INTERNATIONAL THOROUGHBRED BREEDERS INC - 10-K Annual Report

Back to GetFilings.com

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-K

FOR ANNUAL AND TRANSITION REPORTS
PURSUANT TO SECTIONS 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934

(Mark One)
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934

For the fiscal year ended JUNE 30, 1999

OR

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

For the transition period from__________to_________

Commission file number 0-9624
INTERNATIONAL THOROUGHBRED BREEDERS, INC.
(Exact name of registrant as specified in its charter)

DELAWARE 22-2332039
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)

ROUTE 70 AND HADDONFIELD ROAD
CHERRY HILL, NEW JERSEY 08034
(Address of principal executive offices) (Zip Code)

Registrant's telephone number, including area code: (856) 488-3838

Securities registered pursuant to Section 12(b) of the Act: NONE

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

COMMON STOCK, $2.00 PAR VALUE
SERIES A CONVERTIBLE PREFERRED STOCK, $100 PAR VALUE

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____ No__X__

Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K 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. [ ]

Based on the closing sale price on May 5, 2000 the aggregate market value
of the voting stock held by non-affiliates of the Registrant was $2,714,751.

The number of shares outstanding of the Registrant's Common Stock was
8,980,252 at May 5, 2000.

PART I

Item 1 - Business

General

International Thoroughbred Breeders, Inc. ("ITB"), a Delaware corporation,
is a holding company incorporated on October 31, 1980. Until January 28, 1999
when the Company completed the sale of Freehold Raceway, the sale of a ten-acre
parcel at Garden State Park and the lease of the Garden State Park facilities to
subsidiaries of Greenwood Racing, Inc., (the "Greenwood Transaction"), ITB was
primarily engaged through its operating subsidiaries, in (i) the ownership and
operation of standardbred and thoroughbred racetracks in New Jersey (the
"Racetrack Operations") and (ii) the ownership of a non- operating casino
property in Las Vegas, Nevada (the "Casino Development Operations"). ITB owns
and operated until January 28, 1999 Garden State Park in Cherry Hill, New Jersey
(through its wholly-owned subsidiary Garden State Race Track, Inc.) and also
owned and operated Freehold Raceway and certain nearby properties in Freehold,
New Jersey (through its wholly-owned subsidiaries Freehold Racing Association,
Atlantic City Harness, Inc. and Circa 1850, Inc.) until it completed the sale of
all the assets of Freehold Raceway and the lease of the Garden State Park
operations to Greenwood New Jersey, Inc. ("Greenwood"), a wholly-owned
subsidiary of Greenwood Racing, Inc. which is the operator of Philadelphia
Park., on January 28, 1999. The Greenwood Transaction was subsequently amended
to include Penn National Gaming, Inc. ("Penn National") as a 50% joint venture
between Greenwood and Penn National (the "Pennwood Transaction"). See "Racing
Operations" below. ITB also owns the non- operating former El Rancho Hotel and
Casino (the "El Rancho Property") in Las Vegas, Nevada (through its wholly-owned
subsidiary Orion Casino Corporation). On January 25, 2000, the Company entered
into agreements to sell the Garden State Park and the El Rancho properties. See
"Developments During the Last Fiscal Year" below. As used in this Form 10-K, the
term "Company" includes ITB and its wholly- owned subsidiaries.

In April 1998, the Company's Board of Directors (the "Board") authorized
the exploration of strategic opportunities for the Company, including a possible
merger or sale of all of the Company's assets and prior to June 30, 1998, the
Company decided to dispose of its racetracks. On January 28, 1999, the Company
completed the sale of all of the real property and related assets at Freehold
Raceway and the lease of the real property and related assets at Garden State
Park to Greenwood, subsequently amended to include the Pennwood Transaction
("Pennwood"). Accordingly, operating results of the Company's racetrack
subsidiaries have been segregated and reported as discontinued operations in the
accompanying financial statements for the three years ended June 30, 1999, 1998
and 1997. In addition, the Company has determined to dispose of the El Rancho
Property as part of the Delaware Settlement described below. On January 25,
2000, the Company entered into an agreement to sell the El Rancho property. See
"Developments During the Last Fiscal Year" below. There can be no assurance that
the sale of the El Rancho Property will be consummated or as to the timing
thereof. See "Casino Development Operations," "Developments During the Last
Fiscal Year," and "Legal Proceedings-Delaware Settlement."

The Company's loss from continuing operations for the fiscal year ended
June 30, 1999 ("Fiscal 1999") was ($16,034,769) as compared to a loss from
continuing operations for the fiscal year ended June 30, 1998 ("Fiscal 1998") of
($25,468,850), a decrease in the loss of $9,434,081. This decrease in the loss
from continuing operations is primarily the result of: (i) a decrease in general
and administrative expenses of $7,082,988 or 61%, from $11,615,972 in Fiscal
1998 to $4,532,984 in Fiscal 1999, principally attributable to: (a) the accrual
in Fiscal 1998 of the estimated charge of $3,748,000 associated with the
acquisition of 2,904,016 shares of the Company's Common Stock and the
termination of certain agreements upon the consummation of the Delaware
Settlement, as described below; (b) a decrease of approximately

1

$1,500,000 in compensation, travel and director expenses primarily resulting
from the consummation of the Delaware Settlement; (c) a decrease in legal
expenses of approximately $2,000,000 primarily associated with various director
and stockholder lawsuits in Fiscal 1998; (ii) a net increase in interest and
financing expenses primarily associated with: (a) financing costs of $1,742,883
associated with the consummation of the Delaware Settlement in Fiscal 1999;
partially offset by (b) a decrease in interest expense of $1,059,266 or 15% as a
result of the reduced debt; (iii) the estimated impairment loss in Fiscal 1998
in connection with the adjustment to fair market value of the El Rancho Property
of $3,429,252; and (iv) a decrease in interest income of $345,520. See
"Management's Discussion and Analysis of Financial Conditions and Results of
Operations."

Income from discontinued operations was $8,144,072 for Fiscal 1999,
including a net gain of $3,657,688 recognized on the sale of Freehold Raceway,
the sale of a ten-acre parcel at Garden State Park and the lease of the Garden
State Park facilities on January 28, 1999 and income from operations of
$4,486,384 for the seven month period of racetrack operations in Fiscal 1999.

During Fiscal 1999, the Company incurred a net loss of ($7,890,697) as
compared to a net loss of ($18,261,217) for Fiscal 1998. The decrease in net
loss of $10,370,520 is the result of the differences described above, as well as
the Impairment Loss on the El Rancho Property recognized in Fiscal 1998 in the
amount of $3,429,252 as described above. See "Management's Discussion and
Analysis of Financial Conditions and Results of Operations."

As of May 5, 2000, ITB employed seven full-time corporate executive,
administrative and clerical personnel.

On January 28, 1999, the Company fully and finally consummated the
Stipulation and Agreement of Compromise, Settlement and Release dated July 2,
1998 (the "Delaware Stipulation") to settle certain pending lawsuits brought by
certain minority Board members and stockholders (the "Delaware Settlement"). See
"Legal Proceedings." The Delaware Settlement provided for, among other things,
the dismissal of certain litigation with prejudice, the disposition of the El
Rancho Property, the repurchase of approximately 2.9 million shares of the
Company's Common Stock owned by NPD, Inc., a company owned by the Company's
former Chairman and Chief Executive Officer, the retirement of an additional
approximately 2.1 million shares of the Company's Common Stock owned by Las
Vegas Entertainment Network, Inc. ("LVEN"), the resignation of certain of the
Company's Board members and the termination of various agreements. The terms of
the Delaware Settlement were approved by the Delaware Court of Chancery after
notice to all stockholders. The Delaware Settlement was also subject to a number
of other conditions. See "Legal Proceedings" and "Management's Discussion and
Analysis of Financial Conditions and Results of Operations."

On January 21, 2000, after obtaining the written consent of the holders of
a majority of the outstanding shares of stock of the Company entitled to vote
thereon, the Company entered into a restructuring agreement (the "Restructure
Agreement") with its primary lender, Credit Suisse First Boston Mortgage Capital
LLC, ("Credit Suisse"). Prior to this agreement, the Company had been in a
maturity default with Credit Suisse for its loan due on June 1, 1999 (the "CSFB
Loan") in the principal amount of $30,500,000 plus unpaid interest since June 1,
1999. The Restructure Agreement returns the loan to a good standing position and
extends the maturity date of the CSFB Loan to June 30, 2000. See "Developments
During the Last Fiscal Year" below.

Pursuant to the Restructure Agreement, Garden State Race Track, Inc.
transferred title to the Garden State Race Track to GSRT, LLC ("GSRT"), a
Delaware limited liability company in which Garden State Race Track, Inc. is the
sole member, the result of which effects no change in real ownership.

2

Pursuant to the limited liability company agreement of GSRT entered into in
connection with the Restructure Agreement, Garden State Race Track, Inc. may
cause GSRT to enter into an arm's-length sale or joint venture of the Garden
State Property under certain enumerated circumstances and conditions, including
that the purchase price for such sale or joint venture be at least equal to
fifty-percent of the combined outstanding principal balance of the CSFB Loan and
the Trustee Note, which amount must be paid to Credit Suisse, and the contract
for such sale or joint venture be entered into on or prior to January 25, 2000
(the "GSRT Option").

On January 25, 2000, the Company and Garden State Race Track, Inc., the
owner of Garden State Park, entered into an agreement for the sale of all of the
Garden State Park property, excluding a ten-acre parcel of land previously
committed to GS Park Racing, L.P., to Turnberry/Cherry Hill, LLC. The terms of
the sale meet all the conditions required by Credit Suisse to be a valid GSRT
Option, according to a letter received from Credit Suisse (see Agreement of Sale
of Garden State Race Track). The Restructure Agreement further provides that (i)
if the proceeds from the sale of the Garden State Park property are insufficient
to pay the outstanding amounts due to Credit Suisse under the CSFB Loan, or (ii)
after the sale or joint venture of the Garden State property, the total amount
outstanding under the CSFB Loan is equal to or greater than $5,000,000 and the
Company shall not have received a binding commitment for a loan or purchase of
the El Rancho Property, then, Orion Casino Corporation must convey the El Rancho
property to a new Delaware limited liability company ("New LLC") having
substantially same ownership structure and limited liability company agreement
as GSRT. Once the El Rancho property is conveyed to New LLC in accordance with
and upon the happening of the circumstances and conditions provided in the
Restructure Agreement, Orion Casino Corporation, as the sole member of New LLC,
will have the right to cause New LLC to sell or refinance the El Rancho property
so long as the outstanding obligations due under the CSFB Loan are paid in full
by such sale or refinancing and such sale or refinancing closes on or before
June 30, 2000. See "Management's Discussion and Analysis of Financial Conditions
and Results of Operations."

On January 25, 2000, the Company entered into an agreement of sale with
Turnberry/Cherry Hill LLC, for the sale of the Garden State Park real estate.
While the Company received from escrow a $500,000 deposit made by the buyer
under the terms of the sale, possible changes to the agreement are currently
being negotiated by the parties. Upon execution of a modification of the
definitive agreement the Company expects to announce the final terms of the
transaction. See "Management's Discussion and Analysis of Financial Conditions
and Results of Operations."

On January 25, 2000, the Company entered into a binding term sheet for the
sale of the El Rancho property in Las Vegas, Nevada with Turnberry/Las Vegas
Boulevard, LLC. A formal contract was signed on March 1, 2000 on the same terms
as outlined on the binding term sheet with certain mutually acceptable changes
made during the course of negotiations of the definitive agreements. The
closing, originally scheduled to occur by March 31, 2000, had been extended to
April 30, 2000 after the buyer released $1,600,000 as a non-refundable deposit
to the Company. The closing date may be further delayed to June 1, 2000 under
certain conditions. See "Developments During the Last Fiscal Year" below and
"Management's Discussion and Analysis of Financial Conditions and Results of
Operations."

Racetrack Operations

On January 28, 1999, the Company completed the sale of Freehold Raceway,
the sale of a ten-acre parcel at Garden State Park and the lease of the Garden
State Park facilities to subsidiaries of Greenwood Racing, Inc.("Greenwood"),
which owns Philadelphia Park racetrack, the Turf Clubs and Phonebet (the
"Greenwood Transaction"). The purchase price was $46 million ($1 million of
which will be held in escrow to cover certain indemnification and other
obligations of the Company), with an additional $10

3

million in contingent promissory notes (the "Contingent Notes") which become
effective upon, among other things, the New Jersey Legislature's approval of
off-track betting facilities or telephone account pari-mutuel wagering on horse
racing. Further adjustments could be made to increase the purchase price if
certain additional regulatory gaming changes are approved by the New Jersey
Legislature in the future. The Greenwood Transaction was subsequently amended to
include Penn National Gaming, Inc.("Penn National"), which owns Penn National
Race Course, Pocono Downs Racetrack, Charles Town Races and at least ten
off-track betting parlors in Pennsylvania as a 50% joint venture between
Greenwood and Penn National ( "Pennwood"). Greenwood and Pennwood have
guaranteed the performance by the purchaser of all obligations under the
Contingent Notes.

Garden State Park

Garden State Park is owned and was operated until January 28, 1999 by the
Company's wholly- owned subsidiary, Garden State Race Track, Inc. ("GSRT").
Garden State Park is located on approximately 220 acres of land in Cherry Hill,
New Jersey. Cherry Hill forms part of the Philadelphia metropolitan area and is
approximately eight miles from downtown Philadelphia.

The Company purchased the site of Garden State Park on March 15, 1983
following a fire which destroyed the original racetrack facility. Following such
purchase, the Company undertook an extensive reconstruction of the racetrack
facility, as well as the construction of a separate pavilion (completed in
1986). On April 1, 1985, Garden State Park reopened for horse racing.

The reconstructed grandstand and clubhouse is an approximately 500,000
square foot, seven level, steel frame, glass enclosed, fully heated and
air-conditioned facility (the "Clubhouse") with an adjacent multi-level glass
covered thoroughbred paddock area. The Clubhouse can accommodate up to 24,000
spectators, including seating for approximately 9,500 spectators, and contains
three sit-down restaurants as well as 17 food concession stands. The backstretch
area includes 27 barns and stables capable of accommodating approximately 1,500
horses, a harness paddock, a training track, dormitories, cafeteria and
recreation buildings for backstretch personnel, an administration building, and
other service buildings. Reconstruction also included restoration of the main
dirt and turf tracks, installation of lighting for nighttime racing, paving of
parking facilities to accommodate approximately 4,000 automobiles, landscaping,
fencing and other amenities. The approximately 56,000 square foot, 1-1/2 story
pavilion (the "Pavilion") can be used for closed circuit television events
(racing as well as other sporting and non-sporting events), wagering, concerts,
special events, concessions and other conveniences. The Pavilion has seating
capacity for approximately 1,500 spectators.

Casino Development Operations

El Rancho Property

On January 24, 1996, the Company purchased the nonoperating El Rancho
Property from LVEN. The El Rancho Property is an approximately 21 acre property
bounded (i) on the west by Las Vegas Boulevard South (Las Vegas strip with
approximately 735 feet of frontage), (ii) on the south by the Algiers Hotel and
Riviera Boulevard, (iii) on the east by an undeveloped lot and (iv) on the north
by a "Wet and Wild" attraction. The El Rancho Property, which has not operated
since July 1992, consists of a vacant hotel building with 1,008 rooms, an
approximately 90,000 square foot casino and ancillary area, a 52-lane bowling
alley, a swimming pool and a parking garage. The El Rancho Property was one of
the first large scale hotel casinos built in Las Vegas and previously operated
under an old west theme.

In February 1996, the Company announced its intention to develop the El
Rancho Property using

4

the theme "Starship Orion." In February 1997, the Company announced that it
would develop the property under a more modest country and western theme to be
known as "CountryLand". These plans included the development of a 34 story tower
addition containing 380 hotel rooms, a showroom with seating for approximately
1,800 spectators, a 450 seat bullring, a country western dance hall, a swimming
pool, shopping mall and new restaurants. In connection with the Delaware
Settlement, the Company has provided for the disposition of the El Rancho
Property.

Pursuant to the Delaware Settlement, LVEN was granted the exclusive right
to sell the El Rancho Property until November 20, 1998 and the co-extensive
right, along with the Company, to sell the El Rancho Property until April 19,
1999. Beginning January 19, 1999, and ending April 19, 1999, LVEN was required
to pay one-half of the carrying costs associated with maintaining the El Rancho
Property. LVEN also obtained the right, exercisable from March 20, 1999 until
April 19, 1999, to refinance the El Rancho Property and thereby obtain the
extended right to sell the El Rancho Property until the earlier of (a) one year
from April 19, 1999 or (b) the midpoint of the term of the refinancing loan (the
"Refinancing Option"). LVEN did not sell the El Rancho Property nor did it
exercise the Refinancing Option. On January 25, 2000, the Company signed a
binding term sheet for the sale of the El Rancho Property and on March 1, 2000 a
formal contract was signed on the same terms as outlined on the binding term
sheet with certain mutually acceptable changes made during the course of
negotiations of the definitive agreements. See "Developments During the Last
Fiscal Year" below. There can be no assurances that the Company will be able to
dispose of the El Rancho Property as contemplated by the Delaware Settlement.
See "Legal Proceedings - Delaware Settlement."

Developments During the Last Fiscal Year

On July 2, 1998, the Company entered into an agreement with Greenwood for
the sale of the real property and related assets at Freehold Raceway and the
lease for a period of seven years of the real property and related assets at
Garden State Park. The agreement was subject to the satisfaction of a number of
conditions, including without limitation, Company stockholder approval, the
receipt by the Company of a fairness opinion from an independent investment
banker and the receipt by Greenwood of approval from applicable regulatory
authorities. The original purchase price was $45 million, consisting of $33
million in cash and a seven year non-contingent promissory note in the amount of
$12 million, with an additional $10 million in contingent promissory notes which
would become effective upon, among other things, New Jersey's approval of
off-track betting facilities or telephone account pari-mutuel wagering on horse
racing. The transaction, as amended, was consummated on January 28, 1999. See
below.

On July 2, 1998, Michael Abraham and Kenneth Scholl resigned their
positions on the Board of Directors.

Effective August 7, 1998, the Company's Common Stock and its Series A
Preferred Stock were delisted from trading on AMEX for the failure to meet
certain AMEX listing criteria. Neither the Common Stock nor the Preferred Stock
had been traded on AMEX since October 13, 1997 when it was suspended for not
satisfying various AMEX's guidelines and because the Company had not filed its
Annual Report on Form 10-K for Fiscal 1997 within the SEC's prescribed time
period. The stock is listed for quotation on the NQB Pink Sheets.

On January 28, 1999, the Company fully and finally consummated the
settlement and dismissal of the following actions discussed in the "Legal
Proceedings" section of this Form 10K: Quigley et al. v. DeSantis et al., C.A.
No. 15919, in the Court of Chancery of the State of Delaware; Rekulak v.
DeSantis et al., C.A. No. 15920, in the Court of Chancery of the State of
Delaware; Green v. DeSantis, et al., C.A. No. 97-CV-5657, in the New Jersey
District Court. These actions were settled in connection and

5

accordance with the Stipulation and Agreement of Compromise, Settlement and
Release entered into on July 2, 1998 to resolve the above action entitled
Quigley et al. v. DeSantis et al. (the "Delaware Settlement").

Pursuant to the terms of the Delaware Settlement, the Company purchased
from NPD, Inc. ("NPD") approximately 2.9 million shares of ITB common stock (the
"NPD Shares") for $4.6 million cash and the assumption by ITB of a $5.8 million
promissory note originally issued by NPD to acquire the NPD Shares, held by
Donald F. Conway, Chapter 11 Trustee for the Bankruptcy Estate of Robert E.
Brennan (the "Bankruptcy Trustee"). In addition, pursuant to the terms of the
Delaware Settlement and with the approval of the United States Bankruptcy Court
for the District of New Mexico in an action in which AutoLend Group, Inc. is the
debtor, NPD returned to AutoLend Group, Inc. the $2 million originally pledged
by AutoLend Group, Inc. to secure the aforementioned $5.8 million promissory
note (the "NPD Note"). ITB understands that former ITB director Nunzio P.
DeSantis is Chairman, President and a principal stockholder of AutoLend Group,
Inc., and former ITB chairman and director Anthony Coelho is a former director
of AutoLend Group, Inc.

The approval of certain transactions between ITB and the Bankruptcy Trustee
by the United States Bankruptcy Court for the District of New Jersey in the
action entitled In re Robert E. Brennan, C.A. No. 95-35502, was a condition
precedent to the consummation of the Delaware Settlement. This approval was duly
received and the Company consummated a separate settlement with the Bankruptcy
Trustee necessary to consummate the Delaware Settlement (the "Trustee
Settlement"). Pursuant to the Trustee Settlement, the Bankruptcy Trustee
received: (a) a pay down on the NPD Note from the original principal balance of
$5,808,032 to $3,558,032 (see Note11-B); (b) a promissory note from ITB in the
amount of $3,558,032 (the "ITB Note"), on substantially the same terms as the
NPD Note, except that the ITB Note becomes due and payable on the earlier to
occur of (i) January 15, 2001, or (ii) the closing of either the sale of the
Company's non-operating El Rancho hotel and casino property in Las Vegas, Nevada
(the "El Rancho Property"), or the sale of Garden State Park (the "Garden State
Property"); (c) a security interest in the NPD Shares; (d) the payment of the
costs and expenses incurred by the Bankruptcy Trustee in connection with the
Delaware Settlement and the Trustee Settlement; (e) subordinate interests in
both the El Rancho Property and the Garden State Property; and (f) an escrow of
the July 15, 1999 interest payment due on the ITB Note. As a result of the
Trustee Settlement, the Company secured (a) the power to consummate the Delaware
Settlement, (b) releases from the Bankruptcy Trustee in favor of all parties to
the Delaware Settlement, including the Company, and (c) the right to defer
certain interest payments due under the ITB Note until the maturity of such
note.

Upon consummation of the Delaware Settlement, Nunzio P. DeSantis, Anthony
Coelho, and Joseph Zappala immediately resigned from the Company's board of
directors and terminated any and all employment agreements or consulting
arrangements with the Company. Francis W. Murray and Robert J. Quigley remained
directors, and during the quarter ended March 31, 1999, John U. Mariucci and
James J. Murray were elected by the remaining directors to serve on the board of
directors until the next annual stockholders' meeting.

Also pursuant to the Delaware Settlement, Las Vegas Entertainment Network,
Inc. ("LVEN") was granted the exclusive right to sell the El Rancho Property
until November 20, 1998 and the co-extensive right, along with the Company, to
sell the El Rancho Property until April 19, 1999. Beginning January 19, 1999,
and ending April 19, 1999, LVEN was required to pay one-half of the carrying
costs associated with maintaining the El Rancho Property. LVEN also obtained the
right, exercisable from March 20, 1999 until April 19, 1999, to refinance the El
Rancho Property and thereby obtain the extended right to sell the El Rancho
Property until the earlier of (a) one year from April 19, 1999 or (b) the
midpoint of the term of the refinancing loan (the "Refinancing Option"). If the
Company sells or refinances the El Rancho

6

property after April 19, 1999 for an amount in excess of $44,200,000, plus one
half of the carrying costs from January 20, 1999 to April 19, 1999, plus the
customary transaction costs incurred by the Company in such sale (the "Threshold
Amount"), then LVEN shall receive from such cash proceeds in excess of the
Threshold Amount up to the amount of $12,000,000 of cash sale proceeds over and
above the Threshold Amount, out of which LVEN will direct that the first
$2,000,000 be paid over to NPD. NPD is owned by Nunzio DeSantis, the Company's
former Director and CEO and Tony Coelho, the Company's former Director and
Chairman of the Board. As of January 25, 2000 LVEN did not sell the El Rancho
Property and did not exercise the Refinancing Option. On January 25, 2000, the
Company signed a binding term sheet for the sale of the El Rancho Property and
on March 1, 2000 a formal contract was signed on the same terms as outlined on
the binding term sheet with certain mutually acceptable changes made during the
course of negotiations of the definitive agreements. There can be no assurances
that the Company will be able to dispose of the El Rancho Property as
contemplated by the Delaware Settlement.

In exchange for the foregoing, LVEN (a) executed and delivered releases to
all parties to the Delaware Settlement, including the Company and Credit Suisse,
(b) returned to ITB for immediate cancellation the 2,093,868 shares of ITB
common stock (the "LVEN Shares") previously issued to Casino-Co Corporation, a
subsidiary of LVEN, in exchange for the cancellation of a certain $10.5 million
note plus accrued interest from ITB to LVEN, which note remains canceled, (c)
released any and all LVEN or Casino-Co Corporation interests in the NPD Shares,
and (d) cancelled any and all agreements of any kind or nature whatsoever
between LVEN and its affiliates and ITB or any of its subsidiaries.

The foregoing summary of the terms and transactions relating to the
Delaware Settlement and the Trustee Settlement is qualified by reference to the
actual documents filed with the respective courts in the actions discussed
above.

Effective December 3, 1999, the Board of Directors accepted the resignation
of Christopher C. Castens, the Company's Secretary and General Counsel. See
"Termination and Severance Agreements."

On May 7, 1999, the Company notified their primary lender of its intent to
extend the loan maturity date to June 1, 2000. On January 21, 2000 after
obtaining the written consent of the holders of a majority of the outstanding
shares of stock of the Company entitled to vote thereon, the Company entered
into a restructuring agreement (the "Restructure Agreement") with its primary
lender, Credit Suisse First Boston Mortgage Capital LLC, ("Credit Suisse").
Prior to this agreement, the Company had been in a maturity default with Credit
Suisse for its loan due on June 1, 1999 (the "CSFB Loan") in the principal
amount of $30,500,000 plus unpaid interest since June 1, 1999.

The Restructure Agreement returns the loan to a good standing position and
extends the maturity date of the CSFB Loan to June 30, 2000. As part of the
Restructure Agreement, the Company agreed that as of January 21, 2000, the
restructured principal balance due on the CSFB Loan was $33,103,189, which
consisted of: (i) the principal amount of $30,500,000 remaining on the CSFB
Loan; (ii) accrued interest advanced by Credit Suisse from June 1, 1999 to
January 21, 2000 in the amount of $2,523,189; and (iii) an advance of a portion
of Credit Suisse's legal fees incurred in connection with the Restructure
Agreement in the amount of $80,000. Credit Suisse has agreed, pursuant to the
Restructure Agreement, to advance the monthly interest payments due by the
Company under the CSFB Loan until April 15, 2000. Such interest amounts shall,
to the extent not paid when due by the Company, become part of the outstanding
principal balance of the CSFB Loan on the date such interest becomes due.
Commencing April 16, 2000 and until 30 days following the closing of the sale of
the El Rancho property, interest accruing shall be paid by Turnberry/Las Vegas
Boulevard LLC ("Turnberry"), the purchaser of the El Rancho property. The
potential sale to Turnberry is described later in this section.

7

In connection with the Restructure Agreement, the Chapter 11 Bankruptcy
Trustee (the "Trustee") for the estate of Robert E. Brennan, to whom the Company
and its subsidiaries Garden State Race Track, Inc. and Orion Casino Corporation
are indebted to in the remaing principal amount of $3,363,032, as evidenced by a
note dated January 28, 1999 (the "Trustee Note"), entered into an agreement with
the Company wherein: (i) the amounts due under the Trustee Note are due at the
earlier of (a) June 1, 2000 or (b) the date on which the latter of the Garden
State Park or El Rancho property is sold, provided that the sale of the latter
will satisfy the remaining balance on the CSFB Loan and the Trustee Note; (ii)
all interest due under the Trustee Note will be accrued and deferred until the
maturity date of the Note; and (iii) the Company shall reimburse the Trustee for
legal and accounting fees up to $20,000, which amount will be advanced by the
Trustee and added to the outstanding principal balance of the Trustee Note.

Pursuant to the Restructure Agreement, the Company paid at closing: (i)
legal fees in the amount of $146,000 which were incurred by Credit Suisse in
connection with the Restructure Agreement; (ii) real estate transfer taxes in
the amount of $56,275 on behalf of Garden State Race Track, Inc. in connection
with the transfer discussed below; and (iii) loan servicing fees in the amount
of $7,174. Credit Suisse released to the Company $167,476 of funds held in
various escrow accounts in connection with the CSFB Loan which will be used by
the Company for working capital purposes.

Pursuant to the Restructure Agreement, Garden State Race Track, Inc.
transferred title to the Garden State Race Track to GSRT, LLC ("GSRT"), a
Delaware limited liability company in which Garden State Race Track, Inc. is the
sole member, the result of which effects no change in real ownership. Pursuant
to the limited liability company agreement of GSRT entered into in connection
with the Restructure Agreement, Garden State Race Track, Inc. may cause GSRT to
enter into an arm's-length sale or joint venture of the Garden State Property
under certain enumerated circumstances and conditions, including that the
purchase price for such sale or joint venture be at least equal to fifty-percent
of the combined outstanding principal balance of the CSFB Loan and the Trustee
Note, which amount must be paid to Credit Suisse, and the contract for such sale
or joint venture be entered into on or prior to January 25, 2000 (the "GSRT
Option").

On January 25, 2000, the Company and Garden State Race Track, Inc., the
owner of Garden State Park, entered into an agreement for the sale of all of the
Garden State Park property, excluding a ten-acre parcel of land previously
committed to GS Park Racing, L.P., to Turnberry/Cherry Hill, LLC. The terms of
the sale meet all the conditions required by Credit Suisse to be a valid GSRT
Option, according to a letter received from Credit Suisse (see Agreement of Sale
of Garden State Race Track). The Restructure Agreement further provides that (i)
if the proceeds from the sale of the Garden State Park property are insufficient
to pay the outstanding amounts due to Credit Suisse under the CSFB Loan, or (ii)
after the sale or joint venture of the Garden State property, the total amount
outstanding under the CSFB Loan is equal to or greater than $5,000,000 and the
Company shall not have received a binding commitment for a loan or purchase of
the El Rancho Property, then, Orion Casino Corporation must convey the El Rancho
property to a new Delaware limited liability company ("New LLC") having
substantially same ownership structure and limited liability company agreement
as GSRT. Once the El Rancho property is conveyed to New LLC in accordance with
and upon the happening of the circumstances and conditions provided in the
Restructure Agreement, Orion Casino Corporation, as the sole member of New LLC,
will have the right to cause New LLC to sell or refinance the El Rancho property
so long as the outstanding obligations due under the CSFB Loan are paid in full
by such sale or refinancing and such sale or refinancing closes on or before
June 30, 2000. See "Management's Discussion and Analysis of Financial Conditions
and Results of Operations."

On January 25, 2000, the Company entered into an agreement of sale with
Turnberry/Cherry Hill LLC, for the sale of the Garden State Park real estate.
While the Company received from escrow a

8

$500,000 deposit made by the buyer under the terms of the sale, possible changes
to the agreement are currently being negotiated by the parties. Upon execution
of a modification of the definitive agreement the Company expects to announce
the final terms of the transaction.

The sale of the Garden State Race Track property to Turnberry/Cherry Hill,
LLC or any other buyer cannot be assured at this time and if for any reason the
potential buyer of the property is not able to close this transaction by June
30, 2000, the property may be marketed and possibly sold by the Company's
lender, Credit Suisse First Boston Mortgage, LLC

On January 25, 2000, the Company entered into a binding term sheet for the
sale of the El Rancho property in Las Vegas, Nevada with Turnberry/Las Vegas
Boulevard, LLC and on March 1, 2000 a formal contract was signed on the same
terms as outlined on the binding term sheet with certain mutually acceptable
changes made during the course of negotiations of the definitive agreements. The
purchase price is $45,000,000. The purchase price will be paid by: (i) a
$100,000 deposit at the signing of the Purchase and Sale Agreement; (ii) a
$400,000 additional deposit due on March 15, 2000, which amount will be
non-refundable, and (iii) the balance of the purchase price due at the closing,
will be payable in cash.

The closing, originally scheduled to occur by March 31, 2000, has been
extended to April 30, 2000 after the buyer: (i) agreed to pay the approximate
$100,000 carrying costs of the El Rancho property for the month of April 2000;
(ii) agreed to pay the interest due to Credit Suisse First Boston Mortgage
Capital, LLC on a principal amount of $20,000,000 at 12% for the month of April
2000; and (iii) released $1,600,000, which included the above $100,000 and
$400,000 deposits, as a non-refundable deposit to the Company. The closing date
may be further extended to June 1, 2000 provided the buyer: (i) agrees to pay
the approximate $100,000 carrying costs of the El Rancho property for the month
of May 2000; (ii) pays the interest due to Credit Suisse First Boston Mortgage
Capital, LLC on a principal amount of $19,000,000 at 12% for the month of May
2000; (iii) pays an additional deposit of $900,000 to the Company by April 30,
2000, which amount has not yet been received; and (iv) demonstrates it has the
financial ability to close.

The Company has separately agreed to purchase a promissory note of the
buyer in the amount of $23,000,000 which will be convertible at the Company's
option into a 33 1/3% equity interest in the buyer.

The note would accrue interest at a 22% per annum rate, which will be
adjusted from time to time since the interest actually payable will be dependent
upon, and payable solely out of, the buyer's net cash flow available for
distribution to its equity owners ("Distributable Cash"). After the equity
investors in the buyer have received total distributions equal to their capital
contributions plus an agreed upon return on their invested capital, the next $23
million of Distributable Cash will be paid to the Company. The Company will
thereafter receive payments under the note equal to 33 1/3% of all Distributable
Cash until the maturity date, which occurs on the 30th anniversary of the
Company's purchase of the note. The Company may convert the promissory note, at
its option, into a 33 1/3% equity interest in the buyer at any time after the
15th anniversary of the issuance of the note. If not then converted, the note
will convert into a 33 1/3% equity interest in the buyer on the day before the
30th anniversary of its issuance.

The sale of the El Rancho property to Turnberry/Las Vegas Boulevard LLC or
to any other buyer cannot be assured at this time.

9

Item 2 - Properties

In addition to Garden State Park and the El Rancho Property described
above, the Company owns a condominium unit and an ownership interest in the
Ocala Jockey Club located in Reddick, Florida. This property was purchased at a
time when the Company was in the thoroughbred breeding business and is currently
being held for the purpose of generating rental income until such time that it
is sold.

Item 3 - Legal Proceedings

On or about September 10, 1997, three actions were filed in the Delaware
Court of Chancery in and for New Castle County (the "Delaware Chancery Court"),
each of which named the Company as a nominal defendant and one of which was
subsequently dismissed (collectively, the "Delaware Actions"). Additionally, two
actions were filed in New Jersey naming the Company as a nominal defendant
(collectively, the "New Jersey Actions"), one of which is a derivative action
filed on or about February 24, 1998 in the United States District Court for the
District of New Jersey (the "New Jersey District Court"), and the other is a
purported class action filed on or about July 15, 1998 in the Superior Court of
New Jersey (the "New Jersey Superior Court"). As described more fully below,
pursuant to the terms of a Stipulation and Agreement of Compromise, Settlement
and Release dated July 2, 1998 (the "Delaware Stipulation"), upon satisfaction
of certain conditions set forth in the Delaware Stipulation, the Delaware
Actions were fully and finally dismissed with prejudice, and the parties
provided mutual releases of all claims related to the actions thereunder on
January 28, 1999 (the "Delaware Settlement"). See "Delaware Settlement."
Further, pursuant to a memorandum of understanding entered into on August 18,
1998 (the "New Jersey Memorandum"), upon satisfaction of certain conditions, the
New Jersey Actions are to be fully and finally dismissed with prejudice, and the
parties are to provide mutual releases of all claims related to the actions
thereunder (the "New Jersey Settlement"). See "New Jersey Settlement."

Quigley, et al. v. DeSantis, et al.

Quigley, Leo and The Family Investment Trust v. DeSantis, Abraham, Coelho,
Scholl, Zappala, Corazzi and Las Vegas Entertainment Network, Inc. and
International Thoroughbred Breeders, Inc., C.A. No. 15919 (the "Quigley
Action"), was filed in the Delaware Court of Chancery on or about September 10,
1997, and alleged that the director defendants therein acted in contravention of
ITB's by-laws, Delaware law and their fiduciary duties. The Quigley Action
sought a declaratory judgement that the actions taken by the director defendants
violated ITB's by-laws, Delaware law and the director defendants' fiduciary
duties and that such actions are void and should be rescinded by the Court.
Moreover, the Quigley Action sought damages suffered by ITB in connection with
such challenged actions. ITB asserted counterclaims against Quigley, Leo,
Murray, and Dees Jr., alleging that such counterclaim defendants contravened
Delaware law and such counterclaim defendants' fiduciary duties. In connection
with such counterclaims, ITB sought injunctive relief preventing the
counterclaim defendants from interfering with the Company's day-to-day business
affairs, the establishment of a constructive trust over certain assets, a
declaration that a certain supermajority by-law was repealed and money damages.
Murray further counterclaimed against ITB for wrongful termination and failure
to pay certain compensation. All allegations of either the plaintiffs or the
counterclaim plaintiffs were denied.

The Quigley Action was fully and finally dismissed and settled in
connection with the January 28, 1999 consummation of the Delaware Settlement.

10

Rekulak v. DeSantis, et al.

On or about September 11, 1997, the action entitled Rekulak v. DeSantis,
Abraham, Coelho, Scholl, Zappala, Corazzi and Las Vegas Entertainment Network,
Inc. and International Thoroughbred Breeders, Inc., C.A. No. 15920, was brought
in the Delaware Court of Chancery alleging that the defendants therein acted in
contravention of ITB's by-laws, Delaware law and the director defendants'
fiduciary duties (the "Rekulak Action"). The allegations made and the relief
sought in the Rekulak Action are virtually identical to the allegations made and
relief sought in the Quigley Action.

The Rekulak Action was fully and finally dismissed in connection with the
January 28, 1999 consummation of the Delaware Settlement.

Delaware Settlement

On January 28, 1999, the Company fully and finally consummated the
settlement and dismissal of the following actions: Quigley et al. v. DeSantis et
al., C.A. No. 15919, in the Court of Chancery of the State of Delaware; Rekulak
v. DeSantis et al., C.A. No. 15920, in the Court of Chancery of the State of
Delaware; Green v. DeSantis, et al., C.A. No. 97-CV-5657, in the New Jersey
District Court. These actions were settled in connection and accordance with the
Stipulation and Agreement of Compromise, Settlement and Release entered into on
July 2, 1998 to resolve the above action entitled Quigley et al. v. DeSantis et
al. (the "Delaware Settlement").

Pursuant to the terms of the Delaware Settlement, the Company purchased
from NPD, Inc. ("NPD") approximately 2.9 million shares of ITB common stock (the
"NPD Shares") for $4.6 million cash and the assumption by ITB of a $5.8 million
promissory note originally issued by NPD to acquire the NPD Shares, held by
Donald F. Conway, Chapter 11 Trustee for the Bankruptcy Estate of Robert E.
Brennan (the "Bankruptcy Trustee"). In addition, pursuant to the terms of the
Delaware Settlement and with the approval of the United States Bankruptcy Court
for the District of New Mexico in an action in which AutoLend Group, Inc. is the
debtor, NPD returned to AutoLend Group, Inc. the $2 million originally pledged
by AutoLend Group, Inc. to secure the aforementioned $5.8 million promissory
note (the "NPD Note"). ITB understands that former ITB director Nunzio P.
DeSantis is Chairman, President and a principal stockholder of AutoLend Group,
Inc., and former ITB director Anthony Coelho is a director of AutoLend Group,
Inc.

The approval of certain transactions between ITB and the Bankruptcy Trustee
by the United States Bankruptcy Court for the District of New Jersey in the
action entitled In re Robert E. Brennan, C.A. No. 95-35502, was a condition
precedent to the consummation of the Delaware Settlement. This approval was duly
received and the Company consummated a separate settlement with the Bankruptcy
Trustee necessary to consummate the Delaware Settlement (the "Trustee
Settlement"). Pursuant to the Trustee Settlement, the Bankruptcy Trustee
received: (a) a pay down on the NPD Note from the original principal balance of
$5,808,032 to $3,558,032 (see Note11-B); (b) a promissory note from ITB in the
amount of $3,558,032 (the "ITB Note"), on substantially the same terms as the
NPD Note, except that the ITB Note becomes due and payable on the earlier to
occur of (i) January 15, 2001, or (ii) the closing of either the sale of the
Company's non-operating El Rancho hotel and casino property in Las Vegas, Nevada
(the "El Rancho Property"), or the sale of Garden State Park (the "Garden State
Property"); (c) a security interest in the NPD Shares; (d) the payment of the
costs and expenses incurred by the Bankruptcy Trustee in connection with the
Delaware Settlement and the Trustee Settlement; (e) subordinate interests in
both the El Rancho Property and the Garden State Property; and (f) an escrow of
the July 15, 1999 interest payment due on

11

the ITB Note. As a result of the Trustee Settlement, the Company secured (a) the
power to consummate the Delaware Settlement, (b) releases from the Bankruptcy
Trustee in favor of all parties to the Delaware Settlement, including the
Company, and (c) the right to defer certain interest payments due under the ITB
Note until the maturity of such note.

Upon consummation of the Delaware Settlement, Nunzio P. DeSantis, Anthony
Coelho, and Joseph Zappala immediately resigned from the Company's board of
directors and terminated any and all employment agreements or consulting
arrangements with the Company. Francis W. Murray and Robert J. Quigley remained
directors, and during the quarter ended March 31, 1999, John U. Mariucci and
James J. Murray were elected by the remaining directors to serve on the board of
directors until the next annual stockholders' meeting.

Also pursuant to the Delaware Settlement, Las Vegas Entertainment Network,
Inc. ("LVEN") was granted the exclusive right to sell the El Rancho Property
until November 20, 1998 and the co-extensive right, along with the Company, to
sell the El Rancho Property until April 19, 1999. Beginning January 19, 1999,
and ending upon the earlier of a sale of the El Rancho Property or April 19,
1999, LVEN was required to pay one-half of the carrying costs associated with
maintaining the El Rancho Property. LVEN also obtained the right, exercisable
from March 20, 1999 until April 19, 1999, to refinance the El Rancho Property
and thereby obtain the extended right to sell the El Rancho Property until the
earlier of (a) one year from April 19, 1999 or (b) the midpoint of the term of
the refinancing loan (the "Refinancing Option"). If the Company sells or
refinances the El Rancho property after April 19, 1999 for an amount in excess
of $44,200,000, plus one half of the carrying costs from January 20, 1999 to
April 19, 1999, plus the customary transaction costs incurred by the Company in
such sale (the "Threshold Amount"), then LVEN shall receive from such cash
proceeds in excess of the Threshold Amount up to the amount of $12,000,000 of
cash sale proceeds over and above the Threshold Amount, out of which LVEN will
direct that the first $2,000,000 be paid over to NPD. As of March 31, 1999,
neither LVEN, nor the Company had sold the El Rancho Property, and LVEN had not
exercised the Refinancing Option. There can be no assurances that the Company
will be able to dispose of the El Rancho Property as contemplated by the
Delaware Settlement.

In exchange for the foregoing, LVEN (a) executed and delivered releases to
all parties to the Delaware Settlement, including the Company and Credit Suisse,
(b) returned to ITB for immediate cancellation the 2,093,868 shares of ITB
common stock (the "LVEN Shares") previously issued to Casino-Co Corporation, a
subsidiary of LVEN, in exchange for the cancellation of a certain $10.5 million
note plus accrued interest from ITB to LVEN, which note remains canceled, (c)
released any and all LVEN or Casino-Co Corporation interests in the NPD Shares,
and (d) cancelled any and all agreements of any kind or nature whatsoever
between LVEN and its affiliates and ITB or any of its subsidiaries.

The foregoing summary of the terms and transactions relating to the
Delaware Settlement and the Trustee Settlement is qualified by reference to the
actual documents filed with the respective courts in the actions discussed
above.

There can be no assurances that the Company will be able to dispose of the
El Rancho Property as contemplated by the Delaware Settlement.

12

Harris v. DeSantis, et al.

The first New Jersey Action, filed on February 24, 1998 in the New Jersey
District Court, captioned Myron Harris, derivatively on behalf of International
Thoroughbred Breeders, Inc. v. Nunzio P. DeSantis, Anthony Coelho, Kenneth W.
Scholl, Michael Abraham, Joseph Zappala, Frank A. Leo, Robert J. Quigley,
Charles R. Dees, Jr. and Francis W. Murray ("Harris-Federal"), C.A. No. 98-CV-
517(JBS), is a derivative suit brought by a stockholder of the Company. The
Harris-Federal complaint alleges that various individual defendants acted in
contravention of ITB's by-laws and their fiduciary duties by (i) causing the
Company to undertake various actions, including the issuance of a significant
amount of the Company's common stock, in violation of the Supermajority By-law;
(ii) usurping certain corporate opportunities allegedly belonging to ITB; and
(iii) causing the Company to fail to file current, audited financial statements.

On May 4, 1998, all defendants filed a motion to dismiss or stay the
Harris-Federal action, pending resolution of the Quigley action. On May 4, 1998,
the plaintiff filed an amended complaint to, among other things, add Howard J.
Kaufman, a stockholder of the Company, as an additional plaintiff.

As described more fully below, pursuant to the New Jersey Memorandum and
the satisfaction of certain conditions set forth therein, the Harris-Federal
action is to be fully and finally dismissed with prejudice, and the parties are
to provide mutual releases of all claims related to the action. See "New Jersey
Settlement."

Harris v. DeSantis, et al.

A second New Jersey Action, filed on July 15, 1998 in the New Jersey
Superior Court, captioned Myron Harris and Howard Kaufman v. Nunzio P. DeSantis,
Anthony Coelho, Kenneth W. Scholl, Michael Abraham, Joseph Zappala, Frank A.
Leo, Robert J. Quigley and Charles R. Dees, Jr. ("Harris-State" and,
collectively with the Harris-Federal action, the "New Jersey Actions"),
Cam-L-5534-98, is a purported class action suit brought by the same plaintiffs
as the Harris-Federal action. The complaint alleges that the Harris-State
defendants breached their fiduciary duties to the Company's stockholders by
failing to file timely audited financial statements for the fiscal year ended
June 30, 1997, resulting in the indefinite suspension of trading of the
Company's stock on AMEX.

Prior to filing pleadings in response to the Harris-State complaint, ITB
and the defendants in the New Jersey Actions entered into a memorandum of
understanding dated August 18, 1998 (the "New Jersey Memorandum") pursuant to
which upon satisfaction of multiple conditions (including the parties' approval
of definitive settlement documents, notice of the settlement to ITB's past and
current stockholders, and the approval of the New Jersey Superior Court and the
New Jersey District Court), the New Jersey Actions are to be fully and finally
dismissed with prejudice, and ITB and all defendants are to receive a release
from all holders of ITB common and preferred stock of any claims arising out of
the facts and transactions set forth in the complaints in the New Jersey Actions
(the "Proposed New Jersey Settlement"). The New Jersey Memorandum provides that
the Proposed New Jersey Settlement would be submitted for approval to the New
Jersey Superior Court, that a fee petition would be submitted by plaintiffs'
attorneys in the New Jersey Actions for approval by the New Jersey District
Court, and that the Harris-Federal action would be dismissed on the grounds that
the plaintiffs' claims are barred and released as a result of the settlement and
dismissal of the Quigley Action by the Delaware Court of Chancery on October 6,
1998.

New Jersey Settlement

The New Jersey Actions are currently at a standstill as the parties have
entered into the New Jersey

13

Memorandum. Subject to the approval of the New Jersey District Court, the
Company will pay, on behalf and for the benefit of the individual defendants in
the New Jersey Actions, the aggregate sum of $175,000 for plaintiffs' counsel
fees and expenses in the New Jersey Actions. Any incentive award to plaintiffs
Harris and Kaufman would be paid out of this $175,000 sum. Pursuant to the
Proposed New Jersey Settlement, following the implementation of the Delaware
Settlement, the Board will restructure its Audit Committee of the Company so as
to facilitate the procurement and timely filing of audited financial statements
in the future. Further, the ITB Board will establish a Relisting Committee for
the purpose of attempting to secure the relisting of the Company's common stock
on a public market.

Pursuant to the Proposed New Jersey Settlement, the plaintiffs agreed not
to file objections to the Delaware Settlement. In addition, pursuant to the
Proposed New Jersey Settlement, upon consummation of the Delaware Settlement the
plaintiffs will move for a dismissal, with prejudice, of the Harris-Federal
action, and will provide releases to the defendants and the Company and all
others acting on the Company's behalf for any claims that were asserted or could
have been asserted in the Harris-Federal action. For settlement purposes only, a
class will be certified for Harris-State action consisting of all holders of the
Company's stock between October 13, 1997 (the date AMEX suspended trading of the
Company's stock) and the date the final order is entered to dismiss the
Harris-State action.

On June 17, 1999, the New Jersey Superior Court acted unilaterally to
dismiss the complaint in the Harris-State action filed under docket number
Cam-L-5534-98. On July 30, 1999, the plaintiffs in the Harris-State action filed
in the New Jersey Superior Court a second complaint, identical to the original
action and naming as defendants the same parties as the original complaint in
the Harris-State action, under docket number Cam-L-5620-99 (the "Second
Harris-State Complaint"). Subsequent to the filing of the Second Harris-State
Complaint, the terms of the Proposed New Jersey Settlement were amended to
expressly include the claims asserted by plaintiffs in the Second Harris-State
Complaint. Beginning in October 1999, plaintiffs in the Harris-State Action
began serving process of the Second Harris-State Complaint on certain of the
defendants.

The parties in the New Jersey Actions have resolved nearly all issues
necessary to execute the definitive settlement stipulation required to solicit
the requisite approval of the Proposed New Jersey Settlement by the New Jersey
Superior Court and the requisite approval by the New Jersey District Court of
the fee petition by plaintiffs' attorneys. Because of ITB's distressed financial
condition, the Company cannot agree to pay any amount approved by the New Jersey
District Court pursuant to the contemplated fee petition unless and until the
carrier of the Company's directors and officers liability insurance policy (the
"D&O Carrier") agrees to cover entirely the fee award and settlement
implementation costs. The Company is continuing to negotiate such issues with
the D&O Carrier.

On December 3, 1999, plaintiffs in the Harris-Federal action filed with the
New Jersey District Court a motion for an order enforcing the Proposed New
Jersey Settlement. On December 3, 1999, the New Jersey District Court entered an
order dismissing the Harris-Federal action without costs and without prejudice
to the plaintiffs' right to reopen the action within 60 days if the Proposed New
Jersey Settlement is not consummated. In light of the entry of this order, on
December 7, 1999, the New Jersey District Court dismissed as moot plaintiffs'
motion for an order enforcing the Proposed New Jersey Settlement. On January 6,
2000, plaintiffs in the Harris-Federal action moved to vacate the New Jersey
District Court's dismissal order and to pursue the original motion to enforce
the Proposed New Jersey Settlement.

In January 2000, the plaintiffs in the Harris-State action filed Requests
to Enter Default against those defendants who had not answered or otherwise
responded to the Second Harris-State Complaint. Counsel for the defendants in
the Harris-State action are currently engaged in negotiations with counsel for
the plaintiffs in an effort to reach an agreement that plaintiffs will take no
further action in prosecution

14

of the Harris-State action while the parties are finalizing the Proposed New
Jersey Settlement.

ITB is hopeful that the Company and the D&O Carrier will reach an agreement
in the near future to allow the parties to the New Jersey Actions to proceed
with the Proposed New Jersey Settlement. There is no assurance that any such
agreement will be reached or that the Proposed New Jersey Settlement will be
approved by the New Jersey Superior Court and the contemplated fee petition will
be approved by the New Jersey District Court. No prediction can be made at this
time as to the outcome of the New Jersey Actions.

Other Litigation Relating to Delaware Action

In November 1997, two separate actions were filed in the New Jersey
District Court against various directors of the Company and other affiliated
parties. The Company is not a party to either of these actions, both of which
are summarized below:

NPD, Inc. v. Quigley, et al.

On or about November 17, 1997, an action entitled NPD, Inc. v. Quigley,
Francis W. Murray, Leo, Dees Jr., Mariucci, Koenemund and James J. Murray, C.A.
No. 97-CV-5657, was filed in the United States District Court for the District
of New Jersey, alleging that the defendants therein had engaged in fraudulent
and conspiratorial conduct in connection with a certain Stock Purchase Agreement
between Robert E. Brennan and NPD, Inc. ("the "NPD Action"). The NPD Action
sought compensatory and punitive damages. The Company was not a party to the NPD
Action.

The NPD Action was fully and finally dismissed and settled in connection
with the January 28, 1999 consummation of the Delaware Settlement.

Green v. DeSantis, et al.

On or about October 30, 1997, the action entitled Green v. DeSantis,
Corazzi, Coelho, Las Vegas Entertainment Network, Inc. and NPD, Inc., C.A. No.
97-5359 (JHR), was filed in the United States District Court for the District of
New Jersey (the "Green Action"). The Green Action alleged that the defendants
therein acted in contravention of ITB's by-laws, their fiduciary duties and the
contractual obligations in connection with Robert W. Green's interests
pertaining to ITB. Plaintiff Green sought compensatory and punitive damages in
connection with the defendants' actions, an order enjoining defendants from
transferring, encumbering or alienating certain of the Company's common stock
which was subject to an option agreement between Green and NPD, Inc., an order
declaring certain shares of common stock of the Company to be a nullity,
reformation of the aforementioned option agreement to extend the termination
date. The action raised claims substantially similar to those made in the
Quigley Action. The Company was not a party to the Green Action.

The Green Action was fully and finally dismissed and settled in connection
with the January 28, 1999 consummation of the Delaware Settlement.

Other Litigation

The Company is a defendant in two wrongful death actions arising out of
motor vehicle/pedestrian accidents at Freehold Raceway. The cases are in the
initial stages of discovery. The Company believes that it may have adequate
insurance coverage for the claims, however, because of the uncertainties, the
Company is unable to determine at this time the potential liability, if any. Any
claim for punitive damages

15

would not be covered by insurance.

The Company is a defendant in various other lawsuits incidental to the
ordinary course of business. It is not possible to determine with any precision
the probable outcome or the amount of liability, if any, under these lawsuits;
however, in the opinion of the Company and its counsel, the disposition of these
lawsuits will not have material adverse effect on the Company's financial
position, results of operations, or cash flows.

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

No matters were submitted to a vote of security holders by the Company
during the quarter ended June 30, 1999. On December 27, 1999, the Company
received consents from a group of its shareholders representing 4,498,264 shares
or 50.09% of the Company's Common Stock which authorized the Company to enter
into a restructuring agreement with its primary lender. The last annual meeting
of stockholders was held on February 21, 1996.

16

PART II

ITEM 5 - MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS

MARKET INFORMATION

Until October 13, 1997, the Company's Common Stock had been traded on the
American Stock Exchange ("AMEX") since April 4, 1985 under the symbol "ITB" On
October 13, 1997, the AMEX suspended trading in the Common Stock because the
Company had not filed its Annual Report on Form 10-K for Fiscal 1997 within the
SEC's prescribed time period. Effective August 7, 1998, the Company's Common
Stock and its Preferred Stock were delisted from trading on the AMEX for the
failure to comply with certain listing criteria. Neither the Common Stock nor
the Preferred Stock has been traded on AMEX since October 13, 1997. The stock is
listed for quotation on the NQB Pink Sheets. The following table indicates the
high and low sale prices for such stock on the NQB Pink Sheets for the year
ended June 30, 1999 based upon information supplied by the NQB Pink Sheets and
on the American Stock Exchange on a quarterly basis for the year ended June 30,
1997 and the two quarters ended December 31, 1997, based upon information
supplied by the American Stock Exchange:

SALES PRICE
QUARTER ENDED HIGH LOW

September 30, 1996 4.13 3.50

December 31, 1996 3.88 2.63

March 31, 1997 5.13 2.81

June 30, 1997 5.06 4.00

September 30, 1997 4.56 3.50

December 31, 1997
(Trading was suspended
on October 13, 1997) 3.88* 3.44*

September 30, 1998
(Trading commenced
on the NQB Pink Sheets
on September 15, 1998) .25 .25

December 31, 1998 1.00 .10

March 31, 1999 .75 .25

June 30, 1999 .75 .20

* The last sale price on October 13, 1997 was $3.50.

17

HOLDERS

As of June 30, 1999, there were 30,631 recordholders of the Company's
Common Stock.

DIVIDENDS

The Company has not paid any dividends on its Common Stock since its
inception. Anticipated capital requirements of the Company make it unlikely that
any dividends will be declared in the foreseeable future. Furthermore, 25% of
the "net racetrack earnings" from the Company's Garden State Park racetrack
facility are required to be paid by the Company in dividends on its Series A
Preferred Stock and, thus, would not be available for payment as dividends on
the Common Stock. Additionally, the Company's ability to pay dividends in cash
or property or by obligation is limited by the terms of the Credit Suisse Credit
Facility.

18

Item 6 - SELECTED FINANCIAL DATA

INTERNATIONAL THOROUGHBRED BREEDERS, INC.
AND SUBSIDIARIES

Years Ended June 30,
-----------------------------------------------------------------------------
1999 1998 1997 1996 1995(3)
------------- ------------ ------------ ------------ ------------

(Loss) Income from Continuing Operations (2)(6) $ (16,034,769) $(25,468,850) $(15,144,053) $ (2,779,987) $ 386,966

Income From Discontinued Operations (1) . ....... $ 8,144,073 $ 7,207,633 $ 1,594,096 $ 1,710,276 $ 2,011,485

(Loss) Income Before Extraordinary Item ........ $ (7,890,697) $(18,261,217) $(13,549,957) $ (1,069,712) $ 2,398,452

Net (Loss) Income (4)...............................$ (7,890,697) $(18,261,217) $(17,387,582) $ (1,069,711) $ 2,398,452

Per Common Share:

(Loss) Income Before Discontinued Operations
and Extraordinary Item ........................ $ (1.38) $ (1.82) $ (1.29) $ (0.26) $ 0.04

Net Gain on Sale of Net Assets of
Discontinued Operations ...................... $ 0.32 $ -- $ -- $ -- $ --

Income From Discontinued Operations ............. $ 0.39 $ 0.51 $ 0.14 $ 0.16 $ 0.21

(Loss) Income Before Extraordinary Item.......... $ (0.67) $ (1.31) $ (1.15) $ (0.10) $ 0.25

Net (Loss) Income ............................... $ (0.67) $ (1.31) $ (1.49) $ (0.10) $ 0.25

Weighted Average Number of Shares ............... 11,554,476 13,978,086 11,715,256 10,536,414 9,551,369

June 30,
-----------------------------------------------------------------------------
1999 1998 1997 1996 1995
------------- ------------ ------------ ------------ ------------

Working Capital (Deficiency)........................$ (33,069,102) $(36,744,740) $(41,300,996) $ (3,916,684) $ 7,740,788

Total Assets .......................................$ 76,588,565 $ 120,252,901 $164,694,029 $144,880,933 $ 97,469,045

Long-Term Debt .....................................$ 0 $ 0 $ 13,131,003 $ 50,992,702 $ 15,599,097

Stockholders' Equity (5) ...........................$ 40,846,683 $ 59,913,361 $ 75,651,933 $ 79,318,105 $ 72,206,437

(1) Prior to June 30, 1998, the Company decided to sell its racing operations.
As a result, such operations have been classified as discontinued
operations for all periods presented.

(2) As a result of the above described decision, the (loss) income from
continuing operations primarily consists of corporate expenses, charges and
write-offs for years subsequent to June 30, 1995. The year ended June 30,
1995 reflects investment income of approximately $3.4 million reduced by
corporate expenses and charges.

(3) On January 1, 1995, the Company completed its purchase of Freehold Raceway.
The results of operations include the results of Freehold Raceway from such
date.

(4) Net Loss for the fiscal year ended June 30, 1997 is after an extraordinary
loss on early extinguishment of debt in the amount of $3,837,625. (5) The
Company did not pay cash dividends during any of the fiscal years shown
above.

(6) See Management's Discussion and Analysis of Financial Conditions and
Results of Operations and the consolidated financial statements and the
notes thereto for additional information for each of the three years in the
period ended June 30, 1999.

19

ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND
RESULTS OF OPERATIONS

LIQUIDITY AND CAPITAL RESOURCES

The Company's working capital, as of June 30, 1999, was a deficit of
($33,069,102) which represents a decrease in the deficit of approximately
$3,675,638 from the June 30, 1998 working capital deficit of ($36,744,740). The
decrease in the deficit was primarily caused by: (i) the funds received from the
sale of the Freehold operating assets were (a) in excess of the carrying value
of the assets and (b) were used to retire $24.5 million of the debt to the
Company's primary lender, Credit Suisse First Boston Mortgage Capital LLC,
("Credit Suisse"); (ii) the decrease in accrued expenses primarily associated
with the Delaware Settlement; (iii) the decrease in reserve escrow deposits
primarily associated with the interest payments made from the escrow deposits on
debt; and (iv) the addition of a promissory note in the amount of $3,558,032
associated with the Company's purchase of its common stock from NPD.

On May 23, 1997, the Company obtained a credit facility from Credit Suisse.
This two-year $55 million facility was secured by a pledge of certain of the
personal and real property of the Company and its subsidiaries. Proceeds of this
facility were used to repay in full the Company's $30 million credit facility
with Foothill Capital Corporation ("Foothill") and were used to provide funds
for working capital and other general corporate purposes, including, but not
limited to, preliminary development of the El Rancho property. Interest under
the Credit Suisse Credit Facility is payable monthly in arrears at 7% over the
LIBOR rate. Of the remaining facility borrowings, approximately $16.8 million
was placed in escrow accounts ( including $10 million in an interest reserve
account). Financing and closing fees of $4.3 million were paid and $3.9 million
was used by the Company for general corporate purposes and repayment of certain
financial obligations. On January 28, 1999, the credit facility was reduced to
$30.5 million in connection with the sale of certain assets of Freehold Raceway
and the sale of a ten-acre parcel of land at the Garden State Park facility. At
June 30, 1999, the interest rate on the Credit Suisse Credit Facility was
12.24%. On January 21, 2000 after obtaining the written consent of the holders
of a majority of the outstanding shares of stock of the Company entitled to vote
thereon, the Company entered into a restructuring agreement (the "Restructure
Agreement") with Credit Suisse. Prior to this agreement, the Company had been in
a maturity default with Credit Suisse for its loan due on June 1, 1999 (the
"CSFB Loan") in the principal amount of $30,500,000 plus unpaid interest since
June 1, 1999. The Restructure Agreement returns the loan to a good standing
position and extends the maturity date of the CSFB Loan to June 30, 2000. As
part of the Restructure Agreement, the Company agreed that as of January 21,
2000, the restructured principal balance due on the CSFB Loan was $33,103,189,
which consisted of: (i) the principal amount of $30,500,000 remaining on the
CSFB Loan; (ii) accrued interest advanced by Credit Suisse from June 1, 1999 to
January 21, 2000 in the amount of $2,523,189; and (iii) an advance of a portion
of Credit Suisse's legal fees incurred in connection with the Restructure
Agreement in the amount of $80,000. Credit Suisse has agreed, pursuant to the
Restructure Agreement, to advance the monthly interest payments due by the
Company under the CSFB Loan until April 15, 2000. Such interest amounts shall,
to the extent not paid when due by the Company, become part of the outstanding
principal balance of the CSFB Loan on the date such interest becomes due.
Commencing April 16, 2000 and until 30 days following the closing of the sale of
the El Rancho property, interest accruing shall be paid by Turnberry/Las Vegas
Boulevard LLC ("Turnberry"), the purchaser of El Rancho property. (See Notes
11-A and 20-B)

The Credit Suisse Credit Facility is evidenced by a convertible promissory
note (the "CSFB Note") pursuant to which $10 million of the aggregate principal
amount of the CSFB Note can be converted in certain circumstances, including on
the maturity date of the CSFB Note, upon the prepayment of at least $10 million
in an aggregate principal amount of the CSFB Note or upon acceleration of the
CSFB Note, at the option of Credit Suisse, into shares of the Company's Common
Stock at a conversion price of $8.75 per share (subject to adjustment in certain
events). In addition, pursuant to the Credit Suisse loan agreement, Credit
Suisse was granted warrants to purchase 1,044,000 shares of Common Stock at an

20

exercise price of $4.375 per share (subject to adjustment in certain events).
Warrants to purchase 546,847 shares of Common Stock were immediately exercisable
and warrants to purchase 497,153 shares of Common Stock became exercisable on
January 28, 1999 in connection with the Delaware Settlement. The fair value of
the warrants of $1,242,883 was recorded as a financing expense. (See Notes 3, 4
and 11-A)

The net loss for the year ended June 30, 1999 was ($7,890,697). Cash flows
used by operating activities amounted to approximately $1,952,360. The net loss
incurred by the Company includes approximately $4,400,000 of non-cash expenses.

Cash provided by investing activities was $12,834,308 during the year ended
June 30, 1999, primarily the result of cash proceeds of approximately
$19,900,000 from the sale of certain assets of Freehold Raceway and the sale of
a ten-acre parcel of land at the Garden State Park facility, partially offset by
the purchase of 2,904,016 shares of Treasury Stock for $6,850,000. (See Notes 3,
4 and 11-B)

Cash used in financing activities was $8,999,371 during the year ended June
30, 1999, consisting principally of: (i) amounts drawn from the Credit Suisse
interest escrow account in the amount of $10,278,727; (ii) a $2,500,000 payment
of the Credit Suisse note (the note was further reduced by the assumption of
$22,000,000 of the principal balance by the purchasers of Freehold Raceway);
(iii) a pay down of the NPD note in the amount of $2,250,000; and (iv) principal
payments of approximately $13,000,000 primarily associated with the retirement
of the Freehold debt.

On January 28, 1999, the Company completed the sale of Freehold Raceway,
the sale of a ten-acre parcel at Garden State Park and the lease of the Garden
State Park facilities to subsidiaries of Greenwood Racing, Inc.("Greenwood"),
which owns Philadelphia Park racetrack, the Turf Clubs and Phonebet (the
"Greenwood Transaction"). The purchase price was $46 million ($1 million of
which will be held in escrow to cover certain indemnification and other
obligations of the Company), with an additional $10 million in contingent
promissory notes (the "Contingent Notes") which become effective upon, among
other things, the New Jersey Legislature's approval of off-track betting
facilities or telephone account pari-mutuel wagering on horse racing. Further
adjustments could be made to increase the purchase price if certain additional
regulatory gaming changes are approved by the New Jersey Legislature in the
future. The Greenwood Transaction was subsequently amended to include Penn
National Gaming, Inc.("Penn National"), which owns Penn National Race Course,
Pocono Downs Racetrack, Charles Town Races and at least ten off-track betting
parlors in Pennsylvania as a 50% joint venture between Greenwood and Penn
National ( "Pennwood"). Greenwood and Pennwood have guaranteed the performance
by the purchaser of all obligations under the Contingent Notes.

The proceeds of the Greenwood Transaction were principally used by the
Company to pay off the first lien on the assets of Freehold Raceway, reduce the
outstanding balance on the Company's loan from Credit Suisse First Boston
Mortgage Capital LLC ("Credit Suisse") to $30.5 million and to consummate the
Delaware Settlement. In addition, Credit Suisse also released to the Company
approximately $4.475 million from its escrow reserves of which $1.475 million
was used for working capital purposes and $3 million was used to reduce debt and
pay fees.

In connection with the Restructure Agreement, the Chapter 11 Bankruptcy
Trustee (the "Trustee") for the estate of Robert E. Brennan, to whom the Company
and its subsidiaries Garden State Race Track, Inc. and Orion Casino Corporation
are indebted to in the remaing principal amount of $3,363,032, as evidenced by a
note dated January 28, 1999 (the "Trustee Note"), entered into an agreement with
the Company wherein: (i) the amounts due under the Trustee Note are due at the
earlier of (a) June 1, 2000 or (b) the date on which the latter of the Garden
State Park or El Rancho property is sold, provided that the sale of the latter
will satisfy the remaining balance on the CSFB Loan and the Trustee Note; (ii)
all interest due under the Trustee Note will be accrued and deferred until the
maturity date of the Note; and

21

(iii) the Company shall reimburse the Trustee for legal and accounting fees up
to $20,000, which amount will be advanced by the Trustee and added to the
outstanding principal balance of the Trustee Note.

Pursuant to the Restructure Agreement, Garden State Race Track, Inc.
transferred title to the Garden State Race Track to GSRT, LLC ("GSRT"), a
Delaware limited liability company in which Garden State Race Track, Inc. is the
sole member, the result of which effects no change in real ownership. Pursuant
to the limited liability company agreement of GSRT entered into in connection
with the Restructure Agreement, Garden State Race Track, Inc. may cause GSRT to
enter into an arm's-length sale or joint venture of the Garden State Property
under certain enumerated circumstances and conditions, including that the
purchase price for such sale or joint venture be at least equal to fifty-percent
of the combined outstanding principal balance of the CSFB Loan and the Trustee
Note, which amount must be paid to Credit Suisse, and the contract for such sale
or joint venture be entered into on or prior to January 25, 2000 (the "GSRT
Option").

On January 25, 2000, the Company entered into an agreement of sale with
Turnberry/Cherry Hill LLC, for the sale of the Garden State Park real estate.
While the Company received from escrow a $500,000 deposit made by the buyer
under the terms of the sale, possible changes to the agreement are currently
being negotiated by the parties. Upon execution of a modification of the
definitive agreement the Company expects to announce the final terms of the
transaction.

The sale of the Garden State Race Track property to Turnberry/Cherry Hill,
LLC or any other buyer cannot be assured at this time and if for any reason the
potential buyer of the property is not able to close this transaction by June
30, 2000, the property may be marketed and possibly sold by the Company's
lender, Credit Suisse First Boston Mortgage, LLC.

The Restructure Agreement further provides that (i) if the proceeds from
the sale of the Garden State Park property are insufficient to pay the
outstanding amounts due to Credit Suisse under the CSFB Loan, or (ii) after the
sale or joint venture of the Garden State property, the total amount outstanding
under the CSFB Loan is equal to or greater than $5,000,000 and the Company shall
not have received a binding commitment for a loan or purchase of the El Rancho
Property, then, Orion Casino Corporation must convey the El Rancho property to a
new Delaware limited liability company ("New LLC") having substantially same
ownership structure and limited liability company agreement as GSRT. Once the El
Rancho property is conveyed to New LLC in accordance with and upon the happening
of the circumstances and conditions provided in the Restructure Agreement, Orion
Casino Corporation, as the sole member of New LLC, will have the right to cause
New LLC to sell or refinance the El Rancho property so long as the outstanding
obligations due under the CSFB Loan are paid in full by such sale or refinancing
and such sale or refinancing closes on or before June 30, 2000.

On January 25, 2000, the Company entered into a binding term sheet for the
sale of the El Rancho property in Las Vegas, Nevada with Turnberry/Las Vegas
Boulevard, LLC and on March 1, 2000 a formal contract was signed on the same
terms as outlined on the binding term sheet with certain mutually acceptable
changes made during the course of negotiations of the definitive agreements. The
purchase price is $45,000,000. The purchase price will be paid by: (i) a
$100,000 deposit at the signing of the Purchase and Sale Agreement; (ii) a
$400,000 additional deposit due on March 15, 2000, which amount will be
non-refundable; and (iii) the balance of the purchase price due at the closing,
will be payable in cash.

22

The closing, originally scheduled to occur by March 31, 2000, had been
extended to April 30, 2000 after the buyer: (i) agreed to pay the approximate
$100,000 carrying costs of the El Rancho property for the month of April 2000;
(ii) agreed to pay the interest due to Credit Suisse First Boston Mortgage
Capital, LLC on a principal amount of $20,000,000 at 12% for the month of April
2000; and (iii) released $1,600,000, which included the above $100,000 and
$400,000 deposits, as a non-refundable deposit to the Company. The closing date
was further extended to June 1, 2000 provided the buyer: (i) agreed to pay the
approximate $100,000 carrying costs of the El Rancho property for the month of
May 2000; (ii) pays the interest due to Credit Suisse First Boston Mortgage
Capital, LLC on a principal amount of $19,000,000 at 12% for the month of May
2000; (iii) pays an additional deposit of $900,000 to the Company by April 30,
2000, which amount has not yet been received; and (iv) demonstrates it has the
financial ability to close.

The Company has separately agreed to purchase a promissory note of the
buyer in the amount of $23,000,000 which will be convertible at the Company's
option into a 33 1/3% equity interest in the buyer, depending upon certain
circumstances.

The note would accrue interest at a 22% per annum rate, which will be
adjusted from time to time since the interest actually payable will be dependent
upon, and payable solely out of, the buyer's net cash flow available for
distribution to its equity owners ("Distributable Cash"). After the equity
investors in the buyer have received total distributions equal to their capital
contributions plus an agreed upon return on their invested capital, the next $23
million of Distributable Cash will be paid to the Company. The Company will
thereafter receive payments under the note equal to 33 1/3% of all Distributable
Cash until the maturity date, which occurs on the 30th anniversary of the
Company's purchase of the note. The Company may convert the promissory note, at
its option, into a 33 1/3% equity interest in the buyer at any time after the
15th anniversary of the issuance of the note. If not then converted, the note
will convert into a 33 1/3% equity interest in the buyer on the day before the
30th anniversary of its issuance.

The sale of the El Rancho property to Turnberry/Las Vegas Boulevard LLC or
to any other buyer cannot be assured at this time.

The Company currently estimates that the $1.475 million made available on
January 28, 1999 from the Credit Suisse Credit Facility and the escrow funds
made available on January 21, 2000 associated with the Credit Suisse Restructure
Agreement, together with the $500,000 deposit made available March 2, 2000 and
the deposit of $1,600,000 received from the extension of the El Rancho closing
and cash generated from the Company's operations prior to the sale of the
discontinued operations, will be sufficient to finance its current operations
and expected expenditures and carrying costs of the El Rancho Property until
June 30, 2000.

The Company's debt with CSFB is due on June 30, 2000. Unless the sale of
the El Rancho property and Garden State Park property is consummated prior to
that date the Company will be in default in connection with the CSFB loan
agreement. Additionally, the cash proceeds from the sales must be in an amount
sufficient to satisfy the loan due on the trustee note together with accrued
interest. The total amount due on June 30, 2000 to satisfy the CSFB loan
together with accrued interest and fees and the trustee note together with
accrued interest is approximately $39,500,000. The proceeds from the sale of the
El Rancho and Garden State Park properties are expected to be sufficient to meet
this obligation.

The Company currently estimates that approximately $200,000 per month is
needed to cover operating expenses of International Thoroughbred Breeders and
$100,000 per month is needed to cover the carrying costs of the El Rancho
Property.

The Company's Board is continuing to consider all of the Company's
strategic options to maximize stockholder value and alternatives for the
Company's future.

23

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Footnote 1 to the
consolidated financial statements, the Company's debt with its major lender is
due June 30, 2000 and the Company has sustained a loss of approximately $7.9
million for the year ended June 30, 1999, which raises substantial doubt about
its ability to continue as a going concern. Management's plans in regard to
these matters are also described in Footnote 1 to the consolidated financial
statements. The consolidated financial statements do not include any adjustments
that might result from the outcome of these uncertainties.

RESULTS OF OPERATIONS FOR THE FISCAL YEARS ENDED JUNE 30, 1999 AND 1998

On January 28, 1999, the Company completed the sale of Freehold Raceway,
the sale of a ten-acre parcel at Garden State Park, and the lease of the Garden
State Park facilities to subsidiaries of Greenwood Racing, Inc., which owns
Philadelphia Park racetrack, the Turf Clubs, and Phonebet (the "Greenwood
Transaction.") The Greenwood Transaction was subsequently amended to include
Penn National Gaming, Inc.("Penn National"), which owns Penn National Race
Course, Pocono Downs Racetrack, Charles Town Races and at least ten off-track
betting parlors in Pennsylvania as a 50% joint venture between Greenwood and
Penn National ( "Pennwood"). Accordingly, the operating results of the racetrack
subsidiaries have been segregated and reported as discontinued operations for
each of the periods presented. Also, on the same date, the Company consummated
the settlement under the Stipulation and Agreement of Compromise, Settlement and
Release entered into on July 2, 1998 to resolve the pending stockholder
derivative litigation in the Delaware Court of Chancery. Among other actions,
the Delaware Settlement contemplates the disposition of the El Rancho Property.

For the year ended June 30, 1999, The Company's loss from continuing
operations was ($16,034,769) as compared to a loss from continuing operations
for the comparable period in prior fiscal year of ($25,468,850), a decrease in
the loss of $9,434,081. This decrease in the loss from continuing operations was
primarily the result of: (i) a decrease in general and administrative expenses
of $7,082,988; (ii) the estimated loss in connection with the adjustment to fair
market value of the El Rancho Property of $3,429,252 recognized in fiscal 1998;
partially offset by (iii) an increase in financing expenses of $1,807,736
primarily associated with fees and warrants granted in connection with the
Delaware Settlement partially offset by a decrease of $1,059,266 or 15% in
interest expenses primarily associated with reducing the debt during the third
quarter.

General and administrative expenses of $4,532,984 for Fiscal 1999 decreased
$7,082,988 or 61% from the prior fiscal year amount of $11,615,972. This
decrease in general and administrative expenses was principally attributable to:
(i) a decrease in legal expenses of approximately $2,000,000 from $3,300,000 in
Fiscal 1998 to $1,318,000 in Fiscal 1999, primarily as the result of legal
expenses associated with the various director and stockholder lawsuits; (2) a
decrease in officer and corporate administrative salaries and benefits of
$554,216 previously associated with the termination of certain agreements with
directors and officers who resigned upon consummation of the Delaware
Settlement; (3) a decrease in non- employee option expenses of $786,000; and (4)
the accrual in Fiscal 1998 of an estimated charge of $3,748,000 the Company
would incur in connection with the purchase of the 2,904,016 shares from NPD and
the termination of certain agreements upon consummation of the Delaware
Settlement; the charge of $3,748,000 represents the difference between the
amount the Company will pay for the shares and their estimated fair value.

Income from discontinued racetrack operations was $4,486,384 for the year
ended June 30, 1999.As a result of operations being discontinued after seven
months in the fiscal 1999 year, this income is not comparable to the prior
year's results of operations. The Company recognized a net gain of $3,657,688,
following the write down of approximately $14,000,000 to fair value of the
remaining assets of Garden State Park and the approximate gain of $17,600,000 on
the sale of Freehold Raceway, the sale of a ten-acre parcel at the Garden State
Park facility and the lease of the Garden State Park facilities.

24

During the year ended June 30, 1999, the Company incurred a net loss of
($7,890,697) as compared to a net loss of ($18,261,217) for the comparable
period in Fiscal 1998. The decrease in net loss of $10,370,520 was the result of
those differences described above.

RESULTS OF OPERATIONS FOR THE FISCAL YEARS ENDED JUNE 30, 1998 AND 1997

As discussed above, the operating results of the racetrack subsidiaries for
the year ended June 30, 1998 has been segregated and reported as discontinued
operations for each of the periods presented.

The Company's Fiscal 1998 loss from continuing operations was ($25,468,850)
as compared to a loss from continuing operations for the prior fiscal year of
($15,144,053), an increase in the loss of $10,324,797. This increase in the loss
from continuing operations was primarily the result of: (a) an increase in
general and administrative expenses of $6,073,387; (b) an increase in interest
expense of $5,517,093; (c)an increase in amortization of financing costs of
$1,910,674; and (d) the estimated loss in connection with the adjustment to fair
market value of the El Rancho Property of $3,429,252. The increase in the loss
was offset by (i) a write-off in Fiscal 1997 of $2,585,000 in non-refundable
deposits associated with the termination of an option to purchase a parcel of
land adjoining the El Rancho Property, (ii) a write-off of $2,543,968 in Fiscal
1997 associated with the termination of the Starship Orion concept for the
future development of the El Rancho Property, which costs were expensed in
Fiscal 1997, (iii) a decrease of $799,460 in El Rancho Property carrying costs
from $1,773,627 in Fiscal 1997 to $974,167 in Fiscal 1998 and (iv) an increase
in interest income of $677,181.

General and administrative expenses of $11,615,972 for Fiscal 1998
increased $6,073,387 or 110% from the prior fiscal year amount of $5,542,585.
The increase in general and administrative expenses was principally attributable
to: (1) the accrual of an estimated charge of $3,748,000 the Company will incur
in connection with the purchase of the 2,904,016 shares from NPD and the
termination of certain agreements upon consummation of the Delaware Settlement;
the charge of $3,748,000 represents the difference between the amount the
Company will pay for the shares and their estimated fair value; (2) an increase
in legal expenses of $2,400,000 from $900,000 in Fiscal 1997 to $3,300,000 in
Fiscal 1998, primarily as the result of legal expenses associated with the
various director and stockholder lawsuits; (3) an increase in officer and
corporate administrative salaries and benefits of $470,000; and (4) an increase
in non-employee option expenses of $337,500; offset by decreases in (i) taxes of
$400,000, (ii) rental expense of $360,000 and (iii) various executive travel and
related expenses of $262,000. In the absence of a public market for the
Company's Common Stock, management has determined the estimated fair value of
the Common Stock referred to in clause (1) above, to be the anticipated book
value attributable to the Common Stock after taking into account the estimated
operating results until the disposition of the racetrack operations assumed to
occur on December 31, 1998, the disposal of the racetrack assets and the El
Rancho Property, and other transactions contemplated in the Delaware Settlement.
There can be no assurance that all of these transactions will occur or if they
will occur at the estimated amounts.

The increase in interest expenses of $5,517,093 was principally
attributable to higher interest rates and higher indebtedness levels of the
Company and the fact that interest was expensed during Fiscal 1998 as compared
to a portion of the interest being capitalized and a portion being expensed
during Fiscal 1997, offset by an increase in interest income of $677,181 on the
Credit Suisse escrow funds. The increase in amortization of finance costs of
$1,910,674 was principally due to the increased cost of the CSFB Loan as
compared to the cost of the Foothill loan.

Income from discontinued operations was $7,207,633 for Fiscal 1998 as
compared to income from discontinued operations for Fiscal 1997 of $1,594,096,
an increase of $5,613,537. During Fiscal 1998, revenue from racetrack operations
at Freehold Raceway and Garden State Park increased by an aggregate of $204,568
from the prior fiscal year and racetrack operating expenses decreased by
$5,408,969 during

25

the same period, primarily as a result of a decrease in wages and benefits and
outside services at the two facilities.

During Fiscal 1998, the Company incurred a net loss of ($18,261,217) as
compared to a net loss of ($17,387,582) for Fiscal 1997. The increase in net
loss of $873,635 was the result of those differences described above and the
loss on early extinguishment of debt recognized in Fiscal 1997 in the amount of
$3,837,625.

IMPACT OF YEAR 2000 ON THE COMPANY'S SYSTEMS

The year 2000 issue was the result of computer programs being written using
two digits rather than four to define the applicable year, which may have
resulted in systems failures and disruptions to operations at January 1, 2000.
Management determined where appropriate action was necessary and at a cost of
approximately $5,000 brought the Company's accounting and operational systems
into year 2000 compliance. The Company has not experienced any problems with its
computer systems or its vendors associated with a Year 2000 issue.

INFLATION

To date, inflation has not had a material effect on the Company's
operations.

IMPORTANT FACTORS RELATING TO FORWARD LOOKING STATEMENTS

This Report contains certain forward-looking statements within the meaning
of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended, and is subject to the safe-harbor
created by such sections. Such statements concern the Company's operations,
economic performance and financial condition, including the impact on the
Company's operations of the sale and lease of the Company's racetracks, the
disposition of the El Rancho Property, the Delaware Settlement, the Company's
restructuring of the Credit Suisse Credit Facility and the forward- looking
statements in this Report involve known and unknown risk, uncertainties and
other factors that may cause the actual results, performance, or achievements to
differ from those expressed or implied by such forward-looking statements. Such
factors include, among others, the following: general economic and business
conditions; competition; changes in business strategy; the indebtedness of the
Company; quality of management; business abilities and judgment of the Company's
personnel; the availability, terms and deployment of capital; and various other
factors referenced in the Report. The forward-looking statements are made as of
the date of this Report, and the Company assumes no obligation to update the
forward-looking statements or to update the reasons why actual results could
differ from those projected in the forward- looking statements.

ITEM 7A - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Nothing of this item impacts the Company.

ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA

Attached.

26

ITEM 9- CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

On September 28, 1999, the Company was informed by the firm of BDO Seidman,
LLP ("BDO") that the client-auditor relationship between BDO and the Company had
ceased. On October 29, 1999, the Company engaged Stockton Bates, LLP as its
principal accountants to audit its financial statements for the fiscal year
ended June 30, 1999.

27

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

To the Board of Directors and Stockholders of
International Thoroughbred Breeders, Inc.
Cherry Hill, New Jersey

We have audited the accompanying consolidated balance sheet of
International Thoroughbred Breeders, Inc. and subsidiaries as of June 30, 1999
and the related consolidated statements of operations, stockholders' equity and
cash flows for the year then ended. These consolidated financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these consolidated financial statements based on our audit.

We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
consolidated financial statement presentation. We believe that our audit
provides 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
International Thoroughbred Breeders, Inc. and its subsidiaries as of June 30,
1999 and the results of their operations and their cash flows for the year then
ended in conformity with generally accepted accounting principles.

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 1 to the
financial statements, the Company's debt to its major lender is due June 30,
2000 and the Company sustained a loss of approximately $7.9 million for the year
ended June 30, 1999, all of which raise substantial doubt about its ability to
continue as a going concern. Management's plans in regard to these matters are
also described in Note 1. The financial statements do not include any
adjustments that might result from the outcome of these uncertainties.

STOCKTON BATES, LLP

Philadelphia, Pennsylvania
January 13, 2000
[Except for Notes 7, 11-A, 20-B,
20-C and 20-D as to which the
date is May 2, 2000]

28

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

To the Board of Directors and Stockholders of
International Thoroughbred Breeders, Inc.
Cherry Hill, New Jersey

We have audited the accompanying consolidated balance sheet of
International Thoroughbred Breeders, Inc. and subsidiaries as of June 30, 1998
and the related consolidated statements of operations, stockholders' equity and
cash flows for each of the two years in the period ended June 30, 1998. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
consolidated 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
International Thoroughbred Breeders, Inc. and its subsidiaries as of June 30,
1998 and the results of their operations and their cash flows for each of the
two years in the period ended June 30, 1998 in conformity with generally
accepted accounting principles.

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 1 to the
financial statements, the Company was in violation of several loan covenants
with its major lender, was party to various legal proceedings and their proposed
settlements and has sustained a loss of approximately $18.3 million for the year
ended June 30, 1998, all of which raise substantial doubt about its ability to
continue as a going concern. Management's plans in regard to these matters are
also described in Note 1. The financial statements do not include any
adjustments that might result from the outcome of these uncertainties.

BDO SEIDMAN, LLP

Philadelphia, Pennsylvania
October 9, 1998

29

INTERNATIONAL THOROUGHBRED BREEDERS, INC.
AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
AS OF JUNE 30, 1999 AND 1998

ASSETS

June 30, June 30,
------------------------
1999 1998
---- ----
CURRENT ASSETS:
Cash and Cash Equivalents ............. $ 1,358,200 $ 213,795
Reserve Escrow Deposits ............... 182,154 10,460,881
Accounts Receivable ................... 234,774 36,838
Prepaid Expenses ...................... 349,182 322,313
Other Current Assets .................. 53,771 325,756
Net Assets of Discontinued
Operations - Current................. 494,699 12,235,217
--------- ----------
TOTAL CURRENT ASSETS ............. 2,672,780 23,594,800
--------- ----------

NET ASSETS OF DISCONTINUED
OPERATIONS - Long Term .............. 30,000,000 45,626,944
---------- ----------
PROPERTY HELD FOR SALE ........................ 42,149,755 47,434,670
---------- ----------
LAND, BUILDINGS AND EQUIPMENT:
Land and Buildings .................... 214,097 214,097
Equipment ............................. 683,428 814,927
---------- ----------
897,525 1,029,024
LESS: Accumulated Depreciation
and Amortization..................... 329,667 308,162
---------- ----------
TOTAL LAND, BUILDINGS AND
EQUIPMENT, NET ................. 567,858 720,862
---------- ----------

OTHER ASSETS:
Deposits and Other Assets ............. 1,198,172 3,172
Deferred Financing Costs, Net ......... 0 2,872,453
---------- ----------
TOTAL OTHER ASSETS ............... 1,198,172 2,875,625
---------- ----------
TOTAL ASSETS .................................. $ 76,588,565 $120,252,901
============ ============

See Notes to Consolidated Financial Statements.

30

INTERNATIONAL THOROUGHBRED BREEDERS, INC.
AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
AS OF JUNE 30, 1999 AND 1998

LIABILITIES AND STOCKHOLDERS' EQUITY

June 30, June 30,
------------------------
1999 1998
---- ----
CURRENT LIABILITIES:
Accounts Payable ....................$ 267,941 $ 278,786
Accrued Expenses .................... 1,176,796 4,852,328
Current Maturities of
Long-Term Debt ..................... 34,297,145 55,208,426
---------- ----------
TOTAL CURRENT LIABILITIES ..... 35,741,882 60,339,540
---------- ----------
COMMITMENTS AND CONTINGENCIES ........ -- --

STOCKHOLDERS' EQUITY:
Series A Preferred Stock,
$100.00 Par Value,
Authorized 500,000 Shares,
Issued and Outstanding,
362,482 and 362,480 Shares,
Respectively ...................... 36,248,175 36,247,975
Common Stock, $2.00 Par Value,
Authorized 25,000,000
Shares, Issued, 11,884,249
and 13,978,099 Shares,
and Outstanding, 8,980,233 and
13,978,099 Shares, Respectively..... 23,768,497 27,956,197
Capital in Excess of Par ............ 26,144,782 25,878,224
(Deficit) (subsequent to
June 30, 1993,
date of quasi-reorganization) .... (38,023,064) (30,132,368)
---------- ----------
TOTAL .......................... 48,138,390 59,950,028
LESS:
Treasury Stock, 2,904,016
Shares, at Cost ................. (7,260,040) 0
Deferred Compensation, Net ....... (31,667) (36,667)
---------- ----------
TOTAL STOCKHOLDERS' EQUITY ..... 40,846,683 59,913,361
---------- ----------

TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY ................$ 76,588,565 $ 120,252,901
=========== =============

See Notes to Consolidated Financial Statements.

31

INTERNATIONAL THOROUGHBRED BREEDERS, INC.
AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED JUNE 30, 1999, 1998 AND 1997

Years Ended June 30,
--------------------------------------------
1999 1998 1997
------------ ------------ ------------

EXPENSES:
General & Administrative Expenses ........... $ 4,532,984 $ 11,615,972 $ 5,542,585
------------ ------------ ------------
(including legal fees of $1,318,151,
$3,306,877,and $896,729,respectively,
and the estimated charge in connection
with the repurchase of the NPD shares of
$3,748,000 for the 1998 year)................
Interest and Financing Expenses ............. 7,831,021 7,084,968 1,567,875
Interest Income ............................. (343,572) (689,092) (11,911)
Amortization of Financing Costs ............. 2,900,749 3,053,583 1,142,909
El Rancho Property Carrying Costs ........... 1,113,587 974,167 1,773,627
Impairment Loss on El Rancho Property ....... 3,429,252 0
Write Off of Deposits on Land ............... 0 0 2,585,000
Write Off of Starship Orion Costs ........... 0 0 2,543,968

(LOSS) FROM CONTINUING OPERATIONS BEFORE ------------ ------------ ------------
DISCONTINUED OPERATIONS AND EXTRAORDINARY ITEM ... (16,034,769) (25,468,850) (15,144,053)
------------ ------------ ------------
INCOME FROM DISCONTINUED OPERATIONS:
Net Gain on Sale of Net Assets of Discontinued
Operations .................................. 3,657,688 -- --
(less applicable state income taxes
of $1,335,500)
Income from operations of discontinued
racetrack operations (less applicable
state income taxes of $119,348,
$135,100 and $55,617) ..................... 4,486,385 7,207,633 1,594,096
------------ ------------ ------------
INCOME FROM DISCONTINUED OPERATIONS ......... 8,144,072 7,207,633 1,594,096
------------ ------------ ------------
(LOSS) BEFORE EXTRAORDINARY ITEM .................... (7,890,697) (18,261,217) (13,549,957)

EXTRAORDINARY ITEM -
(Loss) on Early Extinguishment of Debt ...... 0 0 (3,837,625)
------------ ------------ ------------
NET (LOSS) .......................................... $ (7,890,697) $(18,261,217) $(17,387,582)
============ ============ ============

BASIC AND DILUTED PER SHARE DATA:
(LOSS) BEFORE DISCONTINUED OPERATIONS
AND EXTRAORDINARY ITEM ............................ $ (1.38) $ (1.82) $ (1.29)
NET GAIN ON SALE OF NET ASSETS OF DISCONTINUED
OPERATIONS......................................... 0.32 -- --
INCOME FROM DISCONTINUED
RACETRACK OPERATIONS............. ................. 0.39 0.51 0.14
EXTRAORDINARY ITEM .................................. -- -- (0.33)
NET (LOSS) .......................................... $ (0.67) $ (1.31) $ (1.48)
------------ ------------ ------------
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING .......... 11,554,476 13,978,086 11,715,256
============ ============ ============

See Notes to Consolidated Financial Statements.

32

INTERNATIONAL THOROUGHBRED BREEDERS, INC.
AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED JUNE 30, 1999, 1998 AND 1997

Preferred Common
--------------------- --------------------------
Number of Number of
Shares Amount Shares Amount
------ ------ ------ ------

BALANCE - JUNE 30, 1996 ........................................... 362,462 $ 36,246,175 11,651,487 $ 23,302,973

Shares Issued in Connection with Retirement of Debt ............ -- -- 2,326,520 4,653,040
Compensation for Options Granted to Non-Employees .............. -- -- -- --
Financing Costs for Warrants Issued
in Connection with Debt Financing .......................... -- -- -- --
Shares Issued for Fractional Exchanges With Respect to the
One-for-twenty Reverse Stock Split effected on March 13, 1992 8 800 53 106
Amortization of Deferred Compensation Costs .................... -- -- -- --
Cancellation of Options Granted for Deferred Compensation ...... -- -- -- --
Net (Loss) for the Year Ended June 30, 1997 .................... -- -- -- --
------- ---------- ---------- ----------
BALANCE - JUNE 30, 1997 ........................................... 362,470 36,246,975 13,978,060 27,956,119

Compensation for Options Granted to Non-Employees .............. -- -- -- --
Shares Issued for Fractional Exchanges With Respect to the
One-for-twenty Reverse Stock Split effected on March 13, 1992 10 1,000 39 78
Amortization of Deferred Compensation Costs .................... -- -- -- --
Gain on Sale of Land ........................................... -- -- -- --
Net (Loss) for the Year Ended June 30, 1998 .................... -- -- -- --
------- ---------- ---------- ----------
BALANCE - JUNE 30, 1998 ........................................... 362,480 36,247,975 13,978,099 27,956,197

Shares Canceled in connection with Delaware Settlement ......... -- -- (2,093,868) (4,187,736)
Purchase of 2,904,016 Shares for Treasury in connection with
Delaware Settlement ......................................... -- -- -- --
Compensation for Options Granted to Non-Employees .............. -- -- -- --
Shares Issued for Fractional Exchanges With Respect to the
One-for-twenty Reverse Stock Split effected on March 13, 1992 2 200 18 36
Financing Costs for Warrants Issued
in Connection with Debt Financing .......................... -- -- -- --
Warrants Issued in Connection With Debt Retirement
(See Note 11-A) ............................................. -- -- -- --
Amortization of Deferred Compensation Costs .................... -- -- -- --
Net (Loss) for the Year Ended June 30, 1999 .................... -- -- -- --
------- ---------- ---------- ----------
BALANCE - JUNE 30, 1999 ........................................... 362,482 $ 36,248,175 11,884,249 $ 23,768,497
======= ============ ========== ============

Capital Retained Treasury
in Excess Earnings Stock,
of Par (Deficit) At Cost
------------ ------------ -----------

BALANCE - JUNE 30, 1996 ........................................... $ 16,111,652 $ 3,829,336 $ 0

Shares Issued in Connection with Retirement of Debt ............ 6,671,245 -- --
Compensation for Options Granted to Non-Employees .............. 493,050 -- --
Financing Costs for Warrants Issued
in Connection with Debt Financing .......................... 1,893,451 -- --
Shares Issued for Fractional Exchanges With Respect to the
One-for-twenty Reverse Stock Split effected on March 13, 1992 (906) -- --
Amortization of Deferred Compensation Costs .................... -- -- --
Cancellation of Options Granted for Deferred Compensation ...... (119,741) -- --
Net (Loss) for the Year Ended June 30, 1997 .................... -- (17,387,582) --
------------ ------------ -----------
BALANCE - JUNE 30, 1997 ........................................... 25,048,751 (13,558,246) 0

Compensation for Options Granted to Non-Employees .............. 830,550 -- --
Shares Issued for Fractional Exchanges With Respect to the
One-for-twenty Reverse Stock Split effected on March 13, 1992 (1,078) -- --
Amortization of Deferred Compensation Costs .................... -- -- --
Gain on Sale of Land ........................................... -- 1,687,095 --
Net (Loss) for the Year Ended June 30, 1998 .................... -- (18,261,217) --
------------ ------------ -----------
BALANCE - JUNE 30, 1998 ........................................... 25,878,224 (30,132,367) 0

Shares Canceled in connection with Delaware Settlement ......... (1,046,934) -- --
Purchase of 2,904,016 Shares for Treasury in connection with
Delaware Settlement ......................................... -- -- (7,260,040)
Compensation for Options Granted to Non-Employees .............. 44,550 -- --
Shares Issued for Fractional Exchanges With Respect to the
One-for-twenty Reverse Stock Split effected on March 13, 1992 (236) -- --
Financing Costs for Warrants Issued
in Connection with Debt Financing .......................... 26,296 -- --
Warrants Issued in Connection With Debt Retirement
(See Note 11-A) ............................................. 1,242,882 -- --
Amortization of Deferred Compensation Costs .................... -- -- --
Net (Loss) for the Year Ended June 30, 1999 .................... -- (7,890,697) --
------------ ------------ -----------
BALANCE - JUNE 30, 1999 ........................................... $ 26,144,782 $(38,023,064) $(7,260,040)
============ ============ ===========

Deferred
Compen-
sation Total
--------- ------------

BALANCE - JUNE 30, 1996 ........................................... $(172,031) $ 79,318,105

Shares Issued in Connection with Retirement of Debt ............ -- 11,324,285
Compensation for Options Granted to Non-Employees .............. -- 493,050
Financing Costs for Warrants Issued
in Connection with Debt Financing .......................... -- 1,893,451
Shares Issued for Fractional Exchanges With Respect to the
One-for-twenty Reverse Stock Split effected on March 13, 1992 -- --
Amortization of Deferred Compensation Costs .................... 10,623 10,623
Cancellation of Options Granted for Deferred Compensation ...... 119,741 --
Net (Loss) for the Year Ended June 30, 1997 .................... -- (17,387,582)
--------- ------------
BALANCE - JUNE 30, 1997 ........................................... (41,667) 75,651,933

Compensation for Options Granted to Non-Employees .............. -- 830,550
Shares Issued for Fractional Exchanges With Respect to the
One-for-twenty Reverse Stock Split effected on March 13, 1992 -- --
Amortization of Deferred Compensation Costs .................... 5,000 5,000
Gain on Sale of Land ........................................... -- 1,687,095
Net (Loss) for the Year Ended June 30, 1998 .................... -- (18,261,217)
--------- ------------
BALANCE - JUNE 30, 1998 ........................................... (36,667) 59,913,362

Shares Canceled in connection with Delaware Settlement ......... -- (5,234,670)
Purchase of 2,904,016 Shares for Treasury in connection with
Delaware Settlement ......................................... -- (7,260,040)
Compensation for Options Granted to Non-Employees .............. -- 44,550
Shares Issued for Fractional Exchanges With Respect to the
One-for-twenty Reverse Stock Split effected on March 13, 1992 -- --
Financing Costs for Warrants Issued
in Connection with Debt Financing .......................... -- 26,296
Warrants Issued in Connection With Debt Retirement
(See Note 11-A) ............................................. -- 1,242,882
Amortization of Deferred Compensation Costs .................... 5,000 5,000
Net (Loss) for the Year Ended June 30, 1999 .................... -- (7,890,697)
--------- ------------
BALANCE - JUNE 30, 1999 ........................................... $ (31,667) $ 40,846,683
========= ============

See Notes to Consolidated Financial Statements.

33

INTERNATIONAL THOROUGHBRED BREEDERS, INC.
AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED JUNE 30, 1999, 1998 AND 1997

Years Ended June 30,
---------------------------------------------
1999 1998 1997
------------ ------------ ------------

CASH FLOWS FROM OPERATING ACTIVITIES:
(LOSS) FROM CONTINUING OPERATIONS .................................... $(16,034,769) $(25,468,850) $(18,981,678)
------------ ------------ ------------
Adjustments to reconcile (loss) to net cash (used in)
operating activities:
Depreciation and Amortization ................................ 2,958,067 3,125,272 2,775,194
Financing Cost from Options Granted .......................... 1,269,178
Compensation for Options Granted ............................. 44,550 830,550 493,050
Loss on Disposal of Fixed Assets ............................. 146,238 31,666 0
Write-Off of Deposits on Land ................................ 0 0 2,585,000
Estimated charge in connection with the repurchase
of the NPD shares .......................................... 0 3,748,000 0
Estimated loss in connection with the adjustment to
fair market value of the El Rancho Property ................ 0 3,429,251 0
Write-Off of Starship Orion Costs ............................ 0 0 2,543,968
Extraordinary Item - Loss on Early Extinguishment of Debt .... 0 0 3,837,625
Other ........................................................ 0 303,002 (783)
Changes in Operating Assets and Liabilities -
Decrease in Restricted Cash and Investments ............... 0 0 (758,785)
Decrease (Increase) in Accounts Receivable ................ (197,935) (31,455) 395,687
Decrease (Increase) in Other Assets ....................... 271,985 (282,609) (297,570)
(Increase) Decrease in Prepaid Expenses ................... (26,869) 239,628 (190,815)
(Decrease) Increase in Accounts and Purses Payable
and Accrued Expenses ..................................... (538,387) (771,010) 1,340,766
Icrease in Deferred Revenue ............................... 0 0 251,123
------------ ------------
CASH (USED IN) CONTINUING OPERATING ACTIVITIES ....................... (12,107,942) (14,846,555)

CASH PROVIDED BY DISCONTINUED OPERATING ACTIVITIES ................... 10,155,578 9,192,657
------------ ------------ ------------
NET CASH (USED IN) OPERATING ACTIVITIES .............................. (1,952,364) (5,653,898) (4,413,122
------------ ------------ ------------

Continued on following page

See Notes to Consolidated Financial Statements.

34

INTERNATIONAL THOROUGHBRED BREEDERS, INC.
AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED JUNE 30, 1999, 1998 AND 1997

CONTINUED FROM PREVIOUS PAGE

Years Ended June 30,
---------------------------------------------
1999 1998 1997
------------ ------------ ------------

CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from Sale of Freehold ................................... 17,900,000 0 0
Proceeds from Sale of Land at Garden State Park .................. 2,000,000 0 0
Purchase of 2,904,016 Shares of Treasury Stock ................... (6,850,000) 0 0
Purchase and Development of El Rancho Property ................... 0 (239,588) (2,016,133)
Deposits on Purchase of Land ..................................... 0 0 (2,115,000)
Deposits on New Mexico Racetrack Options ......................... 0 (600,000) 0
Capital Expenditures ............................................. (69,044) (284,271) (1,428,227)
Decrease in Other Investments .................................. 0 27,405 68,170
------------ ------------
CASH PROVIDED BY (USED IN) CONTINUING INVESTING ACTIVITIES ... 12,980,956 (1,096,454)
CASH (USED IN) PROVIDED BY DISCONTINUED INVESTING ACTIVITIES . (146,648) 8,224,665
------------ ------------ ------------
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES .......... 12,834,308 7,128,211 (5,491,190)
------------ ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of Long Term Notes ........................ 0 0 827,891
Proceeds from Line of Credit - Foothill .......................... 0 0 9,138,690
Proceeds from Credit Suisse Financing ............................ 0 0 55,000,000
Proceeds from Sun Bank Refinance of Foreign Notes ................ 0 0 6,000,000
Deferred Financing Costs ......................................... 0 (22,445) (4,926,943)
Escrow Deposits Utilized ......................................... 10,278,727 7,683,063 (16,762,059)
Proceeds from Land Sale to Reserve Escrow Deposits ............... 0 (1,370,120) 0
(Decrease) Increase in Balances Due From Discontinued Subsidiaries (1,823,666) 8,376,135 0
Principal Payments on Foreign Notes .............................. 0 0 (6,000,000)
Principal Payments on Foothill Notes ............................. 0 0 (29,976,010)
Principal Payments on Short Term Notes ........................... (5,016,770) (303,020) (836,874)
Principal Payments on Long Term Notes ............................ 0 0 (2,991,844)
------------ ------------
CASH PROVIDED BY CONTINUING FINANCING ACTIVITIES ............. 3,438,291 14,363,613
CASH (USED IN) DISCONTINUED FINANCING ACTIVITIES ............. (12,437,662) (16,242,127)
------------ ------------ ------------
NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES .......... (8,999,371) (1,878,514) 9,472,851
------------ ------------ ------------
NET INCREASE(DECREASE) IN CASH AND CASH EQUIVALENTS .................. 1,882,573 (404,200) (431,461)
LESS CASH AND CASH EQUIVALENTS AT END OF YEAR
USED IN (PROVIDED BY) DISCONTINUED OPERATIONS ............ (738,168) (3,166,900) --
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR
FROM CONTINUING OPERATIONS ................................. 213,795 3,784,895 4,216,356
------------ ------------ ------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD ................... $ 1,358,200 $ 213,795 $ 3,784,895
============ ============ ============

Supplemental Disclosures of Cash Flow Information:
Cash paid during the year for:
Interest ............................................. $ 6,498,191 $ 7,936,680 $ 4,849,949
Income Taxes ......................................... $ 1,490,000 $ 200,000 $ 0

Supplemental Schedule of Non-Cash Investing and Financing Activities:

During the years ended June 30, 1998 and 1997, the Company recorded unrealized
losses of $19,174 and $40,000, respectively, on trading securities. For the
year ended June 30, 1999, the Company realized a loss of $12,908 on trading
securities.

During the years ended June 30, 1999, 1998 and 1997, respectively, the Company
issued warrants to purchase 497,153 shares, 300,000 shares and 746,847
shares of Common Stock at fair values of $1,242,882, $830,550 and
$1,893,451, respectively, in connection with financing agreements.

During the year ended June 30, 1998, the Company issued options to purchase
300,000 shares of Common Stock at a fair value of $786,000 to three of the
Company's directors.

During the year ended June 30, 1997, the Company exchanged debt totaling $10.5
million plus accrued interest of approximately $1.1 million for 2,326,520
shares of Common Stock.

During the year ended June 30, 1999, the Company canceled 2,093,868 shares of
Common Stock in connection with the Delaware Settlement.

During the year ended June 30, 1999, the purchase of 2,904,016 shares of Common
Stock was financed, in part, through a long term note in the amount of
$3,558,032.

During the year ended June 30, 1999, $22,000,000 of the Company's short term
debt was assumed by the the purchaser in in connection with the sale of
certain assets at Freehold Raceway and Garden State Park.

See Notes to Consolidated Financial Statements.

35

INTERNATIONAL THOROUGHBRED BREEDERS, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(1) BASIS OF PRESENTATION

On January 28, 1999, the Company completed the sale of Freehold Raceway and
a ten-acre parcel at the Garden State Park facility and the lease of the Garden
State Park facilities. Prior to June 30, 1998, the Company determined to sell
its racetracks and, accordingly, the operating results of the racetrack
subsidiaries have been segregated and reported as discontinued operations for
each of the periods presented.

The accompanying consolidated financial statements have been prepared
assuming International Thoroughbred Breeders, Inc. and subsidiaries
(collectively, the "Company") will continue as a going concern. The remaining
debt to the Company's primary lender was due June 1, 1999. On May 7, 1999, the
Company notified their primary lender, Credit Suisse First Boston Mortgage
Capital LLC ("Credit Suisse"), of its intent to extend the loan maturity date to
June 30, 2000. On January 21, 2000 after obtaining the written consent of the
holders of a majority of the outstanding shares of stock of the Company entitled
to vote thereon, the Company entered into a restructuring agreement with Credit
Suisse. Prior to this agreement, the Company had been in a maturity default with
Credit Suisse for its loan due on June 1, 1999 (the "CSFB Loan") in the
principal amount of $30,500,000 plus unpaid interest since June 1, 1999. The
restructuring agreement returns the loan to a good standing position and extends
the maturity date of the CSFB Loan to June 30, 2000.

On January 25, 2000, the Company entered into agreements with unrelated
third parties for the sale of the Garden State Park and El Rancho properties.
Unless the scheduled closing of the El Rancho property on April 30, 2000, or the
further extended date of June 1, 2000, is consummated and the closing of the
Garden State Park property is consummated, the Company will be in default with
respect to the Credit Suisse loan due on June 30, 2000. The Company does not
have any committed source of working capital and there are no assurances that
the Company would be successful in obtaining working capital from other sources.
There can be no assurances that either sale of the El Rancho or the Garden State
Park properties will be consummated or to the timing thereof.

The Company has sustained losses of approximately $7.9 million, $18.3
million and $17.4 million during fiscals 1999, 1998 and 1997, respectively. The
Company believes its projected cash flows from its current operations will be
sufficient until June 30, 2000 and there can be no assurances beyond that date.

The financial statements do not include any adjustments that might result
from the outcome of these uncertainties.

(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(A) Nature of Operations - The Company is currently in the process of
effecting a sale of its two properties: (i) the non-operating former El Rancho
Hotel and Casino (the "El Rancho Property") in Las Vegas, Nevada; and (ii) the
Garden State Park Property in Cherry Hill, New Jersey. Prior to January 28,
1999, the Company conducted live race meetings for Thoroughbred and Harness
(Standardbred) horses and participated in intrastate and interstate simulcast
wagering as a host and receiving track in Cherry Hill ("Garden State Park") and
Freehold ("Freehold Raceway"), New Jersey.

(B) Principles of Consolidation - The accounts of all subsidiaries are
included in the consolidated financial statements. All significant intercompany
accounts and transactions have been eliminated in consolidation.

36

(C) Classifications - Certain prior years' amounts have been reclassified
to conform with the current years' presentation.

(D) Depreciation and Amortization - Goodwill was the excess of the cost of
acquired net assets at Freehold over their fair value and was being amortized
over 30 years under the straight line method. Accumulated amortization at June
30, 1998 was $666,941. At June 30, 1998, the Goodwill was reclassified to "Net
Assets of Discontinued Operations - current".

Depreciation of property and equipment and amortization of building
improvements were computed by the straight-line method at rates adequate to
allocate their cost or adjusted fair value in accordance with accounting
principles applicable to a quasi-reorganization over the estimated remaining
useful lives of the respective assets.

The Company has adopted the provisions of Statement of Financial Accounting
Standards No. 121 ("SFAS 121") "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to Be Disposed Of." SFAS 121 establishes
accounting standards for the impairment of long-lived assets, certain
identifiable intangibles and goodwill related to those assets to be held and
used for long-lived assets and certain identifiable intangibles to be disposed
of. The Company reviews the carrying values of its long- lived and identifiable
intangible assets for possible impairment whenever events or changes in
circumstances indicate that the carrying amount of the assets may not be
recoverable based on undiscounted estimated future operating cash flows. As of
June 30, 1998 and 1999, the Company determined that an impairment had occurred.
(See E below).

(E) Property Held for Sale - As of June 30, 1997, construction in progress
included the purchase price as well as construction costs in conjunction with
the development of the El Rancho Property. These amounts included real property
acquisition costs in the amount of approximately $43,500,000, capitalized
interest of $4,182,007, consulting and other development costs. As of July 1997,
development of the El Rancho Property was suspended. On January 28, 1999, the
Company fully and finally consummated the settlement agreement entered into on
July 2, 1998 ("the Delaware Settlement"). As part of the Delaware Settlement,
the Company provided for the sale of the El Rancho Property. As of June 30,
1998, the El Rancho Property was reclassified to "Property held for Sale" after
recording an impairment charge during the fourth quarter of Fiscal 1998 of
approximately $3,430,000 to adjust it to fair value, after taking into account
the estimated fair value of the reversion of Las Vegas Entertainment Network,
Inc.'s shares of the Company's common stock. In the absence of a public market
for the Company's Common Stock, management determined the estimated fair value
of the Common Stock to be the anticipated book value attributable to the Common
Stock after taking into account the estimated operating results until the
disposition of the racetrack operations assumed to have occurred on December 31,
1998, the disposal of the racetrack assets and the El Rancho Property, and other
transactions contemplated in the Delaware Settlement. (See Notes 4, 13 & 20).

(F) Net Assets of Discontinued Operations - At June 30, 1998, the Garden
State Property and Freehold Raceway were classified to "Net Assets of
Discontinued Operations." During the third quarter of Fiscal 1999, the Company
recognized a net gain of $3,657,688 from the sale of Freehold Raceway, the sale
of a ten-acre parcel at the Garden State Park facility and the lease of the
Garden State Park facilities after applying approximately $14,000,000 from the
transaction to reduce the fair value of the Garden State property.

37

(G) Recent Accounting Pronouncements - In June 1998, the Financial
Accounting Standards Board issued Statement of Financial Account Standards No.
133, "Accounting for Derivative Instruments" ("SFAS 133 as amended by SFAS
137"). SFAS 137 delays the effective date of implementation of SFAS 133 by one
year. SFAS 133 establishes accounting and reporting standards for derivative
instruments and for hedging activities. SFAS 133 requires that an entity
recognize all derivatives as either assets or liabilities and measure those
instruments at fair market value. Presently, the Company does not use derivative
instruments either in hedging activities or as investments. Accordingly, the
Company believes that the adoption of SFAS 133 will have no impact on its
financial position or results of operations.

The Company has no comprehensive income items as defined in Statement of
Financial Accounting Standards No. 130, "Reporting Comprehensive Income".

(H) Deferred Financing Costs - Deferred financing costs at June 30, 1998
include those amounts associated with its May 23, 1997 financing agreement with
Credit Suisse First Boston Mortgage Capital LLC("Credit Suisse"). These costs of
$6,238,731 were expensed over the two-year life of the loan which had an
original due date of June 30, 1999.

(I) Revenue Recognition - The Company recognized the revenues associated
with horse racing at Garden State Park and Freehold Raceway as they were earned.
Both Garden State Park and Freehold Raceway operated as satellite wagering sites
for both thoroughbred and harness racing meets conducted at other racetracks.
The tracks received broadcasts of live racing from other racetracks under
various simulcasting agreements. The tracks also provided broadcasts of live
racing conducted at the Company's facilities to other racetracks under various
host simulcasting agreements. Under these contracts, the Company received or
paid pari-mutuel commissions of varying percentages of simulcast pari-mutuel
wagering. Costs and expenses associated with horse racing revenues were charged
against income in those periods in which the horse racing revenues were
recognized. Other costs and expenses, including advertising, were recognized as
they actually occur throughout the year.

(J) Income Taxes - The Company has adopted the provisions of Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS
109"). SFAS 109 requires a company to recognize deferred tax liabilities and
assets for the expected future tax consequences of events that have been
recognized in its financial statements or tax returns. Under this method,
deferred tax liabilities and assets are determined based on the difference
between the financial statement carrying amounts and tax bases of assets and
liabilities. Deferred tax assets and liablities are adjusted for the effects of
changes in tax laws and rates on the date of enactment.

(K) Cash and Cash Equivalents - The Company considers all highly liquid
investments with an original maturity of three months or less to be cash
equivalents.

(L) Concentrations of Credit Risk - Financial instruments which potentially
subject the Company to concentrations of credit risk are cash and cash
equivalents. The Company places its cash investments with high credit quality
financial institutions and currently invests primarily in U.S. government
obligations that have maturities of less than 3 months. The amount on deposit in
any one institution that exceeds federally insured limits is subject to credit
risk.

(M) Use Of Estimates - The preparation of financial statements in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the

38

reported amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the dates of the financial statements and the reported
amounts of revenues and expenses during the reporting periods. Actual results
could differ from those estimates.

(N) Net Loss per Common Share - In March 1997, the Financial Accounting
Standards Board issued Statement of Financial Accounting Standards No. 128,
"Earnings Per Share" ("SFAS 128"). SFAS 128 provides a different method of
calculating earnings per share than was used in APB Opinion 15. SFAS 128
provides for the calculation of basic and diluted earnings per share. Basic
earnings per share includes no dilution and is computed by dividing income
available to common stockholders by the weighted average number of common shares
outstanding for the period. Diluted earnings per share reflects the potential
dilution of securities that could share in the earnings of an entity.

Loss per common share is computed by dividing net loss by the weighted
average number of shares of common stock outstanding. Options and warrants to
purchase 3,104,000, 3,271,847, and 3,271,847 shares of Common Stock at various
prices per share, for the years ended June 30, 1999, 1998 and 1997,
respectively, were not included in the computation of diluted loss per share as
their effect would be anti- dilutive.

(3) SALE AND LEASE OF ASSETS

On January 28, 1999, the Company completed the sale of Freehold Raceway,
the sale of a ten-acre parcel at Garden State Park and the lease of the Garden
State Park facilities to subsidiaries of Greenwood Racing, Inc., which owns
Philadelphia Park racetrack, the Turf Clubs and Phonebet (the "Greenwood
Transaction"). The purchase price was $46 million ($1 million of which will be
held in escrow to cover certain indemnification and other obligations of the
Company), with an additional $10 million in contingent promissory notes (the
"Contingent Notes") which become effective upon, among other things, the New
Jersey Legislature's approval of off-track betting facilities or telephone
account pari-mutuel wagering on horse racing. Further adjustments could be made
to increase the purchase price if certain additional regulatory gaming changes
are approved by the New Jersey Legislature in the future. Greenwood Racing, Inc.
has guaranteed the performance by the purchaser of all obligations under the
Contingent Notes, and Pennwood Racing, Inc. ("Pennwood "), a joint venture
between Greenwood Racing, Inc. and Penn National Gaming, Inc. ("Penn National"),
which owns Penn National Race Course, Pocono Downs Racetrack, Charles Town Races
and at least ten off-track betting parlors in Pennsylvania, has also guaranteed
the Contingent Notes.

The proceeds of the Greenwood Transaction were principally used by the
Company to pay off the first lien on the assets of Freehold Raceway, reduce the
outstanding balance on the Company's loan from Credit Suisse to $30.5 million
and to consummate the Delaware Settlement. In addition, Credit Suisse also
released to the Company approximately $4.475 million from its escrow reserves
for working capital purposes, to reduce debt and pay fees. (See Note 9)

The Company recognized a net gain of $3,657,688 on the sale of Freehold
Raceway, following the write down to fair value of the remaining assets of
Garden State Park, the sale of a ten-acre parcel at the Garden State Park
facility and the lease of the Garden State Park facilities during the third
quarter of Fiscal 1999.

39

(4) LITIGATION SETTLEMENT

On January 28, 1999, the Company fully and finally consummated the
settlement and dismissal of the following actions: Quigley et al. v. DeSantis et
al., C.A. No. 15919, in the Court of Chancery of the State of Delaware; Rekulak
v. DeSantis et al., C.A. No. 15920, in the Court of Chancery of the State of
Delaware; Green v. DeSantis, et al., C.A. No. 97-CV-5657, in the New Jersey
District Court. These actions were settled in connection and accordance with the
Stipulation and Agreement of Compromise, Settlement and Release entered into on
July 2, 1998 to resolve the above action entitled Quigley et al. v. DeSantis et
al. (the "Delaware Settlement").

Pursuant to the terms of the Delaware Settlement, the Company purchased
from NPD, Inc. ("NPD") approximately 2.9 million shares of the Company's common
stock (the "NPD Shares") for $4.6 million in cash and assumed a $5.8 million
promissory note originally issued by NPD to acquire the NPD Shares, held by
Donald F. Conway, Chapter 11 Trustee for the Bankruptcy Estate of Robert E.
Brennan (the "Bankruptcy Trustee"). In addition, pursuant to the terms of the
Delaware Settlement and with the approval of the United States Bankruptcy Court
for the District of New Mexico in an action in which AutoLend Group, Inc. is the
debtor, NPD returned to AutoLend Group, Inc. the $2 million originally pledged
by AutoLend Group, Inc. to secure the aforementioned $5.8 million promissory
note (the "NPD Note"). The Company understands that the Company's former
director Nunzio P. DeSantis is Chairman, President and a principal stockholder
of AutoLend Group, Inc., and the Company's former chairman and director Anthony
Coelho is a director of AutoLend Group, Inc.

The approval of certain transactions between ITB and the Bankruptcy Trustee
by the United States Bankruptcy Court for the District of New Jersey in the
action entitled In re Robert E. Brennan, C.A. No. 95-35502, was a condition
precedent to the consummation of the Delaware Settlement. This approval was duly
received and the Company consummated a separate settlement with the Bankruptcy
Trustee necessary to consummate the Delaware Settlement (the "Trustee
Settlement"). Pursuant to the Trustee Settlement, the Bankruptcy Trustee
received: (a) a pay down on the NPD Note from the original principal balance of
$5,808,032 to $3,558,032 (see Note11-B); (b) a promissory note from ITB in the
amount of $3,558,032 (the "ITB Note"), on substantially the same terms as the
NPD Note, except that the ITB Note becomes due and payable on the earlier to
occur of (i) January 15, 2001, or (ii) the closing of either the sale of the
Company's non-operating El Rancho hotel and casino property in Las Vegas, Nevada
(the "El Rancho Property"), or the sale of Garden State Park (the "Garden State
Property"); (c) a security interest in the NPD Shares; (d) the payment of the
costs and expenses incurred by the Bankruptcy Trustee in connection with the
Delaware Settlement and the Trustee Settlement; (e) subordinate interests in
both the El Rancho Property and the Garden State Property; and (f) an escrow of
the July 15, 1999 interest payment due on the ITB Note. As a result of the
Trustee Settlement, the Company secured (a) the power to consummate the Delaware
Settlement, (b) releases from the Bankruptcy Trustee in favor of all parties to
the Delaware Settlement, including the Company, and (c) the right to defer
certain interest payments due under the ITB Note until the maturity of such
note.

Upon consummation of the Delaware Settlement, Nunzio P. DeSantis, Anthony
Coelho, and Joseph Zappala immediately resigned from the Company's board of
directors and terminated any and all employment agreements or consulting
arrangements with the Company. Francis W. Murray and Robert J. Quigley remained
directors, and during the quarter ended March 31, 1999, John U. Mariucci and
James J. Murray were elected by the remaining directors to serve on the board of
directors until the next annual stockholders' meeting.

40

Also pursuant to the Delaware Settlement, Las Vegas Entertainment Network,
Inc. ("LVEN") was granted the exclusive right to sell the El Rancho Property
until November 20, 1998 and the co-extensive right, along with the Company, to
sell the El Rancho Property until April 19, 1999. Beginning January 19, 1999,
and ending upon the earlier of a sale of the El Rancho Property or April 19,
1999, LVEN was required to pay one-half of the carrying costs associated with
maintaining the El Rancho Property. LVEN also obtained the right, exercisable
from March 20, 1999 until April 19, 1999, to refinance the El Rancho Property
and thereby obtain the extended right to sell the El Rancho Property until the
earlier of (a) one year from April 19, 1999 or (b) the midpoint of the term of
the refinancing loan (the "Refinancing Option"). LVEN did not sell the El Rancho
Property nor did it exercise the Refinancing Option. If the Company sells or
refinances the El Rancho property after April 19, 1999 for an amount in excess
of $44,200,000, plus one half of the carrying costs from January 20, 1999 to
April 19, 1999, plus the customary transaction costs incurred by the Company in
such sale (the "Threshold Amount"), then LVEN shall receive from such cash
proceeds in excess of the Threshold Amount up to the amount of $12,000,000 of
cash sale proceeds over and above the Threshold Amount, out of which LVEN will
direct that the first $2,000,000 be paid over to NPD. NPD is owned by Nunzio
DeSantis, the Company's former Director and CEO and Tony Coelho, the Company's
former Director and Chairman of the Board. On January 25, 2000, the Company
signed a binding term sheet for the sale of the El Rancho Property. There can be
no assurances that the Company will be able to dispose of the El Rancho Property
as contemplated by the Delaware Settlement. (See Note 13 - Legal Proceedings)

In exchange for the foregoing, LVEN (a) executed and delivered releases to
all parties to the Delaware Settlement, including the Company and Credit Suisse,
(b) returned to ITB for immediate cancellation the 2,093,868 shares of ITB
common stock (the "LVEN Shares") previously issued to Casino-Co Corporation, a
subsidiary of LVEN, in exchange for the cancellation of a certain $10.5 million
note plus accrued interest from ITB to LVEN, which note remains canceled, (c)
released any and all LVEN or Casino-Co Corporation interests in the NPD Shares,
and (d) cancelled any and all agreements of any kind or nature whatsoever
between LVEN and its affiliates and ITB or any of its subsidiaries.

The foregoing summary of the terms and transactions relating to the
Delaware Settlement and the Trustee Settlement is qualified by reference to the
actual documents filed with the respective courts in the actions discussed
above.

There can be no assurances that the Company will be able to dispose of the
El Rancho Property as contemplated by the Delaware Settlement. (See Note 13 -
Legal Proceedings)

41

(5) DISCONTINUED OPERATIONS

On January 28, 1999, the Company completed the sale of the real property
and certain related assets at Freehold Raceway and a ten-acre parcel of land at
the Garden State Park facility, and the lease of the real property and certain
related assets of Garden State Park for a seven-year period. (See Note 3).

The discontinued operations are summarized as follows:

Years Ended June 30,

DISCONTINUED RACETRACK OPERATIONS: 1999 * 1998 1997

REVENUE $ 37,992,012 $ 68,636,449 $ 68,431,882
------------ ------------ -----------

EXPENSES:

Cost of Revenues:

Purses 12,591,222 22,370,695 23,120,176

Operating Expenses 16,612,009 31,794,410 35,531,034

Depreciation & Amortization 1,078,701 1,665,206 1,579,903

General & Administrative Expenses 2,619,944 4,607,984 5,606,265

Interest Expenses 484,404 855,421 944,791
------------ ------------ -----------
TOTAL EXPENSES 33,386,280 61,293,716 66,782,169
------------ ------------ -----------
INCOME FROM DISCONTINUED RACETRACK

OPERATIONS BEFORE TAXES 4,605,732 7,342,733 1,649,713

INCOME TAX EXPENSE 119,348 135,100 55,617
------------ ------------ -----------
4,486,384 7,207,633 1,594,096

NET GAIN ON SALE OF NET ASSETS
OF DISCONTINUED OPERATIONS
(NET OF $1,335,500 STATE
INCOME TAXES) 3,657,688 -0- -0-
------------ ------------ -----------
INCOME FROM DISCONTINUED
RACETRACK OPERATIONS $ 8,144,072 $ 7,207,633 $ 1,594,096
============ =========== ============
* July 1, 1998 to January 28, 1999

As of June 30, 1998, the Garden State Property was reclassified to "Net
Assets of Discontinued Operations." During the third quarter of Fiscal 1999, the
Company recognized a net gain of $3,657,688 from the sale of Freehold Raceway,
the sale of a ten-acre parcel at the Garden State Park facility and the lease of
the Garden State Park facilities after applying approximately $14,000,000 from
the transaction to reduce the fair value of the Garden State property.

42

The net assets of the operations to be disposed of included in the
accompanying consolidated balance sheets as of June 30, 1999 and 1998 consist of
the following:

June 30,
--------

CLASSIFIED AS: 1999 1998
---- ----

CURRENT ASSETS $ 2,201,036 $ 28,249,055

CURRENT LIABILITIES 1,706,337 16,013,838
--------- ----------

Net Assets of Discontinued
Operations - Current 494,699 12,235,217

Property Assets of Garden State Park 30,000,000 45,626,944
---------- ----------

NET ASSETS OF DISCONTINUED OPERATIONS $30,494,699 $ 57,862,161
=========== ============

Cash flows from discontinued operations for the year ended June 30, 1999
and 1998 consist of the following:

CASH FLOWS FROM DISCONTINUED OPERATING ACTIVITIES: June 30,

1999 1998
----------- ----------
INCOME $ 8,144,072 $ 7,207,633
----------- ----------

ADJUSTMENTS TO RECONCILE INCOME TO NET CASH
PROVIDED BY DISCONTINUED OPERATING ACTIVITIES

Depreciation and Amortization 1,078,701 1,665,206

Net (Gain) Loss on Sale of Discontinued
Operations (3,657,688) 1,007

Changes in Operating Assets and Liabilities
of Discontinued Operations:
Decrease in Restricted Cash and
Investments 3,444,267 277,040

Decrease in Accounts
Receivable 331,742 287,694

Decrease in Other Assets 21,142 140,165

Decrease in Prepaid Expenses 773,312 534,625

Increase (Decrease) in Accounts
and Purse Payable and
Accrued Expenses 1,790,189 (940,299)

(Decrease) Increase in
Deferred Revenue (1,770,159) 19,587
----------- ----------
NET CASH PROVIDED BY DISCONTINUED OPERATING
ACTIVITIES (EXCLUDING INCOME) 10,155,578 9,192,657
----------- ----------

CASH FLOWS FROM DISCONTINUED INVESTING ACTIVITIES:

Proceeds from Sale of Land -0- 8,449,904

Capital Expenditures (69,616) (212,227)

(Increase) in Other Investments (77,032) (13,012)
----------- ----------
NET CASH (USED IN) PROVIDED BY DISCONTINUED
INVESTING ACTIVITIES $ (146,648) $ 8,224,665
----------- ----------

43

June 30,
--------
1999 1998
---- ----

CASH FLOWS FROM DISCONTINUED FINANCING ACTIVITIES:

Principal Payments on Sun Mortgage $ -0- $ (6,000,000)

Principal Payments on Short Term Notes (856,475) (733,719)

Increase (Decrease) in Balances Due To/From
Continuing Operations 1,823,666 (8,376,135)

Principal Payments on Long Term Notes (13,404,853) (1,132,272)
----------- ----------
NET CASH (USED IN) DISCONTINUED
FINANCING ACTIVITIES (12,437,662) (16,242,126)
----------- ----------

NET (DECREASE) INCREASE IN CASH AND CASH
EQUIVALENTS FROM DISCONTINUED OPERATIONS (2,428,732) 1,175,195

CASH AND CASH EQUIVALENTS AT BEGINNING
OF YEAR FROM DISCONTINUEDOPERATIONS 3,166,900 1,991,705
----------- ----------
CASH AND CASH EQUIVALENTS AT END OF
YEAR FROM DISCONTINUED OPERATIONS $ 738,168 $ 3,166,900
============= ============

(6) ACQUISITIONS AND DISPOSITIONS

Fiscal 1999

On January 28, 1999 as described above, the Company completed the sale of
Freehold Raceway, the sale of a ten-acre parcel at Garden State Park and the
lease of the Garden State Park facilities to subsidiaries of Greenwood Racing,
Inc., which owns Philadelphia Park racetrack, the Turf Clubs and Phonebet. (See
Note 3)

In connection with the January 28, 1999 transactions, the Company purchased
the undepreciated balance of equipment located at Garden State Park and a liquor
license owned by an unaffiliated third party, Service America Corporation, for
$500,000 ($100,000 of which will be paid by the lessee). This asset is recorded
in net assets of discontinued operations. (See Notes 3 & 11 - E)

Pursuant to the terms of the Delaware Settlement, the Company purchased
from NPD, Inc. ("NPD") approximately 2.9 million shares of ITB common stock (the
"NPD Shares") for $4.6 million cash and the assumption by ITB of a $5.8 million
promissory note originally issued by NPD to acquire the NPD Shares, held by
Donald F. Conway, Chapter 11 Trustee for the Bankruptcy Estate of Robert E.
Brennan (the "Bankruptcy Trustee").

Fiscal 1998

On July 1, 1997, the Company made a non-refundable payment of $600,000 to
purchase an option to acquire the leasehold interests from D&C Gaming
Corporation ("D&C"), a company owned equally by the Company's former Director,
CEO and President, Nunzio P. DeSantis, and by the Chairman of Las Vegas
Entertainment Network, Inc. ("LVEN"), to acquire operating leases for two New
Mexico

44

racetracks. Subsequently, the option agreement has been terminated by the
Company and D&C. In the Delaware litigation, the minority Board members have
challenged the authorization and enforceability of certain agreements, including
the option agreement. In connection with the Delaware Settlement, the $600,000
has been included in the calculation of the purchase price of the NPD shares.

On October 20, 1997, the Company sold a parcel of land contiguous to Garden
State Park for $9,000,000 exclusive of closing costs of approximately $545,190.
The carrying value of such property was $6,767,715. $6,000,000 of such sales
proceeds was used to repay an existing mortgage on the property. The resulting
gain was recorded as an adjustment to Stockholders' Equity in accordance with
accounting principles applicable to a quasi-reorganization.

Fiscal 1997

The Company executed an agreement to purchase 15 acres of unimproved land
in Las Vegas, Nevada in fiscal 1996. The Company made non-refundable deposits
aggregating $2,585,000 through fiscal 1997. The land is located contiguous to
the El Rancho Property. The Company could not arrange the necessary financing to
finalize the purchase. As a result, these deposits were forfeited during
December 1996.

(7) PROPERTY HELD FOR SALE

On January 28, 1999, the Company consummated the settlement under the
Stipulation and Agreement of Compromise, Settlement and Release entered into on
July 2, 1998 to resolve the stockholder derivative litigation in the Delaware
Court of Chancery (the "Delaware Settlement"). As part of the Delaware
Stipulation, the Company has provided for the possible sale of the El Rancho
Property pursuant to the terms enumerated by the Delaware Settlement. (See Note
4) On June 30, 1998, the El Rancho Property was reclassified from "Construction
in Progress" to "Property held for Sale" after recording an impairment charge
during the fourth quarter of Fiscal 1998 of approximately $3,430,000 to adjust
the El Rancho Property to its estimated fair value, after taking into account
the estimated fair value of the reversion of the LVEN Shares (See Note 4). In
the absence of a public market for the Company's Common Stock, management has
determined the estimated fair value of the Common Stock to be the anticipated
book value attributable to the Common Stock after taking into account the
estimated operating results until the disposition of the racetrack assets and
operations, and the El Rancho Property, and other transactions contemplated by
the Delaware Settlement. (See Notes 4 and 20-C)

On January 25, 2000, the Company entered into a binding term sheet for the
sale of the El Rancho property in Las Vegas, Nevada with Turnberry/Las Vegas
Boulevard, LLC and on March 1, 2000 a formal contract was signed on the same
terms as outlined on the binding term sheet with certain mutually acceptable
changes made during the course of negotiations of the definitive agreements. The
purchase price is anticipated to be $45,000,000. The purchase price will be paid
by: (i) a $100,000 deposit at the signing of the Purchase and Sale Agreement;
(ii) a $400,000 additional deposit due on March 15, 2000, which amount will be
non-refundable, and (iii) the balance of the purchase price due at the closing,
payable in cash.

The closing, originally scheduled to occur by March 31, 2000, had been
extended to April 30, 2000 after the buyer: (i) agreed to pay the approximate
$100,000 carrying costs of the El Rancho property for the month of April 2000;
(ii) agreed to pay the interest due to Credit Suisse First Boston Mortgage

45

Capital, LLC on a principal amount of $20,000,000 at 12% for the month of April
2000; and (iii) released $1,600,000, which included the above $100,000 and
$400,000 deposits, as a non-refundable deposit to the Company. The closing date
was further extended to June 1, 2000 provided the buyer: (i) agrees to pay the
approximate $100,000 carrying costs of the El Rancho property for the month of
May 2000; (ii) pays the interest due to Credit Suisse First Boston Mortgage
Capital, LLC on a principal amount of $19,000,000 at 12% for the month of May
2000; (iii) pays an additional deposit of $900,000 to the Company by April 30,
2000, which amount has not yet been received; and (iv) demonstrates it has the
financial ability to close.

The Company has separately agreed to purchase a promissory note of the
buyer in the amount of $23,000,000 which will be convertible at the Company's
option into a 33 1/3% equity interest in the buyer, depending upon certain
circumstances.

The note would accrue interest at a 22% per annum rate, which will be
adjusted from time to time since the interest actually payable will be dependent
upon, and payable solely out of, the buyer's net cash flow available for
distribution to its equity owners ("Distributable Cash"). After the equity
investors in the buyer have received total distributions equal to their capital
contributions plus an agreed upon return on their invested capital, the next $23
million of Distributable Cash will be paid to the Company. The Company will
thereafter receive payments under the note equal to 33 1/3% of all Distributable
Cash until the maturity date, which occurs on the 30th anniversary of the
Company's purchase of the note. The Company may convert the promissory note, at
its option, into a 33 1/3% equity interest in the buyer at any time after the
15th anniversary of the issuance of the note. If not then converted, the note
will convert into a 33 1/3% equity interest in the buyer on the day before the
30th anniversary of its issuance. (See Notes 4 and 20-C)

(8) INVESTMENTS

Interest income for the fiscal years ended June 30, 1999, 1998, and 1997
was $343,572, $689,092, and $11,911, respectively. Realized losses resulting
from the sale of trading securities for fiscals 1999 were $12,908. There were no
realized gains or losses resulting from the sale of trading securities for
fiscals 1998 and 1997 .

(9) RESERVE ESCROW DEPOSITS

At June 30, 1999, $182,154 was held in various reserve cash escrow deposit
accounts that were established in connection with the Company's two-year $55
million credit facility with Credit Suisse. The terms of such credit facility
provided that such reserve accounts be held by LaSalle National Bank ("the
Depository"). In connection with the January 28, 1999 sale of Freehold Raceway,
the sale of a ten-acre parcel at Garden State Park and the lease of the Garden
State Park facility, Credit Suisse released to the Company approximately
$4,475,000 from its escrow reserves to pay down debt and for working capital
purposes. On August 2, 1999, the Company made a payment of $320,000 to Credit
Suisse for interest due which was credited to the escrow accounts. In connection
with the restructuring agreement on January 21, 2000, Credit Suisse released to
the Company the $167,476 balance in the escrow deposit accounts which will be
used by the Company for working capital purposes. (See Note 20-B)

46

(10) LAND, BUILDINGS AND EQUIPMENT

Land, buildings and equipment acquired prior to June 30, 1993 are carried
at their adjusted fair value in accordance with accounting principles applicable
to a quasi-reorganization which was completed on that date. The property assets
acquired with the acquisition of Freehold Raceway in January 1995 were recorded
at their fair values as required under the purchase method of accounting. All
other property assets are recorded at cost. Depreciation is being computed over
the estimated remaining useful lives using the straight-line method.

Major classes of land, buildings and equipment consist of the following:

Estimated Useful June 30,
---------------- --------
Lives in Years 1999 1998
-------------- ---- ----

Buildings and Improvements 15-40 214,097 214,097

Equipment 5-15 683,428 814,927
------- -------

Totals 897,525 1,029,024

Less Accumulated Depreciation
and Amortization 329,667 308,162
------- -------

$ 567,858 $ 720,862
=========== ===========

As of June 30, 1999 and 1998, Land, Buildings and Improvements, Equipment
relating to the racetrack operations and the El Rancho Property were classified
as "Property Held For Sale", "Net Assets of Discontinued Operations - Current",
and "Net Assets of Discontinued Operations - Long Term".

47

(11) NOTES AND MORTGAGES PAYABLE
Notes and Mortgages Payable are summarized below:

June 30, 1999 June 30, 1998
------------- -------------
Interest % ----------------------- --------------------------
Per Annum Current Long-Term Current Long-Term
----------------------------------- ----------- --------- ----------------

International Thoroughbred
Breeders, Inc.:

Credit Suisse First Boston (A) LIBOR Rate plus 7% $ 30,500,000 $ -0- $ 55,000,000 $ -0-
(6/30/99 rate
12.67%)

REB Bankruptcy Trustee (B) Prime Rate 3,558,032 -0- -0- -0-
(6/30/99 rate 7.75%)

Other Various 239,113 -0- 208,426 -0-

Freehold Raceway:

Kenneth R. Fisher (C) 80% of Prime -0- -0- 625,000 10,000,000
(not to exceed 6%)
(6/30/98 rate 6%)

Kenneth R. Fisher (D) 80% of Prime -0- -0- 225,000 1,572,049
(6/30/98 rate 6.6%)
Garden State Park:

Service America Corporation (E) 6% 400,000 -0- -0- -0-

Other (F) Various 344,954 -0- 351,429 426,682
------------- ------ ----------- ------------
Totals $ 35,042,099 $ -0- 56,409,855 $ 11,998,731

Less Amounts Reclassified to:
Net Assets of Discontinued
Operations - Current -0- -0- (850,000) (11,572,049)

Net Assets of Discontinued
Operations - Long Term (744,954) -0- (351,429) (426,682)
-------------- ----- ------------ ------------
Totals $ 34,297,145$ $ -0- $ 55,208,426 $ -0-
============== ===== ============ ============

The effective LIBOR Rate and the Prime Rate at June 30, 1998 were 5.72% and
8.50%, respectively. There was no short term borrowings outstanding as of June
30, 1998.

A) On May 23, 1997, the Company entered into a two-year $55 million credit
facility with Credit Suisse First Boston Mortgage Capital LLC, ("Credit Suisse")
secured by a pledge of certain of the personal and real property of the Company
and its subsidiaries (the "Credit Suisse Credit Facility"). Proceeds of this
facility were used to repay in full the Company's $30 million existing credit
facility and to provide funds for working capital and other general corporate
purposes, including, but not limited to, preliminary development of the El
Rancho Property. Of the remaining facility borrowings, approximately $16.8
million was placed in escrow accounts, financing and closing fees of $4.3
million were incurred

48

by the Company and $3.9 million was used by the Company for general corporate
purposes and repayment of certain other financial obligations. Interest under
the Credit Suisse Credit Facility is payable monthly in arrears at 7% over the
London interbank offered rate ("LIBOR").

On January 21, 2000, after obtaining the written consent of the holders of
a majority of the outstanding shares of stock of the Company entitled to vote
thereon, the Company entered into a restructuring agreement (the "Restructure
Agreement") with Credit Suisse. Prior to this agreement, the Company had been in
a maturity default with Credit Suisse for its loan due on June 1, 1999 (the
"CSFB Loan") in the principal amount of $30,500,000 plus unpaid interest since
June 1, 1999. On November 17, 1999, the Company and Credit Suisse signed a term
sheet outlining the term and conditions of the Restructure Agreement. At that
time, accrued interest in the amount of $1,762,891 was added to the principal
balance of the note.

The Restructure Agreement returns the loan to a good standing position and
extends the maturity date of the CSFB Loan to June 30, 2000. As part of the
Restructure Agreement, the Company agreed that as of January 21, 2000, the
restructured principal balance due on the CSFB Loan was $33,103,189, which
consisted of: (i) the principal amount of $30,500,000 remaining on the CSFB
Loan; (ii) accrued interest advanced by Credit Suisse from June 1, 1999 to
January 21, 2000 in the amount of $2,523,189; and (iii) an advance of a portion
of Credit Suisse's legal fees incurred in connection with the Restructure
Agreement in the amount of $80,000. Credit Suisse has agreed, pursuant to the
Restructure Agreement, to advance the monthly interest payments due by the
Company under the CSFB Loan until April 15, 2000. Such interest amounts shall,
to the extent not paid when due by the Company, become part of the outstanding
principal balance of the CSFB Loan on the date such interest becomes due.
Commencing April 16, 2000 and until 30 days following the closing of the sale of
the El Rancho property, interest accruing shall be paid by Turnberry/Las Vegas
Boulevard LLC ("Turnberry"), the purchaser of the El Rancho property. (See Note
20-B)

The Credit Suisse Credit Facility is evidenced by a convertible promissory
note (the "Credit Suisse Note") pursuant to which $10 million of the aggregate
principal amount of the CSFB Note can be converted in certain circumstances,
including on the maturity date of the CSFB Note, upon the prepayment of at least
$10 million in an aggregate principal amount of the CSFB Note or upon
acceleration of the CSFB Note, at the option of Credit Suisse, into shares of
the Company's Common Stock at a conversion price of $8.75 per share (subject to
adjustment in certain events). In addition, Credit Suisse was granted warrants
to purchase 1,044,000 shares (valued at $1,269,579) at an exercise price of
$4.375 per share (subject to adjustment in certain events). The warrants to
purchase 546,847 shares are immediately exercisable, have been valued at
approximately $1.6 million and have been recorded as original issue discount.
The warrants to purchase 497,153 shares became exercisable January 28, 1999,
following the consummation of the Delaware Settlement and were recorded as
financing expenses in the amount of $1,242,883 during the third quarter of
Fiscal 1999. (See Notes 13 and 20-B)

Credit Suisse also received 232,652 shares of the Company's Common Stock
upon the prior conversion of a $10.5 million promissory note issued by the
Company to LVEN in consideration for Credit Suisse's consent and advisory
services in connection with this transaction. Credit Suisse's right to receive
further shares upon the consummation of a proposed related acquisition by the
Company of Casino-Co Corporation ("Casino-Co"), a wholly-owned subsidiary of
LVEN, equal to 10% of the stock consideration paid by the Company for such
acquisition, has been terminated by the above described

49

Delaware Settlement. The Company has granted Credit Suisse certain registration
rights with respect to the above described warrants and shares.

The Credit Suisse Credit Facility also provides for both affirmative and
negative covenants, including financial covenants such as tangible net worth, as
defined in the Credit Suisse Credit Facility. The Company's non-compliance with
certain non-financial covenants at December 31, 1998 were waived on January 28,
1999 in connection with the Delaware Settlement. (See Note 4)

On January 28, 1999, a portion of the proceeds from the Greenwood
Transaction and $2,500,000 held in escrow was used to reduce the principal
balance on the Credit Suisse Note to $30.5 million and to pay a 2% prepayment
fee of $500,000, recorded as financing expenses, to Credit Suisse. (See Note 3)

(B) On January 28, 1999 in connection with the Delaware Settlement, the
Company executed a note (the "Trustee Note") in the principal amount of
$3,558,032 to the Chapter 11 Bankruptcy Trustee for the estate of Robert E.
Brennan (the "Trustee") in order to purchase 2,904,016 shares of the Company's
Common Stock from NPD. Pursuant to the Trustee Settlement associated with the
Delaware Settlement, the Trustee received: (a) a pay down on the NPD Note from
the original principal balance of $5,808,032 to $3,558,032; (b) a promissory
note from ITB in the amount of $3,558,032 (the "ITB Note"), on substantially the
same terms as the NPD Note, except that the ITB Note becomes due and payable on
the earlier to occur of (i) January 15, 2001, or (ii) the closing of either the
sale of the Company's non-operating El Rancho hotel and casino property in Las
Vegas, Nevada (the "El Rancho Property"), or the sale of Garden State Park (the
"Garden State Property"); (c) a security interest in the NPD Shares; (d) the
payment of the costs and expenses incurred by the Bankruptcy Trustee in
connection with the Delaware Settlement and the Trustee Settlement; (e)
subordinate interests in both the El Rancho Property and the Garden State
Property; and (f) an escrow of the July 15, 1999 interest payment due on the ITB
Note.

In connection with the January 21, 2000 Restructure Agreement with Credit
Suisse, the Trustee entered into an agreement with the Company wherein: (i) the
amounts due under the Trustee Note are due at the earlier of (a) June 1, 2000 or
(b) the date on which the latter of the Garden State Park or El Rancho property
is sold, provided that the sale of the latter will satisfy the remaining balance
on the CSFB Loan and the Trustee Note; (ii) all interest due under the Trustee
Note will be accrued and deferred until the maturity date of the Note; and (iii)
the Company shall reimburse the Trustee for legal and accounting fees up to
$20,000, which amount will be advanced by the Trustee and added to the
outstanding principal balance of the Trustee Note.

(C) On February 2, 1995, the Company entered into an agreement with the
former owner of Freehold Raceway whereby the $12.5 million balance of the
purchase price of the Freehold Raceway was financed by an eight (8) year
promissory note at 80% of the prevailing prime rate, not to exceed 6%. The note
was secured by a mortgage on the land and buildings at Freehold Raceway. This
note was paid in connection with the sale of the Freehold assets (See Notes 3
and 6)

(D) On February 2, 1995, the seller of Freehold Raceway advanced to
Freehold Raceway $2,584,549 towards the retirement of $5.2 million of existing
debt on Freehold Raceway. The seller received from Freehold Raceway in fiscal
1995, a promissory note evidencing the indebtedness secured by mortgage on the
racetrack property and other collateral. This note was paid in connection with
the sale of the Freehold assets (See Note 3)

50

(E) In connection with the January 28, 1999 lease transactions for the
Garden State Park facility, the Company purchased the undepreciated balance of
equipment located at Garden State Park and a liquor license owned by an
unaffiliated third party, Service America Corporation, for $500,000 ($100,000 of
which will be paid by the lessee when title is transferred to Pennwood, which
event has not occurred as of March 1, 2000) financed by a five (5) year
promissory note at a 6% interest rate. The Company paid $100,000 on June 1,
1999, $99,200 on December 28, 1999 and is scheduled to make principal payments
of $80,000 plus interest on December 28th for the next three years. (See Note 6)

(F) In connection with the January 28, 1999 lease transactions for the
Garden State Park facility, a note associated with certain equipment at the
Garden State Park facility will be paid by Greenwood as part of the lease
agreement.

(12) INCOME TAX EXPENSE

In the event the Company incurs income taxes in the future, any future
income tax benefits resulting from the utilization of net operating losses and
other carryforwards existing at June 30, 1993 to the extent resulting from a
quasi-reorganization of the Company's assets effective June 30, 1993, including
those assets associated with the possible sale of the Garden State Property,
will be excluded from the results of operations and credited to paid in capital.

The Company's income tax expense for the years ending June 30, 1998 and
1997 relates to New Jersey income taxes for its Freehold Raceway operations and
for the fiscal year ended June 30, 1999 relates to New Jersey income taxes for
its Freehold Raceway operations and for the sale of the property.

At June 30, 1993, the Company effected a quasi-reorganization in conformity
with generally accepted accounting principles. The effect of the
quasi-reorganization was to decrease asset values for financial reporting, but
not for Federal income tax purposes. Accordingly, depreciation expense for
Federal income tax purposes continues to be based on amounts that do not reflect
the accounting quasi- reorganization.

The Company has net operating loss carryforwards aggregating approximately
$210,210,000 at June 30, 1999 expiring in the years June 30, 2002 through June
30, 2018. During the fiscal year ended June 30, 1999, the Company utilized
approximately $2,022,000 of the net operating loss carryforward to offset the
taxable income for June 30, 1999. SFAS No. 109 requires the establishment of a
deferred tax asset for all deductible temporary differences and operating loss
carryforwards. Because of the uncertainty that the Company will generate income
in the future sufficient to fully or partially utilize these carryforwards,
however, the deferred tax asset of approximately $88,000,000 is offset by a
valuation allowance of the same amount. Accordingly, no deferred tax asset is
reflected in these financial statements.

Certain amounts of the net operating loss carryforward may be limited due
to possible changes in the Company's stock ownership. In addition, the sale of
Common Stock by the Company to raise additional operating funds, if necessary,
could limit the utilization of the otherwise available net operating loss
carryforwards. The grant and/or exercise of stock options by others would also
impact the number of shares which could be sold by the Company or by significant
stockholders without affecting the net operating loss carryforwards.

51

The Company has the following carryforwards to offset future taxable income at
June 30, 1999:

Net Operating Loss Year End
Carryforwards Expiration Dates
------------- ----------------

$45,750,000 6/30/2002

26,400,000 6/30/2003

19,900,000 6/30/2004

15,600,000 6/30/2005

11,800,000 6/30/2006

90,760,000 6/30/2007
___________ through 6/30/2013

$210,210,000
============

(13) COMMITMENTS AND CONTINGENCIES

A state has asserted a tax claim for the period June 30, 1988 to June 30,
1991 (during which the Company maintained an accounting office in the state) for
a Foreign Corporate Franchise Tax in the approximate amount of $400,000 (which
amount was accrued in Fiscal 1998), not taking into consideration any interest
or penalties that may be assessed. At this time, the Company cannot predict the
final amount which may be due. It is likely that litigation will have to
commence in the courts to pursue a compromise of the amount due. It is unknown
at this time whether the Company will be successful in abating all or part of
the tax due.

During the third quarter of Fiscal 1999, the Company and certain of its
officers and directors and former officers and directors received subpoenas from
the Securities and Exchange Commission (the "SEC") relating to certain
transactions and reports. The Company has fully cooperated with the SEC's
investigation.

Effective December 3, 1999, the Board of Directors accepted the resignation
of Christopher C. Castens, the Company's Secretary and General Counsel. During
the second quarter of Fiscal 2000, the Company paid $79,846 in severance
payments in association with his employment contract.

The Company has operating lease commitments for Fiscal 2000 in the amount
of $6,980 and possible construction contract commitments on the El Rancho
property in the amount of approximately $217,000.

The Company is responsible for remediation costs associated with an
environmental site on the Freehold Raceway property. The Company has accrued
what it believes to be the total cost of remediation. At June 30, 1999 and 1998,
the Company had accrued $300,000 and $100,000, respectively, for remediation
costs.

52

In connection with the January 28, 1999 lease transactions for the Garden
State Park facility, a note associated with certain equipment at the Garden
State Park facility will be paid by Greenwood as part of the lease agreement. In
the event that the Company or Greenwood terminates its lease agreement prior to
July 2001 when the note is fully paid, the Company will be responsible for the
monthly note payments of approximately $17,000.

The Company's debt with CSFB is due on June 30, 2000. Unless the sale of
the El Rancho property and Garden State Park property is consummated prior to
that date, the Company will be in default in connection with the CSFB loan
agreement. Additionally, the cash proceeds from the sales must be in an amount
sufficient to satisfy the loan due on the trustee note together with accrued
interest. The total amount due on June 30, 2000 to satisfy the CSFB loan
together with accrued interest and fees and the trustee note together with
accrued interest is approximately $39,500,000. The proceeds from the sale of the
El Rancho and Garden State Park properties are expected to be sufficient to meet
this obligation.

LEGAL PROCEEDINGS

On or about September 10, 1997, three actions were filed in the Delaware
Court of Chancery in and for New Castle County (the "Delaware Chancery Court"),
each of which named the Company as a nominal defendant and one of which was
subsequently dismissed (collectively, the "Delaware Actions"). Additionally, two
actions were filed in New Jersey naming the Company as a nominal defendant
(collectively, the "New Jersey Actions"), one of which is a derivative action
filed on or about February 24, 1998 in the United States District Court for the
District of New Jersey (the "New Jersey District Court"), and the other is a
purported class action filed on or about July 15, 1998 in the Superior Court of
New Jersey (the "New Jersey Superior Court"). As described more fully below,
pursuant to the terms of a Stipulation and Agreement of Compromise, Settlement
and Release dated July 2, 1998 (the "Delaware Stipulation"), upon satisfaction
of certain conditions set forth in the Delaware Stipulation, the Delaware
Actions were fully and finally dismissed with prejudice, and the parties
provided mutual releases of all claims related to the actions thereunder on
January 28, 1999 (the "Delaware Settlement"). See "Delaware Settlement."
Further, pursuant to a memorandum of understanding entered into on August 18,
1998 (the "New Jersey Memorandum"), upon satisfaction of certain conditions, the
New Jersey Actions are to be fully and finally dismissed with prejudice, and the
parties are to provide mutual releases of all claims related to the actions
thereunder (the "New Jersey Settlement"). See "New Jersey Settlement."

QUIGLEY, ET AL. V. DESANTIS, ET AL.

Quigley, Leo and The Family Investment Trust v. DeSantis, Abraham, Coelho,
Scholl, Zappala, Corazzi and Las Vegas Entertainment Network, Inc. and
International Thoroughbred Breeders, Inc., C.A. No. 15919 (the "Quigley
Action"), was filed in the Delaware Court of Chancery on or about September 10,
1997, and alleged that the director defendants therein acted in contravention of
ITB's by-laws, Delaware law and their fiduciary duties. The Quigley Action
sought a declaratory judgement that the actions taken by the director defendants
violated ITB's by-laws, Delaware law and the director defendants' fiduciary
duties and that such actions are void and should be rescinded by the Court.
Moreover, the Quigley Action sought damages suffered by ITB in connection with
such challenged actions. ITB asserted counterclaims against Quigley, Leo,
Murray, and Dees Jr., alleging that such counterclaim defendants contravened
Delaware law and such counterclaim defendants' fiduciary duties. In connection
with such counterclaims, ITB sought injunctive relief preventing the
counterclaim defendants from interfering with the Company's day-to-day business
affairs, the establishment of a constructive trust over certain assets, a

53

declaration that a certain supermajority by-law was repealed and money damages.
Murray further counterclaimed against ITB for wrongful termination and failure
to pay certain compensation. All allegations of either the plaintiffs or the
counterclaim plaintiffs were denied.

The Quigley Action was fully and finally dismissed and settled in
connection with the January 28, 1999 consummation of the Delaware Settlement.

REKULAK V. DESANTIS, ET AL.

On or about September 11, 1997, the action entitled Rekulak v. DeSantis,
Abraham, Coelho, Scholl, Zappala, Corazzi and Las Vegas Entertainment Network,
Inc. and International Thoroughbred Breeders, Inc., C.A. No. 15920, was brought
in the Delaware Court of Chancery alleging that the defendants therein acted in
contravention of ITB's by-laws, Delaware law and the director defendants'
fiduciary duties (the"Rekulak Action"). The allegations made and the relief
sought in the Rekulak Action are virtually identical to the allegations made and
relief sought in the Quigley Action.

The Rekulak Action was fully and finally dismissed in connection with the
January 28, 1999 consummation of the Delaware Settlement.

See "Other Litigation Relating to Delaware Action" below for additional
information.

DELAWARE SETTLEMENT

On January 28, 1999, the Company fully and finally consummated the
settlement and dismissal of the following actions: Quigley et al. v. DeSantis et
al., C.A. No. 15919, in the Court of Chancery of the State of Delaware; Rekulak
v. DeSantis et al., C.A. No. 15920, in the Court of Chancery of the State of
Delaware; Green v. DeSantis, et al., C.A. No. 97-CV-5657, in the New Jersey
District Court. These actions were settled in connection and accordance with the
Stipulation and Agreement of Compromise, Settlement and Release entered into on
July 2, 1998 to resolve the above action entitled Quigley et al. v. DeSantis et
al. (the "Delaware Settlement").

Pursuant to the terms of the Delaware Settlement, the Company purchased
from NPD, Inc. ("NPD") approximately 2.9 million shares of ITB common stock (the
"NPD Shares") for $4.6 million cash and the assumption by ITB of a $5.8 million
promissory note originally issued by NPD to acquire the NPD Shares, held by
Donald F. Conway, Chapter 11 Trustee for the Bankruptcy Estate of Robert E.
Brennan (the "Bankruptcy Trustee"). In addition, pursuant to the terms of the
Delaware Settlement and with the approval of the United States Bankruptcy Court
for the District of New Mexico in an action in which AutoLend Group, Inc. is the
debtor, NPD returned to AutoLend Group, Inc. the $2 million originally pledged
by AutoLend Group, Inc. to secure the aforementioned $5.8 million promissory
note (the "NPD Note"). ITB understands that former ITB director Nunzio P.
DeSantis is Chairman, President and a principal stockholder of AutoLend Group,
Inc., and former ITB director Anthony Coelho is a director of AutoLend Group,
Inc.

The approval of certain transactions between ITB and the Bankruptcy Trustee
by the United States Bankruptcy Court for the District of New Jersey in the
action entitled In re Robert E. Brennan, C.A. No. 95-35502, was a condition
precedent to the consummation of the Delaware Settlement. This approval was duly
received and the Company consummated a separate settlement with the Bankruptcy
Trustee

54

necessary to consummate the Delaware Settlement (the "Trustee Settlement").
Pursuant to the Trustee Settlement, the Bankruptcy Trustee received: (a) a pay
down on the NPD Note from the original principal balance of $5,808,032 to
$3,558,032 (see Note7-B); (b) a promissory note from ITB in the amount of
$3,558,032 (the "ITB Note"), on substantially the same terms as the NPD Note,
except that the ITB Note becomes due and payable on the earlier to occur of (I)
January 15, 2001, or (ii) the closing of either the sale of the Company's
non-operating El Rancho hotel and casino property in Las Vegas, Nevada (the "El
Rancho Property"), or the sale of Garden State Park (the "Garden State
Property"); copyright a security interest in the NPD Shares; (d) the payment of
the costs and expenses incurred by the Bankruptcy Trustee in connection with the
Delaware Settlement and the Trustee Settlement; (e) subordinate interests in
both the El Rancho Property and the Garden State Property; and (Freehold
Raceway) an escrow of the July 15, 1999 interest payment due on the ITB Note. As
a result of the Trustee Settlement, the Company secured (a) the power to
consummate the Delaware Settlement, (b) releases from the Bankruptcy Trustee in
favor of all parties to the Delaware Settlement, including the Company, and
copyright the right to defer certain interest payments due under the ITB Note
until the maturity of such note.

Upon consummation of the Delaware Settlement, Nunzio P. DeSantis, Anthony
Coelho, and Joseph Zappala immediately resigned from the Company's board of
directors and terminated any and all employment agreements or consulting
arrangements with the Company. Francis W. Murray and Robert J. Quigley remained
directors, and during the quarter ended March 31, 1999, John U. Mariucci and
James J. Murray were elected by the remaining directors to serve on the board of
directors until the next annual stockholders' meeting.

Also pursuant to the Delaware Settlement, Las Vegas Entertainment Network,
Inc. ("LVEN") was granted the exclusive right to sell the El Rancho Property
until November 20, 1998 and the co-extensive right, along with the Company, to
sell the El Rancho Property until April 19, 1999. Beginning January 19, 1999,
and ending upon the earlier of a sale of the El Rancho Property or April 19,
1999, LVEN was required to pay one-half of the carrying costs associated with
maintaining the El Rancho Property. LVEN also obtained the right, exercisable
from March 20, 1999 until April 19, 1999, to refinance the El Rancho Property
and thereby obtain the extended right to sell the El Rancho Property until the
earlier of (a) one year from April 19, 1999 or (b) the midpoint of the term of
the refinancing loan (the "Refinancing Option"). Neither LVEN, nor the Company
have sold the El Rancho Property, and LVEN did not exercise the Refinancing
Option. If the Company sells or refinances the El Rancho property after April
19, 1999 for an amount in excess of $44,200,000, plus one half of the carrying
costs from January 20, 1999 to April 19, 1999, plus the customary transaction
costs incurred by the Company in such sale (the "Threshold Amount"), then LVEN
shall receive from such cash proceeds in excess of the Threshold Amount up to
the amount of $12,000,000 of cash sale proceeds over and above the Threshold
Amount, out of which LVEN will direct that the first $2,000,000 be paid over to
NPD. NPD is owned by Nunzio DeSantis, the Company's former Director and CEO and
Tony Coelho, the Company's former Director and Chairman of the Board. There can
be no assurances that the Company or LVEN will be able to dispose of the El
Rancho Property as contemplated by the Delaware Settlement.

In exchange for the foregoing, LVEN (a) executed and delivered releases to
all parties to the Delaware Settlement, including the Company and Credit Suisse,
(b) returned to ITB for immediate cancellation the 2,093,868 shares of ITB
common stock (the "LVEN Shares") previously issued to Casino-Co Corporation, a
subsidiary of LVEN, in exchange for the cancellation of a certain $10.5 million
note plus accrued interest from ITB to LVEN, which note remains canceled, (c)
released any and all LVEN or

55

Casino-Co Corporation interests in the NPD Shares, and (d) cancelled any and all
agreements of any kind or nature whatsoever between LVEN and its affiliates and
ITB or any of its subsidiaries.

The foregoing summary of the terms and transactions relating to the
Delaware Settlement and the Trustee Settlement is qualified by reference to the
actual documents filed with the respective courts in the actions discussed
above.

HARRIS V. DESANTIS, ET AL.

The first New Jersey Action, filed on February 24, 1998 in the New Jersey
District Court, captioned Myron Harris, derivatively on behalf of International
Thoroughbred Breeders, Inc. v. Nunzio P. DeSantis, Anthony Coelho, Kenneth W.
Scholl, Michael Abraham, Joseph Zappala, Frank A. Leo, Robert J. Quigley,
Charles R. Dees, Jr. and Francis W. Murray ("Harris-Federal"), C.A. No. 98-CV-
517(JBS), is a derivative suit brought by a stockholder of the Company. The
Harris-Federal complaint alleges that various individual defendants acted in
contravention of ITB's by-laws and their fiduciary duties by (i) causing the
Company to undertake various actions, including the issuance of a significant
amount of the Company's common stock, in violation of the Supermajority By-law;
(ii) usurping certain corporate opportunities allegedly belonging to ITB; and
(iii) causing the Company to fail to file current, audited financial statements.

On May 4, 1998, all defendants filed a motion to dismiss or stay the
Harris-Federal action, pending resolution of the Quigley action. On May 4, 1998,
the plaintiff filed an amended complaint to, among other things, add Howard J.
Kaufman, a stockholder of the Company, as an additional plaintiff.

As described more fully below, pursuant to the New Jersey Memorandum and
the satisfaction of certain conditions set forth therein, the Harris-Federal
action is to be fully and finally dismissed with prejudice, and the parties are
to provide mutual releases of all claims related to the action. See "New Jersey
Settlement."

HARRIS V. DESANTIS, ET AL.

A second New Jersey Action, filed on July 15, 1998 in the New Jersey
Superior Court, captioned Myron Harris and Howard Kaufman v. Nunzio P. DeSantis,
Anthony Coelho, Kenneth W. Scholl, Michael Abraham, Joseph Zappala, Frank A.
Leo, Robert J. Quigley and Charles R. Dees, Jr. ("Harris-State" and,
collectively with the Harris-Federal action, the "New Jersey Actions"),
Cam-L-5534-98, is a purported class action suit brought by the same plaintiffs
as the Harris-Federal action. The complaint alleges that the Harris-State
defendants breached their fiduciary duties to the Company's stockholders by
failing to file timely audited financial statements for the fiscal year ended
June 30, 1997, resulting in the indefinite suspension of trading of the
Company's stock on AMEX.

Prior to filing pleadings in response to the Harris-State complaint, ITB
and the defendants in the New Jersey Actions entered into a memorandum of
understanding dated August 18, 1998 (the "New Jersey Memorandum") pursuant to
which upon satisfaction of multiple conditions (including the parties' approval
of definitive settlement documents, notice of the settlement to ITB's past and
current stockholders, and the approval of the New Jersey Superior Court and the
New Jersey District Court), the New Jersey Actions are to be fully and finally
dismissed with prejudice, and ITB and all defendants are to receive a release
from all holders of ITB common and preferred stock of any claims arising out of
the facts and transactions

56

set forth in the complaints in the New Jersey Actions (the "Proposed New Jersey
Settlement"). The New Jersey Memorandum provides that the Proposed New Jersey
Settlement would be submitted for approval to the New Jersey Superior Court,
that a fee petition would be submitted by plaintiffs' attorneys in the New
Jersey Actions for approval by the New Jersey District Court, and that the
Harris-Federal action would be dismissed on the grounds that the plaintiffs'
claims are barred and released as a result of the settlement and dismissal of
the Quigley Action by the Delaware Court of Chancery on October 6, 1998.

NEW JERSEY SETTLEMENT

The New Jersey Actions are currently at a standstill as the parties have
entered into the New Jersey Memorandum. Subject to the approval of the New
Jersey District Court, the Company will pay, on behalf and for the benefit of
the individual defendants in the New Jersey Actions, the aggregate sum of
$175,000 for plaintiffs' counsel fees and expenses in the New Jersey Actions.
Any incentive award to plaintiffs Harris and Kaufman would be paid out of this
$175,000 sum. Pursuant to the Proposed New Jersey Settlement, following the
implementation of the Delaware Settlement, the Board will restructure its Audit
Committee of the Company so as to facilitate the procurement and timely filing
of audited financial statements in the future. Further, the ITB Board will
establish a Relisting Committee for the purpose of attempting to secure the
relisting of the Company's common stock on a public market.

Pursuant to the Proposed New Jersey Settlement, the plaintiffs agreed not
to file objections to the Delaware Settlement. In addition, pursuant to the
Proposed New Jersey Settlement, upon consummation of the Delaware Settlement the
plaintiffs will move for a dismissal, with prejudice, of the Harris-Federal
action, and will provide releases to the defendants and the Company and all
others acting on the Company's behalf for any claims that were asserted or could
have been asserted in the Harris-Federal action. For settlement purposes only, a
class will be certified for Harris-State action consisting of all holders of the
Company's stock between October 13, 1997 (the date AMEX suspended trading of the
Company's stock) and the date the final order is entered to dismiss the
Harris-State action.

On June 17, 1999, the New Jersey Superior Court acted unilaterally to
dismiss the complaint in the Harris-State action filed under docket number
Cam-L-5534-98. On July 30, 1999, the plaintiffs in the Harris-State action filed
in the New Jersey Superior Court a second complaint, identical to the original
action and naming as defendants the same parties as the original complaint in
the Harris-State action, under docket number Cam-L-5620-99 (the "Second
Harris-State Complaint"). Subsequent to the filing of the Second Harris-State
Complaint, the terms of the Proposed New Jersey Settlement were amended to
expressly include the claims asserted by plaintiffs in the Second Harris-State
Complaint. Beginning in October 1999, plaintiffs in the Harris-State Action
began serving process of the Second Harris-State Complaint on certain of the
defendants.

The parties in the New Jersey Actions have resolved nearly all issues
necessary to execute the definitive settlement stipulation required to solicit
the requisite approval of the Proposed New Jersey Settlement by the New Jersey
Superior Court and the requisite approval by the New Jersey District Court of
the fee petition by plaintiffs' attorneys. Because of ITB's distressed financial
condition, the Company cannot agree to pay any amount approved by the New Jersey
District Court pursuant to the contemplated fee petition unless and until the
carrier of the Company's directors and officers liability insurance policy (the
"D&O Carrier") agrees to cover entirely the fee award and settlement
implementation costs. The Company is continuing to negotiate such issues with
the D&O Carrier.

57

On December 3, 1999, plaintiffs in the Harris-Federal action filed with the
New Jersey District Court a motion for an order enforcing the Proposed New
Jersey Settlement. On December 3, 1999, the New Jersey District Court entered an
order dismissing the Harris-Federal action without costs and without prejudice
to the plaintiffs' right to reopen the action within 60 days if the Proposed New
Jersey Settlement is not consummated. In light of the entry of this order, on
December 7, 1999, the New Jersey District Court dismissed as moot plaintiffs'
motion for an order enforcing the Proposed New Jersey Settlement. On January 6,
2000, plaintiffs in the Harris-Federal action moved to vacate the New Jersey
District Court's dismissal order and to pursue the original motion to enforce
the Proposed New Jersey Settlement.

In January 2000, the plaintiffs in the Harris-State action filed Requests
to Enter Default against those defendants who had not answered or otherwise
responded to the Second Harris-State Complaint. Counsel for the defendants in
the Harris-State action are currently engaged in negotiations with counsel for
the plaintiffs in an effort to reach an agreement that plaintiffs will take no
further action in prosecution of the Harris-State action while the parties are
finalizing the Proposed New Jersey Settlement.

ITB is hopeful that the Company and the D&O Carrier will reach an agreement
in the near future to allow the parties to the New Jersey Actions to proceed
with the Proposed New Jersey Settlement. There is no assurance that any such
agreement will be reached or that the Proposed New Jersey Settlement will be
approved by the New Jersey Superior Court and the contemplated fee petition will
be approved by the New Jersey District Court. No prediction can be made at this
time as to the outcome of the New Jersey Actions.

(See Note 4 - Litigation Settlement)

OTHER LITIGATION RELATING TO DELAWARE ACTION

In November 1997, two separate actions were filed in the New Jersey
District Court against various directors of the Company and other affiliated
parties. The Company is not a party to either of these actions, both of which
are summarized below:

NPD, INC. V. QUIGLEY, ET AL.

On or about November 17, 1997, an action entitled NPD, Inc. v. Quigley,
Francis W. Murray, Leo, Dees Jr., Mariucci, Koenemund and James J. Murray, C.A.
No. 97-CV-5657, was filed in the United States District Court for the District
of New Jersey, alleging that the defendants therein had engaged in fraudulent
and conspiratorial conduct in connection with a certain Stock Purchase Agreement
between Robert E. Brennan and NPD, Inc. ("the "NPD Action"). The NPD Action
sought compensatory and punitive damages. The Company was not a party to the NPD
Action.

The NPD Action was fully and finally dismissed and settled in connection
with the January 28, 1999 consummation of the Delaware Settlement.

58

GREEN V. DESANTIS, ET AL.

On or about October 30, 1997, the action entitled Green v. DeSantis,
Corazzi, Coelho, Las Vegas Entertainment Network, Inc. and NPD, Inc., C.A. No.
97-5359 (JHR), was filed in the United States District Court for the District of
New Jersey (the "Green Action"). The Green Action alleged that the defendants
therein acted in contravention of ITB's by-laws, their fiduciary duties and the
contractual obligations in connection with Robert W. Green's interests
pertaining to ITB. Plaintiff Green sought compensatory and punitive damages in
connection with the defendants' actions, an order enjoining defendants from
transferring, encumbering or alienating certain of the Company's common stock
which was subject to an option agreement between Green and NPD, Inc., an order
declaring certain shares of common stock of the Company to be a nullity, and
reformation of the aforementioned option agreement to extend the termination
date. The action raised claims substantially similar to those made in the
Quigley Action. The Company was not a party to the Green Action.

The Green Action was fully and finally dismissed and settled in connection
with the January 28, 1999 consummation of the Delaware Settlement.

OTHER LITIGATION

The Company is a defendant in two wrongful death actions arising out of
motor vehicle/pedestrian accidents at Freehold Raceway. The cases are in the
initial stages of discovery. The Company believes that it may have adequate
insurance coverage for the claims, however, because of the uncertainties, the
Company is unable to determine at this time the potential liability, if any. Any
claim for punitive damages would not be covered by insurance.

The Company is a defendant in various other lawsuits incidental to the
ordinary course of business. It is not possible to determine with any precision
the probable outcome or the amount of liability, if any, under these lawsuits;
however, in the opinion of the Company and its counsel, the disposition of these
lawsuits will not have material adverse effect on the Company's financial
position, results of operations, or cash flows.

(14) FAIR VALUE OF FINANCIAL INSTRUMENTS

As of June 30, 1999, in assessing the fair value of financial instruments,
the Company has used a variety of methods and assumptions, which were based on
estimates of market conditions and loan risks existing at that time. For certain
instruments, including cash and cash equivalents, investments, non-trade
accounts receivable and loans, and short-term debt, it was estimated that the
carrying amount approximated fair value for the majority of these instruments
because of their short-term maturity. Estimated discounted value of future cash
flows, has been used to determine fair value for long term debt. The carrying
amounts of long term debt approximate fair value since the Company's interest
rates approximate current interest rates.

(15) RETIREMENT PLANS

The Company maintains a Retirement Plan under the provisions of section
401(k) of the Internal Revenue Code of 1986, as amended (the "Code") covering
all its non-union full time employees who have

59

completed one year of service. The Company's basic contribution under the plan
is 4% of each covered employee's compensation for such calendar year. In
addition, the Company contributes up to an additional 50% of the first 4% of
compensation contributed by any covered employee to the plan (an employee's
maximum contribution is $10,000 factored for inflation annually). The Company's
expense totaled $137,091, $216,848 and $238,201 for the fiscal years ended June
30, 1999, 1998 and 1997, respectively.

For collectively bargained, multi-employer pension plans, contributions are
made in accordance with negotiated labor contracts and generally are based on
the number of hours worked. With the passage of the Multi-Employer Pension Plan
Amendments Act of 1980 (the "Act"), the Company may, under certain
circumstances, become subject to liabilities in excess of contributions made
under collective bargaining agreements. Generally, these liabilities are
contingent upon the termination, withdrawal, or partial withdrawal from the
plans. Total contributions charged to expense under all collectively bargained
multi-employer pension plans were $442,110, $1,089,070, and $1,106,906 in
fiscals 1999, 1998 and 1997, respectively.

(16) STOCK OPTIONS AND WARRANTS

(A) EMPLOYEE AND NON-EMPLOYEE OPTIONS

In December 1994, the Company's Board of Directors and stockholders adopted
and approved the 1994 Employees' Stock Option Plan ("Plan"). The Plan permits
the grant of options to purchase up to 475,000 shares of Common Stock, at a
price per share no less than 100% of the fair market value of the Common Stock
on the date the option is granted. The price would be no less than 110% of fair
market value in the case of an incentive stock option granted to any individual
who owns more than 10% of the Company's outstanding Common Stock. The Plan
provides for the granting of both incentive stock options intended to qualify
under section 422 of the Code, and non-qualified stock options which do not
qualify. No option may have a term longer than 10 years (limited to five years
in the case of an option granted to a 10% or greater stockholder of the
Company). Options under the Plan are non-transferable except in the event of
death and are only exercisable by the holder while employed by the Company.
Unless the Plan is terminated earlier by the Board, the Plan will terminate in
June 2004.

In addition, the Company has also granted non-qualified stock options for
the purchase of Common Stock to employees and directors of the Company that are
not part of the above mentioned Plan. These options have been granted with terms
of five and ten years. These options have been granted at prices per share that
have been below, equal to or above the fair market value on the grant date.

60

The following table contains information on stock options for options
granted from the Plan and options granted outside the Plan for the three year
period ended June 30, 1999:

Stock Options
-------------

Exercise Weighted
Number Price Range Average
of Shares Per Share Price
--------- --------- -----
Outstanding at June 30, 1996 1,275,000 $4.00 - $5.875 $ 4.59

Granted 875,000 $4.00 - $5.00 $ 4.51

Canceled (550,000) $4.00 - $5.875 $ 4.43
---------
Outstanding at June 30, 1997 1,600,000 $4.00 - $5.875 $ 4.59

Granted 300,000 $4.00 $ 4.00
---------
Outstanding at June 30, 1998 1,900,000 $4.00 - $5.875 $ 4.50

Canceled (350,000) $4.00 - $5.00 $ 4.14
---------
Outstanding at June 30, 1999 1,550,000 $4.00 - $5.875 $ 4.58
=========

Exercise Weighted
Price Range Average
Option shares Per Share Price
------------- --------- -----
Exercisable at June 30:

1997 1,600,000 $4.00 - $5.875 $4.59
--------- -------------- -----
1998 1,900,000 $4.00 - $5.875 $4.50
--------- -------------- -----
1999 1,550,000 $4.00 - $5.875 $4.58
--------- -------------- -----
Options available for
future grant under
the Plan at June 30: 1994 Plan
---------
1997 275,000

1998 275,000

1999 275,000

61

The following table summarizes information about stock options outstanding
at June 30, 1999:

Ranges Total
--------------------------- -------------
Range of exercise prices $4.00 - 4.625 $5.00 - 5.875 $4.00 - 5.875

Outstanding options:

Number outstanding at June 30, 1999 975,000 575,000 1,550,000
--------------------------- -------------
Weighted average remaining
contractual life (years) 6.80 4.40 5.90
--------------------------- -------------
Weighted average exercise price $4.14 $5.30 $4.58
--------------------------- -------------

Exercisable options:

Number outstanding at June 30, 1999 975,000 575,000 1,550,000
--------------------------- -------------
Weighted average exercise price $4.14 $5.30 $4.58
--------------------------- -------------

Weighted Weighted
Weighted Average Fair Value of Number of Average Average
Options Granted Shares Exercise Price Fair Value
- --------------- --------- -------------- ----------
During Fiscal Year Ended:
- -------------------------
June 30, 1997:

Below Market -- -- --

At Market -- -- --

Above Market 875,000 $4.51 $1.78
-------
875,000
-------

June 30, 1998:
------------------------- ----------
Below Market 300,000 $4.00 $2.62

At Market -- -- --

Above Market -- -- --
-------
300,000
-------

62

Options to purchase an aggregate of 6,000,000 shares of Common Stock that
were to have been granted, subject to stockholder approval, to the Company's
former Chief Executive Officer and former Chairman of the Board and are not
reflected in the above tables. On August 21, 1997, the Company granted
non-qualified stock options to purchase an aggregate of 300,000 shares of Common
Stock to certain former directors. Upon consummation of the Delaware Settlement,
options to purchase an aggregate of 6,300,000 shares of Common Stock were
terminated. (See Note 4)

During 1995, the Financial Accounting Standards Board adopted Statement of
Financial Accounting Standards No. 123 ("SFAS 123"), "Accounting for Stock-Based
Compensation," which has recognition provisions that establish a fair value
based method of accounting for stock-based employee compensation plans and
established fair value as the measurement basis for transactions in which an
entity acquires goods or services from non-employees in exchange for equity
instruments. SFAS 123 also has certain disclosure provisions. Adoption of the
recognition provisions of SFAS 123 with regard to these transactions with
non-employees was required for all such transactions entered into after December
15, 1995, and the Company adopted these provisions as required. The recognition
provision with regard to the fair value based method of accounting for
stock-based employee compensation plans is optional. Accounting Principles Board
Opinion No. 25 "Accounting for Stock Issued to Employers" ("APB 25") uses what
is referred to as an intrinsic value based method of accounting. The Company has
decided to continue to apply APB 25 for its stock- based employee compensation
arrangements. Accordingly, no compensation cost has been recognized. The Company
estimates the fair value of each option and warrant granted on the date of grant
using the Black-Scholes option-pricing model with the following assumptions: a
weighted average risk-free interest rate of 6.3%, a weighted average expected
life of 5 years based on Company expectations, and a weighted average expected
volatility of 56.29%.

63

Had compensation cost for the Company's employee stock option plan been
determined based on the fair value at the grant date for awards under the Plan
consistent with the method of SFAS 123, the Company's net loss and net loss per
share would have been increased to the pro forma amounts indicated below:

Years Ended June 30,
1999 1998 1997

Net (Loss): As Reported
(Loss) Before Discontinued Operations &
Extraordinary Item $ (16,034,769) $ (25,468,850) $ (15,144,053)

Income from Discontinued Operations 8,144,072 7,207,633 1,594,096

Extraordinary Item -0- (3,837,625)
------------------------------------------------------
Net (Loss) $ (7,890,697) $ (18,261,217) $ (17,387,582)
------------------------------------------------------

Pro Forma Net (Loss)
(Loss) Before Discontinued Operations &
Extraordinary Item $ (16,034,769) $ (25,468,850) $ (16,090,903)

Income from Discontinued Operations 8,144,072 7,207,633 1,594,096

Extraordinary Item -0- (3,837,625)
------------------------------------------------------
Net (Loss) $ (7,890,697) $ (18,261,217) $ (18,334,432)
------------------------------------------------------
Net (Loss) Per Share: As Reported
(Loss) Before Discontinued Operations &
Extraordinary Item $ (1.38) $ (1.82) $ (1.29)

Income from Discontinued Operations 0.71 0.51 0.14

Extraordinary Item -0- -0- (0.33)
------------------------------------------------------
Net (Loss) $ (0.67) $ (1.31) $ (1.48)
------------------------------------------------------

64

Years Ended June 30,
--------------------
1999 1998 1997
---- ---- ----

Pro Forma Net (Loss) Per Share
(Loss) Before Discontinued Operations &
Extraordinary Item $ (1.38) $ (1.82) $ (1.38)

Income From Discontinued Operations 0.71 0.51 0.14

Extraordinary Item -0- -0- (0.33)
-----------------------------------------------------
Net (Loss) $ (0.67) $ (1.31) $ (1.57)
-----------------------------------------------------

(B) WARRANTS

During the fiscal year ended June 30, 1996, the Company issued warrants to
purchase 925,000 shares of Common Stock in connection with its financing
activities and the purchase of the El Rancho Property. During the fiscal year
ended June 30, 1997, the Company issued warrants to purchase 746,847 shares of
Common Stock in connection with its financing activities, including the Credit
Suisse Credit Facility. During the fiscal year ended June 30, 1999, the Company
issued warrants to purchase 932,153 shares of Common Stock in connection with
its financing activities, including the Credit Suisse Credit Facility.

The fair value of warrants issued during the years ended June 30, 1999,
1998 and 1997 was $1,269,179, $0 and $1,893,451, respectively. The 1999 warrants
were accounted for as financing expenses. The 1997 warrants were accounted for
as deferred financing costs and costs associated with the acquisition of the El
Rancho Property. The deferred financing costs were amortized over the terms of
the related indebtedness. The fair value of the warrants issued in connection
with the acquisition of the El Rancho Property was capitalized and would be
amortized if and when the facility became operational; however, the Company has
determined to dispose of the El Rancho Property.

Certain deferred financing costs recorded by the Company in connection with
the Foothill and other financing agreements were expensed during the fiscal year
ended June 30, 1997. Total expense recorded by the Company during the fiscal
year ended June 30, 1997 associated with these warrants amounted to $1,287,258.

65

Warrants have been granted to acquire Common Stock at various prices above,
below and at fair market value at the date of grant. The following table
contains information on warrants for the three-year period ended June 30, 1999:

Warrants
--------
Exercise Weighted
Number Price Range Average
Of Shares Per Share Price
--------------------------------------

Outstanding at June 30, 1996 925,000 $4.00 - $5.25 $4.76

Granted 746,847 $4.375- $5.00 $4.54
----------
Outstanding at June 30,
1997 and 1998 1,671,847 $4.00 - $5.25 $4.66

Granted During Fiscal 1999 497,153 $4.375 $4.375

Granted During Fiscal 1999 435,000 $2.50 $2.50
----------
Outstanding at June 30, 1999 2,604,000 $2.50 - $5.25 $4.25
==========

(17) DIVIDENDS

The Company is required to pay to the holders of the Company's Series A
Convertible Preferred Stock ("Preferred Stock") a cash dividend from any net
racetrack earnings, as defined, of Garden State Park. No dividends were required
for fiscals 1999, 1998 and 1997. The Preferred Stock has liquidation rights of
$100 per share plus accrued dividends, if any.

(18) RELATED PARTY TRANSACTIONS

Mr. DeSantis, former director and Chief Executive Officer of the Company,
and Mr. Joseph Corazzi, President and Chairman of LVEN, each own one-half of the
stock of D&C Gaming, Inc.. On July 1, 1997, the Company paid for an option to
acquire certain leasehold interests relating to two New Mexico racetracks for a
non-refundable deposit of $600,000 which was to be credited towards the purchase
price. In the Delaware litigation, the minority Board members challenged the
authorization and enforceability of certain agreements, including this option
agreement. In connection with the Delaware Settlement, the $600,000 due to the
Company was offset by the price the Company paid to purchase the 2,904,016
shares of the Company's Common Stock held by NPD. (See Notes 4 & 13).

In connection with the NPD acquisition, NPD borrowed the sum of $2,900,000
from Casino-Co, from whom the Company purchased the El Rancho Property and with
whom the Company has various contractual obligations with respect to the
purchase of the El Rancho Property including, but not limited to, a profit
participation note and an entertainment management contract. Upon consummation
of the Delaware Settlement, the profit participation note and the entertainment
management contract were terminated. The Casino-Co loan, together with accrued
interest, was repaid in July 1997. Mr. DeSantis holds options to acquire
1,500,000 shares of LVEN's common stock at an exercise price of $1.00 per share.
Mr. DeSantis was also paid a commitment fee by LVEN of $110,000 in connection
with a standby financing commitment he made to LVEN on October 31, 1996 as
replacement financing for the El Rancho

66

Property. This standby financing commitment was never drawn upon and was
terminated in January 1997. Mr. DeSantis is a 25% owner in Electric Media
Company, Inc., ("EMC"), a Delaware corporation and subsidiary of LVEN, for which
investment Mr. DeSantis paid $375,000.

Mr. DeSantis owned 80% of Nordic Gaming Corporation, an Ontario corporation
which purchased the Fort Erie Racetrack in Fort Erie, Canada on August 27, 1997.
The Company was offered, but the Executive Committee rejected, the opportunity
to make this investment because of the demands on cash flow. Nordic Gaming
borrowed $182,000 from LVEN for a deposit on the purchase which was repaid to
LVEN at the closing. LVEN has also provided Nordic Gaming with a $1.3 million
secured line of credit to fund operating losses at the Fort Erie Racetrack. On
May 15, 1998, Mr. DeSantis sold his Nordic Gaming shares to Erie Gaming
Organization, Inc., an Ontario corporation which holds the other 20% interest in
Nordic Gaming. In consideration for his shares, Mr. DeSantis received $10.00 and
each of Nordic Gaming, Mr. DeSantis and Erie Gaming exchanged mutual general
releases. In the Delaware litigation, the minority Board members challenged the
decision of the Executive Committee to reject the opportunity to purchase the
Fort Erie Racetrack. In connection with the Delaware Settlement, the litigation
was dropped.

Pursuant to the Tri-Party Agreement executed in connection with the Credit
Suisse Credit Facility, the Company issued an aggregate of 2,326,520 shares of
Common Stock (based on a value of $5.00 per share) in exchange for cancellation
of the Casino-Co Note plus accrued interest. Of such shares, 2,093,868 shares
were issued to Casino-Co (the "Conversion Shares") and 232,652 shares were
issued to Credit Suisse in consideration for its consent and for certain
advisory services on the transaction. In accordance with the Tri-Party
Agreement, the Company had also agreed, subject to, among other things, an
independent valuation, receipt of a fairness opinion from an independent
investment banking firm and Board and stockholder approval, to complete the
Casino-Co transaction. LVEN and Casino-Co granted Mr. DeSantis a proxy to vote
any or all of the Conversion Shares until the occurrence of certain events and
agreed to grant Mr. DeSantis a proxy to vote any or all of the shares to be
issued to LVEN in the Casino-Co transaction. In the Delaware litigation, the
minority Board members challenged the authorization and enforceability of
certain agreements, including the Tri-Party Agreement. Upon consummation of the
Delaware Settlement, the Tri-Party Agreement was terminated and the Conversion
Shares were retired.

In connection with the Credit Suisse Credit Facility, the Company and LVEN
entered into the Bi- Lateral Agreement which set the amount the Company could
recoup prior to Casino-Co receiving consideration under the $160 million profit
participation note at $35 million. In addition, the Bi-Lateral Agreement fixed
the maximum debt service to be netted against cash flow from operations of the
El Rancho Property in computing "adjusted cash flow" under the $160 million
profit participation note at $65 million. In the Delaware litigation, the
minority Board members challenged the authorization and enforceability of
certain agreements, including the Bi-Lateral Agreement. The Bi-Lateral Agreement
and the $160 million profit participation note were terminated upon consummation
of the Delaware Settlement.

Pursuant to the Delaware Settlement, Las Vegas Entertainment Network, Inc.
("LVEN") was granted the exclusive right to sell the El Rancho Property until
November 20, 1998 and the co-extensive right, along with the Company, to sell
the El Rancho Property until April 19, 1999. Beginning January 19, 1999, and
ending April 19, 1999, LVEN was required to pay one-half of the carrying costs
associated with maintaining the El Rancho Property. LVEN also obtained the
right, exercisable from March 20,

67

1999 until April 19, 1999, to refinance the El Rancho Property and thereby
obtain the extended right to sell the El Rancho Property until the earlier of
(a) one year from April 19, 1999 or (b) the midpoint of the term of the
refinancing loan (the "Refinancing Option"). If the Company sells or refinances
the El Rancho property after April 19, 1999 for an amount in excess of
$44,200,000, plus one half of the carrying costs from January 20, 1999 to April
19, 1999, plus the customary transaction costs incurred by the Company in such
sale (the "Threshold Amount"), then LVEN shall receive from such cash proceeds
in excess of the Threshold Amount up to the amount of $12,000,000 of cash sale
proceeds over and above the Threshold Amount, out of which LVEN will direct that
the first $2,000,000 be paid over to NPD. NPD is owned by Nunzio DeSantis, the
Company's former Director and CEO and Tony Coelho, the Company's former Director
and Chairman of the Board. As of January 25, 2000 LVEN did not sell the El
Rancho Property and did not exercise the Refinancing Option. On January 25,
2000, the Company signed a binding term sheet for the sale of the El Rancho
Property and on March 1, 2000 a formal contract was signed on the same terms as
outlined on the binding term sheet with certain mutually acceptable changes made
during the course of negotiations of the definitive agreements. There can be no
assurances that the Company will be able to dispose of the El Rancho Property as
contemplated by the Delaware Settlement.

Effective January 15, 1997, the Company entered into an employment
agreement with Nunzio P. DeSantis, the Company's Chief Executive Officer, for a
ten-year term at an initial annual base salary of $450,000 per year plus $5,000
in non-accountable expenses and $1,500 auto allowance, respectively, each month
in addition to a grant, subject to shareholder approval, of 5,000,000 options to
purchase up to 5,000,000 shares of the Company's Common Stock at an exercise
price of $4.00 per share and the use of a private charter jet for travel on
Company business. In the Delaware litigation, which was dismissed with prejudice
upon consummation of the Delaware Settlement, the minority Board members
challenged the authorization and enforceability of certain agreements, including
Mr. DeSantis' employment agreement. Upon consummation of the Delaware
Settlement, Mr. DeSantis' employment agreement was terminated and options
granted to him in the employment agreement were canceled.

During fiscals 1998 and 1997, the Company paid $12,200 and $217,000
respectively, on behalf of Southwest Jet Group in connection with the use of a
private jet by certain officers and directors of the Company including Mr.
DeSantis, for Company business. Southwest Jet Group is a Nevada corporation,
owned by Mr. DeSantis' son, which operates private jets, including one which was
partially financed by Messrs. DeSantis and Corrazzi. Messrs. DeSantis and
Corazzi used private jets operated by Southwest Jet Group for certain personal
matters for which the Company advanced approximately $177,000 and $160,000
during fiscals 1998 and 1997, respectively, and which LVEN had agreed to
reimburse the Company. The $337,000 owed to the Company was offset by certain
conditions agreed upon in the consummation of the Delaware Settlement. (See Note
4)

During fiscal 1999, the Company paid $70,000 in consulting fees, $25,000
for director fees, $3,500 for an auto allowance and $10,607 in expense
reimbursements to Anthony Coelho, the Company's former Chairman, pursuant to an
agreement effective January 15, 1997. During fiscal 1998, the Company paid
$120,000 in consulting fees, $22,500 for director fees, $6,000 for an auto
allowance and $44,500 in expense reimbursements to Mr. Coelho. During fiscal
1997, the Company paid $55,000 in consulting fees, $18,000 for director fees and
$2,750 for an auto allowance to Mr. Coelho. Mr. Coelho's consulting agreement
was month to month, under which he is to be paid $10,000 per month for ongoing
consulting services, $2,500 for each board meeting he attended and a $500
monthly automobile allowance.

68

In the Delaware litigation, which was dismissed with prejudice upon consummation
of the Delaware Settlement, the minority Board members challenged the
authorization and enforceability of certain agreements, including Mr. Coelho's
consulting agreement. Upon consummation of the Delaware Settlement, Mr. Coelho's
consulting agreement was terminated and options granted to him in the consulting
agreement were canceled.

Kenneth Scholl, a director of the Company until July 23, 1998, provides
consulting services to LVEN and certain of its subsidiaries through the Stanford
Company of which he is the president. Until December 31, 1997, LVEN paid
Stanford Company $10,000 per month for consulting services, including Mr.
Scholl's services as project manager for the El Rancho Property. LVEN was
reimbursed by the Company for the payments to Stanford Company. Effective
January 1, 1998, the Company began paying Mr. Scholl $10,000 per month for
ongoing consulting services as project manager for the El Rancho Property.
During Fiscal 1999, the Company paid Mr. Scholl $120,000 for these services.
Additionally, Mr. Scholl was paid director fees of $10,000 for each of fiscal
1998 and 1997. Mr. Scholl was elected president and director of Casino-Co in
March 1996, he resigned as a board member on March 14, 1997 and resigned as
president on May 19, 1997. Mr. Scholl also held the position of Secretary and
resigned the position on March 1, 1998.

During fiscal 1999, the Company paid approximately $70,000 in consulting
fees and $21,777 of reimbursed expenses to Joseph Zappala, a former director of
the Company. During fiscal 1998, the Company paid approximately $110,000 in
consulting fees and $38,000 of reimbursed expenses to Mr. Zappala. During fiscal
1997, the Company paid approximately $15,000 in consulting fees, and $4,757 of
reimbursed expenses to Mr. Zappala. Upon consummation of the Delaware
Settlement, Mr. Zappala's consulting arrangement was terminated. Mr. Zappala
also provided consulting services to EMC during fiscal 1997 pursuant to which he
was paid $100,000.

During fiscals 1999 and 1998, the Company made payments for legal fees in
the amount of $696,500 and $759,755, respectively, on behalf of the following
current and former directors: Robert J. Quigley, Frank A. Leo, Francis W.
Murray, Charles R. Dees, Jr., John Mariucci, and James J. Murray. These amounts
were for legal fees in connection with the various lawsuits brought against the
Company. (See Notes 4 & 13)

During fiscals 1999 and 1998, the Company made payments for legal fees in
the amount of $50,000 and $45,586 on behalf of Robert Green. Those amounts were
for legal fees in connection with the Green v. DeSantis, et al. suite. (See Note
4 & 13).

During fiscals 1999, 1998 and 1997, the Company paid $90,510 , $141,350 and
$128,000 respectively, to Public Strategies, L.L.C., a company owned by Roger A.
Bodman, a former director of the Company, in consideration for ongoing
consulting services pursuant to an agreement which expired in December 1997.
Public Strategies provided consulting services to the Company on a
month-to-month basis from January 1, 1998 to January 31, 1999.

During fiscal 1998, the Company made payment for legal fees in the amount
of $148,342 on behalf of The Family Investment Trust, a trust for the benefit of
Mr. Brennan's children and of which Mr. Brennan's brother is the trustee, in
connection with the then Delaware litigation.

69

During fiscal 1997, the Company paid approximately $75,300 for the legal
services of Sterns and Weinroth, a law firm partially owned by Joel H. Sterns,
the Company's former chairman.

During fiscal 1997, the Company paid $35,685 in consulting fees to Goldman,
Beale Associates, a company partially owned by Clifford Goldman, a former
director of the Company.

During fiscal 1997, the Company paid approximately $102,000 to Robert E.
Brennan (the Company's former Chairman and a significant stockholder until
January 15, 1997) for reimbursement of Mr. Brennan's legal fees in connection
with the investigation by New Jersey regulatory authorities which oversee the
casino and horse racing industries in the state.

During fiscal 1997, the Company paid LVEN $150,000 under a letter agreement
executed in connection with the purchase of the El Rancho Property, which
provided for a $25,000 per month fee with respect to maintenance and supervision
of the property prior to and during development. The Company terminated the
letter agreement on December 17, 1997.

During fiscal 1997, the Company paid approximately $118,800 to Francis W.
Murray, a director of the Company, for legal fees and reimbursed expenses and
for consulting fees prior to his becoming an employee. Commencing July 2, 1998
upon execution of the Delaware Stipulation, the Company began compensating Mr.
Murray as an employee at a rate of $120,000 per year.

The Company subleased a portion of its office space in Albuquerque, New
Mexico to AutoLend Group, Inc. for $600 per month, which sublease was terminable
on 30 days' notice. Mr. DeSantis is the Chairman, Chief Executive Officer and a
principal stockholder of AutoLend and Mr. Coelho was a director. Under the terms
of the Delaware Settlement, AutoLend assumed the Company's lease for the
Albuquerque office space. Upon such assumption of the lease, AutoLend retained
the leasehold improvements and furniture purchased by the Company in the amount
of $ 211,423 in exchange for assuming the lease and as an offset of the price
the Company paid NPD to purchase the 2,904,016 shares of the Company's Common
Stock held by NPD (of which Mr. DeSantis and Mr. Coelho were owners). In
addition, the computer equipment in the amount of $12,040 purchased by the
Company for the Albuquerque office was sold to AutoLend for $5,000.

The Company also reimbursed AutoLend for $150,000 it paid to Communications
Associates for investment advisory services in connection with locating a
potential financing source for the Company. Communications Associates is a
consulting firm owned by Mr. Corazzi, the Chairman of LVEN. LVEN also subleased
an office from the Company in Albuquerque. In exchange for its first year's
rent, LVEN provided certain furniture for the executive and reception areas of
the Company's Albuquerque office space. Upon consummation of the Delaware
Settlement, the Albuquerque lease was assumed by AutoLend.

Mr. James J. Murray was elected by the Board of Directors to serve as a
Director of the Company on February 22, 1999. Mr. Murray is the brother of Mr.
Francis W. Murray who is a Director and also serves as acting Chief Executive
Officer of the Company.

For additional information regarding related party transactions see
Footnote 4 in the Consolidated Financial Statements.

70

(19) LOSS FROM RETIREMENT OF DEBT

During the fourth quarter of fiscal 1997, the Company recorded an
extraordinary loss of $3,837,625 for the early retirement of debt. The
extraordinary losses consist primarily of write-offs of deferred finance costs
associated with the retired indebtedness.

(20) SUBSEQUENT EVENTS

(A) Effective December 3, 1999, the Board of Directors accepted the
resignation of Christopher C. Castens, the Company's Secretary and General
Counsel. See "Termination and Severance Agreements."

(B) RESTRUCTURING AGREEMENT WITH CREDIT SUISSE

On January 21, 2000 after obtaining the written consent of the holders of a
majority of the outstanding shares of stock of the Company entitled to vote
thereon, the Company entered into a restructuring agreement (the "Restructure
Agreement") with its primary lender, Credit Suisse First Boston Mortgage Capital
LLC, ("Credit Suisse"). Prior to this agreement, the Company had been in a
maturity default with Credit Suisse for its loan due on June 1, 1999 (the "CSFB
Loan") in the principal amount of $30,500,000 plus unpaid interest since June 1,
1999.

The Restructure Agreement returns the loan to a good standing position and
extends the maturity date of the CSFB Loan to June 30, 2000. As part of the
Restructure Agreement, the Company agreed that as of January 21, 2000, the
restructured principal balance due on the CSFB Loan was $33,103,189, which
consisted of: (i) the principal amount of $30,500,000 remaining on the CSFB
Loan; (ii) accrued interest advanced by Credit Suisse from June 1, 1999 to
January 21, 2000 in the amount of $2,523,189; and (iii) an advance of a portion
of Credit Suisse's legal fees incurred in connection with the Restructure
Agreement in the amount of $80,000. Credit Suisse has agreed, pursuant to the
Restructure Agreement, to advance the monthly interest payments due by the
Company under the CSFB Loan until the maturity date of June 30, 2000. Such
amounts shall, to the extent not paid when due by the Company, became part of
the outstanding principal balance of the CSFB Loan on the date such interest
becomes due. Commencing April 16, 2000 and until 30 days following the closing
of the sale of the El Rancho property, interest accruing shall be paid by
Turnberry/Las Vegas Boulevard LLC ("Turnberry"), the purchaser of the El Rancho
property.

In connection with the Restructure Agreement, the Chapter 11 Bankruptcy
Trustee (the "Trustee") for the estate of Robert E. Brennan, to whom the Company
and its subsidiaries Garden State Race Track, Inc. and Orion Casino Corporation
are indebted to in the remaining principal amount of $3,363,032, as evidenced by
a note dated January 28, 1999 (the "Trustee Note"), entered into an agreement
with the Company wherein: (i) the amounts due under the Trustee Note are due at
the earlier of (a) June 1, 2000 or (b) the date on which the latter of the
Garden State Park or El Rancho property is sold, provided that the sale of the
latter will satisfy the remaining balance on the CSFB Loan and the Trustee Note;
(ii) all interest due under the Trustee Note will be accrued and deferred until
the maturity date of the Note; and (iii) the Company shall reimburse the Trustee
for legal and accounting fees up to $20,000, which amount will be advanced by
the Trustee and added to the outstanding principal balance of the Trustee Note.

71

Pursuant to the Restructure Agreement, the Company paid at closing: (i)
legal fees in the amount of $146,000 which were incurred by Credit Suisse in
connection with the Restructure Agreement; (ii) real estate transfer taxes in
the amount of $56,275 on behalf of Garden State Race Track, Inc. in connection
with the transfer discussed below; and (iii) loan servicing fees in the amount
of $7,174. Credit Suisse released to the Company $167,476 of funds held in
various escrow accounts in connection with the CSFB Loan which will be used by
the Company for working capital purposes.

Pursuant to the Restructure Agreement, Garden State Race Track, Inc.
transferred title to the Garden State Race Track to GSRT, LLC, a wholly owned
subsidiary of the Company ("GSRT"), a Delaware limited liability company in
which Garden State Race Track, Inc. is the sole member the result of which
effects no change in real ownership. Pursuant to the limited liability company
agreement of GSRT entered into in connection with the Restructure Agreement,
Garden State Race Track, Inc. may cause GSRT to enter into an arm's-length sale
or joint venture of the Garden State Property under certain enumerated
circumstances and conditions, including that the purchase price for such sale or
joint venture be at least equal to fifty-percent of the combined outstanding
principal balance of the CSFB Loan and the Trustee Note, which amount must be
paid to Credit Suisse, and the contract for such sale or joint venture be
entered into on or prior to January 25, 2000 (the "GSRT Option").

On January 25, 2000, the Company and Garden State Race Track, Inc., the
owner of Garden State Park, entered into an agreement for the sale of all of the
Garden State Park property, excluding a ten-acre parcel of land previously
committed to GS Park Racing, L.P., to Turnberry/Cherry Hill, LLC. The terms of
the sale meet all the conditions required by Credit Suisse to be a valid GSRT
Option, according to a letter received from Credit Suisse (see Agreement of Sale
of Garden State Race Track). The Restructure Agreement further provides that (i)
if the proceeds from the sale of the Garden State Park property are insufficient
to pay the outstanding amounts due to Credit Suisse under the CSFB Loan, or (ii)
after the sale or joint venture of the Garden State property, the total amount
outstanding under the CSFB Loan is equal to or greater than $5,000,000 and the
Company shall not have received a binding commitment for a loan or purchase of
the El Rancho Property, then, Orion Casino Corporation must convey the El Rancho
property to a new Delaware limited liability company ("New LLC") having
substantially same ownership structure and limited liability company agreement
as GSRT. Once the El Rancho property is conveyed to New LLC in accordance with
and upon the happening of the circumstances and conditions provided in the
Restructure Agreement, Orion Casino Corporation, as the sole member of New LLC,
will have the right to cause New LLC to sell or refinance the El Rancho property
so long as the outstanding obligations due under the CSFB Loan are paid in full
by such sale or refinancing and such sale or refinancing closes on or before
June 30, 2000.

(C) AGREEMENT OF SALE OF EL RANCHO

On January 25, 2000, the Company entered into a binding term sheet for the
sale of the El Rancho property in Las Vegas, Nevada with Turnberry/Las Vegas
Boulevard, LLC. It is expected that a formal contract will be signed in the near
future incorporating the same terms as outlined on the binding term sheet with
certain mutually acceptable changes made during the course of negotiations of
the definitive agreements . The purchase price is $45,000,000. The purchase
price will be paid by: (i) a $100,000 deposit at the signing of the Purchase and
Sale Agreement; (ii) a $400,000 additional deposit due on March 15, 2000, which
amount will be non-refundable, and (iii) the balance of the purchase price due
at the closing, will be payable in cash.

72

The closing, originally scheduled to occur by March 31, 2000, had been
extended to April 30, 2000 after the buyer: (i) agreed to pay the approximate
$100,000 carrying costs of the El Rancho property for the month of April 2000;
(ii) agreed to pay the interest due to Credit Suisse First Boston Mortgage
Capital, LLC on a principal amount of $20,000,000 at 12% for the month of April
2000; and (iii) released $1,600,000, which included the above $100,000 and
$400,000 deposits, as a non-refundable deposit to the Company. The closing date
may be further extended to June 1, 2000 provided the buyer: (i) agrees to pay
the approximate $100,000 carrying costs of the El Rancho property for the month
of May 2000; (ii) pays the interest due to Credit Suisse First Boston Mortgage
Capital, LLC on a principal amount of $19,000,000 at 12% for the month of May
2000; (iii) pays an additional deposit of $900,000 to the Company by April 30,
2000, which amount has not yet been received; and (iv) demonstrates it has the
financial ability to close.

The Company has agreed to purchase a promissory note of the buyer in the
amount of $23,000,000 which will be convertible at the Company's option into a
33 1/3% equity interest in the buyer.

The note would accrue interest at a 22% per annum rate, which will be
adjusted from time to time since the interest actually payable will be dependent
upon, and payable solely out of, the buyer's net cash flow available for
distribution to its equity owners ("Distributable Cash"). After the equity
investors in the buyer have received total distributions equal to their capital
contributions plus an agreed upon return on their invested capital, the next $23
million of Distributable Cash will be paid to the Company. The Company will
thereafter receive payments under the note equal to 33 1/3% of all Distributable
Cash until the maturity date, which occurs on the 30th anniversary of the
Company's purchase of the note. The Company may convert the promissory note, at
its option, into a 33 1/3% equity interest in the buyer during a six month
period beginning at the 15th anniversary of the issuance of the note. If not
then converted, the note will convert into a 33 1/3% equity interest in the
buyer at the 30th anniversary of its issuance.

The sale of the El Rancho property to Turnberry/Las Vegas Boulevard LLC or
to any other buyer cannot be assured at this time.

(D) AGREEMENT OF SALE OF GARDEN STATE RACE TRACK

On January 25, 2000, the Company entered into an agreement of sale with
Turnberry/Cherry Hill LLC, for the sale of the Garden State Park real estate.
While the Company received from escrow a $500,000 deposit made by the buyer
under the terms of the sale, possible changes to the agreement are currently
being negotiated by the parties. Upon execution of a modification of the
definitive agreement the Company expects to announce the final terms of the
transaction.

The sale of the Garden State Race Track property to Turnberry/Cherry Hill,
LLC or any other buyer cannot be assured at this time and if for any reason the
potential buyer of the property is not able to close this transaction by June
30, 2000, the property may be marketed and possibly sold by the Company's
lender, Credit Suisse First Boston Mortgage, LLC.

73

PART III

ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

BOARD OF DIRECTORS

The directors of the Company are:

Name Age Director Since Position
- ---- --- -------------- --------
John U. Mariucci 60 November 1996 to Director
January 1997
February 22, 1999

Francis W. Murray 58 May 1996 Director

James J. Murray 61 November 1996 to Director
January 1997
February 22, 1999

Robert J. Quigley 71 October 1980 Director
February 1996 to
October 1997 President
January 1999 President

Set forth below is certain biographical information with respect to each
director set forth above, including his principal occupation and employment
during the past five years.

John U. Mariucci. Mr. Mariucci was elected by the Board of Directors on
February 22, 1999. Mr. Mariucci previously served as a director of the Company
from November 6, 1996 to January 15, 1997. Mr. Mariucci has spent 30 years with
the advertising firm of Doyle Dane Bernbach/DDB Needham Worldwide, including
seven years as a member of the board of DDB Needham Worldwide. In 1986 he was
appointed Executive Vice President, Executive Creative Director of DDB Needham
Worldwide, a position he held until his retirement in 1994. He is the recipient
of more than 100 awards for his advertising, including Cleos, Stephan F. Kelly
Effies and the One Show Awards. He has developed major advertising campaigns for
clients such as American Tourister Luggage, Michelin, Volkswagen, Hershey's,
Weight Watchers, Sony, Citicorp, Nabisco, GTE, Seagrams, IBM and the New York
State Lottery. Mr. Mariucci has been a member of the Audit Committee and the
Compensation and Stock Options Committee since March 15, 1999. Mr. Mariucci has
previously served on the Compensation and Stock Options Committee from December
20, 1996 to January 15, 1997.

Francis W. Murray. From time to time from November 1995 until June 1999,
Mr. Murray served as President of the Company's subsidiaries International
Thoroughbred Gaming Development Corporation ("ITG") and Orion Casino
Corporation. From November 1993 through June 1995, Mr. Murray served as a
General Partner of Healthcare Properties, a partnership operating nursing homes
in New Jersey and as a consultant to ITG. From December 1988 through November
1993, Mr. Murray was the co-owner and President of the New England Patriots and
co-founder of the St. Louis NFL Partnership, which attempted to obtain an
expansion NFL franchise for St. Louis. Mr. Murray has been a member of the
Executive Committee and the Compensation and Stock Options Committee since March
15, 1999. Mr. Murray has previously served on the Executive Committee from
February 21, 1996 to July 9, 1996 and from December 20, 1996 to February 12,
1997.

74

James J. Murray. Mr. Murray was elected by the Board of Directors on
February 22, 1999. Mr. Murray previously served as a director of the Company
from November 6, 1996 to January 15, 1997. Mr. Murray is a member of the Ronald
McDonald House of Charities Local Operations Advisory Council and past President
of Jim Murray, Ltd., a sports promotion and marketing firm. In 1969, Murray
joined the Philadelphia Eagles' public relations staff and two years later he
became the NFL team's administrative assistant. In 1974, just five years after
joining the organization, he was named the Eagles' General Manager and spent
more than nine years in that post, during which the Eagles' appeared in Super
Bowl XV. He also served as Director of Marketing for the Company's Garden State
Park subsidiary from 1985- 1987. Mr. Murray has been a member of the Audit
Committee since March 15, 1999. Mr. Murray has previously served on the
Executive Committee and the Compensation and Stock Options Committee from
December 20, 1996 to January 15, 1997. Mr. Murray is the brother of Francis W.
Murray who is a Director and is also acting as the Chief Executive Officer of
the Company.

Robert J. Quigley. From February 1996 until October 15, 1997, Mr. Quigley
served as President of the Company. Mr. Quigley also served as President of the
Company from 1988 until July 1992. Between November 1995 and May 1996, Mr.
Quigley served as Chairman of the Board and acting Chief Executive Officer of
the Company. From July 1992 until November 1995, Mr. Quigley was President and
Chief Operating Officer of Retama Park Association, Inc., a racetrack facility
in San Antonio, Texas. Mr. Quigley has previously served as a member of the
Executive Committee from July 9, 1996 to December 20, 1996.

COMMITTEES OF THE BOARD

Executive Committee. The Executive Committee is authorized to exercise all
of the authority of the Board in the management of the Company's business
affairs between Board meetings except as otherwise provided by the Company's
By-laws or applicable corporate law. Messrs. Francis W. Murray and Quigley are
the current members of the Executive Committee.

Audit Committee. The Audit Committee provides general financial oversight.
The committee periodically meets and confers with the Company's independent
auditors concerning the Company's accounting systems and the maintenance of its
books and records, reviews the scope of the audit of the Company's financial
statements, and the results thereof, and performs other services. Messrs.
Mariucci and James J. Murray are the current members of the Audit Committee.

Compensation and Stock Options Committee. The Compensation and Stock
Options Committee establishes director and executive compensation levels and is
responsible for the administration of the employee stock option plan. Messrs.
Murray and Mariucci are the current members of the Compensation and Stock
Options Committee.

75

The following is a summary of the composition of these committees
during Fiscal 1999:

Compensation and Stock
Effective Date Executive Committee Audit Committee Options Committee
- -------------- ------------------- --------------- -----------------

January 19, 1998 Anthony Coelho Michael Abraham (1) Anthony Coelho
Nunzio P. DeSantis Charles R. Dees, Jr.(1) Francis W. Murray
Frank A. Leo(1) Joseph Zappala Kenneth S. Scholl(1)
Francis W. Murray Joseph Zappala
Joseph Zappala

July 31, 1998 Anthony Coelho(2) Robert J. Quigley Anthony Coelho(2)
Nunzio P. DeSantis(2) Joseph Zappala(2) Francis W. Murray
Francis W. Murray Joseph Zappala(2)
Joseph Zappala(2)

March 15, 1999 Francis W. Murray John U. Mariucci Francis W. Murray
Robert J. Quigley James J. Murray John U. Mariucci

(1) Resigned on July 2, 1998.
(2) Resigned on January 28, 1999.

EXECUTIVE AND OTHER KEY OFFICERS
- --------------------------------

The executive and other key officers of the Company, in addition to Messrs.
Murray and Quigley, are:

Name Age Position
- ---- --- --------
William H. Warner 55 Treasurer

Christopher C. Castens 48 Secretary and Corporate Counsel
(Resigned December 3, 1999)

Christine E. Rice Newell 53 Assistant Treasurer and Controller

Set forth below is certain biographical information with respect to each
such executive and other key officers:

William H. Warner. Mr. Warner is a certified public accountant and has been
employed by the Company since September 1983. Mr. Warner has served as Treasurer
of the Company since December 1983. Prior to joining the Company, Mr. Warner was
employed in public accounting for 11 years.

76

Christopher C. Castens. Mr. Castens had been General Counsel to the Company
since December 1986. Prior to joining the Company, Mr. Castens served as
in-house counsel and assistant to the Executive Vice President of Harness Tracks
of America.

Christine E. Rice Newell. Ms. Rice Newell is a certified public accountant
and has been employed by the Company since December 1986. Ms. Rice Newell has
served as Assistant Treasurer of the Company since November 1990. From December
1986 to November 1990 Ms. Rice Newell was the Company's Corporate Accounting
Manager.

77

ITEM 11 - EXECUTIVE COMPENSATION

The following table sets forth information concerning the compensation paid
or accrued by the Company during the years ended June 30, 1999, 1998 and 1997 to
(i) the Company's acting Chief Executive Officer, (ii) the Company's four most
highly compensated executive officers (other than the Chief Executive Officer)
who were serving in such capacity at the end of Fiscal 1999 and (iii) a former
executive officer of the Company who was not serving in such capacity at the end
of Fiscal 1999.

SUMMARY COMPENSATION TABLE
Long-Term
Annual Compensation Compensation
------------------- ------------

Securities All
Name and Other Annual Underlying Other
Principal Position Year Salary Compensation Options Compensation
- ------------------ ---- ------ ------------ ------- ------------
$ $ $

Nunzio P. DeSantis(1) 1999 268,269 10,500(2) -0- -0-
Former Chief Executive Officer 1998 450,000 78,000 -0- -0-
of the Company 1997 204,231 39,000 5,000,000(3) -0-

Francis W. Murray 1999 120,692 15,145(4) -0- 12,323(5)
Acting Chief Executive Officer 1998 129,333 16,000 -0- 87,292
of the Company 1997 50,769 -0- -0- 50,769

Robert J. Quigley 1999 138,461 4,000(6) -0- 12,267(7)
President of the Company 1998 220,000 -0- -0- 11,160
1997 210,000 -0- -0- 10,971

Christopher C. Castens(8) 1999 123,693 -0- -0- 9,260(9)
Secretary of the Company 1998 115,770 -0- -0- 8,060
1997 89,039 -0- -0- 6,577

William H. Warner 1999 123,693 -0- -0- 117,355(10)
Chief Financial Officer 1998 125,693 -0- -0- 9,498
of the Company 1997 120,000 -0- -0- 9,360

Christine E. Rice Newell 1999 77,308 3,600(12) -0- 6,112(13)
Assistant Treasurer and 1998 78,308 3,600 -0- 6,455
Controller 1997 74,808 1,800 -0- 5,661

(1) Mr. DeSantis became Chief Executive Officer of the Company on January 15,
1997 following the NPD Acquisition and upon consummation of the Delaware
Settlement on January 28, 1999, Mr. DeSantis' employment was terminated.
See "Termination Agreements" below.

(2) Consisted of $5,000 per month non-accountable expense allowance and $1,500
per month automobile allowance pursuant to an employment agreement
effective January 15, 1997. See "Termination Agreements" below.

(3) Mr. DeSantis was granted options to purchase 5,000,000 shares at an
exercise price of $4.00 per share. Upon consummation of the Delaware
Settlement these options were canceled. See "Legal Proceedings."

78

(4) Consisted of $1,262 per month automobile lease payment.

(5) Fiscal 1999 amounts consist of $2,016 of life insurance premiums paid by
the Company with respect to term life insurance payable to beneficiaries
designated by Mr. Murray, $7,307 contributed by the Company under the
Company's 401(k) plan, and $3,000 for director fees.

(6) Consists of $1,000 per month automobile allowance effective March 1, 1999.

(7) Fiscal 1999 amounts consist of $1,411 of life insurance premiums paid by
the Company with respect to term life insurance payable to beneficiaries
designated by Mr. Quigley, $7,856 contributed by the Company under the
Company's 401(k) plan and $3,000 for director fees.

(8) Effective December 3, 1999, Mr. Castens resigned his position.

(9) Fiscal 1999 amounts include $2,016 of life insurance premiums paid by the
Company with respect to term life insurance payable to beneficiaries
designated by Mr. Castens and $7,244 contributed by the Company under the
Company's 401(k) plan.

(10) Fiscal 1999 amounts include six months severance in the amount of $60,000
and the proceeds of $47,974 for the cash value of a life insurance policy
to which Mr. Warner was entitled to associated with the expiration of Mr.
Warner's employment contract on December 31, 1998, $2,016 of life insurance
premiums paid by the Company with respect to term life insurance payable to
beneficiaries designated by Mr. Warner and $7,365 contributed by the
Company under the Company's 401(k) plan.

(11) Consists of $300 per month automobile allowance.

(12) Fiscal 1999 amounts include $1,512 of life insurance premiums paid by the
Company with respect to term life insurance payable to beneficiaries
designated by Ms. Rice Newell and $4,600 contributed by the Company under
the Company's 401(k) plan.

STOCK OPTIONS

OPTIONS GRANTED IN LAST FISCAL YEAR

The Company did not grant any options during the fiscal year ended June 30,
1999 to any of the persons named in the Summary Compensation Table.

79

AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR END OPTION VALUES

The following table indicates the outstanding stock options held at June
30, 1999 by each person named in the Summary Compensation Table. No options were
exercised during Fiscal 1999 by any of the named executive employees.

Number of Securities
Underlying Value of Unexercised
Unexercised Options In-the-Money Options at
At Fiscal Year End Fiscal Year End (1)
Name Exercisable/Unexercisable Exercisable/Unexercisable
- ---- ------------------------- -------------------------

Robert J. Quigley 100,000/-0- -0-/-0-

William H. Warner
(Expired Decembe 31, 1999) 75,000/-0- -0-/-0-

Christopher C. Castens
(Expired December 31, 1999) 50,000/-0- -0-/-0-

(1) The Company's Common Stock has been trading on the NQB Pink Sheets since
August 1998 and the sales have averaged approximately $.25 per share. As a
result, the Company believes that the market price of the Common Stock is
below the exercise price of such options.

COMPENSATION OF DIRECTORS

Outside directors are provided compensation of $1,000 for each regular or
special meeting of the Board in which each outside director participates either
in person or by telephone. Under the terms of his consulting agreement with the
Company, Mr. Coelho received $2,500 per Board meeting in which he participated
until the consummation of the Delaware Settlement on January 28, 1999.

80

TERMINATION AND SEVERANCE AGREEMENTS

Nunzio DeSantis - Chief Executive Officer and President. Effective January
15, 1997, Mr. DeSantis and the Company entered into a ten-year employment
agreement pursuant to which Mr. DeSantis serves as the Company's Chief Executive
Officer at an initial annual base salary of $450,000. The Agreement also
provided for a performance bonus each year equal to the amount, if any, by which
the net income of the Company (before deduction of federal and state income
taxes) exceeds $2 million. The maximum amount of such performance bonus for any
fiscal year was limited to the amount of Mr. DeSantis' base salary for such
year. Subject to stockholder approval at the Company's next annual meeting, Mr.
DeSantis was granted options to purchase up to 5,000,000 shares of the Company's
Common Stock at an exercise price of $4.00 per share. If approved by the
Company's stockholders, options exercisable for 1,000,000 shares of Common Stock
would have been exercisable immediately and the remaining options becoming
exercisable in eight equal annual installments commencing on January 15, 1999.
If Mr. DeSantis was discharged without cause or resigns for good reason, all
options would vest immediately and Mr. DeSantis would have been entitled to
receive an amount equal to his then base salary for the remaining term of the
agreement or eighteen months, whichever was greater. Upon a change of control
(as defined in the agreement) and Mr. DeSantis' resignation in connection
therewith, all options were to vest immediately and Mr. DeSantis was entitled to
receive an amount equal to his then base salary for the remaining term of the
agreement or three years, whichever was lesser. In the event of the death of Mr.
DeSantis, his estate would have received a lump sum payment of $1 million. Mr.
DeSantis also received a monthly automobile expense allowance and a
non-accountable expense account in an aggregate amount of $6,500. For a period
of two years following the termination of the agreement or while he was
receiving severance payments from the Company, Mr. DeSantis would have been
bound by the terms of a non-competition clause. See "Summary Compensation." Upon
consummation of the Delaware Settlement, Mr. DeSantis' employment agreement was
terminated and his options were canceled. See "Legal Proceedings."

William H. Warner - Treasurer. The Company and Mr. Warner were parties to
an employment agreement effective January 1, 1996 pursuant to which Mr. Warner
serves as the Company's treasurer at an annual salary of $123,693. This
agreement expired on December 31, 1998. In addition to other customary and usual
terms, Mr. Warner's agreement provided that upon termination, the Company was to
pay Mr. Warner six months salary and the cash surrender value of a life
insurance policy the Company owns on Mr. Warner's behalf in the approximate
amount of $50,000. The Company's Board of Directors approved a payment to Mr.
Warner associated with the expiration the employment contract in the amount of
$60,000 (accrued in the fourth quarter of Fiscal 1999) and the payment for the
cash value of a life insurance policy in the amount of $47,000 to Mr. Warner
(which was borrowed from the life insurance company and paid to Mr. Warner in
the first quarter of Fiscal 2000). Mr. Warner continues to be employed by the
Company on a non-contract basis at $120,000 per year.

Christopher C. Castens - Secretary and General Counsel. The Company and Mr.
Castens were parties to an employment agreement effective October 16, 1997
pursuant to which Mr. Castens served as the Company's Secretary and General
Counsel at an annual salary of $123,700. Effective December 3, 1999, the Board
of Directors accepted Mr. Castens' resignation and the Company paid $79,846 in
the second quarter of Fiscal 2000 associated with his employment contract.

81

Kerry B. Fitzpatrick. The Company and Mr. Fitzpatrick were parties to an
employment contract pursuant to which Mr. Fitzpatrick served as Director of
Special Projects and Business Opportunities to the company at an annual salary
of $65,000. Under the terms of this agreement which expired on December 31,
1998, the Company was required to pay Mr. Fitzpatrick $32,500, which represented
six months salary.

Richard E. Orbann - Vice President-Track Operations. The Company Paid
$100,000 to Mr. Orbann and transferred title to his Company car in settlement of
his employment contract in connection with the January 28, 1999 Greenwood
Transaction.

Edward Ryan - General Manager-Freehold Raceway. The Company and Mr. Ryan
were parties to an employment contract pursuant to which Mr. Ryan served as the
general manager of Freehold Raceway at an annual salary of $128,200. Under the
terms of this agreement which expired on December 31, 1998, the Company was
required to pay Mr. Ryan $69,231, which represented six months salary and unused
vacation pay. In addition, the Company transferred to Mr. Ryan the title to his
Company car.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

The compensation of the Company's executive officers is determined by the
Company's Compensation and Stock Options Committee, which consisted of Messrs.
Coelho, Murray and Zappala until January 28, 1999 and, effective March 15, 1999,
consists of Mr. James J. Murray and Mr. Marriucci. No officer or employee of the
Company participated in deliberations of the Compensation and Stock Options
Committee.

During Fiscal 1999, the Company paid Mr. Anthony Coelho, the Company's
former Chairman, pursuant to an agreement effective January 15, 1997, $70,000 in
consulting fees and $10,607 in reimbursed expenses, $25,000 for Board meetings
he attended and $3,500 for an auto allowance. Mr. Coelho's consulting agreement
was month to month, under which he is to be paid $10,000 per month for ongoing
consulting services, $2,500 for each Board meeting he attended and a $500
monthly automobile allowance. In the Delaware Litigation, the minority Board
members have challenged the authorization and enforceability of certain
agreements, including Mr. Coelho's consulting agreement. Mr. Coelho's consulting
agreement was terminated and his options were canceled. See "Legal Proceedings."

During Fiscal 1999, the Company paid approximately $70,000 in consulting
fees and $21,777 in reimbursed expenses to Joseph Zappala, a director of the
Company. The Company paid Mr. Zappala approximately $10,000 per month in which
he provided consulting services. Upon consummation of the Delaware Settlement,
Mr. Zappala's consulting arrangement was terminated. See "Legal Proceedings."

Kenneth Scholl, a former director of the Company, provided consulting
services to LVEN and certain of its subsidiaries through the Stanford Company of
which he is the president. Until December 31, 1997, LVEN advanced Stanford
Company $10,000 per month and was reimbursed by the Company for consulting
services, including Mr. Scholl's services as project manager for the El Rancho
Property. Effective January 1, 1998, the Company began paying Mr. Scholl $10,000
per month for ongoing consulting services as project manager for the El Rancho
Property. During Fiscal 1999 the Company paid Mr. Scholl $120,000. Mr. Scholl
was elected president and director of Casino-Co in March 1996, he resigned as a
board member on March 14, 1997 and resigned as president on May 19, 1997. Mr.
Scholl also held the position of Secretary and resigned the position on March 1,
1998.

82

Commencing July 2, 1998 upon execution of the Delaware Stipulation, the
Company began compensating Mr. Frances W. Murray as an employee at a rate of
$120,000 per year retroactive to June 1997.

The Company subleased a portion of its office space in Albuquerque, New
Mexico to AutoLend for $600 per month, which sublease was terminable on 30 days'
notice. Under the terms of the Delaware Settlement, AutoLend assumed the
Company's lease for the Albuquerque office space. Upon such assumption of the
lease, AutoLend retained the leasehold improvements and furniture purchased by
the Company in the amount of $ 211,423 in exchange for assuming the lease and as
an offset of the price the Company paid NPD to purchase the 2,904,016 shares of
the Company's Common Stock held by NPD (of which Mr. DeSantis and Mr. Coelho
were owners). In addition, the computer equipment in the amount of $12,040
purchased by the Company for the Albuquerque office was sold to Autolend for
$5,000. Mr DeSantis is the Chairman, Chief Executive Officer and a principal
stockholder of AutoLend and Mr. Coelho was a director. See "Legal Proceedings."

83

ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth, as of March 1, 2000, the number of shares
of the Company's Common Stock owned beneficially by (i) each beneficial owner of
more than 5% of such Common Stock, (ii) each named executive officer and
director of the Company and (iii) all executive officers and directors of the
Company as a group (calculated in accordance with Rule 13d-3 under the Exchange
Act). In the case of persons other than executive officers and directors of the
Company, such information is based solely on a review of Schedules 13D and 13G
filed with the SEC. Except as otherwise noted below, each person or entity has
sole voting and dispositive power with respect to the shares of Common Stock
listed below. As of May 5, 2000, the Company had 11,884,268 shares of Common
Stock issued and 8,980,252 shares outstanding. In addition to the Common Stock,
the Company has 362,483 shares of Preferred Stock issued and outstanding. The
Preferred Stock is not convertible into Common Stock and has no voting rights.

AMOUNT AND NATURE
NAME AND ADDRESS OF OF BENEFICIAL PERCENT OF
5% BENEFICIAL OWNER OWNERSHIP(1) CLASS
- ------------------- ------------ -----

Credit Suisse First
Boston Mortgage Capital LLC
Eleven Madison Avenue
New York, NY 10010 2,419,509(1) 20.6%

The Family Investment Trust
(Henry Brennan, Trustee)
340 North Avenue
Cranford, NJ 07016 1,090,731(2) 9.3%

Frank A. Leo 736,201(3) 6.2%

Francis W. Murray 300,000(4) 2.5%

Robert J. Quigley 105,830(5) *

Christopher C. Castens 200(6) *

William H. Warner 124 *

All Executive Officers
and Directors as a Group
(4 persons)(4)(5)(6) 406,154 3.5%

The above persons have sole voting and investment power, unless otherwise
indicated below.

* Less than 1%.

84

(1) Includes 1,044,000 shares of Common Stock issuable upon exercise of
warrants and 1,142,857 shares of Common Stock issuable upon conversion of
the CSFB Note. See "Developments During the Last Fiscal Year" and "Legal
Proceedings."

(2) Henry Brennan is the brother of Robert E. Brennan, whose adult sons are the
beneficiaries of the trust.

(3) Includes 200,000 shares of Common Stock issuable upon exercise of options.

(4) Consists of shares of Common Stock issuable upon exercise of options.

(5) Includes 100,000 shares of Common Stock issuable upon exercise of options.

(6) Includes 200 shares of Common Stock owned of record by Mr. Castens' wife,
as to which Mr. Castens may be deemed to be the beneficial owner.

85

ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Mr. DeSantis, former director and Chief Executive Officer of the Company,
and Mr. Joseph Corazzi, President and Chairman of LVEN, each own one-half of the
stock of D&C Gaming, Inc.. On July 1, 1997, the Company paid for an option to
acquire certain leasehold interests relating to two New Mexico racetracks for a
non-refundable deposit of $600,000 which was to be credited towards the purchase
price. In the Delaware litigation, the minority Board members challenged the
authorization and enforceability of certain agreements, including this option
agreement. In connection with the Delaware Settlement, the $600,000 due to the
Company was offset by the price the Company paid to purchase the 2,904,016
shares of the Company's Common Stock held by NPD. (See Notes 4 & 13).

In connection with the NPD acquisition, NPD borrowed the sum of $2,900,000
from Casino-Co, from whom the Company purchased the El Rancho Property and with
whom the Company has various contractual obligations with respect to the
purchase of the El Rancho Property including, but not limited to, a profit
participation note and an entertainment management contract. Upon consummation
of the Delaware Settlement, the profit participation note and the entertainment
management contract were terminated. The Casino-Co loan, together with accrued
interest, was repaid in July 1997. Mr. DeSantis holds options to acquire
1,500,000 shares of LVEN's common stock at an exercise price of $1.00 per share.
Mr. DeSantis was also paid a commitment fee by LVEN of $110,000 in connection
with a standby financing commitment he made to LVEN on October 31, 1996 as
replacement financing for the El Rancho Property. This standby financing
commitment was never drawn upon and was terminated in January 1997. Mr. DeSantis
is a 25% owner in Electric Media Company, Inc., ("EMC"), a Delaware corporation
and subsidiary of LVEN, for which investment Mr. DeSantis paid $375,000.

Mr. DeSantis owned 80% of Nordic Gaming Corporation, an Ontario corporation
which purchased the Fort Erie Racetrack in Fort Erie, Canada on August 27, 1997.
The Company was offered, but the Executive Committee rejected, the opportunity
to make this investment because of the demands on cash flow. Nordic Gaming
borrowed $182,000 from LVEN for a deposit on the purchase which was repaid to
LVEN at the closing. LVEN has also provided Nordic Gaming with a $1.3 million
secured line of credit to fund operating losses at the Fort Erie Racetrack. On
May 15, 1998, Mr. DeSantis sold his Nordic Gaming shares to Erie Gaming
Organization, Inc., an Ontario corporation which holds the other 20% interest in
Nordic Gaming. In consideration for his shares, Mr. DeSantis received $10.00 and
each of Nordic Gaming, Mr. DeSantis and Erie Gaming exchanged mutual general
releases. In the Delaware litigation, the minority Board members challenged the
decision of the Executive Committee to reject the opportunity to purchase the
Fort Erie Racetrack. In connection with the Delaware Settlement, the litigation
was dropped.

Pursuant to the Tri-Party Agreement executed in connection with the Credit
Suisse Credit Facility, the Company issued an aggregate of 2,326,520 shares of
Common Stock (based on a value of $5.00 per share) in exchange for cancellation
of the Casino-Co Note plus accrued interest. Of such shares, 2,093,868 shares
were issued to Casino-Co (the "Conversion Shares") and 232,652 shares were
issued to Credit Suisse in consideration for its consent and for certain
advisory services on the transaction. In accordance with the Tri-Party
Agreement, the Company has also agreed, subject to, among other things, an
independent valuation, receipt of a fairness opinion from an independent
investment banking firm and Board and stockholder approval, to complete the
Casino-Co transaction. LVEN and Casino-Co granted Mr. DeSantis a proxy to vote
any or all of the Conversion Shares until the occurrence of certain events and
agreed to

86

grant Mr. DeSantis a proxy to vote any or all of the shares to be issued to LVEN
in the Casino-Co transaction. In the Delaware litigation, the minority Board
members challenged the authorization and enforceability of certain agreements,
including the Tri-Party Agreement. Upon consummation of the Delaware Settlement,
the Tri-Party Agreement was terminated and the Conversion Shares were retired.

In connection with the Credit Suisse Credit Facility, the Company and LVEN
entered into the Bi- Lateral Agreement which set the amount the Company could
recoup prior to Casino-Co receiving consideration under the $160 million profit
participation note at $35 million. In addition, the Bi-Lateral Agreement fixed
the maximum debt service to be netted against cash flow from operations of the
El Rancho Property in computing "adjusted cash flow" under the $160 million
profit participation note at $65 million. In the Delaware litigation, the
minority Board members challenged the authorization and enforceability of
certain agreements, including the Bi-Lateral Agreement. The Bi-Lateral Agreement
and the $160 million profit participation note were terminated upon consummation
of the Delaware Settlement.

Effective January 15, 1997, the Company entered into an employment
agreement with Nunzio P. DeSantis, the Company's Chief Executive Officer, for a
ten-year term at an initial annual base salary of $450,000 per year plus $5,000
in non-accountable expenses and $1,500 auto allowance, respectively, each month
in addition to a grant, subject to shareholder approval, of 5,000,000 options to
purchase up to 5,000,000 shares of the Company's Common Stock at an exercise
price of $4.00 per share and the use of a private charter jet for travel on
Company business. In the Delaware litigation, which was dismissed with prejudice
upon consummation of the Delaware Settlement, the minority Board members
challenged the authorization and enforceability of certain agreements, including
Mr. DeSantis' employment agreement. Upon consummation of the Delaware
Settlement, Mr. DeSantis' employment agreement was terminated and options
granted to him in the employment agreement were canceled.

During fiscals 1998 and 1997, the Company paid $12,200 and $217,000
respectively, on behalf of Southwest Jet Group in connection with the use of a
private jet by certain officers and directors of the Company including Mr.
DeSantis, for Company business. Southwest Jet Group is a Nevada corporation,
owned by Mr. DeSantis' son, which operates private jets, including one which was
partially financed by Messrs. DeSantis and Corazzi. Messrs. DeSantis and Corazzi
used private jets operated by Southwest Jet Group for certain personal matters
for which the Company advanced approximately $177,000 and $160,000 during
fiscals 1998 and 1997, respectively, and which LVEN had agreed to reimburse the
Company. The $337,000 owed to the Company was offset by certain conditions
agreed upon in the consummation of the Delaware Settlement. (See Note 4)

During fiscal 1999, the Company paid $70,000 in consulting fees, $25,000
for director fees, $3,500 for an auto allowance and $10,607 in expense
reimbursements to Anthony Coelho, the Company's former Chairman, pursuant to an
agreement effective January 15, 1997. During fiscal 1998, the Company paid
$120,000 in consulting fees, $22,500 for director fees, $6,000 for an auto
allowance and $44,500 in expense reimbursements to Mr. Coelho. During fiscal
1997, the Company paid $55,000 in consulting fees, $18,000 for director fees and
$2,750 for an auto allowance to Mr. Coelho. Mr. Coelho's consulting agreement
was month to month, under which he is to be paid $10,000 per month for ongoing
consulting services, $2,500 for each board meeting he attended and a $500
monthly automobile allowance. In the Delaware litigation, which was dismissed
with prejudice upon consummation of the Delaware Settlement, the minority Board
members challenged the authorization and enforceability of certain agreements,
including Mr. Coelho's consulting agreement. Upon consummation of the Delaware
Settlement, Mr.

87

Coelho's consulting agreement was terminated and options granted to him in the
consulting agreement were canceled.

Kenneth Scholl, a director of the Company until July 23, 1998, provides
consulting services to LVEN and certain of its subsidiaries through the Stanford
Company of which he is the president. Until December 31, 1997, LVEN paid
Stanford Company $10,000 per month for consulting services, including Mr.
Scholl's services as project manager for the El Rancho Property. LVEN was
reimbursed by the Company for the payments to Stanford Company. Effective
January 1, 1998, the Company began paying Mr. Scholl $10,000 per month for
ongoing consulting services as project manager for the El Rancho Property.
During Fiscal 1999, the Company paid Mr. Scholl $120,000 for these services.
Additionally, Mr. Scholl was paid director fees of $10,000 for each of fiscal
1998 and 1997. Mr. Scholl was elected president and director of Casino-Co in
March 1996, he resigned as a board member on March 14, 1997 and resigned as
president on May 19, 1997. Mr. Scholl also held the position of Secretary and
resigned the position on March 1, 1998.

During fiscal 1999, the Company paid approximately $70,000 in consulting
fees and $21,777 of reimbursed expenses to Joseph Zappala, a former director of
the Company. During fiscal 1998, the Company paid approximately $110,000 in
consulting fees and $38,000 of reimbursed expenses to Mr. Zappala. During fiscal
1997, the Company paid approximately $15,000 in consulting fees, and $4,757 of
reimbursed expenses to Mr. Zappala. Upon consummation of the Delaware
Settlement, Mr. Zappala's consulting arrangement was terminated. Mr. Zappala
also provided consulting services to EMC during fiscal 1997 pursuant to which he
was paid $100,000.

During fiscals 1999 and 1998, the Company made payments for legal fees in
the amount of $696,500 and $759,755, respectively, on behalf of the following
current and former directors: Robert J. Quigley, Frank A. Leo, Francis W.
Murray, Charles R. Dees, Jr., John Mariucci, and James J. Murray. These amounts
were for legal fees in connection with the various lawsuits brought against the
Company. (See Notes 4 & 13).

During fiscals 1999 and 1998, the Company made payments for legal fees in
the amount of $50,000 and $45,586 on behalf of Robert Green. Those amounts were
for legal fees in connection with the Green v. DeSantis, et al. suite. (See Note
4 & 13).

During fiscals 1999, 1998 and 1997, the Company paid $90,510 , $141,350 and
$128,000 respectively, to Public Strategies, L.L.C., a company owned by Roger A.
Bodman, a former director of the Company, in consideration for ongoing
consulting services pursuant to an agreement which expired in December 1997.
Public Strategies provided consulting services to the Company on a
month-to-month basis from January 1, 1998 to January 31, 1999.

During fiscal 1998, the Company made payment for legal fees in the amount
of $148,342 on behalf of The Family Investment Trust, a trust for the benefit of
Mr. Brennan's children and of which Mr. Brennan's brother is the trustee, in
connection with the then Delaware litigation.

During fiscal 1997, the Company paid approximately $75,300 for the legal
services of Sterns and Weinroth, a law firm partially owned by Joel H. Sterns,
the Company's former chairman.

88

During fiscal 1997, the Company paid $35,685 in consulting fees to Goldman,
Beale Associates, a company partially owned by Clifford Goldman, a former
director of the Company.

During fiscal 1997, the Company paid approximately $102,000 to Robert E.
Brennan (the Company's former Chairman and a significant stockholder until
January 15, 1997) for reimbursement of Mr. Brennan's legal fees in connection
with the investigation by New Jersey regulatory authorities which oversee the
casino and horse racing industries in the state.

During fiscal 1997, the Company paid LVEN $150,000 under a letter agreement
executed in connection with the purchase of the El Rancho Property, which
provided for a $25,000 per month fee with respect to maintenance and supervision
of the property prior to and during development. The Company terminated the
letter agreement on December 17, 1997.

During fiscal 1997, the Company paid approximately $118,800 to Francis W.
Murray, a director of the Company, for legal fees and reimbursed expenses and
for consulting fees prior to his becoming an employee. Commencing July 2, 1998
upon execution of the Delaware Stipulation, the Company began compensating Mr.
Murray as an employee at a rate of $120,000 per year.

The Company subleased a portion of its office space in Albuquerque, New
Mexico to AutoLend Group, Inc. for $600 per month, which sublease was terminable
on 30 days' notice. Mr. DeSantis is the Chairman, Chief Executive Officer and a
principal stockholder of AutoLend and Mr. Coelho was a director. Under the terms
of the Delaware Settlement, AutoLend assumed the Company's lease for the
Albuquerque office space. Upon such assumption of the lease, AutoLend retained
the leasehold improvements and furniture purchased by the Company in the amount
of $ 211,423 in exchange for assuming the lease and as an offset of the price
the Company paid NPD to purchase the 2,904,016 shares of the Company's Common
Stock held by NPD (of which Mr. DeSantis and Mr. Coelho were owners). In
addition, the computer equipment in the amount of $12,040 purchased by the
Company for the Albuquerque office was sold to AutoLend for $5,000.

The Company also reimbursed AutoLend for $150,000 it paid to Communications
Associates for investment advisory services in connection with locating a
potential financing source for the Company. Communications Associates is a
consulting firm owned by Mr. Corazzi, the Chairman of LVEN. LVEN also subleases
an office from the Company in Albuquerque. In exchange for its first year's
rent, LVEN provided certain furniture for the executive and reception areas of
the Company's Albuquerque office space. Upon consummation of the Delaware
Settlement, the Albuquerque lease was assumed by AutoLend.

Mr. James J. Murray was elected by the Board of Directors to serve as a
Director of the Company on February 22, 1999. Mr. Murray is the brother of Mr.
Francis W. Murray who is a Director and also serves as acting Chief Executive
Officer of the Company.

For additional information regarding related party transactions see
Footnote 4 in the Consolidated Financial Statements. See also "Item 11 -
Compensation Committee Interlocks and Insider Participation."

89

PART IV

ITEM 14 - EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(A) Exhibits

Exhibit
Number Description of Exhibit

3.1 Certificate of Incorporation, as amended (incorporated by reference to
Exhibit 3(A) to the Registrant's Registration Statement on Form S-1, File
No. 2-70153, filed December 5, 1980)

3.2 Amendment to the Certificate of Incorporation (incorporated by reference to
Exhibit 3(a)(11) to Amendment No. 3 to the Registrant's Registration
Statement on Form S-1, File No. 2-70153)

3.3 Amended and Restated By-Laws of the Registrant (incorporated by reference
to Exhibit 3.3 to the Registrant's Annual Report on Form 10-K for the
Fiscal Year Ended June 30, 1997)

4.1 Warrant No. 1 dated May 23, 1997 to purchase 546,847 shares of the
Registrant's Common Stock (incorporated by reference to Exhibit 10.2 to the
Registrant's Current Report on Form 8-K dated May 23, 1997)

4.2 Warrant No. 2 dated May 23, 1997 to purchase 497,153 shares of the
Registrant's Common Stock (incorporated by reference to Exhibit 10.3 to the
Registrant's Current Report on Form 8-K dated May 23, 1997)

4.3 Convertible Promissory Note dated May 23, 1997 from the Registrant to CSFB
(incorporated by reference to Exhibit 4.3 to the Registrant's Annual Report
on Form 10-K for the Fiscal Year Ended June 30, 1997)

10.1 Stipulation and Agreement of Compromise, Settlement and Release dated July
2, 1998 (incorporated by reference to Exhibit 10.1 of the Registrant's
Current Report on Form 8-K dated July 2, 1998)

10.2 Asset Purchase Agreement dated as of July 2, 1998 by, between and among
Greenwood New Jersey, Inc., Garden State Race Track, Inc., Freehold Raceway
Association, Atlantic City Harness, Inc., Circa 1850 and International
Thoroughbred Breeders, Inc. together with exhibits thereto (incorporated by
reference to Exhibit 10.2 on Form 8-K dated July 2, 1998)

10.3 Loan Agreement dated May 23, 1997 by and among CSFB and the Company and
certain of its subsidiaries (incorporated by reference to Exhibit 10.1 to
the Registrant's Current Report on Form 8-K dated May 23, 1997)

90

10.4 Registration Rights Agreement dated as of May 23, 1997 between the
Registrant and CSFB (incorporated by reference to Exhibit 10.4 to the
Registrant's Current Report on Form 8-K dated May 23, 1997)

10.5 Proxy dated October 31, 1997 of LVEN and Casino-Co granted to Nunzio P.
DeSantis (incorporated by reference to Exhibit 10.3 to the Registrant's
Annual Report on Form 10- K for the Fiscal Year Ended June 30, 1997)

10.6 Registration Rights Agreement dated July 1, 1997 between the Registrant and
Casino-Co (incorporated by reference to Exhibit 10.2 to the Registrant's
Current Report on Form 8-K dated July 1, 1997)

10.7 Letter Agreement dated as of January 22, 1996 among LVEN, the Registrant
and Orion Casino Corporation (incorporated by reference to Exhibit 10.1 to
the Registrant's Current Report on Form 8-K dated January 24, 1996)

10.8 Stock Purchase Agreement made as of January 1, 1995 for the acquisition by
the Registrant of all the outstanding capital stock of Freehold Raceway
(incorporated by reference to Exhibit 10.6 to the Registrant's Form 10-K
for the year ended June 30, 1996)

10.9 Tri-Party Agreement by and among the Registrant, CSFB and LVEN, dated as of
May 23, 1997 (incorporated by reference to Exhibit 10.7 to the Registrant's
Form 10-K for the year ended June 30, 1997)

10.10Bi-Lateral Agreement by and between the Registrant and LVEN, dated as of
May 23, 1997 (incorporated by reference to Exhibit 10.8 to the Registrant's
Form 10-K for the year ended June 30, 1997)

10.11* Employment Agreement by and between the Registrant and Nunzio DeSantis,
dated as of January 15, 1997 (incorporated by reference to Exhibit 10.9 to
the Registrant's Form 10-K for the year ended June 30, 1997)

10.12* Consulting Agreement by and between the Registrant and Anthony Coelho,
dated as of January 15, 1997 (incorporated by reference to Exhibit 10.10 to
the Registrant's Form 10- K for the year ended June 30, 1997)

10.13* Amended and Restated Employment Agreement by and between the Registrant
and Richard E. Orbann, dated as of October 16, 1997 (incorporated by
reference to Exhibit 10.11 to the Registrant's Form 10-K for the year ended
June 30, 1997)

10.14* Employment Agreement by and between the Registrant and Christopher C.
Castens, dated as of January 1, 1996 (incorporated by reference to Exhibit
10.2 to the Registrant's Form 10-K for the year ended June 30, 1996)

91

10.14.1* Amendment No. 2 to Employment Agreement, dated as of October 16, 1997

10.15First Amendment to Asset Purchase Agreement dated as of January 28, 1999
among the Company, Garden State Race Track, Inc., Freehold Racing
Association, Atlantic City Harness, Inc., Circa 1850, Inc., Greenwood New
Jersey, Inc. and Penn National Gaming, Inc. (without Exhibits).
(incorporated by reference to Exhibit 10.1 to the Registrant's Current
Report on Form 8K dated January 28, 1999)

10.16Lease Agreement between Garden State Race Track, Inc. and GS Park Racing,
L.P. (without Exhibits). (incorporated by reference to Exhibit 10.2 to the
Registrant's Current Report on Form 8K dated January 28, 1999)

10.17Approval Agreement dated January 28, 1999 between Credit Suisse First
Boston Mortgage Capital LLC, the Company, Garden State Race Track, Inc.,
Freehold Racing Association, International Thoroughbred Gaming Development
Corporation and Orion Casino Corporation (without Exhibits). (incorporated
by reference to Exhibit 10.3 to the Registrant's Current Report on Form 8K
dated January 28, 1999)

10.18Agreement dated January 6, 1999 between the Company and Donald F. Conway,
Chapter 11 Trustee for the Bankruptcy Estate of Robert E. Brennan (without
Exhibits). (incorporated by reference to Exhibit 10.4 to the Registrant's
Current Report on Form 8K dated January 28, 1999)

10.19$1,000,000 Deferred Purchase Price Promissory Note from GS Park Racing,
L.P. and FR Park Racing, L.P. (incorporated by reference to Exhibit 10.5 to
the Registrant's Current Report on Form 8K dated January 28, 1999)

10.20$5,000,000 Contingent Promissory Note from GS Park Racing, L.P. and FR
Park Racing, L.P. to the Company, as Agent for Garden State Race Track,
Inc., Freehold Racing Association, Atlantic City Harness, Inc. and Circa
1850, Inc. (incorporated by reference to Exhibit 10.6 to the Registrant's
Current Report on Form 8K dated January 28, 1999)

10.21$3,000,000 Contingent Promissory Note from GS Park Racing, L.P. and FR
Park Racing, L.P. to the Company, as Agent for Garden State Race Track,
Inc., Freehold Racing Association, Atlantic City Harness, Inc. and Circa
1850, Inc. (incorporated by reference to Exhibit 10.7 to the Registrant's
Current Report on Form 8K dated January 28, 1999)

10.22$2,000,000 Contingent Promissory Note from GS Park Racing, L.P. and FR
Park Racing, L.P. to the Company, as Agent for Garden State Race Track,
Inc., Freehold Racing Association, Atlantic City Harness, Inc. and Circa
1850, Inc. (incorporated by reference to Exhibit 10.8 to the Registrant's
Current Report on Form 8K dated January 28, 1999)

92

10.23Mortgage and Security Agreement, dated January 28, 1999, between FR Park
Racing, L.P. and the Company, as agent for Garden State Race Track, Inc.,
Freehold Racing Association, Atlantic City Harness, Inc. and Circa 1850,
Inc. (incorporated by reference to Exhibit 10.9 to the Registrant's Current
Report on Form 8K dated January 28, 1999)

10.24$3,558,032 Note from the Company to Donald F. Conway, Chapter 11 Trustee
for the Bankruptcy Estate of Robert E. Brennan. (incorporated by reference
to Exhibit 10.10 to the Registrant's Current Report on Form 8K dated
January 28, 1999)

10.25Security Agreement, dated January 28, 1999, between Garden State Race
Track, Inc. and Donald F. Conway, Chapter 11 Trustee for the Bankruptcy
Estate of Robert E. Brennan. (incorporated by reference to Exhibit 10.11 to
the Registrant's Current Report on Form 8K dated January 28, 1999)

10.26Security Agreement, dated January 28, 1999, between Orion Casino
Corporation and Donald F. Conway, Chapter 11 Trustee for the Bankruptcy
Estate of Robert E. Brennan. (incorporated by reference to Exhibit 10.12 to
the Registrant's Current Report on Form 8K dated January 28, 1999)

10.27Employment Termination Agreement, dated January 28, 1999, between the
Company and Richard Orbann. (incorporated by reference to Exhibit 10.13 to
the Registrant's Current Report on Form 8K dated January 28, 1999)

10.28Restructure Agreement dated January 21, 2000, between the Company and
Credit Suisse (incorporated by reference to Exhibit 10.1 to the
Registrant's Current Report on Form 8K dated January 21, 2000)

10.29Limited Liability Company Agreement of GSRT, LLC between the Company and
Credit Suisse (incorporated by reference to Exhibit 10.2 to the
Registrant's Current Report on Form 8K dated January 21, 2000)

10.30Letter approving Garden State joint venture transaction (incorporated by
reference to Exhibit 10.3 to the Registrant's Current Report on Form 8K
dated January 21, 2000)

10.31Letter regarding possible El Rancho transaction (incorporated by reference
to Exhibit 10.4 to the Registrant's Current Report on Form 8K dated January
21, 2000)

10.32Modification of Mortgage, Deed of Trust and Other Loan Documents
(incorporated by reference to Exhibit 10.5 to the Registrant's Current
Report on Form 8K dated January 21, 2000)

93

10.33Indemnification Agreement (incorporated by reference to Exhibit 10.6 to
the Registrant's Current Report on Form 8K dated January 21, 2000)

21 Subsidiaries

27 Financial Data Schedule
-------------------
* Constitutes a management contract or compensation plan.

(B) Financial Statements

Reports of independent certified public accountants.
Consolidated Balance Sheets as of June 30, 1999 and 1998.
Consolidated Statements of Operations for the Years
Ended June 30, 1999, 1998 and 1997.
Consolidated Statements of Stockholders' Equity for the Years
Ended June 30, 1999, 1998 and 1997.
Consolidated Statements of Cash Flows for the Years Ended
June 30, 1999, 1998 and 1997.
Notes to Consolidated Financial Statements.

(C) Reports on Form 8-K

No reports were filed on Form 8-K during the last quarter of the fiscal
year covered by this report.

During the quarter ended March 31, 2000 in Fiscal 2000, the Company filed a
current report on Form 8-K dated January 21, 2000 reporting the following:

ITEM 5. OTHER EVENTS

On December 27, 1999, the Company received consents from a group of its
shareholders representing 4,498,264 shares or 50.09% of the Company's Common
Stock which authorized the Company to enter into a restructuring agreement with
its primary lender.

94

INTERNATIONAL THOROUGHBRED BREEDERS, INC
AND SUBSIDIARIES

EXHIBIT 21

The following table indicates the subsidiaries of International
Thoroughbred Breeders, Inc. and their states of incorporation. All of such
subsidiaries are wholly owned.

Name State of Incorporation

Atlantic City Harness, Inc. New Jersey

Circa 1850, Inc. New Jersey

Freehold Racing Association New Jersey

Garden State Race Track, Inc. New Jersey

International Thoroughbred Breeders Management, Inc. New Jersey

International Thoroughbred Gaming Development Corporation New Jersey

Olde English Management Co., Inc. New Jersey

Orion Casino Corporation Nevada

95

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be signed on
its behalf by the undersigned, thereunto duly authorized, on May 11, 2000.

INTERNATIONAL THOROUGHBRED
BREEDERS, INC.

By:
Robert J. Quigley, President
Chairman of the Board

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

Name Title Date
- ---- ----- ----

By:________________________________ Treasurer (Principal 5/11/2000
William H. Warner Financial and
Accounting Officer)

By:________________________________ Director 5/11/2000
John Mariucci

By:________________________________ Director 5/11/2000
James Murray

By:________________________________ Director 5/11/2000
Francis W. Murray

By:________________________________ Director 5/11/2000
Robert J. Quigley

96