SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 20549
                                   FORM 10-KSB
                                (Amendment No. 4)

|X|   Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange
      Act of 1934

      For the fiscal year ended May 31, 2003, or

|_|   Transition report pursuant to Section 13 or 15(d) of the Securities
      Exchange Act of 1934

      For the transition period from_____________ to_____________

Commission File No. 0-15030

                               WINTER SPORTS, INC.
             (Exact name of registrant as specified in its charter)

        Montana                                               81-0221770
(State of Incorporation)                              (I.R.S. Employer I.D. No.)

                    P. O. Box 1400, Whitefish, Montana 59937

Registrant's telephone number, including area code (406) 862-1900

Securities registered pursuant to Section 12(b) of the Act:

                                      None

Securities registered pursuant to Section 12(g) of the Act:

                           Common Stock, No Par Value

Check whether the registrant (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding
12 months, and (2) has been subject to such filing requirements for the past 90
days. Yes |X| No |_|

Check if there is no disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K contained herein, and no disclosure will be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB. |_|

Registrant's revenues in its most recent fiscal year were $10,312,046.

Approximate aggregate market value of the voting stock held by non-affiliates of
the registrant as of August 16, 2003 was $12,852,684. As of August 16, 2003, the
number of shares outstanding of the registrant's common stock, no par value, was
988,668.

                       DOCUMENTS INCORPORATED BY REFERENCE

Location in Form 10-KSB        Incorporated Document
-----------------------        ---------------------
Part III, Item 9, Item 10      Proxy Statement dated February 27, 2004 to be
Item 11, Item 12, Item 14      filed with the Securities and Exchange Commission
                               for the annual meeting of shareholders to be held
                               on May 6, 2004

Total number of pages, including cover page 48        Exhibit Index - page 38-39


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                               WINTER SPORTS, INC.

                                   Form 10-KSB

                                (Amendment No. 3)

                                Table of Contents

                                                                            Page
                                                                            ----

Part I

Item  1 - Business...........................................................3

Item  2 - Properties ........................................................5

Item  3 - Legal Proceedings .................................................7

Item  4 - Submission of Matters to a Vote of Security Holders ...............7


Part II

Item  5 - Market for Common Stock and Related Stockholder Matters ...........8

Item  6 - Management's Discussion and Analysis of Financial Condition
          and Results of Operations .........................................8

Item  7 - Financial Statements .............................................18

Item  8 - Changes in and Disagreements with Accountants on Accounting
          and Financial Disclosure .........................................35

Item 8A - Controls and Procedures ..........................................35

Part III

Item  9 - Directors and Executive Officers of the Registrant ...............36

Item 10 - Executive Compensation ...........................................36

Item 11 - Security Ownership of Certain Beneficial Owners and
          Management .......................................................36

Item 12 - Certain Relationships and Related Transactions ...................36

Part IV

Item 13 - Exhibits and Reports on Form 8-K .................................37

Signatures .................................................................40


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                                     Part I

Item 1. Business

Winter Sports, Inc. d/b/a Big Mountain Resort (the "Company" or "Big Mountain"),
was organized in 1947 as a Montana corporation, for the purpose of developing
and operating a ski resort at Big Mountain, located eight miles north of
Whitefish, Montana.

Operations are carried out on nearly 4,000 acres of land at that location,
approximately 3,073 acres of which are utilized under permits from, and the
supervision of, the U.S. Department of Agriculture, U.S. Forest Service (the
"Forest Service"). The balance of the land is owned by the Company. Revenues are
generated from lift ticket sales, ancillary services, management agreements and
fees and rentals charged concessionaires and other parties leasing space for
buildings and concessions. In fiscal 1993, real estate sales became a
significant business segment with the creation of Big Mountain Development
Corporation. The Company owns over 900 acres in and around its base area which
is available for resort activities as well as commercial and residential
development.

The ski facilities include nine chairlifts and two T-bar lifts, which service
approximately 45 miles of ski slopes and trails. In addition to the skiing
facilities, the Company also operates the Hibernation House (hotel facilities),
Big Mountain Sports (ski rental, repair and ski shop) and a Ski School, all
located in the base area, as well as the Summit House (retail) located at the
summit of the mountain and the Outpost (ski shop and skier services operation)
at the lower village near the lower parking lots. The Company also operates a
property management business. The Company has leased to concessionaires food and
beverage operations, a day-care center, a photography shop, a snowmobile
operation, horse operations and sleigh and wagon rides. Revenues derived by the
Company from these ancillary operations, other than the ski facilities and real
estate, represented 47.3%, 42.2%, and 33.26% of total revenues in 2002/03,
2001/02, and 2000/01, respectively. The Company has an all beverage liquor
license and is designated as a "resort area" for the issuance of additional
resort retail liquor licenses.

The Company operates its facilities for skiing and related winter activities
from approximately mid-November until the following mid-April of each year.
During the ski season, the Company's facilities are operated seven days a week.
For more than 50 years, Big Mountain has averaged approximately 140 days of
skiing operations annually. A snowmaking system and improved grooming equipment
and technology have lessened the reliance on natural snowfall in recent years;
however, sufficient snowfall to operate the lifts and slopes remains a primary
consideration.

The Company also operates on a limited basis from early June through early
October. The summer operation consists of a chairlift/gondola ride to the summit
for sightseeing, hiking, biking, rental and retail, hotel and recreational
facilities and activities.

The Company's business is primarily seasonal. A significant portion of its gross
revenue is derived during the winter ski season. Real estate sales have occurred
on a year-round basis in the past. The Company maintains a year-round staff of
approximately 80 employees. During the peak ski season, approximately 450
persons are employed. During the summer operations, approximately 130 persons
are employed.

Located at or near the base area and on the access road to Big Mountain are
privately owned condominium developments and a number of private homes and town
homes, many of which are available for public rental. Other


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accommodations are available in the Flathead Valley. The Resort is served by an
all weather secondary highway. Glacier Park International Airport, located in
Kalispell, MT, is 20 miles from the village core.

The ski resort business is highly competitive. The success of Big Mountain's
business is predicated on skiing, which is affected by weather and other
factors, such as the economy, cost and availability of transportation, the
effects of September 11, 2001 and any related events and the Canadian exchange
rate. The profitability and growth of Big Mountain's ski operation is largely
determined by the number of skiers attracted to the area. The Company believes
that its principal competition for skiers comes from other destination resorts
throughout the western United States and western Canada. Some of the ski resorts
continuing to be competitive with Big Mountain are Whistler-Blackcomb in British
Columbia, Sun Valley and Schweitzer Basin in Idaho and Big Sky of Montana. In
addition, Canadian ski resorts such as Lake Louise and Sunshine in Banff are
considered strong competition. The Company also experiences competition from a
number of smaller regional ski areas, but believes it has a competitive
advantage over them because of the greater variety of skiing it offers, its
larger facilities, the length of its season and its extensive snowmaking and
grooming operations.

The land occupied by the Summit House and the Company's lift sites are subject
to a 38-year term, special-use permit from the Forest Service expiring December
31, 2038, covering approximately 18 acres. Approximately 3,055 acres are covered
by a year-to-year Forest Service permit. These permits do not create a legal
interest in favor of the Company on the subject lands. The continued use of
these Forest Service lands is subject to certain hazards, common to all ski
areas developed on such lands, including federal business guidelines. The Forest
Service at any time may terminate the permits under which the Company operates,
upon payment of an equitable consideration for the improvements. Both permits
require the allowed use to be actually exercised at least 90 days per year. The
Company is obligated to pay yearly fees to the Forest Service on a graduated
rate based on certain income. Such rates are adjustable every year. The current
rate is 1.96% of applicable revenues. Payments for fiscal year 2003 were
$106,266. Payments in 2002 and 2001 were $95,319 and $91,596, respectively.

In carrying out its business, the Company must comply with a number of
requirements concerning environmental quality. Advance approval from the Forest
Service must be obtained for all construction, land alteration and significant
repair, in addition to obtaining approval from other state and federal agencies
regarding the protection of the environment and wildlife within the permitted
areas. In 1985-86, the Company undertook a major expansion to build a chairlift
and ski slopes on the previously undeveloped northern slope of Big Mountain. As
a result of this expansion, restrictions for lifts on north slopes were imposed
by the Forest Service covering the length of the ski season on those slopes,
time periods for construction and restriction of outdoor cooking at the mountain
top restaurant during the summer season. Since 1990, the Company has pursued
additional expansion of ski terrain and additional amenities to offer customers
within its permit area and in 1996 a Record of Decision was issued by the Forest
Service approving most of the expansion items requested.

The Company has three wholly owned subsidiaries. Big Mountain Water Co., a
regulated utility, supplies water to all base area facilities and nearby
properties. Big Mountain Development Corporation was activated in September 1991
to oversee and coordinate the planning and real estate activities of certain
land parcels owned by the Company. The Company formed Big Mountain Club LLC
during the end of fiscal year 2003. This entity was formed as negotiations with
the owner of the golf course in the Flathead Valley became substantial in order
to properly accumulate the start up costs for this


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company. This entity is expected to become a non-equity membership club
providing access to alpine facilities at Big Mountain as well as golf amenities
at the golf course.

Item 2. Properties

The properties owned or leased by the Company are located eight miles north of
the City of Whitefish, in the northwest corner of the State of Montana, in the
Whitefish Range overlooking the Flathead Valley. The Flathead Valley lies on the
western slope of the continental divide of the United States and is bordered on
the north by the Canadian provinces of British Columbia and Alberta.

In the winter of 1947, the Company opened a T-Bar lift, ski slopes, day
facilities and parking lots for use by the public. Since 1947, chairlifts, ski
slopes, trails, a cross-country course, dining and lodging accommodations were
added periodically.

In 1997-98 the Company replaced Chair 7, a fixed-grip triple chairlift, with a
high-speed quad chairlift. The former fixed-grip triple chairlift was redeployed
into the Hellroaring Basin which allows guest access to an additional 500 acres
of terrain. During the year a lift was installed which transports guests to the
top of the Company's tubing hill. The Company also purchased two new grooming
vehicles to add to the existing fleet of front-line groomers. A second 4.5
million gallon reservoir was completed near the summit of the mountain. In the
first quarter of the year, Big Mountain Development Corporation began
construction of a 52,000 square foot mixed-use condominium project at the
entrance of the Company's core village. The project, known as the Kintla Lodge,
contains 20 residential condominium units, an owners' lounge and lobby, and five
commercial condominium units.

During 1998-99 the Company replaced the liner in its primary upper-mountain
snowmaking reservoir, replaced the haul rope on its Glacier Chaser chairlift,
installed new underground fuel tanks, purchased a new Bombardier groomer for its
front-line fleet and replaced approximately 33% of its rental inventory of skis,
snowboards and related items. The Company also finished construction of Kintla
Lodge.

In fiscal year 2000, the Company remodeled its guest services building,
completed a turnaround at the entrance of the base area village, replaced
approximately 33% of its rental inventory of skis, snowboards and related items.
The Company also installed a fiber optic backbone and T-1 line to enhance
communications throughout the Company.

For the fiscal year ending May 31, 2001, the Company implemented an integrated
resort-wide ticketing software package. This has allowed the Company to achieve
better guest demographics at the resort as well as give the Company the
opportunity to provide a more seamless experience for the guest. The Company
also installed a new T-Bar lift which gives access to approximately 20 acres of
new terrain on the eastside of the mountain. Improvements were made to the
Hibernation House, an economy hotel-like property owned by the Company. Three
units were purchased in the Alpinglow condominium building in the village core.
These units will be placed in the rental pool. A new groomer was added to the
existing fleet as well as replacement of some of the computers, rental
inventory, and vehicles. The Company also invested in new activities for guests
to enjoy while visiting the mountain throughout the year. A mechanical bull was
added to one of the concessionaire's facilities; archery, new mountain bike
trails as well as Thrill Sleds were added.


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<PAGE>

On March 19, 2001, the Company announced that Hines Resorts, a division of
international real estate firm, Hines, was selected as the developer for the
village at Big Mountain Resort. Plans call for a pedestrian-scale village with
more than 700 residential/lodging units, at least one hotel, condominiums and
town homes, employee housing, as well as additional commercial space and a
conference center.

On May 1, 2001, the Company purchased an existing property management company
which managed properties adjacent to and in the village core. The Company
entered into a non-compete agreement with the former owners. The Company also
retained one of the former owners in the role of a consultant for a period of
one year from the date of sale. The Company plans to continue operating the
business as it had been in the past. With this acquisition, the Company performs
property management services for approximately 200 properties in the village
area.

On December 21, 2001, the Company purchased 120 acres of land contiguous to the
Company's southeastern boundaries. The Company is looking at this purchase as
the first in three potential purchases under an option agreement entered into
with the property owner. The company plans to include this parcel into a larger
activity area at the Resort.

During 2002, the Company added a 2500 square foot meeting room to the Outpost
facility. This room allows an additional potential for group bookings. The
Company began an expansion of its snowmaking capability along the Chair 2 ski
trails. The Company completed this project during the current fiscal year with
the filling of a seven million gallon reservoir near the upper terminal. The
Company also installed a triple chairlift, which services the beginner terrain
for skiers and snowboarders just learning their respective sport. This lift
replaced an old platter lift located at the site. The chairlift allowed the
Company to expand the beginner terrain available.

Toward the end of fiscal year 2002, the Company began development of a new
activity called Walk in the Tree Tops. This activity is a half day activity in
which the participant embarks on a guided tour to learn about plants, trees and
wildlife while suspended in the air. This adventure also provides some
spectacular views of the mountain and valley, previously not seen before. This
activity is the first in a series of new activities the Company is planning to
phase in over the next five years. It is hoped that these activities will appeal
to the guests and provide new ways of enjoying their time at the Resort.

The Company became involved in the planning of a conference center during fiscal
year 2003. This process involved not only completed construction drawings, but
also the marketing and furnishing plan for the facility. The Board of Directors
decided to place the project on hold while researching the various options
available to secure a hotelier for the Resort.

Other improvements during the recently completed fiscal year included additional
upgrades to the rental fleet and computer upgrades.

Also during fiscal year 2003, the Company purchased an additional 52 acres of
land adjacent to the 120 acres purchased in 2001 as part of the continuing plan
to incorporate this area into additional Resort activities.

The Company also sold a small tract of land to a 501(c)(3) entity who plans to
engage a developer to construct 10 affordable housing units. As compensation for
this bargain sale, the Company was able to raise cash and received a charitable
donation.


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<PAGE>

The Company operates on 4,000 acres, approximately 3,073 acres of which are
owned by the United States Forest Service and are subject to their special-use
permits. All of the Company's ski resort assets are encumbered to secure the
Company's line of credit. See Note 6 of the "Notes to Consolidated Financial
Statements".

The lengths and capacities of the Company's ski lifts are as follows:

Lifts                Type              Number *    Vertical Rise      Rides/Hour
-----                ----              --------    -------------      ----------

Glacier Chaser       Quad Chair        #1             2,088 ft.         2,400
Swift Creek          Double Chair      #2             1,116 ft.           950
Tenderfoot           Triple Chair      #3               434 ft.         1,070
Great Northern       Triple Chair      #4             1,360 ft.         1,575
Glacier View         Triple Chair      #5               840 ft.         1,800
Village Lift         Quad Chair        #6               280 ft.         1,500
Big Creek Express    Quad Chair        #7             1,216 ft.         1,800
Hellroaring          Triple Chair      #11            1,281 ft.         1,800
Easy Rider           Triple Chair                       139 ft.         1,800
T-Bar #1             T-bar                              572 ft.           925
T-Bar #2             T-Bar                              400 ft.           855
Powder Puff          Rope Tow                            25 ft.           900

*     Chair numbers refer to numbers assigned in Big Mountain's Resort Area
      Master Plan.

The Company's major buildings are as follows:

                                                               Square Footage
                                                               --------------

Building                                                      Floor         Deck
--------                                                      -----         ----

Chalet                                                       11,428        1,080
Bierstube                                                     3,860        2,000
Big Mountain Ski Shop                                         8,928
Hibernation House                                            15,360
Summit House                                                 14,400        2,920
Ski Hut                                                         896
Maintenance Building                                          5,250
Warehouse and Maintenance Building                           15,360
Ticket Sales Building                                           850
Barn                                                          1,800
Maintenance Shop on mountaintop                               1,800
Outpost Building                                             11,404
Events Building                                               1,440
Kintla Lodge Retail Space                                     6,526
Sherpa Pool                                                   2,850
GVPM Office building                                          3,892

Item 3. Legal Proceedings

The information appearing in Note 12 of the Notes to Consolidated Financial
Statements is incorporated herein by reference.

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

No matters were submitted to a vote of security holders during the fourth
quarter of the fiscal year ended May 31, 2003.


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                                     Part II

Item 5. Market for Common Stock and Related Stockholder Matters

The Company's common stock is currently traded on the NASDAQ Over The Counter
Electronic Bulletin Board under the symbol "WSKI".

The following table sets forth the range of quarterly high and low bid
quotations for the Company's common stock for the last two fiscal years. High
and low bid quotations have been supplied by D. A. Davidson & Co., Inc., a
registered broker-dealer. Such over-the-counter market quotations reflect
inter-dealer prices, without retail mark-up, markdown or commissions and may not
necessarily represent actual transactions.

                                 2003                  2002
                                 ----                  ----
        Quarter            High       Low        High        Low
        -------            ----       ---        ----        ---

          1st              16.50     15.00       19.50      13.00
          2nd              16.50     14.00       20.50      15.00
          3rd              14.25     12.00       19.00      16.00
          4th              13.50      8.00       18.00      15.00

No cash dividends have been paid on the Company's common stock since 1984. The
declaration of dividends is subject to certain restrictions contained in the
loan agreement between Bank of America and the Company. These restrictions
prohibit the payment of cash dividends, other than for preferred dividends or
fractional shares, without prior written consent of the Bank.

The Company's Board of Directors authorized a stock repurchase program on May
19, 2000. Under this program the Company could repurchase up to 40,000 shares of
the Company's outstanding common stock at prevailing market prices from time to
time over the next six to eight months. The Board of Directors renewed this
program on December 20, 2000 for an additional six month time period. The
program ended June 19, 2001. The Company repurchased 19,700 shares under this
program.

The approximate number of shareholders of record for the Company's common stock
as of August 16, 2003 was 691.


Equity Compensation Plan Information

The Company does not have any equity compensation plans at this time.

Item 6. Management's Discussion and Analysis of Financial Condition and Results
of Operations

All statements, other than statements of historical fact contained herein
constitute "Forward-looking Statements" within the meaning of Section 27A of the
Securities Act of 1933, as amended (the "Securities Act") and Section 21E of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"). These forward
statements are not based on historical facts, but rather reflect the Company's
current expectations concerning future results and events. Similarly, statements
that describe the Company's objectives, plans or goals are or may be
forward-looking statements. Such forward-looking statements involve a number of
risks and uncertainties. The Company has tried wherever possible to identify
such statements by using words such as "anticipate," "assume," "believe,"
"expect," "intend," "plan," and words and terms similar in substance in
connection with any discussion of operating or financial performance. In
addition to factors discussed above, other factors that could cause actual
results, performances or achievements to differ materially from


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those projected include, but are not limited to, the following: general business
and economic conditions, both regionally and nationally; weather and snow
conditions; the changes in the visitation habits of travelers as a result of
September 11th, related events thereafter and the Canadian exchange rate; and
other factors listed from time-to-time in the Company's documents filed by the
Company with the Securities and Exchange Commission. The forward-looking
statements included in the document are made only as of the date of this
document and under Section 27A of the Securities Act and Section 21E of the
Exchange Act, the Company does not have or undertake any obligation to publicly
update any forward-looking statements to reflect subsequent events or
circumstances.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The Company's discussion and analysis of its financial condition and results of
operations are based upon the Company's consolidated financial statements, which
have been prepared in accordance with generally accepted accounting principles.

The Company believes certain accounting policies to be critical due to the
estimation process involved in each. The Company records season pass revenue as
it is earned. The Company has a ticketing system which scans the ticket of each
person who accesses the chair lifts. A portion of the season pass revenue is
recognized as revenue each day that the pass holder accesses the lifts. Property
management associated revenue is recognized when the guest checks out and/or at
the end of each accounting cycle, whichever occurs first on a unit by unit
basis. The Company, under a development agreement with Hines Resorts, will from
time to time sell parcels of land. One of the Company's subsidiaries is
recognizing any gain on the sale of these parcels under the cost recovery
method. The Company chose this method because the sale of land during the
current fiscal year has been accomplished through a note which is subordinate to
other loans of the purchasing entity. Under this method, the gain is
unrecognized until such time as the basis of the land and the associated costs
of the sale have been invested in four LLCs. Revenue from these entities is
being recognized under the equity method. The Company's subsidiary, Big Mountain
Development Corporation, does not have day-to-day management control of these
LLCs and does not guarantee any borrowings of the LLC. Depreciation is computed
using the straight-line method for book purposes using the applicable useful
life of the asset. For tax purposes, the Company uses the appropriate tax life
as defined in the Internal Revenue Code. The Company recognizes deferred tax
assets and liabilities based on the differences between the financial statement
carrying amounts and the tax bases of assets and liabilities. The Company
regularly reviews its deferred tax assets for recoverability and establishes a
valuation allowance based on historical income, projected future taxable income,
and expected timing of the reversal of existing temporary differences.

The Company adopted FASB 142 at the beginning of the 2003 fiscal year. Under
this FASB, goodwill and intangible assets deemed to have indefinite lives are no
longer amortized, instead being subject to impairment tests at least annually.
Other intangible assets will continue to be amortized over their contractual
lives. Applications of the nonamortized provisions for the years ended May 31,
2002 and 2001 would have increased net income by $11,382 and $949, respectively,
and increased earnings per share by $.01 in 2002 and would have no effect in
2001. An impairment test of the lodging reporting unit reported no impairment of
goodwill as of the end of the fiscal year 2003. Statement of Financial
Accounting Standards No. 143 was adopted by the Company in 2003. Under this
standard, asset retirement and the obligations associated with the retirement of
tangible long-lived assets will change. This statement will not have a material
effect on the Company's financial statements as presented.


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The Company adopted FASB 144 at the beginning of the 2003 fiscal year. This
standard sets forth guidelines for accounting and reporting for the impairment
of long-lived assets and for long-lived assets to be disposed of. This
pronouncement will not have a material effect on the financial statements as
presented.

In July 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated
with Exit or Disposal Activities." SFAS 146 requires that a liability for a cost
that is associated with an exit or disposal activity be recognized when the
liability is incurred. SFAS 146 also establishes that fair value is the
objective for the initial measurement of the liability. SFAS 146 is effective
for exit or disposal activities that are initiated after December 31, 2002. The
Company did not have any such activities during the current year.

In November 2002, the FASB issued FASB Interpretation No. 45 ("FIN 45"),an
interpretation of FASB Statement No. 5, "Accounting for Contingencies." This
interpretation elaborates on the disclosures to be made by a guarantor in its
interim and annual financial statements about its obligations under certain
guarantees that it has issued. The initial recognition and initial measurement
provisions of FIN 45 are applicable on a prospective basis to guarantees issued
or modified after December 31, 2002, irrespective of the guarantor's fiscal
year-end. The disclosure requirements of FIN 45 are effective for financial
statements of interim or annual periods ending after December 15, 2002. The
adoption of this standard had no material impact on the Company's financial
statements.

In January 2003, the FASB issued FIN 46, "Consolidation of Variable Interest
Entities". FIN 46 explains the concept of a variable interest entity and
requires consolidation by the primary beneficiary where the variable interest
entity does not have sufficient equity at risk to finance its activities without
additional subordinated financial support from other parties. FIN 46 also
requires an investor with a majority of the variable interests in a variable
interest entity to consolidate the entity and also requires majority and
significant variable interest investors to provide certain disclosures. This
interpretation applies immediately to variable interest entities created after
January 31, 2003, and applies in the first year or interim period beginning
after December 15, 2003 to variable interest entities in which an enterprise
holds a variable interest that it acquired before February 1, 2003. Subsequent
to January 31, 2003, one of the Company's subsidiaries became a member in Glades
Development LLC. The Company believes that Glades Development LLC is a variable
interest entity; however it has determined that the Company is not the primary
beneficiary and under FIN 46, the Company will not consolidate the entity. Prior
to January 31, 2003 the same subsidiary became a member in Moose Run II LLC,
Northern Lights LLC and Morning Eagle LLC. The Company has initially determined
that under FIN 46, Moose Run II LLC is a variable interest entity and the
Company's subsidiary, Big Mountain Development Corporation, could be the primary
beneficiary, therefore the entity will be consolidated in the first interim
period beginning after June 15, 2003, due to the date of the initial involvement
with this entity. See Note 4 for the required disclosures.

RESULTS OF OPERATIONS

The Company operates in two segments, the operation of a resort area and real
estate investment. Winter Sports is involved in operations in the resort
industry to develop and provide recreational and related services to guests.
Also included in Winter Sports' segment reporting is the Company's other wholly
owned subsidiary, Big Mountain Water Company. This entity is the local water
supplier for the resort area. Big Mountain Development Corporation


                                       10
<PAGE>

participates in various LLC activities as described in Note 4. The Company
evaluates the performance of its two segments primarily by evaluating the income
from operations of each segment. The Company must be able to react to weather
conditions and changing traveling habits for the resort segment. The real estate
investment segment, or BMDC, is also evaluated primarily by its income from
operations and also by the income received through Equity in Earnings - LLCs
(see Note 4).

Revenues

In 2003 consolidated revenues decreased by 21% from the prior year. The Company
saw a decrease of 17% in Lease, Management and other fees. Lodging revenue at
the Company's economy hotel property decreased by 14%, while Equipment rental
and repair saw a 6% decrease from 2002. Retail experienced a decrease of 8% over
last year. The Company also saw a decrease in Real Estate Sales of $2,004,186
from fiscal year 2002 as the Company is no longer involved in that business.

Skier visits decreased by over 30,200 or 11% in 2003. Lift revenue, however,
remained fairly constant from 2002 to 2003, experiencing a decrease of $101,112
or 1.9%. During the fiscal years ending May 31, 2003, 2002 and 2001, the Company
offered for a limited time a discounted season pass program. The lack of early
season snow and the effects of the war in the Middle East affected guest
visitation. During the time of the conflict, ridership decreased and then
increased again after much of the conflict was reduced. The Company continues to
feel the effects of September 11, 2001 through the change in traveler behavior.
Guests are booking their vacations closer to the time they plan to travel and
are utilizing the internet more to analyze their options. The Resort saw more
local and regional skiers and fewer destination skiers. Destination skiers tend
to stay in lodging at the Resort, rent equipment and take lessons to learn their
sport. The Company also experienced a decline in visitation due to the
perception of lower than average snowfall. The northwestern portion of the
United States in some parts had low snow conditions. The Resort, although having
adequate snowfall, was not perceived by the traveler as having good conditions.
The Company saw improvement in its Canadian markets over last year, but the
weakness of the Canadian dollar still contributes to lower visits than were
previously experienced during the 1980s. The Company does not believe the
weakness in the Canadian dollar is permanent; however, it is unclear as to when
an improvement in the Canadian exchange rate will occur. The Company's four
major markets are: the local drive market, the Pacific Northwest, the Midwest
and Canada. The Company plans to continue expanding its marketing programs in
all of its markets.

Lease, management and other fees - related parties revenues were $345,645 during
fiscal year 2003 compared to $253,985 during the previous fiscal year and
$231,817 during fiscal year 2001. This revenue is derived from services
performed by Winter Sports to related entities, such as homeowner associations.
It is expected that such revenue will increase slightly during the next twelve
months as it is expected that some of the condominium units within the Morning
Eagle facility will require services of the property management department of
Winter Sports.

In 2002 consolidated revenues increased by $140,331 over 2001. The increase is
primarily due to the increase in retail income of $320,157 or 40% from 2001. An
increase in lift revenue of $157,894 or 3% from 2001 to 2002 also contributed to
the increase in revenues. Revenue from Lease, Management and other fees
increased by $881,776 or 38%. The increase was due to increased reservations and
property management fees as a result of the addition of the property management
company purchased in 2001.


                                       11
<PAGE>

The Company's subsidiary, Big Mountain Development Corporation, recorded its
last real estate sale during the first quarter of fiscal year 2002, when the
product inventory was completely sold out. This entity had previously developed
single family residences, town homes and one condominium project. Big Mountain
Development Corporation has not been involved in any phase of development or
marketing of lots since fiscal year 2001.

Operating Cost & Expenses

Operating costs and expenses in 2003 were $11,424,864 compared to $12,940,869 in
2002. The $1,516,005 or 11.7% decrease was primarily attributable to the
decrease in Cost of real estate sales and the decrease in Direct expenses -
Lifts. The decrease in Direct expenses - lifts is due to the Company actively
managing the timing of operations of lifts during the early ski season as well
as during lower visitation periods. The Resort is able to enjoy excess lift
rider capacity and is able to operate some lifts on an as needed basis. The
Company anticipates continuing to utilize a staggered opening of its available
lifts during the early ski season. During fiscal year 2003, the Company wrote
off $11,299 of master planning costs for the village area. It was determined
that these costs no longer had economic benefit for the Company. Also during
fiscal year 2002, the Company wrote off the planning expenses related to the
installation of a potential new chairlift. Those expenses totaled $105,670. The
Company also wrote off the remaining costs of the Environmental Impact Study
(EIS) of $57,306 during the same fiscal year. The EIS was written off because it
no longer had economic benefit for the Company. Most companies have experienced
an increase in insurance premiums as a result of September 11. The ski industry
is also experiencing an increase in premiums due to the level of claims
insurance carriers have seen related to terrain park and half-pipe injuries. The
Company is actively working with its insurance provider to see what can be done
to minimize the effect of even more premium increases. The Company expects, due
to the insurance market overall, another increase in premiums during the current
fiscal year.

Direct expenses - related parties and General and administrative expenses -
related parties are immaterial expenses incurred by the Company in transactions
with entities which Winter Sports has determined are related parties. These
expenses will continue to occur, but are not expected to become a significant
amount.

Income from Operations

The Company operates principally in two segments, the operation of a ski resort
and real estate investment. Income from operations in the ski resort segment
experienced a $(922,970) loss from operations compared with a $(877,900) loss
during the previous fiscal year. The effects of the change in guest visitation
patterns as well as perceived low snowfall, had an adverse effect on income from
operations during both fiscal years. The Company continues to adjust the timing
of lift operations to better reflect snow conditions. The Company is also
adjusting its marketing strategy to reflect the visitation habits of our guests,
who are making their travel arrangements closer to the time of arrival. In
addition, many travelers are driving rather than flying.

Income from operations in the ski resort segment during 2001 was $(1,210,402)
compared with $(877,900) during 2002. During 2001, the resort sector had a lower
than normal year for retail sales as well as an increase in direct
expenses-lifts.

Income from operations on the real estate investment segment was $(189,848)
during the fiscal year ending May 31, 2003, compared with income of $979,213


                                       12
<PAGE>

during the previous fiscal year. The decrease in income is due to very little
activity in the LLCs. The previous fiscal year, the real estate investment
segment experienced activity primarily from Northern Lights LLC.

Income from operations for the real estate investment segment during 2001 was
$1,462,770 compared with $979,213 during 2002. Fiscal year 2001 was the final
year of development of town home lots for this segment. Income from operations
for fiscal year 2001 reflects the final sales of these lots.

Interest Income/Expense and Other Income/Expense

Interest income as of May 31, 2003 was $76,175. This income is associated with
notes held by the Company for land sale transactions. Interest income in 2002
was $203,317. This income was earned from a note receivable related to the sale
of 16 acres earlier in the fiscal year. In each year, the interest income has
been earned from related party entities in which the Company's subsidiary, Big
Mountain Development Corporation, is a member.

In 2003, interest expense was $338,770 compared to $489,287 in 2002, a 31%
decrease. The decrease was due to favorable interest rates on the company's line
of credit. During fiscal year 2002, the Company purchased 120 acres of land
adjacent to the Company's eastern boundary. The purchase was funded with a
five-year term loan from a related party at Wall Street Prime plus 1%. The
Company's line of credit with Bank of America remained relatively the same at
May 31, 2003 as it was at the same time last year. Capitalized interest during
2003 was $6,996 compared to $15,232 in 2001.

The Company recognized a portion of the gain on the sale of land during 2002 in
the amount of $2,368,737. The Company sold approximately 16 acres during the
first quarter of this fiscal year to a Hines entity who developed an eighteen
lot single family subdivision. The Company is recognizing the gain on the sale
of the land under the cost recovery method. Under this method, the gain is
unrecognized until such time as the basis of the land and the associated costs
of the sale of land have been recovered. During the year, these costs were
recovered through proceeds received and the gain will continue to be recognized
as proceeds continue to be received. The Company expects this to continue
through the second quarter of the current fiscal year ending May 31, 2004.

The Company's subsidiary, Big Mountain Development Corporation, is a member of
Morning Eagle LLC, The Glades LLC, Moose Run II LLC and Northern Lights LLC. In
each of these LLCs, the subsidiary does not participate in the day-to-day
operating activities of these entities, nor does it guarantee any debt of the
entities. The manager of each LLC prepares an annual plan for approval of all
members as to the type of development that is envisioned for the tract of land
owned by the LLC. Each LLC undergoes an independent financial audit of its
transactions. The Company's subsidiary receives a portion of the profit from
each of these entities. The profit is residual, if any, of the sales of real
estate product over the costs of developing that product, including marketing.
The Company's subsidiary is accounting for this investment under the equity
method of accounting, as it will receive 60% of the residual profit generated in
each of these LLCs, except for Morning Eagle LLC, in which the Company's
subsidiary will receive 22% of any residual profit. The Company's subsidiary has
recognized income of $144,234 this year, which is found on the Income Statement
labeled, "Equity in Earnings-LLCs". During the first interim period beginning
after June 15, 2003, Moose Run II LLC will be consolidated under the provisions
of FIN 46. It has been determined by the Company that this is the only variable
interest entity in which the Company's subsidiary is the primary beneficiary.
Big Mountain Development Corporation was determined to be the primary
beneficiary of Moose Run II LLC as the LLC owes the Corporation a note


                                       13
<PAGE>

in the amount of $477,000 plus accrued interest, as well as a portion of
potential future revenues.

Other income (expenses) decreased to $36,674 in 2003 from $269,738 in 2002.
During 2002, the Company collected $243,505 from an adjacent landowner under the
terms of an agreement that the landowner would be responsible for the costs
related to construction of a road on the Company's property where the landowner
would have egress. It was previously unclear when and if this would be collected
as well as the actual dollar amount for which the landowner would be liable.
This type of revenue is not expected in the future. Also included in Other
income is the revenue earned and the expenses incurred with the sale of timber
on some of the land owned by the Company. The net amount earned was $4,021. The
Company also sold an easement to a utility company during 2002 for $20,000. This
sale was necessary due to the utility company relocating its needed corridor.
This type of revenue is not expected in the future.

Income Taxes and Net Income

Fiscal year 2003 is reporting pre-tax net loss of ($1,036,919). The income tax
benefit generated from this is $470,446, producing an effective tax rate of
(45%). The Company will carryback this year's net operating loss to May 31, 2001
and 2002 for Federal purposes, resulting in refundable taxes of $203,370. The
remaining $583,626 of Federal net operating loss is available to offset future
taxable income, with the loss expiring May 31, 2023. For state purposes, the net
operating loss was $1,233,720, which was carried back to May 31, 2000 and was
fully utilized. This resulted in a refund of $83,276.

Net loss in 2003 was ($566,473) or ($.57) per common share down from $1,598,517
or $1.62 per common share in 2002.

The pre-tax net income in 2002 was $2,636,120 compared to pre-tax net loss of
($15,028) in 2001. The income tax expense generated from the pre-tax net income
in 2002 was $1,037,603, producing an effective tax rate of 39% compared to an
effective tax benefit of (38%) in 2001.

Net income in 2002 was $1,598,517 or $1.62 per common share up from ($9,328) or
($.01) per common share in 2001.

Deferred Taxes

Long term deferred income taxes increased to $2,448,191 in 2003 from $2,422,153
in 2002. The noncurrent deferred tax asset increased by $228,952 to $469,593 in
fiscal year 2003 from $240,641 in 2002. As described in Note 7, temporary
differences exist in the computation of income for financial and tax-reporting
purposes, giving rise to deferred taxes.

LIQUIDITY AND CAPITAL RESOURCES

At the end of 2003 working capital was ($973,585), a decrease of $228,886 from
May 31, 2002. The decrease is primarily due to a decrease in the Cash available
as well as a decrease in Accounts Receivable.

From mid-March through mid-May of the last three fiscal years, the Company has
offered a limited time reduced season pass price. The effect of this is that the
Company is able to generate cash flow toward the end of the fiscal year, while
it does not recognize the revenue until it is actually earned (as the season
pass holder skis). The Company did not experience as high a level of season pass
sales for the upcoming 2004 season. The Flathead Valley had three of its larger
employers announce layoffs during the time of the early season


                                       14
<PAGE>

pass sales. The Company expects to capture some of these guests through the
frequent skier card product or day ticket sales. During 2002, the Company
increased the season pass price by 13%, thus generating a higher level of
unearned income. The Company expects to continue with this program, although it
is expected that the price will probably increase in the coming years.

As the village core and surrounding lands are developed, property management is
seen as a vehicle to help guests of the Resort have a good experience, on and
off the slopes. As such, property management is a critical source of on-going
revenue, year round. The Company is actively looking for growth opportunities,
such as property management, which are complementary to the Resort business, to
successfully operate the Resort on a less seasonal, more year round basis.

Short term liquidity needs for the Company involve funding seasonal working
capital requirements and funding our limited 2004 capital expenditure program.
Long term, liquidity needs are to fund skiing-related capital improvements.
Capital expenditures are funded through the Company's line of credit with Bank
of America. The size and scope of the capital improvement program will generally
be determined annually depending upon the strategic importance and expected
financial return of the projects, future cash flow availability from Resort
operations and future borrowing availability. The Resort is well positioned for
the next couple of years and should not have to expend large amounts on mountain
improvements. Continued growth of skier visits, revenues and profitability will
require periodic capital investment in on-mountain improvements.

Specifically during 2003, the Company took a conservative approach to capital
expenditures. It completed the seven million gallon water reservoir it began
last fiscal year in order to have snowmaking along the Chair 2 ski trails.
Snowmaking helps to mitigate the weather conditions that impact the Resort
during the ski months. A lower level of capital expenditures continues in fiscal
year 2004, including computer upgrades, equipment rental upgrades and a software
package to enhance retail purchase capabilities for our guests.

Long-term debt at the end of 2003 increased to $7,539,876 from $6,013,705 at the
end of 2002. Long-term debt levels at the end of 2003 and 2002 were 73% and 55%,
respectively, of stockholders' equity.

The Company provides for its cash requirements primarily through cash generated
by operating activities, supplemented by borrowing under a revolving, reducing
credit facility. The Company currently has a loan agreement with Bank of
America. The agreement provides for a $13,500,000 revolving, reducing line of
credit which matures on May 31, 2009. The agreement provides funds for seasonal
working capital, capital projects and restructuring of long-term debt. The
agreement calls for reducing availability of funds in the amount of $1,200,000
each May 31 beginning May 31, 2004. Principal reductions are required on any
outstanding balances above the available amount. The agreement allows any
mandatory principal payment otherwise due to be skipped should annual gross
revenues (excluding real estate related revenues) drop below $8.5 million due to
conditions beyond the control of the Company. The provision is limited to two
such skip payments during the term of the loan. The interest rate on the
facility is at or below Bank of America's reference rate. The Company may obtain
funds below the reference rate by utilizing a London Interbank Offered Rate
based option. Standby letters of credit also reduce the amount available under
the revolving agreement. There were $7,300,829 of unused funds on the Bank of
America line of credit at May 31, 2003.

The Company entered into an agreement with the landowner contiguous to the
Company's eastern boundary during fiscal year 2002. Under this agreement, the


                                       15
<PAGE>

Company obtained an option to purchase approximately 183.5 acres during the next
four years at a specified price. This parcel may be divided into no more than
three separate parcels and may be acquired in as many as three separate
closings. The Company is required to make specified option payments during the
time of this agreement. The first three option payments will be credited
proportionally to parcels as they are purchased. The remaining option payments
will not be applied to the purchase price of any parcel. The Company made option
payments totaling $171,000 during fiscal year 2002. During fiscal year 2003, the
Company exercised part of this option by purchasing 52 acres. As a part of that
purchase, the Company was given credit for $44,204 of previously made option
payments. The Company made an additional $30,000 of option payments during the
year just ended which is reflected in Other Assets in Note 5.

During the fiscal year ended May 31, 2003, the Company sold a .75-acre tract of
land to a Hines Resorts entity for the purpose of developing a condominium
building in the village core. Located on this tract of land, was the Company's
marketing department, Big Drift Coffee House and Alpine Lodge, which contained
Kiddie Korner and a day lodge with related locker facilities. The Company has
moved its marketing department to facilities located near the property
management offices. Kiddie Korner is operating out of temporary facilities slope
side, until a permanent location has been determined. Big Drift moved its
building near Chair 1, behind Alpinglow. A new location for the day lodge is
planned for the upper floor of the Big Mountain Sports building for the upcoming
winter season. The Company expects to recognize the gain on the sale of this
parcel of land using the cost recovery method as with other parcels of land it
has sold. It is expected that this condominium project will contain 49
condominium units of varying sizes. It will also contain approximately 10,000
square feet of retail space. The Company expects to purchase this retail space
in late summer 2003 and lease the space to a varying mix of tenants. The project
broke ground in June, 2002 and is expected to be completed during the fall of
2003. Land sales of this nature will occur based on a detailed plan presented by
Hines Resorts to management and the Board of Directors and the prevailing
economic climate. The proposed development is being analyzed for a number of
important factors, one of the most important being whether the project is in
compliance with the Master Plan for the village core and surrounding area as
well as with the vision statement for the Resort.

Also during 2003, the Company's subsidiary, Big Mountain Development
Corporation, became a member of Morning Eagle LLC. The subsidiary does not
participate in the day-to-day operating activities of this entity, nor does it
guarantee any debt of the entity. The manager of the LLC prepares an annual plan
for approval of all members as to the type of development that is envisioned for
the tract of land owned by the LLC. The Company's subsidiary receives a portion
of the profit from this entity. The profit is the residual, if any, of the sales
of real estate product over the costs of developing that product, including
marketing. The Company's subsidiary is accounting for this investment under the
equity method of accounting, as it will receive 22% of the residual profit
generated.

On August 14, 2002, the Company filed Form 8K to announce that the Company's
Board of Directors authorized management to seek financing and pursue design
documents for a conference center to be built in the village core of the Resort.
The new facility is currently being planned to measure 41,000 square feet,
including parking, with approximately 27,000 square feet of useable meeting
space. At this time, the Board of Directors and management have decided to
vigorously investigate the options available to enable the conference center to
be constructed at the same time as the currently planned hotel adjacent to the
conference center site. It is believed that the conference center and the hotel
property will both become viable entities


                                       16
<PAGE>

quickly if operations begin simultaneously rather than separately. The Company
is currently exploring the various options available with a limited partnership
structure or limited liability company to raise capital for a hotel or a
combination hotel/conference center package with a third party(ies). The Company
continues to have a funding mechanism in place in which a portion of lot sales
are allocated to assist in the funding of the conference center. The Company
will continue to use this funding mechanism as well as others that are currently
under investigation. For the upcoming winter season, the Company has entered
into an agreement with an operator to lease the Bierstube restaurant/bar. It is
hoped that this operator will be interested in moving to the new location of the
Bierstube once that is determined as the conference center is completed.

During June, 2003, the Company entered into two interest rate swaps. These swaps
were entered into for a three and four year period of time at one million
dollars each. The objective of the hedge is to eliminate the variability of cash
flows in the interest payments for the debt, the sole source of which is due to
changes in the LIBOR benchmark interest rate. Changes in the cash flows of the
interest rate swap are expected to exactly offset the changes in cash
flows(i.e., changes in interest rate payments) attributable to fluctuations in
the LIBOR.

The Company has also commenced discussions with its line of credit lender, Bank
of America. During January, 2003, the Company renegotiated its line of credit to
$13.5 million on the assumption that the conference center would be breaking
ground in the near future. As it has been determined to wait on the conference
center, pending investigation of a hotel property, the Company has decided to
reduce the available amount on the outstanding portion of its line of credit. It
is currently planning to reduce the total amount available on the line of credit
from $13.5 million to $10 million. It is further expected that after the first
of calendar year 2004, the amount available will be reduced to $9 million. The
interest rate is expected to remain the same.

The Board of Directors has continued its ongoing discussion regarding the
economic viability of the Company continuing to operate under the rules and
regulations of the Securities and Exchange Commission. In the last 18 months,
following the well-publicized corporate scandals, the Securities and Exchange
Commission has implemented numerous regulations that are a significant new
burden on all public companies. In particular, the Sarbanes-Oxley Act of 2002
imposes further public reporting requirements and has had a dramatic effect on
the cost of Director and Officer (D & O) insurance for companies whose stock is
registered under the Exchange Act. Winter Sports, a relatively small company,
has the same reporting requirements as companies that are 10-100 times larger.
The Company has experienced a significant cost increase in D & O insurance
premiums as well as in audit fees and reporting requirements. At this time the
Company anticipates that additional new reporting requirements may be forth
coming and may have a further burden on the Company.

The above costs which can be quantified also do not include the substantial
attention management must devote to compliance with federal securities laws that
would be inapplicable if the Company were to deregister its common stock under
the Exchange Act. The Board of Directors believes the intangible benefits that
would be derived, if the management of the Company were allowed to focus
additional attention on operations and financial management would further
enhance the Company's financial performance and allow the Company to provide
improved services to its guests.


                                       17
<PAGE>

Item 7. Financial Statements

Index to Consolidated Financial Statements

                                                                            Page
                                                                            ----

        Independent Auditor's Report....................................      19

        Financial Statements:

        Consolidated Balance Sheets as of May 31, 2003 and 2002.........      20

        Consolidated Statements of Income and Retained Earnings
          for the Years Ended May 31, 2003, 2002 and 2001...............      21

        Consolidated Statements of Cash Flow
          for the Years Ended May 31, 2003, 2002 and 2001...............   22-23

        Notes to Consolidated Financial Statements......................   24-35


                                       18
<PAGE>

                          INDEPENDENT AUDITOR'S REPORT

To the Board of Directors and Stockholders
Winter Sports, Inc.
Whitefish, Montana

We have audited the accompanying consolidated balance sheets of Winter Sports,
Inc. (a Montana Corporation) as of May 31, 2003 and 2002, and the related
consolidated statements of income and retained earnings, and cash flows for each
of the three years in the period ended May 31, 2003. These consolidated
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the consolidated
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the consolidated financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Winter Sports, Inc.
as of May 31, 2003 and 2002 and the results of its operations and its cash flows
for each of the three years in the period ended May 31, 2003, in conformity with
accounting principles generally accepted in the United States of America.


Jordahl & Sliter PLLC
Kalispell, Montana
July 3, 2003


                                       19
<PAGE>

                               WINTER SPORTS, INC.
                           CONSOLIDATED BALANCE SHEETS

                                                                  May 31
                                                                  ------
                                                           2003            2002
                                                           ----            ----
ASSETS

Current Assets
  Cash and cash equivalents                        $    475,288    $    740,330
  Cash - restricted                                      76,595               0
  Accounts receivables                                  209,339         451,299
  Accounts receivables - related parties                 65,855         120,137
  Interest receivable - related parties                  68,110           4,761
  Income tax refund receivable                          290,163         154,235
  Current deferred tax asset                             36,514          30,832
  Inventories                                           560,634         573,773
  Prepaid expenses                                      450,523         247,257
                                                   ------------    ------------
Total Current Assets                                  2,233,021       2,322,624
                                                   ------------    ------------

Property and Equipment, at cost                      29,996,638      28,930,197
Accumulated depreciation and amortization           (17,515,325)    (16,253,486)
                                                   ------------    ------------
                                                     12,481,313      12,676,711
Construction in progress                                765,141         721,760
Land and development costs                            7,157,338       6,273,075
                                                   ------------    ------------
Net Property and Equipment                           20,403,792      19,671,546
                                                   ------------    ------------

Investment in LLCs                                     (239,023)        182,322
                                                   ------------    ------------

Goodwill - net of amortization                          158,469         158,469
                                                   ------------    ------------

Other Assets                                            970,253         524,304
                                                   ------------    ------------

TOTAL ASSETS                                       $ 23,526,512    $ 22,859,265
                                                   ============    ============

LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities
  Accounts payable                                 $    556,496    $    626,949
  Accounts payable - related parties                      4,666           8,460
  Employee compensation and related expenses            201,403         304,555
  Taxes other than payroll and income                    95,009          96,976
  Interest payable                                       44,903           7,938
  Interest payable - related parties                     34,062          35,094
  Current deferred tax liability                         28,314               0
  Current portion long-term debt                         45,304          42,890
  Deposits and other unearned income                  2,193,551       2,399,040
  Other current liabilities                               2,898           3,193
                                                   ------------    ------------
Total current liabilities                             3,206,606       3,525,095
Long-term debt                                        7,539,876       6,013,705
Deferred income taxes                                 2,448,191       2,422,153
                                                   ------------    ------------
Total Liabilities                                    13,194,673      11,960,953
                                                   ------------    ------------

Stockholders' Equity
  Common stock (5,000,000 shares authorized;
    988,668 shares outstanding
    in 2003 and 2002)                                 3,887,676       3,887,676
  Retained earnings                                   6,444,163       7,010,636
                                                   ------------    ------------
Total stockholders' equity                           10,331,839      10,898,312
                                                   ------------    ------------

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY         $ 23,526,512    $ 22,859,265
                                                   ============    ============

   The accompanying notes are an integral part of these financial statements.


                                       20
<PAGE>

                               WINTER SPORTS, INC.
             CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS

<TABLE>
<CAPTION>
                                                         Year Ending May 31,
                                                   2003            2002            2001
                                                   ----            ----            ----
<S>                                        <C>             <C>             <C>
Revenue
  Lifts                                    $  5,434,446    $  5,535,558    $  5,377,664
  Retail                                      1,027,529       1,117,510         797,353
  Equipment rental and repair                   639,187         677,293         713,079
  Lodging                                       237,130         275,701         252,231
  Lease, management and other fees            2,628,109       3,177,949       2,296,173
  Lease, management and other fees
    - related parties                           345,645         253,985         231,817
  Real estate sales                                   0       2,004,186       3,233,534
                                           ------------    ------------    ------------
Total Revenue                                10,312,046      13,042,182      12,901,851
                                           ------------    ------------    ------------

Operating Costs & Expenses
  Direct expenses - lifts                     2,072,921       2,262,062       2,163,647
  Depreciation expense - lifts                  907,640         886,164         875,657
  Cost of retail                                656,974         760,055         516,957
  Cost of real estate sales                           0         908,430       1,595,213
  Payroll and related expenses                3,366,862       3,474,450       2,975,356
  Direct expenses                             1,393,284       1,670,735       1,783,222
  Direct expenses - related parties              13,321          30,748          84,825
  Marketing                                     905,920       1,022,938       1,030,007
  Marketing - related parties                     1,281          (1,014)          1,600
  Depreciation and amortization                 716,919         753,103         639,136
  General and administrative                  1,355,562       1,179,395         942,467
  General and administrative -
    related parties                              34,180          (6,197)         41,396
                                           ------------    ------------    ------------
Total Operating Costs & Expenses             11,424,864      12,940,869      12,649,483
                                           ------------    ------------    ------------

Operating Income (Loss)                      (1,112,818)        101,313         252,368
                                           ------------    ------------    ------------
Other Income (Expense)
  Interest income                                 8,065         203,317               0
  Interest income - related parties              68,110               0               0
  Interest expense                             (253,087)       (454,193)       (287,388)
  Interest expense - related parties            (85,683)        (35,094)              0
  Sale of land                                3,445,989       2,441,315               0
  Unrecognized gross profit on land sale     (3,376,468)     (2,441,188)              0
  Cost of land sale                             (69,521)           (127)              0
  Gain on land sale previously
    Unrecognized                                141,938       2,368,737               0
  Gain on land sale                              15,648               0               0
  Equity in Earnings-LLCs                       144,234         182,302               0
  Other income (expense)                         36,674         269,738          19,992
                                           ------------    ------------    ------------

Total Other Income (Expense)                     75,899       2,534,807        (267,396)
                                           ------------    ------------    ------------

Income (Loss) before income taxes            (1,036,919)      2,636,120         (15,028)
  Provision for (Recovery of)
    income taxes                               (470,446)      1,037,603          (5,700)
                                           ------------    ------------    ------------
Net Income (Loss)                              (566,473)      1,598,517          (9,328)

Retained earnings - beginning of year         7,010,636       5,412,119       5,421,447
                                           ------------    ------------    ------------

Retained earnings - end of year            $  6,444,163    $  7,010,636    $  5,412,119
                                           ============    ============    ============
Earnings (Loss) per common share           $       (.57)   $       1.62    $       (.01)
                                           ============    ============    ============
Weighted average shares outstanding             988,688         988,688         995,344
</TABLE>

    The accompanying notes are an integral part of these financial statements


                                       21
<PAGE>

                               WINTER SPORTS, INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                         Year Ending May 31,
                                                  2003           2002           2001
                                                  ----           ----           ----

<S>                                        <C>            <C>            <C>
Cash flows from operating activities:
  Net income (loss)                        $  (566,473)   $ 1,598,517    $    (9,328)
                                           -----------    -----------    -----------

Adjustments to reconcile net income
  to cash provided by
  operating activities:
    Depreciation and amortization            1,580,858      1,632,268      1,510,482
    Increase (decrease) in deferred
         income taxes                         (180,282)       851,836        (69,016)
    (Gain) loss on disposition of assets             0         (2,212)       (18,860)
    (Gain) on sale of land                           0     (2,368,737)             0
    Equity in Earnings-LLCs                    421,345       (182,302)             0
    Write-off of intangible asset               11,299         57,306              0
    Changes in operating assets
     and liabilities:
       Receivables                             132,024       (311,818)      (161,226)
       Refundable income taxes                (135,928)        27,449          8,600
       Inventories                              13,139        (32,193)      (134,704)
       Prepaid expenses                       (203,266)       (16,719)        (6,830)
       Construction in progress               (193,535)      (535,433)       405,353
       Land and development costs                3,795        659,761        535,936
       Other assets                             43,351              0       (189,539)
       Accounts payable                        (74,246)       187,365       (417,866)
       Employee compensation and
         related expenses                     (103,153)        83,277         54,295
       Interest payable                         35,933         43,032        (45,063)
       Taxes other than payroll and
         income taxes                           (1,967)        (2,352)       (43,112)
       Deposits and other
         unearned revenue                     (205,489)       415,107        125,020
       Other liabilities                          (294)        (9,880)        (2,265)
                                           -----------    -----------    -----------
  Total adjustments                          1,143,584        495,755      1,551,205
                                           -----------    -----------    -----------
Net cash provided by
  operating activities                         577,111      2,094,272      1,541,877
                                           -----------    -----------    -----------


Cash flows from investing activities:
  Proceeds from sale of assets and land         69,869      2,386,942         60,822
  Option payments                              (30,000)      (171,000)             0
  Cash-restricted                              (76,595)             0              0
  Property and equipment acquisitions       (1,479,011)    (1,108,696)    (3,534,396)
                                           -----------    -----------    -----------
Net cash provided by (used in)
  investing activities                      (1,515,737)     1,107,246     (3,473,574)
                                           -----------    -----------    -----------

Cash flows from financing activities:
  Proceeds from issuance of
     long-term debt                          9,070,075      6,966,460      8,478,201
  Payments of long-term debt                (8,381,491)    (9,593,971)    (6,445,520)
  Loan fees paid                               (15,000)             0              0
  Stock Repurchase Plan                              0              0       (232,017)
                                           -----------    -----------    -----------
Net cash provided by (used in)
  financing activities                         673,584     (2,627,511)     1,800,664
                                           -----------    -----------    -----------
</TABLE>


                                       22
<PAGE>

<TABLE>
<S>                                        <C>            <C>            <C>
Net increase (decrease) in cash
  and cash equivalents                        (265,042)       574,007       (131,033)
Cash and cash equivalents - beginning
  of year                                      740,330        166,323        297,356
                                           -----------    -----------    -----------
Cash and cash equivalents - end
  of year                                  $   475,288    $   740,330    $   166,323
                                           ===========    ===========    ===========
</TABLE>

    The accompanying notes are an integral part of these financial statements


                                       23
<PAGE>

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1. Summary of Significant Accounting Policies

The consolidated financial statements include the amounts of Winter Sports, Inc.
and its wholly owned subsidiaries, Big Mountain Water Company, Big Mountain
Development Corporation and Big Mountain Club LLC. All significant intercompany
accounts and transactions have been eliminated in consolidation. Certain amounts
in 2002 have been reclassified to conform with 2003 presentation.

The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.

In order to secure the obligation to provide water to a planned affordable
housing community to be built by another developer, the Company is required to
maintain a restricted cash bank account and balance of $76,595, wherein the
Flathead County Board of Commissioners has joint control until completion of the
improvements.

Property and equipment is stated at cost. Additions and betterments are
capitalized, while maintenance and repairs are expensed as incurred. For
financial reporting purposes, depreciation is provided for by the straight-line
method over estimated useful lives. Accelerated depreciation methods are used
for tax purposes. Gains and losses from the sale or retirement of assets are
included in other income (expense).

Land is stated at the lower of cost or net realizable value. All direct and
indirect costs related to land (including land acquisition costs, land
improvement, surveying, engineering and legal fees) are capitalized.

Revenues earned from lifts, retail, rental, lodging and lease management and
other fees are recognized as products are delivered or services rendered.

The Company records deferred revenue under Deposits and other unearned income.
This deferred revenue consists of the sale of season passes. The number of
season passholder visits is estimated based on historical data, and the deferred
revenue is recognized throughout the season based on this estimate.

Interest is capitalized in connection with the construction of major projects.
The capitalized interest is recorded as part of the asset to which it relates
and is amortized over the assets useful life. Capitalized interest during fiscal
year 2003 was $6,996. In 2002 and 2001, $15,231 and $0 of interest was
capitalized, respectively.

The Company, under a development agreement with another entity, will from time
to time sell parcels of land. The Company is recognizing any gain on the sale of
these parcels under the cost recovery method. Under this method, the gain is
unrecognized until such time as the basis of the land and the associated costs
of the sale of these parcels have been recovered.

The Company adopted FASB 142 at the beginning of the 2003 fiscal year. Under
this FASB, goodwill and intangible assets deemed to have indefinite lives are no
longer amortized, instead being subject to impairment tests at least annually.
Other intangible assets will continue to be amortized over their contractual
lives. An impairment test of the lodging reporting unit reported no impairment
of goodwill as of the end of the fiscal year 2003. The effect on net income and
earnings per share exclusive of amortization expense would be as follows:


                                       24
<PAGE>

                                             For the Year Ended May 31,
                                      ------------------------------------------
                                          2003           2002           2001
                                          ----           ----           ----

Reported net income(loss)             $  (566,473)   $ 1,598,517    $    (9,328)
Add Back:  Goodwill amortization                          11,382            949
                                      -----------    -----------    -----------
Adjusted net income(loss)             $  (566,473)   $ 1,609,899    $    (8,379)
                                      ===========    ===========    ===========

Earnings per share:
Reported net income(loss)             $      (.57)   $     (1.62)   $      (.01)
Goodwill amortization                                        .01
                                      -----------    -----------    -----------
Adjusted net income(loss)             $      (.57)   $      1.63    $      (.01)
                                      ===========    ===========    ===========

Statement of Financial Accounting Standards No. 143 was adopted by the Company
in 2003. Under this standard, asset retirement and the obligations associated
with the retirement of tangible long-lived assets will change. This statement
will not have a material effect on its financial statements as presented.

The Company adopted FASB 144 at the beginning of the 2003 fiscal year. This
standard sets forth guidelines for accounting and reporting for the impairment
of long-lived assets and for long-lived assets to be disposed of. This statement
will not have material effect on the financial statements as presented.

In July 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated
with Exit or Disposal Activities." SFAS 146 requires that a liability for a cost
that is associated with an exit or disposal activity be recognized when the
liability is incurred. SFAS 146 also establishes that fair value is the
objective for the initial measurement of the liability. SFAS 146 is effective
for exit or disposal activities that are initiated after December 31, 2002. The
Company did not have any such activities during the current year.

In November 2002, the FASB issued FASB Interpretation No. 45 ("FIN 45"),an
interpretation of FASB Statement No. 5, "Accounting for Contingencies." This
interpretation elaborates on the disclosures to be made by a guarantor in its
interim and annual financial statements about its obligations under certain
guarantees that it has issued. The initial recognition and initial measurement
provisions of FIN 45 are applicable on a prospective basis to guarantees issued
or modified after December 31, 2002, irrespective of the guarantor's fiscal
year-end. The disclosure requirements of FIN 45 are effective for financial
statements of interim or annual periods ending after December 15, 2002. The
adoption of this standard had no material impact on the Company's financial
statements.

Revenue from investments in limited liability companies has been accounted for
under the Equity method of accounting. Under this method, earnings are
recognized at the time they are earned through the LLC. In January 2003, the
FASB issued FIN 46, "Consolidation of Variable Interest Entities". FIN 46
explains the concept of a variable interest entity and requires consolidation by
the primary beneficiary where the variable interest entity does not have
sufficient equity at risk to finance its activities without additional
subordinated financial support from other parties. FIN 46 also requires an
investor with a majority of the variable interests in a variable interest entity
to consolidate the entity and also requires majority and significant variable
interest investors to provide certain disclosures. This interpretation applies
immediately to variable interest entities created after January 31, 2003, and
applies in the first year or interim period beginning after December 15, 2003 to
variable interest entities in which an enterprise holds a variable interest that
it acquired before February 1, 2003. Subsequent to January 31, 2003, one of the
Company's subsidiaries, Big Mountain Development Corporation, became a member in
Glades Development LLC.


                                       25
<PAGE>

The Company believes that Glades Development LLC is a variable interest entity;
however, it has determined that the Company's subsidiary, Big Mountain
Development Corporation, is not the primary beneficiary and under FIN 46, it
will not consolidate the entity. Prior to January 31, 2003 the same subsidiary
became a member in Moose Run II LLC, Northern Lights LLC and Morning Eagle LLC.
The Company has determined that under FIN 46, Moose Run II LLC is a variable
interest entity and the Company's subsidiary, Big Mountain Development
Corporation, is the primary beneficiary; therefore the entity will be
consolidated in the first interim period beginning after December 15, 2003. See
also Note 4.

Advertising costs are expensed as incurred. Advertising expenses were $795,642,
$897,528 and $910,595 in 2003, 2002 and 2001, respectively.

The Company uses the allowance method to account for uncollectible accounts
receivable. The Company considers accounts receivable to be fully collectible at
year-end, accordingly, no allowance for doubtful accounts is required. For
purposes of the Consolidated Statements of Cash Flows, the Company considers all
highly liquid investments purchased with a maturity of three months or less to
be cash equivalents.

Inventories are stated at the lower of cost or market value on a first-in,
first-out method.

Loan costs, included in Other Assets, are being amortized ratably over the term
of the loan. The Covenant Not to Compete is being amortized on a straight-line
basis over a sixty-month period. Goodwill was being amortized on a straight-line
basis over fifteen years until the current fiscal year. During the year ending
May 31, 2003, the Company adopted FAS 142. It has been determined that there has
not been an impairment of this asset and so no write down has occurred during
the past year.

On September 9, 1995, the Company received approval from the U.S. Forest Service
for the Final Environmental Impact Statements (EIS) for The Big Mountain Resort.
The Company has previously amortized the costs of the EIS over its useful life.
During fiscal year 2002, it was determined that there was no value left in the
EIS and so the Company wrote off the remaining balance.

The Company estimates that the fair value of all financial instruments at May
31, 2003 and 2002, do not differ materially from the aggregate carrying values
of its financial instruments recorded in the accompanying balance sheets.

NOTE 2. Business Segment Information

In 2003, 2002 and 2001, the Company operated principally in two industries, the
operation of a resort area and real estate investment. Winter Sports is involved
in operations in the resort area industry to develop and provide recreational
and related services to guests. Also included in Winter Sports segment reporting
is the Company's other wholly owned subsidiary, Big Mountain Water Company. This
entity is the local water supplier for the resort area. Big Mountain Development
Corporation participates in various LLC activities as described in Note 4. The
Company evaluates the performance of its two segments primarily by evaluating
the income from operations of each segment. The Company must be able to react to
weather conditions and changing traveling habits for the resort segment. The
real estate investment segment, or BMDC, is also evaluated primarily by its
income from operations and also by the income received through Equity in
Earnings - LLCs (see Note 4).


                                       26
<PAGE>

Financial information by industry segment for 2003, 2002 and 2001 is summarized
as follows:

                                   Winter Sports       BMDC        Consolidated
                                   -------------   ------------    ------------
2003
  Revenue                          $ 10,212,649    $     99,397    $ 10,312,046
  Operating profit(loss)           $   (922,970)   $   (189,848)   $ (1,112,818)
  Depreciation and amortization    $  1,602,806    $     21,753    $  1,624,559
  Interest income                  $     54,977    $     21,198    $     76,175
  Interest expense                 $   (338,770)   $          0    $   (338,770)
  Gain on land sale previously
         Unrecognized              $    141,938    $          0    $    141,938
  Equity in Earnings -LLCs         $          0    $    144,234    $    144,234
  Income tax expense (benefit)     $   (488,727)   $     18,281    $   (470,446)
  Net income (loss)                $   (556,811)   $     (9,662)   $   (566,473)
  Identifiable assets              $ 20,022,608    $  3,503,904    $ 23,526,512
  Capital expenditures             $  1,479,011    $          0    $  1,479,011

2002
  Revenue                          $ 10,893,082    $  2,149,100    $ 13,042,182
  Operating profit (loss)          $   (877,900)   $    979,213    $    101,313
  Depreciation and amortization    $  1,617,414    $     21,853    $  1,639,267
  Interest income                  $     60,963    $    142,354    $    203,317
  Interest expense                 $   (489,287)   $          0    $   (489,287)
  Gain on land sale previously
         Unrecognized              $  2,368,737    $          0    $  2,368,737
  Equity in Earnings-LLCs          $          0    $    182,302    $    182,302
  Income tax expense               $    695,842    $    341,761    $  1,037,603
  Net income                       $    663,409    $    935,108    $  1,598,517
  Identifiable assets              $ 19,077,997    $  3,781,268    $ 22,859,265
  Capital expenditures             $  1,108,696    $          0    $  1,108,696

2001
  Revenue                          $  9,473,285    $  3,428,566    $ 12,901,851
  Operating profit(loss)           $ (1,210,402)   $  1,462,770    $    252,368
  Depreciation and amortization    $  1,492,742    $     22,051    $  1,514,793
  Interest income                  $          0    $          0    $          0
  Interest expense                 $   (287,388)   $          0    $   (287,388)
  Equity in Earnings-LLCs          $          0    $          0    $          0
  Income tax expense (benefit)     $   (648,471)   $    642,771    $     (5,700)
  Net Income (loss)                $   (973,485)   $    964,157    $     (9,328)
  Identifiable assets              $ 14,761,052    $  2,927,403    $ 17,688,455
  Capital expenditures             $  3,534,396    $          0    $  3,534,396


                                       27
<PAGE>

NOTE 3. Property and Equipment

                                    Asset
                                  Life Years               2003             2002
                                  ----------               ----             ----

Leasehold improvements                  30         $    911,053     $    891,783
Buildings and grounds                10-30           10,497,513       10,328,319
Lifts                                10-15           10,150,579       10,140,438
Machinery and equipment               3-25            6,837,598        6,135,703
Furniture and fixtures                3-10              819,396          752,187
Water system                         10-25              780,499          681,767
                                                   ------------     ------------
Total property and equipment                       $ 29,996,638     $ 28,930,197
                                                   ============     ============

NOTE 4. Investment in LLCs

The Company's subsidiary, Big Mountain Development Corporation has become a
member of four limited liability companies, Northern Lights LLC, Morning Eagle
LLC, The Glades LLC and Moose Run II LLC. In each of these LLCs, the subsidiary
does not participate in the day-to-day operating activities of these entities,
nor does it guarantee any debt. The manager of each LLC prepares an annual plan
for approval of all members as to the type of development that is envisioned for
the tract of land owned by the LLC. The Company's subsidiary receives a portion
of the profit from each of these entities. The profit is residual, if any, of
the sales of real estate product over the costs of developing that product,
including marketing. The Company's subsidiary is accounting for this investment
under the equity method of accounting, as it will receive 60% of the residual
profit generated in each LLC, except for Morning Eagle LLC in which it will
receive 22% of any residual.

As a result of FIN 46, the Company is evaluating its subsidiary's investment in
each of these limited liability companies to determine whether these entities
meet the definition of Variable Interest Entities under this provision. If the
Company's subsidiary, Big Mountain Development Corporation, is determined to be
the primary beneficiary of any of these LLC's, the Company would then be
required to consolidate that entity, rather than reporting on the equity method
as has been done in the past.

Moose Run II LLC was entered into in November, 2001. This entity sold land to
another developer for a lump sum plus a portion of the gross proceeds of any
sales. The entity had total assets of $85,181 and total liabilities of $540,657
as of May 31, 2003. The Company's maximum exposure is limited to its equity
contribution of $10, its ratable share of any income/loss and the remaining
portion of a note receivable in the amount of $477,090 plus accrued interest.
The Company has initially determined that the Company's subsidiary, Big Mountain
Development Corporation, could be the primary beneficiary of this variable
interest entity. Under the provisions of FIN 46, the Company is not required at
this time to consolidate this entity.

The Glades Development LLC was entered into in April, 2003. This entity is
involved in a project for single family home sites. The total assets of this
entity were $3,356,486 and total liabilities of $3,549,994 as of May 31, 2003.
The Company's maximum exposure to loss is the ratable portion of income/loss.
The Company has determined that the Company's subsidiary, Big Mountain
Development Corporation, is not the primary beneficiary of this entity.
Therefore, it will not be consolidated, but rather reported by the equity
method.


                                       28
<PAGE>

The following information summarizes the activity of the LLCs through May 31,
2003:

ASSETS
  Land held for development and sale               $ 15,151,872
  Cash                                                3,121,887
  Other Assets                                          559,092
                                                   ------------
                                                   $ 18,832,851
                                                   ============

LIABILITIES AND EQUITY
  Notes and other payables                         $ 17,167,785
  Equity                                              1,665,066
                                                   ------------
                                                   $ 18,832,851
                                                   ============

Net Income from sales                              $   (360,345)
                                                   ============

NOTE 5. Other Assets

Other assets at May 31, 2003 and 2002 are summarized as follows:

                                                           2003             2002
                                                           ----             ----

Loan costs, net of amortization                        $ 14,732         $ 18,089
Planning and development - long-term                     41,460           52,758
Noncurrent deferred tax asset                           469,593          240,641
Option Payments                                         156,796          171,000
Note receivable                                         100,870                0
Covenant Not to Compete, net of amortization             14,148           18,988
Other long-term assets                                  172,654           22,828
                                                       --------         --------
Total other assets                                     $970,253         $524,304
                                                       ========         ========


                                       29
<PAGE>

NOTE 6. Notes Payable

Long-term debt at May 31, 2003 and 2002 is summarized as follows:

                                                            2003           2002
                                                            ----           ----
Bank of America National Trust and Savings            $6,199,171     $4,628,595
Association, revolving, reducing term loan with
initial $13,500,000 availability decreasing by
$1,200,000 each year beginning May 31, 2004.
Mandatory principal reductions are required on
outstanding balances above amounts available.
Interest at or below banks' reference rate.
Interest rate at May 31, 2003 and 2002 was 2.1934%
and 3.7713%, respectively. Secured by all ski area
operation real and personal property and
assignment in trust of all U.S. Forest Service
special use permits. Matures May 31, 2009.

Whitefish Credit Union, a related party,               1,386,009      1,428,000
Term loan.  Interest reviewed annually and
Set at Wall Street Prime +1%, with a floor of
5% and a cap of 8.5%.  Interest at May 31, 2003
is 5.75%.  Secured by land purchase.  Maturity
date of January 1, 2007.  Five annual payments of
$125,000(principal and interest) due each January 1.

Less current maturities                                  (45,304)       (42,890)

-------------------------------------------------------------------------------
Total long-term debt                                  $7,539,876     $6,013,705
===============================================================================

Mandatory reductions of long-term debt are as follows:

For the Year Ending May 31,              Amount
-----------------------------------------------
          2004                      $    45,304
          2005                           47,892
          2006                           50,646
          2007                        1,242,167
          2008                                0
          2009                        6,199,171
                                    -----------
                                    $ 7,585,180
                                    ===========

The Bank of America loan agreement contains covenants that require a debt
service coverage ratio, health ratio as defined, disposition of assets, capital
expenditures, outside borrowing and payment of dividends. During fiscal year
2003, the Company exceeded its health ratio, but was given a written waiver by
Bank of America. During fiscal year 2002, the Company exceeded its capital
expenditures provision, but was given a written waiver by Bank of America.

At May 31, 2003 and 2002, $7,300,829 and $2,871,405 respectively, were unused
and available for borrowing on the Bank of America line of credit.


                                       30
<PAGE>

NOTE 7. Income Taxes

Income taxes (credits) consist of the following:

                                               2003          2002          2001
                                               ----          ----          ----
Current
  Federal                               $  (203,370)  $   149,330   $    54,040
  Fuel tax credit                            (3,517)         (676)       (1,384)
                                        -----------   -----------   -----------
                                           (206,887)      148,654        52,656
  State                                     (83,276)       37,113        10,660
                                        -----------   -----------   -----------
                                           (290,163)      185,767        63,316
Deferred
  Federal                                  (179,866)      708,797       (58,275)
  State                                        (417)      143,039       (10,741)
                                        -----------   -----------   -----------
Provision for(Recovery of) income taxes $  (470,446)  $ 1,037,603   $    (5,700)
                                        ===========   ===========   ===========



Temporary differences exist in the computation of income for financial and
tax-reporting purposes which gives rise to deferred taxes. The source of these
differences for the year ended May 31 is as follows:

                                               2003          2002          2001
                                               ----          ----          ----

Depreciation                            $ 3,746,501   $ 3,595,057   $ 3,619,900
Uniform capitalization for income tax       (28,625)      (42,215)      (51,401)
Bad debt reserve                                  0             0       (39,861)
Vacation allowance                          (66,326)      (64,944)      (75,257)
Land and LLC Basis                        2,142,787     2,084,585             0
State tax refund                             83,276             0             0
Federal tax net operating loss
    Carryforward                           (583,626)            0             0
Charitable contribution carryforward       (228,047)            0             0

The significant components of Deferred Taxes in the accompanying Balance Sheet
are as follows:

                                               2003          2002
                                               ----          ----

Current deferred tax liability           $   28,314    $        0
Noncurrent deferred tax liability         2,448,191     2,422,153
                                         ----------    ----------
Total deferred tax liability             $2,476,505    $2,422,153
                                         ==========    ==========

Current deferred tax assets              $   36,514    $   30,832
Noncurrent deferred tax asset               469,593       240,641
                                         ----------    ----------
Net deferred tax assets                  $  506,107    $  271,473
                                         ==========    ==========



The difference between the Company's effective income tax rate and the statutory
Federal income tax rate is as follows:

                                              2003         2002         2001
                                              ----         ----         ----

Income (loss) before taxes              $(1,036,919)   $ 2,636,120    $(15,028)
Statutory federal rate                          (34%)           34%        (34%)
Increased (decreases) resulting from:
  State tax at statutory rate                    (7%)            7%         (7%)
  Other (net)                                    (4%)           (2%)         3%
                                        -----------    -----------    --------
Effective tax rate                              (45%)           39%        (38%)
                                        ===========    ===========    ========


                                       31
<PAGE>

At May 31, 2003, the Company incurred a Federal net operating loss of $1,210,831
and a State net operating loss of $1,233,720. The State loss was carried back
three years to May 31, 2000 and fully utilized, resulting in State refundable
taxes of $83,276. The Federal loss was carried back to May 31, 2001 and 2002
with $627,205 of the total loss was utilized, resulting in refundable taxes of
$203,370. The Company has a Federal net operating loss carryforward of $583,626
that can be used to offset future taxable income. The net operating loss will
expire on May 31, 2023. The Company also has a charitable contribution
carryforward of $228,047 that will expire on May 31, 2008.

At May 31, 2002, the Company utilized an alternative minimum tax credit
carryforward of $17,202 to reduce current income taxes. The credit had been
recognized in 2001 as a noncurrent deferred tax asset.

At May 31, 2001 the Company had an alternative minimum tax credit carryforward
of $17,202 which was carried forward to 2002.

NOTE 8. Supplemental Cash Flow Disclosures

Supplemental cash flow information is as follows:

Cash paid during the year for:               2003           2002           2001
                                             ----           ----           ----

Interest (net of capitalized)         $   295,841    $   446,255    $   332,451
Income taxes (net of refunds)         $         0    $         0    $   245,000

Schedule of non-cash investing and financing
  Transactions

                                             2003           2002           2001
                                             ----           ----           ----
Acquisition of Assets                 $ 2,363,215    $ 5,561,831    $ 3,735,196
Less option payment credit                (44,204)             0              0
Less notes payable                       (840,000)    (4,453,135)      (200,800)
                                      -----------    -----------    -----------
  Cash paid                           $ 1,479,011    $ 1,108,696    $ 3,534,396
                                      ===========    ===========    ===========

NOTE 9. Special Use Permits

The operation of ski lifts and trails involves the use of U.S. Forest Service
lands located in the Flathead National Forest. Winter Sports, Inc. is licensed
by special use permits issued by the U.S. Forest Service, which expire December
21, 2038. Charges to income for fees paid, based on the Graduated Rate Fee
System set by the U.S. Forest Service were $106,266, $95,319 and $91,596 for
2003, 2002 and 2001, respectively.

NOTE 10. Employee Benefit Plans

The Company maintains a 401(k) Salary Deferred Plan that covers substantially
all full-time employees meeting minimum requirements. Plan benefits are limited
to the participants' vested share of plan contributions, earnings and
forfeitures. All enrolled employees contribute a minimum of 2% of their gross
compensation. The Company contributes a matching 2% for those employees who
contribute between 2% and 3%. The Company contributes a matching 3% for any
employee who contributes 4% or more. The plan is currently 100% funded. The
Company's contributions to the Plan and charges to income for 2003, 2002 and
2001 amounted to $55,270, $61,955 and $46,639 respectively.


                                       32
<PAGE>

NOTE 11. Related Party Transactions

Revenues are derived and expenses incurred as a result of transactions with
executive officers, stockholders and directors of Winter Sports, Inc. or
companies controlled by them or parties which can significantly influence
management or the operating policies of the transacting parties.

Related party transactions are summarized as follows:

                                                 2003         2002          2001
                                                 ----         ----          ----

Revenue received
  Rent and lease revenue                   $        0   $   10,000    $   13,932
  Interest income                          $   68,110   $        0    $        0
  Other revenue                            $  345,645   $  243,985    $  217,885

Expenses incurred
  Direct Expenses                          $   13,321   $   30,748    $   84,825
  Marketing                                $    1,281   $   (1,014)   $    1,600
  General and administrative               $   34,180   $   (6,197)   $   41,396
  Interest Expense                         $   85,683   $   35,094    $        0

Amounts due to and from related parties
  Accounts receivable                      $   65,855   $  120,137    $   27,128
  Interest receivable                      $   68,110   $    4,761    $        0
  Accounts payable                         $    4,666   $    8,460    $    6,233
  Interest payable                         $   34,062   $   35,094    $        0
  Note payable                             $1,386,009   $1,428,000    $        0

NOTE 12. Commitments and Contingencies

The Company entered into an agreement with the landowner contiguous to the
Company's eastern boundary during the current fiscal year. Under this agreement,
the Company obtained an option to purchase approximately 183.5 acres during the
next four years at a specified price. This parcel may be divided into no more
than three separate parcels and may be acquired in as many as three separate
closings. The Company is required to make specified option payments during the
time of this agreement. The first three option payments will be credited
proportionally to parcels as they are purchased. The remaining option payments
will not be applied to the purchase price of any parcel. The Company made option
payments totaling $30,000 and $171,000 during fiscal years 2003 and 2002,
respectively, which is reflected in Other Assets in Note 5.

From time to time, the Company has been a defendant in unrelated lawsuits filed
by individuals who are each seeking damages of specified amounts for alleged
personal injuries resulting from accidents occurring on the Company's property
or while skiing. The Company's insurance carrier provides defense and coverage
for these claims and the Company's participation has been limited to its policy
deductible. Such amounts are charged to General and Administrative expense upon
settlement.

The Company is a defendant in two lawsuits filed on behalf of individuals who
are seeking damages of unspecified amounts for alleged personal injuries
resulting from an accident occurring on the Company's property. The Company
intends to vigorously defend the claims. Outside counsel for the Company has
advised that at this stage in the proceedings they cannot offer an opinion as to
the probable outcome or estimate the amount or range of a potential loss.


                                       33
<PAGE>

Financial instruments that potentially subject the Company to credit risk
consist of cash balances in one financial institution in excess of the Federal
Deposit Insurance Corporation's $100,000 limit.

Other potential credit risks to the Company consist of trade receivables. The
Company grants credit to customers for group banquets and retail inventory
sales, most of whom are located in the northwest United States.

NOTE 13. Other Income and Expense

During fiscal year 2002, the Company recognized a portion of the gain on the
sale of land during this fiscal year in the amount of $2,368,737. The Company
sold approximately 16 acres during the first quarter of this fiscal year. The
Company is recognizing the gain on the sale of the land under the cost recovery
method. Under this method, the gain is unrecognized until such time as the basis
of the land and the associated costs of the sale of land have been recovered.
During the year, these costs were recovered through proceeds received and the
gain will continue to be recognized as proceeds continue to be received. The
Company expects this to continue through the second quarter of the current
fiscal year.

Included in Other income for fiscal year 2002, is income received from an
adjacent landowner under the terms of a legal agreement, in which the landowner
would be responsible for the costs related to construction of a road on the
Company's property where the landowner would have egress. It was previously
unclear when and if this would be collected as well as what the actual dollar
amount for which the landowner would be liable. During 2002, the Company
collected $243,505. This type of revenue is not expected in the future.

During 2002, the Company thinned a minor portion of its slopeside lands and
earned $4,021 from the sale of the timber. During 2001, no income was earned
from the sale of timber.

The Company also sold an easement to a utility company during 2002 for $20,000.
This sale was necessary due to the utility company relocating its needed
corridor. This type of revenue is not expected in the future.

Other Income (Expense) included in the Consolidated Statements of Income
consists of the following:

                                                    2003        2002        2001
                                                    ----        ----        ----

Gain on sale/retirement of assets              $   2,791   $   2,212   $  18,860
Income on construction of road                         0     243,505           0
Sale of timber                                         0       4,021           0
Sale of easement                                       0      20,000           0
Other                                             33,883           0       1,132
                                               ---------   ---------   ---------
Total other income (expense)                   $  36,674   $ 269,738   $  19,992
                                               =========   =========   =========

Note 14. Subsequent Events

During June, 2003, the Company entered into two interest rate swaps. These swaps
were entered into for periods of three and four years, respectively, at one
million dollars each. The objective of the hedge is to eliminate the variability
of cash flows in the interest payments for the debt, the sole source of which is
due to changes in the LIBOR benchmark interest rate. Changes in the cash flows
of the interest rate swap are expected to exactly offset the changes in cash
flows(i.e., changes in interest rate payments) attributable to fluctuations in
the LIBOR.


                                       34
<PAGE>

The Company has also commenced discussions with its line of credit lender, Bank
of America. During January, 2003, the Company renegotiated its line of credit to
$13.5 million on the assumption that the conference center would be breaking
ground in the near future. As it has determined to wait on the conference
center, pending investigation of a hotel property, the Company has decided to
reduce the available amount on the outstanding portion of its line of credit. It
is currently planning to reduce the total amount available on the line of credit
from $13.5 million to $10 million. It is further expected that after the first
of the calendar year, the amount available will be reduced to $9 million. The
interest rate is expected to remain the same.

The Board of Directors has continued its ongoing discussion regarding the
economic viability of the Company continuing to operate under the rules and
regulations of the Securities and Exchange Commission. In the last 18 months,
following the well publicized corporate scandals, the Securities and Exchange
Commission has implemented numerous regulations that are a significant new
burden on all public companies. In particular, the Sarbanes-Oxley Act of 2002
imposes further public reporting requirements and has had a dramatic effect on
the cost of Director and Officer (D & O) insurance for companies whose stock is
registered under the Exchange Act. Winter Sports, a relatively small company has
the same reporting requirements as companies that are 10-100 times larger. The
Company has experienced a significant cost increase in D & O insurance premiums
as well as in audit fees and reporting requirements. At this time the Company
anticipates that additional new reporting requirements may be forthcoming and
may have a further burden on the Company.

The above costs which can be quantified also do not include the substantial
attention management must devote to compliance with federal securities laws that
would be inapplicable if the Company were to deregister its common stock under
the Exchange Act. The Board of Directors believes the intangible benefits that
would be derived if the Company's management was allowed to focus additional
attention on operations and financial management would further enhance Winter
Sports' financial performance and allow the Company to provide improved services
to its guests.

Item 8. Changes in and Disagreements with Accountants on Accounting and
        Financial Disclosures

The Company has had no disagreements with its accountants on accounting or
financial disclosures.

Item 8A. Controls and Procedures

      (a)   Evaluation of disclosure controls and procedures. The Company's
            Chief Executive Officer and Chief Financial Officer have concluded,
            based on their evaluation within 90 days prior to the date of this
            report, that the Company's disclosure controls and procedures are
            adequate and effective in ensuring that material information
            relating to the Company, which is required to be included in the
            Company's filings with the SEC under the Securities Exchange Act of
            1934, is made known to them.

      (b)   Changes in internal controls. There were no significant changes in
            the Company's internal controls or in other factors that in
            management's examination could significantly affect the Company's
            disclosure controls and procedures subsequent to the date of the
            evaluation, including any corrective actions with regards to
            significant deficiencies and material weaknesses.


                                       35
<PAGE>

                                    Part III

Item 9. Directors and Executive Officers of the Registrant

Incorporated by reference from the Company's definitive proxy statement dated
February 27, 2004 to be filed with the Securities and Exchange Commission for
the annual meeting of shareholders to be held on May 6, 2004.

Item 10. Executive Compensation

Incorporated by reference from the Company's definitive proxy statement dated
February 27, 2004 to be filed with the Securities and Exchange Commission for
the annual meeting of shareholders to be held on May 6, 2004.

Item 11. Security Ownership of Certain Beneficial Owners and Management

Incorporated by reference from the Company's definitive proxy statement dated
February 27, 2004 to be filed with the Securities and Exchange Commission for
the annual meeting of shareholders to be held on May 6, 2004.

Item 12. Certain Relationships and Related Transactions

Incorporated by reference from the Company's definitive proxy statement dated
February 27, 2004 to be filed with the Securities and Exchange Commission for
the annual meeting of shareholders to be held on May 6, 2004.


                                       36
<PAGE>

Item 13. Exhibits and Reports on Form 8-K

(a)   Documents Filed as Part of this Report:

                                                                            Page
                                                                            ----

      (1)   Financial Statements:

            Independent Auditors' Report.................................    19

            Consolidated Balance Sheets as of May 31, 2003 and 2002......    20

            Consolidated Statements of Income and Retained Earnings
            for the Years Ended May 31, 2003, 2002 and 2001..............    21

            Consolidated Statements of Cash Flows for
            the Years Ended May 31, 2003, 2002 and 2001..................  22-23

            Notes to Consolidated Financial Statements...................  24-35

All other schedules are omitted because they are not applicable for the required
information as shown in the Consolidated Financial Statements or Notes thereto.

                                                                        Footnote
                                                                        --------

(c)   Exhibits:

      3.1   Restated Articles of Incorporation and Articles of
            Amendment to the Articles of Incorporation                     (2)

      3.2   By-Laws                                                        (3)

      3.3   Fifth Amendment to By-Laws                                     (4)

      3.4   Sixth Amendment to By-Laws                                     (4)

      3.5   Seventh Amendment to By-Laws                                   (7)

      3.6   Tenth Amendment to By-Laws                                     (9)

      10.3  Business Loan Agreement between Bank of America and
            Winter Sports, Inc. dated January 7, 2003.                     (1)

      10.4  Employment Agreement between Michael Collins and Winter
            Sports, Inc. as of September 1, 2000                           (8)

      10.5  Limited Liability Company Agreement of Northern Lights
            Development LLC                                                (9)

      10.6  Limited Liability Company Agreement of Moose Run II LLC
                                                                          (10)

      10.7  Limited Liability Company Agreement of Morning Eagle
            Development LLC                                               (11)

      10.13 Limited Liability Company Agreement of Glades
            Development LLC                                               (12)

      10.14 Big Mountain Club LLC                                         (13)

      21.1  Subsidiaries of the Company                                    (1)


                                       37
<PAGE>

      31.1  Certification of Dennis L. Green pursuant to 18 U.S.C.
            Section 1350, as Adopted Pursuant to Section 302 of the
            Sarbanes-Oxley Act 0f 2002.                                    (1)

      31.2  Certification of Jami M. Phillips pursuant to 18 U.S.C.
            Section 1350, as Adopted Pursuant to Section 302 of he
            Sarbanes-Oxley Act 0f 2002.                                    (1)

      32.1  Certification of Dennis L. Green pursuant to 18 U.S.C.
            Section 1350, as Adopted Pursuant to Section 906 of he
            Sarbanes-Oxley Act 0f 2002.                                    (1)

      32.2  Certification of Jami M. Phillips pursuant to 18 U.S.C.
            Section 1350, as Adopted Pursuant to Section 906 of he
            Sarbanes-Oxley Act 0f 2002.                                    (1)

      (1)   Filed herewith.

      (2)   Incorporated by reference from the Company's Form 10-KSB for
            fiscal year ended May 31, 1995.

      (3)   Incorporated by reference from the Company's Form 10-KSB for
            fiscal year ended May 31, 1987.

      (4)   Incorporated by reference from the Company's Form 10-KSB for
            fiscal year ended May 31, 1991.

      (5)   Incorporated by reference from the Company's Form 10-QSB for
            the quarter ended September 6, 1992.

      (6)   Incorporated by reference from the Company's Form 10-QSB for
            the quarter ended December 11, 1994.

      (7)   Incorporated by reference from the Company's Form 10-KSB for
            the year ended May 31, 1998.

      (8)   Incorporated by reference from the Company's Form 10-QSB for
            the quarter ended September 10, 2000.

      (9)   Incorporated by reference from the Company's Form 10-QSB for
            the quarter ended September 9, 2001.

      (10)  Incorporated by reference from the Company's Form 10-QSB for
            the quarter ended December 2, 2002.

      (11)  Incorporated by reference from the Company's Form 10-QSB for
            the quarter ended May 31, 2002.

      (12)  Incorporated by reference from the Company's Form 10-QSB for
            the quarter ended February 23, 2003.

      (11)  Incorporated by reference from the Company's Form 8-K filed on
            July 8, 2003.

      21.1  Subsidiaries of the Company...................................... 41


                                       38
<PAGE>

(b)   Reports on Form 8-K:

      One report on Form 8-K was filed by the registrant during the last quarter
      of the period covered by this report. On May 29, 2003, the Company filed a
      Form 8-K reporting its decision to place a temporary hold on plans to
      construct a conference center in Big Mountain Village.

      Subsequent to the end of the fiscal year, on July 8, 2003, the Company
      filed a Form 8-K to announce the formation of a joint venture with
      Northern Pines Golf Club to form the Big Mountain Club. This non-equity
      members club will allow members preferred access to the Big Mountain Golf
      Club (formerly Northern Pines Golf Club) and the soon to be developed
      members golf facilities as well as access to the members' alpine
      facilities at Big Mountain Resort.

Item 14. Principal Accountant Fees and Services

Incorporated by reference from the Company's definitive proxy statement dated
February 27, 2004 to be filed with the Securities and Exchange Commission for
the annual meeting of shareholders to be held on May 6, 2004.


                                       39
<PAGE>

                                   Signatures

In accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934,
the registrant has caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized:

                                         WINTER SPORTS, INC.


                                         By  /s/ Dennis L. Green
                                             -------------------
                                         Dennis L. Green,
                                         Acting Chief Executive Officer
                                         (Principal Executive Officer)
                                         Date:  March 3, 2004

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in capacities and on the dates indicated:


/s/ Charles R. Abell           Director                            March 3, 2004
--------------------
Charles R. Abell


/s/ Brian T. Grattan           Director                            March 3, 2004
--------------------
Brian T. (Tim) Grattan


/s/ Dennis L. Green            Director and Chairman               March 3, 2004
-------------------            of the Board
Dennis L. Green


/s/ Charles P. Grenier         Director                            March 3, 2004
------------------------
Charles P. Grenier


/s/ Jerry J. James             Director                            March 3, 2004
------------------
Jerry J. James


/s/ Michael T. Jenson          Director                            March 3, 2004
---------------------
Michael T. Jenson


/s/ Darrel R. Martin           Director and Vice-Chairman          March 3, 2004
--------------------           of the Board
Darrel R. (Bill) Martin


/s/ Michael J. Muldown         Director                            March 3, 2004
----------------------
Michael J. Muldown


/s/ Jerome T. Broussard        Director                            March 3, 2004
-----------------------
Jerome Broussard


/s/ Jami M Phillips            Principal Financial Officer         March 3, 2004
-------------------
Jami M. Phillips


                                       40