##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 FORM 10-Q
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
 FOR THE QUARTERLY PERIOD ENDED January 31, 2008
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 FOR THE TRANSITION PERIOD FROM  TO
 Commission file number 333-113140
 INN OF THE MOUNTAIN GODS RESORT AND CASINO AND SUBSIDIARIES
  Not Applicable
    
    75-3158926(State or other jurisdiction
    
    (I.R.S. Employerof incorporation or organization)
    
    Identification Number)287 Carrizo Canyon RoadMescalero, New Mexico
    
    88340(Address of principal executive offices)
    
    (Zip Code)
 (505) 464-7000
 þ o
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer   þ
(Do not check if a smaller reporting company)
    
    Smaller Reporting Company o
 o þ




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##### 



INN OF THE MOUNTAIN GODS RESORT AND CASINO AND SUBSIDIARIES
 FORM 10-Q
 FOR THE QUARTER ENDED January 31, 2008
 INDEX
 PagesPART I. FINANCIAL INFORMATIONItem 1. Consolidated Financial Statements:
    
    1Consolidated Balance Sheets as of April 30, 2007 and January 31, 2008 (unaudited)
    
    1Consolidated Statements of Operations for the Three Month and Nine Month Periods Ended
January 31,2007 (unaudited) and January 31, 2008 (unaudited)
    
    2Consolidated Statements of Cash Flows for the Nine Month Periods Ended January 31, 2007
(unaudited) and January 31, 2008 (unaudited)
    
    3Notes to Consolidated Financial Statements (unaudited)
    
    4Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    23Item 3. Quantitative and Qualitative Disclosures about Market Risk
    
    29Item 4. Controls and Procedures
    
    30PART II. OTHER INFORMATIONItem 1. Legal Proceedings
    
    30Item 1A. Risk Factors
    
    30Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    30Item 3. Defaults upon Senior Securities
    
    30Item 4. Submission of Matters to a Vote of Security Holders
    
    30Item 5. Other Information
    
    30Item 6. Exhibits
    
    31Signatures
    
    32EX-10.1EX-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 January 31,2007
    
    
    2008 (unaudited)Current AssetsCash and cash equivalents
    
    $
    16,929,630
    
    
    $
    9,871,340Accounts receivable, net of allowance for doubtful accounts
    
    
    539,368
    
    
    
    424,573Inventories
    
    
    766,658
    
    
    
    1,059,417Prepaid expenses and other assets
    
    
    594,478
    
    
    
    927,619Total current assets
    
    
    18,830,134
    
    
    
    12,282,949Non-Current AssetsProperty plant and equipment
    
    
    298,091,568
    
    
    
    299,193,962Accumulated Depreciation
    
    
    (87,565,430
    )
    
    
    (99,744,981
    )Property plant and equipment, net
    
    
    210,526,138
    
    
    
    199,448,981Other Assets
    
    
    112,500
    
    
    
    100,000Deferred financing costs
    
    
    6,070,653
    
    
    
    4,851,720Total Assets
    
    $
    235,539,425
    
    
    $
    216,683,650Liabilities and Equity (Deficit)Current LiabilitiesAccounts Payable
    
    $
    1,461,913
    
    
    $
    1,869,128Accrued expenses
    
    
    3,966,057
    
    
    
    4,519,805Accrued payroll and benefits
    
    
    2,218,879
    
    
    
    773,628Accrued interest
    
    
    11,200,000
    
    
    
    5,200,000Advanced deposits
    
    
    438,659
    
    
    
    79,588Current portion of long-term debt
    
    
    3,659,278
    
    
    
    3,476,414Total current liabilities
    
    
    22,944,786
    
    
    
    15,918,563Non-Current LiabilitiesLong-term debt, net of current portion
    
    
    208,174,124
    
    
    
    205,548,669Total liabilities
    
    
    231,118,910
    
    
    
    221,467,232Commitments and contingencies (note 9)Equity (Deficit)Contributed Capital
    
    
    29,652,939
    
    
    
    23,649,936Accumulated deficit
    
    
    (25,232,424
    )
    
    
    (28,433,518
    )Total equity (Deficit)
    
    
    4,420,515
    
    
    
    (4,783,582
    )Total liabilities and equity (Deficit)
    
    $
    235,539,425
    
    
    $
    216,683,650
  1




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INN OF THE MOUNTAIN GODS RESORT AND CASINO AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
 Three Months Ended
    
    
    Three Months Ended
    
    
    Nine months Ended
    
    
    Nine months EndedJanuary 31, 2007
    
    
    January 31, 2008
    
    
    January 31, 2007
    
    
    January 31, 2008Revenues:Gaming
    
    $
    16,015,221
    
    
    $
    16,839,587
    
    
    $
    57,246,790
    
    
    $
    60,135,758Hotel
    
    
    2,865,334
    
    
    
    2,783,690
    
    
    
    10,423,235
    
    
    
    10,687,186Food and Beverage
    
    
    3,261,779
    
    
    
    3,685,058
    
    
    
    10,377,119
    
    
    
    11,554,978Recreation and other
    
    
    7,086,737
    
    
    
    6,101,670
    
    
    
    16,643,556
    
    
    
    15,786,963Gross Revenue
    
    
    29,229,071
    
    
    
    29,410,005
    
    
    
    94,690,700
    
    
    
    98,164,885Less-Promotional Allowances
    
    
    608,012
    
    
    
    476,831
    
    
    
    1,585,198
    
    
    
    1,535,717Net Revenue
    
    
    28,621,059
    
    
    
    28,933,174
    
    
    
    93,105,502
    
    
    
    96,629,168Operating ExpensesGaming
    
    
    6,113,440
    
    
    
    6,105,580
    
    
    
    20,360,359
    
    
    
    20,562,395Hotel expenses
    
    
    1,021,451
    
    
    
    1,013,927
    
    
    
    3,497,811
    
    
    
    3,399,474Food and beverage
    
    
    3,252,257
    
    
    
    3,999,628
    
    
    
    10,619,481
    
    
    
    11,806,481Recreation and other
    
    
    3,143,070
    
    
    
    3,956,607
    
    
    
    10,056,461
    
    
    
    11,491,474Marketing
    
    
    2,259,640
    
    
    
    2,506,468
    
    
    
    6,645,184
    
    
    
    7,720,885General and administrative
    
    
    2,882,714
    
    
    
    3,566,379
    
    
    
    8,136,480
    
    
    
    8,543,721Health Insurance  Medical
    
    
    617,657
    
    
    
    591,728
    
    
    
    1,704,953
    
    
    
    1,534,939401 K
    
    
    99,183
    
    
    
    214,461
    
    
    
    99,183
    
    
    
    656,725Mescalero Apache Telecom
    
    
    47,539
    
    
    
    49,093
    
    
    
    151,134
    
    
    
    150,138Tribal Regulatory Fees
    
    
    600,000
    
    
    
    600,000
    
    
    
    1,800,000
    
    
    
    1,800,000Depreciation and amortization
    
    
    4,502,354
    
    
    
    4,087,672
    
    
    
    13,576,720
    
    
    
    12,472,075Loss on disposal of assets
    
    
    
    
    
    
    
    
    
    
    7,439
    
    
    
    63,847Total Operating Expenses
    
    
    24,539,305
    
    
    
    26,691,543
    
    
    
    76,655,205
    
    
    
    80,202,154Operating Income
    
    
    4,081,754
    
    
    
    2,241,631
    
    
    
    16,450,297
    
    
    
    16,427,014Other Income (Expense)Interest Income
    
    
    36,810
    
    
    
    32,154
    
    
    
    217,392
    
    
    
    168,523Interest Expense
    
    
    (6,655,336
    )
    
    
    (6,592,441
    )
    
    
    (20,012,919
    )
    
    
    (19,843,634
    )Other Income (expense)
    
    
    
    
    
    
    44,696
    
    
    
    59,423
    
    
    
    47,003Total Other Income (expense)
    
    
    (6,618,526
    )
    
    
    (6,515,591
    )
    
    
    (19,736,104
    )
    
    
    (19,628,108
    )Net Loss
    
    $
    (2,536,772
    )
    
    $
    (4,273,960
    )
    
    $
    (3,285,807
    )
    
    $
    (3,201,094
    )
  2




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INN OF THE MOUNTAIN GODS RESORT AND CASINO AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
 Nine Months Ended
    
    
    Nine Months EndedJanuary 31, 2007
    
    
    January 31, 2008Cash flows from operating activitiesNet loss
    
    $
    (3,285,807
    )
    
    $
    (3,201,094
    )Adjustments to reconcile net loss to net cash (used in)
provided by operating activities:Depreciation and amortization
    
    
    15,575,980
    
    
    
    13,669,253Changes in assets and liabilities:Loss on disposal of fixed assets
    
    
    7,439
    
    
    
    63,857Accounts receivable, net of allowance
    
    
    324,983
    
    
    
    114,795Inventories
    
    
    282,474
    
    
    
    (292,759
    )Prepaid expenses
    
    
    (476,167
    )
    
    
    (333,141
    )Other long-term assets
    
    
    (88,353
    )
    
    
    12,500Accounts payable
    
    
    (2,353,467
    )
    
    
    407,215Accrued expenses, payroll and benefits
    
    
    (4,294,438
    )
    
    
    (891,503
    )Deposits and advance payments
    
    
    
    
    
    
    (359,072
    )Accrued interest payable
    
    
    (6,000,000
    )
    
    
    (6,000,000
    )Net cash (used in) provided by operating activities
    
    
    (307,356
    )
    
    
    3,190,051Cash flows from investing activities:Purchase of property, plant and equipment
    
    
    (382,018
    )
    
    
    (1,147,600
    )Construction accounts payable
    
    
    (892,236
    )
    
    
    Net cash used in investing activities
    
    
    (1,274,254
    )
    
    
    (1,147,600
    )Cash flows from financing activities:Restricted cash for construction payments and interest reserve
    
    
    18,171,534
    
    
    
    Principal payments on long-term debt, net
    
    
    (3,045,060
    )
    
    
    (3,097,738
    )Distributions to Mescalero Apache Tribe
    
    
    (20,979,160
    )
    
    
    (6,003,003
    )Net cash used in financing activities
    
    
    (5,852,686
    )
    
    
    (9,100,741
    )Net decrease in cash and cash equivalents
    
    
    (7,434,296
    )
    
    
    (7,058,290
    )Cash and cash equivalents, beginning of period
    
    
    16,768,372
    
    
    
    16,929,630Cash and cash equivalents, end of period
    
    $
    9,334,076
    
    
    $
    9,871,340Supplemental cash flow information:Cash paid for interest
    
    $
    24,094,305
    
    
    $
    24,624,701Non-cash investing and financing activities:Property, plant and equipment acquired through capital lease
    
    $
    1,171,020
    
    
    $
    289,420
 3




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




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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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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 future
  Quarter Ended Jan. 31,
    
    
    Nine Months Ended Jan. 312007
    
    
    2008
    
    
    2007
    
    
    2008Rooms
    
    $
    150,534
    
    
    $
    212,825
    
    
    $
    687,332
    
    
    $
    1,369,660Food and beverage
    
    
    94,641
    
    
    
    236,696
    
    
    
    435,228
    
    
    
    922,479Other
    
    
    (16,680
    )
    
    
    (249
    )
    
    
    (10,277
    )
    
    
    21,772$
    228,495
    
    
    
    449,272
    
    
    $
    1,112,283
    
    
    $
    2,313,911
 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
 Financial SFAS 159
 7




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##### Table of Contents



NOTE 2ALLOWANCE FOR DOUBTFUL ACCOUNTS
   NOTE 3INVENTORIES
  April 30, 2007
    
    
    January 31, 2008Food and beverage
    
    $
    260,503
    
    
    $
    203,233Golf and pro shop
    
    
    74,760
    
    
    
    122,180Gift shops, fuel and other
    
    
    431,395
    
    
    
    734,004Inventories
    
    $
    766,658
    
    
    $
    1,059,417
 NOTE 4PROPERTY, PLANT AND EQUIPMENT, NET
  April 30, 2007
    
    
    January 31, 2008Land
    
    $
    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
    
    
    
    51,565,419Gaming equipment
    
    
    20,864,152
    
    
    
    20,869,500Leasehold and land improvements, lake and golf course
    
    
    8,072,925
    
    
    
    8,072,925Subtotal
    
    $
    298,064,068
    
    
    $
    298,975,735Less accumulated depreciation and amortization
    
    
    (87,565,430
    )
    
    
    (99,744,981
    )Property, plant and equipment, net
    
    
    210,498,638
    
    
    
    199,230,754Construction in progress (CIP)
    
    
    27,500
    
    
    
    218,227Net Property, plant and equipment
    
    $
    210,526,138
    
    
    $
    199,448,981
 NOTE 5LONG-TERM DEBT
 Notes
   8




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Indenture Cash Collateral Agreement Project
  April 30, 2007
    
    
    January 31, 2008Senior 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
    
    
    
    990,408Capital Equipment Loans with Key Equipment. Five (5) year term, 7.65% interest
    
    
    10,283,169
    
    
    
    8,034,675Short-Term Notes, up to 8% imputed interest
    
    
    386,665
    
    
    
    211,833,402
    
    
    
    209,025,083Less current portion
    
    
    (3,659,278
    )
    
    
    (3,476,414
    )Long-term portion
    
    $
    208,174,124
    
    
    $
    205,548,669
  2008 (three months)
    
    
    8512009
    
    
    3,5342010
    
    
    203,8172011
    
    
    7222012
    
    
    101$
    209,025
  NOTE 6GAMING REVENUE SHARING AND REGULATORY FEES
 Commission
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##### Table of Contents



State 1997 Compact IGRA
 2001 Compact
  NOTE 7  EMPLOYEE BENEFITS
   NOTE 8RISK MANAGEMENT
   10




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NOTE 9  COMMITMENTS AND CONTINGENCIES
 Legal Matters
  Occupancy Fee
  Construction Agreement
  Employment Agreements
    Aircraft Air Charter Agreement
 Vision
 11




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##### Table of Contents



NOTE 10RELATED-PARTY TRANSACTIONS
   Shared Services and Cost Allocations
  Employee Benefits Cost Allocations
   12




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##### Table of Contents



NOTE 11OPERATING SEGMENTS
    SELECTED OPERATING SEGMENT FINANCIAL INFORMATION
 $(000s)IMG
    
    Travel Ctr
    
    Ski
    
    Non Gaming
    
    Non Segment
    
    ConsolidatedThree Months ended:January 31, 2008Net Revenue
    
    $
    9,941
    
    
    $
    6,627
    
    
    $
    593
    
    
    $
    8,830
    
    
    $
    2,942
    
    
    $
    28,933Operating Income (Loss)
    
    
    7,493
    
    
    
    5,233
    
    
    
    75
    
    
    
    1,466
    
    
    
    (12,025
    )
    
    
    2,242Depreciation Expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,088
    
    
    
    4,088Interest Expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (6,592
    )
    
    
    (6,592
    )Interest Income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    32
    
    
    
    32January 31, 2007Net Revenue
    
    $
    10,065
    
    
    $
    6,006
    
    
    $
    4,107
    
    
    $
    8,616
    
    
    $
    (173
    )
    
    $
    28,621Operating Income (Loss)
    
    
    7,495
    
    
    
    4,549
    
    
    
    2,111
    
    
    
    1,821
    
    
    
    (11,894
    )
    
    
    4,082Depreciation Expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,502
    
    
    
    4,502Interest Expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (6,655
    )
    
    
    (6,655
    )Interest Income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    37
    
    
    
    37
 IMG
    
    Travel Ctr
    
    Ski
    
    Non Gaming
    
    Non Segment
    
    ConsolidatedNine Months ended:January 31, 2008Net Revenue
    
    $
    36,479
    
    
    $
    23,351
    
    
    $
    626
    
    
    $
    33,367
    
    
    $
    2,806
    
    
    $
    96,629Operating Income (Loss)
    
    
    28,466
    
    
    
    18,745
    
    
    
    (79
    )
    
    
    8,832
    
    
    
    (39,537
    )
    
    
    16,427Depreciation Expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    12,472
    
    
    
    12,472Interest Expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (19,844
    )
    
    
    (19,844
    )Interest Income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    169
    
    
    
    169January 31, 2007Net Revenue
    
    $
    35,804
    
    
    $
    22,401
    
    
    $
    4,110
    
    
    $
    32,738
    
    
    $
    (1,947
    )
    
    $
    93,106Operating Income (Loss)
    
    
    27,437
    
    
    
    17,863
    
    
    
    468
    
    
    
    9,121
    
    
    
    (38,439
    )
    
    
    16,450Depreciation Expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    13,577
    
    
    
    13,577Interest Expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (20,013
    )
    
    
    (20,013
    )Interest Income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    217
    
    
    
    217
 NOTE 12CONSOLIDATING INFORMATION
 wholly-owned
Guarantors
 13




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INN OF THE MOUNTAIN GODS RESORT AND CASINO AND SUBSIDIARIES
CONSOLIDATING BALANCE SHEETS
As of January 31, 2008
(unaudited)
 GuarantorIMGRC
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedCash and cash equivalents
    
    $
    6,693,186
    
    
    $
    3,178,154
    
    
    $
    
    
    
    $
    9,871,340Accounts receivable
    
    
    22,530
    
    
    
    402,043
    
    
    
    
    
    
    
    424,573Inventories
    
    
    211,745
    
    
    
    847,672
    
    
    
    
    
    
    
    1,059,417Prepaid expenses
    
    
    749,227
    
    
    
    178,392
    
    
    
    
    
    
    
    927,619Total current assets
    
    
    7,676,688
    
    
    
    4,606,261
    
    
    
    
    
    
    
    12,282,949Fixed Assets
    
    
    
    
    
    
    299,193,962
    
    
    
    
    
    
    
    299,193,962Accumulated Depreciation
    
    
    
    
    
    
    (99,744,981
    )
    
    
    
    
    
    
    (99,744,981
    )Net fixed assets
    
    
    
    
    
    
    199,448,981
    
    
    
    
    
    
    
    199,448,981Non-Current AssetsOther Assets
    
    
    
    
    
    
    100,000
    
    
    
    
    
    
    
    100,000Deferred financing costs
    
    
    4,851,720
    
    
    
    
    
    
    
    
    
    
    
    4,851,720Advances to Subsidiaries
    
    
    68,161,766
    
    
    
    4,793,220
    
    
    
    (72,954,986
    )
    
    
    Investment in Subsidiaries
    
    
    139,020,988
    
    
    
    
    
    
    
    (139,020,988
    )
    
    
    Total Assets
    
    $
    219,711,162
    
    
    $
    208,948,462
    
    
    $
    (211,975,974
    )
    
    $
    216,683,650Accounts Payable and other short term liabilities
    
    $
    1,869,128
    
    
    $
    
    
    
    $
    
    
    
    $
    1,869,128Accrued expenses
    
    
    3,824,093
    
    
    
    695,712
    
    
    
    
    
    
    
    4,519,805Accrued payroll and benefits
    
    
    773,628
    
    
    
    
    
    
    
    
    
    
    
    773,628Accrued interest
    
    
    5,200,000
    
    
    
    
    
    
    
    
    
    
    
    5,200,000Advanced deposits
    
    
    
    
    
    
    79,588
    
    
    
    
    
    
    
    79,588Current portion of long-term debt
    
    
    3,228,180
    
    
    
    248,234
    
    
    
    
    
    
    
    3,476,414Total current liabilities
    
    
    14,895,029
    
    
    
    1,023,534
    
    
    
    
    
    
    
    15,918,563Non-Current LiabilitiesAdvances from subsidiaries
    
    
    4,793,220
    
    
    
    68,161,766
    
    
    
    (72,954,986
    )
    
    
    Long-term debt, net of current portion
    
    
    204,806,495
    
    
    
    742,174
    
    
    
    
    
    
    
    205,548,669Total liabilities
    
    
    224,494,744
    
    
    
    69,927,474
    
    
    
    (72,954,986
    )
    
    
    221,467,232Contributed Capital
    
    
    23,649,936
    
    
    
    (6,012,897
    )
    
    
    6,012,897
    
    
    
    23,649,936Retained earnings (accumulated deficit)
    
    
    (28,433,518
    )
    
    
    145,033,885
    
    
    
    (145,033,885
    )
    
    
    (28,433,518
    )Total equity (deficit)
    
    
    (4,783,582
    )
    
    
    139,020,988
    
    
    
    (139,020,988
    )
    
    
    (4,783,582
    )Total liabilities and equity
    
    $
    219,711,162
    
    
    $
    208,948,462
    
    
    $
    (211,975,974
    )
    
    $
    216,683,650
 15




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##### Table of Contents



INN OF THE MOUNTAIN GODS RESORT AND CASINO AND SUBSIDIARIES
CONSOLIDATING STATEMENT OF OPERATIONS
For the Quarter Ended January 31, 2008
(unaudited)
 GuarantorIMGRC
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedRevenues:Gaming
    
    $
    
    
    
    $
    16,839,587
    
    
    $
    
    
    
    $
    16,839,587Hotel
    
    
    
    
    
    
    2,783,690
    
    
    
    
    
    
    
    2,783,690Food and Beverage
    
    
    
    
    
    
    3,685,058
    
    
    
    
    
    
    
    3,685,058Recreation and other
    
    
    
    
    
    
    6,101,670
    
    
    
    
    
    
    
    6,101,670Gross Revenue
    
    
    
    
    
    
    29,410,005
    
    
    
    
    
    
    
    29,410,005Less-Promotional Allowances
    
    
    19,460
    
    
    
    457,371
    
    
    
    
    
    
    
    476,831Net Revenue
    
    
    (19,460
    )
    
    
    28,952,634
    
    
    
    
    
    
    
    28,933,174Operating Expenses:Gaming
    
    
    
    
    
    
    6,105,580
    
    
    
    
    
    
    
    6,105,580Hotel expenses
    
    
    
    
    
    
    1,013,927
    
    
    
    
    
    
    
    1,013,927Food and beverage
    
    
    
    
    
    
    3,999,628
    
    
    
    
    
    
    
    3,999,628Recreation and other
    
    
    
    
    
    
    3,956,607
    
    
    
    
    
    
    
    3,956,607Marketing
    
    
    
    
    
    
    2,506,468
    
    
    
    
    
    
    
    2,506,468General and administrative
    
    
    2,532,129
    
    
    
    1,034,250
    
    
    
    
    
    
    
    3,566,379Health Insurance  Medical
    
    
    
    
    
    
    591,728
    
    
    
    
    
    
    
    591,728401K
    
    
    
    
    
    
    214,461
    
    
    
    
    
    
    
    214,461Mescalero Apache Telecom
    
    
    
    
    
    
    49,093
    
    
    
    
    
    
    
    49,093Tribal Regulatory Fees
    
    
    
    
    
    
    600,000
    
    
    
    
    
    
    
    600,000Depreciation and amortization
    
    
    
    
    
    
    4,087,672
    
    
    
    
    
    
    
    4,087,672Total Operating Expenses
    
    
    2,532,129
    
    
    
    24,159,414
    
    
    
    
    
    
    
    26,691,543Operating Income (Loss)
    
    
    (2,551,589
    )
    
    
    4,793,220
    
    
    
    
    
    
    
    2,241,631Other Income (Expense)Interest Income
    
    
    32,154
    
    
    
    
    
    
    
    
    
    
    
    32,154Interest Expense
    
    
    (6,592,441
    )
    
    
    
    
    
    
    
    
    
    
    (6,592,441
    )Income from subsidiaries
    
    
    4,793,220
    
    
    
    
    
    
    
    (4,793,220
    )
    
    
    Other income (expense)
    
    
    44,696
    
    
    
    
    
    
    
    
    
    
    
    44,696Total Other Income (expense)
    
    
    (1,722,371
    )
    
    
    
    
    
    
    (4,793,220
    )
    
    
    (6,515,591
    )Net Income (Loss)
    
    $
    (4,273,960
    )
    
    $
    4,793,220
    
    
    $
    (4,793,220
    )
    
    $
    (4,273,960
    )
 16




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##### Table of Contents



INN OF THE MOUNTAIN GODS RESORT AND CASINO AND SUBSIDIARIES
CONSOLIDATING STATEMENT OF OPERATIONS
For the Nine Months Ended January 31, 2008
(unaudited)
 GuarantorIMGRC
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedRevenues:Gaming
    
    $
    
    
    
    $
    60,135,758
    
    
    $
    
    
    
    $
    60,135,758Hotel
    
    
    
    
    
    
    10,687,186
    
    
    
    
    
    
    
    10,687,186Food and Beverage
    
    
    
    
    
    
    11,554,978
    
    
    
    
    
    
    
    11,554,978Recreation and other
    
    
    
    
    
    
    15,786,963
    
    
    
    
    
    
    
    15,786,963Gross Revenue
    
    
    
    
    
    
    98,164,885
    
    
    
    
    
    
    
    98,164,885Less-Promotional Allowances
    
    
    19,460
    
    
    
    1,516,257
    
    
    
    
    
    
    
    1,535,717Net Revenue
    
    
    (19,460
    )
    
    
    96,648,628
    
    
    
    
    
    
    
    96,629,168Operating Expenses:Gaming
    
    
    
    
    
    
    20,562,395
    
    
    
    
    
    
    
    20,562,395Hotel expenses
    
    
    
    
    
    
    3,399,474
    
    
    
    
    
    
    
    3,399,474Food and beverage
    
    
    
    
    
    
    11,806,481
    
    
    
    
    
    
    
    11,806,481Recreation and other
    
    
    
    
    
    
    11,491,474
    
    
    
    
    
    
    
    11,491,474Marketing
    
    
    
    
    
    
    7,720,885
    
    
    
    
    
    
    
    7,720,885General and administrative
    
    
    5,970,302
    
    
    
    2,573,419
    
    
    
    
    
    
    
    8,543,721Health Insurance  Medical
    
    
    
    
    
    
    1,534,939
    
    
    
    
    
    
    
    1,534,939401K
    
    
    
    
    
    
    656,725
    
    
    
    
    
    
    
    656,725Mescalero Apache Telecom
    
    
    
    
    
    
    150,138
    
    
    
    
    
    
    
    150,138Tribal Regulatory Fees
    
    
    
    
    
    
    1,800,000
    
    
    
    
    
    
    
    1,800,000Depreciation and amortization
    
    
    
    
    
    
    12,472,075
    
    
    
    
    
    
    
    12,472,075Loss on disposal of fixed assets
    
    
    
    
    
    
    63,847
    
    
    
    
    
    
    
    63,847Total Operating Expenses
    
    
    5,970,302
    
    
    
    74,231,852
    
    
    
    
    
    
    
    80,202,154Operating Income (Loss)
    
    
    (5,989,762
    )
    
    
    22,416,776
    
    
    
    
    
    
    
    16,427,014Other Income (Expense)Interest Income
    
    
    168,523
    
    
    
    
    
    
    
    
    
    
    
    168,523Interest Expense
    
    
    (19,843,634
    )
    
    
    
    
    
    
    
    
    
    
    (19,843,634
    )Income from subsidiaries
    
    
    22,416,776
    
    
    
    
    
    
    
    (22,416,776
    )
    
    
    Other income (expense)
    
    
    47,003
    
    
    
    
    
    
    
    
    
    
    
    47,003Total Other Income (expense)
    
    
    2,788,668
    
    
    
    
    
    
    
    (22,416,776
    )
    
    
    (19,628,108
    )Net Income (Loss)
    
    $
    (3,201,094
    )
    
    $
    22,416,776
    
    
    $
    (22,416,776
    )
    
    $
    (3,201,094
    )
 17




---



##### Table of Contents



INN OF THE MOUNTAIN GODS RESORT AND CASINO AND SUBSIDIARIES
CONSOLIDATING STATEMENT OF CASH FLOWS
Nine Months Ended January 31, 2008
(unaudited)
 GuarantorIMGRC
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedCash flows from operating activities:Net income (loss)
    
    $
    (3,201,094
    )
    
    $
    22,416,776
    
    
    $
    (22,416,776
    )
    
    $
    (3,201,094
    )Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:Depreciation and amortization
    
    
    1,218,933
    
    
    
    12,450,320
    
    
    
    
    
    
    
    13,669,253Loss on disposal of fixed assets
    
    
    
    
    
    
    63,857
    
    
    
    
    
    
    
    63,857Changes in assets and liabilities:Accounts receivable, net of allowance
    
    
    (22,530
    )
    
    
    137,325
    
    
    
    
    
    
    
    114,795Inventories
    
    
    (69,557
    )
    
    
    (223,202
    )
    
    
    
    
    
    
    (292,759
    )Prepaid expenses
    
    
    (154,749
    )
    
    
    (178,392
    )
    
    
    
    
    
    
    (333,141
    )Other long term assets
    
    
    50,000
    
    
    
    (37,500
    )
    
    
    
    
    
    
    12,500Accounts payable
    
    
    407,215
    
    
    
    
    
    
    
    
    
    
    
    407,215Accrued expenses, payroll and benefits
    
    
    (877,505
    )
    
    
    (13,998
    )
    
    
    
    
    
    
    (891,503
    )Deposits and advanced payments
    
    
    
    
    
    
    (359,072
    )
    
    
    
    
    
    
    (359,072
    )Interest payable
    
    
    (6,000,000
    )
    
    
    
    
    
    
    
    
    
    
    (6,000,000
    )Net cash provided by (used in) operating activities
    
    
    (8,649,287
    )
    
    
    34,256,114
    
    
    
    (22,416,776
    )
    
    
    3,190,051Cash flows from investing activities:Purchase of property, plant and equipment
    
    
    
    
    
    
    (1,147,600
    )
    
    
    
    
    
    
    (1,147,600
    )Investment in subsidiaries
    
    
    (22,416,776
    )
    
    
    
    
    
    
    22,416,776
    
    
    
    Net cash used by investing activities
    
    
    (22,416,776
    )
    
    
    (1,147,600
    )
    
    
    22,416,776
    
    
    
    (1,147,600
    )Cash flows from financing activities:Advances to (from) affiliates
    
    
    33,878,119
    
    
    
    (33,878,119
    )
    
    
    
    
    
    
    Principal payments on long-term debt, net
    
    
    (2,924,578
    )
    
    
    (173,160
    )
    
    
    
    
    
    
    (3,097,738
    )Distributions to Mescalero Apache Tribe
    
    
    (6,003,003
    )
    
    
    
    
    
    
    
    
    
    
    (6,003,003
    )Net cash provided by (used in) financing activities
    
    
    24,950,538
    
    
    
    (34,051,279
    )
    
    
    
    
    
    
    (9,100,741
    )Net decrease in cash and cash equivalents
    
    
    (6,115,525
    )
    
    
    (942,765
    )
    
    
    
    
    
    
    (7,058,290
    )Cash and cash equivalents, beginning of period
    
    
    12,808,711
    
    
    
    4,120,919
    
    
    
    
    
    
    
    16,929,630Cash and cash equivalents, end of period
    
    $
    6,693,186
    
    
    $
    3,178,154
    
    
    $
    
    
    
    $
    9,871,340
 18




---



##### 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, net
    
    
    
    
    
    
    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
    
    
    
    
    
    
    
    298,091,568Accumulated depreciation
    
    
    
    
    
    
    (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 (accumulated 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
 19




---



##### Table of Contents



INN OF THE MOUNTAIN GODS RESORT AND CASINO AND SUBSIDIARIES
CONSOLIDATING STATEMENT OF OPERATIONS
For the Quarter Ended January 31, 2007
 GuarantorIMGRC
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedRevenues:Gaming
    
    $
    
    
    
    $
    16,015,221
    
    
    $
    
    
    
    $
    16,015,221Hotel
    
    
    
    
    
    
    2,865,334
    
    
    
    
    
    
    
    2,865,334Food and Beverage
    
    
    
    
    
    
    3,261,779
    
    
    
    
    
    
    
    3,261,779Recreation and other
    
    
    
    
    
    
    7,086,737
    
    
    
    
    
    
    
    7,086,737Gross Revenue
    
    
    
    
    
    
    29,229,071
    
    
    
    
    
    
    
    29,229,071Less -Promotional Allowances
    
    
    355
    
    
    
    607,657
    
    
    
    
    
    
    
    608,012Net Revenue
    
    
    (355
    )
    
    
    28,621,414
    
    
    
    
    
    
    
    28,621,059Operating Expenses:Gaming
    
    
    
    
    
    
    6,113,440
    
    
    
    
    
    
    
    6,113,440Hotel expenses
    
    
    
    
    
    
    1,021,451
    
    
    
    
    
    
    
    1,021,451Food and beverage
    
    
    
    
    
    
    3,252,257
    
    
    
    
    
    
    
    3,252,257Recreation and other
    
    
    
    
    
    
    3,143,070
    
    
    
    
    
    
    
    3,143,070Marketing
    
    
    
    
    
    
    2,259,640
    
    
    
    
    
    
    
    2,259,640General and administrative
    
    
    2,046,726
    
    
    
    835,988
    
    
    
    
    
    
    
    2,882,714Health Insurance  Medical
    
    
    
    
    
    
    617,657
    
    
    
    
    
    
    
    617,657401(K)
    
    
    
    
    
    
    99,183
    
    
    
    
    
    
    
    99,183Mescalero Apache Telecom
    
    
    
    
    
    
    47,539
    
    
    
    
    
    
    
    47,539Tribal Regulatory Fees
    
    
    
    
    
    
    600,000
    
    
    
    
    
    
    
    600,000Depreciation and amortization
    
    
    
    
    
    
    4,502,354
    
    
    
    
    
    
    
    4,502,354Total Operating Expenses
    
    
    2,046,726
    
    
    
    22,492,579
    
    
    
    
    
    
    
    24,539,305Operating Income (Loss)
    
    
    (2,047,081
    )
    
    
    6,128,835
    
    
    
    
    
    
    
    4,081,754Other Income (Expense)Interest Income
    
    
    36,810
    
    
    
    
    
    
    
    
    
    
    
    36,810Interest Expense
    
    
    (6,655,336
    )
    
    
    
    
    
    
    
    
    
    
    (6,655,336
    )Income from subsidiaries
    
    
    6,128,835
    
    
    
    
    
    
    
    (6,128,836
    )
    
    
    Total Other Income (expense)
    
    
    (489,691
    )
    
    
    
    
    
    
    (6,128,836
    )
    
    
    (6,618,526
    )Net Income (Loss)
    
    $
    (2,536,772
    )
    
    $
    6,128,835
    
    
    $
    (6,128,836
    )
    
    $
    (2,536,772
    )
 20




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##### Table of Contents



INN OF THE MOUNTAIN GODS RESORT AND CASINO AND SUBSIDIARIES
CONSOLIDATING STATEMENT OF OPERATIONS
For the Nine Months Ended January 31, 2007
 GuarantorIMGRC
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedRevenues:Gaming
    
    $
    
    
    
    $
    57,246,790
    
    
    $
    
    
    
    $
    57,246,790Hotel
    
    
    
    
    
    
    10,423,235
    
    
    
    
    
    
    
    10,423,235Food and Beverage
    
    
    
    
    
    
    10,377,119
    
    
    
    
    
    
    
    10,377,119Recreation and other
    
    
    
    
    
    
    16,643,556
    
    
    
    
    
    
    
    16,643,556Gross Revenue
    
    
    
    
    
    
    94,690,700
    
    
    
    
    
    
    
    94,690,700Less -Promotional Allowances
    
    
    398
    
    
    
    1,584,800
    
    
    
    
    
    
    
    1,585,198Net Revenue
    
    
    (398
    )
    
    
    93,105,900
    
    
    
    
    
    
    
    93,105,502Operating Expenses:Gaming
    
    
    
    
    
    
    20,360,359
    
    
    
    
    
    
    
    20,360,359Hotel expenses
    
    
    
    
    
    
    3,497,811
    
    
    
    
    
    
    
    3,497,811Food and beverage
    
    
    
    
    
    
    10,619,481
    
    
    
    
    
    
    
    10,619,481Recreation and other
    
    
    
    
    
    
    10,056,461
    
    
    
    
    
    
    
    10,056,461Marketing
    
    
    
    
    
    
    6,645,184
    
    
    
    
    
    
    
    6,645,184General and administrative
    
    
    5,219,885
    
    
    
    2,916,595
    
    
    
    
    
    
    
    8,136,480Health Insurance  Medical
    
    
    
    
    
    
    1,704,953
    
    
    
    
    
    
    
    1,704,953401(K)
    
    
    
    
    
    
    99,183
    
    
    
    
    
    
    
    99,183Mescalero Apache Telecom
    
    
    
    
    
    
    151,134
    
    
    
    
    
    
    
    151,134Tribal Regulatory Fees
    
    
    
    
    
    
    1,800,000
    
    
    
    
    
    
    
    1,800,000Depreciation and amortization
    
    
    
    
    
    
    13,576,720
    
    
    
    
    
    
    
    13,576,720Loss on disposal of fixed assets
    
    
    
    
    
    
    7,439
    
    
    
    
    
    
    
    7,439Total Operating Expenses
    
    
    5,219,885
    
    
    
    71,435,320
    
    
    
    
    
    
    
    76,655,205Operating Income (Loss)
    
    
    (5,220,283
    )
    
    
    21,670,580
    
    
    
    
    
    
    
    16,450,297Other Income (Expense)Interest Income
    
    
    217,392
    
    
    
    
    
    
    
    
    
    
    
    217,392Interest Expense
    
    
    (20,012,919
    )
    
    
    
    
    
    
    
    
    
    
    (20,012,919
    )Income from subsidiaries
    
    
    21,670,580
    
    
    
    
    
    
    
    (21,670,580
    )
    
    
    Other income (expense)
    
    
    59,423
    
    
    
    
    
    
    
    
    
    
    
    59,423Total Other Income (expense)
    
    
    1,934,476
    
    
    
    
    
    
    
    (21,670,580
    )
    
    
    (19,736,104
    )Net Income (Loss)
    
    $
    (3,285,807
    )
    
    $
    21,670,580
    
    
    $
    (21,670,580
    )
    
    $
    (3,285,807
    )
 21




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##### Table of Contents



INN OF THE MOUNTAIN GODS RESORT AND CASINO AND SUBSIDIARIES
CONSOLIDATING STATEMENT OF CASH FLOWS
Nine Months Ended January 31, 2007
 GuarantorIMGRC
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    ConsolidatedCash flows from operating activities:Net income (loss)
    
    $
    (3,285,807
    )
    
    $
    21,670,580
    
    
    $
    (21,670,580
    )
    
    $
    (3,285,807
    )Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:Depreciation and amortization
    
    
    1,350,352
    
    
    
    14,225,628
    
    
    
    
    
    
    
    15,575,980Loss on disposal of fixed assets
    
    
    
    
    
    
    7,439
    
    
    
    
    
    
    
    7,439Changes in assets and liabilities:Accounts receivable, net of allowance
    
    
    3,450
    
    
    
    321,533
    
    
    
    
    
    
    
    324,983Inventories
    
    
    194,495
    
    
    
    87,979
    
    
    
    
    
    
    
    282,474Prepaid expenses
    
    
    (509,376
    )
    
    
    33,209
    
    
    
    
    
    
    
    (476,167
    )Other long term assets
    
    
    
    
    
    
    (88,353
    )
    
    
    
    
    
    
    (88,353
    )Accounts payable
    
    
    (2,353,467
    )
    
    
    
    
    
    
    
    
    
    
    (2,353,467
    )Accrued expenses
    
    
    (5,640,148
    )
    
    
    1,345,710
    
    
    
    
    
    
    
    (4,294,438
    )Interest payable
    
    
    (6,000,000
    )
    
    
    
    
    
    
    
    
    
    
    (6,000,000
    )Net cash provided by (used in) operating activities
    
    
    (16,240,501
    )
    
    
    37,603,725
    
    
    
    (21,670,580
    )
    
    
    (307,356
    )Cash flows from investing activities:Construction Payable
    
    
    (892,236
    )
    
    
    
    
    
    
    
    
    
    
    (892,236
    )Purchase of property, plant and equipment
    
    
    (234,696
    )
    
    
    (147,322
    )
    
    
    
    
    
    
    (382,018
    )Investment in subsidiaries
    
    
    (21,670,580
    )
    
    
    
    
    
    
    21,670,580
    
    
    
    Net cash used by investing activities
    
    
    (22,797,512
    )
    
    
    (147,322
    )
    
    
    21,670,580
    
    
    
    (1,274,254
    )Cash flows from financing activities:Cash held from construction payments
    
    
    18,171,534
    
    
    
    
    
    
    
    
    
    
    
    18,171,534Advances to (from) affiliates
    
    
    38,211,159
    
    
    
    (38,211,159
    )
    
    
    
    
    
    
    Principal borrowings (payments) on debt
    
    
    (1,638,131
    )
    
    
    (1,460,929
    )
    
    
    
    
    
    
    (3,045,060
    )Distributions to Mescalero Apache Tribe
    
    
    (20,979,160
    )
    
    
    
    
    
    
    
    
    
    
    (20,979,160
    )Net cash provided by (used in) financing activities
    
    
    33,765,402
    
    
    
    (39,618,088
    )
    
    
    
    
    
    
    (5,852,686
    )Net decrease in cash and cash equivalents
    
    
    (5,272,611
    )
    
    
    (2,161,685
    )
    
    
    
    
    
    
    (7,434,296
    )Cash and cash equivalents, beginning of period
    
    
    11,111,229
    
    
    
    5,657,143
    
    
    
    
    
    
    
    16,768,372Cash and cash equivalents, end of period
    
    $
    5,838,618
    
    
    $
    3,495,458
    
    
    $
    
    
    
    $
    9,334,076
 22




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##### Table of Contents



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




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##### Table of Contents



Recreation and Other
 Critical Accounting Policies
  Revenue Recognition
 Promotional Allowances
  EITF Accounting for Certain Sales Incentives Accounting for Points and Certain Other Time-Based or Volume-Based Sales Incentive Offers, and
Offers for Reproduces, or Services to be delivered in the future
 Classification of Departmental Costs
 24




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##### Table of Contents



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




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##### Table of Contents



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




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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
 27




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##### Table of Contents



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




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##### Table of Contents



General Indebtedness
  Credit Facility
  Credit Rating
   Off-Balance Sheet Arrangements
  Regulation and Taxes
  
 Item 3. Quantitative and Qualitative Disclosures About Market Risk.
  29




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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.
   30




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##### Table of Contents



Item 6. Exhibits.
 Exhibit No.
    
    Description10.1
    
    Employment Agreement dated December 20, 2007 between IMG Resort and Casino and Brian Parish.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.
 31




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##### Table of Contents



SIGNATURES
  INN OF THE MOUNTAIN GODS RESORT AND CASINODate: March 14, 2008
    
    By
    
    /s/ Brian D. ParrishName:
    
    Brian D. ParrishIts:
    
    Chief Operating Officer (Principal Executive Officer)Date: March 14, 2008
    
    By
    
    /s/ Pamela GallegosName:
    
    Pamela GallegosIts:
    
    Interim Chief Financial Officer (Principal Financial Officer)
 32




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##### Table of Contents



INDEX TO EXHIBITS
 Exhibit No.
    
    Description10.1
    
    Employment Agreement dated December 20, 2007 between IMG Resort and Casino and Brian Parish.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.
 33