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FORM 10-Q

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

(Mark One)

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

For the quarterly period ended September 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 number 0-9624
---------------------------------------------------------

International Thoroughbred Breeders, Inc.
- -------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)

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

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)

- -------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed
since last report.)

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

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act.)
Yes No X
------ -------

APPLICABLE ONLY TO CORPORATE ISSUERS:

Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the close of the latest practicable date.


Class Outstanding at November 15, 2003
- ------------------------------ --------------------------------
Common Stock, $ 2.00 par value 8,252,135 Shares



INTERNATIONAL THOROUGHBRED BREEDERS, INC.

FORM 10-Q

QUARTERLY REPORT
for the Three Months ended September 30, 2003
(Unaudited)


TABLE OF CONTENTS

PAGE
----
PART I. FINANCIAL INFORMATION

Item 1. Financial Statements:

Consolidated Balance Sheets
as of September 30, 2003 and June 30, 2003...........1-2

Consolidated Statements of Operations
for the Three Months ended
September 30, 2003 and 2002..........................3

Consolidated Statement of Stockholders' Equity
for the Three Months ended September 30, 2003........4

Consolidated Statements of Cash Flows
for the Three Months ended
September 30, 2003 and 2002..........................5

Notes to Consolidated Financial Statements....................6-22

Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations......23-26

Item 4. Controls and Procedures..............................27

PART II. OTHER INFORMATION

Item 6. Exhibits and Reports on Form 8-K......................28

SIGNATURES.............................................................29

CERTIFICATIONS.........................................................30



INTERNATIONAL THOROUGHBRED BREEDERS, INC.
AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
AS OF SEPTEMBER 30, 2003 AND JUNE 30, 2003

ASSETS

September 30,
2003 June 30,
(UNAUDITED) 2003
------------- ------------
CURRENT ASSETS:
Cash and Cash Equivalents $ 5,638,592 $ 6,123,641
Restricted Cash 1,294,050 0
Accounts Receivable 198,829 193,689
Prepaid Expenses 809,752 488,414
Spare Parts Inventory 1,115,477 1,078,740
Other Current Assets 379,851 390,458
Net Assets of Discontinued
Operations - Current 96,150 98,588
------------- ------------
TOTAL CURRENT ASSETS 9,532,701 8,373,530
------------- ------------


EQUIPMENT:
Leasehold Improvements -
Port of Palm Beach 954,471 953,110
Equipment 1,456,134 1,278,175
------------- ------------
2,410,605 2,231,285
LESS: Accumulated Depreciation
and Amortization 440,526 306,494
------------- ------------

TOTAL EQUIPMENT, NET 1,970,079 1,924,791
------------- ------------


OTHER ASSETS:
Notes Receivable 33,000,000 33,000,000
Deposit on Purchase of Palm Beach
Princess Mortgage 4,000,000 4,000,000
Deposits and Other Assets -
Non-Related Parties 334,975 535,239
Deposits and Other Assets -
Related Parties 5,440,232 5,702,249
----------------------------
TOTAL OTHER ASSETS 42,775,207 43,237,488
------------- ------------


TOTAL ASSETS $ 54,277,987 $ 53,535,809
============= ============


See Notes to Consolidated Financial Statements.

1


INTERNATIONAL THOROUGHBRED BREEDERS, INC.
AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
AS OF SEPTEMBER 30, 2003 AND JUNE 30, 2003

LIABILITIES AND STOCKHOLDERS' EQUITY

September 30,
2003 June 30,
(UNAUDITED) 2003
------------ ------------
CURRENT LIABILITIES:
Accounts Payable $ 2,391,625 $ 2,264,499
Accrued Expenses 2,271,207 2,341,209
Short-Term Debt 2,759,073 2,934,330
Short-Term Debt - Related Parties 183,164 183,164
------------ ------------
TOTAL CURRENT LIABILITIES 7,605,069 7,723,202
------------ ------------


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 Issued and Outstanding 36,248,875 36,248,875
Common Stock, $2 Par Value,
Authorized 25,000,000 Shares,
Issued, 11,480,279 and 11,480,278,
respectively and Outstanding,
8,252,134 and 8,252,133, respectively 22,960,557 22,960,555
Capital in Excess of Par 20,191,982 20,191,984
(Deficit) (subsequent to June 30, 1993,
date of quasi-reorganization) (39,330,547) (40,189,608)
------------ ------------
40,070,867 39,211,806
LESS:
Treasury Stock, 3,228,145 Shares, at Cost (1,614,073) (1,614,073)
Deferred Compensation, Net (10,416) (11,666)
------------ ------------
TOTAL STOCKHOLDERS' EQUITY 38,446,378 37,586,067
------------ ------------


TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 54,277,987 $ 53,535,809
============ ============


See Notes to Consolidated Financial Statements.

2


INTERNATIONAL THOROUGHBRED BREEDERS, INC.
AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2003 AND 2002
(UNAUDITED)

September 30,
----------------------------
2003 2002
----------------------------
REVENUE:
Revenue from Operations $ 7,618,664 $ 6,319,402
Interest Income Related Parties 3,254 0
Interest Income 68,694 99,773
------------- ------------
TOTAL REVENUES 7,690,612 6,419,175
------------- ------------

EXPENSES:
Cost of Revenues:
Operating Expenses 4,887,244 4,289,340
Depreciation & Amortization 135,283 76,220
General & Administrative Expenses -
Palm Beach Princess 720,374 716,245
General & Administrative Expenses - Parent 286,682 489,354
ITG Vegas Bankruptcy Costs 258,562 0
Development Costs 25,355 90,896
Interest and Financing Expenses 500,452 317,005
------------- ------------
TOTAL EXPENSES 6,813,952 5,979,060
------------- ------------

INCOME BEFORE TAX PROVISION 876,660 440,115
State Income Tax Expense 17,600 27,000
------------- ------------

NET INCOME $ 859,060 $ 413,115
============= ============


NET BASIC AND DILUTED INCOME
PER COMMON SHARE $ 0.10 $ 0.04
============= ============

WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING - Basic 8,252,133 11,480,272
============================
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING - Diluted 8,998,145 11,480,272
============================

See Notes to Consolidated Financial Statements.

3


INTERNATIONAL THOROUGHBRED BREEDERS, INC.
AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2003


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


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

Shares Issued for Fractional Exchanges
With Respect to the One-for-twenty
Reverse Stock Split effected on March 13, 1992 --- --- 1 2
Amortization of Deferred Compensation Costs --- --- --- ---
Net Income for the Three Months Ended
September 30, 2003 --- --- --- ---

--------- ------------ ------------ ----------
BALANCE - SEPTEMBER 30, 2003 362,489 $ 36,248,875 11,480,279 $ 22,960,557
========= ============ ============ ==========



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


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

Shares Issued for Fractional Exchanges
With Respect to the One-for-twenty
Reverse Stock Split effected on March 13, 1992 (2) --- --- --- ---
Amortization of Deferred Compensation Costs --- --- --- 1,250 1,250
Net Income for the Three Months Ended
September 30, 2003 --- 859,061 --- --- 859,061

------------ ------------- -------------- ----------- --------------
BALANCE - SEPTEMBER 30, 2003 $ 20,191,982 $ (39,330,547) $ (1,614,073) $ (10,416) $ 38,446,378
============ ============= ============== =========== ==============



See Notes to Consolidated Financial Statements.

4


INTERNATIONAL THOROUGHBRED BREEDERS, INC.
AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2003 AND 2002
(UNAUDITED)


September 30,
----------------------------
2003 2002
------------ ------------


CASH FLOWS FROM OPERATING ACTIVITIES: $ 859,060 $ 413,115
------------ ------------
Adjustments to reconcile income to net cash provided by operating
activities:
Depreciation and Amortization 135,283 77,470
Changes in Operating Assets and Liabilities -
(Increase) in Restricted Cash & Investments (1,294,048) 0
(Increase) in Accounts Receivable (5,138) (25,746)
(Increase) in Other Assets (26,130) (26,761)
(Increase) Decrease in Prepaid Expenses (321,337) 19,483
Increase (Decrease) in Accounts Payable and Accrued Expenses 57,120 (8,468)
------------ ------------
CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES BEFORE
DISCONTINUED OPERATIONS (595,190) 449,093
CASH PROVIDED BY DISCONTINUED OPERATING ACTIVITIES 2,400 0
------------ ------------
NET CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES (592,790) 449,093
------------ ------------

CASH FLOWS FROM INVESTING ACTIVITIES:
Deposits on Purchase of Palm Beach Princess Mortgage 0 (500,000)
Capital Expenditures (179,320) (26,407)
Decrease (Increase) in Other Investment Activity 428,858 (91,510)
------------ ------------
CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES
BEFORE DISCONTINUED INVESTING ACTIVITIES 249,538 (617,917)
CASH PROVIDED BY DISCONTINUED INVESTING ACTIVITIES 0 0
------------ ------------
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES 249,538 (617,917)
------------ ------------

CASH FLOWS FROM FINANCING ACTIVITIES:
Principal Payments on Short Term Notes (141,834) (776)
Decrease in Balances Due to/From Subsidiaries 2,438 216
------------ ------------
CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES
BEFORE DISCONTINUED FINANCING ACTIVITIES (139,396) (560)
CASH (USED IN) DISCONTINUED FINANCING ACTIVITIES (2,438) (216)
------------ ------------
NET CASH (USED IN) FINANCING ACTIVITIES (141,834) (776)
------------ ------------

NET DECREASE IN CASH AND CASH EQUIVALENTS (485,086) (169,600)
LESS CASH AND CASH EQUIVALENTS FROM
DISCONTINUED OPERATIONS 37 216
CASH AND CASH EQUIVALENTS AT BEGINNING OF THE PERIOD 6,123,641 796,610
------------ ------------

CASH AND CASH EQUIVALENTS AT END OF THE PERIOD $ 5,638,592 $ 627,226
============ ============

Supplemental Disclosures of Cash Flow Information:
Cash paid during the period for:
Interest $ 303,415 $ 0
Income Taxes $ 0 $ 0


See Notes to Consolidated Financial Statements.

5


INTERNATIONAL THOROUGHBRED BREEDERS, INC.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

(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 sun decks. 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. It is necessary that these
parts be readily available so that the daily cruise operations are not cancelled
due to mechanical failures. The inventories are carried at cost.

(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 twenty four month period
following the dry dock period. For the three months ended September 30, 2003,
there were no amortized expenses associated with a dry dock period. For the
three months ended September 30, 2002, the amortized expense was $41,737.

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 to account for the impairment of long-lived assets, certain
identifiable intangibles and goodwill related to those 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.

(F) Net Assets of Discontinued Operations - At September 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) Revenue Recognition - The Company recognizes the revenues associated
with the casino operation on the Palm Beach Princess as they are earned.

(H) Cash and Cash Equivalents - The Company considers all highly liquid
investments with an

6


INTERNATIONAL THOROUGHBRED BREEDERS, INC.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

original maturity of three months or less to be cash equivalents. As of
September 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.

(I) 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.

(J) 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.

(K) Net Income per Common Share - Income per common share is computed by
dividing net income 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. For the three months ended September
30, 2003, options to purchase 2,075,000 shares of Common Stock at $.269 per
share were used in the computation of diluted income per share because the
exercise price of those options were above average market price, however, the
number of shares that would have been issued from the exercise of stock options
has been reduced by the number of shares that could have been purchased from the
proceeds at the average market price of the Company's stock. The additional
shares that would have been issued did not decrease the stated earnings per
share for the three month period. Options and warrants to purchase 4,046,500
shares of Common Stock at various prices per share, for the three months ended
September 30, 2002 were not included in the computation of income per share
because the exercise price of those options and warrants were above market
value.

(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 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.

7


INTERNATIONAL THOROUGHBRED BREEDERS, INC.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

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.

As of October 15, 2003, 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, were 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 November 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 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. Significantly, the Debtors' obligations to the Brennan Trustee have been
combined with the Company's 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

8


INTERNATIONAL THOROUGHBRED BREEDERS, INC.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

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;

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 Vegas's inclusion in the Company's 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

9


INTERNATIONAL THOROUGHBRED BREEDERS, INC.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

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 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 negotiated a document, executed on November 10,
2003 (See Note 12), entitled Amendment to Master Settlement Agreement with the
Brennan Trustee, which incorporated 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.

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 Company's 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.

10


INTERNATIONAL THOROUGHBRED BREEDERS, INC.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

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
November 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.

(4) DEPOSITS AND OTHER ASSETS - NON RELATED PARTIES

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

September 30, June 30,
2003 2003
------------- ---------
Port Lease Rights $ 250,000 $ 250,000

Deposit on Ship Purchase (See Note 6-D) -0- 200,000

Other Misc. Assets 84,975 85,239
------------- ---------
Total $ 334,975 $ 535,239
============= =========

11


INTERNATIONAL THOROUGHBRED BREEDERS, INC.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

(5) DEPOSITS AND OTHER ASSETS - RELATED PARTIES - NET

The following items are classified as deposits and other assets (See Note
10 - Related Party Transactions):


September 30, 2003 June 30, 2003
------------------------- -------------------------------


Loans to the Ft Lauderdale Project (OC Realty,
LLC) $ 2,034,405 $ 2,034,405

Loan Transferred from Golf Course Project to OC
Realty, LLC 735,584 735,584

Note Receivable from Francis W. Murray * 2,600,749 2,600,749

Accounts Receivable from Francis W. Murray 35,099 35,099

Loans to Francis W. Murray 93,000 93,000


Loan from Francis W. Murray (250,000) (250,000)

Accrued Wages due and Advances from Francis
W. Murray (617,974) (404,204)

Advances (from) MJQ Corporation (FWM
ownership) (450,301) (330,813)

Advances to OC Realty, LLC 76,458 77,162
---------- ---------------
Total Loans to OC Realty, LLC/Francis W.
Murray $ 4,257,020 $ 4,590,982

Accrued Interest on Loans to the Ft. Lauderdale
Project (OC Realty, LLC) 678,498 606,553

Accrued Interest Transferred from Golf Course
Project to OC Realty, LLC $ 287,327 $ 287,327
---------- ---------------
Total Accrued Interest on Loans to OC Realty,
LLC 965,825 893,880

Accounts Receivable from Frank Leo 23,441 23,441

Goodwill on Purchase of GMO Travel 193,946 193,946
----------- -----------
Total Deposits and Other Assets $ 5,440,232 $ 5,702,249
=========== ===========

* 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.

12


INTERNATIONAL THOROUGHBRED BREEDERS, INC.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

(6) NOTES AND MORTGAGES PAYABLE

Notes and Mortgages Payable are summarized below:


September 30, 2003 June 30, 2003
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- 1,511,036 -0-

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

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

First Insurance Funding Corp.(E) 6.95% 86,283 -0- 28,117 -0-

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

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

Other Various 25,000 -0- 25,000 -0-

ITG Vegas, Inc.:
- ----------------
International Game Technology (G) 8% 10,279 -0- 16,709 -0-

Corporate Interiors (H) Prime + 2% 94,475 -0- 121,468 -0-

Garden State Park:
- ------------------
Service America Corporation (I) 6% 160,000 -0- 160,000 -0-
----------- ------ ----------- --------
Totals $ 2,942,237 $ -0- $ 3,277,494 $ -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- (183,164) -0-
----------- ------ ----------- --------
Totals $ 2,759,073 $ -0- $ 2,934,330 $ -0-
=========== ====== =========== ========

The effective Prime Rate at September 30, 2003 and 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

13


INTERNATIONAL THOROUGHBRED BREEDERS, INC.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

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
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. In connection with the Chapter 11 Plan of
Reorganization, the Trustee has accepted a revised schedule of payments which
will satisfy this note. (See Notes 2-5 (b) & (c) and 7)

(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 secures the Stock
Purchase Note and by a pledge of the $23 million Turnberry Note. As of November
15, 2003, the remaining balance of $900,000 of the loan is due on demand.

14


INTERNATIONAL THOROUGHBRED BREEDERS, INC.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

(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.

(E) Our directors and officers liability policy was financed by First
Insurance Funding Corp. for a $128,388 one year promissory note at a 7.99%
interest rate. At September 30, 2003, the principal balance on the note was
$86,283.

(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 September 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 September 30, 2003, the principal balance on
the note was $10,279.

(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 September 30, 2003, the principal balance on the note was
$94,475.

(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 November 15, 2003.

(7) COMMITMENTS AND CONTINGENCIES

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

See Note 10 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

15


INTERNATIONAL THOROUGHBRED BREEDERS, INC.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

$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 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
due to a lack of funds resulting from the institution of proceedings by our
subsidiary, ITGV, under Chapter 11 of the bankruptcy code. The related liability
as of September 30, 2003 totaled $462,874.

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 September 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 November 15, 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..

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 making payments on account of such purchase

16


INTERNATIONAL THOROUGHBRED BREEDERS, INC.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

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 November 15, 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 $679,562 has been paid through
September 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 6 (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. In
connection with the Chapter 11 Plan of Reorganization, the Trustee has accepted
a revised schedule of payments which will satisfy this note. (See Notes 2-5 (b)
& (c))

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

17


INTERNATIONAL THOROUGHBRED BREEDERS, INC.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

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.

The following summarizes commitments on non-cancelable contracts and
leases, including the amounts due to the Brennan Trustee as a result of the
amended Master Settlement Agreement executed in November 2003:


Twelve Months Ended September 30,
--------------------------------------------------------------
There-
2004 2005 2006 2007 2008 after Total
------------ ----------- ----------- ------------ -------- ------ -------------


Minimum Amounts
due to Brennan
Trustee $ 4,150,000 $ 5,060,000 $ 4,960,000 $ 1,060,000 $ -0- $ -0- $ 15,230,000

Employee Contracts
(excluding severance
agreements) 956,750 755,884 77,500 -0- -0- -0- 1,790,134

Boat Charter Fees 550,000 600,000 600,000 100,000 -0- -0- 1,800,000

Operating Leases 307,875 209,891 174,618 116,603 68,018 -0- 877,005

Casino Contracts 15,715 -0- -0- -0- -0- -0- 15,715
------------ ----------- ----------- ------------ -------- ------ -------------
Total $ 5,980,340 $ 6,625,775 $ 5,812,118 $ 1,276,603 $ 68,018 $ -0- $ 19,712,854
============ =========== =========== ============ ======== ====== =============


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.)

(8) FAIR VALUE OF FINANCIAL INSTRUMENTS

As of September 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 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).

18


INTERNATIONAL THOROUGHBRED BREEDERS, INC.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

(9) STOCK OPTIONS AND WARRANTS

At a meeting of the Board of Directors of the Company held September 11,
2003, the Board unanimously authorized future grants of stock options for up to
385,000 shares of common stock, at an exercise price of $0.50 per share, to ITG
Vegas, Inc.'s management team, which included 180,000 shares earmarked for
Francis X. Murray, son of the Company's Chairman, subject, however, to
confirmation of ITG Vegas' Plan of Reorganization and subject to the prior
payment of all obligations of the Company to the Bankruptcy Trustee.
Accordingly, no such options will be issued or granted until the Bankruptcy
Trustee shall have been paid in full, at which time the Company will be
authorized (but not obligated) to grant such options provided that the grantee
is still employed by the Company at that time.

Also at the September 11, 2003 meeting of the Company's Board of Director,
the Board unanimously authorized the future grant of options to purchase an
additional 20,000 shares of common stock to Mr. Francis X. Murray, at $0.50 per
share, subject to confirmation of ITG Vegas' Plan of Reorganization and the
prior payment of all obligations of the Company to the Bankruptcy Trustee. No
such options shall be granted or issued until the Bankruptcy Trustee shall have
been paid in full, at which time the Company will be authorized (but not
obligated) to grant such options provided that Mr. F.X. Murray is still employed
by the Company at that time. Such action was taken in order to compensate Mr.
F.X. Murray for his having personally guaranteed a loan of $300,000 for the
Company and for his providing to the Bankruptcy Trustee a personal guaranty for
portions of the Company's obligations to the Bankruptcy Trustee.

At a meeting of the Board of Directors of the Company held on November 18,
2003, the Board authorized the future grant of options to purchase 25,000 shares
of common stock to each non-employee director, Mr. James Murray and Mr. Walter
ReDavid, at $0.50 per share, as compensation for their services as directors,
subject, however, to the prior payment of all obligations of the Company to the
Bankruptcy Trustee. Accordingly, no such options will be issued or granted until
the Bankruptcy Trustee shall have been paid in full, at which time the Company
will be authorized (but not obligated) to grant such options provided that the
grantee is still serving as a director of the Company at that time.

Also at the November 18, 2003 meeting of the Board, the Board authorized
the future grant of shares of common stock to each of Mr. Francis W. Murray and
Mr. Robert J. Quigley as compensation in lieu of their respective salaries,
which have been deferred since January 3, 2003, and in payment of the unpaid
principal of a $24,000 loan to the Company by Mr. William H. Warner, the
Company's Secretary. The Company will be authorized to pay the accrued salaries
to Messrs. Murray and Quigley and the unpaid loan principal to Mr. Warner in
shares of common stock, valued for such purpose at $0.50 per share, subject to
the prior payment of all obligations of the Company to the Bankruptcy Trustee.
No such shares will be granted and none of the accrued compensation will be paid
until the Bankruptcy Trustee shall have been paid in full, at which time the
Company will be authorized (but not obligated) to grant such shares provided
that the grantee (Mr. Murray, Quigley or Warner, as applicable) agrees to accept
such shares (valued at $0.50 per share) in payment of a portion, specified by
the grantee, of the Company's obligation to him and that he is still employed by
the Company at the time.

19


INTERNATIONAL THOROUGHBRED BREEDERS, INC.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

At September 30, 2003, total employee options outstanding were 3,111,500
and total non-employee options outstanding were 425,000. At September 30, 2003
all of the employee and non-employee options were exercisable.

At September 30, 2003, total warrants outstanding were 710,000. All
warrants were exercisable at September 30, 2003.

(10) 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, 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 September
30, 2003, we had lent $2,034,405 in total to MJQ Development and we have accrued
interest in the amount of $678,498 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 by a joint venture
partner (expected to be up to $6.1 million) 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 and participation interest will be payable out of OC Realty distributions
from the joint venture.

20


INTERNATIONAL THOROUGHBRED BREEDERS, INC.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

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 September 30, 2003 is $900,000 and
we have accrued interest through that date in the amount of $253,699. 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 November 15, 2003, the loan is due on demand. (See Note 6.)

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 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.

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 September 30, 2003, 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

21


INTERNATIONAL THOROUGHBRED BREEDERS, INC.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

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 September 30, 2003 and
November 15, 2003, these loans totaled $159,164. (See Note 6)

(11) 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.

(12) SUBSEQUENT EVENTS

(A) On November 10, 2003, the conditions to the Plan of Reorganization were
satisfied and the Plan became effective October 15, 2003. Payments of $1,254,000
were disbursed from an escrow account previously established for the benefit of
our creditors. These funds were classified as restricted cash on the Balance
Sheet as of September 30, 2003.

22


INTERNATIONAL THOROUGHBRED BREEDERS, INC.
AND SUBSIDIARIES

MANAGEMENT'S ANALYSIS OF FINANCIAL CONDITIONS
AND RESULTS OF OPERATIONS FOR THE THREE MONTHS
ENDED SEPTEMBER 30, 2003

ITEM 2 - 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-Q, 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 our most recent 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 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 and agreed upon restrictions in
connection with such subsidiary's indebtedness;
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 three month period ended September 30,
2003 included approximately $1.1 million in cash generated by the Palm Beach
Princess operations. Such cash flow was used to fund an escrow account for the
first payments to the Chapter 11 creditors of $1,294,050. 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 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 continued to operate as
"debtor-in-possession" under the jurisdiction

23


INTERNATIONAL THOROUGHBRED BREEDERS, INC.
AND SUBSIDIARIES

MANAGEMENT'S ANALYSIS OF FINANCIAL CONDITIONS
AND RESULTS OF OPERATIONS FOR THE THREE MONTHS
ENDED SEPTEMBER 30, 2003

of the Bankruptcy Court until the Effective Date, October 15, 2003 and
subsequently as reorganized debtors (See Note 12) 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. See Note 2 to the financial statements for a summary of our
obligations in connection with the Plan.

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 to the financial statements). 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 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
(in addition to the $100,000 per month tax sharing payments as mentioned above)
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.

Our working capital as of September 30, 2003 was $1,927,632 as compared to
$650,328 at June 30, 2003. The increase in working capital during the past three
months was primarily provided by an increase in cash from the operating
activities, disbursement of which is restricted by ITGV's Plan of
Reorganization.

24


INTERNATIONAL THOROUGHBRED BREEDERS, INC.
AND SUBSIDIARIES

MANAGEMENT'S ANALYSIS OF FINANCIAL CONDITIONS
AND RESULTS OF OPERATIONS FOR THE THREE MONTHS
ENDED SEPTEMBER 30, 2003


Results of Operations for the Three Months Ended September 30, 2003 and 2002
----------------------------------------------------------------------------

Overall
-------

Revenue from for the three months ended September 30, 2003 increased
$1,271,437 from $6,419,175 in Fiscal 2003 to $7,690,612 in Fiscal 2004 primarily
as a result of revenues generated by the Palm Beach Princess operations during
the comparable periods. Expenses increased $834,891 from $5,979,061 in the three
month period in Fiscal 2003 to $6,813,952 in Fiscal 2004 primarily the result of
an increase in Palm Beach Princess operating costs during the comparable
quarters and a net increase in financing costs incurred primarily associated
with interest payments of $294,904 paid to the Trustee during Fiscal 2004 as
compared to extension fees of $150,000 paid under the Purchase and Sale
Agreement for the Palm Beach Princess during Fiscal 2003, and costs associated
with the bankruptcy filing of $258,562, partially offset by a decrease in
corporate general and administrative expenses during the comparable periods and
a decrease in development costs.

For the first quarter of Fiscal 2004, our net income was $859,061 or $0.10
per share as compared to income for the comparable period in the prior fiscal
year of $413,114 or $0.04 per share.

Vessel Operations
-----------------

During the three months ended September 30, 2003, total revenue from vessel
operations was $7,575,158 as compared to $6,308,088 for the three months ended
September 30, 2002. The increase in revenue of $1,267,070 during the comparable
quarters primarily resulted from an increase in casino gaming revenue primarily
the result of a slight increase in the passenger count and an approximate 17%
increase in the average revenue per passenger during the comparable periods.
Total expenses before income taxes for the comparable periods increased $944,077
from $5,279,724 for the three months ended September 30, 2002 to $6,223,801 for
the three months ended September 30, 2003 primarily as a result of an increase
in the number of passengers which increased operating costs, $286,774 in
financing fees, costs associated with the bankruptcy filing of $258,562 and an
increase in other operating expenses. Income before income tax expense for the
first quarter of operation in Fiscal 2004 was $1,351,357 as compared to
$1,028,364 in the comparable quarter of Fiscal 2003.

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. During the first quarter
of Fiscal 2004 the ship completed 167 cruises and eleven (11) cruises were
missed due to scheduled wet dock maintenance. During the first quarter of Fiscal
2003 179 cruises were completed.

25


INTERNATIONAL THOROUGHBRED BREEDERS, INC.
AND SUBSIDIARIES

MANAGEMENT'S ANALYSIS OF FINANCIAL CONDITIONS
AND RESULTS OF OPERATIONS FOR THE THREE MONTHS
ENDED SEPTEMBER 30, 2003

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


Three Months Ended
September 30,
-----------------------------
Description 2003 2002 Change
- --------------------------------------------- ------------- ----------- -----------


Passenger Count 61,487 60,385 1,102
Number of Cruises 167 179 (12)

Revenue:
Fare $ 655,371 $ 658,149 $ (2,778)
On Board 425,100 454,204 (29,104)
Casino 6,494,687 5,195,735 1,298,952
------------- ----------- -----------
Total Revenue 7,575,158 6,308,088 1,267,070
------------- ----------- -----------
Expenses:
Casino Operating Expenses 2,079,618 1,944,693 134,925
Hotel and Gift Shop Expenses 195,241 195,221 20
Sales, Marketing and Advertising Expenses 713,754 720,188 (6,434)
Maritime and Legal Expenses 1,749,269 1,417,924 331,345
Administrative and Finance Expenses 1,485,919 1,001,698 484,221
------------- ----------- -----------
Total Expenses 6,223,801 5,279,724 944,077
------------- ----------- -----------
Income Before Income Tax Expense $ 1,351,357 $ 1,028,364 $ 322,993
============= =========== ===========


Inflation
- ---------

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

26


Item 4. - 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.

The Company's management with the participation of our chief executive
officer and chief financial officer is continuing to perform evaluations of the
design and operation of the Company's entire system of internal controls and
financial reporting over a period of time that will be adequate for it to
determine, whether, as of the end of the Company's current fiscal year, the
design and operation of our internal controls and procedures are effective.

CHANGES IN INTERNAL CONTROLS

There were no changes that occured during the fiscal quarter covered by
this Quarterly Report on Form 10-Q that have materially affected, or are
reasonablely likely to materially affect, our internal controls over financial
reporting.

27


INTERNATIONAL THOROUGHBRED BREEDERS, INC.
AND SUBSIDIARIES


Part II

OTHER INFORMATION


Item 6.

During the quarter ended September 30, 2003, the registrant filed the
following Current Reports on Form 8-K:


Date Subject Matter
- ------------------ ---------------------------------------------------
September 12, 2003 Plan of Reorganization confirmed by the Bankruptcy
Court related to the Chapter 11 filing of ITG Vegas,
operator of the Palm Beach Princess vessel.

28


INTERNATIONAL THOROUGHBRED BREEDERS, INC.
AND SUBSIDIARIES

SIGNATURES


Pursuant to the requirements 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.



INTERNATIONAL THOROUGHBRED BREEDERS, INC.




November 19, 2003 /s/Francis W. Murray
----------------------------------------------------
Francis W. Murray, President, Chief Executive Officer
and Chief Financial Officer

29


CERTIFICATION PURSUANT TO RULE 13A-14 AND 15D-14 OF
THE SECURITIES AND EXCHANGE ACT OF 1934

I, Francis W. Murray, certify that:

1. I have reviewed this quarterly report on Form 10-Q of International
Thoroughbred Breeders;

2. Based on my knowledge, this quarterly 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 quarterly report;

3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly 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 quarterly report;

4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant
and we have:

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

b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to
the filing date of this quarterly report (the "Evaluation
Date"); and

c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures
based on our evaluation as of the Evaluation Date;

5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the
audit committee of registrant's board of directors (or persons
performing the equivalent functions);

a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the
registrant's ability to record, process, summarize and
report financial data and have identified for the
registrant's auditors any material weaknesses in internal
controls; and

b) any fraud, whether or not material, that involves management
or other employees who have a significant role in the
registrant's internal controls; and

6. The registrant's other certifying officers and I have indicated in
this quarterly report whether or not there were significant changes in
internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent
evaluation, including any corrective actions with regard to
significant deficiencies and material weaknesses.


Date: November 19, 2003

/s/Francis W. Murray
---------------------------------
Chairman/Chief Executive Officer/
Chief Financial Officer

30


Exhibit 99.1


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 Quarterly Report on Form 10-Q of
International Thoroughbred Breeders, Inc. (the "Company") for the three months
ended September 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
November 19, 2003

31


Exhibit 99.2

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 Quarterly Report on Form 10-Q of
International Thoroughbred Breeders, Inc. (the "Company") for the three months
ended September 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
November 19, 2003

32