##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 FORM 10-Q
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
 FOR THE QUARTERLY PERIOD ENDED OCTOBER 31, 2007
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 FOR THE TRANSITION PERIOD FROM  TO
 Commission file number 333-113140
 INN OF THE MOUNTAIN GODS RESORT AND CASINO AND SUBSIDIARIES
  Not Applicable
    
    75-3158926(State or other jurisdiction
    
    (I.R.S. Employerof incorporation or organization)
    
    Identification Number)287 Carrizo Canyon RoadMescalero, New Mexico
    
    88340(Address of principal executive offices)
    
    (Zip Code)
 (505) 464-7000
 þ o
  o o þ
 o þ




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##### 



INN OF THE MOUNTAIN GODS RESORT AND CASINO AND SUBSIDIARIES
 FORM 10-Q
 FOR THE QUARTER ENDED OCTOBER 31, 2007
 INDEX
 PagesPART I. FINANCIAL INFORMATIONItem 1. Financial Statements:
    
    
    1Consolidated Balance Sheets as of April 30, 2007 and October 31, 2007 (unaudited)
    
    
    1Consolidated Statements of Operations for the Three Month and Six Month Periods Ended
October 31,2006 (unaudited) and October 31, 2007 (unaudited)
    
    
    2Consolidated Statements of Cash Flows for the Six Month Periods Ended October 31, 2006
(unaudited) and October 31, 2007 (unaudited)
    
    
    3Notes to Consolidated Financial Statements (unaudited)
    
    
    4Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    22Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    28Item 4. Controls and Procedures
    
    
    29PART II. OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    29Item 1A. Risk Factors
    
    
    29Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    29Item 3. Defaults Upon Senior Securities
    
    
    29Item 4. Submission of Matters to a Vote of Security Holders
    
    
    29Item 5. Other Information
    
    
    29Item 6. Exhibits
    
    
    29Signatures
    
    
    30EX-10.8EX-31.1EX-31.2EX-32.1
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##### Table of Contents



PART I  FINANCIAL INFORMATION
 
 Item 1. Financial Statements.
 INN OF THE MOUNTAIN GODS RESORT AND CASINO AND SUBSIDIARIES
 
 CONSOLIDATED BALANCE SHEETS
 As of April 30,
    
    
    As of October 31,2007
    
    
    2007 (unaudited)Current AssetsCash and cash equivalents
    
    $
    16,929,630
    
    
    $
    19,203,898Accounts receivable, net of allowance for doubtful accounts
    
    
    539,368
    
    
    
    756,338Inventories
    
    
    766,658
    
    
    
    985,069Prepaid expenses and other assets
    
    
    594,478
    
    
    
    723,509Total current assets
    
    
    18,830,134
    
    
    
    21,668,814Non-Current AssetsProperty plant and equipment
    
    
    298,091,568
    
    
    
    299,032,383Accumulated Depreciation
    
    
    (87,565,430
    )
    
    
    (95,679,064
    )Property plant and equipment, net
    
    
    210,526,138
    
    
    
    203,353,319Other Assets
    
    
    112,500
    
    
    
    267,678Deferred financing costs
    
    
    6,070,653
    
    
    
    5,258,031Total Assets
    
    $
    235,539,425
    
    
    $
    230,547,842Liabilities and EquityCurrent LiabilitiesAccounts Payable
    
    $
    1,461,913
    
    
    $
    1,872,957Accrued expenses
    
    
    3,966,057
    
    
    
    4,647,684Accrued payroll and benefits
    
    
    2,218,879
    
    
    
    1,182,383Accrued interest
    
    
    11,200,000
    
    
    
    11,200,000Advanced deposits
    
    
    438,659
    
    
    
    214,020Current portion of long-term debt
    
    
    3,659,278
    
    
    
    3,498,228Total current liabilities
    
    
    22,944,786
    
    
    
    22,615,272Non-Current LiabilitiesLong-term debt, net of current portion
    
    
    208,174,124
    
    
    
    206,441,188Total liabilities
    
    
    231,118,910
    
    
    
    229,056,460Commitments and contingencies (note 9)EquityContributed Capital
    
    
    29,652,939
    
    
    
    25,650,941Accumulated deficit
    
    
    (25,232,424
    )
    
    
    (24,159,559
    )Total equity
    
    
    4,420,515
    
    
    
    1,491,382Total liabilities and equity
    
    $
    235,539,425
    
    
    $
    230,547,842
  1




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##### Table of Contents



INN OF THE MOUNTAIN GODS RESORT AND CASINO AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF OPERATIONS
 (unaudited)
 Three Months Ended
    
    
    Three Months Ended
    
    
    Six months Ended
    
    
    Six months EndedOctober 31, 2006
    
    
    October 31, 2007
    
    
    October 31, 2006
    
    
    October 31, 2007Revenues:Gaming
    
    $
    20,528,637
    
    
    $
    21,295,463
    
    
    $
    39,739,413
    
    
    $
    43,296,171Hotel
    
    
    3,868,266
    
    
    
    3,782,138
    
    
    
    7,528,095
    
    
    
    7,903,496Food and Beverage
    
    
    3,665,857
    
    
    
    3,860,663
    
    
    
    6,977,233
    
    
    
    7,869,920Recreation and other
    
    
    4,883,212
    
    
    
    5,306,327
    
    
    
    9,554,994
    
    
    
    9,685,294Gross Revenue
    
    
    32,945,972
    
    
    
    34,244,591
    
    
    
    63,799,735
    
    
    
    68,754,881Less-Promotional Allowances
    
    
    642,721
    
    
    
    377,279
    
    
    
    977,186
    
    
    
    1,058,887Net Revenue
    
    
    32,303,251
    
    
    
    33,867,312
    
    
    
    62,822,549
    
    
    
    67,695,994Operating Expenses:Gaming
    
    
    6,733,770
    
    
    
    7,103,357
    
    
    
    14,246,919
    
    
    
    14,456,815Hotel expenses
    
    
    1,122,717
    
    
    
    1,158,625
    
    
    
    2,476,360
    
    
    
    2,385,547Food and beverage
    
    
    3,482,721
    
    
    
    3,924,967
    
    
    
    7,367,224
    
    
    
    7,806,853Recreation and other
    
    
    3,057,206
    
    
    
    3,785,478
    
    
    
    6,913,390
    
    
    
    7,534,867Marketing
    
    
    1,854,571
    
    
    
    3,002,705
    
    
    
    2,723,652
    
    
    
    5,214,417General and administrative
    
    
    3,694,401
    
    
    
    2,727,407
    
    
    
    5,253,767
    
    
    
    4,977,674Health Insurance  Medical
    
    
    556,310
    
    
    
    393,362
    
    
    
    1,087,296
    
    
    
    943,211401(K)
    
    
    
    
    
    
    220,979
    
    
    
    
    
    
    
    442,265Mescalero Apache Telecom
    
    
    39,059
    
    
    
    50,042
    
    
    
    103,595
    
    
    
    101,044Tribal Regulatory Fees
    
    
    600,000
    
    
    
    600,000
    
    
    
    1,200,000
    
    
    
    1,200,000Depreciation and amortization
    
    
    4,563,267
    
    
    
    4,149,039
    
    
    
    9,074,366
    
    
    
    8,384,403Loss on disposal of assets
    
    
    
    
    
    
    
    
    
    
    7,439
    
    
    
    63,847Total Operating Expenses
    
    
    25,704,022
    
    
    
    27,115,961
    
    
    
    50,454,008
    
    
    
    53,510,943Operating Income
    
    
    6,599,229
    
    
    
    6,751,351
    
    
    
    12,368,541
    
    
    
    14,185,051Other Income (expense):Interest Income
    
    
    98,583
    
    
    
    88,427
    
    
    
    180,581
    
    
    
    136,371Interest Expense
    
    
    (6,669,410
    )
    
    
    (6,628,322
    )
    
    
    (13,357,584
    )
    
    
    (13,251,193
    )Other Income (expense)
    
    
    60,006
    
    
    
    2,307
    
    
    
    59,424
    
    
    
    2,636Total Other Income (expense)
    
    
    (6,510,821
    )
    
    
    (6,537,588
    )
    
    
    (13,117,579
    )
    
    
    (13,112,186
    )Net Income (Loss)
    
    $
    88,408
    
    
    $
    213,763
    
    
    $
    (749,038
    )
    
    $
    1,072,865
  2




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INN OF THE MOUNTAIN GODS RESORT AND CASINO AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 (unaudited)
 Six Months Ended
    
    
    Six Months EndedOctober 31, 2006
    
    
    October 31, 2007Cash flows from operating activities:Net income (loss)
    
    $
    (749,038
    )
    
    $
    1,072,865Adjustments to reconcile net income (loss) to net cash used in operating activities:Depreciation and amortization
    
    
    10,486,987
    
    
    
    9,197,025Changes in assets and liabilities:Loss on disposal of assets
    
    
    
    
    
    
    63,857Accounts receivable, net of allowance
    
    
    (89,890
    )
    
    
    (216,970
    )Inventories
    
    
    339,889
    
    
    
    (218,411
    )Prepaid expenses
    
    
    (263,975
    )
    
    
    (129,031
    )Other long-term assets
    
    
    (7,997
    )
    
    
    (155,178
    )Accounts payable
    
    
    (1,621,739
    )
    
    
    411,044Accrued expenses, payroll and benefits
    
    
    (3,967,243
    )
    
    
    (354,869
    )Deposits and advance payments
    
    
    
    
    
    
    (224,639
    )Net cash provided by operating activities
    
    
    4,126,994
    
    
    
    9,445,693Cash flows from investing activities:Purchase of property, plant and equipment
    
    
    (263,517
    )
    
    
    (986,021
    )Construction accounts payable
    
    
    (797,796
    )
    
    
    Net cash used in investing activities
    
    
    (1,061,313
    )
    
    
    (986,021
    )Cash flows from financing activities:Restricted cash for construction payments and interest reserve
    
    
    18,171,534
    
    
    
    Principal payments on long-term debt, net
    
    
    (2,016,760
    )
    
    
    (2,183,406
    )Distributions to Mescalero Apache Tribe
    
    
    (18,978,158
    )
    
    
    (4,001,998
    )Net cash used in financing activities
    
    
    (2,823,384
    )
    
    
    (6,185,404
    )Net increase in cash and cash equivalents
    
    
    242,297
    
    
    
    2,274,268Cash and cash equivalents, beginning of period
    
    
    16,768,372
    
    
    
    16,929,630Cash and cash equivalents, end of period
    
    $
    17,010,669
    
    
    $
    19,203,898Supplemental cash flow information:Cash paid for interest
    
    $
    13,805,752
    
    
    $
    12,448,571Non-cash investing and financing activities:Property, plant and equipment acquired through capital lease
    
    $
    1,171,020
    
    
    $
    289,420
 3




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##### Table of Contents



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




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##### Table of Contents



Cash and Cash Equivalents
  Accounts Receivable
  Inventories
  Property, Plant and Equipment
   Non-gaming equipment, furniture and other
    
    3 - 15 yearsGaming equipment
    
    5 - 7 yearsLeasehold and land improvements, lake and golf course
    
    5 - 30 yearsBuildings, lifts and snowmaking equipment
    
    10 - 39 years
 Deferred Financing Costs
  Impairment of Long Lived Assets
 Accounting for the Impairment or Disposal of Long-Lived
Assets SFAS 144
 Fair Value of Financial Instruments
  5




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##### Table of Contents



Contributed Capital
  Revenues
   Promotional Allowances
   EITF Accounting for Certain Sales Incentives Accounting for Points and Certain Other Time-Based or Volume-Based Sales Incentive Offers, and
Offers for Preproducts, or Services to be delivered in the futur
  Quarter Ended Oct. 31,
    
    
    Six Months Ended Oct. 312006
    
    
    2007
    
    
    2006
    
    
    2007Rooms
    
    $
    354,065
    
    
    $
    448,060
    
    
    $
    536,798
    
    
    $
    1,151,228Food and beverage
    
    
    177,731
    
    
    
    236,696
    
    
    
    340,588
    
    
    
    709,653Other
    
    
    3,673
    
    
    
    7,143
    
    
    
    6,403
    
    
    
    22,021$
    535,469
    
    
    
    691,899
    
    
    $
    883,789
    
    
    $
    1,882,902
 Marketing
  6




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##### Table of Contents



Tribal Taxes
  Classification of Departmental Costs
  Income Taxes
  New Accounting Pronouncements
 FASB Fair
Value Measurements SFAS 157
 The Fair Value Option for Financial
Assets and Financial Liabilities SFAS 159
 NOTE 2ALLOWANCE FOR DOUBTFUL ACCOUNTS
  7




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##### Table of Contents



NOTE 3INVENTORIES
  April 30, 2007
    
    
    October 31, 2007Food and beverage
    
    $
    260,503
    
    
    $
    300,868Golf and pro shop
    
    
    74,760
    
    
    
    142,400Gift shops, fuel and other
    
    
    431,395
    
    
    
    541,801Inventories
    
    $
    766,658
    
    
    $
    985,069
 NOTE 4PROPERTY, PLANT AND EQUIPMENT, NET
  April 30, 2007
    
    
    October 31, 2007Land
    
    $
    538,894
    
    
    $
    538,894Buildings
    
    
    209,507,247
    
    
    
    209,507,247Lifts and Snowmaking equipment
    
    
    8,421,750
    
    
    
    8,421,750Non-gaming equipment, furniture and other
    
    
    50,659,100
    
    
    
    51,497,971Gaming equipment
    
    
    20,864,152
    
    
    
    20,869,500Leasehold and land improvements, lake and golf course
    
    
    8,072,925
    
    
    
    8,072,925Subtotal
    
    $
    298,064,068
    
    
    $
    298,908,287Less accumulated depreciation and amortization
    
    
    (87,565,430
    )
    
    
    (95,679,064
    )Property, plant and equipment, net
    
    
    210,498,638
    
    
    
    203,229,223Construction in progress (CIP)
    
    
    27,500
    
    
    
    124,096Net Property, plant and equipment
    
    $
    210,526,138
    
    
    $
    203,353,319
 NOTE 5LONG-TERM DEBT
 Notes
   Indenture Cash Collateral Agreement
 8




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##### Table of Contents



Project
  April 30, 2007
    
    
    October 31, 2007Senior Notes, bearing interest at a fixed rate of 12%, maturing in 2010
    
    $
    200,000,000
    
    
    $
    200,000,000Bureau of Indian Affairs, unsecured notes payable with payments of $27,100
per month, including interest at 8.5%, maturing in 2011
    
    
    1,163,568
    
    
    
    1,049,830Capital Equipment Loans with Key Equipment. Five (5) year term, 7.65% interest
    
    
    10,283,169
    
    
    
    8,806,882Short-Term Notes, up to 8% imputed interest
    
    
    386,665
    
    
    
    82,704211,833,402
    
    
    
    209,939,416Less current portion
    
    
    (3,659,278
    )
    
    
    (3,498,228
    )Long-term portion
    
    $
    208,174,124
    
    
    $
    206,441,188
  2008
    
    
    1,7652009
    
    
    3,5342010
    
    
    203,8172011
    
    
    7222012
    
    
    101$
    209,939
  NOTE 6GAMING REVENUE SHARING AND REGULATORY FEES
 Commission
 State 1997 Compact
 9




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##### Table of Contents



IGRA
 2001 Compact
  NOTE 7  PENSION PLAN
   NOTE 8RISK MANAGEMENT
    10




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##### Table of Contents



NOTE 9  COMMITMENTS AND CONTINGENCIES
 Legal Matters
  Occupancy Fee
  Construction Agreement
  Employment Agreements
  Aircraft Air Charter Agreement
 Vision
  NOTE 10RELATED-PARTY TRANSACTIONS
   11




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##### Table of Contents



Shared Services and Cost Allocations
  Employee Benefits Cost Allocations
   NOTE 11OPERATING SEGMENTS
    12




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##### Table of Contents



SELECTED OPERATING SEGMENT FINANCIAL INFORMATION
 $(000s)IMG
    
    Travel Ctr
    
    Ski
    
    Non Gaming
    
    Non Segment
    
    ConsolidatedThree Months ended:October 31, 2007Net Revenue
    
    $
    12,993
    
    
    $
    8,282
    
    
    $
    19
    
    
    $
    12,420
    
    
    $
    153
    
    
    $
    33,867Operating Income (Loss)
    
    
    10,345
    
    
    
    6,733
    
    
    
    (42
    )
    
    
    3,922
    
    
    
    (14,207
    )
    
    
    6,751Depreciation Expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,149
    
    
    
    4,149Interest Expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (6,628
    )
    
    
    (6,628
    )Interest Income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    88
    
    
    
    88October 31, 2006Net Revenue
    
    $
    12,273
    
    
    $
    8,234
    
    
    $
    
    
    
    $
    12,205
    
    
    $
    (410
    )
    
    $
    32,302Operating Income (Loss)
    
    
    10,571
    
    
    
    6,866
    
    
    
    (65
    )
    
    
    4,653
    
    
    
    (15,426
    )
    
    
    6,599Depreciation Expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,563
    
    
    
    4,563Interest Expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (6,669
    )
    
    
    (6,669
    )Interest Income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    99
    
    
    
    99
 IMG
    
    Travel Ctr
    
    Ski
    
    Non Gaming
    
    Non Segment
    
    ConsolidatedSix Months ended:October 31, 2007Net Revenue
    
    $
    26,538
    
    
    $
    16,724
    
    
    $
    32
    
    
    $
    24,537
    
    
    $
    (135
    )
    
    $
    67,696Operating Income (Loss)
    
    
    20,974
    
    
    
    13,512
    
    
    
    (154
    )
    
    
    7,367
    
    
    
    (27,514
    )
    
    
    14,185Depreciation Expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,384
    
    
    
    8,384Interest Expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (13,251
    )
    
    
    (13,251
    )Interest Income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    136
    
    
    
    136October 31, 2006Net Revenue
    
    $
    23,565
    
    
    $
    16,153
    
    
    $
    4
    
    
    $
    23,854
    
    
    $
    (753
    )
    
    $
    62,823Operating Income (Loss)
    
    
    19,941
    
    
    
    13,313
    
    
    
    (205
    )
    
    
    7,508
    
    
    
    (28,188
    )
    
    
    12,369Depreciation Expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9,074
    
    
    
    9,074Interest Expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (13,358
    )
    
    
    (13,358
    )Interest Income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    181
    
    
    
    181
 NOTE 12CONSOLIDATING INFORMATION
 Wholly-Owned
Guarantors
   13




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##### Table of Contents



INN OF THE MOUNTAIN GODS RESORT AND CASINO AND SUBSIDIARIES
CONSOLIDATING BALANCE SHEETS
As of October 31, 2007
(unaudited)
 GuarantorIMGRC
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedCash and cash equivalents
    
    $
    14,771,943
    
    
    $
    4,431,955
    
    
    $
    
    
    
    $
    19,203,898Accounts receivable
    
    
    22,569
    
    
    
    733,769
    
    
    
    
    
    
    
    756,338Inventories
    
    
    279,215
    
    
    
    705,854
    
    
    
    
    
    
    
    985,069Prepaid expenses
    
    
    723,509
    
    
    
    
    
    
    
    
    
    
    
    723,509Total current assets
    
    
    15,797,236
    
    
    
    5,871,578
    
    
    
    
    
    
    
    21,668,814Fixed Assets
    
    
    
    
    
    
    299,032,383
    
    
    
    
    
    
    
    299,032,383Depreciation
    
    
    
    
    
    
    (95,679,064
    )
    
    
    
    
    
    
    (95,679,064
    )Net fixed assets
    
    
    
    
    
    
    203,353,319
    
    
    
    
    
    
    
    203,353,319Non-Current AssetsOther Assets
    
    
    100,000
    
    
    
    167,678
    
    
    
    
    
    
    
    267,678Deferred financing costs
    
    
    5,258,031
    
    
    
    
    
    
    
    
    
    
    
    5,258,031Advances to Subsidiaries
    
    
    90,809,719
    
    
    
    8,701,768
    
    
    
    (99,511,487
    )
    
    
    Investment in Subsidiaries
    
    
    125,305,981
    
    
    
    
    
    
    
    (125,305,981
    )
    
    
    Total Assets
    
    $
    237,270,967
    
    
    $
    218,094,343
    
    
    $
    (224,817,468
    )
    
    $
    230,547,842Accounts Payable and other short term liabilities
    
    $
    1,872,957
    
    
    $
    
    
    
    $
    
    
    
    $
    1,872,957Accrued expenses
    
    
    3,932,891
    
    
    
    714,793
    
    
    
    
    
    
    
    4,647,684Accrued payroll
    
    
    1,182,383
    
    
    
    
    
    
    
    
    
    
    
    1,182,383Accrued interest
    
    
    11,200,000
    
    
    
    
    
    
    
    
    
    
    
    11,200,000Advanced deposits
    
    
    
    
    
    
    214,020
    
    
    
    
    
    
    
    214,020Current portion of long-term debt
    
    
    3,255,195
    
    
    
    243,033
    
    
    
    
    
    
    
    3,498,228Total current liabilities
    
    
    21,443,426
    
    
    
    1,171,846
    
    
    
    
    
    
    
    22,615,272Non-Current LiabilitiesAdvances from subsidiaries
    
    
    8,701,768
    
    
    
    90,809,719
    
    
    
    (99,511,487
    )
    
    
    Long-term debt, net of current portion
    
    
    205,634,391
    
    
    
    806,797
    
    
    
    
    
    
    
    206,441,188Total liabilities
    
    
    235,779,585
    
    
    
    92,788,362
    
    
    
    (99,511,487
    )
    
    
    229,056,460Contributed Capital
    
    
    25,650,941
    
    
    
    (6,012,897
    )
    
    
    6,012,897
    
    
    
    25,650,941Retained earnings (deficit)
    
    
    (24,159,559
    )
    
    
    131,318,878
    
    
    
    (131,318,878
    )
    
    
    (24,159,559
    )Total equity
    
    
    1,491,382
    
    
    
    125,305,981
    
    
    
    (125,305,981
    )
    
    
    1,491,382Total liabilities and equity
    
    $
    237,270,967
    
    
    $
    218,094,343
    
    
    $
    (224,817,468
    )
    
    $
    230,547,842
 14




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##### Table of Contents



INN OF THE MOUNTAIN GODS RESORT AND CASINO AND SUBSIDIARIES
CONSOLIDATING STATEMENT OF OPERATIONS
For the Quarter Ended October 31, 2007
(unaudited)
 GuarantorIMGRC
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedRevenues:Gaming
    
    $
    
    
    
    $
    21,295,463
    
    
    $
    
    
    
    $
    21,295,463Hotel
    
    
    
    
    
    
    3,782,138
    
    
    
    
    
    
    
    3,782,138Food and Beverage
    
    
    
    
    
    
    3,860,663
    
    
    
    
    
    
    
    3,860,663Recreation and other
    
    
    
    
    
    
    5,306,327
    
    
    
    
    
    
    
    5,306,327Gross Revenue
    
    
    
    
    
    
    34,244,591
    
    
    
    
    
    
    
    34,244,591Less-Promotional Allowances
    
    
    23,610
    
    
    
    353,669
    
    
    
    
    
    
    
    377,279Net Revenue
    
    
    (23,610
    )
    
    
    33,890,922
    
    
    
    
    
    
    
    33,867,312Operating Expenses:Gaming
    
    
    
    
    
    
    7,103,357
    
    
    
    
    
    
    
    7,103,357Hotel expenses
    
    
    
    
    
    
    1,158,625
    
    
    
    
    
    
    
    1,158,625Food and beverage
    
    
    
    
    
    
    3,924,967
    
    
    
    
    
    
    
    3,924,967Recreation and other
    
    
    
    
    
    
    3,785,478
    
    
    
    
    
    
    
    3,785,478Marketing
    
    
    
    
    
    
    3,002,705
    
    
    
    
    
    
    
    3,002,705General and administrative
    
    
    1,926,807
    
    
    
    800,600
    
    
    
    
    
    
    
    2,727,407Health Insurance  Medical
    
    
    
    
    
    
    393,362
    
    
    
    
    
    
    
    393,362401(K)
    
    
    
    
    
    
    220,979
    
    
    
    
    
    
    
    220,979Mescalero Apache Telecom
    
    
    
    
    
    
    50,042
    
    
    
    
    
    
    
    50,042Tribal Regulatory Fees
    
    
    
    
    
    
    600,000
    
    
    
    
    
    
    
    600,000Depreciation and amortization
    
    
    
    
    
    
    4,149,039
    
    
    
    
    
    
    
    4,149,039Total Operating Expenses
    
    
    1,926,807
    
    
    
    25,189,154
    
    
    
    
    
    
    
    27,115,961Operating Income (Loss)
    
    
    (1,950,417
    )
    
    
    8,701,768
    
    
    
    
    
    
    
    6,751,351Other Income (Expense)Interest Income
    
    
    88,427
    
    
    
    
    
    
    
    
    
    
    
    88,427Interest Expense
    
    
    (6,628,322
    )
    
    
    
    
    
    
    
    
    
    
    (6,628,322
    )Income from subsidiaries
    
    
    8,701,768
    
    
    
    
    
    
    
    (8,701,768
    )
    
    
    Other income (expense)
    
    
    2,307
    
    
    
    
    
    
    
    
    
    
    
    2,307Total Other Income (expense)
    
    
    2,164,180
    
    
    
    
    
    
    
    (8,701,768
    )
    
    
    (6,537,588
    )Net Income
    
    $
    213,763
    
    
    $
    8,701,768
    
    
    $
    (8,701,768
    )
    
    $
    213,763
 15




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##### Table of Contents



INN OF THE MOUNTAIN GODS RESORT AND CASINO AND SUBSIDIARIES
CONSOLIDATING STATEMENT OF OPERATIONS
For the Six Months Ended October 31, 2007
(unaudited)
 GuarantorIMGRC
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedRevenues:Gaming
    
    $
    
    
    
    $
    43,296,171
    
    
    $
    
    
    
    $
    43,296,171Hotel
    
    
    
    
    
    
    7,903,496
    
    
    
    
    
    
    
    7,903,496Food and Beverage
    
    
    
    
    
    
    7,869,920
    
    
    
    
    
    
    
    7,869,920Recreation and other
    
    
    
    
    
    
    9,685,294
    
    
    
    
    
    
    
    9,685,294Gross Revenue
    
    
    
    
    
    
    68,754,881
    
    
    
    
    
    
    
    68,754,881Less-Promotional Allowances
    
    
    23,905
    
    
    
    1,034,982
    
    
    
    
    
    
    
    1,058,887Net Revenue
    
    
    (23,905
    )
    
    
    67,719,899
    
    
    
    
    
    
    
    67,695,994Operating Expenses:Gaming
    
    
    
    
    
    
    14,456,815
    
    
    
    
    
    
    
    14,456,815Hotel expenses
    
    
    
    
    
    
    2,385,547
    
    
    
    
    
    
    
    2,385,547Food and beverage
    
    
    
    
    
    
    7,806,853
    
    
    
    
    
    
    
    7,806,853Recreation and other
    
    
    
    
    
    
    7,534,867
    
    
    
    
    
    
    
    7,534,867Marketing
    
    
    
    
    
    
    5,214,417
    
    
    
    
    
    
    
    5,214,417General and administrative
    
    
    3,486,497
    
    
    
    1,491,177
    
    
    
    
    
    
    
    4,977,674Health Insurance  Medical
    
    
    
    
    
    
    943,211
    
    
    
    
    
    
    
    943,211401(K)
    
    
    
    
    
    
    442,265
    
    
    
    
    
    
    
    442,265Mescalero Apache Telecom
    
    
    
    
    
    
    101,044
    
    
    
    
    
    
    
    101,044Tribal Regulatory Fees
    
    
    
    
    
    
    1,200,000
    
    
    
    
    
    
    
    1,200,000Depreciation and amortization
    
    
    
    
    
    
    8,384,403
    
    
    
    
    
    
    
    8,384,403Loss on disposal of assets
    
    
    
    
    
    
    63,847
    
    
    
    
    
    
    
    63,847Total Operating Expenses
    
    
    3,486,497
    
    
    
    50,024,446
    
    
    
    
    
    
    
    53,510,943Operating Income (Loss)
    
    
    (3,510,402
    )
    
    
    17,695,453
    
    
    
    
    
    
    
    14,185,051Other Income (Expense)Interest Income
    
    
    136,371
    
    
    
    
    
    
    
    
    
    
    
    136,371Interest Expense
    
    
    (13,251,193
    )
    
    
    
    
    
    
    
    
    
    
    (13,251,193
    )Income from subsidiaries
    
    
    17,695,453
    
    
    
    
    
    
    
    (17,695,453
    )
    
    
    Other income (expense)
    
    
    2,636
    
    
    
    
    
    
    
    
    
    
    
    2,636Total Other Income (expense)
    
    
    4,583,267
    
    
    
    
    
    
    
    (17,695,453
    )
    
    
    (13,112,186
    )Net Income
    
    $
    1,072,865
    
    
    $
    17,695,453
    
    
    $
    (17,695,453
    )
    
    $
    1,072,865
 16




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##### Table of Contents



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




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##### Table of Contents



INN OF THE MOUNTAIN GODS RESORT AND CASINO AND SUBSIDIARIES
CONSOLIDATING BALANCE SHEETS
As of April 30, 2007
 GuarantorIMGRC
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedCash and cash equivalents
    
    $
    12,808,711
    
    
    $
    4,120,919
    
    
    $
    
    
    
    $
    16,929,630Accounts receivable
    
    
    
    
    
    
    539,368
    
    
    
    
    
    
    
    539,368Inventories
    
    
    142,188
    
    
    
    624,470
    
    
    
    
    
    
    
    766,658Prepaid expenses
    
    
    594,478
    
    
    
    
    
    
    
    
    
    
    
    594,478Total current assets
    
    
    13,545,377
    
    
    
    5,284,757
    
    
    
    
    
    
    
    18,830,134Fixed Assets
    
    
    
    
    
    
    298,091,568
    
    
    
    
    
    
    
    298,091,568Depreciation
    
    
    
    
    
    
    (87,565,430
    )
    
    
    
    
    
    
    (87,565,430
    )Net fixed assets
    
    
    
    
    
    
    210,526,138
    
    
    
    
    
    
    
    210,526,138Non-Current AssetsOther Assets
    
    
    50,000
    
    
    
    62,500
    
    
    
    
    
    
    
    112,500Deferred financing costs
    
    
    6,070,653
    
    
    
    
    
    
    
    
    
    
    
    6,070,653Advances to Subsidiaries
    
    
    125,272,243
    
    
    
    28,314,998
    
    
    
    (153,587,241
    )
    
    
    Investment in Subsidiaries
    
    
    116,604,213
    
    
    
    
    
    
    
    (116,604,213
    )
    
    
    Total Assets
    
    $
    261,542,486
    
    
    $
    244,188,393
    
    
    $
    (270,191,454
    )
    
    $
    235,539,425Accounts Payable and other short term liabilities
    
    $
    1,461,913
    
    
    $
    
    
    
    $
    
    
    
    $
    1,461,913Accrued expenses, including payroll and benefits
    
    
    5,475,226
    
    
    
    709,710
    
    
    
    
    
    
    
    6,184,936Accrued interest
    
    
    11,200,000
    
    
    
    
    
    
    
    
    
    
    
    11,200,000Advanced deposits
    
    
    
    
    
    
    438,659
    
    
    
    
    
    
    
    438,659Current portion of long-term debt
    
    
    3,426,322
    
    
    
    232,956
    
    
    
    
    
    
    
    3,659,278Total current liabilities
    
    
    21,563,461
    
    
    
    1,381,325
    
    
    
    
    
    
    
    22,944,786Non-Current LiabilitiesAdvances from subsidiaries
    
    
    28,314,998
    
    
    
    125,272,243
    
    
    
    (153,587,241
    )
    
    
    Long-term debt, net of current portion
    
    
    207,243,512
    
    
    
    930,612
    
    
    
    
    
    
    
    208,174,124Total liabilities
    
    
    257,121,971
    
    
    
    127,584,180
    
    
    
    (153,587,241
    )
    
    
    231,118,910Contributed Capital
    
    
    29,652,939
    
    
    
    (6,012,897
    )
    
    
    6,012,897
    
    
    
    29,652,939Retained earnings (deficit)
    
    
    (25,232,424
    )
    
    
    122,617,110
    
    
    
    (122,617,110
    )
    
    
    (25,232,424
    )Total equity
    
    
    4,420,515
    
    
    
    116,604,213
    
    
    
    (116,604,213
    )
    
    
    4,420,515Total liabilities and equity
    
    $
    261,542,486
    
    
    $
    244,188,393
    
    
    $
    (270,191,454
    )
    
    $
    235,539,425
 18




---



##### Table of Contents



INN OF THE MOUNTAIN GODS RESORT AND CASINO AND SUBSIDIARIES
CONSOLIDATING STATEMENT OF OPERATIONS
For the Quarter Ended October 31, 2006
 GuarantorIMGRC
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedRevenues:Gaming
    
    $
    
    
    
    $
    20,528,637
    
    
    $
    
    
    
    $
    20,528,637Hotel
    
    
    
    
    
    
    3,868,266
    
    
    
    
    
    
    
    3,868,266Food and Beverage
    
    
    
    
    
    
    3,665,857
    
    
    
    
    
    
    
    3,665,857Recreation and other
    
    
    3,564
    
    
    
    4,879,648
    
    
    
    
    
    
    
    4,883,212Gross Revenue
    
    
    3,564
    
    
    
    32,942,408
    
    
    
    
    
    
    
    32,945,972Less Promotional Allowances
    
    
    
    
    
    
    642,721
    
    
    
    
    
    
    
    642,721Net Revenue
    
    
    3,564
    
    
    
    32,299,687
    
    
    
    
    
    
    
    32,303,251Operating Expenses:Gaming
    
    
    
    
    
    
    6,733,770
    
    
    
    
    
    
    
    6,733,770Hotel expenses
    
    
    
    
    
    
    1,122,717
    
    
    
    
    
    
    
    1,122,717Food and beverage
    
    
    
    
    
    
    3,482,721
    
    
    
    
    
    
    
    3,482,721Recreation and other
    
    
    
    
    
    
    3,057,206
    
    
    
    
    
    
    
    3,057,206Marketing
    
    
    
    
    
    
    1,854,571
    
    
    
    
    
    
    
    1,854,571General and administrative
    
    
    2,560,638
    
    
    
    1,133,763
    
    
    
    
    
    
    
    3,694,401Health Insurance  Medical
    
    
    
    
    
    
    556,310
    
    
    
    
    
    
    
    556,310Mescalero Apache Telecom
    
    
    
    
    
    
    39,059
    
    
    
    
    
    
    
    39,059Tribal Regulatory Fees
    
    
    
    
    
    
    600,000
    
    
    
    
    
    
    
    600,000Depreciation and amortization
    
    
    
    
    
    
    4,563,267
    
    
    
    
    
    
    
    4,563,267Total Operating Expenses
    
    
    2,560,638
    
    
    
    23,143,384
    
    
    
    
    
    
    
    25,704,022Operating Income (Loss)
    
    
    (2,557,074
    )
    
    
    9,156,303
    
    
    
    
    
    
    
    6,599,229Other Income (Expense)Interest Income
    
    
    98,583
    
    
    
    
    
    
    
    
    
    
    
    98,583Interest Expense
    
    
    (6,669,410
    )
    
    
    
    
    
    
    
    
    
    
    (6,669,410
    )Income from subsidiaries
    
    
    9,156,303
    
    
    
    
    
    
    
    (9,156,303
    )
    
    
    Other income (expense)
    
    
    60,006
    
    
    
    
    
    
    
    
    
    
    
    60,006Total Other Income (expense)
    
    
    2,645,482
    
    
    
    
    
    
    
    (9,156,303
    )
    
    
    (6,510,821
    )Net Income
    
    $
    88,408
    
    
    $
    9,156,303
    
    
    $
    (9,156,303
    )
    
    $
    88,408
 19




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##### Table of Contents



INN OF THE MOUNTAIN GODS RESORT AND CASINO AND SUBSIDIARIES
CONSOLIDATING STATEMENT OF OPERATIONS
For the Six Months Ended October 31, 2006
 GuarantorIMGRC
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedRevenues:Gaming
    
    $
    
    
    
    $
    39,739,413
    
    
    $
    
    
    
    $
    39,739,413Hotel
    
    
    
    
    
    
    7,528,095
    
    
    
    
    
    
    
    7,528,095Food and Beverage
    
    
    
    
    
    
    6,977,233
    
    
    
    
    
    
    
    6,977,233Recreation and other
    
    
    16,256
    
    
    
    9,538,738
    
    
    
    
    
    
    
    9,554,994Gross Revenue
    
    
    16,256
    
    
    
    63,783,479
    
    
    
    
    
    
    
    63,799,735Less-Promotional Allowances
    
    
    43
    
    
    
    977,143
    
    
    
    
    
    
    
    977,186Net Revenue
    
    
    16,213
    
    
    
    62,806,336
    
    
    
    
    
    
    
    62,822,549Operating Expenses:Gaming
    
    
    75,569
    
    
    
    14,171,350
    
    
    
    
    
    
    
    14,246,919Hotel expenses
    
    
    
    
    
    
    2,476,360
    
    
    
    
    
    
    
    2,476,360Food and beverage
    
    
    
    
    
    
    7,367,224
    
    
    
    
    
    
    
    7,367,224Recreation and other
    
    
    
    
    
    
    6,913,390
    
    
    
    
    
    
    
    6,913,390Marketing
    
    
    
    
    
    
    2,723,652
    
    
    
    
    
    
    
    2,723,652General and administrative
    
    
    3,173,159
    
    
    
    2,080,608
    
    
    
    
    
    
    
    5,253,767Health Insurance  Medical
    
    
    
    
    
    
    1,087,296
    
    
    
    
    
    
    
    1,087,296Mescalero Apache Telecom
    
    
    
    
    
    
    103,595
    
    
    
    
    
    
    
    103,595Tribal Regulatory Fees
    
    
    
    
    
    
    1,200,000
    
    
    
    
    
    
    
    1,200,000Depreciation and amortization
    
    
    
    
    
    
    9,074,366
    
    
    
    
    
    
    
    9,074,366Gain (loss) on disposal of assets
    
    
    
    
    
    
    7,439
    
    
    
    
    
    
    
    7,439Total Operating Expenses
    
    
    3,248,728
    
    
    
    47,205,280
    
    
    
    
    
    
    
    50,454,008Operating Income (Loss)
    
    
    (3,232,515
    )
    
    
    15,601,056
    
    
    
    
    
    
    
    12,368,541Other Income (Expense)Interest Income
    
    
    180,581
    
    
    
    
    
    
    
    
    
    
    
    180,581Interest Expense
    
    
    (13,357,584
    )
    
    
    
    
    
    
    
    
    
    
    (13,357,584
    )Income from subsidiaries
    
    
    15,601,056
    
    
    
    
    
    
    
    (15,601,056
    )
    
    
    Other income (expense)
    
    
    59,424
    
    
    
    
    
    
    
    
    
    
    
    59,424Total Other Income (expense)
    
    
    2,483,477
    
    
    
    
    
    
    
    (15,601,056
    )
    
    
    (13,117,579
    )Net Income (Loss)
    
    $
    (749,038
    )
    
    $
    15,601,056
    
    
    $
    (15,601,056
    )
    
    $
    (749,038
    )
 20




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##### Table of Contents



INN OF THE MOUNTAIN GODS RESORT AND CASINO AND SUBSIDIARIES
CONSOLIDATING STATEMENT OF CASH FLOWS
Six Months Ended October 31, 2006
 GuarantorIMGRC
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedCash flows from operating activities:Net income (loss)
    
    $
    (749,038
    )
    
    $
    15,601,056
    
    
    $
    (15,601,056
    )
    
    $
    (749,038
    )Adjustments to reconcile net income to net cash provided by
(used in) operating activities:Depreciation and amortization
    
    
    944,041
    
    
    
    9,542,946
    
    
    
    
    
    
    
    10,486,987Changes in assets and liabilities:Accounts receivable, net of allowance
    
    
    4,421
    
    
    
    (94,311
    )
    
    
    
    
    
    
    (89,890
    )Inventories
    
    
    119,870
    
    
    
    220,019
    
    
    
    
    
    
    
    339,889Prepaid expenses
    
    
    (262,848
    )
    
    
    (1,127
    )
    
    
    
    
    
    
    (263,975
    )Other long term assets
    
    
    
    
    
    
    (7,997
    )
    
    
    
    
    
    
    (7,997
    )Accounts payable
    
    
    (1,621,739
    )
    
    
    
    
    
    
    
    
    
    
    (1,621,739
    )Accrued expenses
    
    
    (5,527,676
    )
    
    
    1,560,433
    
    
    
    
    
    
    
    (3,967,243
    )Net cash provided by (used in) operating activities
    
    
    (7,092,969
    )
    
    
    26,821,019
    
    
    
    (15,601,056
    )
    
    
    4,126,994Cash flows from investing activities:Purchase of property, plant and equipment
    
    
    (164,112
    )
    
    
    (99,405
    )
    
    
    
    
    
    
    (263,517
    )Construction Payable
    
    
    (797,796
    )
    
    
    
    
    
    
    
    
    
    
    (797,796
    )Investment in subsidiaries
    
    
    (15,601,056
    )
    
    
    
    
    
    
    15,601,056
    
    
    
    Net cash used by investing activities
    
    
    (16,562,964
    )
    
    
    (99,405
    )
    
    
    15,601,056
    
    
    
    (1,061,313
    )Cash flows from financing activities:Cash held from construction payments
    
    
    18,171,534
    
    
    
    
    
    
    
    
    
    
    
    18,171,534Advances to (from) affiliates
    
    
    27,474,116
    
    
    
    (27,474,116
    )
    
    
    
    
    
    
    Principal borrowings (payments) on debt
    
    
    (1,832,998
    )
    
    
    (183,762
    )
    
    
    
    
    
    
    (2,016,760
    )Distributions to Mescalero Apache Tribe
    
    
    (18,978,158
    )
    
    
    
    
    
    
    
    
    
    
    (18,978,158
    )Net cash provided by (used in) financing activities
    
    
    24,834,494
    
    
    
    (27,657,878
    )
    
    
    
    
    
    
    (2,823,384
    )Net (decrease) increase in cash and cash equivalents
    
    
    1,178,561
    
    
    
    (936,264
    )
    
    
    
    
    
    
    242,297Cash and cash equivalents, beginning of period
    
    
    11,111,229
    
    
    
    5,657,143
    
    
    
    
    
    
    
    16,768,372Cash and cash equivalents, end of period
    
    $
    12,289,790
    
    
    $
    4,720,879
    
    
    $
    
    
    
    $
    17,010,669
 21




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##### Table of Contents



Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations.
 Reference in this Quarterly Report on Form 10-Q (this  Form 10-Q  or this Report) to (a) the
Tribe refers to the Mescalero Apache Tribe, a federally recognized Indian tribe, (b) IMG Resort
and Casino refers to Inn of the Mountain Gods Resort and Casino, a business enterprise of the
Tribe, (c) Casino Apache refers to Casino Apache, a business enterprise of the Tribe, (d) the
Inn refers to Inn of the Mountain Gods, a business enterprise of the Tribe, (e) the Travel
Center refers to Casino Apache Travel Center, a business enterprise of the Tribe and (f) Ski
Apache refers to Ski Apache, a business enterprise of the Tribe. Each of Casino Apache, the Inn,
the Travel Center and Ski Apache is a wholly-owned subsidiary of IMG Resort and Casino. Reference
in this Form 10-Q to we, our, and us refer to IMG Resort and Casino.
 FORWARDLOOKING STATEMENTS
 This Form 10-Q includes forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995. Statements regarding our expected financial condition,
results of operations, business, strategies and financing plans under the heading Managements
Discussion and Analysis of Financial Condition and Results of Operations and elsewhere in this
Form 10-Q are forward-looking statements. In addition, in those and other portions of this Form
10-Q, the words anticipate, expect, plan, intend, will, designed, estimate, adjust
and similar expressions, as they relate to us or our management, indicate forward-looking
statements. These forward-looking statements may prove to be incorrect. Important factors that
could cause actual results to differ materially from these forward-looking statements disclosed in
this Form 10-Q include, without limitation, risks relating to the following: (a) our levels of
leverage and ability to meet our debt service obligations; (b) our financial performance; (c)
restrictive covenants in our debt instruments; (d) realizing the benefits of our business plan and
business strategies; (e) changes in gaming laws or regulations, including potential legalization of
gaming in certain jurisdictions; (f) the impact of competition in our markets; (g) our ability to
attract increasing numbers of customers; and (h) general local, domestic and global economic
conditions.
 You are urged to consider these factors carefully in evaluating the forward-looking statements
contained in this Form 10-Q . All subsequent written and oral forward-looking statements
attributable to us or persons acting on our behalf are expressly qualified in their entirety by our
cautionary statements. The forward-looking statements included in this Form 10-Q are made only as
of the date of this Form 10-Q . We do not intend, and undertake no obligation, to update these
forward-looking statements.
 Overview
  Gaming Travel Center
 Rooms
 Food and Beverage
 22




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##### Table of Contents



Recreation and Other
 Critical Accounting Policies
  Revenue Recognition
 Promotional Allowances
  EITF Accounting for Certain Sales Incentives Accounting for Points and Certain Other Time-Based or Volume-Based Sales Incentive Offers, and
Offers for Reproduces, or Services to be delivered in the futur
 Classification of Departmental Costs
 23




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##### Table of Contents



Deferred Financing Costs
 Results of Operations
 Quarter Ended October 31, 2007 Compared to Quarter Ended October 31, 2006.
 Net Revenues
 Gaming
 Hotel
 Food and Beverage
 Recreation and Other
 Promotional Allowances
 Total Operating Expenses
 Gaming
 Hotel
 Food and Beverage
 24




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##### Table of Contents



Recreation and Other
 Marketing
 General and Administrative.
 Health Insurance
 Mescalero Apache 401(K)
 Mescalero Apache Telecom
 Tribal Regulatory Fees
 Depreciation
 Income from Operations
 Other Income (Expenses)
 Six Months Ended October 31, 2007 Compared to Six Months Ended October 31, 2006.
 Net Revenues
 Gaming
 Hotel
 25




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##### Table of Contents



Food and Beverage
 Recreation and Other
 Promotional Allowances
 Total Operating Expenses
 Gaming
 Hotel
 Food and Beverage
 Recreation and Other
 Marketing
 General and Administrative.
 Health Insurance
 Mescalero Apache 401(K)
 Mescalero Apache Telecom
 Tribal Regulatory Fees
 Depreciation
 Income from Operations
 Other Income (Expenses)
 26




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##### Table of Contents



Liquidity and Capital Resources
       Description of Indebtedness
 The Notes
    Incurrence of Additional Indebtedness
  27




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##### Table of Contents



General Indebtedness
  Credit Facility
  Credit Rating
   Off-Balance Sheet Arrangements
  Regulation and Taxes
  
 Item 3. Quantitative and Qualitative Disclosures About Market Risk.
    28




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##### Table of Contents



Item 4. Controls and Procedures.
 Disclosure Controls and Procedures
   
 PART II OTHER INFORMATION
 
 Item 1. Legal Proceedings.
  
 Item 1A. Risk Factors.
  
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
  
 Item 3. Defaults Upon Senior Securities.
  
 Item 4. Submission of Matters to a Vote of Security Holders.
  
 Item 5. Other Information.
  29




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##### Table of Contents



Item 6. Exhibits.
 Exhibit No.
    
    Description3.1*
    
    Mescalero Apache Tribe Resolutions 03-05, 03-28 and 03-29 establishing and governing the Inn of the
Mountain Gods Resort and Casino adopted and approved April 2, 2003, July 15, 2003 and July 15, 2003,
respectively.3.2*
    
    Charter of the Management Board of Inn of the Mountain Gods Resort and Casino.4.1*
    
    Indenture, dated as of November 3, 2003, among the Mescalero Apache Tribe, Inn of the Mountain Gods
Resort and Casino, Casino Apache, Inn of the Mountain Gods, Casino Apache Travel Center, Ski Apache
and U.S. Bank National Association, as Trustee, relating to the 12% Senior Notes due 2010 of the Inn
of the Mountain Gods Resort and Casino.4.2*
    
    Form of 12% Senior Note Due 2010 of the Inn of the Mountain Gods Resort and Casino.4.3*
    
    Registration Rights Agreement, dated as of November 3, 2003, among the Mescalero Apache Tribe, Inn of
the Mountain Gods Resort and Casino, Casino Apache, Inn of the Mountain Gods, Casino Apache Travel
Center, Ski Apache and Citigroup Global Markets Inc, as the Initial Purchaser.10.1*
    
    Second Amended Design/Build Construction Contract, by and among Inn of the Mountain Gods Resort and
Casino, Centex/WorthGroup, LLC, as Design/Builder, and Rider Hunt Levett & Bailey, as Construction
Manager, dated as of September 6, 2003, and Change Order No. 9 thereto, dated January 24, 2003.10.2*
    
    Cash Collateral and Disbursement Agreement, dated as of November 3, 2003, among Inn of the Mountain
Gods Resort and Casino, Casino Apache, Inn of the Mountain Gods, Casino Apache Travel Center, Ski
Apache, U.S. Bank National Association, as Disbursement Agent, Professional Associates Construction
Services, Inc., as Independent Construction Consultant and U.S. Bank National Association, as Trustee.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 and amended Exhibit A to Employment Agreement dated November 10, 2006 between the
Mescalero Apache Tribe and Brian Parrish.10.5****
    
    Employment Agreement dated July 25, 2007 between the Mescalero Apache Tribe and Karen Braswell.10.6**
    
    2001 Compact between the Mescalero Apache Tribe and the State of New Mexico, entered into June 1, 2004.10.7*****
    
    Air Charter Agreement dated July 10, 2007 between the Mescalero Apache Tribe and Vision Airline, Inc.10.8
    
    Employment Agreement dated December 5, 2007 between IMG Resort and Casino and Melissa S. Linton.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. 30




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##### Table of Contents



***
    
    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 27,
2007.****
    
    Incorporated by reference to Inn of the Mountain Gods Resort and
Casinos Current Report on Form 8-K filed with the
SEC on September 5, 2007.*****
    
    Incorporated by reference to Inn of the Mountain Gods Resort and
Casinos Quarterly Report on Form 10-Q filed with
the SEC on September 14, 2007. 31




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##### Table of Contents



SIGNATURES
  INN OF THE MOUNTAIN GODS RESORT AND CASINODate: December 14, 2007
    
    By
Name:
    
    /s/ Brian D. Parrish

Brian D. ParrishIts:
    
    Chief Operating Officer (Principal Executive Officer)Date: December 14, 2007
    
    By
Name:
    
    /s/ Pamela Gallegos

Pamela GallegosIts:
    
    Interim Chief Financial Officer (Principal Financial Officer)
 32




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##### Table of Contents



INDEX TO EXHIBITS
 Exhibit No.
    
    Description3.1*
    
    Mescalero Apache Tribe Resolutions 03-05, 03-28 and 03-29 establishing and governing the Inn of the
Mountain Gods Resort and Casino adopted and approved April 2, 2003, July 15, 2003 and July 15, 2003,
respectively.3.2*
    
    Charter of the Management Board of Inn of the Mountain Gods Resort and Casino.4.1*
    
    Indenture, dated as of November 3, 2003, among the Mescalero Apache Tribe, Inn of the Mountain Gods
Resort and Casino, Casino Apache, Inn of the Mountain Gods, Casino Apache Travel Center, Ski Apache
and U.S. Bank National Association, as Trustee, relating to the 12% Senior Notes due 2010 of the Inn
of the Mountain Gods Resort and Casino.4.2*
    
    Form of 12% Senior Note Due 2010 of the Inn of the Mountain Gods Resort and Casino.4.3*
    
    Registration Rights Agreement, dated as of November 3, 2003, among the Mescalero Apache Tribe, Inn of
the Mountain Gods Resort and Casino, Casino Apache, Inn of the Mountain Gods, Casino Apache Travel
Center, Ski Apache and Citigroup Global Markets Inc, as the Initial Purchaser.10.1*
    
    Second Amended Design/Build Construction Contract, by and among Inn of the Mountain Gods Resort and
Casino, Centex/WorthGroup, LLC, as Design/Builder, and Rider Hunt Levett & Bailey, as Construction
Manager, dated as of September 6, 2003, and Change Order No. 9 thereto, dated January 24, 2003.10.2*
    
    Cash Collateral and Disbursement Agreement, dated as of November 3, 2003, among Inn of the Mountain
Gods Resort and Casino, Casino Apache, Inn of the Mountain Gods, Casino Apache Travel Center, Ski
Apache, U.S. Bank National Association, as Disbursement Agent, Professional Associates Construction
Services, Inc., as Independent Construction Consultant and U.S. Bank National Association, as Trustee.10.3*
    
    Ski Apache Special Use Permit received from the United States Department of Agriculture, Forest
Service dated April 23, 1985.10.4***
    
    Employment Agreement and amended Exhibit A to Employment Agreement dated November 10, 2006 between the
Mescalero Apache Tribe and Brian Parrish.10.5****
    
    Employment Agreement dated July 25, 2007 between the Mescalero Apache Tribe and Karen Braswell.10.6**
    
    2001 Compact between the Mescalero Apache Tribe and the State of New Mexico, entered into June 1, 2004.10.7*****
    
    Air Charter Agreement dated July 10, 2007 between Mescalero Apache Tribe and Vision Airline, Inc.10.8
    
    Employment Agreement dated December 5, 2007 between IMG Resort and Casino and Melissa S. Linton.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. 33




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##### Table of Contents



***
    
    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 27,
2007.****
    
    Incorporated by reference to Inn of the Mountain Gods Resort and
Casinos Current Report on Form 8-K filed with the
SEC on September 5, 2007.*****
    
    Incorporated by reference to Inn of the Mountain Gods Resort and
Casinos Quarterly Report on Form 10-Q filed with
the SEC on September 14, 2007. 34