,725
     Less - promotional allowances                           6,661             328,407                 -            335,068
                                                    ---------------    ----------------    --------------    ---------------
       Net revenue                                          (5,053)         67,052,710                 -         67,047,657
                                                    ---------------    ----------------    --------------    ---------------

Operating costs and expenses:
   Gaming                                                  201,441          15,874,363                 -         16,075,804
   Food and beverage                                       167,202           4,917,247                 -          5,084,449
   Recreation and other                                        760          11,189,261                 -         11,190,021
   General and administrative                            2,066,850           5,427,697                 -          7,494,547
   Health insurance - Medical                              117,569             800,488                 -            918,057
   Pension                                                 345,559           1,443,237                 -          1,788,796
   Mescalero Apache Telecommunication                      121,565              58,536                 -            180,101
   Tribal Regulatory Fees                                   24,952           1,596,966                 -          1,621,918
   Pre-opening costs                                     2,817,586           1,498,079                 -          4,315,665
   Depreciation                                             37,591           5,004,451                 -          5,042,042
                                                    ---------------    ----------------    --------------    ---------------
     Total operating expenses                            5,901,075          47,810,325                 -         53,711,400
                                                    ---------------    ----------------    --------------    ---------------

(Loss) income from operations                           (5,906,128)         19,242,385                 -         13,336,257
                                                    ---------------    ----------------    --------------    ---------------

Other income:
   Interest income                                         501,618              11,745                 -            513,363
   Interest expense                                     (7,319,451)            (66,235)                -         (7,385,686)
   Income from subsidiaries                             19,190,349                   -       (19,190,349)                 -
   Other income (expense)                                   96,760               2,454                 -             99,214
                                                    ---------------    ----------------    --------------    ---------------
     Total other income                                 12,469,276             (52,036)      (19,190,349)        (6,776,109)
                                                    ---------------    ----------------    --------------    ---------------

     Net Income                                         $6,563,148         $19,190,349     $ (19,190,349)      $  6,563,148
                                                    ===============    ================    ==============    ===============

</TABLE>


                                       22
<PAGE>

<TABLE>
<CAPTION>

                                                 CONSOLIDATING STATEMENTS OF CASH FLOWS
                                                               (UNAUDITED)



                                                   NINE-MONTHS ENDED JANUARY 31, 2006

                                                            IMG Resort         Wholly-owned
                                                            and Casino          Guarantors        Eliminations      Consolidated
                                                          ----------------  ------------------  ----------------  -----------------
Cash flows from operating activities:
<S>                                                         <C>                <C>               <C>                 <C>
   Net income (loss)                                        $ (14,356,865)     $   21,876,767    $  (21,876,767)     $  (14,356,865)
   Adjustments to reconcile net income (loss) to net
      cash (used in) provided by operating activities:
      Depreciation and amortization                                               13,288,220                  -          13,288,220
   Changes in assets and liabilities:
     Restricted cash and cash equivalents                               -                  -                  -                   -
     Accounts receivable, net of allowance                        334,712           (148,528)                 -             186,184
     Inventories                                                        -            372,354                  -             372,354
     Prepaid expenses                                             765,487           (442,611)                 -             322,876
     Other long-term assets                                        54,991             63,542                  -             118,533
     Accounts payable                                          (1,320,915)                 -                  -          (1,320,915)
     Construction in progress accounts payable                 (2,870,860)                 -                  -          (2,870,860)
     Accrued expenses                                          (4,743,810)        (2,949,603)                 -          (7,693,413)
     Accrued interest payable                                     313,230               (450)                 -             312,780
                                                          ----------------  ------------------  ----------------  ------------------
          Net cash (used in) provided by operating            (21,824,030)        32,059,691        (21,876,767)        (11,641,106)
          activities
Cash flows from investing activities:
   Purchase of property, plant and equipment                            -        (12,024,351)         1,641,800         (10,382,551)
   Investment in subsidiaries                                 (20,234,967)                 -         20,234,967                   -
                                                          ----------------  ------------------  ----------------  ------------------
       Net cash used by investing activities                  (20,234,967)       (12,024,351)        21,876,767         (10,382,551)

Cash flows from financing activities:
   Cash held for construction payments                         14,763,247                  -                  -          14,763,247
   Advances to (from) affiliates                               28,265,619        (28,265,619)                 -                   -
    Principal borrowings (payments) on long-term debt, net     14,198,236             87,944                  -          14,286,182
    Distributions to Mescalero Apache Tribe                    (6,944,896)                 -                  -          (6,944,896)
                                                          ----------------  ------------------  ----------------  ------------------
        Net cash provided by (used in) financing               50,282,206        (28,177,675)                 -          22,104,531
        activities
                                                          ----------------  ------------------  ----------------  ------------------

Net  increase in cash and cash equivalents                      8,223,209         (8,142,335)                 -              80,874

Cash and cash equivalents, beginning of period                    524,959         13,193,562                  -          13,718,521
                                                          ----------------  ------------------  ----------------  ------------------
Cash and cash equivalents, end of period                     $  8,748,168       $  5,051,227     $            -       $  13,799,395
                                                          ================  ==================  ================  ==================

Supplemental cash flow information:
     Cash paid for interest                                  $ 21,048,073                  -                  -       $  21,048,073

</TABLE>

                                       23
<PAGE>

<TABLE>
<CAPTION>
                                                CONSOLIDATING STATEMENTS OF CASH FLOWS
                                                             (UNAUDITED)



                                                  NINE-MONTHS ENDED JANUARY 31, 2005

                                                                 IMG Resort        Wholly-owned
                                                                 and Casino         Guarantors      Eliminations        Consolidated
                                                               ----------------    -------------    ---------------  ---------------
Cash flows from operating activities:
<S>                                                             <C>               <C>               <C>                <C>
   Net income                                                   $    6,563,148    $  19,190,349     $ (19,190,349)     $  6,563,148
   Adjustments to reconcile net income to net
      cash provided by operating activities:
      Depreciation and amortization                                     37,591        5,004,451                 -         5,042,042
   Changes in assets and liabilities:
     Accounts receivable, net of allowance                                   -         (122,921)                -          (122,921)
     Inventories                                                          (247)        (297,257)                -          (297,504)
     Prepaid revenue sharing                                                 -        3,119,029                 -         3,119,029
     Prepaid expenses                                                 (271,055)         (74,771)                -          (345,826)
     Interest receivable                                                     -          (48,563)                -           (48,563)
     Other long-term assets                                         (3,335,623)         (17,827)                -        (3,353,450)
     Accounts payable                                                3,181,192         (612,872)                -         2,568,320
     Construction in progress accounts payable                        (893,758)               -                 -          (893,758)
     Accrued expenses                                                5,516,698       (1,469,091)                -         4,047,607
     Accrued revenue sharing and regulatory fees                             -      (23,000,000)                -       (23,000,000)
     Accrued interest payable                                       (6,800,000)         (48,378)                -        (6,848,378)
     Deposits and advance payments                                           -         (442,995)                -          (442,995)
                                                               ----------------    -------------    ---------------  ---------------
           Net cash provided by (used in) operating                   3,997,946        1,179,154       (19,190,349)     (14,013,249)
activities
                                                                ----------------    -------------    --------------- ---------------

Cash flows from investing activities:
   Purchase of property, plant and equipment                       (68,975,456)      (2,540,042)                -       (71,515,498)
   Investment in subsidiaries                                      (19,190,349)               -        19,190,349                 -
                                                               ----------------    -------------    ---------------  ---------------
        Net cash used by investing activities                       (88,165,805)      (2,540,042)       19,190,349      (71,515,498)
                                                                ----------------    -------------    --------------- ---------------

Cash flows from financing activities:
   Deferred financing costs                                          1,302,041                -                 -         1,302,041
   Cash held for construction payments                              62,177,310          533,515                 -        62,710,825
   Payment of Compact Settlement                                    23,000,000                                           23,000,000
   Advances to (from) affiliates                                    (6,761,993)       6,761,993                 -                 -
    Advances from Mescalero Apache Tribe                                     -                -                 -                 -
    Borrowings on revolving line of credit                                   -                -                 -                 -
    Principal borrowings (payments) on long-term debt, net                   -         (354,003)                -          (354,003)
    Distributions to Mescalero Apache Tribe                         (5,090,000)      (6,560,680)                -       (11,650,680)
     Contributions from Mescalero Apache Tribe                      10,000,000                -                 -        10,000,000
                                                               ----------------    -------------    ---------------  ---------------
         Net cash provided by (used in) financing                   84,627,358          380,825                 -        85,008,183
activities
                                                               ----------------    -------------    ---------------  ---------------

Net  increase (decrease) in cash and cash equivalents                  459,499         (980,063)                           (520,564)

Cash and cash equivalents, beginning of period                               -       15,794,943                 -        15,794,943
                                                               ----------------    -------------    ---------------  ---------------

Cash and cash equivalents, end of period                          $    459,499      $14,814,880        $        -     $  15,274,379
                                                                ================    =============   ===============  ===============
</TABLE>

                                       24
<PAGE>


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 FEDERAL SECURITIES LAWS. 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

     IMG Resort and Casino is an unincorporated business enterprise of the
Tribe. The Tribe formed IMG Resort and Casino to operate its resort enterprises,
comprised of Casino Apache, the Inn, the Travel Center and Ski Apache, each of
which is an unincorporated Tribal business enterprise wholly-owned by IMG Resort
and Casino. The combined activities of these enterprises comprise the operations
of IMG Resort and Casino. Our four primary areas of operation are:

     GAMING. Our gaming activities are authorized by the Indian Gaming
Regulatory Act of 1988, or IGRA, our gaming compact with the State of New Mexico
and a Tribal gaming ordinance. As of January 31, 2006, we had 55,000-square feet
of combined gaming space featuring 1,509 slot machines and 39 table games
between new our facilities at the Inn of the Mountain Gods Resort and Casino
(the "RESORT"), opened in March 2005, and Casino Apache Travel Center (the
"TRAVEL CENTER CASINO") opened in May 2003.

     FOOD AND BEVERAGE. The Resort features Wendell's, a 158-seat casual and
fine dining restaurant; Gathering of the Nations Buffet, a 250-seat buffet style
restaurant; a 100-seat sports bar; a 75-seat night club featuring live
entertainment and dancing; Wendell's Lounge, a "piano" lounge featuring an
oversized fireplace; and the Apache Summit BBQ, a 85-seat casual restaurant in
the golf clubhouse. The Travel Center Casino features Smoky'Bs, a 135-seat
casual dining restaurant and two sports type bars. Ski Apache operates one main
restaurant and five satellite food and beverage outlets.


                                       25
<PAGE>


     ROOMS. On March 15, 2005, we opened the Resort which features 273 luxury
hotel rooms. The hotel varies between four and eight stories in height,
depending upon the location along the hotel corridor, and allows for easy
traveling distance to and from the casino and events center. Our over-sized
deluxe guest rooms are either 480 square feet or 610 square feet and our suites
are 1,200 square feet (with the ability to connect to a 480 square foot deluxe
guest room, providing a total of 1,680 square feet in that configuration).
In-room amenities include high-speed Internet access, coffee makers, ironing
boards and irons, mini-bars, toiletries, free and pay-per-view movies and other
standard and premium channels. All rooms feature a balcony view of Lake
Mescalero and either Sierra Blanca Mountain or the forest-lined golf course. The
hotel also features an indoor swimming pool and fitness center including a yoga
and aerobics workout area, steam and sauna facilities for both men and women and
a family locker area.

     RECREATION AND OTHER. Our all-season recreational operations include a
750-acre, 55-trail ski resort, the second largest in New Mexico, an 18-hole
championship golf course, seasonal big-game hunts, a shooting range, horseback
riding, boating and fishing. Our ski resort is typically open from Thanksgiving
until Easter, while our golf course generally operates from March through
January. Our retail outlets include a gift shop, golf and pro shop, ski shop, a
2,500-square foot convenience store, a Conoco-branded fuel station with 12
gasoline and eight diesel pumping stations and laundry and shower facilities.

CRITICAL ACCOUNTING POLICIES

     The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires management to make
estimates and assumptions that affect the recorded amount of assets and
liabilities at the date of the financial statements and revenues and expenses
during the period. Significant accounting policies employed by us, including the
use of estimates and assumptions, are presented in the notes to our consolidated
financial statements included elsewhere in this Form 10-Q. Our management bases
its estimates on its historical experience, together with other relevant
factors, in order to form the basis for making judgments that will affect the
carrying value of assets and liabilities. On an ongoing basis, management
evaluates its estimates and makes changes to carrying values as deemed necessary
and appropriate. We believe that estimates related to the following areas
involve a high degree of judgment and/or complexity: the liability associated
with unredeemed Apache Spirit Club points, the estimated lives of depreciable
assets and pension costs. Actual results could differ from those estimates.

     REVENUE RECOGNITION. In accordance with gaming industry practice, we
recognize gaming revenues as the net win from gaming activities, which is the
difference between gaming wins and losses. Gaming revenues are net of accruals
for anticipated payouts of progressive slot jackpots and table games. These
anticipated jackpot payments are reflected as current liabilities on our balance
sheets. Net slot win represents all amounts played in the slot machines reduced
by both (1) the winnings paid out and (2) all amounts we deposit into slot
machines to ensure there are a sufficient number of coins to pay out the
winnings. Table games net win represents the difference between table game wins
and losses. The table games historical win percentage is reasonably predictable
over time, but may vary considerably during shorter periods. Revenues from food,
beverage, rooms, recreation, retail and other are recognized at the time the
related service or sale is completed. Player reward redemptions for food and
beverage, hotel rooms and other items are included in gross revenue at full
retail value.

     PROMOTIONAL ALLOWANCES. We reward our customers with "points" based on the
volume of their gaming activity through our customer loyalty program, the Apache
Spirit Club. These points are redeemable for player reward services or
merchandise. Points are accrued and reflected as current liabilities on our
consolidated balance sheets. We determine the adequacy of these accruals by
periodically evaluating the historical experience and projected trends related
to these accruals. If such information indicates that the accruals are
overstated or understated, we will adjust the assumptions utilized in the
methodologies and reduce or provide for additional accruals as appropriate. The
retail value of these promotional allowances is recognized by IMG Resort and
Casino as a reduction from gross revenue.

     RESERVES FOR BAD DEBT- REVENUE RECOGNITION. Credit card purchases of fuel
at IMG Resort and Casino's Conoco-branded fuel station located at the Travel
Center are processed by Conoco directly and paid to IMG Resort and Casino by the
third party fuel distributor who delivers fuel to the Travel Center. During the
quarter ended October 31, 2005, the distributor, who was suffering a liquidity
issue, failed to remit credit card proceeds due IMG


                                       26
<PAGE>


Resort and Casino. During the quarter ended October 31, 2005, IMG Resort and
Casino set aside a reserve of $200,000, or approximately 30% of the account
receivable from the distributor, which reduced Recreation and Other Revenue by
the amount of the reserve. As of January 31, 2006, the account receivable from
this distributor has been reduced to approximately $70,000, or one (1) week of
receivables and the reserve of $200,000 has been eliminated.

     CLASSIFICATION OF DEPARTMENTAL COSTS. Gaming direct costs are comprised of
all costs of the Resorts' gaming operation, including labor costs for
casino-based supply costs, certain (including costs in operating our players'
clubs) and other direct operating costs of the casinos. Food and beverage direct
costs are comprised of all costs of the Resorts' food and beverage operations,
including labor costs for personnel employed by the Resorts' restaurants and
food and beverage, supply costs for all food and beverages served in the casinos
or sold in the Resorts' restaurants and other food outlets and other expenses
including other direct operating expenses related to these activities. General
and administrative direct costs are comprised of administrative expenses at our
headquarters, including the salaries of corporate officers, accounting, finance,
legal and other professional expense and occupancy costs and other indirect
costs not included in the direct costs of our operating departments

     CAPITALIZATION OF INTEREST. In accordance with Statement of Financial
Accounting Standards No. 34, "Capitalization of Interest Cost" or SFAS 34,
interest cost associated with major development and construction projects is
capitalized as part of the cost of the project. Interest is capitalized on
amounts expended on the Resort using the weighted-average cost of our
outstanding borrowings. Capitalization of interest started with the construction
of the Resort beginning in January 2004 and ended with the completion of the
Resort in March 2005. Interest capitalized on the Resort totaled $0.0 million
for the three months ended January 31, 2006 and $4.5 million for the three
months ended January 31, 2005.

     DEFERRED FINANCING COSTS. Debt issuance costs incurred in connection with
the issuance of IMG Resort and Casino financing are capitalized and amortized.
using the straight-line method over the stated maturity of the debt, which
approximates the effective interest method. Unamortized deferred financing costs
totaled approximately $8.1 million as of January 31, 2006.

RESULTS OF OPERATIONS

QUARTER ENDED JANUARY 31, 2006 COMPARED TO QUARTER ENDED JANUARY 31, 2005.

     NET REVENUES. Net revenues increased $4.0 million, or 18%, to $25.7 million
for the quarter ended January 31, 2006 from $21.7 million for the quarter ended
January 31, 2006. The increase in net revenues was primarily attributable to the
opening of our new Resort in March 2005, offset by a decrease in recreation and
other revenues due to reduced revenues from our ski operations during the
period. Except for recreation and other revenues, we realized increases in each
of our lines of business in the 2006 period compared to the 2005 period: gaming
revenues increased $4.1 million, up 32% over the comparable prior period; food
and beverage revenues increased $1.3 million, or 91%, over the comparable prior
period; hotel revenues increased $2.3 million over a year ago (when there were
no comparable revenues). Recreation and other revenue for the 2006 period
decreased $3.3 million, or 45%, from the 2005 period due primarily to decreased
ski visitors as a result of poor snowfall.

     GAMING. Gaming revenues increased $4.1 million, or 32%, to $17.2 million
for the quarter ended January 31, 2006 from $13.1 million for the quarter ended
January 31, 2005. Slot revenues increased to approximately $15.9 million for the
quarter ended January 31, 2006 from $11.1 million for the quarter ended January
31, 2005, an increase of $4.8 million, or 43%. These increases are primarily due
to the opening of the new casino. Gross slot win per unit, per day was $114 for
the quarter ended January 31, 2006 compared to $122 for the quarter ended
January 31, 2005; in this period the weighted average number of units increased
from 1,091 units in the quarter ended January 31, 2005 to 1,509 for the quarter
ended January 31, 2006. Table games revenue increased $0.5 million, or 25%, to
$2.5 million for the quarter ended January 31, 2006 from $2.0 million for the
quarter ended January 31, 2005. The decrease in win per unit per day on a year
over year basis was attributable to an increase in the weighted average number
of slot devices of approximately 32%.


                                       27
<PAGE>


     FOOD AND BEVERAGE. Food and beverage revenues increased $1.3 million, or
93%, to $2.7 million for the quarter ended January 31, 2006 from $1.4 million
for the quarter ended January 31, 2005. The increase is due to the new Resort
offering additional food and beverage outlets as well as an increase in banquet
facility space.

     HOTEL. Hotel revenues for the quarter ended January 31, 2006 were $2.3
million. The Resort's grand opening was in March 2005, so the quarter ended
January 31, 2006 is the third full quarter the Resort and its luxury hotel was
in operation. The quarter ending January 31, 2005 had no hotel revenues.
Occupancy rates averaged 52% for the quarter ended January 31, 2006. The average
daily rate for the quarter ended January 31, 2006 was $129. Revenue per
available room was $144 for the quarter ended January 31, 2006.

     RECREATION AND OTHER. Recreation and other revenues decreased $3.3 million,
or 45% to $4.1 million for the quarter ended January 31, 2006 compared to $7.4
million for the quarter ended January 31, 2005. The decrease is due to reduced
revenue from our ski operations due to poor snowfall, offset by increased retail
sales due to opening the Resort.

     PROMOTIONAL ALLOWANCES. Promotional allowances of $0.6 million for the
quarter ended January 31, 2006 compared to $0.2 million for the quarter ended
January 31, 2005 an increase of $0.4 million or 200%. The increase was due to
increased promotions to our club members and a 11% increase in applicable gross
revenue.

     TOTAL OPERATING EXPENSES. Total operating expenses increased $1.7 million
to $22.9 million for the quarter ended January 31, 2006 from $21.2 million for
the quarter ended January 31, 2005. The increase was primarily due to increases
of $1.4 million in food and beverage expenses, $1.8 million in general and
administrative expenses, $1.4 million in marketing expenses, $1.2 million in
hotel expenses, and $2.4 million in depreciation expense, offset by decreases of
$1.9 million in gaming expenses, $2.5 million in pre-opening costs and expenses,
and $1.4 million in recreation and other expenses.

     GAMING. Gaming expenses decreased $1.9 million to $3.8 million for the
quarter ended January 31, 2006 from $5.7 million for the quarter ended January
31, 2005. Gaming expenses as a percentage of gaming revenue decreased 22%, to
22% for the quarter ended January 31, 2006 compared to 44% for the quarter ended
January 31, 2005. The decrease in gaming expenses is attributable to reduced
revenue sharing and regulatory fees under the 2001 Compact, which commenced in
March 2005, as well as an increase in operating efficiencies resulting from the
sharing of services between the Resort and the Travel Center.

     FOOD AND BEVERAGE. Food and beverage expenses increased $1.5 million, or
94%, to $3.0 million for the quarter ended January 31, 2006 from $1.5 million
for the quarter ended January 31, 2005. The increase was primarily due to
increased expenses associated with operating an increased number of food and
beverage outlets, including the addition and training of food and beverage team
members. Food and beverage margins as a percentage of food and beverage revenue
decreased 2%, from (7%) for the quarter ended January 31, 2005 compared to (9%)
for the quarter ended January 31, 2006.

     HOTEL. Hotel expenses increased to $1.2 million for the quarter ended
January 31, 2006 from $0.0 million for the quarter ended January 31, 2005 due to
the opening of the Resort. Hotel expenses represented 52% of hotel revenue for
the quarter ended January 31, 2006.

     RECREATION AND OTHER. Recreation and other costs decreased $1.4 million, or
32% to $3.0 million for the quarter ended January 31, 2006 from $4.4 million for
the quarter ended January 31, 2005. The decrease is primarily related to reduced
expenses associated with our ski operations as a result of decreased activity
related to poor snowfall.

     MARKETING AND ADVERTISING. Marketing and advertising costs increased $1.4
million to $1.9 million for the quarter ended January 31, 2006 from $0.5 million
for the quarter ended January 31, 2005. The increase was primarily due to the
opening of the Resort.


                                       28
<PAGE>


     GENERAL AND ADMINISTRATIVE. General and administrative expenses increased
$1.9 million, or 82%, to $4.2 million for the quarter ended January 31, 2006
from $2.3 million for the quarter ended January 31, 2005. The increase was due
primarily to increased expenses associated with opening the Resort, as well as
increased costs associated with improvement of disclosure controls .

     PRE-OPENING COSTS AND EXPENSES. There were no current charges for the
quarter ending January 31, 2006. Previous expenses of $2.5 million for the
quarter ended January 31, 2005, were attributable to segregating primarily
general and administrative expenses while the new Resort was being constructed.

     DEPRECIATION. Depreciation increased $2.5 million to $4.5 million for the
quarter ended January 31, 2006 from $2.0 million for the quarter ended January
31, 2005. The increase was primarily the result of opening the Resort. In
addition to the Resort, other equipment was put into service at the Travel
Center as well as Ski Apache.

     INCOME FROM OPERATIONS. Income from operations increased $2.3 million, or
460%, to $2.8 million for the quarter ended January 31, 2006 from $0.5 million
for the quarter ended January 31, 2005. The increase was primarily-due to
improved efficiencies in connection with adjusting to seasonal decreases in
revenue.

     OTHER INCOME (EXPENSES). Other non-operating expenses increased $5.6
million to $7.4 million for the quarter ended January 31, 2006 from $1.8 million
for the quarter ended January 31, 2005. The increase was primarily due to
expensing interest on the $200 million senior notes issued in November 2003,
which had previously been capitalized during the construction period and the
correction of $0.8 million to the Bond Accrual dating back to November 2003.

     Other income (expenses) is comprised of interest income and other income
minus interest expense and other expenses.

RESULTS OF OPERATIONS

NINE MONTHS ENDED JANUARY 31, 2006 COMPARED TO THE NINE MONTHS ENDED JANUARY 31,
2005.

     NET REVENUES. Net revenues increased $20.6 million, or 31%, to $87.6
million for the nine months ended January 31, 2006 from $67.0 million for the
nine months ended January 31, 2005. The increase in net revenues was primarily
attributable to the opening of our new Resort in March 2005. As a result, we
realized an increase in most of our lines of business for the nine month period
ended January 31,2006 compared to the nine month period ended January 31,2005:
gaming revenues increased $10.9 million, up 23% over the comparable period; food
and beverage revenues increased $5.4 million, or 129%, over the comparable
period; and hotel revenues increased $8.4 million over a year ago (when there
were no comparable revenues).

     GAMING. Gaming revenues increased $10.9 million, or 23%, to $58.9 million
for the nine months ended January 31,2006 from $48.0 million for the nine months
ended January 31, 2005. Slot revenues increased to $51.2 million for the nine
months ended January 31, 2006 from $41.4 million for the nine months ended
January 31, 2005, an increase of $9.8 million, or 24%. These increases are
primarily due to the opening of the new casino. Gross slot win per unit, per day
was $131 for the nine months ended January 31, 2006 compared to $145 for the
nine months ended January 31, 2005; in this period the weighted average number
of units increased from 1,151 units in the nine months ended January 31, 2005 to
1,509 for the nine months ended January 31, 2006. Table games revenue increased
$1.2 million, or 28%, to $7.8 million for the nine months ended January 31, 2006
from $6.6 million for the nine months ended January 31, 2005. The decrease in
win per unit per day on a year over year basis was attributable to an increase
in the weighted average number of slot devices of approximately 32%.

     FOOD AND BEVERAGE. Food and beverage revenues increased $5.4 million, or
129%, to $9.6 million for the nine months ended January 31, 2006 from $4.2
million for the nine months ended January 31, 2005. The increase is due to the
new Resort offering additional food and beverage outlets as well as an increase
in banquet facility space.


                                       29
<PAGE>



     HOTEL. Hotel revenues for the nine months ended January 31, 2006 were $8.4
million. The resort re-opened in March 2005, the nine months ended January 31,
2006 is the first full nine months the Resort and its luxury hotel was in
operation. The nine months ended January 31, 2005 had no hotel revenues.
Occupancy rates averaged 67% over the nine months ended January 31, 2006,
average daily rate was $144 and revenue per available room was $183.

     RECREATION AND OTHER. Recreation and other revenues decreased $2.2 million,
or 14% to $13.0 million for the nine months ended January 31, 2006 compared to
$15.2 million for the nine months ended January 31, 2005. The decrease is due to
the significant reduction in snowfall.

     PROMOTIONAL ALLOWANCES. Promotional allowances were $2.3 million for the
nine months ended January 31, 2006 compared to $0.3 million for the nine months
ended January 31, 2005 an increase of $2.0 million. The amount for the nine
months ended January 31, 2005, reflects the reversal of a prior accrual and
consequently is not directly comparable to promotional allowances for the nine
months ended January 31, 2006. The increase was due to increased promotions to
our club members and a 34% increase in gross revenue.

     TOTAL OPERATING EXPENSES. Total operating expenses increased $27.2 million
to $80.9 million for the nine months ended January 31, 2006 from $53.7 million
for the nine months ended January 31, 2005. As a percentage of revenue,
operating expenses decreased 12% to 92% of revenue for the nine months ended
January 31, 2006. The increase in total operating expenses was primarily due to
increases of $7.4 million in food and beverage expenses, $12.2 million in
general and administrative expenses, $4.7 million in marketing expenses, $3.9
million in hotel expenses, and $8.2 million in depreciation expense, offset by
decreases of $3.2 million in gaming expenses, $4.3 in pre-opening costs and
expenses, and $1.7 million in recreation and other expenses.

     GAMING. Gaming expenses decreased $3.3 million to $12.8 million for the
nine months ended January 31, 2006 from $16.1 million for the nine months ended
January 31, 2005. Gaming expenses as a percentage of gaming revenue decreased
12%, from 34% for the nine months ended January 31, 2005 compared to 22% for the
nine months ended January 31, 2006. The decrease in gaming expenses is
attributable to reduced revenue sharing and regulatory fees under the 2001
Compact, which commenced in March 2005, as well as an increase in operating
efficiencies resulting from the sharing of services between the Resort and the
Travel Center.

     FOOD AND BEVERAGE. Food and beverage expenses increased $7.3 million, or
143%, to $12.4 million for the nine months ended January 31, 2006 from $5.1
million for the nine months ended January 31, 2005. The increase was primarily
due to increased expenses associated with operating an increased number of food
and beverage outlets, including the addition and training of food and beverage
team members. Food and beverage margins as a percentage of food and beverage
revenue increased 7%, from (16%) for the nine months ended January 31, 2005
compared to (23%) for the nine months ended January 31, 2006.

     HOTEL. Hotel expenses increased to $3.9 million for the nine months ended
January 31, 2006 from $0.0 million for the nine months ended January 31, 2005
due to the opening of the Resort. Hotel expenses represented 46% of hotel
revenue for the nine months ended January 31, 2006.

     RECREATION AND OTHER. Recreation and other costs decreased $1.8 million, or
16% to $9.4 million for the nine months ended January 31, 2006 from $11.2
million for the nine months ended January 31, 2005. The decrease in recreation
and other costs was primarily attributable to the significant reduction in
snowfall.

     MARKETING AND ADVERTISING. Marketing and advertising costs increased $4.7
million, or 235% to $6.7 million for the nine months ended January 31, 2006 from
$2 million for the nine months ended January 31, 2005. The increase was
primarily due to the opening of the Resort.

     GENERAL AND ADMINISTRATIVE. General and administrative expenses increased
$12.3 million, or 224%, to $17.8 million for the nine months ended January 31,
2006 from $5.5 million for the nine months ended January 31, 2005. The increase
was due primarily to increased expenses associated with opening the Resort, as
well as increased consulting and audit fees associated with improving our
disclosure controls and procedures, increased


                                       30
<PAGE>


training of our accounting staff, compliance with Sarbanes Oxley and payment for
settlement of unpaid federal and state withholding tax.

     PRE-OPENING COSTS AND EXPENSES. There were no current pre-opening costs and
expenses for the nine months ended January 31, 2006. Previous expenses of $4.3
million for the nine month period ended January 31, 2005, were attributable to
segregating primarily general and administrative expenses while the new Resort
was being constructed.

     DEPRECIATION. Depreciation increased $8.3 million to $13.3 million for the
nine months ended January 31, 2006 from $5.0 million for the nine months ended
January 31, 2005. The increase was primarily the result of opening the Resort in
March 2005, with the nine months ended January 31, 2006 reflecting a full nine
months of depreciation expense. In addition to the Resort, other equipment was
put into service at the Travel Center as well as Ski Apache.

     INCOME FROM OPERATIONS. Income from Operations decreased $7.2 million, or
54%, to $6.7 million for the nine months ended January 31, 2006 from $13.3
million for the nine months ended January 31, 2005. The decrease was primarily
due to the increase in general and administrative, marketing, food and beverage
and depreciation expenses associated with the opening of the Resort, in addition
to increases in inventory reserves, consulting and audit fees associated with
improvement of disclosure controls, and accruing for settlement of unpaid
federal and state withholding tax.

     OTHER INCOME (EXPENSES). Other non-operating expenses increased $14.3
million to $21.0 million for the nine months ended January 31, 2006 from $6.8
million for the nine months ended January 31, 2005. The increase was primarily
due to expensing interest on the $200 million senior notes issued in November
2003, which had previously been partially capitalized during the construction
period plus the correction of $0.8 million to the Bond Accrual dating back to
November 2003. The nine months ended January 31, 2006 reflects the first full
nine months of bond interest charges.

     Other income (expenses) is comprised of interest income and other income
minus interest expense and other expenses, including other reserves for under
utilized assets.

LIQUIDITY AND CAPITAL RESOURCES

     As of January 31, 2006 and April 31, 2005, we had cash and cash equivalents
(net of amounts in restricted accounts) of $13.8 million and $13.7 million,
respectively. Our principal sources of liquidity for the nine months ended
January 31, 2006 were cash from financing activities of $22.1 million, offset by
approximately $11.6 million used in operations and $10.3 million used in
investing activities.

     Cash used in investing activities for the nine months ended January 31,
2006 was $10.3 million, which consisted exclusively of the purchase of property,
plant and equipment. This represents a decrease of $61.1 million from the nine
month period ended January 31, 2005, during which we were engaged in the
construction of our new Resort.

     Cash provided from financing activities for the nine months ended January
31, 2006 was $22.1 million, consisting of $14.8 million of cash released from
our restricted accounts pursuant to the terms of the indenture governing the
Notes, and $14.3 million from equipment financing, reduced by $6.9 million
distributed to the Tribe. During the nine months ended January 31, 2005, $85.0
million was provided from financing activities reflecting higher releases of
restricted cash to pay for construction costs.

     We believe that existing cash balances and operating cash flows and
permitted borrowings will provide adequate funds for our working capital needs,
planned capital expenditures, including equipment and furnishings for the Resort
and debt service requirements for at least the next twelve months. However, our
ability to fund our operations, make planned capital expenditures, and make
scheduled payments depends on our future operating performance and success in
seeking to increase operating efficiencies and reduce operating expenses, which
are subject to economic, financial, business and other conditions, some of which
are beyond our control. Additionally,



                                       31
<PAGE>


our ability to incur additional indebtedness is limited under the terms of the
indenture governing the Notes. If our expected operating performance or success
in increasing operating efficiencies and reducing operating expenses does not
meet management expectations, we may need to arrange for additional sources of
funding in the form of permitted borrowings under our indenture or contributions
from the Tribe, which sources of funding cannot be assured.

     On October 5, 2005, Standard & Poor's Rating Services announced that it had
placed its ratings on us on credit watch with negative implications. We do not
have any credit rating downgrade triggers that would accelerate repayment of the
outstanding senior notes issued in November 2003, however any adverse changes to
our credit ratings may increase the cost of, or restrict our ability to secure,
any new borrowings.

DESCRIPTION OF INDEBTEDNESS

THE NOTES

     On November 3, 2003, we issued $200.0 million senior notes, with fixed
interest payable at a rate of 12% per annum. Interest on the notes is payable
semi-annually on May 15 and November 15. The notes mature on November 15, 2010.
As of January 31, 2006 accrued interest payable on the Notes was $6.0 million.
The notes are secured until delivery of a final certificate of completion of the
Resort by first priority security interests in the following accounts:

     o    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, 2006, the balance in the
          interest reserve account was $22,548;

     o    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, 2006, the balance in the
          construction disbursement account was $265.00;

     o    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, 2006, the balance in the construction
          reserve account was $15.8 million; and

     o    a construction retainage account. As of January 31, 2006, the balance
          the construction retainage accounts was $5.3 million.

     The Notes rank senior in right of payment to all of our future indebtedness
or other obligations that are, by their terms, expressly subordinated in right
of payment to the notes. In addition, the Notes rank equal in right of payment
to all of our existing and future senior unsecured indebtedness and other
obligations that are not, by their terms, expressly subordinated in right of
payment to the notes. Each of our wholly-owned subsidiaries are guarantors of
the Notes.

GENERAL INDEBTEDNESS

     The Tribe, for the benefit of the Inn of the Mountain Gods, a wholly-owned
subsidiary of IMG Resort and Casino, executed a promissory note dated September
1, 1982, which we refer to as the BIA Note in favor of the Department of
Interior, Bureau of Indian Affairs in the amount of approximately $3.5 million.
The BIA Note accrues interest at the rate of 8.5% per annum payable annually
from the date of the BIA Note until paid in full on September 1, 2011. As of
January 31, 2006, there is approximately $1.6 million outstanding on the BIA
Note.



                                       32
<PAGE>


CREDIT FACILITY

     On June 15, 2004, we entered into a $15.0 million credit facility with Key
Equipment Finance, a Division of Key Corporate Capital Inc. The fixed rate loan
is fully amortizable over five years and bears an interest rate indexed off the
3-year Treasury Interest Rate Swaps. Proceeds from the loan were used to fund
furniture, fixtures and equipment for the Resort. As of January 31, 2006,
approximately $13.8 million had been drawn against this facility to finance
purchases of furniture, fixtures and equipment.

OFF-BALANCE SHEET ARRANGEMENTS

     As of January 31, 2006, we have no off-balance sheet arrangements that
affect our financial condition, liquidity and results of operation. We have
certain contractual obligations including long-term debt, operating leases and
employment contracts.

REGULATION AND TAXES

     We are subject to extensive regulation by the Mescalero Apache Tribal
Gaming Commission, the National Indian Gaming Commission, the NIGC, and, to a
lesser extent, the New Mexico Gaming Control Board. Changes in applicable laws
or regulations could have a significant impact on our operations. We are
unincorporated Tribal business enterprises, directly or indirectly owned by the
Tribe, a federally recognized Indian tribe, and are located on reservation land
held in trust by the United States of America; therefore, we were not subject to
federal or state income taxes for the quarters ended January 31, 2006 or 2005,
nor is it anticipated we will be subject to such taxes for the foreseeable
future. Various efforts have been made in the U.S. Congress over the past
several years to enact legislation that would subject the income of tribal
business entities, such as us, to federal income tax. Although no such
legislation has been enacted, similar legislation could be passed in the future.
A change in our non-taxable status could have a material adverse affect on our
cash flows from operations.

                                  RISK FACTORS

     SEVERAL OF THE MATTERS DISCUSSED IN THIS REPORT CONTAIN FORWARD-LOOKING
STATEMENTS THAT INVOLVE RISKS AND UNCERTAINTIES. FACTORS ASSOCIATED WITH THE
FORWARD-LOOKING STATEMENTS THAT COULD CAUSE ACTUAL RESULTS TO DIFFER FROM THOSE
PROJECTED OR FORECASTED IN THIS REPORT ARE INCLUDED IN THE STATEMENTS BELOW. IN
ADDITION TO OTHER INFORMATION CONTAINED IN THIS REPORT, YOU SHOULD CAREFULLY
CONSIDER THE FOLLOWING CAUTIONARY STATEMENTS AND RISK FACTORS. THE RISKS AND
UNCERTAINTIES DESCRIBED BELOW ARE NOT THE ONLY RISKS AND UNCERTAINTIES WE FACE.
ADDITIONAL RISKS AND UNCERTAINTIES NOT PRESENTLY KNOWN TO US OR THAT WE
CURRENTLY DEEM IMMATERIAL ALSO MAY IMPAIR OUR BUSINESS OPERATIONS. IF ANY OF THE
FOLLOWING RISKS ACTUALLY OCCUR, OUR BUSINESS, FINANCIAL CONDITION, AND RESULTS
OF OPERATIONS COULD SUFFER. THE RISKS DISCUSSED BELOW ALSO INCLUDE
FORWARD-LOOKING STATEMENTS AND OUR ACTUAL RESULTS MAY DIFFER SUBSTANTIALLY FROM
THOSE DISCUSSED IN THESE FORWARD-LOOKING STATEMENTS

                         RISKS RELATING TO OUR BUSINESS

WE HAVE A SUBSTANTIAL AMOUNT OF INDEBTEDNESS, WHICH COULD ADVERSELY AFFECT OUR
FINANCIAL CONDITION.

     As of January 31, 2006, we had an aggregate of approximately $215.8 million
of indebtedness outstanding, which includes $200.0 million of debt on the notes
issued on November 3, 2003. This substantial indebtedness could have important
consequences to you and significant effects on our business and future
operations. For example, it could:

     o    make it more difficult for us to satisfy our debt service obligations;

     o    increase our vulnerability to general adverse economic and industry
          conditions or a downturn in our business;

     o    limit our ability to fund future working capital, capital expenditures
          and other general operating requirements;



                                       33
<PAGE>


     o    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;

     o    place us at a competitive disadvantage compared to our competitors
          that have less debt; and

     o    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.

OUR FAILURE TO GENERATE SUFFICIENT CASH FLOW FROM OUR GAMING AND OTHER RESORT
OPERATIONS COULD ADVERSELY AFFECT OUR ABILITY TO MEET OUR DEBT SERVICE
OBLIGATIONS.

     Our ability to make payments on and repay or refinance our debt will depend
on our ability to generate cash flow from the operations of our gaming and other
resort operations. Our ability to generate sufficient cash flow from operations
to satisfy our obligations will depend on our future operating performance,
which is subject to many economic, competitive, regulatory and other business
factors that are beyond our control. If we are not able to generate sufficient
cash flow to service our debt obligations, we may need to refinance or
restructure our debt, sell assets, reduce or delay capital investments, or seek
to raise additional capital. For the following reasons, among others, these
alternatives may not be available to us on reasonable terms or at all, or, if
available, they may not be available in amounts adequate to enable us to satisfy
our debt service obligations:

     o    unlike non-governmental businesses, we are prohibited by law from
          generating cash through an offering of equity securities;

     o    our ability to incur additional debt is limited by the covenants of
          the indenture governing the notes; and

     o    the indenture governing the notes includes covenants which limit our
          ability to create liens on or sell our assets.

     If our cash flow is insufficient and we are unable to raise additional
capital, we may not be able meet our debt service obligations.

RESTRICTIVE COVENANTS IN THE INDENTURE GOVERNING THE NOTES MAY LIMIT OUR ABILITY
TO EXPAND OUR OPERATIONS AND CAPITALIZE ON OUR BUSINESS OPPORTUNITIES.

     The indenture governing the notes includes covenants which limit our
ability to borrow money, make investments, create liens, sell assets, engage in
transactions with affiliates, engage in other businesses and engage in mergers
or consolidations. These restrictive covenants may limit our ability to expand
our operations and capitalize on business opportunities. If we are unable to
expand our operation or otherwise capitalize on our business opportunities, our
business, financial condition and results of operations could be materially
adversely affected and we may not be able to meet our debt service obligations.

WE MAY NOT BE ABLE TO REALIZE THE BENEFITS OF OUR BUSINESS STRATEGY.

     The Resort and the Travel Center Casino are part of our business strategy
to develop an integrated resort, increase our market reach and realize operating
benefits from business synergies. We may not be able to fully implement this
strategy or may not fully realize these anticipated benefits. Implementation of
our business strategy could be adversely affected by a number of factors beyond
our control, including general or local economic conditions, increased
competition or other changes in our industry. In particular, we may not be able
to attract a sufficient number of guests, gaming customers and other visitors in
order to achieve our performance goals. Furthermore, we may not be successful in
our plan to promote our customers' utilization of our various resort amenities,
including our gaming, hotel, entertainment and other amenities as anticipated or
to a degree that will



                                       34
<PAGE>


allow us to achieve our performance goals. Additionally, our business strategy,
intended to capitalize on the spending levels of our patrons, attract customers
from new target markets and reduce seasonality, may not achieve its intended
results. A failure to effectively implement our business strategy could have a
material adverse effect on our business, financial condition, results of
operations and our ability to meet our debt service obligations.

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.

     Federal, state and Tribal laws and regulations, and our gaming compact,
regulate our gaming operations. For example, various regulatory bodies,
including the NIGC, the Mescalero Apache Tribal Gaming Commission and the New
Mexico Gaming Control Board have oversight of our gaming operations. In
addition, Congress has regulatory authority over Indian affairs and can
establish and change the terms upon which Indian tribes may conduct gaming. The
operation of all gaming on Indian lands is subject to IGRA.

     The legal and regulatory environment governing our activities, which
involve gaming and commercial relations with Indian tribes, is susceptible to
changes in public policy regarding these matters. For example, over the past
several years, legislation has been introduced in Congress designed to address a
myriad of perceived problems with IGRA, including proposed legislation repealing
many of the provisions of IGRA and prohibiting the operation of gaming on Indian
reservations in states where gaming is not otherwise allowed on a commercial
basis. While none of the substantive proposed amendments to IGRA have proceeded
out of committee hearings to a vote by either house of the U.S. Congress, we
cannot predict the ramifications of future legislative acts. Changes in
applicable laws or regulations, or a change in the interpretation of these laws
or regulations or our gaming compact with the State of New Mexico could limit or
materially affect the types of gaming, if any, that we may offer. Any
restrictions with respect to gaming could have a material adverse effect on our
business, financial condition, results of operations and 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.

     Currently, we compete with 15 tribal gaming casinos and non-tribal racinos
operated within 200 miles of our location, one of which, Ruidoso Downs, is
approximately 10 miles away from us in Ruidoso, and another, Sunland Park
Racetrack and Casino, is approximately 125 miles away from us in Sunland Park,
New Mexico. Ruidoso Downs offers quarter horse and thoroughbred racing from May
through September, as well as a 20,000 square foot casino featuring
approximately 300 slot machines and a buffet restaurant. Sunland Park offers
quarter horse and thoroughbred racing from mid-November to early-April, a 36,000
square foot casino featuring approximately 700 slot machines and five
restaurants. The other 12 tribal gaming casinos and one racino are located in
and around Albuquerque and Santa Fe, New Mexico, all which are outside of our
primary market area. We also compete with other forms of legal gaming in New
Mexico, Texas and Northern Mexico, including horse racing, Class II gaming,
pari-mutuel wagering, the New Mexico State Lottery, the Texas State Lottery, as
well as non-gaming leisure activities. With completion of the Resort, we have
expanded our existing geographic market and increased the percentage of our
overnight and larger spending customers who tend to live greater distances from
us. With completion of the Resort, we now compete more directly for regional
overnight and national customers with casinos and resorts located in other parts
of the country. Many of our competitors in this expanded geographical market
have substantially greater resources and name recognition than we do or are in a
more convenient location, which is closer to a major population center or
transportation hub. If we are unable to compete successfully, our business,
financial condition and results of operations could be materially adversely
affected and we may not be able 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.

     Even with completion of the Resort and our expanded market, we continue to
rely primarily on drive-in customers living within our primary market area
consisting of southern New Mexico, western Texas and northern


                                       35
<PAGE>


Mexico for the majority of our revenues. We expect to continue to increase our
market reach, but if our marketing strategy is not successful, our primary
customer base will continue to be a predominately local one. Therefore, we are
subject to greater risks than more geographically diversified gaming or resort
operations. Among others, the following conditions could have a material adverse
effect on our results of operations:

     o    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;

     o    an increase in competition in our primary market area or the
          surrounding area;

     o    continued increase in automotive fuel prices;

     o    inaccessibility due to road construction or closures of primary access
          routes; and

     o    natural and other disasters in the surrounding area including forest
          fires and floods.

     These factors may cause a disruption in our business and as a result have a
material adverse effect on our business, financial condition, result of
operations and our ability to meet our debt service obligations.

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 hope to attract customers from beyond our primary market who will have
to travel by air to our property. The terrorist attacks of September 11, 2001,
the United States' ongoing military campaign against terrorism, the situation in
Iraq, and continued violence, conflicts and instability in other areas of the
world have created many economic and political uncertainties, some of which may
affect our ability to attract customers outside our current primary market as
well as our operations and profitability. The potential short-term and long-term
effects that these and similar other situations and events may have for our
customers, our primary and secondary markets and the U.S. economy in general are
uncertain. These and similar other future events could have a significant impact
on the number of customers visiting the Resort and the Travel Center Casino and,
as a result, may have a material adverse effect on 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.

     The operation of our resort requires us to continuously recruit and retain
a substantial number of qualified professionals, employees, executives and
managers with gaming, hospitality, management and financial reporting
experience. There can be no assurances that we will be able to recruit, train
and retain a sufficient number of qualified employees. A failure to be able to
recruit and retain qualified personnel could result in management, operating and
financial reporting difficulties or affect the experience and enjoyment of our
patrons, either of which could have a material adverse effect on our business,
financial condition, results of operations or ability to meet our debt service
obligations.

WE DO NOT HAVE A HISTORY OF OPERATING ON AS LARGE OF A SCALE AS CONTEMPLATED BY
THE RESORT.

     As a result of the opening of our new Resort in March 2005, our business
operations are significantly expanded in size and diversity. Our gaming space
grew by more than 32,000 square feet (including the addition of a second casino
location) and our gaming positions by approximately 700 slot machines and 22
table games. In addition, we have significantly expanded restaurant, lounge and
bar operations, a fuel station and a number of additional retail facilities. The
expansion of our resort operations places a significant demand on our management
resources which may affect our ability to effectively manage our growth. These
increased demands on our management could distract them from the operation of
our business, which could have a material adverse effect on our business,
financial condition, results of operations and ability to meet our debt service
obligations.


                                       36
<PAGE>


ADDITIONAL AND ONGOING CONSTRUCTION AT THE RESORT COULD ADVERSELY AFFECT OUR
FINANCIAL CONDITION, RESULTS OF OPERATIONS AND OUR ABILITY TO MEET OUR DEBT
SERVICE OBLIGATIONS.

     Certain portions of the Resort, including completion of our luxury spa
facilities, completion of a retaining wall, and other miscellaneous punch list
items are not yet fully complete. Additionally, we are experiencing subsidence
issues at one of our parking facilities. We expect there is sufficient funding
in the construction reserve account and necessary insurance coverage to
complete, or assure completion, of these construction matters. In addition, we
are taking measures to minimize any impact these matters have to the operations
of our Resort. In addition to potentially impacting revenue, these matters
require us to devote additional management and other resources away from our
existing operations. As a result, these matters could adversely affect our
business, financial condition and results of operations and our ability to meet
our debt service obligations.

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.

     Based on current interpretations of federal and state tax laws, we are not
a taxable entity for federal and state income tax purposes. If these
interpretations are reversed or modified, or if the applicable tax law changes
in this regard, our cash flow and ability fulfill our debt service obligations
may be adversely affected.

     Efforts have been made in Congress over the past several years to tax the
income of tribal business enterprises. These have included a House of
Representatives bill that would have taxed gaming income earned by Indian tribes
as business income subject to corporate tax rates. Although that legislation has
not been enacted, similar legislation could be enacted in the future. Any future
legislation permitting the taxation of the Tribe or our businesses could have a
material adverse effect on our business, financial condition, results of
operations or ability to meet 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.

     The Tribe is governed by a ten member Tribal Council, consisting of the
President and Vice President of the Tribe and eight voting Tribal Council
members. The President is a non-voting member of the Tribal Council and the
Tribe's Vice President only votes in the event of a tie in the voting of the
eight voting members of the Tribal Council. Terms of all Tribal Council members
(including the President and Vice President of the Tribe) are two years, with
members elected on a staggered basis so that four Tribal Council members are
elected each year. If there is a significant change in the composition of the
Tribal Council, the new Tribal Council may not have the same agenda or goals as
the current government, in particular with respect to the Resort. In addition,
the Tribal Council acts by majority vote and with respect to any issue or
policy, a change in views by one or more members could result in a change in the
policy adopted by the Tribal Council. Changes in the Tribal Council or its
policies could result in significant changes in our structure or operations or
in the Resort, which could adversely affect our business plan or otherwise
result in a material adverse effect in our business, financial condition,
results of operations or ability to meet our debt service obligations.

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.

     Effective internal controls are necessary for us to provide reliable and
accurate financial reports and prevent fraud. If we cannot provide reliable and
accurate financial reports and prevent fraud, our business and operating results
could be harmed. In preparing our Report on Form 10-Q for the period ended
October 31, 2005, the Prior Quarterly Report, we discovered material weaknesses
in our internal controls over financial reporting, which we continue to
experience. These material weaknesses along with our implemented and planned
corrective measures to address these material weaknesses, are more fully
discussed in Item 4 of this Report, "Controls and Procedures." We believe that
the corrective measures we have implemented in connection with preparing this
Report, as discussed in Item 4 of this Report, have been effective to ensure
that our financial statements, and other financial information included in this
Report, have been recorded, processed, summarized and reported correctly. We are
implementing permanent


                                       37
<PAGE>


changes in our internal controls over financial reporting in an effort to
enhance our internal controls and address these material weaknesses, as
described in Item 4 of this Report. We have not yet fully implemented all of
these changes, which include: improved documentation and verification of
transactions; an improved system of entering transactions into general and
subsidiary ledgers; improved and additional systems relating to account
reconciliation and transaction reporting; developing a comprehensive policies
and procedures manual for our finance staff, specifically defining and
documenting the responsibilities of our financial reporting personnel; improved
training of our financial reporting personnel; and retaining an independent
advisory firm to assist in evaluating our internal controls.

     We cannot be certain that any corrective measures we take will ensure that
we will design, implement and maintain adequate disclosure and internal controls
over our financial processes and reporting in the future. Remedying the material
weaknesses that have been identified, and any additional deficiencies,
significant deficiencies or material weaknesses that we may identify in the
future, could require us to incur significant costs, expend significant time and
management resources or make other changes. Any delay or failure to design and
implement new or improved controls, or difficulties encountered in their
implementation or operation, could harm our operating results, cause us to fail
to meet our financial reporting obligations, or prevent us from providing
reliable and accurate financial reports or avoiding or detecting fraud.
Disclosure of our material weaknesses or our failure to remediate such material
weaknesses in a timely fashion could cause investors to lose confidence in our
reported financial information, which could have a negative effect on our
ability to access capital markets in the future.

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

     Market risk is the risk of loss arising from adverse changes in market
rates and prices, such as interest rates, foreign currency exchange rates and
commodity prices. Our primary exposure to market risk is interest rate risk
associated with our short term variable rate debt. As of January 31, 2006, we
had no variable rate debt outstanding.

     Management has and will continue to limit our exposure to interest rate
risk by maintaining a conservative ratio of fixed rate, long-term debt to total
debt such that variable rate exposure is kept at an acceptable level and fixing
certain long-term variable rate debt through the use of interest rate swaps or
interest rate caps with appropriately matching maturities.

     As of January 31, 2006, we held no derivative instruments.

ITEM 4.  CONTROLS AND PROCEDURES.

DISCLOSURE CONTROLS AND PROCEDURES

     As of the end of the period covered by this Report, we conducted an
evaluation, under the supervision and with the participation of IMG Resort and
Casino's management, including our Principal Executive Officer and Principal
Financial Officer, of the effectiveness of the design and operation of our
disclosure controls and procedures pursuant to Rule 13a-15 and 15d-15 of the
Securities and Exchange Act of 1934, as amended (the "Exchange Act"). Based on
this evaluation, and as previously reported in our Form 10-Q for our fiscal
quarter ended July 31, 2005 filed with the Commission on November 3, 2005 and
our Form 10-Q for our fiscal quarter ended October 31, 2005 filed with the
Commission on December 15, 2005 (the "Prior Reports"), our Principal Executive
Officer and Principal Financial Officer concluded that, as a result of the
material weaknesses in our internal controls over financial reporting discussed
below, our disclosure controls and procedures were not effective at the
reasonable assurance level designed to ensure that information required to be
disclosed by us in the reports that we file or submit under the Exchange Act is
recorded, processed, summarized and reported within the time periods specified
in the Commission's rules and forms. A "material weakness" is a significant
deficiency, or combination of significant deficiencies, that results in more
than a remote likelihood that a material misstatement of the financial
statements will not be prevented or detected.


                                       38
<PAGE>

     As a result of our material weaknesses previously reported in our Prior
Reports, which continue to exist based upon our evaluation noted above, we
adopted remedial measures and procedures, described below, to address the
deficiencies in our internal controls that existed as of July 31, 2005, October
31, 2005 and continue to exist. Accordingly, based upon these remedial measures,
our Principal Executive Officer and Principal Financial Officer have concluded,
based on their knowledge, that the financial statements and other financial
information included in this quarterly report fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report.

MATERIAL WEAKNESSES IN INTERNAL CONTROL OVER FINANCIAL REPORTING

     In connection with the preparation of this Report on Form 10-Q, and as
previously reported in our Prior Reports, our management and audit committee
concluded we did not maintain effective internal control over financial
reporting due to material weaknesses. Specifically, we did not maintain adequate
systems, policies or procedures principally with respect to:

     o    our system of entering transactions into our general and subsidiary
          ledgers, including the time for entering transactions;
     o    timely and effective documentation of transactions to be entered into
          our accounting system;
     o    timely reconciliation of general ledger to appropriate underlying
          subsidiary records;
     o    implementation of an appropriate checks and balances system with
          respect to documentation and recording of transactions;
     o    provision of adequate education to our finance staff with respect to
          our accounting and financial reporting policies and procedures; and
     o    maintenance of a comprehensive written accounting policies and
          procedures manual.

     At the direction of our audit committee, beginning during the second
quarter of fiscal 2006 and continuing through the filing of this Report, we
began implementing permanent changes in an effort to enhance our internal
controls in response to management's conclusions (the "Permanent Changes"). The
Permanent Changes include:

     o    improved system for documentation and verification of transactions;
     o    improved system of entering transaction into general and subsidiary
          ledgers in a timely and complete manner;
     o    implementing improved and additional systems relating to account
          reconciliation and transaction reporting, including the review,
          analysis and reconciliation of ledger details and timely recording of
          transactions;
     o    developing a comprehensive policies and procedures manual that is
          accessible and understood by all members of our finance staff;
     o    specifically defining and documenting the responsibilities of our
          financial reporting personnel;
     o    improved training of our financial reporting personnel; and
     o    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.

     We have not yet fully implemented the changes identified above. In order to
prepare this Report, we continued to utilize interim alternative and additional
control measures (the "Interim Measures") we adopted during the period covered
by this Report in connection with filing our Prior Reports to ensure that our
financial statements, and other financial information included in this Report,
fairly present in all material respects our financial condition, results of
operations and cash flows, as of, and for, the periods presented in this Report.
These Interim Measures include, but are not limited to:

     o    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;
     o    increase in number of internal and external accounting and financial
          personnel;


                                       39
<PAGE>


     o    frequent reviews and cross-checking of this Report by senior
          management, internal audit personnel and Protiviti, Inc.;
     o    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
     o    utilization of existing financial management software, reports for
          ledger and sub-ledger details for financial transactions.

     Our management, including our Principal Executive Officer and Principal
Financial Officer, does not expect that our disclosure controls or our internal
controls will prevent all error and all fraud. A control system, no matter how
well designed and operated, can provide only reasonable, not absolute, assurance
that the control system's objectives will be met. Further, the design of a
control system must reflect the fact that there are resource constraints, and
the benefits of controls must be considered relative to their costs. Because of
the inherent limitations in all control systems, no evaluation of controls can
provide absolute assurance that all control issues and instances of fraud, if
any, within IMG Resort and Casino have been detected. These inherent limitations
include the realities that judgments in decision-making can be faulty, and that
breakdowns can occur because of simple error or mistake. Controls can also be
circumvented by the individual acts of some persons, by collusion of two or more
people or by management override of the controls. Because of the inherent
limitations in a cost-effective control system, misstatements due to error or
fraud may occur and not be detected.

CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING

     During the period covered by this Report on Form 10-Q, we continued to
utilize the Interim Measures, and began implementing the permanent changes to
our internal controls, described above.

     During the period covered by this Report on Form 10-Q, other than with
respect to implementing the Permanent Measures and continued utilization of the
Interim Measures, described above, there were no significant changes in our
internal controls or in other factors that have materially affected, or are
likely to materially affect, our internal controls.



                                       40
<PAGE>

PART II  OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS.

     We are involved in litigation incurred in the normal course of business;
however, we are not currently a party to any material pending claim or legal
action.

ITEM 1A. RISK FACTORS.

None.

ITEM 2.  UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

None.

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES.

None.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

Not applicable.

ITEM 5.  OTHER INFORMATION.

None.

ITEM 6.  EXHIBITS.


                                       41
<PAGE>

<TABLE>
<CAPTION>
<S>             <C>
 EXHIBIT NO.    DESCRIPTION

3.1*            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**          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.

</TABLE>

                                       42
<PAGE>


                                   SIGNATURES

     Pursuant to the requirements of the Securities Act, the registrant has duly
caused this quarterly report to be signed on its behalf by the undersigned,
thereunto duly authorized

<TABLE>
<CAPTION>
<S>                                                   <C>
                                                     INN OF THE MOUNTAIN GODS RESORT AND CASINO



Date:    March 15, 2006                                    By   /s/ Brian D. Parrish
                                                               ----------------------------------------
                                                           Name:    Brian D. Parrish
                                                           Its:     Chief Operating Officer (Principal
                                                                    Executive Officer)


Date:    March 15, 2006                                    By:  /s/ Lance Kintz
                                                               ----------------------------------------
                                                           Name:    Lance Kintz
                                                           Its:     Chief Financial Officer (Principal
                                                                    Financial Officer)

</TABLE>


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<PAGE>