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, 2001
                               -------------------------------------------------
                                       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
   ---------    ----------


                      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 12, 2001
------------------------------            -------------------------------------
Common Stock, $ 2.00 par value                     11,480,271 Shares


<PAGE>



                    INTERNATIONAL THOROUGHBRED BREEDERS, INC.

                                    FORM 10-Q

                                QUARTERLY REPORT
                  for the Three Months ended September 30, 2001
                                   (Unaudited)


                                TABLE OF CONTENTS

                                                                            PAGE
PART I. FINANCIAL INFORMATION

         Item 1. Financial Statements:

         Consolidated Balance Sheets
                  as of September 30, 2001 and June 30, 2001.................1-2

         Consolidated Statements of Operations
                  for the Three Months ended
                  September 30, 2001 and 2000..................................3

         Consolidated Statement of Stockholders' Equity
                  for the Three Months ended September 30, 2001................4

         Consolidated Statements of Cash Flows
                  for the Three Months ended
                  September 30, 2001 and 2000..................................5

         Notes to Consolidated Financial Statements.........................6-13

         Item 2. Management's Discussion and Analysis of
                    Financial Condition and Results of Operations..........14-17

PART II. OTHER INFORMATION

         Item 6. Exhibits and Reports on Form 8-K.............................18

SIGNATURES....................................................................19




<PAGE>

                   INTERNATIONAL THOROUGHBRED BREEDERS, INC.
                                AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS
                   AS OF SEPTEMBER 30, 2001 AND JUNE 30, 2001

                                     ASSETS

<TABLE>
                                                                  September 30,
                                                                      2001              June 30,
                                                                   (UNAUDITED)            2001
                                                                 ----------------   ----------------
<CAPTION>
<S>                                                            <C>                <C>
CURRENT ASSETS:
     Cash and Cash Equivalents                                 $       1,518,081  $       1,361,287
     Accounts Receivable                                                 734,263            843,385
     Prepaid Expenses                                                    626,644            362,048
     Refundable Deposit on Palm Beach Princess Mortgage                1,250,000            750,000
     Other Current Assets                                              1,079,679          1,032,311
     Net Assets of Discontinued Operations - Current                           0          1,007,398
                                                                 ----------------   ----------------
      TOTAL CURRENT ASSETS                                             5,208,667          5,356,429
                                                                 ----------------   ----------------


LAND, BUILDINGS AND EQUIPMENT:
     Land and Buildings                                                        0            214,097
     Equipment and Artwork                                               444,770            289,426
                                                                 ----------------   ----------------
                                                                         444,770            503,523
     LESS: Accumulated Depreciation and Amortization                      98,124            285,004
                                                                 ----------------   ----------------

      TOTAL LAND, BUILDINGS AND EQUIPMENT, NET                           346,646            218,519
                                                                 ----------------   ----------------



OTHER ASSETS:
     Note Receivable                                                  23,000,000         23,000,000
     Note Receivable of Discontinued Operations - Long-Term           10,000,000         10,000,000
     Deposits and Other Assets                                         2,966,201          2,816,260
                                                                 ----------------   ----------------
      TOTAL OTHER ASSETS                                              35,966,201         35,816,260
                                                                 ----------------   ----------------


TOTAL ASSETS                                                   $      41,521,514  $      41,391,208
                                                                 ================   ================
</TABLE>

See Notes to Consolidated Financial Statements.


                                        1



                    INTERNATIONAL THOROUGHBRED BREEDERS, INC.
                                AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS
                   AS OF SEPTEMBER 30, 2001 AND JUNE 30, 2001

                      LIABILITIES AND STOCKHOLDERS' EQUITY

<TABLE>

                                                                   September 30,
                                                                      2001            June 30,
                                                                   (UNAUDITED)           2001
                                                                 ----------------   ----------------
<CAPTION>
<S>                                                            <C>                <C>
CURRENT LIABILITIES:
     Accounts Payable                                          $       2,345,424  $       2,549,539
     Accrued Expenses                                                  1,064,077          1,247,534
     Short-Term Debt                                                   1,229,149          1,000,000
     Net Liabilities of Discontinued Operations - Current                108,129                  0
                                                                 ----------------   ----------------
       TOTAL CURRENT LIABILITIES                                       4,746,779          4,797,073
                                                                 ----------------   ----------------

DEFERRED INCOME                                                        4,212,648          4,138,426
                                                                 ----------------   ----------------

LONG-TERM DEBT                                                           132,000            482,000
                                                                 ----------------   ----------------

COMMITMENTS AND CONTINGENCIES                                           -                  -


STOCKHOLDERS' EQUITY:
     Series A Preferred Stock, $100.00 Par Value,
      Authorized 500,000 Shares, Issued and Outstanding,
      362,487 and 362,487 Shares, respectively                        36,248,675         36,248,675
     Common Stock, $2.00 Par Value, Authorized 25,000,000
      Shares Issued and Outstanding, 11,480,270 and
      11,480,267,respectively                                         22,960,539         22,960,533
     Capital in Excess of Par                                         20,192,200         20,192,206
     (Deficit) (subsequent to June 30, 1993,
      date of quasi-reorganization)                                  (46,950,910)       (47,406,038)
                                                                 ----------------   ----------------
                                                                      32,450,504         31,995,376
     LESS:
      Deferred Compensation, Net                                         (20,417)           (21,667)
                                                                 ----------------   ----------------
       TOTAL STOCKHOLDERS' EQUITY                                     32,430,087         31,973,709
                                                                 ----------------   ----------------


TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                     $      41,521,514  $      41,391,208
                                                                 ================   ================

</TABLE>

See Notes to Consolidated Financial Statements.

                                        2



<PAGE>
                    INTERNATIONAL THOROUGHBRED BREEDERS, INC.
                                AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF OPERATIONS
             FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2001 AND 2000




                                                   Three Months Ended
                                                      September 30,
                                           -----------------------------------
                                                 2001               2000
                                           ----------------   ----------------
REVENUE:
     Revenue from Operations             $       5,939,469  $               0
     Other Income                                   77,877             76,407
     Interest Income                               144,336             30,810
                                           ----------------   ----------------
         TOTAL REVENUES                          6,161,682            107,217
                                           ----------------   ----------------

EXPENSES:
     Cost of Revenues:
      Operating Expenses                         5,007,757                  0
      Depreciation & Amortization                   10,794                  0
      General & Administrative Expenses            589,520            571,992
      Interest and Financing Expenses               76,483              4,977
                                           ----------------   ----------------
         TOTAL EXPENSES                          5,684,554            576,969
                                           ----------------   ----------------

INCOME (LOSS)  BEFORE TAX PROVISION                477,128           (469,752)
     LESS:State Income Tax Expense                  22,000                  0
                                           ----------------   ----------------

NET INCOME (LOSS)                        $         455,128  $        (469,752)
                                           ================   ================


NET BASIC AND DILUTED INCOME (LOSS)
 PER COMMON SHARE                        $             0.04 $            (0.05)
                                           ================   ================

WEIGHTED AVERAGE COMMON
   SHARES OUTSTANDING                           11,480,269          8,980,244
                                           ================   ================

See Notes to Consolidated Financial Statements.

                                        3



<PAGE>

                    INTERNATIONAL THOROUGHBRED BREEDERS, INC.
                                AND SUBSIDIARIES

                 CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
                  FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2001

<TABLE>

                                                    Preferred                  Common
                                          ------------------------   --------------------------
                                            Number of                 Number of
                                             Shares       Amount        Shares          Amount
                                          ----------- ------------   -----------   ------------
<CAPTION>
<S>                                        <C>        <C>             <C>         <C>
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                     0             0             3              6
   Amortization of Deferred
    Compensation Costs                         ---           ---           ---            ---
   Net Income for the Three Months
    Ended September 30, 2001                   ---           ---           ---            ---

                                          -----------  ------------ ------------   ------------
BALANCE - SEPTEMBER 30, 2001                 362,487  $ 36,248,675    11,480,270  $  22,960,539
                                          ===========  ============ ============   ============
</TABLE>

<TABLE>
                                                  Capital                   Deferred
                                                 in Excess                   Compen-
                                                  of Par      (Deficit)      sation         Total
                                            -------------   -------------   ---------   -----------
<CAPTION>
<S>                                        <C>             <C>             <C>         <C>
BALANCE - JUNE 30, 2001                    $   20,192,206  $ (47,406,038)  $ (21,667)  $ 31,973,709

   Shares Issued for Fractional
    Exchanges With Respect to the
    One-for-twenty Reverse Stock Split
    effected on March 13, 1992                         (6)         ---         ---            ---
   Amortization of Deferred
    Compensation Costs                              ---            ---         1,250          1,250
   Net Income for the Three Months
    Ended September 30, 2001                        ---          455,128       ---          455,128

                                            -------------   -------------   ---------   -----------
BALANCE - SEPTEMBER 30, 2001               $   20,192,200  $ (46,950,910)  $ (20,417)  $ 32,430,087
                                            =============   =============   =========   ===========
</TABLE>


See Notes to Consolidated Financial Statements.

                                      4


<PAGE>

                    INTERNATIONAL THOROUGHBRED BREEDERS, INC.
                                AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
             FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2001 AND 2000
<TABLE>

                                                                           Three Months Ended
                                                                              September 30,
                                                                     ----------------------------
                                                                          2001           2000
                                                                     -------------   ------------
<CAPTION>
<S>                                                                 <C>             <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
     INCOME (LOSS) BEFORE DISCONTINUED OPERATIONS                   $     455,128   $   (469,752)
                                                                     -------------   ------------
     Adjustments to reconcile income (loss) to net cash (used in)
      provided by operating activities:
                   Depreciation and Amortization                           12,044         15,594
                   (Gain) on Sale of Fixed Assets                         (77,577)             0
                   Changes in Operating Assets and Liabilities -
                    (Increase) Decrease in Restricted Cash &
                     Investments                                                0        (14,430)
                   Decrease in Accounts Receivable                        109,122        427,654
                   (Increase) in Other Assets                             (40,561)        (7,063)
                   (Increase) Decrease in Prepaid Expenses               (264,596)        95,719
                    Increase (Decrease) in Accounts Payable and
                     Accrued Expenses                                    (387,573)        11,742
                                                                      -------------   ------------

     CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES BEFORE
      DISCONTINUED OPERATIONS                                            (194,013)        59,464

     CASH PROVIDED BY DISCONTINUED OPERATING ACTIVITIES                         0         11,676
                                                                     -------------   ------------
     NET CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES                 (194,013)        71,140
                                                                     -------------   ------------

CASH FLOWS FROM INVESTING ACTIVITIES:
    Refundable Deposits on Palm Beach Princess                           (500,000)             0
    Proceeds from Auction of Fixed Assets                               1,189,755              0
    Capital Expenditures                                                 (155,345)             0
    Loans on Development Projects                                        (365,000)             0
    (Increase) Decrease in Other Investment Activity                            0              0
                                                                     -------------   ------------
     CASH PROVIED BY INVESTING ACTIVITIES
      BEFORE DISCONTINUED INVESTING ACTIVITIES                            169,411              0
     CASH PROVIDED BY DISCONTINUED INVESTING ACTIVITIES                         0              0
                                                                     -------------   ------------
     NET CASH PROVIDE BY INVESTING ACTIVITIES                             169,411              0
                                                                     -------------   ------------

CASH FLOWS FROM FINANCING ACTIVITIES:
    Proceeds from Short-Term Loans                                              0        150,000
    Decrease in Balances Due to/From Discontinued Subsidiaries            193,228       (136,405)
                                                                     -------------   ------------
     CASH PROVIDED BY FINANCING ACTIVITIES
      BEFORE DISCONTINUED FINANCING ACTIVITIES                            193,228         13,595
     CASH PROVIDED BY DISCONTINUED FINANCING ACTIVITIES                         0          5,475
                                                                     -------------   ------------
     NET CASH PROVIDED BY FINANCING ACTIVITIES                            193,228         19,070
                                                                     -------------   ------------

NET INCREASE IN CASH AND CASH EQUIVALENTS                                 168,626         90,210
          LESS CASH AND CASH EQUIVALENTS AT END OF THE PERIOD
            FROM DISCONTINUED OPERATIONS                                  (11,832)       (17,151)
     CASH AND CASH EQUIVALENTS AT BEGINNING OF THE PERIOD
      BEFORE DISCONTINUED OPERATIONS                                    1,361,287        271,119
                                                                     -------------   ------------

     CASH AND CASH EQUIVALENTS AT END OF THE PERIOD                 $   1,518,081   $    344,178
                                                                     =============   ============

     Supplemental Disclosures of Cash Flow Information:
                  Cash paid during the period for:
                  Interest                                          $           0   $          0
                  Income Taxes                                      $           0   $          0
</TABLE>


See Notes to Consolidated Financial Statements.
                                                              5


<PAGE>


                    INTERNATIONAL THOROUGHBRED BREEDERS, INC.
                                AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

(1)  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     (A)  Nature  of  Operations  -  The  Company  is  currently  engaged  in an
entertainment  cruise and casino ship business  under a bareboat  charter of the
vessel MV 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 period amounts have been reclassified
to conform with the current years' presentation.

     (D)  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  generally  accepted  accounting
principles over the estimated remaining useful lives of the respective assets.

     The Company has adopted the provisions of Statement of Financial Accounting
Standards  No. 121 ("SFAS 121")  "Accounting  for the  Impairment  of Long-Lived
Assets  and for  Long-Lived  Assets to Be  Disposed  Of."  SFAS 121  establishes
accounting   standards  for  the  impairment  of  long-lived   assets,   certain
identifiable  intangibles  and  goodwill  related to those assets to be held and
used for long-lived assets and certain  identifiable  intangibles to be disposed
of. The Company  reviews the carrying  values of its long-lived  property 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.

     (E) Net Assets of  Discontinued  Operations - At June 30, 1998,  the Garden
State  Property  and  Freehold   Raceway  were  classified  as  "Net  Assets  of
Discontinued  Operations."  At June 30,  2001,  the  remaining  net  assets  and
liabilities  of Garden State Park and Freehold  Raceway were  classified as "Net
Assets of  Discontinued  Operations."  At September 30, 2001,  the remaining net
assets and liabilities of Garden State Park and Freehold Raceway were classified
as "Net Liabilities of Discontinued Operations."

     (F) Recent  Accounting  Pronouncements  - In September  2000, the Financial
Accounting  Standards Board issued Statement of Financial  Account Standards No.
140,   "Accounting   for  Transfers  and  Servicing  of  Financial   Assets  and
Extinguishments  of  Liabilities".   In  June  2001,  the  Financial  Accounting
Standards Board issued Statement of Financial Statement of Financial  Accounting
Standards No. 141, "Business  Combinations".  This statement addresses financial
accounting and reporting for business combinations.  In June 2001, the Financial
Accounting  Standards Board issued Statement of Financial  Accounting  Standards
No.  143,  "Accounting  for  Assets  Retirement  Obligations".   This  Statement
establishes  accounting standards for recognition and measurement of a liability
for an asset retirement obligation and the associated asset retirement cost.

                                        6

<PAGE>


                    INTERNATIONAL THOROUGHBRED BREEDERS, INC.
                                AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

     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.

     (G) Revenue  Recognition - The Company recognized the revenues and expenses
associated  with the casino  operation  on the Palm Beach  Princess as they were
earned.

     (H) 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.

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

     (J) 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.

     (K)  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.

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

     Income  (Loss) per common  share is computed  by  dividing  net loss by the
weighted  average  number of shares of common  stock  outstanding.  Options  and
warrants  to purchase  3,104,000  shares of Common  Stock at various  prices per
share,  for  the  each  of  the  periods  presented  were  not  included  in the
computation of diluted loss per share as their effect would be anti-dilutive.

                                        7

<PAGE>


                    INTERNATIONAL THOROUGHBRED BREEDERS, INC.
                                AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)


(2)  NOTES RECEIVABLE

     A portion  of the  proceeds  form 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 the Company to purchase a  promissory
note in the face amount of $23,000,000.  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 equity  investors in the
buyer have received  total  distributions  equal to their capital  contributions
plus an agreed upon return on their  invested  capital,  the next $23 million of
Distributable  Cash will be paid to the  Company.  The Company  will  thereafter
receive payments under the note equal to 33 1/3% of all Distributable Cash until
the  maturity  date,  which  occurs  on the 30th  anniversary  of the  Company's
purchase  of the note.  The Company may  convert  the  promissory  note,  at its
option,  into a 33 1/3% equity  interest in the buyer  during a six month period
beginning  at the 15th  anniversary  of the  issuance  of the note.  If not then
converted,  the note will convert into a 33 1/3% equity interest in the buyer at
the 30th anniversary of its issuance.

     A portion of the  proceeds  from sale of the  Company's  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 the  Company.  The Company  will  thereafter
receive payments under the Note equal to 33 1/3% of all Distributable Cash until
the maturity date,  which occurs on the 15th  anniversary of the issuance of the
Note. The Company may convert the promissory note, at its 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
the  Company  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.

(3)  DISCONTINUED OPERATIONS

     On January 28, 1999,  the Company  completed  the sale of the real property
and certain related assets at Freehold  Raceway and a ten-acre parcel of land at
the Garden State Park  facility and on November 30, 2000,  closed on the sale of
the Garden State Park property.

     The net assets of the operations  disposed of included in the  accompanying
consolidated balance sheets as of September 30, 2001 consist of the following:

    Classified As:

    Current Assets                         $                      424,471

    Current Liabilities                                          (532,600)
                                                 ------------------------
         Net Liabilities of Discontinued
          Operations - Current             $                     (108,129)
                                                 ========================


                                        8

<PAGE>


                    INTERNATIONAL THOROUGHBRED BREEDERS, INC.
                                AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)


(4)  NOTES AND MORTGAGES PAYABLE

     Notes and Mortgages Payable are summarized below:

                                                     September 30, 2001
                                                -------------------------------
                                   Interest %        Current           Long-
                                   Per Annum                           Term
                                  ------------     -----------     ----------
International Thoroughbred
Breeders Inc.:

Robert E. Brennan Jr. (A)                                  -0-       132,000
Michael J. Quigley, III (B)               10%        1,000,000
Other                                 Various          229,149           -0-

Garden State Park:

Service America Corporation (C)            6%          240,000           -0-
                                                   -----------     ---------
    Totals                                       $   1,469,149    $      -0-

Less Amounts Reclassified to:
  Net Liabilities of Discontinued
    Operations - Current                              (240,000)          -0-
                                                   -----------     ---------
    Totals                                       $   1,229,149    $  132,000
                                                   ===========     =========

     (A) The Company's promissory note issued to Robert E. Brennan,  Jr., son of
the  Company's  former  Chairman and Chief  Executive  Officer,  represents  the
balance of the  purchase  price owing to Mr.  Brennan,  Jr.  from the  Company's
purchase  from him of two large  bronze  sculptures  located on the Garden State
Park property, which sculptures were previously on loan to the Company from him.
As amended,the note bears interest at 15% per annum beginning  November 30, 2001
only if the principal of such note is not paid in full by December 10, 2001, and
the note is due and payable on November 30,  2002,  although the Company has the
right to defer  payment to such later date as the  Company  shall have  received
payment  in full of the  note it  received  when it  resold  the  sculptures  to
Realen-Turnberry/Cherry Hill, LLC.

     (B) On January 26, 2001, the Company  borrowed  $1,000,000  from Michael J.
Quigley,  III at an annual  interest rate of 10%. On May 14, 2001,  the loan was
modified to be due on demand.  Principal  and interest on the note was due on or
about April 25, 2001. 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.

     (C) 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.  The  Company  has paid  $260,000 as of
September  30, 2001 and yearly  principal  payments of $80,000 plus interest are
due on December 28 of each year until December

                                        9

<PAGE>


                    INTERNATIONAL THOROUGHBRED BREEDERS, INC.
                                AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

28, 2003 when all outstanding principal will be due.

(5)  COMMITMENTS AND CONTINGENCIES

     See  Note  8  for  commitments  and   contingencies   of  the  Company  and
transactions with related parties.

     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
note was due on April 25, 2001,  however, 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.

     Effective December 1, 2000, the Company entered into a five-year employment
contract with Francis W. Murray,  the Company's  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 the
Company's employees.  As part of his contract,  on December 28, 2000, Mr. Murray
was awarded options to purchase  2,000,000  shares of the Company's Common Stock
(with tandem stock appreciation rights).

     Commencing in the third quarter of Fiscal 1999,  the Company and certain of
its officers and directors and former officers and directors  received subpoenas
from the  Securities  and Exchange  Commission  (the "SEC")  relating to certain
transactions  and  reports.  The  Company  has fully  cooperated  with the SEC's
investigation.  On March 15,  2001,  the Company was advised by the staff of the
SEC that they intend to recommend  that the SEC bring civil  injunction  actions
against the Company and certain current and former officers. The Company and the
current and former officers will determine the appropriate  response when and if
there is any action brought in this matter.

     The  Company  is  responsible  for  remediation  costs  associated  with an
environmental  site on the Freehold  Raceway  property.  The Company has accrued
what it believes to be the total cost of remediation. At September 30, 2001, the
remaining balance of such accrual was $295,000 for remediation costs.

     In connection with the January 28, 1999 lease  transactions  for the Garden
State  Park  facility,  the  Company  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 September 30, 2001,
the unpaid principal balance was $240,000.  Yearly principal payments of $80,000
plus  interest are due on December 28 of each year until  December 28, 2003 when
all outstanding principal will be due. The liquor license was transferred to the
lessee in consideration  of a $100,000 payment to the Company.  If the lessee is
not awarded a license to own and operate an off-track  betting facility prior to
January 28,  2002,  the lessee may be  required  by the Company to transfer  the
liquor  license to the Company in  consideration  of the Company's  repayment of
such $100,000 to the lessee.

     The Chapter 11 Trustee (the "Trustee") for the bankruptcy  estate of Robert
E.  Brennan  has  asserted   certain   claims   challenging   the  ownership  of
approximately 2,300,000 shares of the Company's Common Stock (the "Shares") held
by certain individuals. In order to preserve the Company's net

                                       10

<PAGE>


                    INTERNATIONAL THOROUGHBRED BREEDERS, INC.
                                AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

operating loss carryforwards which otherwise may be lost due to the Shares being
transferred,  the Company and the Trustee have entered into an agreement whereby
the Company  will pay the Trustee a minimum of $.50 per share or a maximum of $1
per share for the Trustee's release of claim to the Shares in the event that the
Trustee is awarded a judgement  granting him an ownership interest in the Shares
and  executes on such  judgement.  The price per share is based upon the average
trading  price per share  during the  previous  thirty  day period  prior to the
Trustee  being  awarded the  judgement but will not be less than the agreed upon
$.50 per share or more than $1 per share.  It is  expected  that this  agreement
with the Trustee will be replaced by another  agreement,  in connection with the
settlement  being  negotiated  with the Trustee  involving  the  purchase by the
Company's  subsidiary  of the Ship  Mortgage  Obligation  on the vessel M/V Palm
Beach  Princess,  pursuant to which the Company would purchase from the Trustee,
on or about July 1, 2002, between  approximately  1,335,000 and 2,235,000 shares
of  common  stock in the  Company  at a  purchase  price of $0.50  per share and
acquire an option to purchase up to 2,315,731 additional shares of the Company's
common stock at $0.50 per share.

LEGAL PROCEEDINGS

     The Company is 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  material  adverse  effect  on the  Company's  financial
position, results of operations, or cash flows.

(6)  FAIR VALUE OF FINANCIAL INSTRUMENTS

     As of  September  30,  2001,  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 that would be  available  to the  Company in the market
place.

(7)  STOCK OPTIONS AND WARRANTS

     (A) EMPLOYEE AND NON-EMPLOYEE OPTIONS

     At September 30, 2001,  total employee  options  outstanding were 3,136,500
and total non-employee  options outstanding were 300,000. At September 30, 2001,
1,803,000  of the  employee  options  and 300,000 of the  non-employee  options,
respectively, were exercisable.

     (B) WARRANTS

     At September 30, 2001,  total  warrants  outstanding  were  2,604,000.  All
warrants were exercisable at September 30, 2001.

                                       11

<PAGE>


                    INTERNATIONAL THOROUGHBRED BREEDERS, INC.
                                AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)


(8)  RELATED PARTY TRANSACTIONS

     During the third  quarter  of Fiscal  2001,  the  company  invested  in two
projects in which its Chairman,  President and Chief Executive Officer,  Francis
W. Murray, also has a pecuniary  interest.  In connection with one such project,
the Company has agreed to advance,  as a loan, up to $1.5 million,  the proceeds
of which are to be used to pay  costs and  expenses  for  development  of a golf
course in Southern  California.  A limited  partnership,  the general partner of
which is owned by Mr.  Murray,  has acquired an option to purchase  certain real
estate in Southern  California on which it intends to construct a golf club. The
project is a  long-term  one,  requiring  environmental,  engineering  and other
studies, regulatory approvals and other governmental entitlements.  Loans by the
Company to the limited  partnership will bear interest at an annual rate of 12%,
and the  Company  will have the right to  convert  its loans  into a 50%  equity
interest in the limited  partnership (which percentage interest would be reduced
if additional  investments by others are made in the limited  partnership).  Mr.
Murray's  equity  interest in the limited  partnership,  indirectly  through his
ownership  of the  general  partner,  presently  is 80%,  and  will  be  reduced
proportionally  if the  Company  exercises  its right to convert  its loans into
equity.  At September 30, 2001,  approximately  $695,848 has been loaned to such
project.

     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  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 owner,  MJQ Development  which is owned by Michael J. Quigley,  III, is
developing a condominium hotel resort. Mr. Quigley has no relationship to Robert
J. Quigley, the Company's director and former president.  At September 30, 2001,
the Company has lent $2,250,495 to the property owner.  The Company's loans will
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.  The Company
will have the right to  convert  its loan into an equity  interest  (subject  to
receiving  certain third party  approvals),  which would entitle it to receive a
priority return of its investment and a priority profits interest equal to three
times its  investment.  Repayment  of the  Company's  loans (and  receipt of any
return if it  converts  its loans to equity)  will be subject to  repayment  of,
first,  bank debt of approximately  $3.8 million incurred in the purchase of the
real property and, second,  construction  financing expected to amount to $25 to
$30  million.  If the  project is  successful,  Mr.  Murray  stands to receive a
contingent  benefit,  which  could  be  substantial,  from  the  owner  for  his
participation  in the  project,  but only after the  Company  and the owner have
received priority returns of their investment and priority shares of profits.

     On January  26,  2001,  the Company  borrowed  $1,000,000  from  Michael J.
Quigley,  III at an annual  interest rate of 10%. On May 14, 2001,  the loan was
modified to be due on demand.  Principal  and interest on the note was due on or
about April 25, 2001. 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.

     Effective April 30, 2001, the Company entered into a bareboat  charter with
MJQ Corporation, pursuant to which the Company is 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.  Francis W. Murray, the Company's
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.

                                       12

<PAGE>


                    INTERNATIONAL THOROUGHBRED BREEDERS, INC.
                                AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

Under the charter  agreement,  the Company is 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.  As of September 30, 2001 we owed MJQ  Corporation  $1,279,894  for
such expenses. In addition, in order to obtain the bareboat charter, the Company
has  entered  into a  letter  of  intent  with the  Chapter  11  Trustee  of the
Bankruptcy  Estate of Robert E. Brennan (the  "Trustee"),  MJQ  Corporation  and
others  which  contemplates  that,  subject to the  negotiation,  execution  and
delivery of satisfactory definitive agreements,  the Company would purchase from
the  Trustee  the  promissory  note of MJQ  Corporation,  having  a  balance  of
principal  and  interest  outstanding  of  approximately  $14.6  million  as  of
September  30,  2001 and  secured  by a ship  mortgage  against  the Palm  Beach
Princess vessel (the "Ship Mortgage Obligation"), for a purchase price of $13.75
million.  Pursuant  to the letter of intent  (which is subject to change  during
negotiation of the definitive agreements),  such purchase price would be payable
in 12  consecutive  monthly  installments  of $250,000,  a 13th payment of $10.5
million on April 30,  2002,  and a final  payment of  $250,000  on July 1, 2002.
Pursuant to the letter of intent, MJQ Corporation and its officers and directors
(including  Francis W. Murray and his son) would exchange  mutual  releases with
the Trustee and others having claims to the Ship Mortgage Obligation.

     For  additional   information  regarding  related  party  transactions  see
Footnote 14 in the consolidated  financial  statements included in the Company's
Form 10-K for the fiscal year ended June 30, 2001.


                                       13

<PAGE>


                    INTERNATIONAL THOROUGHBRED BREEDERS, INC.
                                AND SUBSIDIARIES

                  MANAGEMENT'S ANALYSIS OF FINANCIAL CONDITIONS
                 AND RESULTS OF OPERATIONS FOR THE THREE MONTHS
                            ENDED SEPTEMBER 30, 2001

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 "Rise
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    general  economic  and  business  conditions   affecting  the  tourism
          business in Florida;
     o    competition;
     o    execution of our new business strategy;
     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

     Our working capital,  as of September 30, 2001, was $461,888 as compared to
$559,356 at June 30, 2001.

     Net income for the three months ended September 30, 2001 was $455,128. Cash
flows used in operating  activities amounted to approximately  ($194,013) during
the three months ended September 30, 2001.

     Cash provided by investing  activities was $169,411 during the three months
ended September 30, 2001,  principally  consisting of the proceeds from the June
2001 fixed asset auction partially offset by the refundable deposits made on the
Palm Beach Princess  vessel of $500,000,  the $365,000 of additional  loans from
the Company on development  projects,  and capital expenditures of approximately
$155,345 which were primarily associated with the Palm Beach Princess operations
during the first quarter of Fiscal 2002.(See Note 8)

     Cash provided by financing  activities was $193,228 during the three months
ended   September  30,  2001,   primarily   consisting  of  the  net  effect  of
inter-company subsidiary transactions.

     We currently  estimate that  approximately  $200,000 per month is needed to
cover overhead expenses of International Thoroughbred Breeders. In June 2001, we
held an  auction at which all of the  personal  property,  including  equipment,
furniture, furnishings and art work, that we owned at Garden State

                                       14

<PAGE>


                    INTERNATIONAL THOROUGHBRED BREEDERS, INC.
                                AND SUBSIDIARIES

                  MANAGEMENT'S ANALYSIS OF FINANCIAL CONDITIONS
                 AND RESULTS OF OPERATIONS FOR THE THREE MONTHS
                            ENDED SEPTEMBER 30, 2001

Park was sold for  approximately  $1.2  million in cash,  which was  received in
August 2001 and used for working capital  purposes and to make additional  loans
(which as of  September  30, 2001  totaled  $2,250,495)  for the Ft.  Lauderdale
project. (See Note 8 - Related Party Transactions.)

     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 out of the Port of Palm Beach,
Florida.  Under the bareboat charter agreement,  we are obligated to pay $50,000
per month as the charter hire fee to the vessel's  owner,  MJQ  Corporation.  In
order to obtain the  bareboat  charter,  we have entered into a letter of intent
with the Chapter 11 Trustee of the  Bankruptcy  Estate of Robert E. Brennan (the
"Brennan  Bankruptcy  Trustee"),  MJQ Corporation and others which  contemplates
that,  subject  to the  negotiation,  execution  and  delivery  of  satisfactory
definitive agreements, we would purchase from the Brennan Bankruptcy Trustee the
promissory note of MJQ  Corporation,  having a balance of principal and interest
outstanding of approximately  $14.6 million as of September 30, 2001 and secured
by a ship  mortgage  against  the M/V Palm Beach  Princess  (the "Ship  Mortgage
Obligation"),  for a purchase price of $13.75 million. Such purchase price would
be payable in consecutive monthly  installments of $250,000 through a date to be
negotiated,  but expected to be no earlier  than July 31,  2002,  with a balloon
payment due at that time. If the date for the final balloon  payment is July 31,
2002,  the  amount  of such  payment  at  that  time  would  be  $10.5  million.
Accordingly,  we expect  that we will need to generate  $300,000  per month from
operation  of the vessel to pay the  monthly  bareboat  charter  fee and monthly
installments to the Brennan Bankruptcy Trustee of the purchase price of the Ship
Mortgage  Obligation,  at least until July 31, 2002, and expect to have the need
for  approximately $10 million in financing in order to make the balloon payment
of the purchase  price of the Ship Mortgage  Obligation due as early as July 31,
2002. We plan to seek refinancing of the vessel at the earliest possible time in
order to finance such balloon payment.

     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  (including the charter fee) and the $250,000 per month payments to the
Brennan  Bankruptcy  Trustee  on  account  of the  purchase  price  for the Ship
Mortgage  Obligation,  there is no guarantee that we will be able to continue to
do so, or that we will be able to finance the balloon payment expected to be due
to the Brennan  Bankruptcy  Trustee and the failure to do so in the future could
materially harm our revenues and cause us to lose our only operating asset.

     Other 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 15

<PAGE>


                    INTERNATIONAL THOROUGHBRED BREEDERS, INC.
                                AND SUBSIDIARIES

                  MANAGEMENT'S ANALYSIS OF FINANCIAL CONDITIONS
                 AND RESULTS OF OPERATIONS FOR THE THREE MONTHS
                            ENDED SEPTEMBER 30, 2001

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. If we need
additional  working  capital,  we may attempt to borrow on these Notes, but such
borrowing  is  expected  to be  difficult  to obtain as long as the  timing  and
amounts of payments under the Notes remain unpredictable.

     In conjunction  with the settlement  agreement  being  negotiated  with the
Brennan  Bankruptcy  Trustee,  we expect to commit to purchase  from the Brennan
Bankruptcy Trustee between  approximately  1,335,000 shares and 2,235,000 shares
of common  stock in the Company at a purchase  price of $0.50 per share,  for an
aggregate  purchase  price  expected to be between  approximately  $667,500  and
$1,117,500. We believe that such stock purchase is desirable in order to prevent
the Brennan  Bankruptcy  Trustee  from  selling such shares since the sale could
adversely affect our tax loss carryforward.  The letter of intent between us and
the  Brennan  Bankruptcy  Trustee  contemplates  that we would be  obligated  to
consummate  such  purchase on July 1, 2002.  Such letter of intent also provides
for us to pledge  payments due or to become due to us under the $10 Million Note
as collateral  security for our  obligation  to pay the purchase  price of those
shares of common stock. We hope to be able to fund such purchase out of payments
we receive  under the $10 Million Note or by  borrowing  against the $10 Million
Note,  but no assurance  can be given that we will receive  sufficient  payments
under that Note or be able to borrow against that Note.

     While  management  believes  that the $10 Million  Note and the $23 Million
Note  owned  by us have  substantial  value  and,  ultimately,  should  generate
significant  cash  payments  to us, the  timing of receipt of any such  payments
cannot be accurately predicted and we may not receive substantial payments under
the notes for one year or more.  At the same time,  we have  utilized  available
cash over the last  several  months to invest  in the  development  of  projects
which, while believed by management to be worthwhile,  are expected to take more
than one year  before  generating  cash  returns  to us.  We will seek to borrow
against  the notes in order to  obtain  funds for  short  term  obligations  and
current  expenses.  However,  there can be no assurance  that we will be able to
borrow the necessary funds.

Results of Operations for the Three Months Ended September 30, 2001 and 2000

     Revenue for the three months ended September 30, 2001 increased  $6,054,465
from $107,217 in Fiscal 2001 to $6,161,682 in Fiscal 2002  primarily as a result
of revenues generated by the Palm Beach Princess operations.  Expenses increased
$5,107,585  from $576,969 in the three month period in Fiscal 2001 to $5,684,554
primarily  the result of operating  expenses of $5,042,656  associated  with the
Palm Beach Princess during the first quarter of Fiscal 2002.

     Effective  April 30, 2001, we chartered the vessel M/V Palm Beach  Princess
for the purpose of operating an entertainment  and casino cruise business out of
the Port of Palm Beach, Florida.  During the first quarter of Fiscal 2002, total
revenue was $5,940,395 and total  expenses were  $5,042,656.  Net income for the
first quarter of operation was $875,739.

     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, 16

<PAGE>


                    INTERNATIONAL THOROUGHBRED BREEDERS, INC.
                                AND SUBSIDIARIES

                  MANAGEMENT'S ANALYSIS OF FINANCIAL CONDITIONS
                 AND RESULTS OF OPERATIONS FOR THE THREE MONTHS
                            ENDED SEPTEMBER 30, 2001

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.  Out of the 184  scheduled
cruises, 4 cruises were cancelled for weather and mechanical difficulties.

     For the first  quarter of Fiscal 2002,  our income was $455,128 or $.04 per
share,  respectively,  as compared to a loss for the comparable  period in prior
fiscal year of ($469,752) or ($0.05) per share, respectively.

Inflation

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





                                       17

<PAGE>



                   INTERNATIONAL THOROUGHBRED BREEDERS, INC.
                                AND SUBSIDIARIES


                                     Part II

                                OTHER INFORMATION


Item 6.

     The  Company  did not file any  reports  on Form  8-K with  respect  to the
quarter ended September 30, 2001.


                                       18

<PAGE>




                    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 14, 2001       /s/Francis W. Murray
                        ---------------------------------
                        Francis W. Murray, President, and
                        Chairman of the Board




November 14, 2001       /s/William H. Warner
                        -------------------------------------
                        William H. Warner
                        Secretary/Treasurer
                        (Principal Financial and Accounting Officer)




                                       19

<PAGE>