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UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K


þ		ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE ACT OF 1934

For the fiscal year ended April 30, 2007


o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 333-113140

INN OF THE MOUNTAIN GODS RESORT AND CASINO

(Exact Name of Registrant as Specified in Its Charter)


Not Applicable (State or Other Jurisdiction of Incorporation or Organization)		75-3158926 (I.R.S. Employer Identification Number)

287 Carrizo Canyon Road Mescalero, New Mexico (Address of Principal Executive Offices)		88340 (Zip Code)

(505) 464-7000

(Registrant’s Telephone Number, Including Area Code)

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


Title of Each Class None		Name of Each Exchange on Which Registered None
Securities registered under Section 12(g) of the Act:
(Title of Class) None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o No þ

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o No þ

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not 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-K or any amendment to this Form 10-K. þ

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

Large accelerated filer o Accelerated filer o Non-accelerated filer þ

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ

State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant’s most recently completed second fiscal quarter. Not applicable

Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date. Not applicable

DOCUMENTS INCORPORATED BY REFERENCE

List hereunder the following documents if incorporated by reference and the Part of the Form 10-K (e.g., Part I, Part II, etc.) into which the document is incorporated: (1) Any annual report to security holders; (2) Any proxy or information statement; and (3) Any prospectus filed pursuant to Rule 424(b) or (c) under the Securities Act of 1933. The listed documents should be clearly described for identification purposes (e.g., annual report to security holders for fiscal year ended December 24, 1980). None

References in this Annual Report on Form 10-K (this “Form 10-K” or this “Report”) to (a) the “Tribe” refers to the Mescalero Apache Tribe, a federally recognized Indian tribe, (b) “IMG Resort and Casino” refers to Inn of the Mountain Gods Resort and Casino, a business enterprise of the Tribe, (c) “Casino Apache” refers to Casino Apache, a business enterprise of the Tribe, (d) the “Inn” refers to Inn of the Mountain Gods, a business enterprise of the Tribe, (e) the “Travel Center” refers to Casino Apache Travel Center, a business enterprise of the Tribe and (f) “Ski Apache” refers to Ski Apache, a business enterprise of the Tribe. Each of Casino Apache, the Inn, the Travel Center and Ski Apache is a wholly-owned subsidiary of IMG Resort and Casino. References in this Form 10-K to “we,” “our,” “Resort,” “Company,” and “us” refer to IMG Resort and Casino.

FORWARD-LOOKING STATEMENTS

This Form 10-K includes “forward-looking statements” within the meaning of the federal securities laws. Statements regarding our expected financial condition, results of operations, business, strategies and financing plans under the headings “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Business” and elsewhere in this Form 10-K are forward-looking statements. In addition, in those and other portions of this Form 10-K, the words “anticipate,” “expect,” “plan,” “intend,” “will,” “designed,” “estimate,” “adjust” and similar expressions, as they relate to us or our management, indicate forward-looking statements. These forward-looking statements may prove to be incorrect. Important factors that could cause actual results to differ materially from these forward-looking statements disclosed in this Form 10-K include, without limitation, risks relating to the following: (a) our levels of leverage and ability to meet our debt service obligations; (b) our financial performance; (c) restrictive covenants in our debt instruments; (d) realizing the benefits of our business plan and business strategies; (e) changes in gaming laws or regulations, including potential legalization of gaming in certain jurisdictions; (f) the impact of competition in our markets; (g) our ability to attract increasing numbers of customers; (h) general local, domestic and global economic conditions; and (i) other factors discussed under “Risk Factors” or elsewhere in this Form 10-K.

You are urged to consider these factors carefully in evaluating the forward-looking statements contained in this Form 10-K. All subsequent written and oral forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by our cautionary statements. The forward-looking statements included in this Form 10-K are made only as of the date of this Form 10-K. We do not intend, and undertake no obligation, to update these forward-looking statements.

PART I.

Item 1. Business

Overview

IMG Resort and Casino

IMG Resort and Casino, established on April 2, 2003, is a wholly owned enterprise of the Tribe with the exclusive power to conduct and regulate gaming activities on the Tribe’s reservation. We operate New Mexico’s only all-season gaming destination resort on the Tribe’s 725 square mile reservation in south-central New Mexico. We are located in the forests of the Sacramento Mountains and our operations include: a full- service casino, the Travel Center, offering 17,000 square feet of gaming space including 499 slot machines and 14 table games as of April 30, 2007; and a new resort hotel and casino on the banks of Lake Mescalero offering 38,000 square feet of gaming space including 999 slot machines and 33 table games as of April 30, 2007; the second largest ski resort in New Mexico; a championship golf course; big-game hunting and various other outdoor recreational activities. We are located approximately 120 miles north of El Paso, Texas and the Mexican border, approximately 200 miles south of Albuquerque, New Mexico and approximately 10 miles west of the resort town of Ruidoso. Ruidoso and its surrounding area offers tourists a variety of year-round activities, including skiing, golfing, hunting, boating, fishing, camping, swimming, horseback riding and cultural events. The neighboring town of Ruidoso Downs features the Ruidoso Downs Race Track and Casino, offering quarter horse and thoroughbred racing throughout the summer months and is home of the world’s richest quarter horse race, the All-American Futurity. White Sands National Monument, which attracts in excess of 500,000 visitors a year, is located approximately 60 miles away from our properties.

Our casinos and resort hotel are conveniently located off of a heavily traveled four-lane highway, U.S. Highway 70. According to the New Mexico State Highway and Transportation Department, approximately 5.9 million vehicles travel across U.S. Highway 70 each year. We are the only full-service casino operator within our primary market area, encompassing southern New Mexico, including the cities of Ruidoso, Alamogordo, Las Cruces and Roswell and western Texas, including the cities of El Paso, Lubbock and Odessa, and northern Mexico, including Ciudad Juárez.

Our Business Activities

IMG Resort and Casino was formed by the Tribe on April 2, 2003 to be the holding company for all of the Tribe’s gaming and resort enterprises. Prior to the formation of IMG Resort and Casino, the Tribe operated all of its gaming and resort activities through four separate tribal enterprises: Casino Apache, which owned and operated the Tribe’s original casino, Casino Apache, since the commencement of its operations in 1992; Ski Apache, which owned and operated the Tribe’s ski resort, since the commencement of its operations in 1964; Inn of the Mountain Gods, which owned and operated the Tribe’s resort hotel, the Inn of the Mountain Gods, since the commencement of its operations in 1975; and the Travel Center, which owned and operated the Tribe’s second gaming facility, Casino Apache Travel Center, since the commencement of its operations in April 2003. On April 2, 2003, each of the Tribe’s gaming and resort enterprises — the Travel Center, Casino Apache, Ski Apache and Inn of the Mountain Gods — were contributed to IMG Resort and Casino by the Tribe and are wholly-owned subsidiaries of IMG Resort and Casino.

Gaming

We currently operate two gaming facilities, the Travel Center and IMG Resort and Casino. The Travel Center, opened on May 21, 2003, is located directly on U.S. Highway 70 and is highly visible to drivers in both directions. As of April 30, 2007, the Travel Center featured 17,000 square feet of gaming space, 499 slot machines and 14 table games, including blackjack and roulette. IMG Resort and Casino opened on March 15, 2005 and is located two miles off of U.S. Highway 70, adjacent to the site of our old casino, Casino Apache. As of April 30, 2007, IMG Resort and Casino featured 38,000 square feet of gaming space, 993 slot machines and 32 table games, including craps, blackjack, roulette, three-card poker and “Let it Ride;” a 100-seat buffet restaurant; a gift shop and approximately 2,200 customer parking spaces.

Resort Amenities

The original Inn of the Mountain Gods opened in 1975 and quickly established its brand identity across New Mexico, West Texas and other parts of the region as a five-star, all-season resort destination which offered a wide range of amenities and recreational activities. The brand also benefited tremendously from the resort’s natural surroundings and the beauty of Mescalero which is situated in the Sacramento Mountains of New Mexico. These mountains provide a spectacular backdrop for the Inn’s18-hole championship golf course, which was designed by Ted Robinson, and create an ideal setting for enjoying skiing, horseback riding, big game hunting, water sports on Lake Mescalero and many other recreational opportunities made available by the Mescalero Apache Tribe.

The Tribe opened the new and expanded Inn of the Mountain Gods Resort & Casino in March 2005 and was able to build on the 30-year reputation of quality already established by the original facility. The new Inn has received the prestigious four diamond award from AAA in each of its first two years of operations and has been recognized for excellence in convention & meetings facilities, as well as golf. A luxury hotel featuring 273-guest rooms, 40,000 sq. ft. of flexible meeting space, compliment a 38,000 sq ft casino which offers class III Las Vegas-style gaming.”

Skiing

We have owned and operated Ski Apache since 1964. Ski Apache has 750-acres of ski area and is the second largest snow ski area (based upon acres of ski area) in the State of New Mexico. Our ski resort is located on U.S. Forest and Tribal land on the 12,003-foot Sierra Blanca Mountain, on the southern tip of the Rocky Mountains, approximately 20 miles from the site of the Resort. The number of annual skier visits ranges from 160,000 to 220,000 in a typical year with average snowfall. At April 30, 2007, Ski Apache featured:

	•		11 lifts providing the largest lift capacity in New Mexico (over 16,500 people per hour), which include a four-passenger gondola (the only one in New Mexico), two quad chair lifts, five triple chairs, one double chair lift and two surface lifts;

	•		a base elevation of 9,600 feet and a vertical drop of 1,900 feet;

	•		55 ski trails, of which 20 percent are beginner, 35 percent are intermediate and 45 percent are advanced, as well as Apache Bowl, an expert open bowl ski area;

	•		a Professional Ski Instructors of America ski and snowboarding school; and

	•		a sport shop with ski rental, offering top quality ski and snowboarding equipment.

Although Ski Apache typically averages over 15 feet of snowfall each year, Ski Apache features a multi-million dollar snowmaking system, which covers 1,000 feet of vertical drop, trails for all ability levels and the use of 8 of its 11 lifts.

Business Strategy

For the past fiscal year, IMGRC management focused on solid execution of a proven business strategy that combined an emphasis on revenue growth, expense containment, consistency in the delivery of quality in all products & services and the documentation & implementation of expanded internal controls.

	•		The Inn of the Mountain Gods Resort & Casino — The resort continues to be marketed and branded as the best all-season resort destination in the southwest. The combination of premium quality facilities that are situated in the naturally beautiful mountains of Mescalero, distinguish the Inn from its competition within the region. To further refine the Inn’s brand, consistency in the delivery of quality in all services & amenities has been essential to attracting new guests as well as retaining existing ones. From an operational perspective, containing costs and creating greater efficiencies in operations also contributed to the improvements in quality. This enabled management to avoid passing price increases on to the guest which further enhanced value. The documentation and implementation of internal controls yielded the first wave of improvements in financial management — even greater benefits to the operations are anticipated in the coming year.

	•		Casino Apache Travel Center — Casino Apache has developed a very strong local’s customer base which fuels a year-round revenue stream. Additionally, because the facility is located right on Highway 70, revenues are further boosted by more than 8,000 vehicles passing by each day. Gasoline prices are kept at .03-cents below the local Wal-Mart to ensure that fuel is priced to attract traffic off the highway. Mid-week food & gaming promotions are also offered and showcased on the electronic readerboard — the grill-type restaurant features larger portion sizes of high-quality at very reasonable prices. A

wide variety of slots is offered with a concentration in the lower denominations. Table games also offer lower limits to extend playtime for the guest.

	•		Ski Apache — In the prior year (2005-06 ski season), Ski Apache experienced a 60% decrease in skier visits as compared to its 5-year average — this was attributable to receiving only 16” of natural snowfall throughout the entire season or less than 10% of the annual average. As a result, the Ski Apache team implemented an expanded cost control program to compensate for having to produce man-made snow during nearly 80% of the season. This cost structure was then carried over to the 2006-07 ski year and was a major factor in the generation of the highest cash flow & operating margin ever generated by Ski Apache. The management team also concentrated on service, maintenance and improved labor utilization — marketing & advertising support was boosted to help fuel increases in skier visits back to 5-year averages.

	•		Championship Golf — The Ted Robinson-designed championship golf course is a very productive standalone asset that also serves as a critical amenity for the Inn of the Mountain Gods Resort. The golf course was originally opened in 1975 and has developed a reputation for providing a high-quality golf experience in a uniquely beautiful mountain setting. The golf course brand has also been enhanced by serving as the host location for the top two professional tournaments held in the State of New Mexico for the past three years. The Hotel Sales department has been very successful in increasing mid-week group business by cross-marketing conventions & meetings with access to the championship golf course.

	•		Big Game Hunting — Mescalero Big Game Hunts has been nationally-recognized as one of the top bull elk operations in North America. Co-branding alliances with Cabela’s Outdoor Outfitters and Christensen Arms, a premium firearms manufacturer, have expanded awareness and boosted recognition not only of the hunts but of the Inn of the Mountain Gods Resort. In particular, the Inn has successfully marketed the hunt program to attract new high-end gaming customers — the hunts are a premium amenity that cannot be duplicated by any competitor within or near our market.

Gaming in New Mexico

Competition

Our primary market area encompasses southern New Mexico, including the cities of Ruidoso, Alamogordo, Las Cruces and Roswell, western Texas, including the cities of El Paso, Lubbock and Odessa and northern Mexico, including Ciudad Juárez. According to the U.S. Census Bureau and Desarrollo Economico de Ciudad Juárez/INEGI there are approximately 3.1 million people in our primary market area and 1.8 million adults.

Currently, we are the only full-service casino operator within our primary market area. We currently face competition in our primary market area from two racinos, Ruidoso Downs, 10 miles away in Ruidoso and Sunland Park Racetrack and Casino, 125 miles away in Sunland Park, New Mexico. Ruidoso Downs offers quarter horse and thoroughbred racing from May through September, as well as a 20,000 square foot casino featuring 300 slot machines and a buffet restaurant. Sunland Park offers quarter horse and thoroughbred racing from mid-November to early-April, a 36,000 square foot casino facility, 700 slot machines and five restaurants. Both of these facilities lack table games and lodging facilities. In addition, we compete with 11 other New Mexico Indian casinos and one racino located in and around Albuquerque and Santa Fe, New Mexico, which is outside of our primary market area plus a racino in Hobbs, NM, which is also outside our primary market area, but impacts our west Texas customers.

We also compete with other forms of legal gaming in New Mexico, Texas and Northern Mexico, including horse racing, Class II gaming, pari-mutuel wagering, the New Mexico State Lottery, the Texas State Lottery, as well as non-gaming leisure activities. We intend to expand our existing geographic market and increase the percentage of our overnight and larger spending customers who tend to live greater distances from us. We hope that with the completion of the Project, we will be able to compete more directly for regional overnight and national customers with casinos and resorts located in other parts of the country.

Mescalero Apache Tribe

Tribal Administration

The Tribe is a federally recognized Indian tribe located on a 750 square mile reservation in south-central New Mexico and has approximately 4,400 members. The Indian Reorganization Act of 1934 and subsequent federal legislation govern the relationship between the Tribe and the United States government. The Tribe operates under a constitution approved by the United States Secretary of the Interior on March 25, 1936, revised on January 12, 1965, and amended on May 31, 1985.

In accordance with its Constitution, the Tribe is governed by and enacts laws through ordinances and resolutions of the Mescalero Apache Tribal Council, or the Tribal Council, which is comprised of a President, Vice President and eight Council Members, each of whom is elected by a majority vote of the eligible adult enrolled members of the Tribe. The President is a non-voting member of the Tribal Council and the Vice President only votes if necessary to break a tie. Each member of the Tribal Council serves a two-year term, with the terms of the voting members staggered so that each year four of those eight positions are up for election. The Tribal Council has the power, by ordinance, to establish the principles and policies governing the operation and control of all enterprises of the Tribe. The Tribal President has the power to contract for the Tribe upon authorization from the Tribal Council. The Tribal Executive Committee, or the Executive Committee, has responsibility for oversight of all business activities on behalf of the Tribal Council. The Executive Committee is comprised of the President and Vice President as well as a Secretary and Treasurer. The Secretary and Treasurer are appointed by the President from the present Tribal Council.

Tribal Court System

The Constitution and Tribal Code provides for the establishment of the tribal court known as the Mescalero Apache Tribal Court, or Tribal Court. The jurisdiction of the Tribal Court extends to all matters, criminal and civil, except where prohibited by the Constitution, laws or treaties of the United States of America, and except as this jurisdiction may be otherwise limited from time to time by ordinance of the Tribal Council. The criminal offenses over which the Tribal Court has jurisdiction may be embodied in a Code of Laws, adopted by ordinance of the Tribal Council, and subject to review by the Secretary of the Interior. The duties and procedures of the Tribal Court are determined by ordinance of the Tribal Council.

The Tribal Court consists of a chief judge and two associate judges, appointed by the President of the Tribe, with the concurrence of not less than a three-fourths majority vote of the whole membership of the Tribal Council. The Tribal Council also sits as a court of appeals whenever necessary and may hear appeals at any regular or special meeting. The tenure and salary of tribal judges is established by resolution of the Tribal Council.

A judge of the Tribal Court must be an Indian as defined in the Tribal Code, not less than thirty-five years or more than seventy years of age; and cannot have been convicted of a felony, or, within one year, of a misdemeanor. The Tribal Code defines an “Indian” as some one who possesses at least one-quarter Indian blood, and is a member of any federally recognized tribe, nation, or band of Indians, or is an Eskimo, Aleut, or other Alaskan.

The Tribe has adopted its own rules of procedure and evidence, which are found in the Tribal Code. In determining cases, a tribal court judge relies on the applicable laws in the following order of precedence:

(a) Tribal Constitution, Tribal Code, ordinances, traditions and customs and (b) federal laws not in conflict with tribal laws and customs.

Mescalero Apache Tribal Gaming Commission

On August 20, 1999, the Tribe formed the Mescalero Apache Tribal Gaming Commission as a governmental subdivision of the Tribe. The Mescalero Apache Tribal Gaming Commission consists of 4 members, including a Chairman, Vice Chairman and Secretary-Treasurer and Commissioner. The Mescalero Apache Tribal Gaming Commission is vested with the authority to regulate all licenses and gaming activity conducted on tribal lands, including licensing persons, vendors, financial sources and contractors employed by the casino, ensuring compliance with internal control standards established by the National Indian Gaming Commission, or the NIGC, an independent agency within the U.S. Department of the Interior and establishing technical specifications for gaming devices. The Mescalero Apache Tribal Gaming Commission is responsible for carrying out the Tribe’s regulatory responsibilities under federal, state and tribal law and the 2001 Compact.

Government Regulation

General

We are subject to federal, state and tribal laws governing commercial relationships with Indians, Indian gaming and the management and financing of casinos owned by an Indian tribe. In addition, we are regulated by federal and state laws applicable to the gaming industry generally and to the distribution of gaming equipment. The following description of the regulatory environment in which Indian gaming takes place and in which we operate our casinos is only a summary and not a complete recitation of all

applicable law. Moreover, this particular regulatory environment is more susceptible to changes in public policy considerations than others. We cannot predict how certain provisions will be interpreted from time to time or whether they will remain intact. Changes in these laws could have a material adverse impact on our business and results of operations and our ability to meet our debt service obligations.

Tribal Law and Legal Systems

Applicability of Federal Law. Federally recognized Indian tribes are independent governments, subordinate to the United States, with sovereign powers, except as those powers may have been limited by treaty or by the U.S. Congress. The power of Indian tribes to enact their own laws to regulate gaming derives from the exercise of tribal sovereignty and is subject to federal law. Indian tribes maintain their own governmental systems and often their own judicial systems. Indian tribes have the right to tax persons and businesses operating on Indian lands, and also have the right to require licenses and to impose other forms of regulations and regulatory fees on persons and businesses operating on their lands.

Waiver of Sovereign Immunity; Jurisdiction; Exhaustion of Tribal Remedies. Indian tribes enjoy sovereign immunity from unconsented suit similar to that of the states and the United States. To sue an Indian tribe (or an enterprise, agency or instrumentality of an Indian tribe, such as us), the tribe must have effectively waived its sovereign immunity with respect to the matter in dispute. Further, in most commercial disputes with Indian tribes, the jurisdiction of the federal courts, which are courts of limited jurisdiction, may be difficult or impossible to obtain. A commercial dispute is unlikely to present a federal question, and courts have ruled that an Indian tribe as a party is not a citizen of any state for purposes of establishing diversity jurisdiction in the federal courts. The remedies available against an Indian tribe also depend, at least in part, on the rules of comity requiring initial exhaustion of remedies of tribal tribunals and, as to some judicial remedies, the tribe’s consent to jurisdictional provisions contained in the disputed agreements. Under U.S. Supreme Court case law, where a tribal court exists, the remedies in that forum first may have to be exhausted before any dispute arising on or involving the affected tribe’s reservation and to which the tribe, a tribal enterprise such as us or a tribal member is a party, can be properly heard by federal or state courts which would otherwise have jurisdiction. Generally, where a dispute as to the existence of jurisdiction in the tribal forum exists, the tribal court first may need to rule as to the limits of its own jurisdiction, subject to certain limited exceptions enumerated by the U.S. Supreme Court.

The Indian Gaming Regulatory Act of 1988

Regulatory Authority. The operation of casinos and of all gaming on Indian land is subject to the Indian Gaming Regulatory Act of 1988 (the “IGRA”). IGRA is administered by the NIGC which exercises primary federal regulatory responsibility over Indian gaming. The NIGC has exclusive authority to issue regulations governing tribal gaming activities, approve tribal ordinances for regulating Class II and Class III gaming (as described below), approve management agreements for gaming facilities, and conduct investigations and generally monitor tribal gaming. The Bureau of Indian Affairs, or the BIA, which is a bureau of the Department of the Interior, retains certain responsibilities under IGRA (such as the approval of per capita distribution plans to tribal members and the approval of transfers of lands into trust status for gaming). The BIA also has responsibility to review and approve land leases and other agreements relating to Indian lands. Criminal enforcement is a shared responsibility of the U.S. Department of Justice, the state in which the Tribe is located and the Tribe, in accordance with federal law.

The NIGC is empowered to impose civil penalties for violations of IGRA. IGRA also provides for federal criminal penalties for illegal gaming on Indian land and for theft from Indian gaming facilities. The NIGC has adopted rules implementing certain provisions of IGRA. These rules govern, among other things, the submission and approval of tribal gaming ordinances or resolutions and require an Indian tribe to have the sole proprietary interest in and responsibility for the conduct of any gaming on its lands. Tribes are required to issue gaming licenses only under articulated standards, conduct or commission financial audits of their gaming enterprises, perform or commission background investigations for primary management officials and key employees and maintain facilities in a manner that adequately protects the environment and the public health and safety. These rules also set out review and reporting procedures for tribal licensing of gaming operation employees.

Classes of Gaming. IGRA classifies games that may be conducted on Indian lands into three categories. Class I gaming includes social games solely for prizes of minimal value or traditional forms of Indian gaming engaged in by individuals as part of, or in connection with, tribal ceremonies or celebrations. Class II gaming includes bingo, pulltabs, lotto, punch boards, non-banked card games, tip jars, instant bingo and other games similar to bingo, if those games are played at the same location as bingo is played. Class III gaming includes all other forms of gaming, such as slot machines, video casino games, banked table games and other commercial gaming, such as sports betting and pari-mutuel wagering.

Class III gaming is permitted on Indian lands if the conditions applicable to Class II gaming are met and, in addition, the gaming is conducted in conformity with the terms of a tribal-state compact, which is a written agreement between the tribal government and the government of the state within whose boundaries the tribe’s lands lie. IGRA requires Indian tribes to enter into tribal-state compacts in order to conduct Class III gaming.

Tribal-State Compacts. Tribal-state compacts may include provisions for the allocation of criminal and civil jurisdiction between the state and the Indian tribe necessary for the enforcement of these laws and regulations, taxation by the Indian tribe of the Class III gaming activity in amounts comparable to those amounts assessed by the state for comparable activities, remedies for breach, standards for the operation of the Class III gaming activity and maintenance of the gaming facility, including licensing and any other subjects that are directly related to the operation of gaming activities. While the terms of tribal-state compacts vary from state to state, compacts within one state tend to be substantially similar. Tribal-state compacts usually specify the types of permitted games, establish technical standards for video gaming machines, set maximum and minimum machine payout percentages, entitle the state to inspect casinos, require background investigations and licensing of casino employees and may require the tribe to pay a portion of the state’s expenses for establishing and maintaining regulatory agencies. Some tribal-state compacts are for set terms, while others are for indefinite duration.

Tribal Ordinances. Under IGRA, except to the extent otherwise provided in a tribal-state compact as described below, Indian tribal governments have primary regulatory authority over Class III gaming on land within a tribe’s jurisdiction. Therefore, a tribe’s gaming operations, and persons engaged in gaming activities, are guided by and subject to the provisions of that tribe’s ordinances and regulations regarding gaming.

IGRA requires that the NIGC review tribal gaming ordinances and authorizes the NIGC to approve these ordinances only if they meet requirements relating to:

	•		the ownership, security, personnel background, recordkeeping and auditing of a tribe’s gaming enterprises;

	•		the use of the revenues from that gaming; and

	•		the protection of the environment and the public health and safety.

Possible Changes in Federal Law. Several bills have been introduced in Congress that would amend IGRA. While there have been a number of technical amendments to the law, to date there have been no material changes to IGRA. Any amendment of IGRA could change the governmental structure and requirements within which we could conduct gaming, and may have an adverse effect on our business and results of operations or impose additional regulatory or operational burdens.

Employee and Labor Relations

As of April 30, 2007, we had 1,097 full-time team members, excluding approximately 186 additional seasonal team members who alternate between Ski Apache during the ski season, which typically runs from Thanksgiving to Easter and then return to work at the hotel the other months. We have developed and implemented training programs for our hotel and resort team members and believe that we will be able to hire and train a sufficient number of employees for the operation of the Resort. Our team members are not covered by any collective bargaining agreements. We have good labor relations with our team members, over 43.5% of whom are tribal, or tribal affiliates.

Item 1A. Risk Factors

RISK FACTORS

Several of the matters discussed in this Report contain forward-looking statements that involve risks and uncertainties. Factors associated with the forward-looking statements that could cause actual results to differ from those projected or forecasted in this Report are included in the statements below. In addition to other information contained in this Report, you should carefully consider the following cautionary statements and risk factors. The risks and uncertainties described below are not the only risks and uncertainties we face. Additional risks and uncertainties not presently known to us or that we currently deem immaterial also may impair our business operations. If any of the following risks actually occur, our business, financial condition, and results of operations could suffer. The risks discussed below also include forward-looking statements and our actual results may differ substantially from those discussed in these forward-looking statements

Risks Relating to Our Business

We have a substantial amount of indebtedness, which could adversely affect our financial condition.

As of April 30, 2007, we had an aggregate of approximately $211.8 million of indebtedness outstanding, which includes $200.0 million of debt on the notes issued on November 3, 2003. This substantial indebtedness could have important consequences to you and significant effects on our business and future operations. For example, it could:

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

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

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

	•		require us to dedicate a substantial portion of our cash flow from operations to service our outstanding indebtedness, thereby reducing the availability of our cash flow to fund working capital, capital expenditures, the Project and other general operating requirements;

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

	•		limit our ability to borrow additional funds.

Our indebtedness could result in a material adverse effect on our business, financial condition and results of operations. If we incur additional debt in the future, these adverse consequences could intensify.

Our failure to generate sufficient cash flow from our gaming and other resort operations could adversely affect our ability to meet our debt service obligations.

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

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

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

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

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

Restrictive covenants in the indenture governing the notes may limit our ability to expand our operations and capitalize on our business opportunities.

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

We may not be able to realize the benefits of our business strategy.

The Project is part of our business strategy to develop an integrated resort, increase our market reach and realize operating benefits

from business synergies. We may not be able to fully implement this strategy or may not fully realize these anticipated benefits. Implementation of our business strategy could be adversely affected by a number of factors beyond our control, including general or local economic conditions, increased competition or other changes in our industry. In particular, we may not be able to attract a sufficient number of guests, gaming customers and other visitors in order to achieve our performance goals. Furthermore, we may not be successful in our plan to promote our customers’ utilization of our various resort amenities, including our gaming, hotel, entertainment and other amenities as anticipated or to a degree that will allow us to achieve our performance goals. Additionally, our business strategy, intended to capitalize on the spending levels of our patrons, attract customers from new target markets and reduce seasonality, may not achieve its intended results. A failure to effectively implement our business strategy could have a material adverse effect on our business, financial condition, results of operations and our ability to meet our debt service obligations.

Federal, state and Tribal laws and regulations, and our gaming compact, regulate our gaming operations and noncompliance with these laws and regulations by us or the Tribe, as well as changes in these laws and regulations (which are susceptible to changes in public policy) or future interpretations thereof, could have a material adverse effect on our ability to conduct gaming, and thus on our ability to meet our debt service obligations.

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

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

We compete with casinos, other forms of gaming and other resort properties. If we are not able to successfully compete, we will not be able to generate sufficient cash flow to meet our debt service obligations.

Currently, we compete with 15 tribal gaming casinos and non-tribal racinos operated within 200 miles of our location, one of which, Ruidoso Downs, is approximately 10 miles away from us in Ruidoso, and another, Sunland Park Racetrack and Casino, is approximately 125 miles away from us in Sunland Park, New Mexico. Ruidoso Downs offers quarter horse and thoroughbred racing from May through September, as well as a 20,000 square foot casino featuring approximately 300 slot machines and a buffet restaurant. Sunland Park offers quarter horse and thoroughbred racing from mid-November to early-April, a 36,000 square foot casino featuring approximately 700 slot machines and five restaurants. The other 11 tribal gaming casinos and one racino are located in and around Albuquerque and Santa Fe, New Mexico, all of which are outside of our primary market area. We also compete with other forms of legal gaming in New Mexico, Texas and Northern Mexico, including horse racing, Class II gaming, pari-mutuel wagering, the New Mexico State Lottery, the Texas State Lottery, as well as non-gaming leisure activities. We intend to expand our existing geographic market and increase the percentage of our overnight and larger spending customers who tend to live greater distances from us. The Project will allow us to compete more directly for regional overnight and national customers with casinos and resorts located in other parts of the country. Many of our competitors in this expanded geographical market have substantially greater resources and name recognition than we do or are in a more convenient location, which is closer to a major population center or transportation hub. If we are unable to compete successfully, our business, financial condition and results of operations could be materially adversely affected and we may not be able to meet our debt service obligations.

We are highly dependent on our surrounding market area. As a result, we face greater risks than a geographically diverse company.

We rely primarily on drive-in customers living within our primary market area consisting of southern New Mexico, western Texas and northern Mexico for the majority of our revenues. We expect to increase our market reach, but if our marketing strategy is not successful, our primary customer base will continue to be a predominately local one. Therefore, we are subject to greater risks than

more geographically diversified gaming or resort operations. Among others, the following conditions could have a material adverse effect on our results of operations:

	•		a decline in the economies of our primary market area or a decline in the number of gaming customers from these areas for any reason;

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

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

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

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

We may face difficulties in recruiting, training and retaining qualified employees.

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

We do not have a history of operating on as large of a scale as contemplated by the Project.

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

The terms of four of the eight voting members of the Tribal Council expire each year and the terms of the Tribe’s President and Vice President expire every two years; changes in the Tribal Council or its policies could affect the Resort or other aspects of our business.

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

Item 1B. Unresolved Staff Comments

None.

PART II.

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

The Resort has not issued or sold any equity securities.

Item 6. Selected Financial Data

SELECTED HISTORICAL FINANCIAL AND OTHER DATA

The selected financial data set forth below for each of the five fiscal years ended April 30, 2003, 2004, 2005, 2006, and 2007 have been derived from our audited financial statements. You should read the following financial data in conjunction with the section in this Form 10-K entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and with our financial statements and the related notes included in this Form 10-K beginning on page F-1. Our financial statements for each of the fiscal years ended April 30, 2003 and 2004 were audited by Grant Thornton LLP. Our financial statements for the years ended April 30, 2005, 2006 and 2007 were audited by BDO Seidman LLP, an independent registered public accounting firm, and are included in this Form 10-K.


	Fiscal Year Ended
	April 30,
	2003			2004			2005			2006			2007
Statements of Income Data:
Revenues:
Gaming	$	46,942		$	60,277		$	64,254		$	76,476		$	79,392
Rooms		3,394			—			1,168			10,860			13,492
Food and beverage		4,894			5,615			6,369			12,260			14,067
Recreation and other		11,953			16,472			23,013			16,621			23,409

Gross revenues		67,183			82,364			94,804			116,217			130,360
Less: promotional allowances		931			1,437			1,770			2,766			4,486

Net revenues		66,252			80,927			93,034			113,451			125,874

Operating expenses:
Gaming		19,458			25,406			25,765			27,179			25,967
Reversal of accrued fees		—			(27,136	)		—			—			—
Rooms		1,552			120			651			5,181			4,611
Food and beverage		4,955			6,587			7,274			15,729			14,101
Recreation and other		5,757			10,702			15,435			12,379			13,802
Marketing		0			2,809			2,868			8,920			9,817
General and administrative		6,500			6,229			6,973			15,713			11,850
Shared Service-Related Parties		3,183			4,271			5,544			5,104			5,207
Pre-opening costs and expenses		1,390			3,072			8,324			—			—
Depreciation and amortization		9,213			4,930			7,270			17,779			18,170

Total operating expenses		52,008			36,990			80,104			107,984			103,525

Income from operations		14,244			43,937			12,930			5,467			22,349
Interest Income (expense), net of amounts capitalized		190			(4,450	)		(10,887	)		(26,398	)		(26,362	)
Other non-operating income		171			258			97			(337	)		48

Net income (loss)	$	14,605		$	39,745		$	2,140			($21,268	)		($3,965	)

Other Financial Data:
EBITDA (1)	$	23,628		$	49,125		$	20,297		$	22,909		$	40,567
Capital expenditures		30,735			107,003			88,661			14,769			465
Cash provided by (used in) operating activities		32,021			38,113			(3,135	)		(1,528	)		10,576
Cash provided by (used in) financing activities		(20,955	)		68,899			95,183			25,218			(8,906	)
Ratio of Earnings to Fixed Charges (2)		85.2x			3.4x			0.5x			0.2x			0.9x


	As of April 30,
	2003		2004		2005		2006		2007
Property Data (as of end of period except win per day data) (unaudited)
Gross slot win per day	$	155	$	134	$	147	$	129	$	136
Table game win per day		632		550		646		513		595
Number of slot machines		803		1,180		1,503		1,510		1,498
Number of table games		25		38		56		47		46
Number of hotel rooms		—		—		273		273		273
Number of restaurant seats		200		200		803		803		803
Gaming square footage		22,600		39,600		55,000		55,000		55,000
Balance Sheet Data:
Cash and cash equivalents	$	9,332	$	15,795	$	13,718	$	16,768	$	16,930
Total assets		96,595		316,210		293,694		273,360		235,539
Total debt and capital lease obligations		7,453		201,947		201,528		211,530		208,174
Total equity		1,159		59,004		58,143		31,365		4,421


(1)		We define EBITDA as earnings before interest, taxes, depreciation and amortization. We are instrumentalities of a sovereign Indian nation and are not subject to federal or state income tax. Below is a quantitative reconciliation of EBITDA to the most directly comparable GAAP financial performance measure, which is net income:


	Fiscal Year Ended
	April 30,
	2003			2004		2005		2006			2007
Net income (loss)	$	14,605		$	39,745	$	2,140		($21,268	)	$	(3,965	)
Interest expense (income), net		(190	)		4,450		10,887		26,398			26,362
Depreciation and amortization		9,213			4,930		7,270		17,779			18,170

EBITDA	$	23,628		$	49,125	$	20,297	$	22,909		$	40,567

We caution you that amounts presented in accordance with our definition of EBITDA may not be comparable to similar measures disclosed by other issuers because not all issuers and analysts calculate EBITDA in the same manner. EBITDA is presented in this Form 10-K because management believes it is a useful supplement to income from operations and cash provided by operating activities in understanding cash flows available for debt service, capital expenditures and Tribal distributions. Accordingly, our management utilizes EBITDA along with net income, income from operations and other GAAP measures in evaluating our operations and performance. EBITDA should not be considered as an alternative measure of our net income, income from operations, cash flow or liquidity. EBITDA is not a measurement of financial performance or liquidity in accordance with GAAP. Although we believe EBITDA enhances your understanding of our financial condition and results of operations, this non-GAAP financial measure, when viewed individually, is not necessarily a better indicator of any trend as compared to GAAP financial measures (e.g., income from operations, net revenues, cash provided by operating activities) conventionally computed in accordance with GAAP.

(2) RATIO OF EARNINGS TO FIXED CHARGES

“Earnings” consist of income (loss) from continuing operations including amortization of capitalized interest, before extraordinary items, and fixed charges. “Fixed charges” consist of interest expense, capitalized expenses related to indebtedness, the portion of operating lease expense that represents interest and any preference security dividend requirements of consolidated subsidiaries. The table in Exhibit 12.1 sets forth our calculation of ratio of earnings to fixed charges for the periods indicated.

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operation

Summary of Past Year’s Activities

This year’s improvements in revenue, cost-control, internal controls, guest service and EBITDA across each of the Tribe’s hospitality enterprises are the direct result of a comprehensive action plan to position the overall company for growth and expansion over the next few years. A summary of the most notable activities from the past year are highlighted below:

Inn of the Mountain Gods Resort & Casino

•

Boosting Slot Coin-In

	•		Increasing Time Value — By making select reductions in hold percentages, play time is extended for the guest. This was considered essential for building loyalty and earning repeat visitation from the player base.

	•		Enhancing Player Loyalty Program — The Apache Spirit Club is the guest loyalty program that offers incremental values to the guest for gaming & non-gaming spending. Points accumulated from gaming activity can be redeemed for all goods and services offered by any of IMGRC’s hospitality enterprises as well as for cash back — the program also offers a 5% discount in all non-gaming outlets.

	•		Expanding Direct Marketing Efforts — Direct marketing efforts have been refined using greater segmentation to more closely align reinvestment in the player with their earning potential. The scope of offers was also expanded to reach a broader mix of customers to stimulate repeat visitation during off-peak periods.

	•		Aggressive Special Events, Promotions & Concert Schedule — These programs are staged weekly to drive visitation & gaming activity during slower periods and to introduce new clientele to the resort.

	•		Refinements in Game Mix — Management continues to make refinements in game mix by reducing participation, wide-area progressive games and video poker games in favor of adding “house” games with lower hold percentages.

•

Boosting Mid-week Room Occupancy

	•		Group Sales — Staffing was expanded to increase market share as well as improve the capture rate of select groups with greater spending profiles — room rates have increased nominally while the number of room nights attributable to groups has exceeded goals.

	•		Daily Yield Management — A broad range of rates is utilized with adjustments being made to the available rate on a daily basis in small increments of $10-$20. Emphasis has been placed on driving occupancy with modest year-over-year increases in the average rate.

	•		Leisure Marketing — Increases in occupancy from the leisure market segment has been achieved through direct marketing to established guests & prospects, as well as by broad-based advertising.

•

Enhancing Guest Satisfaction

	•		Leadership Develop Series Training — Supervisors & above were required to attend 15 different classes covering 45-hours of mandatory training in all major aspects of leadership and management. This training also involved passing exams with a grade of 90% or better in each module.

	•		Anonymous Shoppers Program — An anonymous shopping company was retained to provide detailed accounts of an individual customer’s experience in all areas of the operations — the data collected was utilized for training and developing operational improvements.

	•		Revised Guest Satisfaction Program — The survey instruments were completely revised using a 7-point scoring system and re-focused on a broader range of issues with greater detail. Additionally, the distribution system of these surveys was expanded to increase the number of responses for more accurate measurement.

Casino Apache

•

Improving Consistency in Products & Services

•

Appointment of Director of Operations — The organization created the position of Director of Operations for Casino Apache to focus on monitoring day-to-day business, enhancing service and streamlining operations.

	•		Culinary Training — Technical training was implemented in food & beverage for the culinary team along with refining recipes and improving vendor management to reduce item substitutions.

	•		Implementation of Internal Controls — Internal controls continue to be standardized in documentation & implementation across all of the hospitality enterprises.

•

Updating Casino Floor

	•		Slot Mix Refresh — The Slot Management team continues to swap out video poker, participation & wide-area progressive games to provide a mix of games that is more closely aligned with the market.

	•		Black Jack Tables — Four games that are open only one shift per week were replaced with new dollar slots — hours of operations and limits on the remaining black jack games were adjusted to avoid displacing any play.

	•		Table Games Training — Dealer and supervisory personnel in table games were required to undergo training, auditions and academic testing on game rules & protection measures.

•

Unique Promotional & Marketing Programs

	•		Seniors Program — Mondays are dedicated to values reserved just for seniors — food & beverage and gaming offers reward players for repeat visitation and rated play — cash promotions for slot and table games play compensate players for extended play time.

	•		Steak & Shrimp Special — This special meal is $7.77 when you earn 10 points from gaming activity or $12.95 without points. It quickly became the 4^th best selling item on the menu and is available Monday thru Thursday.

•

Pricing Strategies to Attract Visitation

	•		Fuel-Pricing — Gas prices at the Conoco-branded refueling station are kept at .03-cents below the local Wal-Mart to build loyalty with the frequent visitor to the area.

	•		Tobacco Products — Discount pricing is also offered on premium brand tobacco products to attract repeat visitation to the facility and build loyalty.

Ski Apache

•

Profit Enhancement Strategies

	•		2005-06 Ski Season Cost Structure — During last year’s ski season, the mountain received only 16 inches of natural snow or 10% of the annual average. This lack of snow discouraged the skier market and drove skier visits down to 40% of 5-year averages. Therefore, management was forced to learn how to operate the ski facility without the average level of revenue — adjustments were made not only variable costs but to fixed costs as well to ensure that a profit could be generated.

	•		Operational Improvements — Labor hours were scheduled to more closely coincide with historical fluctuations in business levels through weekly labor forecasting and daily approvals of hours worked. Service was improved through training and constant reviews by management in all areas of the operations. The management structure was also reorganized to better utilize the skills and talents of the current management team and reward those individuals who performed to a higher standard and were able to take on additional duties.

	•		Lift Maintenance — The management team has done a superior job in the area of lift maintenance — not only is the work ahead of schedule but the level of detail in documentation was significantly improved above industry standards.

IMGRC Championship Golf

•

Event Marketing to Refine the Brand

•

Marquis Golf Tournaments — For the past three years, the IMGRC Championship Golf course has been the host location for the two largest and most prestigious tournaments in the State of New Mexico: the Adidas Tight Lies and the New Mexico Open. These events attract full fields of PGA professionals and also garner regional media coverage in newspaper and radio.

•

Upgraded Maintenance Program

	•		Delayed Opening Date — Due to excessive amounts of snow still left on the ground by the usual course opening date in late March, the opening of the golf course was delayed until mid-April. This allowed the grass to come out of dormancy at a pace that allowed for a full recovery from the cold winter temperatures.

	•		Expanded Line of Fertilizers — The Grounds Maintenance team bought and applied an expanded line of fertilizers to make the grass more durable and prepare it for regular cutting & trimming.

Mescalero Big Game Hunts

•

Continuation of Key Brand Alliances

	•		Cabela’s — IMGRC and the Mescalero Big Game Hunts has maintained a strategic brand alliance with Cabela’s for three full years. In exchange for limited sales opportunities for a select few of their most valuable clientele, the Mescalero Big Game Hunts receives premium print advertising and broad-based television advertising.

	•		Christensen Firearms Manufacturing — This company is a manufacturer of premium firearms for big game hunting — this company brings a camera crew once per year to film an actual bull elk hunt out in the field. The coverage also includes footage of the Inn and the other hospitality enterprises. All of this footage is then edited together to create a 30-minute television program for ESPN or the Outdoor Life network — the show airs multiple times during the year.

Significant Challenges and Accomplishments

The list of accomplishments over the past fiscal year is extensive and involves each of the individual hospitality enterprises:

	•		Expense Management — Further refinements were implemented in the areas of labor forecasting, daily payroll approvals, vendor management, daily cash management and the overhaul of supply chain operations to include purchasing controls, inventory management and receiving & distribution.

	•		Significant Over-Staffing — The right-sizing and complete reorganization of the operations that was initiated in the prior year was completed yielding a 19% reduction in year-over-year payroll costs on higher revenues.

	•		Design & Construction Flaws — Remedial construction projects were initiated in July 2005 to correct design & construction flaws with the resort’s residential hot water system, pool deck and underground retaining wall that follows the entire south perimeter of the Inn. These projects were fully completed by August 2006 to include 3^rd party inspections which were necessary before restricted cash accounts could be released back to the Tribe as documented in the bond indenture.

	•		Delays in Releasing Financial Reports — The material weaknesses which were previously reported and led to delays in releasing reports to the Securities and Exchange Commission (SEC) have been corrected.

	•		Sarbanes-Oxley Act Compliance — IMGRC was fully compliant with 302-level certification requirements by 31 December 2006 as required by SOX law.

	•		Weak Management Team — Eight of thirteen directors were released and replaced with seasoned, experienced gaming & technical professionals who are able to introduce new operational efficiencies, improve overall business management and accelerate the education and development of team members across all areas of the enterprises.

	•		Facility Offerings “Out of Sync” with Guest Needs — The resort opened with multiple amenities that were not properly matched with the needs of the market place. This primarily encompassed restaurant menu engineering, the mix of slots, pricing strategies and product quality. Steps were taken in each of these areas to make immediate and sustained improvements.

	•		AAA Four Diamond Award — The Inn received its 2^nd consecutive four diamond award during fiscal year 2007. Only 3% of resorts nation-wide achieve this distinction — only 8 resorts in New Mexico also received this award.

	•		Meetings & Conventions Magazine — This key industry publication awarded the Inn the prestigious Gold Tee award for excellence in meetings and golf facilities. Only 83 resorts in North America received this award. This recognition also comes from a premium target customer market that represents an accelerated revenue growth opportunity for the Inn.

	•		El Paso In & Out Magazine — This regional publication originates in the Inn’s top customer market and identified IMGRC as the top resort in the region for El Paso residents.

	•		Native American Casino Magazine — This gaming industry publication covers the entire Native American sector. On an annual basis, the magazine selects one operation to be worthy of being named, the sexiest casino. The criteria includes, but is not limited to: facility design, architecture and décor, natural beauty of the physical environment, amenities, lighting, service and the overall ambiance of the operations. This is only the 3^rd year that the publication has offered this award. All 349 Native American gaming operations were surveyed — last year’s winner was Foxwoods of the Mashantucket Pequot Tribe of Connecticut.

	•		One-Year Rebound by Ski Apache — The 2005-06 ski season was particularly grueling after receiving only 16” of natural snowfall for the entire season. However, through expanded marketing and solid preparations by the ski management team, the operation rebounded fully the next season and generated in excess of 185,000 skier visits for the 2006-07 season which was in-line with 5-year averages for visitation.

	•		Four Bond Payments — The Tribe and its hospitality enterprises have made four separate bond interest payments out of cash from operations totaling $48M during the period of November 2005 through May 2007.

Critical Accounting Policies

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

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

Promotional Allowances IMG Resort and Casino periodically rewards rooms and other promotions, including Apache Spirit Club points and gift certificates, to its customers. The retail value of these player rebates are recognized by IMG Resort and Casino as a reduction from gross revenue. The total vouchers recognized by IMG Resort and Casino were approximately $1,770,000, $2,770,000 and $4,490,000 for the years ended April 30, 2005, 2006 and 2007, respectively.

The Casino’s Apache Spirit Club allows customers to earn “points” based on the volume of their gaming activity. These points are redeemable for certain services or merchandise. Points are accrued based upon their historical redemption rate multiplied by the cash value or the cost of providing the applicable complimentary services. The player’s club point’s liability is included in accrued expenses and totaled $1,028,000 at April 30, 2006 and $1,076,713 at April 30, 2007.

Emerging Issues Task Force (“EITF”) Issue No. 00-14, Accounting for Certain Sales Incentives requires that discounts which result in a reduction in or refund of the selling price of a product or service in a single exchange transaction be recorded as a reduction of revenues. IMG Resort and Casino adopted EITF 00-14 on April 30, 2001. IMG Resort and Casino’s accounting policy related to free or discounted food and beverage and other services already complies with EITF 00-14, and those free or discounted services are generally deducted from gross revenues as “promotional allowances.” In January 2001, the EITF reached a consensus on certain issues related to Issue No. 00-22, Accounting for “Points” and Certain Other Time-Based or Volume-Based Sales Incentive Offers, and Offers for Reproduces, or Services to be delivered in the future. Effective January 1, 2001, IMG Resort and Casino, through its wholly-owned subsidiaries adopted EITF 00-22, which requires that cash or equivalent amounts provided or returned to customers as part of a transaction not be shown as an expense, but instead as an offset to the related revenue.

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

Capitalization of Interest. In accordance with Statement of Financial Accounting Standards No. 34, “Capitalization of Interest Cost” or SFAS 34, interest cost associated with major development and construction projects is capitalized as part of the cost of the project. Interest is capitalized on amounts expended on the Resort using the weighted-average cost of our outstanding borrowings. Capitalization of interest started with the construction of the Resort beginning in January 2004 and ended with the completion of the Resort in March 2005. Interest capitalized on the Resort totaled $11.9 for fiscal year ended April 30, 2005. No interest has been capitalized by the resort for years 2006 and 2007.

Deferred Financing Costs. Debt issuance costs incurred in connection with the issuance of IMG Resort and Casino financing are capitalized and amortized using the straight-line method over the stated maturity of the debt, which approximates the effective interest method. Unamortized deferred financing costs totaled approximately $6.1 million as of April 30, 2007.

Impairment of Long-Lived Assets

Management reviews long-lived assets for impairment whenever events or changes in circumstances indicate the carrying amount of such assets may not be recoverable. In August 2001, the Financial Accounting Standards Board issued Statement of Accounting Standards No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets (“SFAS 144”), which established the approach to be used in the determination of impairment.

Under the provisions of SFAS 144, a long-lived asset to be abandoned is disposed of when it ceases to be used. If an entity commits to a plan to abandon a long-lived asset before the end of its previously estimated useful life, depreciation estimates shall be revised to reflect the use of the asset over its shortened useful life.

Results of Operations

Fiscal Year Ended April 30, 2007 Compared to the Fiscal Year Ended April 30, 2006

Net Revenues. Net revenues increased $12.4 million, or 10.9%, to $125.9 million for the fiscal year ended April 30, 2007 from $113.5 million for the fiscal year ended April 30, 2006. Gaming revenues increased $2.9 million, up 3.8% over the comparable period; food and beverage revenues increased $1.8 million, or 14.7%, over the comparable period; and hotel revenues increased $2.6 million over a year ago.

Gaming. Gaming revenues increased $2.9 million, or 3.8%, to $79.4 million for fiscal year ended April 30, 2007 from $76.5 million for the fiscal year ended April 30, 2006. Slot revenues increased to $68.3 million for the fiscal year ended April 30, 2007 from $66.2 million for the fiscal year ended April 30, 2006. Gross slot win per unit, per day was $141 for the fiscal year ended April 30, 2007 compared to $122 for the fiscal year ended April 30, 2006. Table games revenue increased $0.7 million, or 6.8%, to $11.0 million for the fiscal year ended April 30, 2007 from $10.3 million for the fiscal year ended April 30, 2006.

Hotel. Hotel revenues improved $2.6 million to $13.5 million for the fiscal year ended April 30, 2007 from $10.9 million for the fiscal year ended April 30, 2006, as a result of daily yield management, direct marketing and boosting midweek occupancy. Occupancy rates averaged 74% over the fiscal year ended April 30, 2007 an increase of 9%, average daily rate was $176 and revenue per available room was $129.

Food and Beverage. Food and beverage revenues increased $1.8 million, or 14.7%, to $14.1 million for the fiscal year ended April 30, 2007 from $12.3 million for the fiscal year ended April 30, 2006. The increase is due to covers increases as well as increased skier visits.

Recreation and Other. Recreation and other revenues increased $6.8 million, or 41.0% to $23.4 million for the April 30, 2007 compared to $16.6 million for the April 30, 2006. The increase is attributable to the average snowfall experienced this season at Ski Apache resort thus increasing revenue as contrasted to 2006 when we had historically low snowfall.

Promotional Allowances. Promotional allowances were $4.5 million for the fiscal year ended April 30, 2007 compared to $2.8 million for the fiscal year ended April 30, 2006, an increase of $1.7 million. The increase was due to expanded targeted, crossover promotions using players database with coupons and promotions.

Total Operating Expenses. Total operating expenses decreased $4.5 million to $103.5 million for the fiscal year ended April 30, 2007 from $108.0 million for the fiscal year ended April 30, 2006. As a percentage of revenue, operating expenses decreased by 13.5% of revenue for the fiscal year ended April 30, 2007. The decrease in total operating expense was due to improved cost management in our revenue generating operations and numerous one time charges recognized in the prior year.

Gaming. Gaming expenses decreased $1.2 million to $26.0 million for the fiscal year ended April 30, 2007 from $27.2 million for the fiscal year ended April 30, 2006. Gaming expenses as a percentage of gaming revenue decreased 2.8%, from 32.7% for the fiscal year ended April 30, 2007 compared to 35.5% for the fiscal year ended April 30, 2006.

Hotel. Hotel expenses decreased to $4.6 million for the fiscal year ended April 30, 2007 from $5.2 million for the fiscal year ended April 30, 2006. Hotel expenses represented 34.2% in April 2007 as compared to 47.7% of hotel revenue for the fiscal year ended April 30, 2006.

Food and Beverage. Food and beverage expenses decreased $1.6 million, or 10.3%, to $14.1 million for the fiscal year ended April 30, 2007 from $15.7 million for the fiscal year ended April 30, 2006. Food and beverage expenses as a percent of food and beverage revenue decreased 28%, from (100%) for the fiscal year ended April 30, 2007 compared to (128%) for the fiscal year ended April 30, 2006. Cost of Good Sold as a percent of revenue dropped 5.2% from 2006, and 2007 and wages fell $1.0 million or 68.7% as a percent of revenue from 2006.

Recreation and Other. Recreation and other costs increased $1.4 million, or 11.5% to $13.8 million for the fiscal year ended April 30, 2007 from $12.4 million for the fiscal year ended April 30, 2006. The increase in recreation and other costs was primarily attributable to the average snowfall as well as rising fuel costs.

Marketing and Advertising. Marketing and advertising costs increased $0.9 million, or 10.1% to $9.8 million for the fiscal year ended April 30, 2007 from $8.9 million for the fiscal year ended April 30, 2006 as a result of new logo design.

General and Administrative. General and administrative expenses decreased $3.9 million, or 24.5%, to $11.9 million for the fiscal year ended April 30, 2007 from $15.7 million for the fiscal year ended April 30, 2006 due one time charge incurred in the prior year.

Overhead allocations to Gaming were $10.4 million and $10.6 million in fiscal years ended April 30, 2006 and 2007 respectively.

The decrease in fiscal 2007 general and administrative costs was due primarily to the 2006’s increased expenses associated with opening the Resort, including an increase of $2.0 million in utilities and general liability insurance, including worker compensation, compensation of $0.6 million, general repairs and maintenance of $0.4 million, IT security software and hardware of $0.3 million, maintenance contracts (2nd year) increase of $0.5 million, bad debt reserve of $0.3 million, office, bank, and credit card fees of $0.4 million and one-time paid time off charges of $1.2 million, executive severance of $0.3 million, penalties and interest costs of $1.4 million and various professional fees of $1.8 million. Actual wages paid in General and Administrative expenses fell $1.1 million.

Pre-Opening Costs and Expenses. There were no current pre-opening costs and expenses for the fiscal years 2006 and 2007.

Depreciation. Depreciation increased $0.4 million to $18.2 million for the fiscal year ended April 30, 2007 from $17.8 million for the fiscal year ended April 30, 2006.

Income from Operations. Income from Operations increased $16.9 million, or 308.8%, to $22.3 million for the fiscal year ended April 30, 2007 from $5.5 million for the fiscal year ended April 30, 2006, as a result of the successful tournaround in all division’s operations.

Other Income (Expenses). Other non-operating expenses decreased $0.4 million to $26.3 million for the fiscal year ended April 30, 2007 from $26.7 million for the fiscal year ended April 30, 2006.

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

Fiscal Year Ended April 30, 2006 Compared to Fiscal Year Ended April 30, 2005

Net Revenues. Net revenues increased $20.5 million, or 21.9%, to $113.5 million for the fiscal year ended April 30, 2006 from $93.0 million for the fiscal year ended April 30, 2005. The increase in net revenues was primarily attributable to the opening of our IMGRC in March 2005. As a result, we realized an increase in most of our lines of business for the fiscal year ended April 30, 2006 compared to the fiscal year ended April 30, 2005: gaming revenues increased $12.2 million, up 19.0% over the comparable period; food and beverage revenues increased $5.9 million, or 92.5%, over the comparable period; and hotel revenues increased $9.7 million over a year ago (when there were no significant comparable revenues).

Gaming. Gaming revenues increased $12.2 million, or 19.0%, to $76.5 million for fiscal year ended April 30, 2006 from $64.3 million for the fiscal year ended April 30, 2005. Slot revenues increased to $66.2 million for the fiscal year ended April 30, 2006 from $55.2 million for the fiscal year ended April 30, 2005, an increase of $11 million, or 19.9%. These increases are primarily due to the opening of IMGRC. Gross slot win per unit, per day was $129 for the fiscal year ended April 30, 2006 compared to $135 for the fiscal year ended April 30, 2005; in this period the weighted average number of units increased from 1,240 units in the fiscal year ended April 30, 2005 to 1,500 for the fiscal year ended April 30, 2006. Table games revenue increased $1.2 million, or 13.2%, to $10.3 million for the fiscal year ended April 30, 2006 from $9.1 million for the fiscal year ended April 30, 2005. The decrease in win per unit per day on a year over year basis was attributable to an increase in the weighted average number of slot devices of approximately 21%.

Hotel. Hotel revenues for the fiscal year ended April 30, 2006 were $10.9 million. The resort re-opened in March 2005, the fiscal year ended April 30, 2006 is the first full fiscal year the Resort and its luxury hotel was in operation. Occupancy rates averaged 65% over the fiscal year ended April 30, 2006, average daily rate was $167 and revenue per available room was $109.

Food and Beverage. Food and beverage revenues increased $5.9 million, or 92.5%, to $12.3 million for the fiscal year ended April 30, 2006 from $6.4 million for the fiscal year ended April 30, 2005. The increase is due to the new Resort offering additional food and beverage outlets as well as an increase in banquet facility space.

Recreation and Other. Recreation and other revenues decreased $6.4 million, or 27.8% to $16.6 million for the April 30, 2006 compared to $23.0 million for the April 30, 2005. The decrease is due to the significant reduction in snowfall at its Ski Apache resort.

Promotional Allowances. Promotional allowances were $2.8 million for the fiscal year ended April 30, 2006 compared to $1.8 million for the fiscal year ended April 30, 2005, an increase of $1.0 million. The increase was due to increased promotions to our club members and a 32% increase in gross revenue excluding Ski.

Total Operating Expenses. Total operating expenses increased $27.6 million to $107.7 million for the fiscal year ended April 30, 2006 from $80.1 million for the fiscal year ended April 30, 2005. As a percentage of revenue, operating expenses increased by 9% of revenue for the fiscal year ended April 30, 2006. The percentage of revenue the increase in expenses was made up primarily of charges, including depreciation and paid time off accruals, in addition to the changing revenue mix and consulting costs addressing accounting needs and partially offset by strict monitoring of cash expenditures. The increase in total operating expenses was primarily due to increases of $8.4 million in food and beverage expenses, $18.8 million in general and administrative expenses, $6.0 million in marketing expenses, $4.5 million in hotel expenses, and $10.5 million in depreciation expense, offset by decreases of $9.0 million in gaming expenses, $8.3 in pre-opening costs and expenses, and $3.0 million in recreation and other expenses.

Gaming. Gaming expenses increased $1.4 million to $27.2 million for the fiscal year ended April 30, 2006 from $25.8 million for the fiscal year ended April 30, 2005. Gaming expenses as a percentage of gaming revenue decreased 5%, from 40% for the fiscal year ended April 30, 2005 compared to 36% for the fiscal year ended April 30, 2006. The increase in direct gaming expenses is attributable to the 19% increase in gaming revenue.

Hotel. Hotel expenses increased to $5.2 million for the fiscal year ended April 30, 2006 from $0.7 million for the fiscal year ended April 30, 2005 due to the opening of the Resort. Hotel expenses represented 48% of hotel revenue for the fiscal year ended April 30, 2006.

Food and Beverage. Food and beverage expenses increased $8.4 million, or 115.1%, to $15.7 million for the fiscal year ended April 30, 2006 from $7.3 million for the fiscal year ended April 30, 2005. The increase was primarily due to increased expenses associated with operating an increased number of food and beverage outlets, including the addition and training of food and beverage team members. Food and beverage margins as a percentage of food and beverage revenue decreased 14%, from (114%) for the fiscal year ended April 30, 2005 compared to (128%) for the fiscal year ended April 30, 2006 as a result of non-cash accruals entries, and accelerated write-downs of opening inventories. Cost of Good Sold as a percent of revenue dropped 18% from 2005 and wages fell 22% as a percent of revenue from 2005.

Recreation and Other. Recreation and other costs decreased $3.0 million, or 19.8% to $12.4 million for the fiscal year ended April 30, 2006 from $15.4 million for the fiscal year ended April 30, 2005. The decrease in recreation and other costs was primarily attributable to the significant reduction in snowfall. Retail Cost of Goods Sold as a percent of revenue dropped 10% from 2005, even after significant write-downs due to the poor snowfall at ski, and the slow retail sales at that location.

Marketing and Advertising. Marketing and advertising costs increased $6.0 million, or 206.9% to $8.9 million for the fiscal year ended April 30, 2006 from $2.9 million for the fiscal year ended April 30, 2005. Fiscal year 2005 included approximately $4.6 million of Pre-opening and General and administrative cost allocations. The remaining $2.4 million increase was primarily due to the opening of the Resort and applied toward media, advertising, special events and performers. These costs made up $6.7 million of the total Marketing and Advertising costs.

General and Administrative. General and administrative expenses increased $8.7 million, or 124%, to $15.7 million for the fiscal year ended April 30, 2006 from $7.0 million for the fiscal year ended April 30, 2005. If 2005’s Pre-opening costs of $8.3 million were included in 2005’s General and administrative expenses, the increase would be $0.4 million or 5.7%. Pre-opening costs consisted principally of personnel costs, training costs and payroll costs for retaining the former employees of the Inn. Overhead allocations to Gaming were $8.0 million and $10.4 million in fiscal years ended April 30, 2005 and 2006 respectively.

The increase in fiscal 2006 was due primarily to increased expenses associated with opening the Resort, including an increase of $2.0 million in utilities and general liability insurance, including worker compensation, compensation of $0.6 million, general repairs and maintenance $0.4 million, IT security software and hardware $0.3 million, maintenance contracts (2nd year) increase of $0.5 million, bad debt reserve of $0.3 million, office, bank, and credit card fees of $0.4 million and one-time paid time off charges of $1.2 million, executive severance of $0.3 million, penalties and interest costs of $1.4 million and various professional fees of $1.8 million. Actual wages paid in General and Administrative expenses fell $0.5 million.

Pre-Opening Costs and Expenses. There were no current pre-opening costs and expenses for the fiscal years ended April 30, 2006 and 2007. Previous expenses of $8.3 million for the fiscal year ended April 30, 2005, were attributable to segregating primarily general and administrative expenses while the new Resort was being constructed.

Depreciation. Depreciation increased $10.5 million to $17.8 million for the fiscal year ended April 30, 2006 from $7.3 million for the fiscal year ended April 30, 2005. The increase was primarily the result of opening the Resort in March 2005, with the fiscal year ended April 30, 2006 reflecting a full year of depreciation expense. In addition to the Resort, other equipment was put into service at the Travel Center as well as Ski Apache.

Income from Operations. Income from Operations decreased $7.4 million, or 57.7%, to $5.5 million for the fiscal year ended April 30, 2006 from $12.9 million for the fiscal year ended April 30, 2005. The decrease was primarily due to the increase in general and administrative, marketing, food and beverage and depreciation expenses associated with the opening of the Resort, in addition to increases in inventory reserves, consulting and audit fees associated with improvements in disclosure, controls, and accruing for settlement of unpaid federal and state withholding tax.

Other Income (Expenses). Other non-operating expenses increased $15.9 million to $26.7 million for the fiscal year ended April 30, 2006 from $10.8 million for the fiscal year ended April 30, 2005. The increase was primarily due to expensing interest on the $200 million senior notes issued in November 2003, which had previously been partially capitalized during the construction period. The fiscal year ended April 30, 2006 reflects the first fiscal year of bond interest charges expensed and none capitalized.

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

Liquidity and Capital Resources

As of April 30, 2007 and April 30, 2006, we had cash and cash equivalents (net of amounts in restricted accounts) of $16.9 million and $16.8 million, respectively. Our principal sources of liquidity for the fiscal year ended April 30, 2007 were cash from operating activities of $10.6 million, offset by approximately $1.5 million used in investing and $8.9 million used in financing activities.

Cash provided in operating activities was $10.6 million, a $12.1 million improvement over the previous year. The majority of the income was a result of the improved sales and profitability at Ski Apache and high operating costs at the beginning of the 2006 fiscal year.

Cash used in investing activities for the fiscal year ended April 30, 2007 was $1.5 million, which consisted of the purchase of property, plant and equipment and change in construction payables. This represents a decrease of $19.1 million from the fiscal year ended April 30, 2006, during which we completed the construction of our new Resort.

Cash used by financing activities for the fiscal year ended April 30, 2007 was $8.9 million, consisting of $18.2 million of cash released from our restricted accounts pursuant to the terms of the indenture governing the Notes. During the fiscal year 2007, $8.0 million was for Tribal government service and $14.9 was paid as a return of construction reserves. The remaining $4.1 million was used to pay down the Resort’s long term note obligations.

We believe that existing cash balances and operating cash flows and permitted borrowings will provide adequate funds for our working capital needs, planned capital expenditures, including equipment and furnishings for the Resort and debt service requirements for at least the next twelve months. However, our ability to fund our operations, make planned capital expenditures, and make scheduled payments depends on our future operating performance and success in seeking to increase operating efficiencies and reduce operating expenses, which are subject to economic, financial, business and other conditions, some of which are beyond our control. Additionally, our ability to incur additional indebtedness is limited under the terms of the indenture governing the Notes. If our expected operating performance or success in increasing operating efficiencies and reducing operating expenses does not meet management expectations, we may need to arrange for additional sources of funding in the form of permitted borrowings under our indenture or contributions from the Tribe, which sources of funding cannot be assured.

On Dec. 15, 2006, Standard & Poor’s Ratings Services revised its outlook on Inn of the Mountain Gods Resort and Casino (IMG) to developing from negative. At the same time, Standard & Poor’s affirmed its ratings on the company, including its ‘B-’ issuer credit and senior secured debt ratings. Per S&P, credit measures, adjusted for non-recurring charges, have improved meaningfully with debt to EBITDA and EBITDA coverage of interest expense having improved to 6.0x and 1.4x, respectively, for the 12 months

ended Oct. 31, 2006, from 7.9x and 1.0x, respectively, for the 12 months of its fiscal year ended April 30, 2006. The outlook revision recognizes the improved operating performance, which if sustained could result in ratings upside potential. It also incorporates a history of inconsistent earnings and continued material weaknesses that were disclosed in IMG’s form 10Q for the period ended Oct. 31, 2006.

On August 21, 2006, Standard and Poor’s (“S&P”) downgraded our Notes from ‘B’ to ‘B-’, including its issuer rating from ‘B’ to ‘B-’, with an outlook of negative. Key factors stated by S&P in its downgrade decision include 1) disappointing earnings for the fourth quarter ended April 30, 2006, 2) a tight liquidity position, and 3) reported internal control weaknesses. Other weaknesses include 1) remoteness of its market, 2) single market operator, 3) small cash flow base, 4) high debt levels, 5) weak credit measures, and 6) challenges associated with operating a larger resort facility. The ratings positively reflected our limited competition in southern New Mexico. We do not believe that these rating actions have had or will have a significant impact on our operations. We regularly provide financial information to rating agencies to both maintain and enhance existing ratings. We are in compliance with all covenants or other requirements set forth in our credit agreements. Further, we do not have any rating downgrade triggers that would automatically accelerate the maturity dates of any debt.

Description of Indebtedness

The Notes

On November 3, 2003, we issued $200.0 million senior notes, with fixed interest payable at a rate of 12% per annum. Interest on the notes is payable semi-annually on May 15 and November 15. The notes mature on November 15, 2010. As of April 30, 2007 accrued interest payable on the Notes was $11.2 million. The notes are secured until delivery of a final certificate of completion of the IMG Resort and Casino by first priority security interests in the following accounts:

	•		an interest reserve account, which was funded at the time the notes were sold with approximately $36.4 million, which, together with interest earned thereon, was used to make the first three (3) interest payments on the notes. As of April 30, 2007, the balance in the interest reserve account was $0;

	•		a construction disbursement account, which was funded at the time the Notes were sold with approximately $94.3 million and was used to fund completion of the Resort. As of April 30, 2007, the balance in the construction disbursement account was $0;

	•		a construction reserve account, which was funded at the time the Notes were sold with approximately $53.6 million and was to be used to (i) fund contingencies related to the construction of the Resort and (ii) fund a resolution relating to a disagreement over the Tribe’s prior gaming compact. As of April 30, 2007, the balance in the construction reserve account was $0 million; and

	•		a retainage account. As of April 30, 2007, the balance the construction retainage accounts was $0 million.

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

Incurrence of Additional Indebtedness

In general, we are restricted in connection with the issuance of the Notes and the related Indenture, that we would not incur any indebtedness if and to the extent the indebtedness would appear as a liability upon our balance sheet prepared in accordance with GAAP; provided however, we may incur indebtedness if certain financial ratios meet certain criteria. Furthermore, we agreed that we would not incur any indebtedness that is contractually subordinated in right of payment to our other indebtedness unless such indebtedness is also contractually subordinated in right of payment to the Notes. Our ability to create liens (other than certain permitted liens) upon any of our property or assets, or any proceeds, income or profits therefrom, or assign or convey any right to receive income therefrom are restricted unless payments due under the Indenture and the Notes are secured on an equal and ratable basis with (or, in the case of subordinated indebtedness, senior thereto, with the same relative priority that the Notes shall have with respect to such subordinated indebtedness) the obligation so secured until such time as such obligations are no longer secured by a lien. Accordingly, our ability to incur additional debt financing is severely limited.

General Indebtedness

The Tribe, for the benefit of the Inn of the Mountain Gods, a wholly-owned subsidiary of IMG Resort and Casino, executed a promissory note dated September 1, 1982, which we refer to as the BIA Note in favor of the Department of Interior, Bureau of Indian Affairs in the amount of approximately $3.5 million. The BIA Note accrues interest at the rate of 8.5% per annum payable annually from the date of the BIA Note until paid in full on September 1, 2011. As of April 30, 2007, there is approximately $1.2 million outstanding on the BIA Note.

Credit Facility

On June 15, 2005, we entered into a $15.0 million credit facility with Key Equipment Finance, a Division of Key Corporate Capital Inc. The five (5) fixed rate loans are fully amortizable over five years and bear an interest rate from 7.55% to 8.18%. Proceeds from the loan were used to fund furniture, fixtures and equipment purchases for the Resort. As of April 30, 2007, approximately $10.3 million remains outstanding.

Off-Balance Sheet Arrangements

As of April 30, 2007, we have no off-balance sheet arrangements that affect our financial condition, liquidity and results of operation. We have certain contractual obligations including long-term debt, operating leases and employment contracts.

Tabular Disclosure of Contractual Obligations

The following table sets forth, as of April 30, 2007, our scheduled principal, interest and other contractual annual cash obligations due by us for each of the periods indicated below (Dollars in thousands):


	Payments Due by Period
			Less						More
			Than		1-4		5-7		Than
Contractual Obligations	Total		1 Year		Years		Years		7 Years
Long-Term Debt Obligations (a)	$	309,383	$	28,434	$	280,846	$	103	$	—
Employment Contracts		1,050		350		700		—		—

Total	$	310,433	$	28,784	$	281,546	$	103	$	—


(a)		Includes interest.

A special use permit was obtained from the United States Department of Agriculture Forest Service for Ski Apache’s use of 80 acres of land in Lincoln National Forest. The permit is dated April 23, 1985, and has a term of 30 years with a yearly fee based on revenue and gross fixed assets. Occupancy fee for the years ended April 30, 2005, 2006 and 2007 totaled approximately $137,300, $137,200 and $92,000 respectively.

Impact of Inflation

Absent changes in competitive and economic conditions or in specific prices affecting the industry, we do not expect that inflation will have a significant impact on our operations. Changes in specific prices, such as fuel and transportation prices, relative to the general rate of inflation may have a material adverse effect on the hotel and casino industry in general.

Regulation and Taxes

We are subject to extensive regulation by the Mescalero Apache Tribal Gaming Commission, the NIGC and, to a lesser extent, the New Mexico Gaming Control Board. Changes in applicable laws or regulations could have a significant impact on our operations. We are unincorporated Tribal enterprises, directly or indirectly owned by the Tribe, a federally recognized Indian tribe, and are located on reservation land held in trust by the United States of America; therefore, we were not subject to federal or state income taxes for the fiscal years ended April 30, 2005, 2006 or 2007 , nor is it anticipated we will be subject to such taxes for the foreseeable future. Various efforts have been made in the U.S. Congress over the past several years to enact legislation that would subject the income of tribal business entities, such as us, to federal income tax. Although no such legislation has been enacted, similar legislation could be passed in the future. A change in our non-taxable status could have a material adverse affect on our cash flows from operations.

New Accounting Pronouncements

In September 2006, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 157 Fair Value Measurements (“SFAS 157”). SFAS 157 provides a new single authoritative definition of fair value and provides enhanced guidance for measuring the fair value of assets and liabilities and requires additional disclosures related to the extent to which companies measure assets and liabilities at fair value, the information used to measure fair value, and the effect of fair value measurements on earnings. SFAS 157 is effective for the Company as of May 1, 2008. The Company is currently assessing the impact, if any, of SFAS 157 on its consolidated financial statements.

In February 2007, the FASB issued Statement No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities” (SFAS 159). SFAS 159 provides that companies may elect to measure specified financial instruments and warranty and insurance contracts at fair value on a contract-by-contract basis, with changes in fair value recognized in earnings each reporting period. The election, called the “fair value option,” will enable some companies to reduce the variability in reported earnings caused by measuring related assets and liabilities differently. Companies may elect fair-value measurement when an eligible asset or liability is initially recognized or when an event, such as a business combination, triggers a new basis of accounting for that asset or liability. The election is irrevocable for every contract chosen to be measured at fair value and must be applied to an entire contract, not to only specified risks, specific cash flows, or portions of that contract. SFAS 159 is effective as of the beginning of a company’s first fiscal year that begins after November 15, 2007. Retrospective application is not allowed. Companies may adopt SFAS 159 as of the beginning of a fiscal year that begins on or before November 15, 2007 if the choice to adopt early is made after SFAS 159 has been issued and within 120 days of the beginning of the fiscal year of adoption and the entity has not issued GAAP financial statements for any interim period of the fiscal year that includes the early adoption date. Companies are permitted to elect fair-value measurement for any eligible item within SFAS 159’s scope at the date they initially adopt SFAS 159. The adjustment to reflect the difference between the fair value and the current carrying amount of the assets and liabilities for which a company elects fair-value measurement is reported as a cumulative-effect adjustment to the opening balance of retained earnings upon adoption. Companies that adopt SFAS 159 early must also adopt all of SFAS 157’s requirements at the early adoption date. The company is assessing the impact of adopting SFAS 159 and currently do not believe the adoption will have a material impact on our consolidated financial statements.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market risk is the risk of loss arising from adverse changes in market rates and prices, such as interest rates, foreign currency exchange rates and commodity prices. Our primary exposure to market risk is interest rate risk associated with our short term variable rate debt. As of April 30, 2007, we had no variable rate debt outstanding.

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

As of April 30, 2007, we held no derivative instruments.

Item 8. Financial Statements and Supplementary Data

The financial statements required pursuant to this item are included in Part IV of this report and begin on page F-1. The supplementary financial information required by this item is included in “Item 6. Selected Financial Data.”

Item 9A. Controls and Procedures

Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report. Disclosure controls and procedures are defined in SEC regulations as controls and other procedures of an issuer that are designed to ensure that information required to be disclosed by the issuer in the reports that it files or submits under the Securities Exchange Act of 1934, as amended, is recorded, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Securities Exchange Act of 1934, as amended, is accumulated and communicated to the issuer’s

management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Based on their evaluation, the Chief Executive Officer and Chief Financial Officer concluded that these controls were effective as of April 30, 2007. A control system cannot provide absolute assurance that the objectives of the controls system are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected.

Management’s Report on Internal Control Over Financial Reporting

Current System of Internal Control over Financial Reporting. Management is responsible for establishing and maintaining adequate internal control over financial reporting. Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Our internal control over financial reporting includes those policies and procedures that: (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of management and our directors; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.

Because of its inherent limitations, Internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Remediation of Previously Disclosed Material Weakness. We have previously reported that there were material weaknesses in our internal controls which may have prevented us form being able to accurately report our financial results or prevent fraud which could harm our business and operating results. As was noted in our previous filings with the Securities and Exchange Commission material weaknesses had been identified and were being remedied. Specifically, the material weaknesses identified were:

	•		our system of entering transactions into our general and subsidiary ledgers, including the time for entering transactions;

	•		timely and effective documentation of transactions to be entered into our accounting system;

	•		timely reconciliation of general ledger to appropriate underlying subsidiary records;

	•		implementation of an appropriate checks and balances system with respect to documentation and recording of transactions;

	•		provision of adequate education to our finance staff with respect to our accounting and financial reporting policies and procedures; and

	•		maintenance of a comprehensive written accounting policies and procedures manual.

At the direction of our audit committee, we have implemented permanent changes in an effort to enhance our internal controls in response to management’s conclusions (the “Permanent Changes”). The Permanent Changes include:

	•		improved system for documentation and verification of transactions;

	•		improved system of entering transaction into general and subsidiary ledgers in a timely and complete manner;

	•		implementing improved and additional systems relating to account reconciliation and transaction reporting, including the review, analysis and reconciliation of ledger details and timely recording of transactions;

	•		developing a comprehensive policies and procedures manual that is accessible and understood by all members of our finance staff;

	•		specifically defining and documenting the responsibilities of our financial reporting personnel;

	•		improved training of our financial reporting personnel; and

	•		retaining Protiviti, Inc., an independent advisory firm, to assist in evaluating our internal controls, including the identification, documentation and testing of significant controls, policies and procedures.

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

	•		implementation of a focused and detailed review and cross-checking of prior financial statements by internal audit personnel, supervised and cross-checked by senior management, outside advisors and our audit committee;

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

	•		frequent reviews and cross-checking of the data used to create this Report by senior management, internal audit personnel and consultants;

	•		extensive research, review, cross-checking and documentation of material transactions with focus on reporting for revenue recognition, cash transactions and balances, receivables, fixed assets, payroll, inventory, payables and accrued expenses, and payments to affiliates; and

	•		utilization of existing financial management software, reports for ledger and sub-ledger details for financial transactions.

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

Changes in Internal Control Over Financial Reporting. During the period covered by this Report on Form 10-K, we continued to implement the Interim Measures, and successfully implemented the permanent changes to our internal controls, as described above.

During the period covered by this Report on Form 10-K, other than with respect to implementing the Permanent Measures and continued utilization of the Interim Measures, described above, there were significant changes in the form of improvements and strengthening, in our internal controls or in other factors that have materially affected, or are likely to materially affect, our internal controls.

These changes included, but are not limited to:

	•		Hiring of experienced, trained, professionals in both Accounting and IT. These new professionals successfully implemented permanent controls, in addition to training of other staff in improved job performance and financial controls.

	•		Process mapping of all financial control processes and procedures in place. During this process, job duties and descriptions were revised, duties segregated, additional training conducted, review and sign-off with follow-up reporting implemented.

	•		Instituted rigorous, de-centralized, monthly financial close process, that included:

	•		10 working day close cycle, documented daily tasks, reviews, and follow-up.

	•		Monthly reconciliation of balance sheet accounts

	•		Cross training of close cycle functions

	•		De-centralized departmental expense review process. Monthly departmental expense detail reports and

comparisons to detailed, line-item budgets are distributed and reviewed within the 10 day close cycle.

	•		Implemented closed purchase order system requiring written approvals.

	•		Strengthened inventory control by creating centralized stores to distribute common product to all outlets. Resulting in reduced inventory on hand in the central stores location as outlet ordering improved to JIT needs. Implemented an item master list, that restricts the ability to add new items without senior management review and written authorization.

	•		Weekly, distributed and review of revenue numbers by division along with labor expenses and a discussion and review of the next 10 days of bookings, group visits, special events to properly plan labor and inventory needs. These weekly reports are tracked and compared to the previous years results as well as the current year budget.

	•		Improved the organization’s internal control compliance by incorporating all team members in the implementation and testing of controls, policies and procedures.

	•		Emphasizing cross training in all departments at all levels.

Item 9B. Other Information

None.

PART III.

Item 10. Directors and Executive Officers of the Registrant

The Tribe has established IMG Resort and Casino as an unincorporated enterprise of the Tribe to operate its gaming, hotel, resort and ski businesses. IMG Resort and Casino is governed by a Management Board comprised of between seven to nine members, including: the four members of the Executive Committee of the Tribe (including the President of the Tribe who serves as Chairperson, as well as the Vice President, Secretary and Treasurer of the Tribe); the Chief Operating Officer of IMG Resort and Casino, and at least one, and up to three, independent members. The Management Board designates officers to administer the economic and business affairs of IMG Resort and Casino.

The following are our current officers and members of the Management Board of IMG Resort and Casino:


Name	Age		Position
Mark Chino		53	Management Board Member (Chairperson), President of the Tribe
Frederick Chino, Sr.		62	Management Board Member, Vice President of the Tribe
Alfred LaPaz		59	Management Board Member, Secretary of the Tribe
Fredrick Peso		68	Management Board Member, Treasurer of the Tribe
Manuel Lujan, Jr.		79	Management Board Member
R. Miles Ledgerwood		52	Management Board Member, Audit Committee Chair
Brian Parrish		45	Management Board Member, Chief Operating Officer of IMG Resort and Casino
Lance Kintz		50	Chief Financial Officer of IMG Resort and Casino

There are no family relationships between any Management Board Member and/or any executive officer. All Management Board Members serve for a term of one year commencing in January of each year.

The Management Board met a total of 13 times during the fiscal year ended April 30, 2007. All members of the Management Board attended more than 90% of the time.

Mark Chino has served as Chairperson of the Management Board of IMG Resort and Casino and President of the Tribe since January 2004. Mr. Chino’s term on the Tribal Council and Executive Committee expires in January 2008. Prior to his election as President of the Tribe, Mr. Chino was employed by the Bureau of Indian Affairs for nearly 30 years, serving as a Police Officer, Lead Police Officer (Sergeant) and Supervisory Police Officer (Lieutenant) from 1975 to 1988, and then as a Criminal Investigator from 1988 to 2004. Mr. Chino received a Bachelor of Police Science degree from New Mexico State University in 1977.

Frederick Chino, Sr. has served as a member of the Management Board of IMG Resort and Casino since January 2005 and Vice President of the Tribe since January 2005. Mr. Chino retired from the Public Health Service in 1993 following 23 years of service and has been active in Tribal activities.

Alfred LaPaz has served as a member of the Management Board of IMG Resort and Casino since June 2004. Mr. LaPaz also serves as Secretary of the Tribal Council and as Chairperson of the Programs Committee. Mr. LaPaz’s term on the Tribal Council and Executive Committee expires in January 2007. Since 2000, Mr. LaPaz served as Director of Security at the IMG and now serves with the Office of the Sheriff of Otero County, New Mexico. Mr. LaPaz was employed with the Federal Law Enforcement and retired as Captain after 30 years service.

Fredrick Peso has served as a member of the Management Board of IMG Resort and Casino since January 2006. Mr. Peso also serves as the vice president of the IMG Resort and Casino audit committee. Mr. Peso attended New Mexico State University, Western New Mexico College and Fort Lewis College. Mr. Peso is the Vice President of the Tribal Council and his term expires in January 2008. Mr. Peso has served on the Tribal Council for 20 years. During his tenure with the Tribal Council, he has served in many different capacities. He has served on the Commission of Indian Affairs and as chairman and vice president of Southwestern Indian Polytechnic Institution Board of Regents.

Manuel Lujan Jr. has served as an independent member of the Management Board of IMG Resort and Casino since January 2004. Mr. Lujan also currently serves as the Chairman of the board of directors of Laguna Construction Company, which is owned by the Pueblo of Laguna in New Mexico. Mr. Lujan served as U.S. Congressman representing the State of New Mexico from January 1969 to January 1989 and as Secretary of the Interior under the Bush Administration from 1989 to 1993. Since 1993, Mr. Lujan has served as a lobbyist in Washington, D.C. through his company Manuel Lujan Associates, a consulting firm dealing with matters involving federal agencies.

R. Miles Ledgerwood has served as a member of the Management Board of IMG Resort and Casino since March 2004. Mr. Ledgerwood has also served as President and CEO of Alamogordo Federal Savings and Loan Association since 1983. Mr. Ledgerwood also currently serves as a member of the Board of Directors of Alamogordo Financial Corporation, Alamogordo Federal Savings and Loan Association and Space Age City Service Corporation. Mr. Ledgerwood is the Chairman of the IMG Resort and Casino Audit Committee. Mr. Ledgerwood is an independent member of the Management Board.

Brian Parrish has served as a member of the Management Board of IMG Resort and Casino and as Chief Operating Officer since June 2005. Prior to serving as acting Chief Operating Officer, Mr. Parrish served as the Director of Marketing of IMG Resort and Casino since January 2003. Mr. Parrish has over 15 years of marketing experience, recently at the Venetian Resort Hotel Casino in Las Vegas, Nevada, where he was Vice President of Marketing from 2000 to 2002. Prior to his experience at the Venetian, Mr. Parrish served as Vice President of Hotel Operations and Regional Marketing of the Boyd Gaming Corporation from 1999 to 2000 and as Regional Vice President of Marketing from 1997 to 1999. Mr. Parrish also served as Director of Casino Marketing for the Flamingo Hilton in Las Vegas, Nevada from 1993 to 1995. Mr. Parrish also worked in the U.S. Defense Intelligence Industry from 1983 to 1988.

Lance Kintz has served as the Chief Financial Officer of the Company since September 12, 2005. Since 2002 Mr. Kintz has been an independent consultant advising various companies in cash flow, operational and management concerns, as well as acquisitions and financings. These companies’ sales ranged from under $3 million to over $60 million in such industries as newspapers, apparel, architectural products and automobile dealerships. Before becoming an independent consultant, Mr. Kintz was a financial executive at Gannett Co., Inc. which owned the Arizona Republic Newspaper from 1999 to 2001 and Western Digital Corporation which manufactured and sold computer disk drives from 1989 to 1999. Mr. Kintz is a Certified Public Accountant. He received his Master of Business Administration Degree from Pepperdine University and B.S. in Accounting from Arizona State University. Mr. Kintz is on a month-to-month employment contract with the Company.

Audit Committee Financial Expert

On behalf of the Board, the Audit Committee is responsible for providing an independent, objective review of our auditing, accounting and financial reporting process, public reports and disclosures, and system of internal controls regarding financial accounting. Currently, R. Miles Ledgerwood serves as the Audit Committee financial expert. Mr. Ledgerwood is an independent member of the Audit Committee. During the fiscal year ended April 30, 2007, the Audit Committee met a total of 7 times with 100% attendance.

Code of Ethics

We have adopted a Code of Business Conduct and Ethics applicable to all of our employees, including our Chief Executive Officer, Chief Financial Officer, and all other senior financial executives, and to our directors when acting in their capacity as directors. Our Code of Business Conduct and Ethics is designed to set the standards of business conduct and ethics and to help

directors and employees resolve ethical issues. The purpose of our Code of Business Conduct and Ethics is to ensure to the greatest possible extent that our business is conducted in a consistently legal and ethical manner. Employees may submit concerns or complaints regarding audit, accounting, internal controls or other ethical issues on a confidential basis by means of a toll-free telephone call or an anonymous email. We investigate all concerns and complaints. Copies of our Code of Business Conduct and Ethics are available to investors upon written request. Any such request should be sent by mail to Inn of the Mountain Gods Resort and Casino, 287 Carrizo Canyon Road, Mescalero, New Mexico 88340, Attn: Chief Operating Officer or should be made by telephone by calling (505) 464-7000.

We intend to disclose on our website amendments to, or waivers from, any provision of our Code of Business Conduct and Ethics that apply to our Chief Executive Officer, Chief Financial Officer, and persons performing similar functions and amendments to, or waivers from, any provision which relates to any element of our Code of Business Conduct and Ethics described in Item 406(b) of Regulation S-K.

Item 11. Executive Compensation

Executive Compensation

The Management Board has reviewed and discussed the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K with management of the Company. Based on that review and discussion, we agree to include the Compensation Discussion and Analysis on Form 10-K for the fiscal year ended April 30, 2007.

Report Submitted by:
THE MANAGEMENT BOARD

Mark Chino, Chairman
Frederick Chino, Sr.
Alfred LaPaz
Frederick Peso
Manuel Lujan, Jr.
R. Miles Ledgerwood
Brian D. Parrish

COMPENSATION DISCUSSION AND ANALYSIS

Compensation Objectives

The Company’s success depends on the expertise, talent, experience and long-term commitment of the Company’s employees, especially its named executives. The Company’s compensation plan is intended to achieve the following objectives:

	•		To attract, retain, motivate and reward key employees to drive the successful implementation of the Company’s current and long-term financial and operating goals;

	•		To establish appropriate incentives for management and employees that are consistent with the Company’s culture and values; and

	•		To provide an annual compensation program that rewards both Company and individual performance with the proper balance between salary, and performance-based incentives.

Our named executives consist of our Chief Operating Officer (our COO) and our Chief Financial Officer (our CFO). Most of our compensation elements address one or more of our performance, alignment and retention objectives. These elements consist of base salary and performance oriented awards. The Company believes that this creates an environment that allows it to achieve its objectives and maximize the achievement of our compensation goals.

Compensation of officers is established after a review of data for executives in similar positions in comparable companies, mostly companies in the hospitality and gaming fields. When reviewing individual compensation levels, the Company considers individual and corporate performance, levels of responsibility, and competitive pay practices. These factors vary from individual to individual and other subjective features are also considered such as the individual’s experience.

Roles in Establishing Executive Officers Compensation

Our executive officers compensation is set by our entire Management Board and not by a compensation committee. To the extent that an executive officer is a member of the board, they recuse themselves from discussion or do not participate in compensation decisions that relate to them. The Management Board relies on input from the COO in connection with the CFO’s position and compensation. The Management Board determines the COO’s position and compensation without the input of any other executive officer.

Factors in Determining Compensation

Employment Agreements. The Company entered into an employment agreement with the COO on November 10, 2006 and with the CFO on September 12, 2005. We entered into the employment agreements primarily to ensure the long-term retention of these executive officers. The employment agreements determine the annual base salary and severance packages available to these executive officers.

Performance. The amount of compensation for each named executive reflects their superior management experience and continued high level of performance over a long period of time. The key elements of our compensation program that award performance include a cash incentive that is based on the achievement of set levels of performance goals for the Company. We do not generally adhere to specific formulas for awarding cash performance incentives. At the creation of the employment contract, we set specific performance thresholds that form the basis of the payment of cash incentives.

Elements of Compensation

Base Annual Compensation. The Company believes that the base salary levels of the Company’s executive officers are reasonably related to the base salary levels of executive officers of comparable companies in the gaming and hospitality fields and the geographical region in which the Company is located. The base salary levels were not objectively determined with a formula but instead reflect levels that the Company concluded were appropriate based upon our general experience. The Company believes that the current base salary levels of the Company’s executive officers take into account the unique talents and experience of our executive officers. Base salaries are adjusted annually for cost of living adjustments. Base salaries are reviewed at the end of the contract period and increases in base salary takes into account such factors as individual past performance, changes in responsibilities, and changes in pay levels of companies deemed comparable to us.

Severance Benefits. We believe that companies should provide reasonable severance benefits to its employees when leaving the company due to a change in control or without cause. The amount of each executive’s severance is determined by the terms of each of their respective employment agreements.

Other Compensation. In addition to the compensation described above, the Company also provides the executive officers with other benefits to assist the Company in remaining competitive in the marketplace and to encourage executive officers to remain with the Company. The Company provides medical and other group insurance coverage generally made available to all of our full time employees.

Retirement Benefits. The executive officers may elect to participate in retirement plan benefits of our 401(K) plan generally available to all of our full time employees. The Company does not make any 401(K) contributions on behalf of the executive officers.

Pension Benefits. The Company does not have a benefit pension plan.

Deferred Compensation. The Company has neither a non-qualified defined contribution plan nor any other non-qualified deferred compensation plans.

Summary Compensation Table

The following table sets forth, as to the Chief Operating Officer and Chief Financial Officer during fiscal year 2007 (referred to as the named executive officers), information concerning all compensation paid for services to us in all capacities for the year ended April 30, 2007 indicated below.

Change in

Pension

Value and

Non-

Qualified

Non-Equity

Deferred

Incentive

Compen-

All Other

Name and

Option

Plan

sation

Compensa-

Principal

Stock Awards

Awards

Compensa-

Earnings

tion

Total

Position(1)

Year

Salary ($)

Bonus ($)

($)

tion ($)

($)

(a)

(b)

(c)

(d)

(e)

(f)

(g)

(h)

(i)

(j)

Brian Parish Chief Operating Officer (2)

2007

350,000

Lance Kintz Chief Financial Officer

2007

180,000

75,000

(3)

255,000


(1)		All of our officers receiving compensation in excess of $100,000 during the last fiscal year are listed above. No other officers other than the COO and CFO receive compensation in excess of $100,000.

(2)		Effective July 22, 2005, Brian Parrish was appointed Chief Operating Officer and member of the Management Board of IMG Resort and Casino. Effective November 10, 2006, Mr. Parrish’s employment term was extended through September 11, 2008 with total compensation of $350,000 per annum.

(3)		Consists of project milestone completions.

Compensation Narrative

The bonuses and other compensation noted in the summary table for Mr. Kintz were specifically paid for completing milestones towards the goal of the completion of certain projects which include, accounting and finance department restructuring, recruiting, and training; establishing efficient, accurate timely forecasting and budget processes; explore refinancing opportunities with investment community and bankers; prepare investment presentations; SEC Form 10K, 10Q and 8-K preparation, review and filings; and establish central purchasing, receiving, control of company assets. Determination of project completion is a joint review by the COO and general councel.

DIRECTOR COMPENSATION


									Change in Pension
									Value and
									Non-qualified
							Non-Equity		Deferred
	Fees Earned or Paid						Incentive Plan		Compensation		All Other
	in Cash		Stock Awards		Option Awards		Compensation		Earnings		Compensation		Total
Name	($)		($)		($)		($)		($)		($)		($)
(a)	(b)		(c)		(d)		(e)		(f)		(g)		(h)
Mark Chino	$	3,600		—		—		—		—		—	$	3,600
Fredrick Chino Sr	$	3,800		—		—		—		—		—	$	3,800
Alfred LaPaz	$	4,000		—		—		—		—		—	$	4,000
Fredrick Peso	$	4,000		—		—		—		—		—	$	4,000
Manual Lujan Jr	$	11,000		—		—		—		—		—	$	11,000
R. Miles Ledgerwood	$	13,500		—		—		—		—		—	$	13,500

Compensation of the Management Board and Audit Committee

Members of the Management Board who are officers of the Resort but are not Tribal members do not receive any additional compensation or fees for attending Management Board or Audit Committee meetings. Tribal members serving on the Management Board and Audit Committee receive $200 per meeting. Independent members serving on the Management Board and Audit Committee receive $500 per meeting and an additional $1,000 per quarter.

Employment Agreements

Brian Parrish. Effective November 10, 2006, the Management Board approved an amendment to Mr. Parrish’s (Chief Operating Officer) executive employment agreement. The amended agreement extends Mr. Parrish’s employment term through September 11, 2008 and changes total compensation to $350,000 per annum. If either Mr. Parrish or IMG Resort and Casino terminates the agreement involuntarily, IMG Resort and Casino is obligated to pay Mr. Parrish the then current monthly base salary, benefits and allowance continuation for a period of six months or until Mr. Parrish has secured employment with another employer. We are not required to pay any compensation if Mr. Parrish terminates the agreement voluntarily. Bonus compensation was eliminated from the amended agreement

Lance Kintz. Pursuant to an employment agreement dated September 12, 2005, Mr. Kintz provides services to the IMG Resort and Casino as its Chief Financial Officer on a month to month basis. The agreement provides that either Mr. Kintz or IMG Resort and Casino may terminate the agreement for any reason whatsoever. Mr. Kintz receives a monthly salary of $15,000. In addition to bonuses for the completion of various critical project milestones. In addition, Mr. Kintz has received bonus compensation for key deliverables and satisfying critical project milestones.

Other Post-Employment Compensation

On June 28, 2007 the Management Board approved a $50,000 project milestone completion bonus as of July 31, 2007 for Mr. Kintz. Mr. Kintz will be replaced as CFO on August 1, 2007. Additionally, Mr. Kintz may provide us with post termination consulting services. However, the details of such arrangement have not yet been finalized.

New Chief Financial Officer

Mrs. Karen Braswell will assume the duties of CFO as of August 1, 2007 (please refer to the Form 8-K filed with the SEC by the Company on July 25, 2007 which is incorporated herein by reference).

Item 12. Security Ownership of Certain Beneficial Owners and Management

None.

Item 13. Certain Relationships and Related Transactions

Distributions to the Tribe with Other Payments

Distributions to the Tribe were $8.0 million in government service payments and $14.9 million in return of construction reserve for the fiscal year ended April 30, 2007. We make distributions to the Tribe under the terms of an annual Tribal budget resolution passed at the discretion of the Tribal Council. We intend to continue to make distributions to the Tribe subject to the restrictions set forth in the indenture, which generally provide we can make no distributions unless we meet certain debt leverage tests, other than the following: (a) $5.0 million in aggregate at any one time, (b) $8.0 million a year for government services and (c) amounts to fund a resolution of the Tribe’s dispute with the State of New Mexico regarding the 1997 Compact. IMG Resort and Casino’s reduced government service distribution to the Tribe in 2006 was due to its reduced cash on hand as a result of its meeting its debt service from operations.

Tribal Taxes

The Tribal Code provides for the imposition of a gross receipts tax on the sale of food, beverages, retail sales and services and the rental of rooms on the Mescalero Reservation. The rate of the tax is comparable to the cumulative state and local sales or use tax imposed on identical transactions taking place outside the reservation and within the State of New Mexico. This tax applies to sales at our current operations and will apply to sales on future operations. IMG Resort and Casino collects and remits the gross receipts tax to the Tribe on a monthly basis.

The Tribal Code also provides for the collection of an excise tax on gasoline sold at retail on the Mescalero Reservation. The rate of the tax is equivalent to the same tax imposed by the State of New Mexico on identical transactions taking place outside the reservation and within the State of New Mexico. IMG Resort and Casino collects and remits the excise tax to the Tribe on a monthly basis.

The Tribal Code also provides for the imposition of a special assessment school tax on the resort enterprises to provide a source of funds to service debt incurred to construct the Tribe’s K-12 School. The rate of the tax, for each month, is equal to the difference between $200,000 and all taxes imposed on or collected by and remitted by the resort enterprises to the Tribe for that month. If the total taxes imposed on us by the Tribe for any month is greater than $200,000, then the special assessment tax for that month is zero.

Shared Services and Cost Allocations

In connection with the issuance of the original notes, IMG Resort and Casino and the Tribe entered into a service and cost allocation agreement, provides that the Tribe or its enterprises will continue to provide IMG Resort and Casino and its resort enterprises the following services in accordance with past practice: (i) insurance; (ii) telecommunications; (iii) propane; and (iv) gaming regulation, and that IMG Resort and Casino and its resort enterprises will pay, on behalf of the Tribe, for (a) revenue sharing and regulatory fee obligations required under the 1997 Compact or any new compact, (b) federal regulatory fees required by IGRA, (c) an amount equal to the monthly payments required under the BIA Note and (d) amounts for certain other miscellaneous liabilities. IMG reimburses the Tribe for its direct costs as billed by the third party.

Employee Benefits Cost Allocations

In connection with the issuance of the original notes, IMG Resort and Casino and the Tribe entered into an employee benefits cost allocation agreement, which provides that the Tribe will continue to provide IMG Resort and Casino and its resort enterprises with certain employee benefits in accordance with past practice, including group health benefits, worker’s compensation insurance, disability insurance, unemployment benefits and pension benefits. IMG Resort and Casino reimburses the Tribe for its employees’ direct costs for coverage as billed by the third party.

The Tribe provides employee benefits to IMG Resort and Casino, which reimburses the Tribe for all costs and expenses associated with this insurance. IMG Resort and Casino paid the Tribe approximately $1.4 million, $2.0 million, $3.3 million for the fiscal years ended April 30, 2005, 2006 and 2007.

The Tribe sponsors a federally compliant 401(k) savings plan, which covers substantially all employees who worked for IMG Resort and Casino for at least 120 days and attained 18 years of age. The company matches employee contribution up to 4%. Qualified employees who have been employed for more than 120 days had the initial waiting period waived. The total amount of match made by IMG Resort and Casino was $315,404 for the year ending April 30, 2007. This plan became effective January 1, 2007. The first payroll deduction and match began on January 12, 2007.

ATM Fees

IMG Resort and Casino does not receive revenues from the use by our customers of the ATM machines provided at our business locations. Pursuant to agreements with third party ATM providers, the Tribe receives a portion of the transaction fees paid by ATM users. The Tribe will continue to receive payments related to the ATM services provided in our new facilities under similar arrangements, and we will receive no revenue from these services, for the remaining of the current contract which expires December 31, 2008.

Item 14. Principal Accounting Fees and Services

The following table sets forth the aggregate fees for professional service provided to IMG Resort and Casino for fiscal 2006 and 2007 by BDO Seidman, LLP:


	Year Ended April 30,				Percentage of Services
	2006		2007		2006			2007
Audit Fees	$	325,650	$	327,473		89	%		89	%
Tax Fees		—		—		—			—
MICS Audit Fees		40,000		38,480		11	%		11	%

Total Fees	$	365,650	$	365,953		100.00	%		100.00	%

“Audit Fees” billed during fiscal 2006 and 2007 were for professional services rendered for the audit of our financial statements quarterly reviews and services rendered in connection with regulatory filings for those fiscal years. “MICS Audit Fees” consists of fees related to agreed upon procedures applied to minimum internal control standards.

The Audit Committee has adopted a policy for the pre-approval of all audit and non-audit services to be performed for IMG Resort and Casino by its independent auditor. The Audit Committee has considered the role of BDO Seidman, in providing audit and MICS services to IMG Resort and Casino and has concluded that such services are compatible role as IMG Resort and Casino’s independent auditor.

PART IV.

Item 15. Exhibits, Financial Statement Schedules, and Reports on Form 8-K

(a)

(1) FINANCIAL STATEMENTS — See Index to Consolidated Financial Statements of this Annual Report on Form 10-K.

	(2)		FINANCIAL STATEMENT SCHEDULES — All financial statement schedules have been omitted because they are not applicable or are not required, or because the information required to be set forth therein is included in the Consolidated Financial Statements or Notes thereto.

	(3)		EXHIBITS — See Exhibit Index on pages 36-37 of this Annual Report on Form 10-K.

(b)

None.

(c)

See Exhibit Index on pages 36-37 of this Annual Report on Form 10-K.

Exhibits Index


Exhibit No.		Description
3.1*		Mescalero Apache Tribe Resolutions 03-05, 03-28 and 03-29 establishing and governing the Inn of the Mountain Gods Resort and Casino adopted and approved April 2, 2003, June 15, 2003 and June 15, 2003, respectively.

3.2*		Charter of the Management Board of IMG Resort and Casino.

4.1*		Indenture, dated as of November 3, 2003, among the Mescalero Apache Tribe, Inn of the Mountain Gods Resort and Casino, Casino Apache, Inn of the Mountain Gods, Casino Apache Travel Center, Ski Apache and U.S. Bank National Association, as Trustee, relating to the 12% Senior Notes due 2010 of the Inn of the Mountain Gods Resort and Casino.

4.2*		Form of 12% Senior Note Due 2010 of the Inn of the Mountain Gods Resort and Casino.

4.3*		Registration Rights Agreement, dated as of November 3, 2003, among the Mescalero Apache Tribe, Inn of the Mountain Gods Resort and Casino, Casino Apache, Inn of the Mountain Gods, Casino Apache Travel Center, Ski Apache and Citigroup Global Markets Inc, as the Initial Purchaser.

10.1*		Second Amended Design/Build Construction Contract, by and among Inn of the Mountain Gods Resort and Casino, Centex/WorthGroup, LLC, as Design/Builder, and Rider Hunt Levett & Bailey, as Construction Manager, dated as of September 6, 2003, and Change Order No. 9 thereto, dated October 24, 2003.

10.2*		Cash Collateral and Disbursement Agreement, dated as of November 3, 2003, among Inn of the Mountain Gods Resort and Casino, Casino Apache, Inn of the Mountain Gods, Casino Apache Travel Center, Ski Apache, U.S. Bank National Association, as Disbursement Agent, Professional Associates Construction Services, Inc., as Independent Construction Consultant and U.S. Bank National Association, as Trustee.

10.3*		Ski Apache Special Use Permit received from the United States Department of Agriculture, Forest Service dated April 23, 1985.

10.4****		Employment Agreement dated September 12, 2005 between the Mescalero Apache Tribe and Lance Kintz.

10.5		Employment Agreement dated November 10, 2006 between the Mescalero Apache Tribe and Brian Parrish (filed herewith).

10.7***		2001 Compact between the Mescalero Apache Tribe and the State of New Mexico, entered into June 1, 2004.

12.1		Statement of Calculation of Ratio of Earnings to Fixed Charges (filed herewith).

14.1***		Code of Business Conduct and Ethics of Inn of the Mountain Gods Resort and Casino.

14.2***		Code of Ethics for Principal Executive Officer and Senior Financial Officer.

21.1*		Subsidiaries of the Registrant.

24.1		Power of Attorney (Included with Signature Page).

31.1		Certification of Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith).

31.2		Certification of Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith).

32.1		Certification of Principal Executive Officer and Principal Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith).


*		Incorporated by reference to IMG Resort and Casino’s Registration Statement on Form S-4 filed with the SEC on February 27, 2004 (SEC File No. 333-113140).

**		Incorporated by reference to IMG Resort and Casino’s Amendment No. 1 to Registration Statement on Form S-4 filed with the SEC on April 22, 2004 (SEC File No. 333-113140).

***		Incorporated by reference to IMG Resort and Casino’s Annual Report on Form 10-K filed with the SEC on July 29, 2004.

****		Incorporated by reference to IMG Resort and Casino’s Annual Report on Form 10-K for year ended April 30, 2006, filed with the SEC on August 15, 2006.

Each person whose signature appears below constitutes and appoints Brian Parrish and Lance Kintz and each of them, as his true and lawful attorneys-in-fact and agents with full power of substitution and resubstitution, for him and his name, place and stead, in any and all capacities, to sign any or all amendments to this Annual Report on Form 10-K and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the foregoing, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or either of them, or their substitutes, may lawfully do or cause to be done by virtue hereof.

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


Signature	Title	Date

/s/ Mark Chino Mark Chino	Management Board Member (Chairperson)	July 25, 2007

/s/ Fredrick Chino, Jr. Fredrick Chino, Jr.	Management Board Member	July 25, 2007

/s/ Alfred LaPaz Alfred LaPaz	Management Board Member	July 25, 2007

/s/ Fred Peso Fred Peso	Management Board Member	July 25, 2007

/s/ Manuel Lujan, Jr. Manuel Lujan, Jr.	Management Board Member	July 25, 2007

/s/ R. Miles Ledgerwood R. Miles Ledgerwood	Management Board Member	July 25, 2007

/s/ Brian D. Parrish Brian D. Parrish	Chief Operating Officer and Management Board Member (Chief Executive Officer)	July 25, 2007

/s/ Lance Kintz Lance Kintz	Chief Financial Officer	July 25, 2007

Report of Independent Registered Public Accounting Firm

Management Board
Inn of the Mountain Gods Resort and Casino and subsidiaries
Mescalero, New Mexico

We have audited the accompanying consolidated balance sheets of Inn of the Mountain Gods Resort and Casino and subsidiaries (the “Company”), unincorporated enterprises of the Mescalero Apache Tribe, as of April 30, 2006 and 2007, and the related statements of operations, changes in equity, and cash flows for each of the three years in the period ended April 30, 2007. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal controls over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, including 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 Inn of the Mountain Gods Resort and Casino and subsidiaries as of April 30, 2006 and 2007, and the results of its operations and its cash flows for each of the three years in the period ended April 30, 2007, in conformity with accounting principles generally accepted in the United States of America.

Inn of the Mountain Gods Resort and Casino and subsidiaries are unincorporated enterprises of the Mescalero Apache Tribe and are not separate legal entities, These financial statements reflect the financial position of the Inn of the Mountain Gods Resort and Casino and subsidiaries and the results of their operation and their cash flows and do not purport to represent the financial position and activity of the Mescalero Apache Tribe as a whole.

/s/ BDO Seidman, LLP

Los Angeles, California

July 27, 2007

F-2

INN OF THE MOUNTAIN GODS RESORT AND CASINO AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
As of April 30,


	2006			2007
Current Assets
Cash and cash equivalents	$	16,768,372		$	16,929,630
Restricted cash and cash equivalents		18,171,534			—
Accounts receivable, net of allowance for doubtful accounts		565,420			539,368
Inventories, net of reserves		809,789			766,658
Prepaid expenses and other assets		372,774			594,478

Total current assets		36,687,889			18,830,134
Non-Current Assets
Property plant and equipment		300,320,136			298,091,568
Accumulated Depreciation		(71,385,662	)		(87,565,430	)

Property plant and equipment, net		228,934,474			210,526,138
Other Assets		42,003			112,500
Deferred financing costs		7,695,897			6,070,653

Total Assets	$	273,360,263		$	235,539,425


Liabilities and Equity
Current Liabilities
Accounts Payable	$	2,606,670		$	1,461,913
Construction accounts payable		2,274,874			—
Accrued expenses		7,701,724			3,966,057
Accrued payroll and benefits		3,058,620			2,218,879
Accrued interest		11,200,000			11,200,000
Advanced deposits		372,470			438,659
Current portion of long-term debt		3,250,329			3,659,278

Total current liabilities		30,464,687			22,944,786
Non-Current Liabilities
Long-term debt, net of current portion		211,530,149			208,174,124

Total liabilities		241,994,836			231,118,910
Equity
Contributed Capital		52,633,096			29,652,939
Accumulated deficit		(21,267,669	)		(25,232,424	)

Total equity		31,365,427			4,420,515

Total liabilities and equity	$	273,360,263		$	235,539,425

The accompanying notes are an integral part of these statements.

F-3

INN OF THE MOUNTAIN GODS RESORT AND CASINO AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS
For the Years Ended April 30,


	2005			2006			2007
Revenues:
Gaming	$	64,254,312		$	76,476,004		$	79,391,694
Hotel		1,168,484			10,860,411			13,492,495
Food and Beverage		6,368,994			12,260,170			14,066,916
Recreation and other		23,012,602			16,620,951			23,408,843

Gross Revenue		94,804,392			116,217,536			130,359,948
Less-Promotional Allowances		1,770,462			2,766,644			4,485,896

Net Revenue		93,033,930			113,450,892			125,874,052
Operating Expenses
Gaming		25,765,169			27,179,353			25,967,457
Hotel expenses		651,118			5,180,746			4,610,914
Food and beverage		7,273,668			15,728,649			14,101,330
Recreation and other		15,434,816			12,378,385			13,802,044
Marketing		2,867,696			8,919,685			9,817,038
General and administrative		6,973,287			15,712,890			11,849,988
Health Insurance — Medical		1,408,164			2,014,038			2,291,743
Mescalero Apache 401K		1,289,615			—			315,404
Mescalero Apache Telecom		231,592			144,813			199,573
Tribal Regulatory Fees		2,615,775			2,945,629			2,400,000
Pre-opening costs		8,323,930			—			—
Depreciation		7,269,578			17,779,316			18,169,528

Total Operating Expenses		80,104,408			107,983,504			103,525,019
Operating Income		12,929,522			5,467,388			22,349,033
Other Income (Expense)
Interest Income		657,110			442,172			286,823
Interest Expense		(11,543,860	)		(26,840,510	)		(26,648,687	)
Other income (expense)		97,020			(336,719	)		48,076

Total Other Income (expense)		(10,789,730	)		(26,735,057	)		(26,313,788	)

Net Income (Loss)	$	2,139,792		$	(21,267,669	)	$	(3,964,755	)

The accompanying notes are an integral part of these statements.

F-4

INN OF THE MOUNTAIN GODS RESORT AND CASINO AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
For Years Ending April 30,


	2005			2006			2007
Cash flows from operating activities
Net income (loss)	$	2,139,792		$	(21,267,669	)	$	(3,964,755	)
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization		7,269,578			19,404,560			20,417,794
Changes in assets and liabilities:
Restricted cash and cash equivalents		533,514			—			—
Accounts receivable, net of allowance		(544,910	)		12,056			26,052
Inventories		(460,921	)		619,717			43,131
Prepaid revenue sharing fees		4,218,673			—			—
Prepaid expenses		(398,135	)		487,415			(221,704	)
Other long-term assets		(118,301	)		153,210			(70,497	)
Accounts payable		2,060,634			(66,837	)		(1,144,757	)
Accrued expenses, payroll and benefits		5,255,709			(244,868	)		(4,575,408	)
Accrued revenue sharing and regulatory fees		(22,572,558	)		—			—
Accrued interest payable		(847,928	)		(450	)		—
Deposits and advance payments		330,265			(624,895	)		66,189

Net cash provided by (used in) operating activities		(3,134,588	)		(1,527,761	)		10,576,045

Cash flows from investing activities:
Purchase of property, plant and equipment		(88,661,149	)		(14,769,093	)		(464,765	)
Construction accounts payable		(5,463,633	)		(5,870,860	)		(1,044,426	)

Net cash used in investing activities		(94,124,782	)		(20,639,953	)		(1,509,191	)

Cash flows from financing activities:
Deferred financing costs		1,708,352			—			—
Restricted cash for construction payments and interest reserve		96,893,043			17,699,152			18,171,534
Principal borrowings on long-term debt		—			15,420,363			—
Principal (payments) on long-term debt, net		(418,406	)		(2,391,696	)		(4,096,973	)
Distributions to Mescalero Apache Tribe		(13,000,000	)		(5,510,254	)		(22,980,157	)
Contributions from Mescalero Apache Tribe		9,999,959			—			—

Net cash provided by (used in) financing activities		95,182,948			25,217,565			(8,905,596	)


Net (decrease) increase in cash and cash equivalents		(2,076,422	)		3,049,851			161,258
Cash and cash equivalents, beginning of year		15,794,943			13,718,521			16,768,372

Cash and cash equivalents, end of year	$	13,718,521		$	16,768,372		$	16,929,630

Supplemental cash flow information:
Cash paid for interest	$	24,250,669		$	26,840,510		$	25,023,443

Non-cash investing and financing activities:
Property, plant and equipment acquired through capital lease	$	—		$	223,623		$	1,149,897

The accompanying notes are an integral part of these statements.

F-6

INN OF THE MOUNTAIN GODS RESORT AND CASINO AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
April 30, 2005, 2006 and 2007

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

Reporting Entity and Operations

The Inn of the Mountain Gods Resort and Casino (the “IMG Resort and Casino”), an unincorporated enterprise of the Mescalero Apache Tribe (the “Tribe”), was established on April 30, 2003 for the purpose of managing all resort enterprises of the Tribe including activities of IMG Resort and Casino and its wholly owned subsidiaries: Casino Apache, Casino Apache Travel Center, Inn of the Mountain Gods and Ski Apache (collectively the “Resorts”). Effective April 30, 2003, the Tribe contributed the Resorts to the IMG Resort and Casino. Prior to such contribution to IMG Resort and Casino, the Resorts operated as separate, unincorporated enterprises of the Tribe. Due to common control of the Resorts and IMG Resort and Casino, the contribution was accounted for as a reorganization of entities under common control. The Tribe is the sole owner of the IMG Resort and Casino. The IMG Resort and Casino is a separate legal entity from the Tribe and is managed by a separate management board.

Inn of the Mountain Gods (the “Casino”) offers Class III gaming as defined by the Indian Gaming Regulatory Act, on the tribal land in Mescalero, New Mexico. The Casino Apache Travel Center (the “Travel Center”), which opened for business on May 22, 2003, also offers Class III gaming as defined by the Indian Gaming Regulatory Act, on tribal land in Mescalero. The Inn of the Mountain Gods (the “Inn”) operated a 273-room resort hotel located on the Tribe’s reservation in Mescalero. The resort hotel has been demolished as of April 30, 2003 and the construction of a new resort hotel and casino (the “Resort Project”) on the same site was opened for commercial business on March 15, 2005. Ski Apache operates a ski resort within the Tribe’s reservation in Mescalero and on the U.S. Forest Service land. The IMG Resort and Casino’s activities primarily support the development and management efforts related to the new resorts.

Principles of Consolidation

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

Reclassifications

Certain reclassifications have been made in the prior years’ financial statements to conform to the current presentation.

Use of Estimates

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Significant estimates included in the accompanying financial statements relate to the liability associated with the unredeemed Apache Spirit Club points, estimated lives of depreciable assets, allowances for doubtful accounts and impairment of long-lived assets. Actual results could differ from those estimates.

Cash and Cash Equivalents

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

F-7

Restricted Cash and Cash Equivalents

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

Accounts Receivable

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

Inventories

Inventories consist of food and beverage items, fuel, retail merchandise in the golf and pro shop, ski shop, gift shops and other miscellaneous items, parts and supplies. All inventories are stated at the lower of cost or market using the first-in, first-out method.

Deferred Financing Costs

Debt issuance costs incurred in connection with the issuance of the Project financing are capitalized and amortized to interest expense using the straight-line method over the stated maturity of the debt, which approximates the effective interest method. Unamortized deferred financing costs totaled $7,695,897 as of April 30, 2006 and $6,070,653 as of April 30, 2007. The amortization related to this deferred financing cost was $1,625,244 and $1,625,244 for the years ended April 30, 2006 and 2007, respectively.

Property, Plant and Equipment

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

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


Non-gaming equipment, furniture and other		3—15 years
Gaming equipment		5—7 years
Leasehold and land improvements, lake and golf course		5—30 years
Buildings, lifts and snowmaking equipment		10—39 years

Impairment of Long Lived Assets

Fair Value of Financial Instruments

The carrying amount of cash and cash equivalents, restricted cash, accounts receivable, accounts payable and accrued expenses, bank financing facilities and capital lease obligations approximate fair value. The IMG Resort and Casino’s senior notes were approximately $216.0 million at April 30, 2007, based on quoted market prices. The notes are not heavily traded, and price quotes

F-8

ranged from 109.00 to 107.00 at April 30, 2007.

Contributed Capital

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

Revenues

In accordance with gaming industry practice, the Casino recognizes casino revenue as the net win from gaming activities, which is the difference between gaming wins and losses. Gaming revenues are net of accruals for anticipated payouts of progressive slot jackpots and table games. Such anticipated jackpot payments are reflected as accrued expenses in the accompanying consolidated balance sheets. The total accrual for jackpots and progressives was $151,874 and $150,806 at April 30, 2006 and 2007, respectively.

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

Promotional Allowances

IMG Resort and Casino periodically rewards rooms and other promotions, including Apache Spirit Club points and gift certificates, to its customers. The retail value of these player rebates are recognized by IMG Resort and Casino as a reduction from gross revenue. The total vouchers recognized by IMG Resort and Casino were approximately $1,770,000, $2,770,000 and $4,490,000 for the years ended April 30, 2005, 2006 and 2007, respectively.

The Casino’s Apache Spirit Club allows customers to earn “points” based on the volume of their gaming activity. These points are redeemable for certain complimentary services or merchandise. Points are accrued based upon their historical redemption rate multiplied by the cash value or the cost of providing the applicable complimentary services. The player’s club point’s liability is included in accrued expenses and totaled $1,028,000 at April 30, 2006 and $1,076,713 at April 30, 2007.

Emerging Issues Task Force (“EITF”) Issue No. 00-14, Accounting for Certain Sales Incentives requires that discounts which result in a reduction in or refund of the selling price of a product or service in a single exchange transaction be recorded as a reduction of revenues. IMG Resort and Casino adopted EITF 00-14 on April 30, 2001. IMG Resort and Casino’s accounting policy related to free or discounted food and beverage and other services already complies with EITF 00-14, and those free or discounted services are generally deducted from gross revenues as “promotional allowances.” In January 2001, the EITF reached a consensus on certain issues related to Issue No. 00-22, Accounting for “Points” and Certain Other Time-Based or Volume-Based Sales Incentive Offers, and Offers for Reproduces, or Services to be delivered in the future. Effective January 1, 2001, IMG Resort and Casino, through its wholly-owned subsidiaries adopted EITF 00-22, which requires that cash or equivalent amounts provided or returned to customers as part of a transaction not be shown as an expense, but instead as an offset to the related revenue.

The estimated cost of providing such complimentary allowances, as they relate to the all operations, was included in casino expenses as follows:


	Year Ended April 30,
	2005		2006		2007
Rooms	$	46,607	$	—	$	734,978
Food and beverage		200,099		773,585		409,036
Other		31,439		—		—

	$	278,145	$	773,585	$	1,144,014

Pre-Opening Costs and Expenses

Pre-opening costs and expenses consist principally of direct incremental personnel costs, training costs and payroll costs for retaining the employees of the Inn during the fiscal year 2005 and 2004 construction period. In accordance with the American Institute of Certified Public Accountants’ Statement of Position 98-5, Reporting on the Costs of Start-Up Activities, pre-opening costs and expenses are expensed as incurred.

Tribal Taxes

F-9

The Resorts are subject to tribal taxes as long as the enterprises are not subject to New Mexico Gross Receipts Tax. Ski Apache is subject to New Mexico Gross Receipts Tax. A tribal tax charge of 10.75% of room revenue, 6.75% of food and beverage revenue, and 6.5% of other revenue is accrued monthly and is payable to the Tribe. The Resorts have recorded approximately $200,000 per month Tribal taxes for both 2006 and 2007.

Classification of Departmental Costs.

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

Capitalization of Interest.

In accordance with Statement of Financial Accounting Standards No. 34, “Capitalization of Interest Cost” or SFAS 34, interest cost associated with major development and construction projects is capitalized as part of the cost of the project. Interest is capitalized on amounts expended on the resort using the weighted-average cost of our outstanding borrowings. Capitalization of interest started with the construction of the resort beginning in January 2004 and ended with the completion of the Resort in March 2005. Interest capitalized on the Resort totaled $11.9 million for the fiscal year 2005 and no Interest has been capitalized by the Resort for the fiscal ended years 2006 and 2007.

Income Taxes

As an unincorporated enterprise of the Tribe, the IMG Resort and Casino and the Resorts are exempt from federal and state income taxes.

New Accounting Pronouncements

F-10

NOTE 2 — ALLOWANCE FOR DOUBTFUL ACCOUNTS

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

The allowance for doubtful accounts was $240,362 as of April 30, 2006 and $48,803 as of April 30, 2007.


	2006			2007
Allowance, beginning of year	$	3,448		$	240,362
Bad debt expense (collections), net		335,528			(124,370	)
Write-offs		(98,614	)		(67,189	)

Allowance, end of year	$	240,362		$	48,803

NOTE 3 — RESTRICTED CASH AND CASH EQUIVALENTS

Restricted cash and equivalents consists of the following at April 30, 2006 and 2007:


	April 30, 2006		April 30, 2007
Interest reserve	$	22,881	$	—
Construction reserve		15,818,236		—
Construction retainage		2,330,417		—

Total restricted cash	$	18,171,534	$	—

NOTE 4 — INVENTORIES

Inventories consist of the following at April 30, 2006 and 2007:


	April 30, 2006			April 30, 2007
Food and beverage	$	259,580		$	260,503
Golf and pro shop		134,377			74,760
Gift shops, fuel and other		567,577			431,395
Reserves		(151,745	)		—

Inventories, net of reserves	$	809,789		$	766,658

NOTE 5 — PROPERTY, PLANT AND EQUIPMENT, NET

Property, plant and equipment is summarized as follows at April 30, 2006 and 2007:


	April 30, 2006			April 30, 2007
Land	$	538,894		$	538,894
Buildings		209,507,247			209,507,247
Lifts and snowmaking equipment		8,421,750			8,421,750
Non-gaming equipment, furniture and other		51,167,661			50,659,100
Gaming equipment		21,469,769			20,864,152
Leasehold and land improvements, lake and golf course		6,842,477			8,072,925

Subtotal		297,947,798			298,064,068
Less accumulated depreciation		(71,385,662	)		(87,565,430	)

Property, plant and equipment, net		226,562,136			210,498,638
Construction in progress (CIP)		2,372,338			27,500

Net Property, plant and equipment	$	228,934,474		$	210,526,138

F-11

NOTE 6 — LONG-TERM DEBT

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

IMG Resort and Casino received its final certificate of completion for the construction project on August 17, 2006.

The indenture governing the Notes contains covenants that limit, among other things, IMG Resort and Casino and the guarantors’ ability to pay dividends and make distributions to the Tribe; make investments; incur additional debt or types of debt; create liens; sell equity interests in subsidiaries; enter into transactions with affiliates; enter into sale and leaseback transactions; engage in other businesses; transfer or sell assets; and merge or consolidate with or into other entities. IMG Resort and Casino is in compliance with all covenants required in the Notes.

In connection with the IMG Resort and Casino’s issuing $200.0 million of its 12% Senior Notes (“Notes”) pursuant to an underlying Indenture (“Indenture”), IMG Resort and Casino entered into a Cash Collateral and Disbursement Agreement dated November 3, 2003 (the “Cash Collateral Agreement”), by and among U.S. Bank National Association, as disbursement agent, securities intermediary and depositary bank, U.S. Bank National Association, as trustee under the Indenture, Professional Associates Construction Services, Inc., a California corporation, the Tribe and certain unincorporated entities of the Tribe as guarantors pursuant to a certain Guaranty Agreement (“Guarantee”). Pursuant to the Cash Collateral Agreement, certain amounts were placed in reserve accounts (“Collateral Accounts”) (i) to finance the design, development, construction, equipment and operations of phase II of its two-phase construction project, which was comprised of the Inn of the Mountain Gods Resort and Casino, including a casino, hotel and certain related amenities (the “Project”), (ii) for payment of the first three interest payments due on the Notes, (iii) to fund a Compact Dispute Resolution and, after all funds in the Construction Disbursement Account have been exhausted, to finance completion of the Project, including the furnishing, fixturing and equipping thereof, and (iv) from the other accounts established under the Cash Collateral Agreement for the purposes set forth therein. Following the Projection Completion Date, as set forth and defined in the Cash Collateral Agreement, IMG Resort and Casino submitted to the Disbursement Agent, the Trustee and the Independent Construction Consultant a Final Disbursement Request pertaining to the amounts requested for disbursement, together with all required schedules and certifications. The final disbursement was made from the construction reserve account on or about August 17, 2006 in the amount of $13,881,000 to the Tribe and $2,000,000 to Centex/Worth Group, LLC. The Tribe and IMG Resort and Casino have entered into a Settlement and Assignment Agreement (“Settlement Agreement”) dated July 10, 2006 with Centex/Worth Group, LLC, the Contractor of the Project, and Centex Construction, LLC, the Subcontractor of the Project, whereby the Tribe (through the Final Disbursement Request) paid the Contractor $2,000,000 from the construction reserve account to settle certain claims against various parties, including the Subcontractor. In addition, the Tribe and IMG Resort and Casino assigned various causes of action they had against various parties involved with the construction of the Project to the Contractor.

The indenture governing the Notes contains covenants that limit, among other things, IMG Resort and Casino and the guarantors’ ability to pay dividends and make distributions to the Tribe; make investments; incur additional debt or types of debt; create liens; sell equity interests in subsidiaries; enter into transactions with affiliates; enter into sale and leaseback transactions; engage in other businesses; transfer or sell assets; and merge or consolidate with or into other entities. IMG Resort and Casino was in compliance with all covenants required in the Notes.

On June 15, 2004, IMG Resort and Casino entered into a $15.0 million credit facility with Key Equipment Finance, a Division of Key Corporate Capital Inc. The fixed credit facility is fully amortizable over five years and bears fixed interest rates ranging from 7.55% to 8.18%. Proceeds from the loan were used to fund furniture, fixtures and equipment for the Resort. As of April 30, 2007, $10.3 million had been drawn against this facility to finance the purchases of furniture, fixtures and equipment. Long-term debt at April 30, 2006 and 2007 is summarized as follows:

F-12


	April 30, 2006			April 30, 2007
Senior Notes, bearing interest is at a fixed rates of 12%, maturing in 2010	$	200,000,000		$	200,000,000
Bureau of Indian Affairs, unsecured notes payable with payments of $27,100 per month, including interest at 8.5%, maturing in 2011		1,457,501			1,163,568
Capital Equipment Loans with Key Equipment, Five (5) year term, interest ranging from 7.55% to 8.18%		13,099,354			10,283,169
Short-Term Capital Leases, 8% imputed interest		223,623			386,665

Total		214,780,478			211,833,402
Less: Current Portion		(3,250,329	)		(3,659,278	)

Long-Term Portion	$	211,530,149		$	208,174,124

The maturities of long-term debt as of April 30, 2007 are as follows (in thousands):


2008	$	3,659
2009		3,534
2010		203,817
2011		722
2012		101

Total	$	211,833

NOTE 7 — GAMING REVENUE SHARING AND REGULATORY FEES

The Tribe regulates IMG Resort and Casino’s gaming activities through the Mescalero Apache Tribe Gaming Regulatory Commission, an agency of the Tribe (the “Commission”). The Commission reports directly to the Tribal Council. A regulatory fee is paid to the Tribe as reimbursement for the cost of regulating the gaming activities. IMG Resort and Casino also pays a federal regulatory fee. All tribal and federal regulatory fees due and payable have been properly accrued for the State of New Mexico Gaming Commission of $225,000.

On August 29, 1997, the Tribe and the State of New Mexico (the “State”) entered into a Tribal-State Compact (the “Compact”) to govern gaming on the Mescalero Apache Reservation. The terms of the Compact subject the Casino to various regulatory fees and revenues sharing payable to the State. Among the provisions of the Compact are requirements for quarterly revenues sharing payments consisting of 16% of the net win from video gaming and quarterly regulatory fees assessed on the number of gaming facilities, the number of gaming machines and the number of gaming tables and other devices. The Tribe has challenged the legality of these fee arrangements, claiming them to be an illegal tax on Indian gaming under the Indian Gaming Regulatory Act.

On April 20, 2004, the Tribe and the State of New Mexico entered into a settlement agreement which resolved all of their disputes regarding the 1997 Compact. Under the settlement agreement, the State of New Mexico and the Tribe agreed that they would enter into a new gaming compact, the 2001 Compact, and that the Tribe would pay the State of New Mexico $25.0 million in full settlement of all revenue sharing and regulatory fees payable under the 1997 Compact as well as all revenue sharing fees payable under the 2001 Compact through March 2005. On April 20, 2004, the IMG Resort and Casino paid an initial payment of $2.0 million pursuant to the terms of the settlement agreement.

The 2001 Compact provides for a revenue sharing amount equal to 8% of “net win” from gaming machines, payable no later than 25 days after the last day of each calendar quarter and an annual regulatory fee of $100,000, paid in quarterly installments of $25,000 on the first day of each calendar quarter. Pursuant to the terms of the settlement agreement, the IMG Resort and Casino began incurring revenue sharing payments to the State of New Mexico at the rate of 8% of “net win” pursuant to the 2001 Compact in March 2005, with the first revenue sharing payment under the 2001 Compact due in June 2005. In addition, pursuant to the terms of the settlement agreement, the IMG Resort and Casino began incurring regulatory fees, at the rate of $100,000 per year, from the date the approval of the 2001 Compact is published in the Federal Register with the first payment for regulatory fees under the 2001 Compact due on the first day of the first full calendar quarter thereafter. On June 1, 2004, the Tribe and the State of New Mexico entered into the 2001 Compact. On June 22, 2004, the Department of Interior approved the 2001 Compact. The IMG Resort and Casino made the remaining $23.0 million payment required under the settlement agreement in August 2004. As a result of the settlement with the State, expense and the liability for accrued revenue sharing and regulatory fees has been reduced. The 2007 liability is cleared every three months with the quarterly payment to the state.

NOTE 8 — PENSION PLAN

In connection with the issuance of the original notes, IMG Resort and Casino and the Tribe entered into an employee benefits cost

F-13

allocation agreement, which provides that the Tribe will continue to provide IMG Resort and Casino and its resort enterprises with certain employee benefits in accordance with past practice, including group health benefits, worker’s compensation insurance, disability insurance, unemployment benefits and pension benefits. IMG Resort and Casino reimburses the Tribe for its employees’ direct costs for coverage as billed by the third party.

The Tribe sponsors a federally compliant 401(k) savings plan, which covers substantially all employees who worked for IMG Resort and Casino for at least 120 days and attained 18 years of age. The Company matches employee contribution up to 4%. Qualified employees who have been employed for more than 120 days had the initial waiting period waived. The total amount of match made by IMG Resort and Casino was $315,404 for the year ended April 30, 2007. This plan became effective January 1, 2007. The first payroll deduction and match began on January 12, 2007. The IRS sets the maximum allowed each year for qualified 401(k) plans.
The maximum amount For 2007, under 50 years old, $15, 500 and over 50 years old, $20,500.

NOTE 9 — RISK MANAGEMENT

The IMG Resort and Casino manages the exposure to the risk of most losses through various commercial insurance policies. There have been no reductions in insurance coverage. Settlement amounts have not exceeded insurance coverage for 2005, 2006 and 2007, respectively.

The Tribe is self-insured for employee health and accident insurance. The IMG Resort and Casino’s employees are covered by this plan and remit amounts to the Tribe for their share of the self-insurance costs. The total amounts reimbursed to the Tribe were approximately $1,408,000, $2,014,038 and $3,273,162 for 2005, 2006 and 2007, respectively. Loss limits per claim are $100,000. Aggregate loss limit for policy year (currently July through June) is $1,058,000. This amount is in total for all Tribal entities aggregated which includes the IMGR&C components.

The Tribe maintains worker’s compensation insurance coverage under a retrospective rated policy whereby premiums are accrued based on the loss experience of the Tribe and its various enterprises. The IMG Resort and Casino’s and the Resorts’ employees are covered under this plan. Under this policy, premiums may be adjusted at the end of the coverage period based on loss experience for the coverage period. Management of the Tribe, the IMG Resort and Casino and the Resorts have monitored their claims and loss experiences. Workers compensation insurance coverage, combined with the Tribe and IMG’s causality and liability claims have been below projected levels and properly accrued for.

NOTE 10 — COMMITMENTS AND CONTINGENCIES

Legal Matters

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

Occupancy Fee

A special use permit was obtained from the United States Department of Agriculture Forest Service for Ski Apache’s use of 80 acres of land in Lincoln National Forest. The permit is dated April 23, 1985, and has a term of 30 years with an annual occupancy fee based on revenue and gross fixed assets. Occupancy fee for the years ended April 30, 2005, 2006 and 2007 totaled approximately $137,300, $137,200 and $92,000 respective1y.

Construction Agreement

In February 2002, the Tribe entered into a construction agreement for the development of the Travel Center and the new resort on behalf of the IMG Resort and Casino. Construction cost under the contract was approximately $149,720,000. In March 2005, the contractor issued a certificate of substantial completion and the IMG Resort and Casino started commercial operation on March 15, 2005. A final certificate of completion and acceptance has been issued following the successful completion of identified incomplete items on August 17, 2006. At April 30, 2007 there was no (zero) retainage. In addition, the original contract was amended to include approximately $3.0 million of additional (primarily HVAC) equipment and excavation work.

Employment Agreements

F-14

Effective November 10, 2006, the Management Board approved an amendment to Mr. Parrish’s (Chief Operating Officer) executive employment agreement. The amended agreement extends Mr. Parrish’s employment term through September 11, 2008 and changes total compensation to $350,000 per annum. If either Mr. Parrish or IMG Resort and Casino terminate the agreement involuntarily, IMG Resort and Casino is obligated to pay Mr. Parrish the then current monthly base salary, benefits and allowance continuation for a period of six months or until Mr. Parrish has secured employment with another employer. IMG Resort and Casino is not required to pay any compensation if Mr. Parrish terminates the agreement voluntarily. Bonus compensation was eliminated from the amended agreement

Pursuant to an employment agreement dated September 12, 2005, Mr. Kintz provides services to the IMG Resort and Casino as its Chief Financial Officer on a month to month basis. The agreement provides that either Mr. Kintz or IMG Resort and Casino may terminate the agreement for any reason whatsoever. Mr. Kintz receives a monthly salary of $15,000; in addition to bonuses for the completion of various critical project milestones.

NOTE 11 — RELATED-PARTY TRANSACTIONS

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

The IMG Resort and Casino uses Mescalero Apache Telecommunications for some of its telecommunications related services. The IMG Resort and Casino paid Mescalero Apache Telecommunications approximately $232,000, $145,000 and $200,000 for the years ended April 30, 2005, 2006 and 2007, respectively, for such services.

Shared Services and Cost Allocations

Employee Benefits Cost Allocations

In connection with the issuance of the original notes, IMG Resort and Casino and the Tribe entered into an employee benefits cost allocation agreement, which provides that the Tribe will continue to provide IMG Resort and Casino and its resort enterprises with certain employee benefits in accordance with past practice, including group health benefits, worker’s compensation insurance, disability insurance, unemployment benefits and pension benefits. IMG reimburses the Tribe for its employees’ direct costs for coverage as billed by the third party.

The Tribe provides employee benefits to the IMG Resort and Casino, which reimburses the Tribe for all costs and expenses associated with this insurance. IMG Resort and Casino paid the Tribe approximately $1.4 million, $2.0 million and $3.3 million for the fiscal years ended April 30, 2005, 2006 and 2007, respectively.

NOTE 12 — OPERATING SEGMENTS

The IMG Resort and Casino has four operating segments and a consolidating segment: Gaming at the IMG, Gaming at the Travel Center, Ski, and all other non-gaming. The Gaming segments include the activities of the two casinos. The Ski segment includes Ski lifts and Ski school at Ski Apache. The Non-Gaming segment includes the hotel, hunts, golf, food and beverage, banquets, conferences, retail shops, convenience store and truck stop fuel sales.

As a result of realigning its operations, the resulting reporting of the segments has changed. The Company has restated prior year’s segment information to be consistent with the current reporting and operating structure in place today. Assets and liabilities have been consolidated under the non-segment group, and as a result, depreciation and interest expenses are not broken out separately by segment, which is consistent with the internal decision makers’ information requirements.

F-15

These operating segments represent distinct business activities, which are managed separately from a profit and loss perspective, but jointly from a balance sheet perspective.

SELECTED OPERATING SEGMENT FINANCIAL INFORMATION

$(000s)


	Gaming
	IMG		Travel Ctr		Ski			Non Gaming			Non Segment			Consolidated
2005ACTUAL
Net Revenue		27,746		35,905		10,026			19,885			(528	)		93,034
Operating Income		11,131		24,557		2,206			(3,663	)		(21,301	)		12,930
Depreciation Expense		—		—		782			—			6,488			7,270
Interest Expense		—		—		—			—			11,544			11,544
Interest Income		—		—		1			—			656			657
2006 ACTUAL
Total Assets		—		—		6,357			—			267,003			273,360
Net Revenue		46,570		29,707		3,527			36,179			(2,532	)		113,451
Operating Income		33,321		23,947		(2,994	)		4,748			(53,555	)		5,467
Depreciation Expense		—		—		776			—			17,003			17,779
Interest Expense		—		—		—			—			26,841			26,841
Interest Income		—		—		—			—			442			442
2007 ACTUAL
Total Assets		—		—		5,670			—			229,869			235,539
Net Revenue		47,334		30,086		1,332			40,662			6,460			125,874
Operating Income		36,767		24,357		377			10,234			(49,386	)		22,349
Depreciation Expense		—		—		776			—			17,394			18,170
Interest Expense		—		—		—			—			26,649			26,649
Interest Income		—		—		—			—			287			287

NOTE 13 — CONSOLIDATING INFORMATION

In connection with IMG Resort and Casino’s issuance in November 2003 of $200,000,000 of 12% senior notes, IMG Resort and Casino and the Resorts (the “wholly-owned Guarantors”) have, jointly and severally, fully and unconditionally guaranteed the 12% senior notes. These guarantees are secured only until the completion of the Resort Project and thereafter unsecured and subordinated in right of payment to all existing and future indebtedness outstanding and any other indebtedness permitted to be incurred by IMG Resort and Casino under the terms of the indenture agreement for the 12% senior subordinated notes. A final certificate of completion and acceptance has not been issued pending the successful completion of identified incomplete items.

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

F-16

INN OF THE MOUNTAIN GODS RESORT AND CASINO AND SUBSIDIARIES

CONSOLIDATING BALANCE SHEETS
As of April 30, 2007


				Guarantor
	IMGRC			Subsidiaries			Eliminations			Consolidated
Cash and cash equivalents	$	12,808,711		$	4,120,919		$	—		$	16,929,630
Accounts receivable		—			539,368			—			539,368
Inventories		142,188			624,470			—			766,658
Prepaid expenses		594,478			—			—			594,478

Total current assets		13,545,377			5,284,757			—			18,830,134
Fixed Assets		—			298,091,568			—			298,091,568
Depreciation		—			(87,565,430	)		—			(87,565,430	)

Net fixed assets		—			210,526,138			—			210,526,138
Non-Current Assets
Other Assets		50,000			62,500			—			112,500
Deferred financing costs		6,070,653			—			—			6,070,653
Advances to Subsidiaries		125,272,243			28,314,998			(153,587,241	)		—
Investment in Subsidiaries		116,604,213			—			(116,604,213	)		—

Total Assets	$	261,542,486		$	244,188,393		$	(270,191,454	)	$	235,539,425


Accounts Payable and other short term liabilities	$	1,461,913		$	—		$	—		$	1,461,913
Accrued expenses, including payroll and benefits		5,475,226			709,710			—			6,184,936
Accrued interest		11,200,000			—			—			11,200,000
Advanced deposits		—			438,659			—			438,659
Current portion of long-term debt		3,426,322			232,956			—			3,659,278

Total current liabilities		21,563,461			1,381,325						22,944,786
Non-Current Liabilities
Advances from subsidiaries		28,314,998			125,272,243			(153,587,241	)		—
Long-term debt, net of current portion		207,243,512			930,612			—			208,174,124

Total liabilities		257,121,971			127,584,180			(153,587,241	)		231,118,910
Contributed Capital		29,652,939			(6,012,897	)		6,012,897			29,652,939
Retained earnings (deficit)		(25,232,424	)		122,617,110			(122,617,110	)		(25,232,424	)

Total equity		4,420,515			116,604,213			(116,604,213	)		4,420,515

Total liabilities and equity	$	261,542,486		$	244,188,393		$	(270,191,454	)	$	235,539,425

F-17

INN OF THE MOUNTAIN GODS RESORT AND CASINO AND SUBSIDIARIES

CONSOLIDATING STATEMENT OF OPERATIONS
For the Years Ended April 30, 2007


				Guarantor
	IMGRC			Subsidiaries		Eliminations			Consolidated
Revenues:
Gaming	$	—		$	79,391,694	$	—		$	79,391,694
Hotel		—			13,492,495		—			13,492,495
Food and Beverage		—			14,066,916		—			14,066,916
Recreation and other		—			23,408,843		—			23,408,843

Gross Revenue		—			130,359,948		—			130,359,948
Less-Promotional Allowances		3,974			4,481,922		—			4,485,896

Net Revenue		(3,974	)		125,878,026		—			125,874,052
Operating Expenses
Gaming		—			25,967,457		—			25,967,457
Hotel expenses		—			4,610,914		—			4,610,914
Food and beverage		—			14,101,330		—			14,101,330
Recreation and other		—			13,802,044		—			13,802,044
Marketing		—			9,817,038		—			9,817,038
General and administrative		5,961,991			5,887,997		—			11,849,988
Health Insurance — Medical		—			2,291,743		—			2,291,743
401K		—			315,404		—			315,404
Mescalero Apache Telecom		—			199,573		—			199,573
Tribal Regulatory Fees		—			2,400,000		—			2,400,000
Depreciation and amortization		—			18,169,528		—			18,169,528

Total Operating Expenses		5,961,991			97,563,028		—			103,525,019
Operating Income (Loss)		(5,965,965	)		28,314,998		—			22,349,033
Other Income (Expense)
Interest Income		286,823			—		—			286,823
Interest Expense		(26,648,687	)		—		—			(26,648,687	)
Income from subsidiaries		28,314,998			—		(28,314,998	)		—
Other income (expense)		48,076			—		—			48,076

Total Other Income (expense)		2,001,210			—		(28,314,998	)		(26,313,788	)

Net Income (Loss)	$	(3,964,755	)	$	28,314,998	$	(28,314,998	)	$	(3,964,755	)

F-18

INN OF THE MOUNTAIN GODS RESORT AND CASINO AND SUBSIDIARIES

CONSOLIDATING STATEMENT OF CASH FLOWS
Year Ended April 30, 2007


				Guarantor
	IMGRC			Subsidiaries			Eliminations			Consolidated
Cash flows from operating activities:
Net income (loss)	$	(3,964,755	)	$	28,314,998		$	(28,314,998	)	$	(3,964,755	)
Adjustments to reconcile net income to net cash provided by (used in) operating activities:											—
Depreciation and amortization		1,625,244			18,792,550			—			20,417,794
Changes in assets and liabilities:
Accounts receivable, net of allowance		4,421			21,631			—			26,052
Inventories		(142,188	)		185,319			—			43,131
Prepaid expenses		(259,818	)		38,114			—			(221,704	)
Other long term assets		—			(70,497	)		—			(70,497	)
Accounts payable		(1,144,757	)		—			—			(1,144,757	)
Accrued expenses, payroll and benefits		(5,616,324	)		1,040,916			—			(4,575,408	)
Deposits and advance payments		—			66,819			—			66,819

Net cash provided by (used in) operating activities		(9,498,177	)		48,389,220			(28,314,998	)		10,576,045

Cash flows from investing activities:
Purchase of property, plant and equipment		—			(464,765	)		—			(464,765	)
Construction accounts payable		—			(1,044,426	)		—			(1,044,426	)
Investment in subsidiaries		(41,412,095	)		—			41,412,095			—

Net cash used by investing activities		(41,412,095	)		(1,509191	)		41,412,095			(1,509,191	)

Cash flows from financing activities:
Cash restricted for construction payments		18,171,534			—			—			18,171,534
Advances to (from) affiliates		57,710,310			(44,613,213	)		(13,097,097	)		—
Principal payments on long-term debt, net		(293,933	)		(3,803,040	)		—			(4,096,973	)
Distributions to Mescalero Apache Tribe		(22,980,157	)		—			—			(22,980,157	)

Net cash used by (provided by) financing activities		52,607,754			(48,416,253	)		(13,097,097	)		(8,905,596	)


Net (decrease) increase in cash and cash equivalents		1,697,482			(1,536,224	)		—			161,258
Cash and cash equivalents, beginning of period		11,111,229			5,657,143			—			16,768,372

Cash and cash equivalents, end of period	$	12,808,711		$	4,120,919		$	—		$	16,929,630

F-19

INN OF THE MOUNTAIN GODS RESORT AND CASINO AND SUBSIDIARIES

CONSOLIDATING BALANCE SHEETS
As of April 30, 2006


				Guarantor
	IMGRC			Subsidiaries			Eliminations			Consolidated
Cash and cash equivalents	$	11,111,229		$	5,657,143		$	—		$	16,768,372
Restricted cash and cash equivalents		18,171,534			—			—			18,171,534
Accounts receivable		4,421			560,999			—			565,420
Inventories		—			809,789			—			809,789
Prepaid expenses		334,660			38,114			—			372,774

Total current assets		29,621,844			7,066,045			—			36,687,889
Fixed Assets		2,371,311			297,948,825			—			300,320,136
Depreciation		(251,806	)		(71,133,856	)		—			(71,133,856	)

Net fixed assets		2,119,505			226,814,969			—			228,934,474
Non-Current Assets
Other Assets		50,000			(7,997	)		—			42,003
Deferred financing costs		7,695,897			—			—			7,695,897
Advances to Subsidiaries		186,971,842			29,885,898			(216,857,740	)		—
Investment in Subsidiaries		75,288,309			—			(75,288,309	)		—

Total Assets	$	301,747,397		$	263,758,915		$	(292,146,049	)	$	273,360,263


Accounts Payable and other short term liabilities	$	2,606,670		$	—		$	—		$	2,606,670
Construction accounts payable		2,274,874			—			—			2,274,874
Accrued expenses, including payroll and benefits		11,090,735			(330,391	)		—			10,760,344
Accrued interest		11,200,000			—			—			11,200,000
Advanced deposits		815			371,655			—			372,470
Current portion of long-term debt		3,039,808			210,521			—			3,250,329

Total current liabilities		30,212,902			251,785			—			30,464,687
Non-Current Liabilities
Advances from subsidiaries		29,885,898			186,971,842			(216,857,740	)		—
Long-term debt, net of current portion		210,283,170			1,246,979			—			211,530,149

Total liabilities		270,381,970			188,470,606			(216,857,740	)		241,994,836
Contributed Capital		52,633,096			(19,109,994	)		19,109,994			52,633,096
Retained earnings (deficit)		(21,267,669	)		94,398,303			(94,398,303	)		(21,267,669	)

Total equity		31,365,427			75,288,309			(75,288,309	)		31,365,427

Total liabilities and equity	$	301,747,397		$	263,758,915		$	(292,146,049	)	$	273,360,263

F-20

INN OF THE MOUNTAIN GODS RESORT AND CASINO AND SUBSIDIARIES

CONSOLIDATING STATEMENT OF OPERATIONS
For the Years Ended April 30, 2006


				Guarantor
	IMGRC			Subsidiaries		Eliminations			Consolidated
Revenues:
Gaming	$	—		$	76,476,004	$	—		$	76,476,004
Hotel		—			10,860,411		—			10,860,411
Food and Beverage		—			12,260,170		—			12,260,170
Recreation and other		—			16,620,951		—			16,620,951

Gross Revenue		—			116,217,536		—			116,217,536
Less-Promotional Allowances		—			2,766,644		—			2,766,644

Net Revenue		—			113,450,892		—			113,450,892
Operating Expenses
Gaming		—			27,179,353		—			27,179,353
Hotel expenses		—			5,180,746		—			5,180,746
Food and beverage		—			15,728,649		—			15,728,649
Recreation and other		—			12,378,385		—			12,378,385
Marketing		—			8,919,685		—			8,919,685
General and administrative		7,905,503			7,807,387		—			15,712,890
Health Insurance — Medical		—			2,014,038		—			2,014,038
Mescalero Apache Telecom		—			144,813		—			144,813
Tribal Regulatory Fees		—			2,945,629		—			2,945,629
Depreciation and amortization		—			17,779,316		—			17,779,316

Total Operating Expenses		7,905,503			100,078,001		—			107,983,504
Operating Income (Loss)		(7,905,503	)		13,372,891		—			5,467,388
Other Income (Expense)
Interest Income		442,172			—		—			442,172
Interest Expense		(26,840,510	)		—		—			(26,840,510	)
Income from subsidiaries		13,372,891			—		(13,372,891	)		—
Other income (expense)		(336,719	)		—		—			(336,719	)

Total Other Income (expense)		(13,362,166	)		—		(13,372,891	)		(26,735,057	)

Net Income (Loss)	$	(21,267,669	)	$	13,372,891	$	(13,372,891	)	$	(21,267,669	)

F-21

INN OF THE MOUNTAIN GODS RESORT AND CASINO AND SUBSIDIARIES

CONSOLIDATING STATEMENT OF CASH FLOWS
Year Ended April 30, 2006


				Guarantor
	IMGRC			Subsidiaries			Eliminations			Consolidated
Cash flows from operating activities:
Net income (loss)	$	(21,267,669	)	$	13,372,891		$	(13,372,891	)	$	(21,267,669	)
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization		1,625,244			17,779,316			—			19,404,560
Changes in assets and liabilities:
Restricted cash and cash equivalents		—			—			—			—
Accounts receivable, net of allowance		376,446			(364,390	)		—			12,056
Inventories		—			619,717			—			619,717
Prepaid expenses		765,487			(278,072	)		—			487,415
Other long term assets		74,991			78,219			—			153,210
Accounts payable		(66,837	)		—			—			(66,837	)
Accrued expenses, payroll and benefits		4,174,122			(4,418,990	)		—			(244,868	)
Interest Payable		—			(450	)		—			(450	)
Deposits and advance payments		—			(624,895	)		—			(624,895	)

Net cash provided by (used in) operating activities		(14,318,216	)		26,163,346			(13,372,891	)		(1,527,761	)
Cash flows from investing activities:
Purchase of property, plant and equipment		—			(16,160,575	)		1,391,482			(14,769,093	)
Construction accounts payable		(5,870,860	)		—			—			(5,870,860	)
Investment in subsidiaries		(13,372,891	)		—			13,372,891			—

Net cash used by investing activities		(19,243,751	)		(16,160,575	)		14,764,373			(20,639,953	)
Cash flows from financing activities:
Cash held from construction payments		17,699,152			—			—			17,699,152
Advances to (from) affiliates		18,859,985			(17,468,503	)		(1,391,482	)		—
Principal borrowings on long-term debt		15,420,363			—			—			15,420,363
Principal payments on long-term debt, net		(2,321,009	)		(70,687	)		—			(2,391,696	)
Distributions to Mescalero Apache Tribe		(5,510,254	)		—			—			(5,510,254	)

Net cash used by (provided by) financing activities		44,148,237			(17,539,190	)		(1,391,482	)		25,217,565

Net (decrease) increase in cash and cash equivalents		10,586,270			(7,536,419	)		—			3,049,851
Cash and cash equivalents, beginning of period		524,959			13,193,562			—			13,718,521

Cash and cash equivalents, end of period	$	11,111,229		$	5,657,143		$	—		$	16,768,372

F-22

INN OF THE MOUNTAIN GODS RESORT AND CASINO AND SUBSIDIARIES

CONSOLIDATING BALANCE SHEETS
As of April 30, 2005


			Guarantor
	IMGRC		Subsidiaries		Eliminations			Consolidated
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	524,959	$	13,193,562	$	—		$	13,718,521
Restricted cash and cash equivalents		35,870,686		—		—			35,870,686
Accounts receivable, net		380,867		196,609		—			577,476
Inventories		—		1,429,506		—			1,429,506
Prepaid expenses		765,487		94,702		—			860,189

Total current assets		37,541,999		14,914,379		—			52,456,378
NON CURRENT ASSETS:
Advanced to affiliates		205,038,001		9,043,808		(214,081,809	)		—
Property, plant and equipment, net		—		231,721,074		—			231,721,074
Other Assets		124,991		70,222		—			195,213
Deferred Financing Costs		9,321,141		—		—			9,321,141
Investments in affiliates		44,097,873		—		(44,097,873	)		—

TOTAL ASSETS	$	296,124,005	$	255,749,483	$	(258,179,682	)	$	293,693,806


LIABILITIES AND EQUITY
CURRENT LIABILITIES:
Accounts payable and other short-term liabilities	$	2,673,507	$	—	$	—		$	2,673,507
Construction Payables		8,145,734		—		—			8,145,734
Accrued expenses, payroll & benefits		6,916,507		4,088,705		—			11,005,212
Accrued interest		11,200,000		450		—			11,200,450
Deposits and advance payments		—		997,365		—			997,365
Current portion of long-term debt		—		254,007		—			254,007

Current liabilities		28,935,748		5,340,527		—			34,276,275
LONG TERM DEBT AND NOTES
Advances from affiliates		9,043,808		205,038,001		(214,081,809	)		—
Long-term debt, net of current portion		200,001,099		1,273,082		—			201,274,181

Long Term Liabilities		209,044,907		206,311,083		(214,081,809	)		201,274,181

Total Liabilities		237,980,655		211,651,610		(214,081,809	)		235,550,456
EQUITY:
Contributed capital		58,143,350		20,166,161		(20,166,161	)		58,143,350
Retained Earnings		—		23,931,712		(23,931,712	)		—

TOTAL EQUITY		58,143,350		44,097,873		(44,097,873	)		58,143,350

TOTAL LIABILITIES AND EQUITY	$	296,124,005	$	255,749,483	$	(258,179,682	)	$	293,693,806

F-23

INN OF THE MOUNTAIN GODS RESORT AND CASINO AND SUBSIDIARIES

CONSOLIDATING STATEMENT OF OPERATIONS
For the Year Ended April 30, 2005


				Guarantor
	IMGRC			Subsidiaries			Eliminations			Consolidated
Revenues:
Gaming	$	—		$	64,254,312		$	—		$	64,254,312
Hotel		—			1,168,484			—			1,168,484
Food and beverage		1,608			6,367,386			—			6,368,994
Recreation and other		—			23,012,602			—			23,012,602

Gross revenues		1,608			94,802,784			—			94,804,392
Less-promotional allowances		11,820			1,758,642			—			1,770,462

Net revenue		(10,212	)		93,044,142			—			93,033,930
Operating costs and expenses:
Gaming		257,934			25,507,235			—			25,765,169
Hotel Expenses		—			651,118			—			651,118
Food and beverage		202,922			7,070,746			—			7,273,668
Recreation and other		760			15,434,056			—			15,434,816
Marketing		—			2,867,696			—			2,867,696
General and administrative		2,191,613			4,781,674			—			6,973,287
Pension (allocated by related party)		275,675			1,013,940			—			1,289,615
Tribal Regulatory fees (charged by related party)		24,952			2,590,823			—			2,615,775
Insurance (allocated by related party)		178,660			1,229,504			—			1,408,164
Telecommunication (fm related party)		173,056			58,536			—			231,592
Pre-opening costs and expenses		5,228,268			3,095,662			—			8,323,930
Depreciation and amortization		37,590			7,231,988			—			7,269,578

Total operating expenses		8,571,430			71,532,978			—			80,104,408
Income(loss) from operations		(8,581,642	)		21,511,164			—			12,929,522
Other income (expense):
Interest income		640,139			16,971			—			657,110
Interest expense		(11,154,441	)		(389,419	)		—			(11,543,860	)
Other income		94,580			2,440			—			97,020
Income from affiliates		21,141,156			—			(21,141,156	)		—

Non Operating Income (Expenses)		10,721,434			(370,008	)		(21,141,156	)		(10,789,730	)

Net Income	$	2,139,792		$	21,141,156		$	(21,141,156	)	$	2,139,792

F-24

INN OF THE MOUNTAIN GODS RESORT AND CASINO AND SUBSIDIARIES

CONSOLIDATING STATEMENTS OF CASH FLOWS
Year Ended April 30, 2005


				Guarantor
	IMGRC			Subsidiaries			Eliminations			Consolidated
Cash flows from operating activities:
Net income	$	2,139,792		$	21,141,156		$	(21,141,156	)	$	2,139,792
Adjustments to reconcile net income to net Cash (used in) operating activities:
Depreciation and amortization		—			7,269,578			—			7,269,578
Changes in assets and liabilities:
Restricted cash and cash equivalents		—			533,514			—			533,514
Accounts receivable, net of allowance		(380,867	)		(164,043	)		—			(544,910	)
Inventories		4,869			(465,790	)		—			(460,921	)
Prepaid revenue sharing fees		—			4,218,673			—			4,218,673
Prepaid expenses		(709,682	)		311,547			—			(398,135	)
Other long term assets		(124,991	)		6,690			—			(118,301	)
Accounts payable		2,673,507			(612,873	)		—			2,060,634
Accrued expenses, payroll and benefits		5,939,201			(683,492	)		—			5,255,709
Accrued revenue sharing and regulatory fees		—			(22,572,558	)		—			(22,572,558	)
Accrued interest payable		(800,000	)		(47,928	)		—			(847,928	)
Deposits and advance payments		—			330,265			—			330,265

Net cash provided (used in) by operating activities		8,741,829			9,264,739			(21,141,156	)		(3,134,588	)

Cash flows from investing activities:
Investment in subsidiaries		(21,141,156	)		—			21,141,156			—
Purchase of property, plant and equipment		113,112,297			(201,773,446	)		—			(88,661,149	)
Construction in progress accounts payable		(5,463,633	)		—			—			(5,463,633	)

Net cash provided (used in) by investing activities		86,507,508			(201,773,446	)		21,141,156			(94,124,782	)

Cash flows from financing activities:
Deferred financing costs		1,708,352			—			—			1,708,352
Cash held for construction payments		96,893,043			—			—			96,893,043
Advances to (from) affiliates		(197,010,831	)		197,010,831			—			—
Principal borrowings (payments) on long-term debt, net		1,099			(419,505	)		—			(418,406	)
Distributions to Mescalero Apache Tribe		(6,316,000	)		(6,684,000	)		—			(13,000,000	)
Contributions from Mescalero Apache Tribe		9,999,959			—			—			9,999,959

Net cash used in (provided by) financing activities		(94,724,378	)		189,907,326			—			95,182,948

Net increase (decrease) in cash and cash equivalents		524,959			(2,601,381	)		—			(2,076,422	)
Cash and cash equivalents, beginning of year		—			15,794,943			—			15,794,943

Cash and cash equivalents, end of year	$	524,959		$	13,193,562		$	—		$	13,718,521

F-25


	Page
Report of Independent Registered Public Accounting Firm		F-2
Audited Financial Statements:
Consolidated Balance Sheets as of April 30, 2006 and 2007		F-3
Consolidated Statements of Operations for the Years ended April 30, 2005, 2006 and 2007		F-4
Consolidated Statements of Changes in Equity for the Years ended April 30, 2005, 2006 and 2007		F-5
Consolidated Statements of Cash Flows for the Years ended April 30, 2005, 2006 and 2007		F-6
Notes to Consolidated Financial Statements		F-7


PART I			1
Item 1. Business			1
Item 1A. Risk Factors			6
Item 1B. Unresolved Staff Comments			9
Item 2. Properties			10
Item 3. Legal Proceedings			10
Item 4. Submission of Matters to a Vote of Security Holders			10
PART II			11
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities			11
Item 6. Selected Financial Data			11
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operation			12
Item 7A. Quantitative and Qualitative Disclosures About Market Risk			24
Item 9A. Controls and Procedures			24
Item 9B. Other Information			27
PART III			27
Item 10. Directors and Executive Officers of the Registrant			27
Item 11. Executive Compensation			29
Item 12. Security Ownership of Certain Beneficial Owners and Management			33
Item 13. Certain Relationships and Related Transactions			33
Item 14. Principal Accounting Fees and Services			34
PART IV			34
Item 15. Exhibits, Financial Statement Schedules, and Reports on Form 8-K			34

SIGNATURES			36
INDEX TO EXHIBITS
EXHIBIT 10.4
EXHIBIT 31.1
EXHIBIT 31.2
EXHIBIT 32.1
EXHIBIT 12.1
EX-10.5
EX-12.1
EX-31.1
EX-31.2
EX-32.1


	INN OF THE MOUNTAIN GODS RESORT AND CASINO
	By:	/s/ Brian D. Parrish
		Brian D. Parrish
		Its: Chief Operating Officer and Management Board Member


				Retained
	Contributed			Earnings			Total
	Capital			(Deficit)			Equity
Balances, May 1, 2004	$	56,113,676		$	2,889,923		$	59,003,599
Contributed capital from Mescalero Apache Tribe:
Construction of Resort		9,999,959			—			9,999,959
Distributions to Mescalero Apache Tribe:
Capital Distribution/Operating Transfers		(7,970,285	)		(5,029,715	)		(13,000,000	)
Net Income		—			2,139,792			2,139,792

Balances, April 30, 2005		58,143,350			—			58,143,350
Distributions to Mescalero Apache Tribe:
Capital Distribution/Operating Transfers		(5,510,254	)		—			(5,510,254	)
Net loss		—			(21,267,669	)		(21,267,669	)

Balances, April 30, 2006		52,633,096			(21,267,669	)		31,365,427
Distributions to Mescalero Apache Tribe:
Capital Distribution/Operating Transfers		(22,980,157	)		—			(22,980,157	)
Net loss		—			(3,964,755	)		(3,964,755	)

Balances, April 30, 2007	$	29,652,939		$	(25,232,424	)	$	4,420,515


Chairperson		F. Randolph Burroughs, Esq.
Inn of the Mountain Gods Resort and Casino	and	Burroughs and Rhodes
287 Carrizo Canyon Road		906 Virginia Ave.
Mescalero, New Mexico 88340		Alamogordo, New Mexico 88310


INN OF THE MOUNTAIN GODS RESORT AND CASINO		BRIAN D. PARRISH




By: Mark R. Chino, Chairperson		By: Brian D. Parrish


Employee Name:		Brian D. Parrish

Term:		Effective September 12, 2005 through September 11, 2008.

Position:		Chief Operating Officer

Location:		Mescalero, New Mexico

Reporting Relationship:		To Chairperson of the Inn of the Mountain Gods Resort and Casino Management Board, or any party so designated by the Chairperson.

Monthly Base Salary:		Twenty Nine Thousand One Hundred and Sixty-Six Dollars and 67 /100 Dollars ($29,166.67)

Employee Benefits:		Employee, spouse and eligible dependents will be eligible for immediate coverage for medical, dental and vision benefits to the extent permitted by the Plan Document.

Effective date of this Amendment:		This amendment is effective as of the Management Board meeting held on November 10, 2006. The employee base salary as adjusted above shall be applicable, for the next pay period following November 10, 2006.

	a)		Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;

	b)		Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this annual report based on such evaluation; and

	c)		Disclosed in this annual report, any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

	a)		all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

	b)		any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.



By:	/s/ Brian D. Parrish
	Brian D. Parrish
	Title:	Principal Executive Officer



By:	/s/ Lance Kintz
	Lance Kintz
	Title:	Principal Financial Officer



Dated: July 27, 2007	By:	/s/ Brian D. Parrish
		Brian D. Parrish
		Chief Executive Officer


Dated: July 27, 2007	By:	/s/ Lance Kintz
		Lance Kintz
		Chief Financial Officer