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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

[x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934

For the fiscal year ended June 30, 2003

OR

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

For the transition period from ________ to ________.

Commission File No. 0-9624

INTERNATIONAL THOROUGHBRED BREEDERS, INC.
-----------------------------------------
(Exact name of registrant as specified in its charter)


Delaware 22-2332039
----------------------------- ------------------------------
(State or other jurisdiction (IRS Employer Identification No.)
of incorporation)


211 Benigno Boulevard, Suite 210, Bellmawr, New Jersey 08031
------------------------------------------------------ -------
(Address of principal executive offices) (Zip Code)

(856) 931-8163
------------------------------
(Registrant's telephone number,
including area code)

Securities registered pursuant to Section 12 (b) of the Act: None
Securities registered pursuant to Section 12 (g) of the Act: Common Stock, par
value $2.00

Indicate by check mark whether 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 X No__

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 the 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.[ X ]

The aggregate market value of the registrant's common stock held by
non-affiliates of the registrant as of September 30, 2003 was approximately
$497,180. Shares of common stock held by each executive officer and director and
by each person who owns 10% or more of our outstanding common stock have been
excluded since such persons may be deemed affiliates. This determination of
affiliate status is not necessarily a conclusive determination for other
purposes.

As of October 14, 2003, there were 8,252,133 outstanding shares of the
registrant's common stock.





TABLE OF CONTENTS


PART I

Item 1. Business 1
Item 2. Properties 8
Item 3. Legal Proceedings 8
Item 4. Submission of Matters to a Vote of Security Holders 8

PART II

Item 5. Market for the Registrant's Common Equity and Related
Stockholder Matters 9
Item 6. Selected Financial Data 10
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations 11
Item 7A. Quantitative and Qualitative Disclosures about
Market Risk 20
Item 8. Financial Statements and Supplementary Data 20
Item 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure 52
Item 9A. Controls and Procedures 52

PART III

Item 10. Directors and Executive Officers of the Registrant 53
Item 11. Executive Compensation 56
Item 12. Security Ownership of Certain Beneficial Owners and
Management 59
Item 13. Certain Relationships and Related Transactions 61

PART IV

Item 14. Exhibits, Financial Statement Schedule, and
Report on Form 8-K 63





CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS

We have made forward-looking statements in this Form 10-K, including the
information concerning possible or assumed future results of our operations and
those preceded by, followed by or that include words such as "anticipates,"
"believes," "expects," "intends" or similar expressions. For those statements,
we claim the protection of the safe harbor for forward-looking statements
contained in the Private Securities Litigation Reform Act of 1995. You should
understand that the following important factors, in addition to those discussed
elsewhere in this document, particularly under "Risk Factors," could affect our
future results and could cause those results to differ materially from those
expressed in our forward-looking statements:

o general economic and business conditions;
o competition;
o execution of our new business strategy;
o changes in laws regulating our industry;
o fluctuations in quarterly operating results as a result of
seasonal and weather considerations; and
o events directly or indirectly relating to our business causing
our stock price to be volatile.







INTERNATIONAL THOROUGHBRED BREEDERS, INC.

PART I

Item 1. Business.

General

International Thoroughbred Breeders, Inc., a Delaware corporation, was
incorporated on October 31, 1980. Until the January 1999 sale of Freehold
Raceway and leasing to a third party of Garden State Park, we were primarily
engaged, through various operating subsidiaries, in the ownership and operation
of standardbred and thoroughbred racetracks in New Jersey. For the period of
approximately 22 months after our January 1999 sale of Freehold Raceway and our
leasing of Garden State Park to a third party, our focus concentrated upon
working out the Company's debt problems, by selling our real properties in an
orderly fashion rather than permitting such assets to be lost by foreclosure.
Our efforts in that regard were successful, and in two transactions, one in May
2000 and the other in November 2000, we sold all of our real properties and paid
our indebtedness in full. Since November 2000, we have evaluated and continue to
look for business opportunities. We are committed to remaining as an operating
company.

To that end, as of April 30, 2001, we acquired, by a bareboat charter,
operations of an offshore gaming vessel, the M/V Palm Beach Princess. This
vessel sails twice daily from the Port of Palm Beach, Florida and, once beyond
the three-mile territorial limit, engages in a casino gaming business. We
acquired this business pursuant to a bareboat charter for a one- year term,
which is continuing on a month-to-month basis, and, by negotiating to purchase
the substantial debt secured by a mortgage against the vessel, we plan to
negotiate an acquisition of the vessel and related assets. The business of
operating the cruise vessel includes a variety of shipboard activities,
including casino gaming, dining, music and other entertainment.

Current Operations

Effective April 30, 2001, we entered into a bareboat charter with MJQ
Corporation, pursuant to which we charter the vessel M/V Palm Beach Princess for
the purpose of operating a casino cruise business from the Port of Palm Beach,
Florida. Under the bareboat charter agreement, as amended, we are obligated to
pay $50,000 per month as a charter hire fee to the vessel's owner, MJQ
Corporation. In order to obtain the bareboat charter, we entered into a letter
of intent as of April 30, 2001, and then concluded a Master Settlement Agreement
dated February 22, 2002 with the Chapter 11 Trustee (the "Trustee") for the
Bankruptcy Estate of Robert E. Brennan, MJQ Corporation and others, including
Francis W. Murray, our Chairman, who is also a director and officer of MJQ
Corporation. (See Item 13, Certain Relationships and Related Transactions.) The
Master Settlement Agreement by its terms was subject to bankruptcy court
approval, and on April 1, 2002, the approval of the United States Bankruptcy
Court for the District of New Jersey, having jurisdiction over the bankruptcy
estate of Robert E. Brennan, was obtained.

In accordance with the Master Settlement Agreement, through a subsidiary,
we entered into a Purchase and Sale Agreement which provides for our purchase
from the Trustee of the

1




promissory note of MJQ Corporation, having an original balance of principal and
interest of approximately $12 million and secured by a ship mortgage against the
M/V Palm Beach Princess (the "Ship Mortgage Obligation"). At June 30, 2003, the
interest accrued on this note was $4,464,984. The purchase price payable by us
for the Ship Mortgage Obligation is $13.75 million. We began making payments on
account of such purchase price effective April 30, 2001, in monthly installments
of $250,000. Such monthly installments continued under the terms of the Purchase
and Sale Agreement through July 31, 2002, at which time a $9.75 million balloon
payment was to be due. However, before July 31, 2002, we exercised our right to
extend the time for payment of the balance of the purchase price for up to three
(3) additional months, to October 31,2002, by paying fees of $70,000 for the
first one month extension, an additional $80,000 for the second month extension
and an additional $100,000 for the third month extension. On October 30, 2002,
the Master Settlement Agreement was amended to provide for a further extension
of the due date for payment of the $9.75 million balance under the Purchase and
Sale Agreement until January 6, 2003, in consideration of our payment of
$220,000 as an extension fee. On January 3, 2003, we did not have the funds to
complete the purchase by January 6, 2003 and the Trustee denied our request for
a further extension of the January 6, 2003 due date. Therefore, on January 3,
2003, in order to protect our invested deposits and operation of the vessel, our
subsidiary filed a voluntary petition for relief under Chapter 11 of the
Bankruptcy Code. MJQ Corporation, the entity which ownes the vessel, also filed
for relief under Chapter 11 of the Bankruptcy Code.

Our transaction with the Brennan Bankruptcy Trustee, including our
agreement to purchase the Ship Mortgage Obligation, is an opportunity which
arose out of the Brennan Bankruptcy Trustee's claims against MJQ Corporation and
others, including Mr. Murray, alleging that MJQ Corporation had received a loan
(the Ship Mortgage Obligation) from an entity which, in turn, received funds
from offshore trusts created by Robert E. Brennan (the Company's former
chairman). The Brennan Bankruptcy Trustee acquired the Ship Mortgage Obligation
through a settlement of litigation which the Brennan Bankruptcy Trustee brought
against those offshore trusts. We learned of the opportunity to acquire the Ship
Mortgage Obligation and of the opportunity to acquire, at least temporarily
(through the bareboat charter), the vessel and MJQ Corporation's casino cruise
business, through Mr. Murray's connection as a director of MJQ Corporation.

Under the bareboat charter, we have (on a month-to-month basis) the right
to operate the M/V Palm Beach Princess, which, once outside the three-mile
territorial coastal limit, operates a casino gaming business.

The Palm Beach Princess is a large, ocean going cruise ship with a
passenger capacity of approximately 850 for coastal voyages. The ship is 420
feet long, 6,659 gross tons, and registered in the Republic of Panama.
Originally built in 1964, the ship was substantially reconstructed, refurbished,
and upgraded in 1973, 1984 and 1997. The ship fully complies with the highest
standards of the International Convention on Safety of Life at Sea as applicable
to large passenger ships, and is regularly subjected to safety and health
inspections by the United States Coast Guard and the United States Public Health
Service.

The Palm Beach Princess performs fourteen cruises weekly, that is, a
daytime and an evening cruise each day. Each cruise is of five to six hours
duration. During each cruise, the

2





Palm Beach Princess offers a range of amenities and services to her passengers,
including a full casino, sit-down buffet dining, live musical shows,
discotheque, bars and lounges, swimming pool and sundecks. The casino occupies
15,000 square feet aboard the ship and is equipped with approximately 400 slot
machines, all major table games (blackjack, dice, roulette and poker), and a
sports wagering book.

Pursuant to the bareboat charter between MJQ Corporation, the owner of the
vessel, and a subsidiary of ours, the vessel is provided to us on a
month-to-month basis, unless earlier terminated. As charterer of the vessel, we
are responsible for maintaining the vessel, all machinery, boilers and other
equipment on the vessel, and are responsible for making all necessary repairs.
We are responsible for all expenses of operations, including all taxes payable
in respect thereof. As charterer, we have the use of all equipment on board the
vessel at the time it was delivered to us, and are responsible for re-delivery
of the vessel and equipment at the end of the charter period in the same
condition as when we received it, ordinary wear and tear excepted. We are also
responsible for replacing any items of equipment that need to be replaced and,
to the extent equipment may be leased, we are responsible for all rental and
other liabilities of MJQ Corporation under such leases during the term of the
charter. We are to keep all insurance in place for the vessel and equipment.
Further, MJQ Corporation is to continue to conduct for us certain operations of
the vessel until such time as we obtain, through our operating subsidiary, all
permits, licenses and registrations required in connection with the operation of
the vessel, including but not limited to, the federal water pollution
certification, registration under the Gambling Devices Act, registration for
Florida sales tax, and Florida alcoholic beverage licensing. All costs of such
operations incurred by MJQ Corporation on our behalf are to be reimbursed by us
to MJQ Corporation. Pending consummation of our purchase of the Ship Mortgage
Obligation, we have not obtained such permits, licenses or registrations in our
own or our subsidiary's name.

On January 3, 2003, ITG Vegas, Inc.("ITGV"), our subsidiary operating the
Palm Beach Princess, and MJQ Corporation ("MJQ"), which owns the Palm Beach
Princess vessel, an entity owned by Francis W. Murray, filed voluntary petitions
for relief under Chapter 11 of the United States Bankruptcy Code (the
"Bankruptcy Code") in the United States Bankruptcy Court for the Southern
District of Florida, Palm Beach Division (the "Bankruptcy Court"), In re: ITG
Vegas, Inc., Case No. 03-30038. The petition did not cover the parent company,
ITB, nor any other of ITB's subsidiaries. The Palm Beach Princess continued to
operate as "debtor-in-possession" under the jurisdiction of the Bankruptcy Court
and in accordance with the applicable provisions of the Bankruptcy Code and
orders of the Bankruptcy Court. We had previously entered into a Master
Settlement Agreement to purchase from the Chapter 11 Trustee for the Bankruptcy
Estate of Robert E. Brennan (the "Trustee") the promissory note of MJQ
Corporation for $13.75 million. We did not have funds necessary to complete that
purchase by January 6, 2003, the date required for payment of the balance of
such purchase price. Therefore, on January 3, 2003, in order to protect our
invested deposits and operation of the vessel, ITGV (together with MJQ
Corporation) filed a voluntary petition for relief under Chapter 11 of the
Bankruptcy Code.

On September 12, 2003, the United States Bankruptcy Court for the Southern
District of Florida (Palm Beach Division) issued an order confirming the Amended
Joint Chapter 11 Plan of Reorganization (the "Plan") in the Chapter 11 cases of
ITG Vegas, Inc., the

3





Company's wholly owned subsidiary, and MJQ Corporation. On the effective date of
the Plan (the "Effective Date"), all claims, debts, liens, security interests
and encumbrances of and against the Debtors and against all property of their
respective bankruptcy estates, which arose before confirmation, will be
discharged, except as otherwise provided in the Plan or confirmation order.
Post-confirmation, each of the Debtors will continue as reorganized debtors.

The Plan includes the following principal features: (i) On the Effective
Date, all administrative expense claims and tax claims will be paid in full;
(ii) All pre-petition debtors will be paid in two installments, one-half on the
Effective Date and one-half (with interest thereon at 8% per year from the
Effective Date) on the six month anniversary of the Effective Date; and (iii)The
Debtor's principal creditor, Donald F. Conway, as Chapter 11 Trustee for the
Bankruptcy Estate of Robert E. Brennan (the "Brennan Trustee"), will receive
payment in full of all obligations over a period not to exceed three years which
will consist of (a) the balance of the purchase price that had been payable by
ITG Vegas for the purchase of the ship mortgage against the Vessel, in the
amount of $9,750,000; (b) the balance of the Company's indebtedness to the
Brennan Trustee in respect of the purchase of stock in the Company, in the
principal amount of $1,511,035.70, plus interest thereon from December 13, 2002
to January 23, 2003 at 9% per annum and thereafter at 11% per annum until the
Effective Date; (c) a new obligation of the Company for the purchase of an
additional 450,000 shares of the Company's stock from the Brennan Trustee, at
$0.50 per share, or $225,000; (d) a forbearance fee of $350,000 also shall
accrue to the Brennan Trustee on the Effective Date, of which $100,000 will be
payable on the Effective Date and the balance of $250,000 will be due on or
about the third anniversary of the Effective Date.

Monthly payments of $400,000 with interest at 12% will be required to be
made to the Brennan Trustee, to be applied first to interest accrued and then to
principal. In addition, the Brennan Trustee shall be entitled to payment of a
Stay Bonus in the amount of $200,000 if the Payment Obligation shall not have
been paid in full within 12 months after the Effective Date, and an additional
$100,000 if the Payment Obligation shall not have been paid in full within 24
months after the Effective Date. Beginning with ITG Vegas' 2004 internal
accounting year (commencing December 29, 2003) and annually thereafter, 75% of
ITG Vegas' Free Cash Flow (as defined in the Plan) for the period shall be paid
to the Brennan Trustee as a Sweep Payment to be applied to the foresaid debt.


Prior Operations

In April of 1998, our Board of Directors authorized the exploration of
strategic opportunities for our business, including a possible merger or sale of
all of our racetrack and hotel assets. The Board ultimately decided that a sale
of our assets was the preferred alternative.

On January 28, 1999, we completed the sale of Freehold Raceway, the sale of
a ten acre parcel at Garden State Park and the lease of Garden State Park
facilities to subsidiaries of Greenwood Racing, Inc. The purchase price was $46
million, with up to an additional $10 million in Contingent Promissory Notes
which would become payable only upon, among other things, the New Jersey
Legislature's approval of off-track betting facilities or telephone

4





account pari-mutuel wagering on horse racing by certain dates and Greenwood's
obtaining necessary licenses to operate by January 24, 2002. Such contingency
did not occur.

On May 22, 2000, through our wholly-owned subsidiary, Orion Casino
Corporation, we closed on the sale of the non-operating former El Rancho Hotel
and Casino in Las Vegas, Nevada to Turnberry/Las Vegas Boulevard, LLC. The sale
price was $45 million and was paid by: (i) previous cash deposits totaling $2
million; and (ii) the balance of the sale price paid in cash at the closing. The
proceeds from the El Rancho sale were principally used by us to reduce the
outstanding balances on our loan from Credit Suisse First Boston Mortgage
Capital LLC to $14.7 million and to purchase a promissory note, secured by the
rights to 100% of the distributable cash of the buyer in the event of a default,
of the buyer in the amount of $23 million, which will be convertible at our
option into a 33 1/3% equity interest in the buyer. The interest payable under
such note will be dependent upon, and payable solely out of, the buyer's net
cash flow available for distribution to its equity owners. After the equity
investors in the Company 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 us. We will thereafter
receive payments under the Note equal to 33 1/3% of all distributable cash until
the maturity date, which occurs on the thirtieth anniversary of our purchase of
the Note. We may convert the Promissory Note, at our option, into a 33 1/3%
equity interest in the buyer during a six-month period beginning on the
fifteenth 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 thirtieth
anniversary of its issuance. We have elected to defer the gain on the sale until
such time that collectability, under the $23 million Note purchased from
Turnberry after the closing, can be determined.

On November 30, 2000, through our wholly-owned subsidiary, GSRT, LLC, we
closed on the sale of our Garden State Park property, located in Cherry Hill,
New Jersey, to Realen- Turnberry/Cherry Hill, LLC. The purchase price was $30
million and was paid by: (i) previous cash deposits totaling $1 million; (ii) a
Promissory Note in the face amount of $10 million; and (iii) the balance of the
purchase price paid in cash at the closing. The cash proceeds from such sale
were principally used by us to repay in full the outstanding balances on our
debt to Credit Suisse First Boston Mortgage Capital LLC of approximately $14.3
million and to repay in full approximately $3.75 million of principal and
interest on the debt to the Chapter 11 Bankruptcy Trustee for the estate of
Robert E. Brennan which had been incurred to purchase 2,904,016 shares of our
common stock.

Under the $10 Million Note, the interest payable will be dependent upon,
and payable solely out of, the buyer's net cash flow available for distribution
to its equity owners. After the equity investors in the buyer have received
aggregate distributions equal to their capital contributions plus an agreed upon
return on their invested capital, the next $10 million of distributable cash
will be paid to us. We will thereafter receive payments under the Note equal to
33 1/3% of all distributable cash until the maturity date, which occurs on the
fifteenth anniversary of the issuance of the Note. We may convert the Promissory
Note, at our option, into a 33 1/3% equity interest in Realen-Turnberry/Cherry
Hill during the six-month period prior to the fifteenth anniversary of the
issuance of the Note. If not then converted, the Note will be payable at
maturity in an amount equal to (i) the difference, if any, between $10 million
and total payments previously made to us under the Note and (ii) 33 1/3% of any
excess of the fair market value of Realen-Turnberry/Cherry Hill's assets over
the sum of its

5





liabilities (other than the Note) and any unreturned equity investment of its
owners. We have elected to defer the gain on the sale until such time that
collectability under the $10 million Note from Realen-Turnberry/Cherry Hill can
be determined.

During June 2001, we held auctions at which all of the personal property,
including equipment, furniture, furnishings and art work, that we owned at
Garden State Park was sold for approximately $1.2 million in cash.

Employees

As of June 30, 2003, we employed 8 full-time corporate executive,
administrative and clerical personnel. All of the crew of the M/V Palm Beach
Princess (226 persons) and office and management personnel of MJQ Corporation
(78 persons) are made available to us for operation of the casino cruise
business under an arrangement between us and MJQ Corporation by which all costs
of such personnel are borne by us.

Competition

From July 1, 2001 to December 9, 2001 the M/V Palm Beach Princess was the
only vessel operating a coastal gaming business from the Port of Palm Beach and
our closest competition was approximately 50 miles away in Ft. Lauderdale,
Florida. From December 10, 2001 until April 29, 2002, when it returned to its
home port of Boston Massachusetts, another coastal gaming vessel, the S.S.
Horizon Edge, operated from Riviera Beach Marina, which is in close proximity to
the Port of Palm Beach. This vessel was 186 feet and had a passenger capacity of
500 people. The M/V Palm Beach Princess is considerably larger at 420 feet with
a passenger capacity of 850 people. The Horizon Edge operated on a similar
schedule as the Palm Beach Princess, that is, two five hour cruises per day, 7
days a week, however, due to its smaller size it canceled more cruises than the
Palm Beach Princess for inclement weather. From June, 2002 until February 15,
2003, the coastal gaming vessel Texas Treasure II (formerly the M/V Contessa)
was operating from the Port of Palm Beach in competition with the M/V Palm Beach
Princess. This vessel is approximately 400 feet, was built in 1968 and has a
passenger capacity of approximately 700 people. This vessel had previously
operated in competition with the Palm Beach Princess from May 13, 1999 until it
discontinued operations on May 15, 2000. We may compete with other vessels which
may from time to time be located in the port on the basis of cruise schedules,
passenger services, amenities, prices, and percentages of gaming win. Our
agreement with the Port of Palm Beach District (see Item 2 - Properties, below)
gives us a competitive advantage as to preferred cruise scheduling times and
convenience of passenger parking areas. A 300 passenger high-speed ferry is
scheduled to begin carrying passengers late in 2003 on daily round trips to
Freeport, Grand Bahamas where gaming is conducted.

There is no assurance that other competing vessels will not enter the
gaming business at the existing Port of Palm Beach, at a new and larger port
facility in Palm Beach or at another port facility in the future.

In addition to competing with other vessels in the coastal gaming cruise
business, we


6





compete with a variety of other entertainment activities in and around Palm
Beach, Florida, including, but not limited to, land-based Indian gaming casinos,
poker rooms, dog racing, state-sponsored lotteries, short-term cruises, resort
attractions, various sports activities and numerous other recreational
activities. There is no assurance that we will be able to successfully compete
with such other activities.

Weather and Seasonal Fluctuations

The success of our casino cruise business depends to significant extent on
the weather conditions. In particular, inclement weather, or the threat of such
weather, has a direct effect on passenger counts, potentially adversely
affecting our revenues. On relatively rare occasions, bad weather or sea
conditions may result in the cancellation of cruises. Our business is also
subject to seasonal fluctuations. Our peak seasons are the late fall, winter,
and early spring seasons due to the increased local population as well as
increased tourist populations.

Federal and State Regulations - Florida

The effect of amendments in 1994 to the Federal Gambling Ship Act and in
1992 to the Federal Johnson Act was to repeal the prior prohibition under
Federal law of gambling aboard ships performing coastal voyages beyond the
jurisdiction of state territorial waters (three miles on the United States
Atlantic coast), and to permit individual states to enact laws regulating or
prohibiting gambling aboard ships performing coastal voyages from ports located
in such states. From time to time in prior years, bills have been introduced in
the Florida legislature which, if enacted, would prohibit coastal gaming cruises
from Florida ports. No such bills have been enacted and no such bill is
currently pending. There is a risk that the State of Florida may at some future
date regulate or prohibit the coastal cruise gaming business. In addition, the
Federal government could determine to enact regulations or prohibition of
coastal gaming cruises.

Further, from time to time, bills have been introduced seeking to place
passenger surcharges on cruises originating from ports within the State of
Florida. Originally, this surcharge was intended to fund a trust fund to be used
for statewide beach restoration and management. Such bills were subsequently
amended so that the gaming cruise industry would not be taxed. However, there
can be no assurance that similar bills designed to tax passengers on cruises
such as those offered by us will not be introduced in the future. In addition,
while current law and regulations do not now prohibit casino advertising, from
time to time bills have been introduced which, in part, prohibit the
advertisement of any form of gambling in any newspaper, circular, poster,
pamphlet, radio, telegraph, telephone or otherwise. There can be no assurance
that such bills will not be reintroduced or enacted in the future. There has
also been litigation instituted in the State of Florida against gaming cruise
operators for allegedly causing a public nuisance. There can be no assurance
that further litigation will not be instituted in the future which, if
successful, could adversely affect the industry in which we operate.


7





Item 2. Properties.

We lease approximately 4,000 square feet of office space in Bellmawr, New
Jersey which serves as our corporate headquarters. The lease is for a three year
period, expiring on May 31, 2004, and provides for an option to extend such term
for an additional three year period commencing June 1, 2004. We also lease, on a
month to month basis, approximately 200 square feet of office space in Toms
River, New Jersey which serves as a satellite executive office.

Through our subsidiary, ITG Vegas, Inc. ("ITGV"), we have negotiated with
the Port of Palm Beach District a new operating agreement and lease of space in
a new office complex constructed at the Port of Palm Beach adjacent to a new
cruise terminal effective, as modified, on May 5, 2003. The term of the initial
lease is five years at $183,200 per year payable monthly. We were also required
to make tenant improvements to the new space in a minimum amount of $333,000,
however the actual cost to make the improvements was approximately $950,000. We
will have the right to a credit of up to a minimum amount of improvements
required of $333,000 of construction costs against the initial term of our five
year lease.

Item 3. Legal Proceedings.

We are a defendant in various 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 a material adverse effect on our financial position, results of
operations or cash flows.

Our subsidiary, ITG Vegas, Inc., successor by merger to Palm Beach
Princess, Inc., initiated proceedings under Chapter 11 of the Bankruptcy Code on
January 3, 2003 (See Item 1 under this section and Footnote 2).

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

We did not submit any matters to a vote of security holders during the
fourth quarter of fiscal year 2003.


8




PART II


Item 5. Market for the Registrant's Common Equity and Related Stockholder
Matters

Our common stock has been traded infrequently on the Pink Sheets since
September 15, 1998. The following table sets forth, for the fiscal years
indicated, the high and low sales prices for each share of our common stock on
the Pink Sheets based upon information supplied by the Pink Sheets.

Fiscal Year High Low
----------- ---- ---

2002
First Quarter .30 .17
Second Quarter .28 .17
Third Quarter .50 .20
Fourth Quarter .50 .23
2003
First Quarter .45 .16
Second Quarter .21 .16
Third Quarter .18 .14
Fourth Quarter .28 .15

On June 30, 2003, there were approximately 30,000 holders of record of the
shares of our outstanding common stock.

We have not paid any dividends since our inception. The declaration and
payment of dividends in the future will be determined by our board of directors
in light of conditions then existing, including our earnings, financial
condition and capital requirements. We do not anticipate paying dividends in the
foreseeable future.

9



Item 6 - SELECTED FINANCIAL DATA

INTERNATIONAL THOROUGHBRED BREEDERS, INC.
AND SUBSIDIARIES

Years Ended June 30,
------------------------------------------------------------------------
2003 2002 2001 2000 1999
---------- ----------- ------------- ------------ -------------



Income (Loss) Before Discontinued Operations (1)(5) $ 5,233,826 $ 1,982,603 $ (2,402,142) $ (6,980,831) $ (16,034,769)

Income From Discontinued Operations (3) $ 0 $ 0 $ 0 $ 0 $ 8,144,072

Net Income (Loss) $ 5,233,826 $ 1,982,603 $ (2,402,142) $ (6,980,831) $ (7,890,697)

Per Common Share - Basic and Diluted:

Income (Loss) Before Discontinued Operations $ 0.54 $ 0.17 $ (0.24) $ (0.78) $ (1.38)

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

Income From Discontinued Operations $ -- $ -- $ -- $ -- $ 0.39

Net Income (Loss) $ 0.54 $ 0.17 $ (0.24) $ (0.78) $ (0.67)

Weighted Average Number of Shares 9,720,275 11,480,272 9,987,114 8,980,244 11,554,476

June 30,
-------------------------------------------------------------------------
2003 2002 2001 2000 1999
------------ ------------ -------------- ------------- -------------

Working Capital (Deficiency) (2) $ 650,328 $ (2,200,346) $ (190,643) $ (17,792,740) $ (33,069,102)

Total Assets $ 53,535,809 $ 45,928,295 $ 41,391,208 $ 58,166,739 $ 76,588,565

Long-Term Debt $ 0 $ 0 $ 482,000 $ 482,000 $ 0

Stockholders' Equity $ 37,586,067 $ 33,961,313 $ 31,973,709 $ 33,870,852 $ 40,846,683


(1) The Company commenced operation of a casino cruise vessel as of April 30,
2001 which materially affects the comparability of a portion of the
information reflected in the above data.

(2) The working capital presentation in Fiscal 2002 reclassed to long term a
$750,000 deposit that was previously presented as current in Fiscal 2001.

(3) 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 June 30, 1999. As a result, the (loss) from operations
primarily consists of corporate expenses, charges and write-offs for years
June 30, 1999 through June 30, 2000.

(4) The Company did not pay cash dividends during any of the fiscal years shown
above.

(5) 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, 2003.


10




Item 7. Management's Discussion And Analysis of Financial Conditions And Results
of Operations

Forward-Looking Statements
- --------------------------

We have made forward-looking statements in this Form 10-K, including the
information concerning possible or assumed future results of our operations and
those preceded by, followed by or that include words such as "anticipates,"
"believes," "expects," "intends," or similar expressions. For those statements,
we claim the protection of the safe harbor for forward-looking statements
contained in the Private Securities Litigation Reform Act of 1995. You should
understand that the following important factors, in addition to those discussed
under "Risk Factors" in this Annual Report on Form 10-K, could affect our future
results and could cause those results to differ materially from those expressed
in our forward-looking statements:

o Chapter 11 proceedings affecting our Palm Beach Princess business and
our ability to successfully consummate a Chapter 11 plan of
re-organization;

o termination of the bareboat charter under which we operate our gaming
business;

o lack of cash flow for the Parent Company to continue to operate and
pay its debts as a result of the Chapter 11 proceedings of our
operating subsidiary;

o general economic and business conditions affecting the tourism
business in Florida;

o competition;

o changes in laws regulating the gaming industry;

o fluctuations in quarterly operating results as a result of seasonal
and weather considerations; and

o events directly or indirectly relating to our business causing our
stock price to be volatile.

Liquidity and Capital Resources

Cash flow and liquidity during the twelve month period ended June 30, 2003
included approximately $8.5 million in cash generated by the Palm Beach Princess
operations. Such cash flow was used, in part, to fund $500,000 of the payments
on account of the purchase price of the Ship Mortgage Obligation against the
Palm Beach Princess, $470,000 in fees that were recorded as operating expenses
of the parent to extend the closing under the Purchase and Sale Agreement as
described below and approximately $1,350,000 for leasehold improvements and
equipment in connection with the Port of Palm Beach lease. We have explored
gaming related business opportunities in various foreign countries and may
continue to incur expenses for exploring potential business opportunities in the
future. Approximately $306,000 has been funded and expensed in various foreign
projects during the twelve months ended June 30, 2003. Until January 3, 2003,
all of our cash flow during the current fiscal year had come from the Palm Beach
Princess vessel.

On January 3, 2003, ITG Vegas, Inc.("ITGV"), our subsidiary operating the
Palm Beach Princess, and MJQ Corporation ("MJQ"), an entity owned by Francis W.
Murray, filed voluntary petitions for relief under Chapter 11 of the United
States Bankruptcy Code (the "Bankruptcy Code") in the United States Bankruptcy
Court for the Southern District of Florida, Palm Beach Division (the "Bankruptcy
Court"), In re: ITG Vegas, Inc., Case No. 03-30038. The petition does not cover
the parent company, ITB, nor any other of ITB's subsidiaries. The Parent Company
has used all the available funds that we had prior to the bankruptcy filing to
pay some of our expenses and needs to find immediate financing in order to pay
remaining existing liabilities as well as future expenses. Since the bankruptcy
filing, the only source of funds to the Parent Company has been

11



limited to loans made by Company officers, collection of a loan previously made
to a South American gaming project and refunds from vendors and tax agencies
relating to our prior racetrack operations. The Bankruptcy filing has severely
limited our ability to make timely payments by our parent to its creditors and
corporate vendors which has affected our ability to retain the professional
services and vendors who serve our company. The Palm Beach Princess will
continue to operate as "debtor-in-possession" under the jurisdiction of the
Bankruptcy Court and in accordance with the applicable provisions of the
Bankruptcy Code and orders of the Bankruptcy Court.

On September 12, 2003, the United States Bankruptcy Court for the Southern
District of Florida (Palm Beach Division) issued an order confirming the Amended
Joint Chapter 11 Plan of Reorganization (the "Plan") in the Chapter 11 cases of
ITG Vegas, Inc., the Company's wholly owned subsidiary, and MJQ Corporation. On
the effective date of the Plan (the "Effective Date"), all claims, debts, liens,
security interests and encumbrances of and against the Debtors and against all
property of their respective bankruptcy estates, which arose before
confirmation, will be discharged, except as otherwise provided in the Plan or
confirmation order. Post-confirmation, each of the Debtors will continue as
reorganized debtors.

The Plan includes the following principal features: (i) On the Effective
Date, all administrative expense claims and tax claims will be paid in full;
(ii) All pre-petition debtors will be paid in two installments, one-half on the
Effective Date and one-half (with interest thereon at 8% per year from the
Effective Date) on the six month anniversary of the Effective Date; and (iii)
The Debtor's principal creditor, Donald F. Conway, as Chapter 11 Trustee for the
Bankruptcy Estate of Robert E. Brennan (the "Brennan Trustee"), will receive
payment in full of all obligations over a period not to exceed three years which
will consist of (a) the balance of the purchase price that had been payable by
ITG Vegas for the purchase of the ship mortgage against the Vessel, in the
amount of $9,750,000; (b) the balance of the Company's indebtedness to the
Brennan Trustee in respect of the purchase of stock in the Company, in the
principal amount of $1,511,035.70, plus interest thereon from December 13, 2002
to January 23, 2003 at 9% per annum and thereafter at 11% per annum until the
Effective Date; (c) a new obligation of the Company for the purchase of an
additional 450,000 shares of the Company's stock from the Brennan Trustee, at
$0.50 per share, or $225,000; (d) a forbearance fee of $350,000 also shall
accrue to the Brennan Trustee on the Effective Date, of which $100,000 will be
payable on the Effective Date and the balance of $250,000 will be due on or
about the third anniversary of the Effective Date.

Monthly payments of $400,000 with interest at 12% will be required to be
made to the Brennan Trustee, to be applied first to interest accrued and then to
principal. In addition, the Brennan Trustee shall be entitled to payment of a
Stay Bonus in the amount of $200,000 if the Payment Obligation shall not have
been paid in full within 12 months after the Effective Date, and an additional
$100,000 if the Payment Obligation shall not have been paid in full within 24
months after the Effective Date. Beginning with ITG Vegas' 2004 internal
accounting year (commencing December 29, 2003) and annually thereafter, 75% of
ITG Vegas' Free Cash Flow (as defined in the Plan) for the period shall be paid
to the Brennan Trustee as a Sweep Payment to be applied to the foresaid debt.

Under the Plan, the maximum amount of funds permitted to be upstreamed by
ITG Vegas to the Parent Company is $100,000 per month as a tax sharing payment
(See Note 2 below). The Parent Company has no other source of funds presently
available without the consent of the Brennan Trustee. For these reasons, and
since the $100,000 per month tax sharing payment will be suspended at any time
when the Debtors are not current in payment of their obligations to the Brennan
Trustee, no assurance can be given that the Company will be able to function as
a going concern and pay its debts as they become due.

ITGV's cash flow from operations of the vessel is seasonal. The period July
1st to December 31st is a seasonably slow period for the vessel operation. The
period from January 1st to June 30th has been a period of increased activity and
profits for the vessel. Certain of ITGV's operating costs, including the

12



charter fee payable to the vessel's owner, fuel costs and wages, are fixed and
cannot be reduced when passenger loads decrease or when rising fuel or labor
costs cannot be fully passed through to customers. Passenger and gaming revenues
earned from the vessel must be high enough to cover such expenses.

Unless and until ITGV successfully emerges from its Chapter 11 case and
pays in full all the debts to the Brennan Trustee, our possible sources of cash
include the two promissory notes we received when we sold our Garden State Park
real property in November, 2000 and our Las Vegas real property in May, 2000.
One such Note is in the face amount of $10 million, issued by
Realen-Turnberry/Cherry Hill, LLC, the purchaser of the Cherry Hill property
(the "$10 Million Note"), and the other promissory note is in the face amount of
$23 million, issued by Turnberry/Las Vegas Boulevard, LLC, purchaser of our Las
Vegas real property (the "$23 Million Note"). Under both Notes, interest and
principal payments will be dependent upon, and payable solely out of, the
obligor's net cash flow available for distribution to its equity owners. After
the obligor's equity investors have received aggregate distributions equal to
their capital contributions plus an agreed upon return on their invested
capital, the next $10 million of distributable cash in the case of the $10
Million Note, and the next $23 million of distributable cash in the case of the
$23 Million Note, will be paid to us, and following our receipt of the face
amount of the Note we will receive 33 1/3% of all distributable cash of the
obligor until maturity of the Note. The probable timing and amounts of payments
under these Notes cannot be predicted. We are attempting to borrow on these
Notes for additional working capital but such borrowing is expected to be
difficult to obtain as long as the timing and amounts of payments under the
Notes remain unpredictable.

Our working capital as of June 30, 2003 was $650,328 as compared to a
negative ($2,200,346) at June 30, 2002. The change in working capital during the
past twelve months was primarily caused by an increase in cash provided by the
operating activities which is limited to disbursement by the Bankruptcy Court,
the use of cash to make payments of $500,000 on the Ship Mortgage Obligation,
pay the extension fees of $470,000 on the purchase and to fund on-going
development projects partially offset by the cash provided by operating
activities. Other transactions affecting working capital that did not require
the use of cash was the purchase of the spare parts inventory in the amount of
$1,103,125 because the amount due for the inventory was offset by amounts owed
to the Company from the seller that were previously classified as other long
term assets. In addition, the debt incurred in the amount of $1,648,403
including interest of $34,330 for the purchase of 3,228,145 shares of the
Company's common stock from the Brennan Trustee did not require the use of cash.

Results of Operations for the Years Ended June 30, 2003 and 2002

Revenue for the year ended June 30, 2003 increased $5,509,060 from
$26,055,591 in Fiscal 2002 to $31,564,651 in Fiscal 2003 primarily as a result
of increased revenues generated by the Palm Beach Princess operations during the
comparable periods. Expenses increased $2,251,587 from $23,933,738 in Fiscal
2002 to $26,185,325 in Fiscal 2003 primarily the result of an increase in Palm
Beach Princess operating costs during the comparable periods, financing costs
incurred during the third and fourth quarters of Fiscal 2003 primarily
associated with the amended Purchase and Sale Agreement for the Palm Beach
Princess operation in the amount of $1,338,649, and costs associated with the
bankruptcy filing of $841,348, partially offset by a decrease in development
costs and a decrease in corporate general and administrative expenses during the
comparable periods.

During the year ended June 30, 2003, our net income was $5,233,827 or $.54
per share on weighted average outstanding shares of 9,720,275 as compared to net
income for the comparable period in prior fiscal year of $1,982,603 or $0.17 per
share on weighted average outstanding shares of 11,480,272. The change of
$3,251,224 was primarily the result of the increased revenues and expenses as
discussed above.


13





During the year ended June 30, 2003, total revenue from vessel operations
was $31,080,921 as compared to $25,473,777 for the year ended June 30, 2002. The
increase in revenue of $5,607,144 during the comparable periods primarily
resulted from an increase in casino gaming and on board revenue primarily the
result of an increase in the passenger count, an increase in the average amount
bet by each passenger, and an increase in the number of cruises during the
comparable periods partially offset by a decrease in fare revenues primarily
associated with the competitive pricing related to the ship competing with
another gaming vessel for a portion of operations in Fiscal 2003. Total expenses
before income taxes for the comparable periods increased $3,275,111 from
$20,466,948 for the year ended June 30, 2002 to $23,742,059 for the year ended
June 30, 2003 primarily as a result of an increase in the number of passengers
and the number of cruises which increased operating costs, increases in sales
and marketing expenses associated with competition, a $600,000 increase in
accrued employee bonus compensation costs related to our full calendar year of
operation, $869,760 in financing fees, costs associated with the bankruptcy
filing of $841,348 and a decrease in other operating expenses. Income before
taxes from operation of the vessel for the year ended June 30, 2003 was
$7,338,863 as compared to $5,006,829 for the year ended June 30, 2002. Out of
the 711 scheduled cruises during the year ended June 30, 2003, 2 were cancelled
for weather or mechanical difficulties as compared to Fiscal 2002 where out of
710 scheduled cruises, 13 cruises were cancelled for weather or mechanical
difficulties. During the year ended June 30, 2003 the vessel was placed in wet
dock for 5 days, whereas the vessel was placed in dry dock for 6 days in fiscal
2002.

The Palm Beach Princess business is subject to seasonal fluctuations. Our
peak seasons are the winter and spring seasons due to the increased local
population as well as increased tourist populations.

The following is a comparative summary of income and expenses of the Palm Beach
Princess operation for the years ended June 30, 2003 and 2002:

Years Ended
June 30,
-----------------------------------------

Description 2003 2002 Change
- ----------------------------------- ------------- ------------- -----------

Passenger Count 262,346 232,803 29,543
Number of Cruises 709 697 12

Revenue:
Fare $ 2,952,066 $ 3,199,389 $ (247,323)
On Board 1,773,926 1,711,631 62,294
Casino 26,354,930 20,562,757 5,792,173
------------ -------------- ---------
Total Revenue 31,080,921 25,473,777 5,607,144
------------ -------------- ---------

Expenses:
Casino Operating Expenses 7,889,140 7,147,301 741,839
Hotel and Gift Shop Expenses 849,022 871,893 (22,871)
Sales, Marketing and Advertising
Expenses 3,171,856 2,934,483 237,373
Maritime and Legal Expenses 5,960,421 6,151,650 (191,229)
Administrative and Finance Expenses 5,871,620 3,361,621 2,506,000
------------ -------------- ----------
Total Expenses 23,742,059 20,466,948 3,275,111
------------ -------------- ----------
Income Before Income Tax Expense $ 7,338,863 $ 5,006,829 $ 2,332,033
============ ============== ==========

The Palm Beach Princess performs fourteen cruises weekly, that is, a
daytime and an evening cruise each day. Each cruise is of five to six hours
duration. During each cruise, the Palm Beach Princess offers a range of
amenities and services to her passengers, including a full casino, sit-down
buffet dining, live musical shows, discotheque, bars and lounges, swimming pool
and sundecks. The casino occupies

14




15,000 square feet aboard the ship and is equipped with approximately 400 slot
machines, all major table games (blackjack, dice, roulette and poker), and a
sports wagering book.

From time to time the M/V Palm Beach Princess faces competition from other
gaming vessels which operate from the same port as the Palm Beach Princess. From
June 2002 until February 15, 2003 another coastal gaming vessel, Texas Treasure
II operated from the Port of Palm Beach in competition with the M/V Palm Beach
Princess. This vessel was approximately 400 feet, was built in 1968 and had a
passenger capacity of approximately 700 people. The Palm Beach Princess has been
operating without any direct competition since February 16, 2003. A 300
passenger high-speed ferry is scheduled to begin carrying passengers late in
2003 on daily round trips to Freeport, Grand Bahamas where gaming is conducted.

For the year ended June 30, 2003, our net income was $5,233,827 or $0.54
per share as compared to net income for the year ended June 30, 2002 of
$1,982,603 or $0.17 per share.

Results of Operations for the Year Ended June 30, 2002 and 2001

Revenue for the year ended June 30, 2002 increased $21,134,500 from
$4,921,091 in Fiscal 2001 to $26,055,591 in Fiscal 2002 primarily as a result of
revenues generated by the Palm Beach Princess operations. Expenses increased
$16,610,505 from $7,323,233 in Fiscal 2001 to $23,933,738 in Fiscal 2002
primarily as the result of total operating expenses of $20,466,948 associated
with the Palm Beach Princess during the twelve month period in Fiscal 2002 as
compared to $3,767,710 for the two month period of operations in Fiscal 2001.
General and Administrative expenses for the parent decreased $904,762 primarily
as a result of a Fiscal 2001 $500,000 non-cash compensation cost of the
2,500,000 shares of Common Stock issued to Francis W. Murray, the Company's
Chief Executive Officer and Fiscal 2001 remediation costs of approximately
$300,000 associated with the sale of Freehold Raceway.

During the year ended June 30, 2002, our net income was $1,982,603 or $.17
per share on weighted average outstanding shares of 11,480,272 as compared to a
loss for the comparable period in prior fiscal year of ($2,402,142) or ($0.24)
per share on weighted average outstanding shares of 9,987,114. The change of
$4,384,745 was primarily the result of the net income from a full year's
operation of the vessel.

During the year ended June 30, 2002, our first full year of operation,
passenger count was 256,021 and total revenue from the vessel was $25,473,777
which included casino revenue of $20,562,757, passenger fares of $3,199,389 and
on board revenue of $1,711,631. Casino operating expenses which also includes
food, beverage and entertainment for the twelve month period were $7,147,301 or
35% of casino revenue. Sales, marketing and advertising expenses were $2,934,483
and on board gift shop, catering and cabin expenses were $871,893. Maritime and
maintenance costs to operate the ship were $6,151,650. Finance and
administrative expenses were $3,361,621. State Income Tax expense was $139,250.
Net income from operation of the vessel for the year ended June 30, 2002 was
$4,867,579. Out of the 710 scheduled cruises during the year ended June 30,
2002, 13 cruises were cancelled for weather or mechanical difficulties. During
the twelve month period the vessel was placed in dry dock for 6 days in October,
which is a slow seasonal period, for general maintenance and repairs.

From July 1, 2001 to December 4, 2001 the M/V Palm Beach Princess was the
only vessel operating a coastal gaming business from the Port of Palm Beach and
our closest competition was approximately 50 miles away in Ft. Lauderdale,
Florida. From December 10, 2001 until April 29, 2002, another coastal gaming
vessel, the S.S. Horizon Edge, operated from Riviera Beach Marina, which is in
close proximity to the Port of Palm Beach. This vessel was 186 feet and had a
passenger capacity of 500 people. The M/V Palm Beach Princess is considerably
larger at 420 feet with a passenger capacity of 850


15




people. The Horizon Edge operated on a similar schedule as the Palm Beach
Princess, that is, two five hour cruises per day, 7 days a week, however, due to
its smaller size it canceled more cruises than the Palm Beach Princess for
inclement weather. Another coastal gaming vessel, Texas Treasure II, began
operating in approximately June 2002 until February 2003 from the Port of Palm
Beach in competition with the M/V Palm Beach Princess. This vessel was
approximately 400 feet, was built in 1968 and had a passenger capacity of
approximately 700 people.

Recently Issued Accounting Standards

In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based
Compensation - Transition and Disclosure - an Amendment of FASB Statement No.
123". SFAS No. 148 amends FASB Statement No. 123, "Accounting for Stock-Based
Compensation", to provide alternative methods of transition for an entity that
voluntarily changes to the fair-value-based method of accounting for stock-based
employee compensation. It also amends the disclosure provisions of that
statement to require prominent disclosure about the effects on reported net
income and earnings per share and the entity's accounting policy decisions with
respect to stock-based employee compensation. Certain of the disclosure
requirements are required for all companies, regardless of whether the fair
value method or intrinsic value method is used to account for stock-based
employee compensation arrangements. This amendment to SFAS 123 became effective
for financial statements for fiscal years ended after December 15, 2002 and for
interim periods beginning after December 15, 2002. Accordingly, we have adopted
the disclosure provisions of this statement in fiscal 2003.

Other Information - Risk Factors

You should consider the following risk factors that pertain to our
business. The realization of any of these risks could result in significant harm
to our results of operations, financial condition, cash flows, business or the
market price of our common stock. Keep these risk factors in mind when reading
"forward-looking" statements elsewhere in this Form 10-K.

We derive substantially all of our revenues from our offshore gaming operations.

Substantially all of our revenues are currently derived from our operation
of the M/V Palm Beach Princess. Certain of our operating costs, including the
charter fee payable to the vessel's owner, fuel costs and wages, are fixed and
cannot be reduced when passenger loads decrease or when rising fuel or labor
costs cannot be fully passed through to customers. Passenger and gaming revenues
earned from the vessel must be high enough to cover such expenses. While we have
generated sufficient revenues from the M/V Palm Beach Princess to pay its
expenses, there is no guarantee that we will be able to continue to cover
operating expenses of that business as well as the new monthly debt service
payments of $400,000 to the Brennan Trustee, and our failure to do so could have
materially adverse consequences.

16



Emerging from Chapter 11 Bankruptcy.

Our operations are limited and restricted by the finalization and
confirmation of the Plan of Reorganization in ITGV's Chapter 11 bankruptcy case
and our agreements with the Brennan Trustee. Moreover, until the plan has been
fully performed and all debts to the Brennan Trustee and all other creditors
have been paid if full, we will still be limited in operation due to the
restriction of funds available from ITGV to the Parent Company.

Risk of default under the settlement with the Brennan Trustee.

In the event the Company is unable to make all the payments under the
agreements with the Brennan Trustee or otherwise defaults in performance of the
terms of such indebtedness, the Company stands to lose its only operating
business. Subject to applicable grace periods, the Brennan Trustee can cause the
liquidation of our only operating business, the Palm Beach Princess line.

Revenues from our investments in real estate developments are uncertain.

When we sold our real estate property located in Las Vegas, Nevada in May,
2000, we used proceeds from that sale to purchase a promissory note, in the face
amount of $23 million, issued by the purchaser of the property. And, when we
sold our real estate property in Cherry Hill, New Jersey in November, 2000, a
portion of the purchase price was paid to us in the form of the purchaser's
promissory note in the face amount of $10 million. Each such promissory note is
payable solely from distributable cash generated by the purchaser's development
or sale of the property purchased from us, and, in each case, we could receive
more or less than the face amount of the note. The times and amounts of all
payments under these notes are uncertain and depend entirely upon the
profitability of each purchaser's development (or resale) of the subject real
property.

We face competition to our gaming operations.

We currently compete with a variety of other vacation activities in and
around Palm Beach, Florida, including short-term cruises, resort attractions and
sporting and other recreational activities. We also expect competition in other
areas surrounding Palm Beach in the future. Within fifty miles of the Port of
Palm Beach, there are a number of smaller marinas that are capable of handling
other coastal gaming vessels, although any such vessels necessarily would be
substantially smaller than the Palm Beach Princess. Our operations could compete
directly with the other Palm Beach vessel and in the future we expect
competition to increase as new gaming operators enter our market, existing
competitors expand their operations, gaming activities expand in existing
jurisdictions and gaming is legalized in new jurisdictions. Increased
competition will result from expanded gaming in existing jurisdictions and as
gaming is legalized in new jurisdictions.

17




In general, gaming activities include traditional land-based casinos,
dockside gaming, casino gaming on Indian land, state-sponsored lotteries, video
poker in restaurants, bars and hotels, pari-mutuel betting on horse racing, dog
racing and jai-alai and sports bookmaking. Our operations compete with all of
these forms of gaming and will compete with any new forms of gaming that may be
legalized in the future, as well as with other types of entertainment. Over the
past few years, there has been an attempt to legalize gaming throughout the
state of Florida. While this movement has yet to be successful, it is likely
that the gaming industry will continue to pursue legalization of gaming in
Florida, and we believe that the legalization of gaming in Florida would have a
material adverse impact on our operations. In addition, we are also subject to
competition from other gaming establishments in other jurisdictions, including
but not limited to Atlantic City, New Jersey, Las Vegas, Nevada, the Bahamas,
and riverboat gambling on the Mississippi river. Such competition could
adversely affect our ability to compete for new gaming opportunities and to
maintain revenues.

We are potentially subject to a number of gaming regulations and statutes.

Under Federal law, individual states are permitted to regulate or prohibit
coastal gaming. The state of Florida does not currently regulate coastal gaming.
However, from time to time in prior years, legislation has been introduced
which, if enacted, would prohibit the coastal gaming business. There is the risk
that Florida may at some future date regulate the coastal gaming business. Such
regulation could adversely harm our business.

In addition, the Federal government has also previously considered a
Federal tax on casino revenues and may consider such tax or other regulations
that would affect our gaming business in the future. From time to time,
legislators and special interest groups have proposed legislation that would
expand, restrict or prevent gaming operations in Florida and in other
jurisdictions throughout the country. Any such taxes, expansion of gaming or
restriction on or prohibition of our gaming operations could have a material
adverse effect on our operating results.

We are subject to non-gaming regulations.

The M/V Palm Beach Princess and any other vessels which we may operate in
the future must comply with various international and U.S. Coast Guard
requirements as to ship design, on-board facilities, equipment, personnel and
general safety. Our inability to maintain compliance with such regulations could
force us to incur additional costs to retain compliance or require us to buy new
vessels. In addition, we are subject to certain Federal, state and local safety
and health laws, regulations and ordinances that apply to non-gaming businesses
generally, such as the Clean Air Act, the Clean Water Act, and other
environmental rules and regulations. The coverage and compliance costs
associated with such laws, regulations and ordinances may result in future
additional costs to our operations.

We rely on patrons primarily from Florida and tourists from the Northeastern
United States.

We derive a substantial portion of our revenues from patrons from the
southern and central portions of Florida as well as from tourists visiting
Florida from other parts of the United States, particularly the Northeast.
Adverse economic conditions in any of these markets, or the failure of our
vessel to continue to attract customers from these geographic markets as a
result of increased competition in such markets, or other factors such as the
recent terrorist attacks which may lead to a decline in tourist travel, could
have a material adverse effect on our operating

18




results. Conditions and other factors beyond our control include competition
from other amusement properties, changes in regional and local population and
disposable income composition, seasonality, changes or cancellations in local
tourist, athletic or cultural events, changes in travel patterns or preferences
which may be affected by increases in gasoline prices, changes in airline
schedules and fares, strikes and weather patterns, and our need to make
renovations, refurbishments and improvements to our vessel.

Weather and other conditions could seriously disrupt our operations.

Our gaming operations are subject to unique risks, including loss of
service because of casualty, mechanical failure, extended or extraordinary
maintenance requirements, flood, hurricane or other severe weather conditions.
Our vessel faces additional risks from its movement and the movement of other
vessels on waterways. Palm Beach, Florida is subject to severe storms,
hurricanes and occasional flooding. As a result of such weather conditions, as
well as the ordinary or extraordinary maintenance requirements of our vessel, if
we are unable to operate our vessel, our results of operations will be harmed.
The loss of our vessel from service for any period of time could adversely
affect our revenues.

We depend on our management to execute our business plan.

Our success is dependent upon the efforts of our current management, in
particular that of our President and Chief Executive Officer, Francis W. Murray.
Since the business of gaming has expanded significantly over the past few years,
competition for qualified employees will be intense. There is no assurance that
such persons can be retained or readily replaced, and there is no assurance that
we will be able to continue to add qualified personnel as required. The loss of
the services of any of our executive officers could adversely affect our
business.

We experience quarterly fluctuations in operating results.

Our quarterly operating results are expected to fluctuate significantly
because of seasonality and other factors. We expect to generate the majority of
our income during our third and fourth fiscal quarters ending March 31 and June
30. Such fluctuations could affect our stock price, particularly during the
first and second fiscal quarters.

Our stock price faces volatility as a result of a number of factors.

The market price of our stock is dependent upon future operating results,
and therefore, is highly dependent on specific developments including, but not
limited to, successfully emerging from the ITGV bankruptcy, or defeat of
relevant gaming legislation or related initiatives, weather patterns, and the
general vibrancy of the economy and the Florida tourism industry. Announcements
concerning legislation approving or defeating gaming legislation, various
governmental actions, developments in the gaming industry generally,
announcements by our competition, weather patterns, and other general economic
matters or tourism industry may have a significant impact on the market price of
our common stock.

Terrorist Attacks of September 11, 2001

The terrorist attacks of September 11, 2001 adversely impacted our
operations and have effected our ability to borrow the approximately $10 million
dollars needed in order to make the balloon payment of the purchase of the Ship
Mortgage Obligation due on October 31, 2002 and to pay for the purchase of the
stock that was due to the Trustee on July 1, 2002. These attacks

19



as well as any similar attacks and/or future security alerts could have a
material adverse effect on our future operations.


Item 7A. Quantitative and Qualitative Disclosures about Market Risk.

Not Applicable

Item 8. Financial Statements and Supplemental Data.



INDEX TO FINANCIAL STATEMENTS


Report of Independent Public Accountants .................21
Balance Sheets............................................22
Statements of Operations .................................24
Statements of Stockholders' Equity .......................25
Statements of Cash Flow ..................................26


20




REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

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


We have audited the accompanying consolidated balance sheets of
International Thoroughbred Breeders, Inc. and subsidiaries as of June 30, 2003
and 2002 and the related consolidated statements of operations, stockholders'
equity and cash flows for each of the three years ended June 30, 2003, 2002 and
2001. 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 audits in accordance with U.S. 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,
2003 and 2002 and the results of their operations and their cash flows for the
three years ended June 30, 2003, 2002 and 2001 in conformity with U.S. generally
accepted accounting principles.



STOCKTON BATES, LLP




Philadelphia, Pennsylvania
August 22, 2003



21



INTERNATIONAL THOROUGHBRED BREEDERS, INC.
AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
AS OF JUNE 30, 2003 AND 2002

ASSETS


June 30,
-------------------------
2003 2002
----------- -----------
CURRENT ASSETS:
Cash and Cash Equivalents $ 6,123,641 $ 796,609
Accounts Receivable 193,689 37,684
Prepaid Expenses 488,414 190,639
Spare Parts Inventory 1,078,740 0
Other Current Assets 390,458 391,596
Net Assets of Discontinued
Operations - Current 98,588 123,569
------------ ------------
TOTAL CURRENT ASSETS 8,373,530 1,540,097
------------ ------------


EQUIPMENT:
Leasehold Improvements -
Port of Palm Beach 953,110 0
Equipment 1,278,175 723,420
------------ ------------
2,231,285 723,420
LESS: Accumulated Depreciation
and Amortization 306,494 113,061
------------ ------------

TOTAL EQUIPMENT, NET 1,924,791 610,359
------------ ------------



OTHER ASSETS:
Notes Receivable 33,000,000 33,000,000
Deposit on Purchase of Palm Beach
Princess Mortgage 4,000,000 3,500,000
Deposits and Other Assets -
Non-Related Parties 535,239 374,724
Deposits and Other Assets -
Related Parties 5,702,249 6,903,115
------------ ------------
TOTAL OTHER ASSETS 43,237,488 43,777,839
------------ ------------


TOTAL ASSETS $ 53,535,809 $ 45,928,295
============ ============

See Notes to Consolidated Financial Statements.

22




INTERNATIONAL THOROUGHBRED BREEDERS, INC.
AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
AS OF JUNE 30, 2003 AND 2002

LIABILITIES AND STOCKHOLDERS' EQUITY


June 30,
--------------------------
2003 2002
------------ -----------
CURRENT LIABILITIES:
Accounts Payable $ 2,264,499 $ 1,324,351
Accrued Expenses 2,341,209 1,353,811
Short-Term Debt 2,934,330 1,062,280
Short-Term Debt - Related Parties 183,164 0
------------- ------------
TOTAL CURRENT LIABILITIES 7,723,202 3,740,442
------------- ------------


DEFERRED INCOME 8,226,540 8,226,540
------------- ------------


COMMITMENTS AND CONTINGENCIES - -


STOCKHOLDERS' EQUITY:
Series A Preferred Stock, $100 Par Value,
Authorized 500,000 Shares, 362,489 and 362,488
Issued and Outstanding, respectively 36,248,875 36,248,775
Common Stock, $2 Par Value, Authorized
25,000,000 Shares, Issued, 11,480,278
and 11,480,275, respectively and
Outstanding, 8,252,133 and
11,480,275, respectively 22,960,555 22,960,549
Capital in Excess of Par 20,191,984 20,192,090
(Deficit) (subsequent to June 30, 1993,
date of quasi-reorganization) (40,189,608) (45,423,434)
------------- ------------
39,211,806 33,977,980
LESS:
Treasury Stock, 3,228,145 Shares, at Cost (1,614,073) 0
Deferred Compensation, Net (11,666) (16,667)
------------- ------------
TOTAL STOCKHOLDERS' EQUITY 37,586,067 33,961,313
------------- ------------


TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 53,535,809 $ 45,928,295
============= ============

See Notes to Consolidated Financial Statements.

23


INTERNATIONAL THOROUGHBRED BREEDERS, INC.
AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED JUNE 30, 2003, 2002 AND 2001



June 30,
---------------------------------------
2003 2002 2001
------------ ------------ ------------
REVENUE:
Revenue from Operations $ 31,141,386 $ 25,501,806 $ 4,588,592
Other Income 0 78,163 209,939
Interest Income Related Party 342,226 350,833 101,788
Interest Income 81,039 124,789 20,772
------------ ------------ ------------
TOTAL REVENUES 31,564,651 26,055,591 4,921,091
------------ ------------ ------------

EXPENSES:
Cost of Revenues:
Operating Expenses 18,404,361 17,734,777 3,273,163
Depreciation & Amortization 254,082 139,294 42,097
General & Administrative Expenses-
Palm Beach Princess 3,587,886 2,666,666 452,450
General & Administrative Expenses-
Parent 1,452,047 2,152,414 3,057,176
ITG Vegas Bankruptcy Costs 841,348 0 0
Development Costs 306,952 933,814 0
Interest and Financing Expenses 1,338,649 306,773 498,347
------------ ------------ ------------
TOTAL EXPENSES 26,185,325 23,933,738 7,323,233
------------ ------------ ------------

INCOME BEFORE TAX PROVISION 5,379,326 2,121,853 (2,402,142)
State Income Tax Expense 145,500 139,250 0
------------ ------------ ------------

NET INCOME $ 5,233,826 $ 1,982,603 $ (2,402,142)
============ ============ ============


NET BASIC AND DILUTED INCOME
PER COMMON SHARE $ 0.54 $ 0.17 $ (0.24)
============ ============ ============

WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING 9,720,275 11,480,272 9,987,114
============ ============ ============



See Notes to Consolidated Financial Statements.

24



INTERNATIONAL THOROUGHBRED BREEDERS, INC.
AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED JUNE 30, 2003, 2002 AND 2001


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


BALANCE - JUNE 30, 2000 362,484 $ 36,248,375 11,884,270 $ 23,768,539

Treasury Shares Retired --- --- (2,904,016) (5,808,032)
Shares Issued for Compensation --- --- 2,500,000 5,000,000
Shares Issued for Fractional Exchanges With Respect to the
One-for-twenty Reverse Stock Split effected on March 13, 1992 3 300 13 26
Amortization of Deferred Compensation Costs --- --- --- ---
Net (Loss) for the Year Ended June 30, 2001 --- --- --- ---

--------- ------------- ------------- -------------
BALANCE - JUNE 30, 2001 362,487 $ 36,248,675 11,480,267 $ 22,960,533

Shares Issued for Fractional Exchanges With Respect to the
One-for-twenty Reverse Stock Split effected on March 13, 1992 1 100 8 16
Amortization of Deferred Compensation Costs --- --- --- ---
Net Income for the Year Ended June 30, 2002 --- --- --- ---

--------- ------------- ------------- -------------
BALANCE - JUNE 30, 2002 362,488 $ 36,248,775 11,480,275 $ 22,960,549
Purchase of Shares for Treasury in connection with REB Trustee --- --- --- ---
Shares Issued for Fractional Exchanges With Respect to the
One-for-twenty Reverse Stock Split effected on March 13, 1992 1 100 3 6
Amortization of Deferred Compensation Costs --- --- --- ---
Net Income for the Year Ended June 30, 2003 --- --- --- ---

--------- ------------- ------------- -------------
BALANCE - JUNE 30, 2003 362,489 $ 36,248,875 11,480,278 $ 22,960,555
========= ============= ============= =============



Capital Treasury Deferred
in Excess Stock Compen-
of Par (Deficit) At Cost sation Total
------------ ------------- ---------- ---------- -----------


BALANCE - JUNE 30, 2000 $ 26,144,540 $ (45,003,895) (7,260,040) (26,667) $33,870,852

Treasury Shares Retired (1,452,008) --- 7,260,040 --- ---
Shares Issued for Compensation (4,500,000) --- --- --- 500,000
Shares Issued for Fractional Exchanges With Respect to the
One-for-twenty Reverse Stock Split effected on March 13, 1992 (326) --- --- --- ---
Amortization of Deferred Compensation Costs --- --- --- 5,000 5,000
Net (Loss) for the Year Ended June 30, 2001 --- (2,402,142) --- --- (2,402,142)

------------ ------------------------- ---------- -----------
BALANCE - JUNE 30, 2001 $ 20,192,206 $ (47,406,037) 0 (21,667) $31,973,710

Shares Issued for Fractional Exchanges With Respect to the
One-for-twenty Reverse Stock Split effected on March 13, 1992 (116) --- --- --- ---
Amortization of Deferred Compensation Costs --- --- 5,000 5,000
Net Income for the Year Ended June 30, 2002 --- 1,982,603 --- --- 1,982,603

------------ ------------------------- ---------- -----------
BALANCE - JUNE 30, 2002 $ 20,192,090 $ (45,423,434) 0 (16,667) $33,961,313

Purchase of Shares for Treasury in connection with REB Trustee --- --- (1,614,073) --- (1,614,073)
Shares Issued for Fractional Exchanges With Respect to the
One-for-twenty Reverse Stock Split effected on March 13, 1992 (106) --- --- --- ---
Amortization of Deferred Compensation Costs --- --- --- 5,001 5,001
Net Income for the Year Ended June 30, 2003 --- 5,233,826 --- --- 5,233,826

------------ ------------------------- ---------- -----------
BALANCE - JUNE 30, 2003 $ 20,191,984 $ (40,189,608) (1,614,073) (11,666) $37,586,067
============ ========================= ========== ===========



See Notes to Consolidated Financial Statements.

25




INTERNATIONAL THOROUGHBRED BREEDERS, INC.
AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED JUNE 30, 2003, 2002 AND 2001

June 30,
-----------------------------------------------------------
2003 2002 2001
----------------- ----------------- -----------------


CASH FLOWS FROM OPERATING ACTIVITIES: $ 5,233,826 $ 1,982,603 $ (2,402,142)
----------------- ----------------- -----------------
Adjustments to reconcile income to net cash provided
by operating activities:
Depreciation and Amortization 254,082 144,294 47,097
(Gain) on Sale of Fixed Assets 0 (77,577) (81,733)
Compensation for Common Shares Issued 0 0 500,000
Changes in Operating Assets and Liabilities -
Increase (Decrease) in Restricted Cash & Investments 0 0 1,656,743
(Increase) Decrease in Accounts Receivable (156,010) 805,703 (415,731)
Decrease (Increase) in Other Assets 21,247 (304,316) (720,559)
(Increase) Decrease in Prepaid Expenses (297,773) 171,409 750,273
Increase (Decrease) in Accounts Payable and Accrued Expenses 2,217,821 (151,167) 2,876,062
----------------- ----------------- -----------------
CASH PROVIDED BY OPERATING ACTIVITIES BEFORE
DISCONTINUED OPERATIONS 7,273,193 2,570,949 2,210,010
CASH (USED IN) PROVIDED BY DISCONTINUED OPERATING ACTIVITIES 14,939 0 (1,011,785)
----------------- ----------------- -----------------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES 7,288,132 2,570,949 1,198,225
----------------- ----------------- -----------------

CASH FLOWS FROM INVESTING ACTIVITIES:
Deposits on Purchase of Palm Beach Princess Mortgage (500,000) (2,750,000) (750,000)
Deposits on Purchase of Additional Vessel (300,000) 0
Investment in Port Lease (250,000) 0
Proceeds from Auction of Garden State Park Fixed Assets 0 1,216,481 0
Capital Expenditures (1,363,809) (480,615) 0
Loans made on Development Projects 0 (922,751) (2,095,105)
Decrease (Increase) in Other Investment Activity 314,846 (108,040) (17,983)
----------------- ----------------- -----------------
CASH (USED IN) INVESTING ACTIVITIES
BEFORE DISCONTINUED INVESTING ACTIVITIES (2,098,963) (3,044,925) (2,863,088)
CASH PROVIDED BY DISCONTINUED INVESTING ACTIVITIES 0 0 20,000,000
----------------- ----------------- -----------------
NET CASH (USED IN) PROVIDED BY INVESTING ACTIVITIES (2,098,963) (3,044,925) 17,136,912
----------------- ----------------- -----------------

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from Related Party Loans 183,164 0 0
Proceeds from Bank Financing 200,000 0 1,650,000
Principal Payments on Short Term Notes (248,144) (100,000) (17,654,555)
Decrease in Balances Due to/From Subsidiaries 17,783 9,298 17,747,801
----------------- ----------------- -----------------
CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES
BEFORE DISCONTINUED FINANCING ACTIVITIES 152,803 (90,702) 1,743,246
CASH (USED IN) DISCONTINUED FINANCING ACTIVITIES (17,783) (9,298) (19,005,177)
----------------- ----------------- -----------------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 135,020 (100,000) (17,261,931)
----------------- ----------------- -----------------

NET INCREASE IN CASH AND CASH EQUIVALENTS 5,324,189 (573,976) 1,073,206
LESS CASH AND CASH EQUIVALENTS FROM DISCONTINUED OPERATIONS 2,843 9,298 16,962
CASH AND CASH EQUIVALENTS AT BEGINNING OF THE PERIOD 796,609 1,361,287 271,119
----------------- ----------------- -----------------

CASH AND CASH EQUIVALENTS AT END OF THE PERIOD $ 6,123,641 $ 796,609 $ 1,361,287
================= ================= =================

Supplemental Disclosures of Cash Flow Information:
Cash paid during the period for:
Interest $ 412,431 $ 13,200 $ 109,681
Income Taxes $ 115,983 $ 0 $ 0


Supplemental Schedule of Non-Cash Investing and Financing Activities:
On November 13, 2002 parts inventory in the amount of $1,103,125 was
recorded on the balance sheet as part of a non-cash transaction offset by
existing liabilities.
On Decemberr 13, 2002, the Company issued a promissory note in the
amount of $1,648,403 including interest of $34,330 to purchase 3,228,145
shares of its Common Stock.

See Notes to Consolidated Financial Statements.

26





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


(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES


(A) Nature of Operations - ITGV is currently engaged in an entertainment
cruise and casino ship business under a bareboat charter of the vessel M/V Palm
Beach Princess (the "Palm Beach Princess"). The Palm Beach Princess performs
fourteen cruises weekly, that is, a daytime and an evening cruise each day. Each
cruise is of five to six hours duration. During each cruise, the Palm Beach
Princess offers a range of amenities and services to her passengers, including a
full casino, sit-down buffet dining, live musical shows, discotheque, bars and
lounges, swimming pool and sundecks. The casino occupies 15,000 square feet
aboard the ship and is equipped with approximately 400 slot machines, all major
table games (blackjack, dice, roulette and poker), and a sports wagering book.

(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.

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

(D) Spare Parts Inventory - Spare parts inventory consists of operating
supplies, maintenance materials and spare parts. The inventories are carried at
cost. Should the Trustee be able to exercise his right to take possession of the
vessel, the Company may be required to forfeit the spare parts inventory if the
book value of the assumed liabilities exceeds the current assets at the time of
his possession. It is necessary that these parts be readily available so that
the daily cruise operations are not cancelled due to mechanical failures.

(E) Depreciation and Amortization - Depreciation of property and equipment
were computed by the straight-line method at rates adequate to allocate their
cost or adjusted fair value in accordance with U. S. generally accepted
accounting principles over the estimated remaining useful lives of the
respective assets. Amortization expense consists of the write off of major
vessel repairs and maintenance work normally completed at dry dock in the fall
of each year. These expenses are written off during a one year period following
the dry dock period. For the years ended June 30, 2003 and 2002, the amortized
expense was $55,650 and $83,475, respectively.

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 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.


27



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

(F) Net Assets of Discontinued Operations - At June 30, 2003 and 2002, the
remaining net assets and liabilities of Garden State Park and Freehold Raceway
were classified as "Net Assets of Discontinued Operations."

(G) Recent Accounting Pronouncements - In December 2002, the FASB issued
SFAS No. 148, "Accounting for Stock-Based Compensation - Transition and
Disclosure - an Amendment of FASB Statement No. 123". SFAS No. 148 amends FASB
Statement No. 123, "Accounting for Stock-Based Compensation", to provide
alternative methods of transition for an entity that voluntarily changes to the
fair-value-based method of accounting for stock-based employee compensation. It
also amends the disclosure provisions of that statement to require prominent
disclosure about the effects on reported net income and earnings per share and
the entity's accounting policy decisions with respect to stock-based employee
compensation. Certain of the disclosure requirements are required for all
companies, regardless of whether the fair value method or intrinsic value method
is used to account for stock-based employee compensation arrangements. This
amendment to SFAS 123 became effective for financial statements for fiscal years
ended after December 15, 2002 and for interim periods beginning after December
15, 2002. Accordingly, we have adopted the disclosure provisions of this
statement in fiscal 2003.

Presently, the Company does not have any circumstances that would require
the implementation of these standards. Accordingly, the Company believes the
adoption of these statements will have no impact on its financial position or
results of operations.

(H) Revenue Recognition - The Company recognizes the revenues associated
with the casino operation on the Palm Beach Princess as they are earned.

(I) 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 liabilities are adjusted for the effects of
changes in tax laws and rates on the date of enactment.

(J) Cash and Cash Equivalents - The Company considers all highly liquid
investments with an original maturity of three months or less to be cash
equivalents. As of June 30, 2003, funds classified as cash and cash equivalents,
which are primarily those of the Palm Beach Princess operations under
debtor-in-possession, are only available under bankruptcy court approval
guidelines.

(K) 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.

28



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

(L) 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 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.

(M) Net Income (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.

Income (Loss) per common share is computed by dividing net income (loss) by
the weighted average number of shares of common stock outstanding. On December
13, 2002, the Company purchased 3,228,145 shares of its Common Stock from the
Trustee and have accounted for the transaction on the cost method of accounting
for treasury stock. Options and warrants to purchase 4,046,500 shares of Common
Stock at various prices per share, for the years ended June 30, 2003 and 2002
were not included in the computation of income per share because the exercise
price of those options and warrants were above market value. Options and
warrants to purchase 3,104,000 shares of Common Stock at various prices per
share, for the year ended June 30, 2001 were not included in the computation of
loss per share for those periods as their effect would have been anti-dilutive.

(2) ITG VEGAS, INC. CHAPTER 11 PLAN OF REORGANIZATION

On January 3, 2003, ITG Vegas, Inc.("ITGV"), our subsidiary operating the
Palm Beach Princess, and MJQ Corporation ("MJQ"), which owns the Palm Beach
Princess vessel, an unrelate entity owned by Francis W. Murray, filed voluntary
petitions for relief under Chapter 11 of the United States Bankruptcy Code (the
"Bankruptcy Code") in the United States Bankruptcy Court for the Southern
District of Florida, Palm Beach Division (the "Bankruptcy Court"), In re: ITG
Vegas, Inc., Case No. 03-30038. The petition did not cover the parent company,
ITB, nor any other of ITB's subsidiaries. The Palm Beach Princess continued to
operate as "debtor-in-possession" under the jurisdiction of the Bankruptcy Court
and in accordance with the applicable provisions of the Bankruptcy Code and
orders of the Bankruptcy Court. As described in Note 12 below we had previously
entered into a Master Settlement Agreement to purchase from the Chapter 11
Trustee for the Bankruptcy Estate of Robert E. Brennan (the "Trustee") the
promissory note of MJQ Corporation for $13.75 million. We did not have funds
necessary to complete that purchase by January 6, 2003, the date required for
payment of the balance of such purchase price. Therefore, on January 3, 2003, in
order to protect our invested deposits and operation of the vessel, ITGV
(together with MJQ Corporation) filed a voluntary petition for relief under
Chapter 11 of the Bankruptcy Code.

29



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

On September 12, 2003, the Bankruptcy Court issued an order confirming the
Amended Joint Chapter 11 Plan of Reorganization (the "Plan") in the Chapter 11
Cases of ITG Vegas, Inc. and MJQ Corporation (ITG Vegas, Inc. and MJQ
Corporation being hereinafter called the "Debtors"). The Plan is a plan of
reorganization under Chapter 11 of the Bankruptcy Code which was jointly
proposed by the Debtors.

On the effective date of the Plan (the "Effective Date"), all claims,
debts, liens, security interests and encumbrances of and against the Debtors and
against all property of their respective bankruptcy estates, which arose before
confirmation, will be discharged, except as otherwise provided in the Plan or
confirmation order. Post-confirmation, each of the Debtors will continue as
reorganized debtors.

The Plan includes the following principal features:

1. On the Effective Date, all Allowed Administrative Expense Claims and all
Allowed Priority Tax Claims and Allowed Priority Non-Tax Claims will be paid in
full (to the extent not already paid).

2. All pre-petition non-insider (non-affiliate), non-insured unsecured debt
of the Debtors will be paid in two installments, one-half on the Effective Date
and one-half (with interest thereon at 8% per year from the Effective Date) on
the six month anniversary of the Effective Date. The holders of such unsecured
pre-petition debt will receive security interests in the cash bank maintained on
board the Vessel (approximately $700,000) and in all of the shore side furniture
and equipment to secure the Plan payments to them. In addition, an amount equal
to $70,000 will be paid monthly into escrow as further collateral for the
holders of such debt. Through October 14, 2003, $1,286,051 has been placed in
escrow towards the payments required for distribution.

3. All non-insider claims covered by insurance will be entitled to payment
in accordance with the insurance coverages. There are no policy limits on the
Debtors liability coverages and the holders of these claims will be required to
pursue the insurance proceeds for payment, except with respect to the
deductible, for which the Debtors shall remain obligated.

4. The Debtors principal creditor, Donald F. Conway as Chapter 11 Trustee
for the Bankruptcy Estate of Robert E. Brennan (the Brennan Trustee), will
receive payment in full of all obligations over a period not to exceed three
years. Significantly, the Debtors obligations to the Brennan Trustee have been
combined with the Companys indebtedness to the Brennan Trustee, for all of which
the Debtors and the Company will be jointly and severally liable. All of the
obligations to the Brennan Trustee will be secured by a first priority ship
mortgage against the Vessel and, with certain exceptions, first priority
security interests in all of the other assets of the Debtors, subject to the
security interests being granted in favor of the pre-petition unsecured
creditors as described in paragraph 2 above.

5. The payment obligations to the Brennan Trustee will consist of the
following:

(a) The balance of the purchase price that had been payable by ITG Vegas
for the purchase of the ship mortgage against the Vessel, in the amount of
$9,750,000;

30


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

(b) The balance of the Companys indebtedness to the Brennan Trustee in
respect of the purchase of stock in the Company, in the principal amount of
$1,511,035.70, plus interest thereon from December 13, 2002 to January 23, 2003
at 9% per annum and thereafter at 11% per annum until the Effective Date;

(c) A new obligation of the Company for the purchase of an additional
450,000 shares of the Companys stock from the Brennan Trustee, at $0.50 per
share, or $225,000;

The amounts described in subparagraphs (a), (b) and (c) are collectively
called the "Payment Obligations". A forbearance fee of $350,000 also shall
accrue to the Brennan Trustee on the Effective Date, of which $100,000 will be
payable on the Effective Date and the balance of $250,000 will be due on the
earliest to occur of the date the Payment Obligation is paid in full, the third
anniversary of the Effective Date, or any date on which ITG Vegas shall have
monitized its receivable from OC Realty, LLC, an affiliate of the Company's
Chairman and CEO.

The Payment Obligation shall accrue interest at 12% per annum. Monthly
payments of $400,000 will be required to be made to the Brennan Trustee, to be
applied first to interest accrued and then to principal. In addition, the
Brennan Trustee shall be entitled to payment of a Stay Bonus in the amount of
$200,000 if the Payment Obligation shall not have been paid in full within 12
months after the Effective Date, and an additional $100,000 if the Payment
Obligation shall not have been paid in full within 24 months after the Effective
Date. Beginning with ITG Vegas' 2004 internal accounting year (commencing
December 29, 2003) and annually thereafter, 75% of ITG Vegas' Free Cash Flow (as
defined in the Plan) for the period shall be paid to the Brennan Trustee as a
Sweep Payment, to be applied first to accrued and unpaid interest, then to
principal on the Payment Obligation, and thereafter to any unpaid Forbearance
Fee and Stay Bonuses.

6. Restrictions are imposed under the Plan on ITG Vegas making payments to
affiliated entities, including the parent company. Payment of indebtedness to
affiliated entities of ITG Vegas generally will be subordinated and intercompany
advances and transfers from ITG to affiliated entities generally will be
prohibited, except that, if no default exists in the obligations to the Brennan
Trustee, (i) $50,000 per month may be paid by ITG Vegas to MJQ Corporation in
respect of the bareboat charter fee for use of the Vessel and (ii) $100,000 per
month will be permitted to be paid by ITG Vegas to the Company under the Tax
Sharing Agreement between them. The Company will enter into a Tax Sharing
Agreement with ITG Vegas effective on the Effective Date, pursuant to which ITG
Vegas will compensate the Company for the tax savings realized as a result of
ITG Vegass inclusion in the Companys consolidated group of companies for federal
income tax purposes, in the amount of $100,000 per month, provided that no such
payments are permitted to be made if any default exists in respect of the
obligations to the Brennan Trustee.

The maximum amount of funds permitted to be upstreamed by ITG Vegas to the
Company is $100,000 per month under the Tax Sharing Agreement (and, beginning in
2005, 25% of ITG's annual Free Cash Flow, as defined). The Company has no other
source of funds presently available. For these reasons, and since the $100,000
per month tax sharing payment will be suspended at any time when the Debtors are
not current in payment of their obligations to the

31



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

Brennan Trustee, no assurance can be given that the Company will be able to
function as a going concern and pay its debts as they become due.

The foregoing summary of the Plan, the Payment Obligations to the Brennan
Trustee and the terms thereof are not intended to be complete. For further
information about the Payment Obligations and collateral therefor, the covenants
of the Company and the Debtors, events of default and other terms agreed to in
principle among the Debtors, the Company and the Brennan Trustee, reference is
made to the Term Sheet for Plan of Reorganization which is attached as Exhibit A
to the Plan and filed with the Securities and Exchange Commission on the
Company's Form 8-K filed on September 22, 2003.

ITG Vegas and the Company are attempting to negotiate a document entitled
Amendment to Master Settlement Agreement with the Brennan Trustee, which would
incorporate the above-described terms and other modifications to the Master
Settlement Agreement previously entered into by the Brennan Trustee, the
Company, Palm Beach Princess, Inc. (predecessor of ITG Vegas, Inc.), MJQ
Corporation and others. In the event the parties are unable to reach a
definitive amendment agreement in that respect, the Term Sheet filed on Form 8-K
with the Securities and Exchange Commission on September 22, 2003 and attached
as Exhibit A to the Plan, together with certain additions and clarifications
announced on the record at the confirmation hearing, will remain in effect as
the modification to Master Settlement Agreement.

7. All of the outstanding shares of stock in ITG Vegas are owned by
International Thoroughbred Gaming Development Corporation (ITGD), which is a
wholly owned subsidiary of the Company. While ITGD will pledge all of its shares
of stock in ITG Vegas as additional collateral to the Brennan Trustee, in all
other respects the Companys indirect stock ownership of ITG Vegas is not
affected by the Plan.

By reaching the foregoing consensual plan of reorganization by agreement
with the Brennan Trustee, the Debtors have avoided the costs and delays of a
contested confirmation hearing with their largest creditor and developed a Plan
believed to be feasible.

(3) NOTES RECEIVABLE

A portion of the proceeds from the sale of the non-operating former El
Rancho Hotel and Casino in Las Vegas to Turnberry/Las Vegas Boulevard, LLC
("Turnberry") on May 22, 2000 was used by us to purchase a promissory note in
the face amount of $23,000,000. The interest rate under such note 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 us. We 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 our purchase of the note.
We may convert the promissory note, at our 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.


32



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

A portion of the proceeds from the sale on November 30, 2000 of our Garden
State Park property in Cherry Hill, New Jersey, to Realen-Turnberry/Cherry Hill,
LLC ("Realen") was paid in the form of a promissory note in the face amount of
$10 million (the "Note.") Under the Note, the interest rate 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 buyer's equity investors
have received aggregate distributions equal to their capital contributions plus
an agreed upon return on their invested capital, the next $10 million of
Distributable Cash will be paid to us. We will thereafter receive payments under
the Note equal to 33 1/3% of all Distributable Cash until the maturity date,
which occurs on the 15th anniversary of the issuance of the Note. We may convert
the promissory note, at our option, into a 33 1/3% equity interest in Realen
during the six month period prior to the 15th anniversary of the issuance of the
Note. If not then converted, the Note will be payable at maturity on said 15th
anniversary in an amount equal to (i) the difference, if any, between $10
million and total payments previously made to us under the Note and (ii) 33 1/3%
of any excess of the fair market value of Realen's assets over the sum of its
liabilities (other than the Note) and any unreturned equity investment of its
owners.

In addition, we sold two large bronze sculptures located at the Garden
State Park property to Realen, in exchange for Realen's promissory note due
November 30, 2002, in the principal amount of $700,000. The Chapter 11 Trustee
for the Bankruptcy Estate of Robert E. Brennan claimed ownership of those
sculptures, and we settled the resulting litigation over the sculptures by
agreeing that the first $350,000 in principal payments made by Realen under such
note would be remitted to the Brennan Bankruptcy Trustee (together with one-half
of the interest paid by Realen under such note). The remaining $350,000 of the
$700,000 note is classified in other current assets on our balance sheet as of
June 30, 2003. As part of the settlement of the sculpture litigation, the party
who sold us the sculptures, agreed to reduce the amount of our obligation for
payment of the balance of the sculpture price (described in Note 10(A) below) by
the same principal amount, $350,000, given up by us to the Trustee. As of
October 14, 2003, Realen had not made the payment due to ITB in the amount of
$350,000 which was due on November 30, 2002. On January 30, 2003, the Trustee
instituted litigation against Realen and the Company demanding payment of the
first $350,000. On August 18, 2003 the judge granted a summary judgement against
Realen-Turnberry/ Cherry Hill, LLC in the sculpture litigation and dismissed a
cross claim that Realen-Turnberry/Cherry Hill, LLC had brought against ITB.

33



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

(4) DEPOSITS AND OTHER ASSETS - RELATED PARTIES
The following items are classified as deposits and other assets (See Note
17 - Related Party Transactions):


June 30,
-------------------------
2003 2002
------------ -----------


Loans to the Ft Lauderdale Project (OC Realty, LLC) $ 2,034,405 $ 2,067,363
Loan Transferred from Golf Course Project to OC Realty, LLC 735,584 -0-
Note Receivable from Francis W. Murray * 2,600,749 -0-
Accounts Receivable from Francis W. Murray 35,099 -0-
Loans to Francis W. Murray 93,000 -0-
Loan from Francis W. Murray (250,000)
Accrued Wages due and Advances from Francis W. Murray (404,204)
Advances (from) MJQ Corporation (FWM ownership) (330,813)
Advances to OC Realty, LLC 77,162
-----------
Total Loans to OC Realty, LLC/Francis W. Murray $ 4,590,982

Accrued Interest on Loans to the Ft. Lauderdale Project (OC
Realty, LLC) 606,553 458,711
Accrued Interest Transferred from Golf Course Project to OC
Realty, LLC $ 287,327
-----------
Total Accrued Interest on Loans to OC Realty, LLC 893,880

Loans including accrued interest to the Golf Course Project in
California -0- 911,169
Deposits on Port Lease -0- 75,000
Advances to MJQ Corporation (MJQ ownership) -0- 521,583
Accounts Receivable from Frank Leo 23,441 13,804
Accounts Receivable from Francis W. Murray -0- 19,236
Goodwill on Purchase of GMO Travel 193,946 -0-

Assets Assigned from Leo Equity Group, Inc. (See Note 17):

Note Receivable from Michael J Quigley III* -0- 2,600,749
Accounts Receivable from MJQ Corp -0- 21,000
Accounts Receivable from Ft Lauderdale Project -0- 8,000
Loans to Francis W Murray -0- 93,000
Accounts Receivable from GMO Travel -0- 113,500
----------- ------------
Total Deposits and Other Assets $ 5,702,249 $ 6,903,115
=========== ============

* The note receivable from Francis W. Murray is non-recourse except to his stock
in MJQ Corporation which stock was previously owned Michael J. Quigley and now
owned by our CEO, Francis W. Murray, subject to our lien.

34



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

(5) DEPOSITS AND OTHER ASSETS - NON RELATED PARTIES

The following items are classified as deposits and other assets -
non-related parties:


June 30,
-----------------------
2003 2002
---------- -----------
Loans to South American Gaming Projects $ -0- $ 349,472
Port Lease Rights 250,000 -0-
Deposit on Ship Purchase (See Note 10-D) 200,000 -0-
Other Misc. Assets 85,239 25,252
---------- -----------
Total $ 535,239 $ 374,724
========== ===========

(6) DISCONTINUED OPERATIONS

On January 28, 1999, we 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. On November 30, 2000, the Company, through its wholly-owned
subsidiary, GSRT, LLC, closed on the sale (the "Garden State Transaction") of
the Garden State Park property (the "Garden State Park Property") in Cherry
Hill, New Jersey, to Realen-Turnberry/Cherry Hill, LLC ("Realen"). The purchase
price was $30 million and was paid by: (i) previous cash deposits totaling a
$1,000,000; (ii) a promissory note in the face amount of $10 million (the
"Note"); and (iii) the balance of the purchase price paid in cash at the
closing. The Company has elected to defer the gain on the sale until such time
that collectability under the $10,000,000 note from Realen can be determined.

The cash proceeds of the Garden State Transaction were principally used by
the Company to repay in full the outstanding balances on the Company's debt to
Credit Suisse First Boston Mortgage Capital LLC ("Credit Suisse") of
approximately $14.3 million and to repay in full approximately $3.75 million of
principal and interest on the debt to the Chapter 11 Bankruptcy Trustee for the
estate of Robert E. Brennan which was incurred to purchase 2,904,016 shares of
the Company's Common Stock.

In June 2001, the Company conducted a five-day public auction of the
equipment, furnishings and artwork that were not included in the sale of the
Garden State Park to Realen. Net proceeds after commission of the Garden State
Park equipment, furnishings and artwork were in the amount of $1,110,113 which
are classified as accounts receivable at June 30, 2001. Proceeds from the sale
were received in September 2001.

35



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

The net assets of the operations to be disposed of included in the
accompanying consolidated balance sheets as of June 30, 2003 and 2002 consist of
the following:

June 30,
------------------------
Classified As: 2003 2002
----------- ----------
Current Assets $ 399,785 $ 415,166
Current Liabilities (301,197) (291,597)
----------- ----------
Net Assets of Discontinued Operations $ 98,588 $ 123,569
=========== ==========

Cash flows from discontinued operations for the years ended June 30, 2003,
2002 and 2001 consist of the following:


June 30,
-----------------------------------

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


Cash Flows From Discontinued Operating Activities:

Income $ -0- $ -0- $ -0-
--------- -------- ------------

Adjustments to reconcile income to net cash
provided by discontinued operating activities

Changes in Operating Assets and Liabilities
of Discontinued Operations:

Decrease (Increase) in Accounts Receivable 12,539 -0- (1,030,285)

Increase (Decrease) in Accounts and Purses
Payable and Accrued Expenses 2,400 -0- 1,000

Increase in Deferred Revenue -0- -0- 17,500
--------- -------- ------------

Net Cash Provided by Discontinued Operating
Activities 14,939 -0- (1,011,785)
--------- -------- -------------

Cash Flows From Discontinued Investing Activities:

Proceeds from Sale of Garden State Park -0- -0- 20,000,000
--------- -------- ------------

Net Cash (Used In) Provided by Discontinued
Investing Activities -0- -0- 20,000,000
--------- -------- ------------

Cash Flows from Discontinued Financing Activities:

(Decrease) in Balances Due To/From Continuing
Operations (17,782) (9,298) (19,005,177)
--------- -------- -------------

Net Cash (Used In) Discontinued Financing
Activities (17,782) (9,298) (19,005,177)
--------- -------- -------------

Net (Decrease) Increase in Cash and Cash
Equivalents From Discontinued Operations (2,843) (9,298) (16,962)

Cash and Cash Equivalents at Beginning of
Year From Discontinued Operations 2,527 11,825 28,787
--------- -------- ------------

Cash and Cash Equivalents at End of Year From
Discontinued Operations $ (316) $ 2,527 $ 11,825
========= ======= ============


36



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

(7) ACQUISITIONS AND DISPOSITIONS

o Fiscal 2003

There were no acquisitions or dispositions during the year ended June 30,
2003.

o Fiscal 2002

On July 18, 2001, we sold our condominium unit and an ownership interest in
the Ocala Jockey Club that was located in Reddick, Florida. The sales price was
$94,000 and the proceeds after closing fees and other expenses were $81,645. A
gain of $77,577 was recognized during the first quarter of Fiscal 2002.

o Fiscal 2001

On November 30, 2000, the Company, through its wholly-owned subsidiary,
GSRT, LLC, closed on the sale of the Garden State Park property in Cherry Hill,
New Jersey, to Realen-Turnberry/Cherry Hill, LLC ("Realen"). (See Note 3.)

In June 2001, the Company conducted a five-day public auction of the
equipment, furnishings and artwork that were excluded in the sale of the Garden
State Park to Realen.

(8) INVESTMENTS

Interest income for the fiscal years ended June 30, 2003, 2002, and 2001
was $81,039, $124,789, and $20,772, respectively. Related party interest income
for the fiscal years ended June 30, 2003, 2002, and 2001 was $3420226 $350,833,
and $101,772, respectively. There were no realized gains or losses resulting
from the sale of trading securities for fiscals 2003, 2002 and 2001.

(9) LAND, BUILDINGS AND EQUIPMENT

Land, buildings and equipment 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:

June 30,
Estimated Useful ------------------------
Lives in Years 2003 2002
- ---------------------------- --------------------- ---------- ----------

Leasehold Improvements 15-40 $ 953,110 $ -0-

Equipment and Artwork 5-15 1,278,175 723,420
--------- ----------

Totals 2,231,285 723,420

Less Accumulated Depreciation
and Amortization 306,494 113,061
--------- ----------

$ 1,924,791 $ 610,359
========= ==========

37



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

(10) NOTES AND MORTGAGES PAYABLE

Notes and Mortgages Payable are summarized below:


June 30, 2003 June 30, 2002
Interest % ------------------------ ---------------------
Per Annum Current Long-Term Current Long-Term
----------- ------------ ----------- ---------- --------


International Thoroughbred Breeders,
Inc.:
- ------------------------------------
MCJEM, INC. (A) 15% $ 132,000 $ -0- $ 132,000 $ -0-

Chapter 11 Trustee (the "Trustee") for
the Bankruptcy Estate of Robert E.
Brennan (B) 11% 1,511,036 -0- -0- -0-

Michael J. Quigley, III (C) 10% 900,000 -0- 900,000 -0-

Florida Bank, N.A. (D) Prime + .25% 200,000 -0- -0- -0-

First Insurance Funding Corp.(E) 6.95% 28,117 -0- -0- -0-

Francis X. Murray (F) 8% 159,164 -0- -0- -0-

William H. Warner(F) 12% 24,000 -0- -0- -0-

Other Various 25,000 -0- 30,280 -0-

ITG Vegas, Inc.:
- ------------------------------------
International Game Technology (G) 8% 16,709 -0- -0- -0-

Corporate Interiors (H) Prime + 2% 121,468 -0- -0- -0-

Garden State Park:
- ------------------------------------
Service America Corporation (I) 6% 160,000 -0- 160,000 -0-
------------ ---------- ----------- ---------

Totals $ 3,277,494 $ -0- $ 1,222,280 $ -0-

Net Assets of Discontinued
Operations - Long Term -0- -0- -0- -0-

Net Liabilities of Discontinued
Operations - Long Term (160,000) -0- (160,000) -0-

Related Party Notes (183,164) -0- -0- -0-
------------ ---------- ----------- ---------
Totals $ 2,934,330 $ -0- $ 1,062,280 $ -0-
============ ========== =========== =========

The effective Prime Rate at June 30, 2003 was 4%.


(A) On February 24, 2000, the Company sold several pieces of artwork to
Robert E. Brennan Jr., son of the Company's former Chairman and Chief Executive
Officer. The $218,000 sales price of the artwork was in excess of the original
cost of $186,600. The Company recorded a $31,400 gain on the sale in Fiscal
2000. In addition, the Company purchased two large bronze sculptures located on
the Garden State Park property that were previously on loan to the Company from
Mr. Brennan Jr. The purchase price of the sculptures was $700,000. In connection
with the

38



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

transaction, the Company signed a $482,000 promissory note with Mr. Brennan Jr.
which represented the purchase price of the sculptures less the sales price of
the artwork sold to Mr. Brennan Jr. On July 27, 2000 the Company received a
notice from the Chapter 11 Trustee for the bankruptcy estate of Robert E.
Brennan (the "Chapter 11 Trustee") asserting certain ownership rights in a
number of items on loan to the Company, including the sculptures mentioned
above. After the Chapter 11 Trustee claimed ownership of the sculptures, an
arrangement was agreed to between the Company and the Chapter 11 Trustee
pursuant to which the Company was permitted to resell the sculptures to Realen
in May 2001, free and clear of any claim by the Chapter 11 Trustee, in exchange
for a $700,000 promissory note of Realen due November 30, 2002 (the "Realen
Sculpture Note"). Pursuant to the agreement between the Company and the Chapter
11 Trustee, payments by Realen under the Realen Sculpture Note were to be held
in escrow pending determination of the Chapter 11 Trustee's claims. On December
29, 2000, the Chapter 11 Trustee instituted suit against the Company seeking the
right to all payments and proceeds of the Realen Sculpture Note. After the end
of the fiscal year, in September 2001, a settlement agreement was entered into
among the Company, Robert E. Brennan, Jr., the Chapter 11 Trustee and others
pursuant to which, among other things, the litigation by the Chapter 11 Trustee
against the Company was dismissed with prejudice and the first $350,000 of
principal plus one-half of the interest received under the $700,000 Realen
Sculpture Note will be paid to the Chapter 11 Trustee. The balance (up to
$350,000 in principal plus one-half of the interest) will be paid to the
Company. As a result of this settlement, the Company and Mr. Brennan Jr. agreed
that (i) all claims of the Company against Mr. Brennan Jr. arising out of his
sale of the sculptures to the Company will be released and (ii) the promissory
note issued by the Company to Mr. Brennan Jr. will be amended (x) to reduce the
principal amount of such promissory note from $482,000 to $132,000, with
interest on that sum at the rate of 15% annum to accrue from November 30, 2001
only if the principal of such note is not paid in full by December 10, 2001, (y)
to make such promissory note due and payable on November 30, 2002, and (z) to
permit the Company to defer payment of the promissory note to such later date as
the Company shall have received payment in full of the Realen Sculpture Note.
The effect of the aforesaid settlement is therefore that the Company's loss of
the amount to be paid under the settlement agreement to the Chapter 11 Trustee
will be borne by Brennan Jr. by reduction to the Company's promissory note
payable to him.

(B) On December 13, 2002, we issued a twelve month promissory note in the
amount of $1,648,403 including interest of $34,330 (the "Stock Purchase Note")
bearing interest at 9% (increases to 11% after default) to Donald F. Conway, the
Chapter 11 Trustee (the "Trustee") for the Bankruptcy Estate of Robert E.
Brennan for the purchase of 3,228,146 shares of our common stock held or claimed
by the Trustee. The first principal payment of $137,367 was also paid on that
date. At June 30, 2003, the principal balance on the note was $1,511,036. The
Stock Purchase Note is secured by a security interest in proceeds and payments
receivable under the $10 million Realen Note. A principal payment of $137,367
was made in December 2002. We are currently in default on the monthly payments
of principal and interest from January 13, 2003 through October 14, 2003. (See
Note 12)

(C) On January 26, 2001, we borrowed $1,000,000 from Michael J. Quigley,
III at an annual interest rate of 10%. Principal and interest on the note was
due on or about April 25, 2001. On May 14, 2001, the loan was modified to be due
on demand. The loan is secured by a pledge of the $10 million Realen Note, which
is subordinate to the security interest of the Trustee which

39



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

secures the Stock Purchase Note and by a pledge of the $23 million Turnberry
Note. As of October 14, 2003, the remaining balance of $900,000 of the loan is
due on demand.

(D) On March 19, 2003, we issued a two month promissory note in the amount
of $200,000 bearing interest at prime plus .25% to Florida Bank, N.A. The
proceeds of such note were used to fund a escrow deposit in connection with a
charter/purchase of an offshore gaming vessel. The escrow deposit was returned
to us on May 7, 2003 following the expiration of the negotiation period, and we
have satisfied the note to Florida Bank, N.A. (See Note 20)

(E) Our directors and officers liability policy was financed by First
Insurance Funding Corp. for a $314,677 one year promissory note at a 6.95%
interest rate. At June 30, 2003, the principal balance on the note was $28,117.

(F) On March 1, 2003, we issued a promissory note for a line of credit up
to $225,000 bearing interest at 8% to Francis X. Murray. The outstanding balance
on the line of credit note at June 30, 2003 was $159,164. On February 3, 2003,
we issued a promissory note for $20,000 bearing interest at 12% to William H.
Warner, Secretary of the Company. On June 30, 2003, Mr. Warner advanced to the
Company an additional $4,000. The proceeds from the all the related party loans
were used as working capital.

(G) On December 6, 2002, Palm Beach Princess, Inc. issued a twenty four
month promissory note in the amount of $21,000 bearing interest at 8% to
International Game Technology for the purchase of gaming equipment. A payment of
$2,100 was paid on delivery of the equipment and 23 consecutive monthly
installments of $854.80 were to be paid on the balance. As a result of the
institution of proceedings by our subsidiary, ITGV, under Chapter 11 of the
bankruptcy code, payments have been delayed until the effective date of the Plan
of Reorganization (See Note 2). At June 30, 2003, the principal balance on the
note was $16,709.

(H) On April 30 2003, ITG Vegas, Inc. issued a one year promissory note in
the amount of $161,958 bearing interest at prime plus 2% to Corporate Interiors
for the purchase of office furniture. Monthly payments of $13,496.46 are being
paid on the note. At June 30, 2003, the principal balance on the note was
$121,468.

(I) In connection with the January 28, 1999 lease transactions for the
Garden State Park facility, the Company purchased equipment located at Garden
State Park and a liquor license owned by an unaffiliated third party, Service
America Corporation (the "Holder"), for $500,000 financed by a five (5) year
promissory note at a 6% interest rate. Yearly principal payments of $80,000 plus
interest were due on December 28, 2002 and on December 28, 2003. The payment due
on December 28, 2002 has not been made as of October 14, 2003.

(11) 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,

40



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

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 ended June 30, 2003 and 2002
relates to state income taxes for its Palm Beach Princess operations.

The Company has net operating loss carryforwards aggregating approximately
$147,000,000 at June 30, 2003 expiring in the years June 30, 2004 through June
30, 2021. 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 $58,800,000 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.

The Company has the following carryforwards to offset future taxable income at
June 30, 2003:

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

$ 20,000,000 6/30/2004

15,600,000 6/30/2005

11,700,000 6/30/2006

4,300,000 6/30/2007

95,400,000 6/30/2008
-------------- through 6/30/2021
$147,000,000
=============

(12) COMMITMENTS AND CONTINGENCIES

See Note 2 for additional commitments and contingencies with respect to the
Chapter 11 Bankruptcy filing.

See Note 17 for additional commitments and contingencies of the Company and
transactions with related parties.

Effective December 1, 2000, we entered into a five-year employment contract
with Francis W. Murray, our Chief Executive Officer. The contract provides for
annual compensation of $395,000, a $1,500 monthly automobile expense allowance,
a country club annual dues allowance and travel and entertainment reimbursements
for business expenses reasonably incurred by him in

41



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

addition to participation in various other benefits provided to our employees.
As part of his employment contract, Mr. Murray was awarded options to purchase
2,000,000 shares of our Common Stock. On January 4, 2003, we began deferring
payments of compensation due to Mr. Murray which as of June 30, 2003 total
$404,204 due to a lack of funds resulting from the institution of proceedings by
our subsidiary, ITGV, under Chapter 11 of the bankruptcy code.

We are responsible for remediation costs associated with an environmental
site on the Freehold Raceway property. We have accrued what we believe to be the
total cost of remediation. At June 30, 2003, the remaining balance of such
accrual was $130,398 for remediation costs. The remediation work has been
delayed due to a lack of funds resulting from the institution of proceedings by
our subsidiary, ITGV, under Chapter 11 of the bankruptcy code. At this time, we
are unable to predict the effects that such delays may cause.

In connection with the January 28, 1999 lease transactions for the Garden
State Park facility, we purchased a liquor license owned by an unaffiliated
third party, Service America Corporation, for $500,000 financed by a five (5)
year promissory note at a 6% interest rate. At December 31, 2002, the unpaid
principal balance was $160,000. Yearly principal payments of $80,000 plus
interest are due on December 28, 2002 and December 28, 2003. The payment due on
December 28, 2002 has not been made as of October 14, 2003.

Effective February 20, 2002, we entered into a Master Settlement Agreement
with the Chapter 11 Trustee (the "Trustee") for the Bankruptcy Estate of Robert
E. Brennan and a related Stock Purchase Agreement, and, through our Palm Beach
Princess, Inc. subsidiary, a Purchase and Sale Agreement, described below. These
agreements followed many months of negotiation with the Trustee of the details
of the transactions outlined in the letter of intent that had been signed by the
parties effective April 30, 2001. It was on the basis of the letter of intent,
initially, and then the Master Settlement Agreement that we have been operating
the vessel M/V Palm Beach Princess and conducting a casino cruise business since
April 30, 2001.

As permitted by the Master Settlement Agreement with the Trustee, we have
entered into a bareboat charter with MJQ Corporation, pursuant to which we have
chartered the vessel M/V Palm Beach Princess for the purpose of operating a
casino cruise business from the Port of Palm Beach, Florida. Under the bareboat
charter agreement, we are obligated to pay $50,000 per month as a charter hire
fee to the vessel's owner, MJQ Corporation. Other parties to the Master
Settlement Agreement include MJQ Corporation, Leo Equity Group, Inc. and Francis
W. Murray, our Chairman, who is also a director and officer of MJQ Corporation
and a director of Leo Equity Group, Inc. In October 2002, Mr. Murray purchased
the stock of MJQ Corporation and effective October 27, 2002 we purchased the
stock of Leo Equity Group, Inc. (See Note 17 , Related Party Transactions.)

In accordance with the Master Settlement Agreement, through our Palm Beach
Princess, Inc. subsidiary (which has been merged into ITGV) we entered into a
Purchase and Sale Agreement which provides for our purchase from the Trustee of
the promissory note of MJQ Corporation, having an original balance of principal
and interest of approximately $15.7 million and secured by a ship mortgage
against the M/V Palm Beach Princess (the "Ship Mortgage Obligation"). The
purchase price payable by us for the Ship Mortgage Obligation is $13.75 million.
We began

42



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

making payments on account of such purchase price effective April 30, 2001, in
monthly installments of $250,000. Such monthly installments continued under the
terms of the Purchase and Sale Agreement through July 31, 2002, at which time a
$9.75 million balloon payment was to be due. However, before July 31, 2002, we
exercised our right to extend the time for payment of the balance of the
purchase price for up to three (3) additional months, to October 31,2002, by
paying fees of $70,000 for the first one month extension, an additional $80,000
for the second month extension and an additional $100,000 for the third month
extension. On October 30, 2002, the Master Settlement Agreement was amended to
provide for a further extension of the due date for payment of the $9.75 million
balance under the Purchase and Sale Agreement until January 6, 2003, in
consideration of our payment of $220,000 as an extension fee. On January 3,
2003, we did not have the funds to complete the purchase by January 6, 2003 and
the Trustee denied our request for a further extension of the January 6, 2003
due date. Therefore, on January 3, 2003, in order to protect our invested
deposits and operation of the vessel, ITGV, successor by merger to our
subsidiary the Palm Beach Princess, Inc., filed a voluntary petition for relief
under Chapter 11 of the Bankruptcy Code. MJQ Corporation, the entity which owns
the vessel, also filed for relief under Chapter 11 of the Bankruptcy Code. The
Trustee is the largest creditor in the MJQ/ITGV cases, and his position is
secured by a mortgage against the vessel. In order to re-organize under a
Chapter 11 plan on a basis under which we would continue to operate the vessel,
we will need to pay or provide for payment of a minimum of $9.75 million payable
to the Trustee plus approximately $1.3 million of debt to unsecured creditors of
ITGV (excluding debt to related parties). Through October 14, 2003, $1,286,051
has been placed in escrow towards payments required to be distributed to
creditors. The Bankruptcy Court has required and approved ITGV to pay interest
on said $9.75 million monthly to the Trustee at an interest rate of 12% per
year. Interest of $384,658 has been paid through June 30, 2003.

The second agreement which we entered into with the Trustee pursuant to the
Master Settlement Agreement is a Stock Purchase Agreement. Under this Agreement,
which superseded all prior agreements and understandings between us and the
Trustee for the purchase of our common stock held or claimed by the Trustee, we
agreed to purchase up to approximately 2,235,000 shares of our common stock at a
purchase price of $0.50 per share on July 11, 2002. We desired to purchase these
shares in order to preserve our net operating loss carryforwards which otherwise
may be lost if the shares are transferred. As collateral security for our
payment of the purchase price for these shares, we granted to the Trustee a
security interest in all proceeds of (including all payments that might be made
in the future under) the $10 million Realen Note, described in Note 2 above. We
were unable to pay the purchase price under the Stock Purchase Agreement on July
11, 2002 (which price, at that date, was $892,500 for 1,785,000 shares). On
October 30, 2002, the Stock Purchase Agreement was amended to provide for an
extension of the due date on the purchase of the shares until December 13, 2002
at which time the Trustee agreed to accept payment of the purchase price for
3,228,145 shares (including additional shares over which the Trustee obtained
control) in the form of a twelve month promissory note bearing interest at
9%(increasing to 11% after default) in the amount of $1,648,402 including
interest of $34,330. (See Note 10(B).) Should the Trustee obtain control over an
additional 450,000 shares, we are further obligated to purchase those shares at
$0.50 per share. A principal payment of $137,367 was made in December 2002. We
are currently in default on all monthly payments of principal and interest that
were due to the Trustee from January 13, 2003 through May 13, 2003.

43



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

Through ITGV, we have negotiated with the Port of Palm Beach District a new
operating agreement and lease of space in a new office complex constructed at
the Port of Palm Beach adjacent to a new cruise terminal effective, as
modified,May 5, 2003. The term of the initial lease is five years at $183,200
per year payable monthly. We are also required to make tenant improvements to
the new space in a minimum amount of $333,000, however that the actual cost to
make the improvements was approximately $950,000. We will have the right to a
credit of up to the minimum amount of improvements required of $333,000 of
construction costs against the initial term of our five year lease.

In February 2003, an unrelated party deposited $200,000 to our escrow agent
on behalf of the Company for an option to charter a second gaming vessel which
would operate out of the Port of Palm Beach. These funds were replaced on March
19, 2003 by a loan obtained from the Florida Bank, N.A. in the amount of
$200,000. The Company assumed a Promissory Note negotiated by Francis W. Murray
in the amount of $25,000 due on May 24, 2003. This note was negotiated to cover
legal and transactions fees for the $200,000 escrow advance on the gaming vessel
and the stock option agreement.

The following summarizes commitments on non-cancelable contracts and leases as
of June 30, 2003:


Year Ended June 30,
-----------------------------------------------------
There-
2004 2005 2006 2007 2008 after Total
----------- --------- ---------- --------- --------- ------ -----------


Employee Contracts
(excluding severance
agreements) $ 1,190,500 $ 722,884 $ 155,000 $ -0- $ -0- $ -0- $ 2,068,383

Operating Leases 331,119 209,891 197,941 116,603 97,169 -0- 889,550

Casino Contracts 142,137 -0- -0- -0- -0- -0- 142,137
----------- --------- ---------- --------- --------- ------ --------------
Total $ 1,663,756 $ 932,775 $ 352,941 $ 116,603 $ 97,169 $ -0- $ 3,100,071
=========== ========= ========== ========= ========= ====== ==============

The above chart does not include payments to the Brennan Trustee which are
still being negotiated.

LEGAL PROCEEDINGS

We are a defendant in various 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 a material adverse effect on our financial position, results of
operations, or cash flows.

Our subsidiary, ITG Vegas, Inc., successor by merger to Palm Beach
Princess, Inc., initiated proceedings under Chapter 11 of the Bankruptcy Code on
January 3, 2003. (See Note 2.)

(13) FAIR VALUE OF FINANCIAL INSTRUMENTS

As of June 30, 2003, 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

44



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

approximated fair value for the majority of these instruments because of their
short-term maturity. The carrying amounts of long term debt approximate fair
value since the Company's interest rates approximate current interest rates. On
our $33 million notes receivable, we have elected to defer the gain on the sale
and the interest to be accrued until such time that collectability can be
determined (See Note 3).

(14) 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 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 $12,000 factored for
inflation annually). The Company's expense totaled $34,021, $40,901 and $36,863
for the fiscal years ended June 30, 2003, 2002 and 2001, respectively.

(15) STOCK OPTIONS AND WARRANTS

(A) EMPLOYEE AND NON-EMPLOYEE OPTIONS

On October 16, 2000, the Company awarded options to purchase 6,500 shares
of the Company's Common Stock to various employees as part of annual
compensation. On January 7, 2002, Mr. Francis W. Murray and Mr. William H.
Warner were awarded options to purchase 2,000,000 and 75,000 shares,
respectively, of the Company's Common Stock, expiring December 31, 2010, with an
exercise price of $0.26875 per share. These options replaced options for the
same number of shares which had been granted to them in December, 2000 under an
Incentive Stock Option Plan. Such Incentive Stock Option Plan and the options
granted under it terminated under the Plan's requirement that if approval of
Plan by the Company's common stockholders shall not be obtained within twelve
months from the date the Incentive Plan was adopted by the Board, the Incentive
Plan and all options then outstanding under it automatically will terminate and
be of no force or effect.

The Company's 1994 Employees' Stock Option Plan ("Option Plan"), remains in
effect. The Option Plan was approved by the Company's Board and stockholders in
December 1994, and 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 Option 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 Option Plan are
non-transferable except in the event of death and are only exercisable by the
holder while employed by the Company. Unless the Option Plan is terminated
earlier by the Board, the Option Plan will terminate in June 2004. As of June
30, 2003, no options were outstanding under this Option Plan.

45



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

In addition to the non-qualified options granted to Messrs. Murray and
Warner described above, the Company has 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 Option 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. At June 30, 2003, total employee options outstanding were 3,111,500 and
total non-employee options outstanding were 225,000.

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, 2003:

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

Exercise Weighted
Number Price Range Average
of Shares Per Share Price
--------------- --------------- ---------

Outstanding at June 30, 2000 1,355,000 $1.00 - $5.00 $ 4.37

Granted during FYE 6/01 2,081,500 $0.269 - $1.00 $ 0.283
---------------
Outstanding at June 30, 2001 3,436,500 $0.269 - $5.00 $ 1.89

Canceled during FYE 6/02 (2,175,000) $0.269 - $5.00 $ 0.489

Granted during FYE 6/02 2,075,000 $0.269 $ 0.269
---------------
Outstanding at June 30, 2002
and 2003 3,336,500 $0.269 - $5.00 $ 1.59
===============


Exercise Weighted
Price Range Average
Option shares Per Share Price
--------------- ----------------- ---------

Exercisable at June 30:

2001 3,436,500 $ 0.269 - $5.00 $1.89
--------------- ----------------- ---------

2002 3,336,500 $ 0.269 - $5.00 $1.59
--------------- ----------------- ---------

2003 3,336,500 $ 0.269 - $5.00 $1.59
--------------- ----------------- ---------

-----------------
Options available for future
grant under the Plan at June 30: 1994 Plan
-----------------

2001 475,000

2002 475,000

2003 475,000

46



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

The following table summarizes information about stock options outstanding at
June 30, 2003:


Ranges Total
------------------------------------- -------------


Range of exercise prices $0.20 - 0.50 $1.00 - 4.625 $5.00 $0.20 - 5.00
------------ ------------- ----- ------------

Outstanding options:

Number outstanding at June 30, 2003 2,281,500 755,000 300,000 3,336,500
--------------------------------------- --------------
Weighted average remaining contractual life (years) 7.14 2.82 3.50 5.48
--------------------------------------- --------------
Weighted average exercise price 0.29 4.17 5.00 1.59
--------------------------------------- --------------

Exercisable options:

Number outstanding at June 30, 2003 2,281,500 755,000 300,000 3,336,500
--------------------------------------- --------------
Weighted average exercise price 0.29 4.17 5.00 1.59
--------------------------------------- --------------


Prior to July 1, 2002 we accounted for all stock option grants under the
recognition and measurement provisions of APB Opinion No. 25, "Accounting for
Stock Issued to Employees", and related Interpretations. No stock-based employee
compensation cost is reflected in net income before fiscal 2003, as all stock
option grants had an exercise price equal or greater than the market value of
the underlying common stock on the date of grant. Effective July 1, 2002, we
adopted within our financial statements the provisions of SFAS No. 123,
"Accounting for Stock-Based Compensation" by applying the fair value method
prospectively for stock options grants made on or after that date. Stock option
grants under the 1995 Plan vest over periods ranging from six months to three
years. Therefore, the cost related to stock-based employee compensation included
in the determination of net income for fiscal 2003 is less than that which would
have been recognized if the fair value based method had been applied to all
stock option grants since the original effective date of SFAS No. 123. As of
January 1, 2003, we adopted the provisions of SFAS No. 148, "Accounting for
Stock-Based Compensation - Transition and Disclosure". Accordingly, the
following table illustrates the effect on net income and net income per share if
the fair value method had been applied to all outstanding stock option grants in
each period.


Years Ended June 30,
--------------------
2003 2002 2001
---- ---- ----
Net Income (Loss): As Reported

Income (Loss) $ 5,233,827 $ 1,982,603 $ (2,402,142)
------------ ----------- ------------
Net Income (Loss) $ 5,233,827 $ 1,982,603 $ (2,402,142)
------------ ----------- ------------


Pro Forma Net Income (Loss)

Income (Loss) $ 5,233,827 $ 1,671,353 $ (2,498,508)
------------ ----------- ------------
Net Income (Loss) $ 5,233,827 $ 1,671,353 $ (2,498,508)
------------ ----------- ------------

Net Income (Loss) Per Share -
Basic and Diluted: As Reported

Income (Loss) $ 0.54 $ 0.17 $ (0.24)
------------ ----------- ------------
Net Income (Loss) $ 0.54 $ 0.17 $ (0.24)
------------ ----------- ------------

47



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

Pro Forma Net Income (Loss) Per Share

Income (Loss) $ 0.54 $ 0.15 $ (0.25)
------------ ----------- ------------

Net Income (Loss) $ 0.54 $ 0.15 $ (0.25)
------------ ----------- ------------

(B) WARRANTS

During the fiscal years ended June 30, 1996, 1997 and 1999, the Company
issued 925,000, 746,847 and 932,153, respectively of warrants to purchase Common
Stock in connection with financing activities. During Fiscal 2002, 1,894,000 of
those warrants expired. All outstanding warrants are exercisable at June 30,
2003. The fair value of warrants issued during the year ended June 30, 1999 were
accounted for as financing expense.

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, 2003:

Warrants
--------

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

Outstanding at June 30, 1999, 2000 and 2001 2,604,000 $2.50 - $5.25 $4.25

Expired During Fiscal 2002 (1,894,000) $4.375 - $5.25 $4.68
------------
Outstanding at June 30, 2002 and 2003 710,000 $2.50 - $4.00 $3.08
============

(16) 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 2003, 2002 and 2001. Since the Company has sold Garden State Park,
no dividends will ever be paid on the Preferred Stock except on liquidation of
the Company. The Preferred Stock has liquidation rights of $100 per share.

(17) RELATED PARTY TRANSACTIONS

During the third quarter of Fiscal 2001, we invested in two projects in
which our Chairman, President and Chief Executive Officer, Francis W. Murray,
also has a pecuniary interest. In connection with one such project, the Board of
Directors approved advances, as loans, of up to $1.5 million to a limited
partnership in which Francis W. Murray owned, at that time, an 80% equity
interest and owned the general partner, the proceeds of which were to be used to
pay costs and expenses for development of a golf course in Southern California.
Mr. Murray's equity interest in the limited partnership, indirectly through his
ownership of the general partner, as of December 26, 2002, was 64%. At December
26, 2002, loans of $735,584 were outstanding on such project and we had accrued
$155,945 of interest due on the loans. On December 26, 2002, the limited
partnership's indebtedness to us was assumed by OC Realty,

48



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

LLC, a Florida limited liability company which is owned by Francis W. Murray and
which owns the second real estate project described below. Such indebtedness is
due December 31, 2004 and bears an interest rate of 6%.

In the second project, Mr. Murray is participating in the development of an
oceanfront parcel of land, located in Fort Lauderdale, Florida, which has
received all governmental entitlements from the City of Fort Lauderdale and the
state of Florida to develop a 14-story building to include a 5-story parking
garage, approximately 6,000 square feet of commercial space and a residential
9-story tower. The property had been owned by MJQ Development, LLC, which was
owned by Michael J. Quigley, III until December 26, 2002 when the property was
acquired by OC Realty, LLC, the entity owned by Mr. Murray. Mr. Quigley has no
relationship to Robert J. Quigley, one of our directors. OC Realty is developing
a condominium hotel resort on the property as discussed above. As of June 30,
2003, we had lent $2,034,405 in total to MJQ Development and we have accrued
interest in the amount of $606,553 on the loan. Upon the acquisition of the
property, OC Realty assumed MJQ Development's indebtedness to us. These loans
bear interest at 12% and will be repayable out of the first proceeds, after
payment of bank debts, generated by the sale of the condominiums. We will also
have the right to receive, as participation interest, from available cash flow
of OC Realty if the project is successful, a priority return of our investment
and a priority profits interest for up to three times our investment. Repayment
of these loans and our participation interest will be subject to repayment of,
first, bank debt of approximately $5.5 million (at present) incurred in the
purchase of the real property and, second, construction financing expected to
amount to $25 to $30 million and third, capital invested in OC Realty by a joint
venture partner plus a 15% per annum return thereon. At the time the loans to
MJQ Development were approved, Mr. Murray stood to receive a substantial
contingent benefit from MJQ Development for his participation in the project.

In order to raise the capital which with to proceed in the development of
the Ft. Lauderdale property, OC Realty has placed the Ft. Lauderdale property in
a joint venture in connection with which the other joint venture partner will
fund up to $6.5 million for development and receive a 50% equity interest. Our
loan will be payable out of 100% of the cash flows after repayment of debt and
the new investor's capital investment and the participation interest will be
payable out of OC Realty's 50% interest.

On January 26, 2001, we borrowed $1,000,000 from Michael J. Quigley, III at
an annual interest rate of 10%. Principal and interest on the note was due on or
about April 25, 2001. On May 14, 2001, the loan was modified to be due on
demand. The principal balance on the note at June 30, 2003 is $900,000 and we
have accrued interest through that date in the amount of $231,014. As collateral
for the loan, we pledged the $10 million Realen Note and the $23 million
Turnberry Note. On February 20, 2002 Mr. Quigley released his security interest
in the Realen Note in connection with the Master Settlement Agreement. As of
October 14, 2003, the loan is due on demand. (See Note 10.)

Effective April 30, 2001, we entered into a bareboat charter with MJQ
Corporation, pursuant to which we are chartering the vessel M/V Palm Beach
Princess for the purpose of operating an entertainment casino cruise business
from the Port of Palm Beach, Florida. Michael J. Quigley, III was a principal of
MJQ Corporation. In October 2002, Francis W. Murray, our Chairman, President and
Chief Executive Officer purchased the stock of MJQ Corporation and

49




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

has been an officer and director of MJQ Corporation. Francis X. Murray, the son
of Francis W. Murray, is President and a director of MJQ Corporation and
President of our subsidiary, ITG Vegas, Inc., which operates the vessel. Under
the bareboat charter agreement, we are obligated to pay $50,000 per month as the
charter hire fee to MJQ Corporation. All costs of operating the vessel incurred
by MJQ Corporation on our behalf are to be reimbursed by us to MJQ Corporation.
In addition, as described in Note 6 above, we have entered into an amended
Master Settlement Agreement with the Chapter 11 Trustee of the Bankruptcy Estate
of Robert E. Brennan, MJQ Corporation and others to purchase from the Trustee
the Ship Mortgage Obligation of MJQ Corporation, having an original balance of
principal and interest outstanding of approximately $15.7 million for a purchase
price of $13.75 million. Pursuant to the Master Settlement Agreement, MJQ
Corporation and its officers and directors (including Francis W. Murray)
exchanged mutual releases with the Trustee and others having claims to the Ship
Mortgage Obligation.

Also we entered into an agreement to purchase all of the shares of
outstanding stock of Leo Equity Group, Inc. Mr. Francis W. Murray has been a
director of Leo Equity Group, Inc. Closing on the Leo Equity Group, Inc. stock
purchase occurred effective October 27, 2002. The purchase price payable by us
for the stock in Leo Equity Group, Inc. was $250,000, payable without interest
in 10 monthly installments of $25,000 each. As of March 31, 2003, this note was
paid in full. We also agreed to reduce the exercise price of previously granted
options held by the seller, Frank A. Leo (our former director and chairman), to
purchase 200,000 shares of our common stock, from $4.00 per share to $0.50 per
share, while conditioning exercise of such options upon our first having
consummated the purchase of the shares required to be purchased by us from the
Trustee under the Stock Purchase Agreement. The purpose of such acquisition was
to enable us to obtain the lease and operating agreement with the Port of Palm
Beach District which had been owned by Leo Equity Group, Inc. During the period
we made the $25,000 monthly installments to Mr. Leo and before the note was paid
in full, we made advances on Mr. Leo's behalf. These advances totaled $23,439 as
of June 30, 2003.

The Master Settlement Agreement with the Chapter 11 Trustee for the
Bankruptcy Estate of Robert E. Brennan included a final settlement by the
Trustee with numerous parties. Among those parties were Frank A. Leo, Leo Equity
Group, Inc., Michael J. Quigley III and MJQ Corporation. During the quarter
ended March 31, 2002 we charged Leo Equity Group $3,000,000 and MJQ Corporation
$1,000,000 for their portion of expenses incurred by us and a success fee for
the efforts of International Thoroughbred Breeders, Inc. in connection with the
final settlement with the Trustee. Prior to our acquisition of Leo Equity Group,
Inc., Leo Equity Group, Inc. assigned to us certain receivables in the
approximate amount of $3 million, including the receivables of approximately
$2.6 million due it from Michael J. Quigley III, in payment of this obligation.
That $2.6 million debt from Mr. Quigley was assumed by Francis W. Murray when he
purchased the MJQ Corporation shares and is a non-recourse obligation which is
payable solely from pledged shares of his stock in MJQ Corporation. Mr. Murray
purchased the MJQ Corporation stock subject to our lien securing payment of that
debt. We have deferred all income from these transactions until such time as
payment is received.

On July 12, 2002, we borrowed $300,000 from Francis W. Murray at an annual
interest rate of 6%. The note is due on demand and interest is payable monthly.
As of June 30, 2003,

50



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

the balance of the note was $250,000 and is classified as Deposits and Other
Assets - Related Parties on the balance sheet as an offset to previous advances
to Mr. Murray.

On November 13, 2002, the Company and MJQ Corporation signed an agreement
and bill of sale which transferred maintenance materials and spare parts
inventory previously maintained by MJQ Corporation to Palm Beach Princess, Inc.
The value of the parts inventory sold and assigned was $1,103,125. Payment for
the inventory was made by way of offsets on amounts previously due to Palm Beach
Princess, Inc. by MJQ Corporation.

Francis X. Murray, President of our ITG Vegas, Inc. subsidiary and son of
Francis W. Murray, our President, CFO and CEO has agreed to loan the company up
to $225,000 in the form of a line of credit. As of June 30, 2003 and October 14,
2003 these loans totaled $159,164. (See Note 10)

Mr. Francis X. Murray guaranteed on the Company's behalf, a loan from
Florida Bank, N.A. in the amount of $200,000 which was also used as a deposit on
the second gaming vessel (which deposit was returned to the bank on July 7,
2003). The Company agreed to indemnify Mr. Murray for the guaranteed obligation
with respect to this loan.

(18) TREASURY SHARES PURCHASED

On December 13, 2002, the Company issued a promissory note in the amount of
$1,648,403 to purchase 3,228,145 shares of its Common Stock from the Chapter 11
Trustee for the bankruptcy estate of Robert E. Brennan.

(19) QUARTERLY FINANCIAL DATA (UNAUDITED)

The following quarterly financial data is unaudited, but in our opinion
includes all necessary adjustments for a fair presentation of the interim
results:

Fiscal 2003
-------------------------------------------------

4th Quarter 3rd Quarter 2nd Quarter 1st Quarter

Revenues $ 9,347,965 $ 8,890,400 $ 6,907,111 $ 6,419,175

Net Income $ 2,347,241 $ 1,878,471 $ 595,001 $ 413,114

Net Income Per Share $ 0.21 $ 0.23 $ 0.06 $ 0.04

Fiscal 2002
-------------------------------------------------

4th Quarter 3rd Quarter 2nd Quarter 1st Quarter

Revenues $ 6,783,534 $ 8,050,016 $ 5,060,359 $ 6,161,682

Net Income $ 501,828 $ 1,852,916 $ (827,269) $ 455,128

Net Income (Loss) Per Share $ 0.04 $ 0.16 $ (0.07) $ 0.04


51



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

(20) SUBSEQUENT EVENTS

(A) On July 7, 2003, the $200,000 note to the Florida Bank, N.A was
satisfied (See Note 10-D).

(B) On September 12, 2003, the United States Bankruptcy Court for the
Southern District of Florida issued an order confirming the Amended Joint
Chapter 11 Plan of Reorganization (the "Plan") in the Chapter 11 Cases of ITG
Vegas, Inc., the Company's wholly owned subsidiary, and an affiliated entity,
MJQ Corporation (the sole stockholder of which is Francis W. Murray, the
Registrant's Chairman and Chief Executive Officer) (ITG Vegas, Inc. and MJQ
Corporation being hereinafter called the "Debtors"). ITG Vegas, Inc. is the
Registrant's principal operating subsidiary. It operates the vessel Palm Beach
Princess (the "Vessel"), a casino and entertainment cruise ship based at the
Port of Palm Beach, Florida. The Vessel is owned by MJQ Corporation and
chartered, under a bareboat charter, to ITG Vegas, Inc. The Plan is a plan of
reorganization under Chapter 11 of the Bankruptcy Code which was jointly
proposed by the Debtors. (See Note 2)


Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure

None

Item 9A. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure
that information required to be disclosed in our Exchange Act reports is
recorded, processed, summarized and reported within the time periods specified
in the SEC's rules and forms, and that such information is accumulated and
communicated to our management, including our chief executive officer and chief
financial officer, as appropriate, to allow timely decisions regarding required
disclosure. In designing and evaluating the disclosure controls and procedures,
management recognized that any controls and procedures, no matter how well
designed and operated, can provide only reasonable assurance of achieving the
desired control objectives, and management necessarily was required to apply its
judgment in evaluating the cost-benefit relationship of possible controls and
procedures.

Within 90 days prior to the filing of this report, we completed an
evaluation, under the supervision and with the participation of our management,
including our chief executive officer and chief financial officer, of the
effectiveness of the design and operation of our disclosure controls and
procedures. Based on the foregoing, our chief executive officer and chief
financial officer concluded that the Company's disclosure controls and
procedures were effective.

CHANGES IN INTERNAL CONTROLS

There have not been any significant changes in the Company's internal
controls or in other factors that could significantly affect these controls
subsequent to the date of their evaluation.

52


PART III

Item 10. Directors and Executive Officers of the Registrant.

Set forth below is certain information regarding our directors and
executive officers:


Name Age Position
- ---- --- --------
Francis W. Murray 62 Chairman of the Board, President and
Chief Executive Officer
James J. Murray 64 Director
Walter ReDavid 77 Director
Robert J. Quigley 74 Director

- --------------------------------------------------------------------------------

Set forth below is certain biographical information with respect to each
director, including his principal occupation and employment during the past five
years. The Company does not stand committees such as audit or compensation,
instead, the full board performs such roles.

Francis W. Murray. Mr. Murray has been a director since 1996 and our
President, Chief Executive Officer and Chairman of the Board since October 10,
2000. On October 15, 2002, Mr. Murray assumed the position of Chief Financial
Officer. 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 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 the city of St. Louis.

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, Mr. Murray
joined the Philadelphia Eagles' public relations staff and two years later
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 our Garden State Park
subsidiary from 1985-1987. Mr. Murray is the brother of Francis W. Murray, who
is a director and our President, Chief Executive Officer and Chairman of the
Board.

Walter ReDavid. Mr. ReDavid was elected to the board on July 3, 2001. Mr.
ReDavid is a past Registrar of Wills and has served on various Delaware County,
Pennsylvania township boards. Mr. ReDavid has been practicing general law as a
sole practitioner for over 50 years.

53




Robert J. Quigley. Mr. Quigley has been a director since 1980. Since 2002,
Mr. Quigley has served as an officer of one of our subsidiaries which was formed
to develop foreign gaming opportunities. From February 1996 until October 15,
1997, and again from 1999 until October 10, 2000, Mr. Quigley served as our
President. Mr. Quigley also served as President from 1988 until July 1992.
Between November 1995 and May 1996, Mr. Quigley served as our Chairman of the
Board and acting Chief Executive Officer. 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.

Executive and Other Key Officers

Our executive and other key officers, in addition to
Mr. Francis W. Murray, include:
- --------------------------------------------------------------------------------
Name Age Position
- ---- --- --------

William H. Warner 58 Secretary

Christine E. Rice Newell 58 Assistant Treasurer and Controller

Francis X. Murray 37 Vice President and CEO of ITG Vegas, Inc.
(ITGV) (surviving company of merger of Palm
Beach Princess, Inc. And ITGV)

Jerry Winters 43 Treasurer and CFO of ITG Vegas, Inc.

Stephen Flood 43 Vice President of Casino Operations, ITG Vegas,
Inc.
- --------------------------------------------------------------------------------

William H. Warner. Mr. Warner was appointed our Secretary in October 2000.
Mr. Warner served as Treasurer and Chief Financial Officer from 1983 until
October 15, 2002. Mr. Warner resigned from his Treasurer and CFO positions over
his concerns that the Company may not maintain its Director and Officer's
insurance policy in the future. The limits of the policy have been reduced
significantly from Fiscal 2001 levels due to cash flow shortages. Mr. Warner is
a certified public accountant, and prior to joining us, was employed in public
accounting for 11 years.

Christine E. Rice Newell. Ms. Rice Newell has been our Assistant Treasurer
and Controller since 1990. From 1986 until 1990, Ms. Rice Newell was our
Corporate Accounting Manager. Ms. Rice Newell is a certified public accountant.

Francis X. Murray. Mr. Murray, son of our Chairman and CEO, has, since
April 2001, been Vice President of our ITGV subsidiary,(surviving company of the
merger of Palm Beach Princess, Inc. and ITGV) which operates the cruise ship M/V
Palm Beach Princess and related

54




offshore gaming business. He has also been President of MJQ Corporation since
May of 1999, which corporation owns the M/V Palm Beach Princess and operated the
cruise and offshore gaming business from May 1999 until chartering the vessel to
Palm Beach Princess, Inc. in April, 2001. Prior thereto, Mr. Murray was
President (January 1999 to May 1999), and Vice President and General Manager
(February 1998 to January 1999) of Palm Beach Casino Line, a division of Leo
Equity Group, Inc. which operated the vessel M/V Palm Beach Princess; and in
1997-98 was a consultant for Leo Equity Group, Inc.

Jerry Winters. Mr. Winters has been Treasurer and Chief Financial Officer
of our ITG Vegas, Inc. subsidiary since its inception in April 2001. He has also
been Treasurer and CFO of MJQ Corporation since March 1999. Prior thereto, Mr.
Winters was CFO for Home Care America, Inc. (March 1998 to March 1999) and
regional CFO for Vencor, Inc., (March 1996 to March, 1998). Mr. Winters is a
certified public accountant.

Stephan Flood. Mr. Flood joined the previous owners of the Palm Beach
Princess in May 1994. From 1997 he served as a casino manager until January 2000
when he assumed his current position of Vice President, Casino Operations. In
that position, Mr. Flood is responsible for management and direction of all
aspects of the company's casino operations, including casino marketing, tracking
and customer service. Prior to joining the company Mr. Flood was employed in a
range of casino positions by Norwegian Cruise Line, Premier Cruises, Lucayan
Beach Casino and Charlie Chester's London Casino. He holds licenses issued by
British casino regulatory authorities.

Section 16(a) Beneficial Ownership Reporting Compliance

Pursuant to Section 16(a) of the Securities Exchange Act of 1934, our
executive officers and directors are required to file reports with the SEC
relating to their ownership of and transactions in our equity securities. Based
on our records and other information, we believe that all Section 16(a) filing
requirements were met for fiscal year 2003.

Involvement in Certain Legal Proceedings

In February, 2002, Robert J. Quigley and William H. Warner, without
admitting or denying the allegations, settled a cease and desist order
instituted by the Securities and Exchange Commission relating to filings made in
Fiscal 1997, which included findings by the Commission that Messrs. Quigley and
Warner committed and caused violations of the reporting, record keeping and
internal control provisions of the Securities Exchange Act of 1934 (the
"Exchange Act") by causing the Company to improperly disclose and account for
certain related party transactions involving the Company's former chief
executive officer. Without admitting or denying the Commission's findings, Mr.
Quigley consented to the issuance of an order that he cease and desist from
causing any violation or future violation of Section 13(a) of the Exchange Act
and Rules 12b- 20 and 13a-13 thereunder and from committing any violation and
any future violation of Rule

55




13b2-2. Also without admitting or denying the Commission's findings, Mr. Warner
consented to the issuance of an order that he cease and desist from causing any
violation or future violation of Sections 13(a), 13(b)(2)(A) and 13(b)(2)(B) of
the Exchange Act and Rules 12b-20 and 13a-13 thereunder and from committing any
violations and any future violations of Rules 13b2-1 and 13b2-2.

Item 11. Executive Compensation

The following table sets forth the cash compensation as well as certain
other compensation paid or accrued during fiscal years 2003, 2002 and 2001 to
the individuals who served as our chief executive officer during fiscal year
2003 and other executive officers of the Company who earned more than $100,000
during fiscal year 2003 (collectively, the "Named Executives"):


Long-Term
Compensation
Annual Compensation Awards
------------------- ------
Securities All
Name and Other Annual Underlying Other
Principal Position Year Salary Bonus Compensation Options Compensation
($) ($) ($) (#) ($)
- ------------------ ---- ---------- --- --------- --- ---------


Francis W. Murray, 2003 402,596(1) -0- 11,503(3) -0- 14,733(5)
President, Chief 2002 387,404 -0- 17,049 2,000,000(4) 18,658
Executive Officer and 2001 278,654 500,000(2) 17,011 -0- 18,537
Chief Financial
Officer

Francis X. Murray, 2003 301,154 88,628(7) 11,647(8) -0- 21,137(9)
Vice President of ITG 2002 277,885 135,320 11,423 -0- 21,930
Vegas, Inc. 2001 63,462(6) 12,000 1,904 -0- 1,074

William H. Warner, 2003 171,635 -0- 9,780(10) -0- 10,717(12)
Secretary 2002 176,346 -0- 3,244 75,000(11) 18,650
2001 123,693 -0- -0- -0- 15,430

(1) Consists of $212,692.48 in salary paid to Mr. Murray and $189,904 of salary
earned through June 30, 2003 but deferred.

(2) In recognition of Mr. F. W. Murray's efforts in successfully settling the
significant litigation in Delaware involving Mr. DeSantis, successfully
closing the transactions involving the sale of our real properties located
in Las Vegas, Nevada and Cherry Hill, New Jersey, paying off all of our
bank debt and acquiring valuable interests in the profits from development
of the properties sold, we awarded a bonus to Mr. Murray of $500,000,
payable solely in shares of our common stock valued at $0.20 per share,
which was determined by the Board of Directors to equal or exceed the fair
market value per share of our common stock. Accordingly, such compensation
was paid in the form of 2,500,000 shares of our common stock.

(3) Consists of monthly automobile lease payments.

(4) Represents the number of shares under options granted in fiscal 2002. Such
options replaced options for the same number of shares which had been
granted in fiscal 2001 and terminated in fiscal 2002.

56




(5) Fiscal 2003 amounts consist of $2,733 of life and long-term disability
insurance premiums paid by the Company with respect to term life insurance
payable to beneficiaries designated by Mr. F. W. Murray and $12,000
contributed by the Company under the Company's 401(k) plan.

(6) Includes compensation in Fiscal 2001 from April 30, 2001 to June 30, 2001.

(7) Bonus earned through June 30, 2003 but deferred.

(8) Consists of monthly automobile lease payments.

(9) Fiscal 2003 amounts consist of $877 of life insurance premiums paid by the
Company with respect to term life insurance payable to beneficiaries
designated by Mr. F. X. Murray, $1,315.39 contributed by the Company under
MJQ's 401(k) plan and $19,822 of golf membership dues as provided with an
MJQ employment contract.

(10) Consists of monthly automobile allowance which was deferred by Mr. Warner.

(11) Represents the number of shares under options granted in fiscal 2002. Such
options replaced options for the same number of shares which had been
granted in fiscal 2001 and terminated in fiscal 2002.

(12) Fiscal 2003 amounts include $1,967 of life and long-term disability
insurance premiums paid by the Company with respect to term life insurance
payable to beneficiaries designated by Mr. Warner and $8,750 contributed by
the Company under the Company's 401(k) plan.


Stock Options Grants

There were no stock options granted to the Named Executives during Fiscal
Year 2003.

Stock Option Exercises and Holdings

The following table sets forth the value of options held by each of the
Named Executives at June 30, 2003. None of the Named Executives exercised any
options during fiscal year 2003.


Aggregated Option Exercises in 2003 and Option Values at June 30, 2003
- --------------------------------------------------------------------------------------------------------

Number of Securities Underlying Value of Unexercised
Unexercised Options In-the-Money Options
at June 30, 2003 (#) at June 30, 2003 ($)(1)

Shares Value
Acquired on Realized
Name Exercise (#) ($) Exercisable Unexercisable Exercisable Unexercisable


Francis W. Murray -- -- 2,300,000 0 0 0
William H. Warner -- -- 75,000 0 0 0
- ---------------------------------------------------------------------------------------------------------

(1) The value of unexercised in-the-money options is based on the difference
between the last reported sale price of a share of common stock as reported on
the Pink Sheets on June 27, 2003 ($0.28) and the exercise price of the options,
multiplied by the number of options.

57




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.

Employment Contracts

Effective December 1, 2000, we entered into a five-year employment contract
with Mr. Francis W. Murray as our Chief Executive Officer. The contract provides
for annual compensation of $395,000, a $1,500 monthly automobile expense
allowance, a country club annual dues allowance and travel and entertainment
reimbursements for business expenses reasonably incurred by him, in addition to
participation in various other benefits provided to our employees. As part of
his contract, on December 28, 2000, Mr. Murray was awarded options to purchase
2,000,0000 shares of our common stock under an stock incentive plan which was
subject to stockholder approval. Such options terminated in fiscal 2002 since
the Plan was not submitted for shareholder approval, and replacement options
were granted in fiscal 2002 with an exercise price of $0.26875 per share,
expiring December 31, 2010.

In connection with the bareboat charter with MJQ Corporation we are
obligated to honor several employment contracts between key executives and MJQ
Corporation. Should we be successful in purchasing from the Trustee the
promissory note of MJQ Corporation, it is our intention to honor these
employment contracts. A contract for Named Executive, Francis X. Murray,
provides for a base salary of $275,000, $290,000 and $310,000 respectively
during calendar years 2001, 2002 and 2003. Additionally the contract provides
for an annual bonus of up to 30% of the executive's base salary if certain
EBITDA performance goals are met, membership to a golf club and other expense
allowances.

Compensation Committee Interlocks and Insider Participation

Mr. Francis W. Murray, a member of the Compensation Committee of the Board
of Directors, currently serves as our President and Chief Executive Officer. See
also "Item 13. Certain Relationships and Related Transactions" for additional
information with respect to Mr. Murray.


58





Item 12. Security Ownership of Certain Beneficial Owners and Management.

Security Ownership of Certain Beneficial Owners

The following table sets forth certain information with respect to the
beneficial ownership, as of October 10, 2003, of each person who we knew to be
the beneficial owner of more than 5% of our common stock. Each of the
stockholders named below has sole voting and investment power with respect to
such shares, unless otherwise indicated.

- --------------------------------------------------------------------------------
Common Stock
---------------------------------
Name and Address of
Beneficial Owner Number of Shares Percent
- ---------------- ---------------- -------
The Family Investment Trust 1,090,731 (1) 16.2%
Henry Brennan, Trustee
340 North Avenue
Cranford, NJ 07016

Francis W. Murray 4,800,000 (2) 43.5%
211 Benigno Boulevard
Suite 210
Bellmawr, NJ 08031

Frank A. Leo 736,201 (3) 6.7%
44 Minebrook Rd
Colts Neck, NJ 07722
- --------------------------------------------------------------------------------
(1) Henry Brennan is the brother of Robert E. Brennan, our former president,
whose adult sons are the beneficiaries of the trust.
(2) Includes 2,300,000 shares of common stock issuable upon the exercise of
warrants.
(3) Includes 200,000 shares purchasable under stock options.

Security Ownership of Management

The following table sets forth certain information with respect to the
beneficial ownership, as of October 10, 2003, of (i) each director, (ii) the
Named Executives and (iii) all of our directors and executive officers as a
group. Each of the stockholders named below has sole voting and investment power
with respect to such shares, unless otherwise indicated.

- --------------------------------------------------------------------------------

Name of Beneficial Owner Number of Shares(1) Percent of Class
- ------------------------ ------------------- ----------------
Francis W. Murray 4,800,000 (2) 43.5%
James J. Murray 25,000 (3) *
Walter ReDavid 0 *
Robert J. Quigley 105,830 (4) *
William H. Warner 75,124 (5) *
All executive officers and
directors as a group (6 persons) 5,010,954 46.6%
- --------------------------------------------------------------------------------
*Less than 1 percent.

59




(1) With respect to each stockholder, includes any shares issuable upon
exercise of any options or warrants held by such stockholder that are or
will become exercisable within sixty days of October 14, 2003.
(2) Includes 2,300,000 shares issuable upon the exercise of stock options.
(3) Consists of shares of common stock issuable upo the exercise of options.
(4) Includes 100,000 shares of common stock issuabl upon the exercise of
options.
(5) Includes 75,000 shares issuable upon the exercise of stock options.


Equity Compensation Plan Information

The following table contains information on Equity Compensation Plans that
have been and have not been approved by security holders at June 30, 2003:


Number of securities
remaining available for
Number of future issuance under
Securities to be Weighted average equity compensation
issued upon exercise exercise price of plans (excluding
of outstanding options, outstanding options, securities reflected in
warrants and rights warrants and rights column (a)
Plan Category (a) (b) (c)
- --------------------- ----------------------- -------------------- -----------------------


Equity compensation
plans approved by -0- N/A N/A
security holders

Equity compensation
plans not approved by 4,046,500 -0-
security holders
Total 4,046,500 -0-


Set forth below is a summary of the material terms of stock options granted
by the Company which were not approved by the Company's securityholders.

Pursuant to a Non-qualified Stock Option Agreement dated January 7, 2002
between the Company and each of Francis W. Murray and William H. Warner, the
Company granted an option to purchase 2,000,000 shares of Common Stock to Mr.
Murray and to purchase 75,000 shares of Common Stock to Mr. Warner, in each case
for a purchase price of $0.26875 per share. The options vested immediately and
expire December 31, 2010. The options are not transferable other than by will or
the laws of descent and distribution, and, during the lifetime of the optionee,
are exercisable only by the optionee. The options remain exercisable following
termination of employment, until their scheduled expiration date.

In Fiscal 1997, the Company granted a non-qualified stock option to Frank
A. Leo, its then chairman, to purchase 200,000 shares of Common Stock at $4.00
per share. In fiscal 2002, in connection with the agreement to purchase Mr.
Leo's stock in Leo Equity Group, Inc., the Company agreed to reduce the purchase
price for shares under Mr. Leo's stock option to $0.50

60




per share and imposed, as a condition of exercise of such option, the
requirement that the Company first shall have consummated its purchase of
Company Common Stock from the Chapter 11 Trustee for the Bankruptcy Estate of
Robert E. Brennan pursuant to the Stock Purchase Agreement dated as of February
22, 2002, between the Company and such Trustee. Mr. Leo's option survived
termination of his employment and expires December 20,2006.

In connection with prior agreements with former officers and directors, the
Company granted options to purchase 925,000 shares of Common Stock at prices
ranging from $4.00 to $5.00 per share. These options expire at various times
from January 2006 to January 2007.

In Fiscal 1999, the Company granted warrants to purchase 435,000 shares of
Common Stock at $2.50 per share in connection with obtaining financing. These
warrants expire in May 2004. In Fiscal 1996 the Company granted warrants to
purchase 275,000 shares of Common Stock at $4.00 per share as a finder's fee in
connection with the purchase of its El Rancho property. These warrants expire in
April 2006.

Item 13. Certain Relationships and Related Transactions.

During the third quarter of Fiscal 2001, we invested in two projects in
which our Chairman, President and Chief Executive Officer, Francis W. Murray,
also has a pecuniary interest. In connection with one such project, the Board of
Directors approved advances, as loans, of up to $1.5 million to a limited
partnership in which Francis W. Murray owned, at that time, an 80% equity
interest and owned the general partner, the proceeds of which were to be used to
pay costs and expenses for development of a golf course in Southern California.
Mr. Murray's equity interest in the limited partnership, indirectly through his
ownership of the general partner, as of December 26, 2002, was 64%. At December
26, 2002, loans of $735,584 were outstanding on such project and we had accrued
$155,945 of interest due on the loans. On December 26, 2002, the limited
partnership's indebtedness to us was assumed by OC Realty, LLC, a Florida
limited liability company which is owned by Francis W. Murray and which owns the
second real estate project described below. Such indebtedness is due December
31, 2004 and bears an interest rate of 6%.

In the second project, Mr. Murray is participating in the development of an
oceanfront parcel of land, located in Fort Lauderdale, Florida, which has
received all governmental entitlements from the City of Fort Lauderdale and the
state of Florida to develop a 14-story building to include a 5-story parking
garage, approximately 6,000 square feet of commercial space and a residential
9-story tower. The property had been owned by MJQ Development, LLC, which was
owned by Michael J. Quigley, III until December 26, 2002 when the property was
acquired by OC Realty, LLC, the entity owned by Mr. Murray. Mr. Quigley has no
relationship to Robert J. Quigley, one of our directors. OC Realty is developing
a condominium hotel resort on the property as discussed above. As of June 30,
2003, we had lent $2,034,405 in total to MJQ Development and we have accrued
interest in the amount of $606,553 on the loan. Upon the acquisition of the
property, OC Realty assumed MJQ Development's indebtedness to us. These

61




loans bear interest at 12% and will be repayable out of the first proceeds,
after payment of bank debts, generated by the sale of the condominiums. We will
also have the right to receive, as participation interest, from available cash
flow of OC Reality if the project is successful, a priority return of our
investment and a priority profits interest for up to three times our investment.
Repayment of these loans and our participation interest will be subject to
repayment of, first, bank debt of approximately $5.5 million (at present)
incurred in the purchase of the real property and, second, construction
financing expected to amount to $25 to $30 million and third, capital invested
in OC Reality by a joint venture partner plus a 15% per annum return thereon. At
the time the loans to MJQ Development were approved, Mr. Murray stood to receive
a substantial contingent benefit from MJQ Development for his participation in
the project.

On January 26, 2001, the Company borrowed $1,000,000 from Michael J.
Quigley, III at an annual interest rate of 10%. Principal and interest on the
loan was due on or about April 25, 2001. On May 14, 2001, the loan was modified
to be due on demand. As collateral for the loan, the Company pledged the $33
million in notes receivable from the sale of the El Rancho and Garden State Park
properties. On February 22, 2002, Mr. Quigley released his security interest in
the Garden State Park Note in connection with the Master Settlement Agreement.
(See Note 10.)

Effective April 30, 2001, we entered into a bareboat charter with MJQ
Corporation, pursuant to which we are chartering the vessel M/V Palm Beach
Princess for the purpose of operating a casino cruise business from the Port of
Palm Beach, Florida. Francis W. Murray, our Chairman, President and Chief
Executive Officer, is an officer and director of MJQ Corporation, and his son,
Francis X. Murray, is President and a director of MJQ Corporation. Under the
charter agreement, we are obligated to pay $50,000 per month as the charter hire
fee to MJQ Corporation. All costs of operating the vessel incurred by MJQ
Corporation on our behalf are to be reimbursed by us to MJQ Corporation. In
addition, in order to maintain the bareboat charter, we have entered into a
Master Settlement Agreement with the Chapter 11 Trustee of the Bankruptcy Estate
of Robert E. Brennan, MJQ Corporation and others, and a related Purchase and
Sale Agreement, providing for our purchase from the Trustee of the promissory
note of MJQ Corporation, having a balance of principal and interest outstanding
of approximately $15.7 million as of June 30, 2002 and secured by a ship
mortgage against the Palm Beach Princess vessel, for a purchase price of $13.75
million. See Notes 10 and 17. Pursuant to the Master Settlement Agreement , MJQ
Corporation and its officers and directors (including Francis W. Murray and his
son) exchanged mutual releases with the Trustee and others having claim to the
Ship Mortgage Obligation.

On July 12, 2002, we borrowed $300,000 from Francis W. Murray at an annual
interest rate of 6%. The note is due on demand and interest is payable monthly.


62




PART IV

Item 14. Exhibits, Financial Statement Schedules, and Reports On Form 8-K.

(a) The following documents are filed as part of this report

1. Financial Statements.

See index to Financial Statements at Item 8 on page 18 of this report.

2. Financial Statement Schedules.

See index to Financial Statements at Item 8 on page 18 of this report.

3. Exhibits.

The following exhibits are filed as part of, or incorporated by
reference into, this report:


Exhibit
Number Description
------ -----------

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).

10.1 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).

10.2 * Employment Agreement by and between the Registrant and Francis W.
Murray dated as of December 1, 2000

10.3 Note Purchase Agreement Between Orion Casino Corporation, as
Purchaser, and Turnberry/Las Vegas Boulevard, LLC, as Issuer, Dated as
of March 1, 2000 (incorporated by reference to Exhibit 10.2 to the
Registrant's Current Report on Form 8-K dated May 22, 2000).


63



Exhibit
Number Description
------ -----------

10.4 $23,000,000.00 Promissory Note dated May 18, 2000, from Turnberry/Las
Vegas Boulevard, LLC (the "Maker") to Orion Casino Corporation (the
"Payee") (incorporated by reference to Exhibit 10.3 to the
Registrant's Current Report on Form 8-K dated May 22, 2000).

10.5 Security Agreement, dated as of May 18, 2000, by and among
Turnberry/Las Vegas Boulevard, LLC (the "Joint Venture"), the members
of the Joint Venture parties to this Agreement (said members being
collectively called the "Pledgers"), and Orion Casino Corporation, a
Nevada corporation (the "Purchaser") (incorporated by reference to
Exhibit 10.4 to the Registrant's Current Report on Form 8-K dated May
22, 2000).

10.6 Note Agreement between GSRT, LLC, and Realen-Turnberry/Cherry Hill,
LLC, as Issuer, dated as of November 29, 2000. (incorporated by
reference to Exhibit 10.1 to the Registrant's Current Report on Form
8-K dated November 30, 2000)

10.7 $10,000,000.00 Promissory Note dated November 29, 2000, from Realen-
Turnberry/Cherry Hill, LLC to GSRT, LLC. (incorporated by reference to
Exhibit 10.2 to the Registrant's Current Report on Form 8-K dated
November 30, 2000)

10.8 Security Agreement, dated as of November 29, 2000, by and among
Realen- Turnberry/Cherry Hill, LLC, its sole member
Realen-Turnberry/Cherry Hill Associates and GSRT, LLC. (incorporated
by reference to Exhibit 10.3 to the Registrant's Current Report on
Form 8-K dated November 30, 2000)

10.9 Amended and Restated Bareboat Charter between Palm Beach Princess.
Inc. and MJQ Corporation

10.10Master Settlement Agreement dated February 22, 2002, among the
Chapter 11 Trustee for the Bankruptcy Estate of Robert E. Brennan, the
Company, and, among others, MJQ Corporation, Leo Equity Group, Inc.,
Francis W. Murray, Frank A. Leo and Michael J. Quigley, III

10.11Purchase and Sale Agreement dated February 22, 2002, between Palm
Beach Princess, Inc. and the Chapter 11 Trustee for the Bankruptcy
Estate of Robert E. Brennan

10.12Stock Purchase Agreement dated February 22, 2002, between the Company
and the Chapter 11 Trustee for the Bankruptcy Estate of Robert E.
Brennan

10.13* Non-Qualified Stock Option Agreement dated January 7, 2002, between
the Company and Francis W. Murray

10.14* Non-Qualified Stock Option Agreement dated January 7, 2002, between
the Company and William H. Warner

64



Exhibit
Number Description
------ -----------

10.15 * Stock Option granted to Francis W. Murray on January 15, 1997

10.16 * Stock Option granted to Frank A. Leo on December 20, 1996

10.17Joint Amended Plan of Reorganization of ITG Vegas, Inc. and MJQ
Corporation (incorporated by reference to Exhibit 2.1 on Form 8-K
dated September 9, 2003)

21 Subsidiaries.

31.1 Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant
to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2 Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant
to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1 Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2 Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002.

- ---------------------------------------------------------
* Constitutes a management contract or compensation plan.

(b) Reports on Form 8-K.

No reports on Form 8-K were filed by the Registrant during the last quarter
of fiscal year 2003.


65




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, in Bellmawr, New
Jersey, this 14th day of October, 2003.

INTERNATIONAL THOROUGHBRED BREEDERS, INC.


By:/s/ Francis W. Murray
------------------------------------------------------------
Francis W. Murray
Chairman of the Board, President and Chief Executive Officer

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, this report has been signed by the following persons on
behalf of the Registrant and in the capacities and on the dates indicated.

Signature Title Date
--------- ----- ----

/s/ Francis W. Murray Chairman of the Board, President October 14, 2003
- ---------------------------- and Chief Executive Officer
Francis W. Murray (Principal Executive Officer)


/s/ Francis W. Murray Chief Financial Officer October 14, 2003
- ---------------------------- (Principal Financial and
Francis W. Murray Accounting Officer)


/s/ James J. Murray Director October 14, 2003
- ----------------------------
James J. Murray

/s/ Robert J. Quigley Director October 14, 2003
- ----------------------------
Robert J. Quigley

/s/ Walter ReDavid Director October 14, 2003
- ----------------------------
Walter ReDavid

66




Exhibit 31.1


CERTIFICATION PURSUANT TO RULE 13a-14
OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED,
AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Francis W. Murray, the President and Chief Executive Officer of International
Thoroughbred Breeders, Inc., certify that:

1. I have reviewed this annual report on Form 10-K of International
Thoroughbred Breeders, Inc.;

2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this annual report;

3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this annual report.


Date: October 14 , 2003 /s/Francis W. Murray
-------------------------------------
Francis W. Murray
President and Chief Executive Officer


Exhibit 31.2


CERTIFICATION PURSUANT TO RULE 13a-14
OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED,
AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Francis W. Murray, the Chief Financial Officer and Treasurer of International
Thoroughbred Breeders, Inc., certify that:

1. I have reviewed this annual report on Form 10-K of International
Thoroughbred Breeders, Inc.;

2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this annual report;

3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this annual report.


Date: October 14 , 2003 /s/ Francis W. Murray
-------------------------------------
Francis W. Murray
Chief Financial Officer and Treasurer





EXHIBIT INDEX


Exhibit
Number Description
------ -----------

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).

10.1 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).

10.2 * Employment Agreement by and between the Registrant and Francis W.
Murray dated as of December 1, 2000

10.3 Note Purchase Agreement Between Orion Casino Corporation, as
Purchaser, and Turnberry/Las Vegas Boulevard, LLC, as Issuer, Dated as
of March 1, 2000 (incorporated by reference to Exhibit 10.2 to the
Registrant's Current Report on Form 8-K dated May 22, 2000).


10.4 $23,000,000.00 Promissory Note dated May 18, 2000, from Turnberry/Las
Vegas Boulevard, LLC (the "Maker") to Orion Casino Corporation (the
"Payee") (incorporated by reference to Exhibit 10.3 to the
Registrant's Current Report on Form 8-K dated May 22, 2000).

10.5 Security Agreement, dated as of May 18, 2000, by and among
Turnberry/Las Vegas Boulevard, LLC (the "Joint Venture"), the members
of the Joint Venture parties to this Agreement (said members being
collectively called the "Pledgers"), and Orion Casino Corporation, a
Nevada corporation (the "Purchaser") (incorporated by reference to
Exhibit 10.4 to the Registrant's Current Report on Form 8-K dated May
22, 2000).

10.6 Note Agreement between GSRT, LLC, and Realen-Turnberry/Cherry Hill,
LLC, as Issuer, dated as of November 29, 2000. (incorporated by
reference to Exhibit 10.1 to the Registrant's Current Report on Form
8-K dated November 30, 2000)

10.7 $10,000,000.00 Promissory Note dated November 29, 2000, from Realen-
Turnberry/Cherry Hill, LLC to GSRT, LLC. (incorporated by reference to
Exhibit 10.2 to the Registrant's Current Report on Form 8-K dated
November 30, 2000)

68




Exhibit
Number Description
------ -----------

10.8 Security Agreement, dated as of November 29, 2000, by and among
Realen- Turnberry/Cherry Hill, LLC, its sole member
Realen-Turnberry/Cherry Hill Associates and GSRT, LLC. (incorporated
by reference to Exhibit 10.3 to the Registrant's Current Report on
Form 8-K dated November 30, 2000)

10.9 Amended and Restated Bareboat Charter between Palm Beach Princess.
Inc. and MJQ Corporation

10.10Master Settlement Agreement dated February 22, 2002, among the
Chapter 11 Trustee for the Bankruptcy Estate of Robert E. Brennan, the
Company, and, among others, MJQ Corporation, Leo Equity Group, Inc.,
Francis W. Murray, Frank A. Leo and Michael J. Quigley, III

10.11Purchase and Sale Agreement dated February 22, 2002, between Palm
Beach Princess, Inc. and the Chapter 11 Trustee for the Bankruptcy
Estate of Robert E. Brennan

10.12Stock Purchase Agreement dated February 22, 2002, between the Company
and the Chapter 11 Trustee for the Bankruptcy Estate of Robert E.
Brennan

10.13* Non-Qualified Stock Option Agreement dated January 7, 2002, between
the Company and Francis W. Murray

10.14* Non-Qualified Stock Option Agreement dated January 7, 2002, between
the Company and William H. Warner

10.15 * Stock Option granted to Francis W. Murray on January 15, 1997

10.16 * Stock Option granted to Frank A. Leo on December 20, 1996

10.17Joint Amended Plan of Reorganization of ITG Vegas, Inc. and
MJQ Corporation (incorporated by reference to Exhibit 2.1 on
Form 8-K dated September 9, 2003)

21 Subsidiaries.

31.1 Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant
to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2 Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant
to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1 Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2 Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002.

- ---------------------------------------------------------
* Constitutes a management contract or compensation plan.

70




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

Garden State Race Track, Inc. New Jersey

GSRT, LLC Delaware

Holdfree Racing Association New Jersey

International Thoroughbred Breeders Management, Inc. New Jersey

International Thoroughbred Gaming Development Corporation New Jersey

ITG - Brazil, Inc. Delaware

ITG - Venezuela, Inc. Delaware

Olde English Management Co., Inc. New Jersey

Orion Casino Corporation Nevada

Palm Beach Princess, Inc. Delaware

ITG Vegas, Inc Nevada

South America Thoroughbred Company, LLC Delaware

ITG Peru, LLC Delaware

Premier Lottery Co., LLC Delaware

Palm Beach Entertainment, Inc. Delaware

70





Exhibit 32.1

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906 OF
THE SARBANES-OXLEY ACT OF 2002

In connection with the filing of the Annual Report on Form 10-K of
International Thoroughbred Breeders, Inc. (the "Company") for the year ended
June 30, 2003 as filed with the Securities and Exchange Commission on the date
hereof (the "Report"), I, Francis W. Murray, Chief Executive Officer of the
Company, hereby certify pursuant to 18 U.S.C. ss.1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my
knowledge:

(1) The Report fully complies with the requirements of Section 13(a) or
Section 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations of the
Company.



/s/ Francis W. Murray
------------------------
Name: Francis W. Murray
Title: President and CEO
October 14, 2003

71




Exhibit 32.2

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906 OF
THE SARBANES-OXLEY ACT OF 2002

In connection with the filing of the Annual Report on Form 10-K of
International Thoroughbred Breeders, Inc. (the "Company") for the year ended
June 30, 2003 as filed with the Securities and Exchange Commission on the date
hereof (the "Report"), I, Francis W. Murray, Chief Financial Officer of the
Company, hereby certify pursuant to 18 U.S.C. ss.1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my
knowledge:

(1) The Report fully complies with the requirements of Section 13(a) or
Section 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations of the
Company.



/s/ Francis W. Murray
------------------------------
Name: Francis W. Murray
Title: Chief Financial Officer
October 14, 2003

72