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       March 31, 1999
                               ------------------------
                                           OR

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

For the transition period from           to


Commission file number                0-9624

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

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

                  P.O. Box 1232, Cherry Hill, New Jersey 08034
                    (Address of principal executive offices)
                                   (Zip Code)

                                 (609) 488-3838
              (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 May 14, 1999
Common Stock, $2.00 par value               8,980,232  Shares



<PAGE>





                    INTERNATIONAL THOROUGHBRED BREEDERS, INC.

                                    FORM 10-Q

                                QUARTERLY REPORT
                    for the Nine Months ended March 31, 1998
                                   (Unaudited)


                                TABLE OF CONTENTS

                                                                      PAGE
PART I. FINANCIAL INFORMATION

         Item 1. Financial Statements:

         Consolidated Balance Sheets
                  as of March 31, 1999 and June 30, 1998...............1-2

         Consolidated Statement of Stockholders' Equity
                  for the Nine Months ended March 31, 1999   ............3

         Consolidated Statements of Operations
                  for the Three and Nine Months ended
                  March 31, 1999 and 1998 ...............................4

         Consolidated Statements of Cash Flows
                  for the Nine Months ended
                  March 31, 1999 and 1998................................5

         Notes to Financial Statements ...............................6-17

         Item 2. Management's Discussion and Analysis of
                    Financial Condition and Results of Operations....18-21

PART II. OTHER INFORMATION

         Item 6. Exhibits and Reports on Form 8-K ......................22

SIGNATURES        ......................................................23



<PAGE>

<TABLE>
                    INTERNATIONAL THOROUGHBRED BREEDERS, INC.
                                AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS
                     AS OF MARCH 31, 1999 AND JUNE 30, 1998

                                     ASSETS

                                                      March 31,
                                                        1999          June 30,
                                                     (UNAUDITED)        1998
                                                     -----------        ----
<CAPTION>
CURRENT ASSETS:
<S>                                                <C>            <C>
 Cash and Cash Equivalents .....................   $  2,160,594   $    213,795
 Reserve Escrow Deposits .......................      1,149,156     10,460,881
 Accounts Receivable ...........................              0         36,838
 Prepaid Expenses ..............................        121,827        322,313
 Other Current Assets ..........................        145,856        325,756
 Net Assets of Discontinued Operations - Current        574,715     12,235,217
                                                        -------     ----------
      TOTAL CURRENT ASSETS .....................      4,152,148     23,594,800
                                                      ---------     ----------


NET ASSETS OF DISCONTINUED OPERATIONS-Long Term.     30,000,000     45,626,944
                                                     ----------     ----------

PROPERTY HELD FOR SALE .........................     42,149,755     47,434,670
                                                     ----------     ----------

LAND, BUILDINGS AND EQUIPMENT:
 Land and Buildings ............................        214,097        214,097
 Equipment .....................................        652,058        814,927
                                                        -------        -------
                                                        866,155      1,029,024
 LESS: Accumulated Depreciation and Amortization        313,017        308,162
                                                        -------        -------

      TOTAL LAND, BUILDINGS AND EQUIPMENT, NET .        553,138        720,862
                                                        -------        -------


OTHER ASSETS:
 Deposits and Other Assets .....................      1,198,172          3,172
 Deferred Financing Costs, Net .................        299,011      2,872,453
                                                        -------      ---------
      TOTAL OTHER ASSETS .......................      1,497,183      2,875,625
                                                      ---------      ---------


TOTAL ASSETS ...................................   $ 78,352,224   $120,252,901
                                                   ============   ============
</TABLE>



See Notes to Consolidated Financial Statements.


                                        1

<PAGE>

<TABLE>
                    INTERNATIONAL THOROUGHBRED BREEDERS, INC.
                                AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS
                     AS OF MARCH 31, 1999 AND JUNE 30, 1998

                      LIABILITIES AND STOCKHOLDERS' EQUITY

                                                                   March 31,
                                                                     1999               June 30,
                                                                  (UNAUDITED)             1998
                                                                  -----------             ----
<CAPTION>
CURRENT LIABILITIES:
<S>                                                                <C>              <C>
  Accounts Payable ............................................    $    181,427     $    278,786
  Accrued Expenses ............................................         886,824        4,852,328
  Current Maturities of Long-Term Debt ........................      30,500,000       55,208,426
                                                                     ----------       ----------
       TOTAL CURRENT LIABILITIES ..............................      31,568,251       60,339,540
                                                                     ----------       ----------


LONG-TERM DEBT, Net of Current Portion ........................       3,558,032                0
                                                                     ----------       ----------
COMMITMENTS AND CONTINGENCIES .................................            --               --


STOCKHOLDERS' EQUITY:
  Series A Preferred Stock, $100.00 Par Value,
    Authorized 500,000 Shares, Issued and Outstanding,
    362,482 and 362,480 Shares, Respectively ..................      36,248,175       36,247,975
  Common Stock, $2.00 Par Value, Authorized 25,000,000 Shares,
   Issued, 11,884,245 and 13,978,099 Shares,
   and Outstanding, 8,980,228 and 13,978,099 Shares ...........      23,768,489       27,956,197
  Capital in Excess of Par ....................................      26,073,944       25,878,224
  (Deficit) (subsequent to June 30, 1993,
     date of quasi-reorganization) ............................     (35,571,710)     (30,132,368)
                                                                    -----------      -----------
       TOTAL ..................................................      50,518,898       59,950,028
  LESS:
     Treasury Stock, 2,904,016 Shares, at Cost ................      (7,260,040)               0
     Deferred Compensation, Net ...............................         (32,917)         (36,667)
                                                                     ----------       ----------
       TOTAL STOCKHOLDERS' EQUITY .............................      43,225,941       59,913,361
                                                                     ----------       ----------


TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY ....................   $  78,352,224    $ 120,252,901
                                                                  =============    =============
</TABLE>


See Notes to Consolidated Financial Statements.
                                        2

<PAGE>


<TABLE>
                    INTERNATIONAL THOROUGHBRED BREEDERS, INC.
                                AND SUBSIDIARIES

                 CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
                    FOR THE NINE MONTHS ENDED MARCH 31, 1999


                                                        Preferred                    Common
                                                        ---------                    ------                   Capital
                                                 Number of                    Number of                       in Excess
                                                 Shares          Amount       Shares          Amount          of Par
                                                 ------          ------       ------          ------          ------
<CAPTION>
<S>            <C> <C>                            <C>     <C>                <C>           <C>             <C>
BALANCE - JUNE 30, 1998 ......................    362,480 $   36,247,975     13,978,099    $ 27,956,197    $ 25,878,224

 Shares Canceled in connection with
  Delaware Settlement .........................      --             --       (2,093,868)     (4,187,736)     (1,046,934)
 Purchase of 2,904,016 Shares for
  Treasury in connection with
  Delaware Settlement .........................      --             --             --              --              --
 Shares Issued for Fractional Exchanges
  With Respect to the
  One-for-twenty Reverse Stock Split
  effected on March 13, 1992 ..................        2            200             14              28            (228)
 Warrants Issued in Connection With Debt
  Retirement (See Note 11-B) ..................                                                              1,242,882
 Amortization of Deferred Compensation Costs        --             --             --              --              --
 Net (Loss) for the Nine Months
   Ended March 31, 1999 .......................     --             --             --              --              --
                                                 ------- --------------     ----------    ------------    ------------
BALANCE - MARCH 31, 1999 .....................   362,482 $   36,248,175     11,884,245    $ 23,768,489    $ 26,073,944
                                                 ======= ==============     ==========    ============    ============
</TABLE>

<TABLE>

                                                   Retained           Treasury       Deferred
                                                   Earnings            Stock,         Compen-
                                                   (Deficit)          At Cost         sation          Total
                                                   ---------          -------         ------          -----
<CAPTION>
<S>                                              <C>             <C>             <C>             <C>
BALANCE - JUNE 30, 1998 ......................   $(30,132,367)   $          0    $    (36,667)   $ 59,913,361

 Shares Canceled in connection with
  Delaware Settlement ........................           --              --              --        (5,234,670)
 Purchase of 2,904,016 Shares for
  Treasury in connection with
  Delaware Settlement ........................           --        (7,260,040)           --        (7,260,040)
 Shares Issued for Fractional Exchanges
  With Respect to the
  One-for-twenty Reverse Stock Split
  effected on March 13, 1992 .................           --              --              --              --
 Warrants Issued in Connection With Debt
  Retirement (See Note 11-B)                                                                       1,242,882
  Amortization of Deferred Compensation Costs           --              --             3,750           3,750
 Net (Loss) for the Nine Months
  Ended March 31, 1999 .......................     (5,439,343)           --              --        (5,439,343)
                                                 ------------    ------------    ------------    ------------
BALANCE - MARCH 31, 1999 .....................   $(35,571,710)   $ (7,260,040)   $   (32,917)    $ 43,225,941
                                                 ============    ============    ============    ============
</TABLE>

See Notes to Consolidated Financial Statements.
                                                                3

<PAGE>


<TABLE>
                    INTERNATIONAL THOROUGHBRED BREEDERS, INC.
                                AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF OPERATIONS
           FOR THE THREE AND NINE MONTHS ENDED MARCH 31, 1999 AND 1998


                                                                      Three Months Ended               Nine Months Ended
                                                                           March 31,                       March 31,
                                                              ------------------------------   ------------------------------
                                                                     1999            1998            1999            1998
                                                                     ----            ----            ----            ----
<CAPTION>
EXPENSES:
<S>                                                              <C>            <C>             <C>             <C>
        General & Administrative Expenses ...................    $   836,955    $  1,508,824    $  3,572,277    $  5,678,432
        Interest and Financing Expenses .....................      3,270,275       1,744,989       6,794,248       5,324,146
        Interest Income .....................................        (85,411)       (134,062)       (298,492)       (558,899)
        Amortization of Financing Costs .....................      1,044,839         764,801       2,574,441       2,288,781
        El Rancho Property Carrying Costs ...................        303,029         203,448         922,562         777,490

(LOSS) FROM CONTINUING OPERATIONS                                 ----------      ----------     -----------     -----------
   BEFORE DISCONTINUED OPERATIONS ...........................     (5,369,687)     (4,088,000)    (13,565,036)    (13,509,950)
                                                                  ----------      ----------     -----------     -----------

INCOME FROM DISCONTINUED OPERATIONS:
        Gain on Sale of Net Assets of Discontinued Operations      3,621,507            --         3,621,507            --
          (less applicable state income taxes of $1,300,000)
          Income from operations of discontinued racetrack
          operations (less
          applicable state income taxes of $22,500
          and $50,863 for the three
          months ended March 31, 1999 and 1998, respectively,
          and $150,000 and
          $121,100 for the nine months
          ended March 31, 1999 and 1998, respectively) ......        247,640       1,401,825       4,504,184       5,582,057
                                                                  ----------      ----------     -----------     -----------
        INCOME FROM DISCONTINUED OPERATIONS .................      3,869,147       1,401,825       8,125,691       5,582,057
                                                                  ----------      ----------     -----------     -----------
                                                                  ----------      ----------     -----------     -----------
NET (LOSS) ..................................................    $(1,500,540)   $ (2,686,175)   $ (5,439,345)   $ (7,927,893)
                                                                 ===========      ==========     ===========      ==========

BASIC PER SHARE DATA:
(LOSS) FROM CONTINUING  OPERATIONS ..........................    $     (0.59)   $      (0.29)   $      (1.08)   $      (0.97)
INCOME FROM DISCONTINUED OPERATIONS .........................           0.43            0.10            0.65            0.40
                                                                  ----------      ----------      ----------     -----------
NET (LOSS) ..................................................    $     (0.16)   $      (0.19)   $      (0.43)   $      (0.57)
                                                                  ==========      ==========      ==========      ==========

WEIGHTED AVERAGE
  COMMON SHARES OUTSTANDING .................................      8,980,226      13,978,076      12,409,426      13,978,084
                                                                  ==========      ==========      ==========      ==========
</TABLE>


See Notes to Consolideated Financial Statements.

                                        4

<PAGE>

<TABLE>
                    INTERNATIONAL THOROUGHBRED BREEDERS, INC.
                                AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                FOR THE NINE MONTHS ENDED MARCH 31, 1999 AND 1998

                                                                       Nine Months Ended
                                                                           March 31,
                                                                 -----------------------------
                                                                      1999            1998
                                                                      ----            ----
<CAPTION>
CASH FLOWS FROM OPERATING ACTIVITIES:
<S>                                                              <C>             <C>
        (LOSS) FROM CONTINUING OPERATIONS ....................   $(13,565,036)   $(13,509,950)
                                                                 ------------    ------------
        Adjustments to reconcile (loss)  to net cash (used in)
          provided by operating activities:
                Income from discontinued racetrack operations       8,125,691       5,582,057
                Depreciation and Amortization ................      2,613,859       3,586,519
                Compensation for Options Granted .............              0         819,413
                Loss on Disposal of Fixed Assets .............        146,238          32,673
                Changes in Assets and Liabilities -
                   Decrease in Restricted Cash and Investments              0       1,317,851
                   Decrease (Increase) in Accounts Receivable          36,838      (1,288,198)
                   Decrease (Increase) in Other Assets .......        179,900        (328,811)
                   Decrease in Prepaid Expenses ..............        200,486         875,681
                   (Decrease) in Accounts and Purses Payable
                    and Accrued Expenses .....................       (914,871)       (351,571)
                   (Decrease) in Deferred Revenue ............              0        (608,030)
                                                                 ------------
        CASH (USED IN) CONTINUING OPERATING ACTIVITIES .......     (3,176,895)

        CASH PROVIDED BY DISCONTINUED OPERATING ACTIVITIES ...      2,629,637
                                                                 ------------    ------------
        NET CASH (USED IN) OPERATING ACTIVITIES ..............       (547,258)     (3,872,366)
                                                                 ------------    ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
    Proceeds from Sale of Freehold ...........................     17,900,000               0
    Proceeds from Sale of Land at Garden State Park ..........      2,000,000       8,449,904
    Purchase of 2,904,016 Shares of Treasury Stock ...........     (6,850,000)              0
    Development of El Rancho Property ........................              0        (239,588)
    Deposits on New Mexico Racetrack Options .................              0        (600,000)
    Capital Expenditures .....................................        (69,044)       (409,891)
    (Increase) in Other Investments ..........................              0         (60,417)
                                                                 ------------
        CASH PROVIDED CONTINUING INVESTING ACTIVITIES ........     12,980,957
        CASH(USED IN) DISCONTINUED INVESTING ACTIVITIES ......        (85,068)
                                                                 ------------    ------------
        NET CASH PROVIDED BY INVESTING ACTIVITIES ............     12,895,888       7,140,008
                                                                 ------------    ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
    Deferred Financing Costs .................................              0         (22,445)
    Escrow Deposits Utilized .................................      9,311,725       6,790,994
    Deposits to Reserve Escrow Deposits from Land Sale .......              0      (1,370,120)
    (Increase) in Balances Due From Discontinued Subsidiaries     (14,460,563)              0
    Principal Payments on Sun Mortgage .......................              0      (6,000,000)
    Principal Payments on Short Term Notes ...................     (2,708,426)       (908,370)
    Principal Payments on Long Term Notes ....................              0      (1,006,070)
                                                                 ------------
        CASH (USED IN) CONTINUING FINANCING ACTIVITIES .......     (7,857,264)
        CASH (USED IN) DISCONTINUED FINANCING ACTIVITIES .....     (4,644,520)
                                                                 ------------    ------------
        NET CASH (USED IN) FINANCING ACTIVITIES ..............    (12,501,784)     (2,516,011)
                                                                 ------------    ------------
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS .........       (153,153)        751,630
         LESS CASH AND CASH EQUIVALENTS PROVIDED BY
            DISCONTINUED OPERATIONS ..........................      2,099,952            --
        CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR
          FROM CONTINUING OPERATIONS .........................        213,795       3,784,895
                                                                 ------------    ------------
        CASH AND CASH EQUIVALENTS AT END OF PERIOD ...........   $  2,160,594    $  4,536,525
                                                                 ============    ============

        Supplemental Disclosures of Cash Flow Information:
                Cash paid during the period for:
                Interest                                         $  4,636,979    $  5,832,726
                Income Taxes                                     $  1,500,000    $    100,000

        Supplemental Schedule of Non-Cash Investing and Financing Activities:
        During the nine  months  ended  March  31,  1999 and 1998,  the  Company
          recorded an unrealized  loss of $12,078 and $3,334,  respectively,  on
          trading securities.
        During the nine months ended March 31, 1999, the Company issued warrants
          to  purchase  497,153  shares  of  Common  Stock  at a fair  value  of
          $1,242,883 in connection with financing agreements.
        During the nine months ended March 31, 1998,  the Company issued options
          to purchase 300,000 shares of Common Stock at a fair value of $786,000
          to three of the Company's directors.
        During the nine  months  ended  March 31,  1999,  the  Company  canceled
          2,093,868  shares  of Common  Stock in  connection  with the  Delaware
          Settlement.
        During the nine months ended March 31,  1999,  the purchase of 2,904,016
          shares of Common Stock was financed, in part, through a long term note
          in the amount of $3,558,032.
        During  the  nine  months  ended  March  31,  1999,  $22,000,000  of the
          Company's  short  term debt was  assumed  by the the  purchaser  in in
          connection  with the sale of certain  assets at  Freehold  Raceway and
          Garden State Park.
</TABLE>

See Notes to Consolidated Financial Statements.


                                        5

<PAGE>


                    INTERNATIONAL THOROUGHBRED BREEDERS, INC.
                                AND SUBSIDIARIES

                               NOTES TO FINANCIAL
                                   (Unaudited)

(1)      BASIS OF PRESENTATION

     On January 28, 1999, the Company completed the sale of Freehold Raceway and
a ten-acre  parcel at the Garden State Park facility and the lease of the Garden
State Park  facilities.  Prior to June 30, 1998, the Company  determined to sell
its  racetracks  and,  accordingly,  the  operating  results  of  the  racetrack
subsidiaries  have been segregated and reported as  discontinued  operations for
each of the periods presented. (See Notes 2 and 4)

     The  accompanying  unaudited  consolidated  financial  statements have been
prepared in accordance with generally accepted accounting principles for interim
financial  information and with the  instructions to Form 10-Q and Rule 10-01 of
Regulation  S-X.  Accordingly,  they do not include all of the  information  and
footnotes  required by generally  accepted  accounting  principles  for complete
financial statements. In the opinion of management,  all adjustments (consisting
of normal recurring accruals)  considered necessary for a fair presentation have
been  included.  Operating  results for the nine months ended March 31, 1999 are
not  necessarily  indicative  of the results that may be expected for the fiscal
year ended June 30, 1999. The unaudited consolidated financial statements should
be read in conjunction with the consolidated  financial statements and footnotes
thereto  included in the Company's  Form 10-K for the fiscal year ended June 30,
1998.

     The  accompanying  consolidated  financial  statements  have been  prepared
assuming   International    Thoroughbred   Breeders,   Inc.   and   subsidiaries
(collectively,  the "Company")  will continue as a going concern.  The remaining
debt to the Company's primary lender is due June 1, 1999, unless an extension is
obtained.  On May 7, 1999,  the Company  notified their primary  lender,  Credit
Suisse First Boston  Mortgage  Capital LLC ("Credit  Suisse"),  of its intent to
extend the loan maturity  date to June 1, 2000.  The Company will be required to
deposit  sufficient  funds into an escrow  account to cover interest and fees of
approximately $4 million. The Company is currently considering financing sources
for the funds required to extend the debt payment date. However, there can be no
assurance that the Company will be successful in such endeavors.

     The Company has sustained losses of  approximately  $18.3 million and $17.4
million  during  fiscals  1998  and  1997,  respectively,  and  a  net  loss  of
approximately $5.4 million for the nine months ended March 31, 1999. The Company
believes its projected cash flows from its current operations will be sufficient
until June 1, 1999 when the debt to the  Company's  primary  lender is due,  and
there can be no assurances beyond that date.

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

(2)      SALE AND LEASE OF ASSETS

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

     The proceeds of the  Greenwood  Transaction  were  principally  used by the
Company to pay off the first lien on the assets of Freehold Raceway,  reduce the
outstanding  balance on the  Company's  loan from Credit Suisse to $30.5 million
and to  consummate  the Delaware  Settlement.  (See Note 3) In addition,  Credit
Suisse also released to the Company approximately $4.475 million from its escrow
reserves for working capital purposes. (See Note 6)

     The Company  recognized a net gain of $3,621,507,  following the write down
to fair value of the remaining assets

                                        6

<PAGE>


                    INTERNATIONAL THOROUGHBRED BREEDERS, INC.
                                AND SUBSIDIARIES

                               NOTES TO FINANCIAL
                                   (Unaudited)

of Garden State Park,  on the sale of Freehold  Raceway,  the sale of a ten-acre
parcel at the Garden State Park  facility and the lease of the Garden State Park
facilities during the third quarter of Fiscal 1999.

(3) LITIGATION SETTLEMENT

     On  January  28,  1999,  the  Company  fully and  finally  consummated  the
settlement  and  dismissal  of the  following  actions  discussed  in the  Legal
Proceedings  Section of this 10Q:  Quigley et al. v.  DeSantis et al.,  C.A. No.
15919, in the Court of Chancery of the State of Delaware; Rekulak v. DeSantis et
al., C.A. No. 15920, in the Court of Chancery of the State of Delaware; Green v.
DeSantis,  et al., C.A. No. 97-CV-5657,  in the New Jersey District Court. These
actions were settled in  connection  and  accordance  with the  Stipulation  and
Agreement of Compromise,  Settlement and Release entered into on July 2, 1998 to
resolve  the above  action  entitled  Quigley  et al. v.  DeSantis  et al.  (the
"Delaware Settlement").

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

     The approval of certain transactions between ITB and the Bankruptcy Trustee
by the United  States  Bankruptcy  Court for the  District  of New Jersey in the
action  entitled In re Robert E.  Brennan,  C.A. No.  95-35502,  was a condition
precedent to the consummation of the Delaware Settlement. This approval was duly
received and the Company  consummated a separate  settlement with the Bankruptcy
Trustee   necessary  to  consummate  the  Delaware   Settlement   (the  "Trustee
Settlement").  Pursuant  to  the  Trustee  Settlement,  the  Bankruptcy  Trustee
received:  (a) a pay down on the NPD Note from the original principal balance of
$5,808,032 to $3,558,032  (see Note7-B);  (b) a promissory  note from ITB in the
amount of $3,558,032 (the "ITB Note"),  on  substantially  the same terms as the
NPD Note,  except  that the ITB Note  becomes  due and payable on the earlier to
occur of (i)  January  15,  2001,  or (ii) the closing of either the sale of the
Company's non-operating El Rancho hotel and casino property in Las Vegas, Nevada
(the "El Rancho Property"),  or the sale of Garden State Park (the "Garden State
Property");  (c) a security  interest in the NPD Shares;  (d) the payment of the
costs and expenses  incurred by the  Bankruptcy  Trustee in connection  with the
Delaware  Settlement and the Trustee  Settlement;  (e) subordinate  interests in
both the El Rancho Property and the Garden State Property;  and (f) an escrow of
the July 15,  1999  interest  payment  due on the ITB  Note.  As a result of the
Trustee Settlement, the Company secured (a) the power to consummate the Delaware
Settlement,  (b) releases from the Bankruptcy Trustee in favor of all parties to
the  Delaware  Settlement,  including  the  Company,  and (c) the right to defer
certain  interest  payments  due under the ITB Note until the  maturity  of such
note.

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

     Also pursuant to the Delaware Settlement,  Las Vegas Entertainment Network,
Inc.  ("LVEN") was granted the  exclusive  right to sell the El Rancho  Property
until November 20, 1998 and the co-extensive  right, along with the Company,  to
sell the El Rancho  Property until April 19, 1999.  Beginning  January 19, 1999,
and ending  upon the  earlier of a sale of the El Rancho  Property  or April 19,
1999,  LVEN is required to pay one-half of the carrying  costs  associated  with
maintaining the El Rancho  Property.  LVEN also obtained the right,  exercisable
from March 20, 1999 until April 19, 1999,  to refinance  the El Rancho  Property
and thereby obtain the extended  right to sell the El Rancho  Property until the
earlier of (a) one year from April 19,  1999 or (b) the  midpoint of the term of
the refinancing loan (the "Refinancing  Option").  As of March 31, 1999, neither
LVEN, nor the Company have sold the El Rancho Property, and LVEN has not

                                        7

<PAGE>


                    INTERNATIONAL THOROUGHBRED BREEDERS, INC.
                                AND SUBSIDIARIES

                               NOTES TO FINANCIAL
                                   (Unaudited)

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

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

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

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

(4)      DISCONTINUED OPERATIONS

     On January 28, 1999,  the Company  completed  the sale of the real property
and certain related assets at Freehold  Raceway and a ten-acre parcel of land at
the Garden State Park  facility,  and the lease of the real property and certain
related assets of Garden State Park for a seven-year period. (See Note 2).



                                        8

<PAGE>


                    INTERNATIONAL THOROUGHBRED BREEDERS, INC.
                                AND SUBSIDIARIES

                               NOTES TO FINANCIAL
                                   (Unaudited)

<TABLE>

         The discontinued operations are summarized as follows:

                                             Three Months Ended March 31, Nine Months Ended March 31,

Discontinued Racetrack Operations:                1999          1998          1999          1998
                                                  ----          ----          ----          ----
<CAPTION>

<S>                                           <C>           <C>           <C>           <C>
  Revenue .................................   $ 4,071,896   $18,850,288   $38,295,517   $54,036,089
                                              -----------   -----------   -----------   -----------

  Expenses:

      Cost of Revenues:

         Purses ...........................     1,041,118     6,909,264    13,115,586    18,929,027

         Operating Expenses ...............     2,276,779     8,748,513    16,525,480    24,089,056

         Depreciation & Amortization ......       255,378       413,909     1,078,701     1,246,207

      General & Administrative Expenses ...       166,148     1,122,460     2,454,559     3,416,934

      Interest Expenses ...................        67,437       203,054       472,112       651,708
                                              -----------   -----------   -----------   -----------
                 Total Expenses ...........     3,801,756    17,397,200    33,641,334    48,332,932
                                              -----------   -----------   -----------   -----------

Income From Discontinued Racetrack
Operations Before Taxes ...................       270,140     1,453,088     4,654,184     5,703,157

      Income Tax Expense ..................        22,500        51,263       150,000       121,100
                                              -----------   -----------   -----------   -----------

                                                  247,640     1,401,825     4,504,184     5,582,057

Gain on Sale of Net Assets of Discontinued
Operations  (Net of $1,300,000 state income
taxes) ....................................     3,621,507          --       3,621,507          --
                                              -----------   -----------   -----------   -----------

Income From Discontinued
 Racetrack Operations .....................   $ 3,869,147   $ 1,401,825   $ 8,125,691   $ 5,582,057
                                              ===========   ===========   ===========   ===========
</TABLE>

      The net assets of the discontinued operations included in the accompanying
consolidated balance sheet as of March 31, 1999 consist of the following:

Classified As:

Current Assets ..................................            $    3,009,933

Current Liabilities .............................                 2,435,219
                                                                 ----------

  Net Assets of Discontinued Operations - Current                   574,715

Property Assets of Garden State Park ............                30,000,000
                                                                 ----------
  Net Assets of Discontinued Operations .........            $   30,574,714
                                                                 ==========


                                        9

<PAGE>


                    INTERNATIONAL THOROUGHBRED BREEDERS, INC.
                                AND SUBSIDIARIES

                               NOTES TO FINANCIAL
                                   (Unaudited)
<TABLE>

  Cash flows from  discontinued  operations  for the nine months ended March 31,
1999 consist of the following:

Cash Flows From Discontinued Operating Activities:
<CAPTION>

<S>                                                                     <C>
        Income ......................................................   $  8,125,691

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

                Gain on Sale of Discontinued Operations .............     (3,621,507)

                Depreciation and Amortization .......................      1,078,701

                Changes in Assets and Liabilities:

                          Decrease in Restricted Cash and Investments      3,291,166

                          Increase in Accounts Receivable ...........       (112,676)

                          Decrease in Other Assets ..................         21,142

                          Decrease in Prepaid Expenses ..............        565,249

                          Decrease in Accounts and Purses Payable and
                            Accrued Expenses ........................     (5,357,933)

                          Decrease in Deferred Revenue ..............     (1,360,196)
                                                                        ------------

        Net Cash Provided By Discontinued Operating Activities
         (Excluding Income) .........................................      2,629,637
                                                                        ------------

Cash Flows From Discontinued Investing Activities:

        Capital Expenditures ........................................        (82,570)

        (Increase) in Other Investments .............................         (2,498)
                                                                        ------------

        Net Cash (Used In) Discontinued Investing Activities ........        (85,068)
                                                                        ------------

Cash Flows from Discontinued Financing Activities:

        Principal Payments on Short Term Notes ......................       (723,545)

        Decrease in Balances Due To Parent Company ..................      8,077,756

        Principal Payments on Long Term Notes .......................    (11,998,731)
                                                                        ------------

        Net Cash (Used In) Discontinued Financing Activities ........     (4,644,521)
                                                                        ------------

        Net Decrease in Cash and Cash Equivalents From Discontinued
         Operations .................................................     (2,099,952)

              Cash and Cash Equivalents at Beginning of Year From
               Discontinued Operations ..............................      3,166,904
                                                                        ------------
              Cash and Cash Equivalents at End of Period From
                Discontinued Operations .............................   $  1,066,952
                                                                        ============
</TABLE>


                                       10

<PAGE>


                    INTERNATIONAL THOROUGHBRED BREEDERS, INC.
                                AND SUBSIDIARIES

                               NOTES TO FINANCIAL
                                   (Unaudited)

(5)      PROPERTY HELD FOR SALE

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

(6)      RESERVE ESCROW DEPOSITS

     At March 31,  1999,  $1,149,156  was held in various  reserve  cash  escrow
deposit accounts that were established in connection with the Company's two-year
$55  million  credit  facility  with  Credit  Suisse.  The terms of such  credit
facility  provided that such reserve  accounts be held by LaSalle  National Bank
("the  Depository").  On the maturity date of such credit facility,  any amounts
remaining on deposit shall,  at Credit Suisse's  option,  be applied against any
outstanding obligations of the Company under such credit facility or returned to
the Company.  In connection with the January 28, 1999 sale of Freehold  Raceway,
the sale of a ten-acre  parcel at Garden  State Park and the lease of the Garden
State Park facility,  Credit Suisse released to the Company approximately $4.475
million  from its  escrow  reserves  to pay down  debt and for  working  capital
purposes.

The Escrow Accounts are summarized below:

                 Account                                March 31, 1999
------------------------------------------------      ----------------

Interest Reserve .............................           $     959,776

El Rancho Reserve ............................                   6,750

Working Capital ..............................                 182,630
                                                             ---------

                                         Total           $   1,149,156
                                                      ================


(7)      NOTES AND MORTGAGES PAYABLE
<TABLE>

         Notes and Mortgages Payable are summarized below:

                                                                     March 31, 1999
                                                             ------------------------------
                                   Interest % Per Annum           Current       Long-Term
                                  ------------------------------------------  -------------
<CAPTION>

International Thoroughbred Breeders Inc.:
<S>                              <C>                       <C>              <C>
Credit Suisse First Boston(A)    LIBOR Rate plus 7%
                                 (3/31/99  rate 11.94%)    $   30,500,000   $       -0-

REB Bankruptcy Trustee(B)        Prime Rate
                                 (3/31/99 rate 7.75%)                 -0-      3,558,032
                                                            ---------------- -------------
    Total                                                  $   30,500,000   $  3,558,032
                                                            ================ =============
The  effective  LIBOR Rate and the Prime  Rate at March 31,  1999 were 4.94% and
7.75%, respectively.
</TABLE>
                                       11
<PAGE>

                    INTERNATIONAL THOROUGHBRED BREEDERS, INC.
                                AND SUBSIDIARIES

                               NOTES TO FINANCIAL
                                   (Unaudited)



     (A) On May 23, 1997, the Company entered into a two-year $55 million credit
facility with Credit  Suisse  secured by a pledge of certain of the personal and
real  property of the Company and its  subsidiaries  (the "Credit  Suisse Credit
Facility").  Proceeds of this  facility were used to repay in full the Company's
$30 million credit facility with Foothill Capital  Corporation  ("Foothill") and
to provide  funds for working  capital  and other  general  corporate  purposes,
including,  but  not  limited  to,  preliminary  development  of the  El  Rancho
Property. Of the remaining facility borrowings,  approximately $16.8 million was
placed in escrow  accounts,  financing  and closing  fees of $4.3  million  were
incurred  by the  Company  and $3.9  million was used by the Company for general
corporate  purposes  and  repayment  of  certain  other  financial  obligations.
Interest under the Credit Suisse Credit  Facility is payable  monthly in arrears
at 7% over the London interbank offered rate ("LIBOR").  The scheduled  maturity
date of the Credit Suisse Facility is June 1, 1999.

     The Credit Suisse Credit Facility is evidenced by a convertible  promissory
note (the "Credit Suisse Note"). In addition, Credit Suisse was granted warrants
to purchase  1,044,000  shares at an exercise price of $4.375 per share (subject
to adjustment in certain  events).  The warrants to purchase  546,847 shares are
immediately exercisable, have been valued at approximately $1.6 million and have
been  recorded as original  issue  discount.  The  warrants to purchase  497,153
shares became  exercisable  January 28, 1999,  following the consummation of the
Delaware  Settlement  and were  recorded as financing  expenses in the amount of
$1,242,883 during the third quarter of Fiscal 1999. (See Notes 2 and 11)

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

     The Credit Suisse Credit  Facility also provides for both  affirmative  and
negative covenants, including financial covenants such as tangible net worth, as
defined in the Credit Suisse Credit Facility. The Company's non- compliance with
certain non-financial  covenants at December 31, 1998 were waived on January 28,
1999 in connection with the Delaware Settlement. (See Note 3)

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

     The approval  agreements signed on January 28, 1999 between the Company and
CSFB  required the Company to register  with the SEC the warrants and the shares
issued to CSFB within 90 days of the  agreements.  To date,  the Company has not
completed  the  Registration  Statement.  The  Company is  currently  seeking an
extension  to  register  these  warrants  and shares and it is  expected  that a
resolution will be agreed upon by June 1, 1999.

     (B) As  discussed  in Note 3 above,  and in  connection  with the  Delaware
Settlement, the Company executed a note in the principal Amount of $3,558,032 in
order to purchase  the NPD Shares.  The terms of such ITB Note are  discussed in
Note 3.

(8)      INCOME TAX EXPENSE

     The  Company's  income tax  expense  for the three and nine  month  periods
ending  March 31,  1999 and 1998  relates  to New  Jersey  income  taxes for its
Freehold Raceway operations and the gain on the sale of the Freehold Assets.

(9)      COMMITMENTS AND CONTINGENCIES

     (A) On July 2, 1998, the Company  entered into the Delaware  Stipulation to
resolve certain  pending  litigation.  The Delaware  Settlement was subject to a
number of  conditions,  including  without  limitation,  Delaware court approval
(which was issued on October 6,  1998),  the  consent of the  Company's  primary
lender  (which was  granted on January  28,  1999) (See Note 3) and the grant of
certain  approvals  by certain  U.S.  bankruptcy  courts  (which  were issued on
January 15, 1999). The Delaware  Settlement resulted in, among other things: (i)
the dismissal of the pending litigation with prejudice; and (ii) the

                                       12

<PAGE>


                    INTERNATIONAL THOROUGHBRED BREEDERS, INC.
                                AND SUBSIDIARIES

                               NOTES TO FINANCIAL
                                   (Unaudited)

Company's purchase from NPD of approximately 2.9 million shares of the Company's
Common Stock (the "NPD  Shares") for $4.6  million  plus the  assumption  by the
Company of NPD's $5.8 million  promissory  note held by the Bankruptcy  Trustee,
and (iii) the termination of the Company's  option  agreement with D & C Gaming,
Inc. During the fourth quarter of Fiscal 1998, the Company  recorded a charge of
approximately  $3.7 million,  based on the difference between the estimated fair
value at June 30, 1998 of $2.50 per share and the agreed upon price per share of
$3.58,  for the purchase of the NPD Shares.  Approximately  $3.1 million of this
charge,  previously reflected in accrued expenses, was eliminated as part of the
Delaware Settlement on January 28, 1999.

     Upon the mailing of the settlement notice to the Company's  stockholders on
July 23,  1998,  Michael C.  Abraham,  Charles R.  Dees,  Jr.,  Frank A. Leo and
Kenneth S. Scholl  resigned  from the  Company's  Board of  Directors.  Upon the
purchase of the NPD Shares by the Company on January 28, 1999,  Anthony  Coelho,
Nunzio P. DeSantis and Joseph  Zappala  resigned  from the Board and  terminated
their employment and consulting agreements with the Company.

     As discussed above, the Delaware  Settlement also  contemplates a potential
disposition of the El Rancho Property. The proceeds of such sale will be used to
retire its outstanding  debt to the Company's  primary  lender.  There can be no
assurance that any such  disposition  will occur in the amounts  contemplated by
the Delaware Settlement. (See Note 3).

     As part of the Delaware Settlement,  Las Vegas Entertainment  Network, Inc.
has returned to the Company for cancellation approximately 2.1 million shares of
the Company's  common stock (the "LVEN  Shares"),  and has terminated all of its
contractual arrangements with the Company.

     As a result  of the  cancellation  of the  2,093,868  LVEN  Shares  and the
repurchase of the NPD Shares by the Company  (recorded as Treasury  Stock),  the
number of  outstanding  shares of the  Company's  common  stock was  reduced  to
8,980,227 shares.

     (B) The Company  entered into lease  agreements  for certain  equipment and
maintenance  contracts at the Garden State Park  facility and Freehold  Raceway.
Two of these  agreements  were based upon the daily  average of the total amount
wagered  and number of live  racing days at the  Company's  racetracks.  Minimum
rental  payments for the next five years were based on projected  racing  dates.
These  lease  agreements  were  transferred  as  part  of  the  sale  and  lease
transactions  completed on January 28, 1999. In connection  with the January 28,
1999 transactions,  the Company purchased the undepreciated balance of equipment
located at Garden State Park and a liquor license owned by an unaffiliated third
party, Service America Corporation, for $500,000 ($100,000 of which will be paid
by the  lessee).  During July 1997,  the Company  executed an agreement to lease
office space in Albuquerque, New Mexico for a five-year period, expiring on July
31, 2002.  The lease provided for a monthly rent of  approximately  $10,000 when
the space was fully  occupied.  In  connection  with  this  lease,  the  Company
sub-leased a portion of the  premises to AutoLend,  a company in which Nunzio P.
DeSantis is the Chairman, President and principal stockholder and Anthony Coelho
is a director,  for $600 per month. Upon consummation of the Delaware Settlement
on January 28, 1999, the Albuquerque lease was assumed by AutoLend.

     In connection with the Greenwood  Transaction  (See Note 2), Mr. Richard E.
Orbann,  Vice  President of Racing  Operations  of the Company,  and the Company
entered into an agreement  terminating Mr. Orbann's employment with the Company.
Such  termination was effective on February 5, 1999. The cost of terminating the
contract in the amount of $132,548 was recorded during the third quarter.

     As of December 31, 1998, the employment  contracts of Edward Ryan and Kerry
Fitzpatrick  expired.  During the third  quarter,  the Company paid  $119,036 in
severance payments in association with their employment contracts.

     (C) 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  for the period January
1, 1997 to the present.  It is the Company's  intent to cooperate fully with the
SEC's investigation.

     (D) The approval  agreements signed on January 28, 1999 between the Company
and CSFB  required  the Company to register  with the SEC the  warrants  and the
shares issued to CSFB within 90 days of the agreements. To date, the Company has
not completed such registration  statement.  The Company is currently seeking an
extension  to  register  these  warrants  and shares and it is  expected  that a
resolution will be agreed upon by June 1, 1999.

                                       13

<PAGE>


                    INTERNATIONAL THOROUGHBRED BREEDERS, INC.
                                AND SUBSIDIARIES

                               NOTES TO FINANCIAL
                                   (Unaudited)

         LEGAL PROCEEDINGS

Quigley et al. v. DeSantis et al.

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

     The  Quigley  Action  was  fully  and  finally  dismissed  and  settled  in
connection with the January 28, 1999 consummation of the Delaware  Settlement as
described in Note 3.

Rekulak v. DeSantis et al.

     On or about  September 11, 997, the action  entitled  Rekulak v.  DeSantis,
Abraham,  Coelho, Scholl, Zappala,  Corazzi and Las Vegas Entertainment Network,
Inc. and International  Thoroughbred Breeders, Inc., C.A. No. 15920, was brought
in the Delaware Court of Chancery alleging that the defendants  therein acted in
contravention  of  ITB's  by-laws,  Delaware  law and the  director  defendants'
fiduciary  duties  (the"Rekulak  Action").  The allegations  made and the relief
sought in the Rekulak Action are virtually identical to the allegations made and
relief sought in the Quigley Action.

     The Rekulak Action was fully and finally  dismissed in connection  with the
January 28, 1999 consummation of the Delaware Settlement as described in Note 3.

Green v. DeSantis et al.

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

     The Green Action was fully and finally  dismissed and settled in connection
with the January 28, 1999  consummation of the Delaware  Settlement as described
in Note 3.

NPD, Inc. v. Quigley et al.

     On or about  November 17, 1997,  an action  entitled  NPD, Inc. v. Quigley,
Francis W. Murray, Leo, Dees Jr., Mariucci,  Koenemund and James J. Murray, C.A.
No.  97-CV-5657,  was filed in the United States District Court for the District
of New Jersey,  alleging that the  defendants  therein had engaged in fraudulent
and conspiratorial conduct in connection with a certain Stock Purchase Agreement
between  Robert E. Brennan and NPD,  Inc.  ("the "NPD  Action").  The NPD Action
sought

                                       14

<PAGE>


                    INTERNATIONAL THOROUGHBRED BREEDERS, INC.
                                AND SUBSIDIARIES

                               NOTES TO FINANCIAL
                                   (Unaudited)

compensatory  and  punitive  damages.  The  Company  was not a party  to the NPD
Action.

     The NPD Action was fully and finally  dismissed  and settled in  connection
with the January 28, 1999  consummation of the Delaware  Settlement as described
in Note 3.

Harris v. DeSantis, et al.

     On February 24, 1998,  the action  entitled Myron Harris,  derivatively  on
behalf of  International  Thoroughbred  Breeders,  Inc. v.  Nunzio P.  DeSantis,
Anthony Coelho,  Kenneth W. Scholl,  Michael Abraham,  Joseph Zappala,  Frank A.
Leo,   Robert  J.  Quigley,   Charles  R.  Dees,   Jr.  and  Francis  W.  Murray
("Harris-Federal"),  C.A. No. 98-CV-517(JBS),  was brought in the District Court
for the  District  of New Jersey  (the  "Harris  Federal  Action").  The factual
allegations  and claims asserted in the  Harris-Federal  Action are virtually
identical to the claims asserted in the Quigley Action and in the  Counterclaims
asserted by the Company in the Quigley Action.

     On May 4,  1998,  all  defendants  filed a motion  to  dismiss,  or, in the
alternative,  a motion to stay the Harris-Federal  Action, pending resolution of
the Quigley Action.  The New Jersey District Court has not ruled on that motion.
On May 4, 1998, the plaintiff filed an amended complaint to, among other things,
add another stockholder as an additional plaintiff.

     As described  more fully below,  pursuant to the New Jersey  Memorandum and
the  satisfaction of certain  conditions set forth therein,  the  Harris-Federal
Action is to be fully and  finally  dismissed  with  prejudice.  See "New Jersey
Settlement."

Harris v. DeSantis, et al.

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

     Prior to filing pleadings in response to the Harris-State  complaints,  the
defendants  entered  into  the New  Jersey  Memorandum  pursuant  to  which  the
Harris-State Action is to be fully and finally dismissed with prejudice, and the
parties are to provide mutual releases of all claims related to the action.  See
"New Jersey Settlement."

New Jersey Settlement

     The New Jersey  Actions are  currently at a standstill  as the parties have
entered  into the New Jersey  Memorandum.  Subject to the approval of the court,
the  defendants  and the Company  will pay the  aggregate  sum of  $175,000  for
plaintiffs' counsel fees and expenses in the New Jersey Litigation.  Pursuant to
the  New  Jersey  Settlement,  following  the  implementation  of  the  Delaware
Settlement,  the defendants will  restructure the Audit Committee of the Company
so as to  facilitate  the  procurement  and timely  filing of audited  financial
statements in the future. Further, the Company will take all appropriate actions
necessary to promptly  initiate the quotation of the Company's  Common Stock and
Preferred Stock on the OTC Bulletin Board.

     Pursuant to the New Jersey  Settlement,  the plaintiffs  agreed not to file
objections to the Delaware Settlement.  In addition,  pursuant to the New Jersey
Settlement,  the plaintiffs will move for a dismissal,  with  prejudice,  of the
Harris-Federal  Action because the Delaware  Settlement bars further prosecution
of the claims in the Harris  Federal  Action.  For  settlement  purposes only, a
class will be certified for Harris-State Action consisting of all holders of the
Company's  stock after October 13, 1997 (the date AMEX suspended  trading of the
Company's stock). If the New Jersey Settlement becomes final, the plaintiffs and
the class  members  will release the  defendants  and the Company and all others
acting on the Company's  behalf from any claims that were asserted or could have
been asserted in the  Harris-State  Action.  The Settlement of the  Harris-State
Action remains subject to the execution of the definitive  Settlement  Documents
and court approvals.


                                       15

<PAGE>


                    INTERNATIONAL THOROUGHBRED BREEDERS, INC.
                                AND SUBSIDIARIES

                               NOTES TO FINANCIAL
                                   (Unaudited)

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

(10)     DEFERRED FINANCING COSTS

     Deferred financing costs at March 31, 1999 include those amounts associated
with its May 23, 1997  financing  agreement  with Credit  Suisse.  (See Note 7).
These costs of $6,238,731,  less amortization of $5,939,720,  are being expensed
over the two-year  life of the loan.  Amortization  expense for the three months
ended  March  31,  1999 and  1998 was  $1,044,839  and  $764,801,  respectively.
Amortization  expense  for the nine  months  ended  March 31,  1999 and 1998 was
$2,574,441 and $2,288,781, respectively.

     The Fiscal 1999  amounts for  interest and  financing  expenses  include an
accellerated  charge to existing deferred financing costs of $435,000 related to
the early debt payment in connection  with the sale of Freehold and the lease of
the Garden State Park facility.

(11)     STOCK OPTIONS AND WARRANTS

         (A)      EMPLOYEE AND  NON-EMPLOYEE OPTIONS

     The fair value of options issued  recognized as  non-employee  option costs
during  the nine  months  ended  March  31,  1999 and 1998 was $0 and  $819,413,
respectively.  At March  31,  1999,  total  employee  options  outstanding  were
1,300,000 and total non-employee  options  outstanding were 300,000.  Options to
purchase an aggregate of 6,000,000 shares of Common Stock were granted,  subject
to stockholder  approval,  to the Company's Chief Executive Officer and Chairman
of the Board.  On August 21,  1997,  the  Company  granted  non-qualified  stock
options to purchase an  aggregate  of 300,000  shares of Common Stock to certain
directors.  Upon  consummation  of the Delaware  Settlement on January 28, 1999,
options to  purchase  an  aggregate  of  6,300,000  shares of Common  Stock were
cancelled.

         (B)      WARRANTS

     At March 31, 1999, total warrants outstanding were 2,169,000,  1,647,817 of
which have been accounted for as deferred  financing costs and costs  associated
with the  acquisition  of the El  Rancho  property  and  497,153  of which  were
recorded as financing expenses. The deferred financing costs are being amortized
over the  terms of the  related  indebtedness.  The fair  value of the  warrants
issued in connection  with the  acquisition  of the El Rancho  property has been
capitalized  and  will be  amortized  when  the  facility  becomes  operational;
however, the Company has determined to dispose of the El Rancho Property.

     Effective  January 28, 1999,  in  connection  with the  Approval  Agreement
between the Company and CSFB,  the Company  agreed that the warrants to purchase
497,153 shares of common stock at $4.375 were  immediately  exercisable by CSFB.
The fair  value of the  warrants  of  $1,242,883  was  recorded  as a  financing
expense.


(12)     RELATED PARTY TRANSACTIONS

     During the nine months  ended March 31,  1999,  the Company paid $70,000 in
consulting  fees,  $25,000 for director  fees,  $3,500 for an auto allowance and
$25,765 in expense  reimbursements  to Anthony Coelho,  the Company's  Chairman,
pursuant to an agreement  effective  January 15, 1997. Mr.  Coelho's  consulting
agreement  was month to month,  under  which he was paid  $10,000  per month for
ongoing  consulting  services,  $2,500 for each board  meeting he attended and a
$500  monthly  automobile  allowance.  Mr.  Coelho's  consulting  agreement  was
terminated and options granted to him in the consulting agreement were canceled,
effective January 28, 1999, the date of consummation of the Delaware Settlement.

     The Company  pays Mr.  Scholl,  $10,000  per month for  ongoing  consulting
services as project manager for the El Rancho Property.  Mr. Scholl is currently
the Secretary of Casino-Co  and was  President and a director of Casino-Co  from
March 1996 to May 19, 1997.

                                       16

<PAGE>


                    INTERNATIONAL THOROUGHBRED BREEDERS, INC.
                                AND SUBSIDIARIES

                               NOTES TO FINANCIAL
                                   (Unaudited)


     The Company paid $10,000 per month to Mr. Zappala for  consulting  services
and for the first nine months of Fiscal 1999,  Mr.  Zappala was paid $10,000 for
director  fees and $11,777 of  reimbursed  expenses.  Upon  consummation  of the
Delaware  Settlement on January 28, 1999, Mr. Zappala's  consulting  arrangement
was terminated.

     On February 22, 1999, James J. Murray was elected by the Board of Directors
to serve as a director of the Company until the next stockholder's  meeting. Mr.
Murray is the  brother of Francis W.  Murray,  a director  and  employee  of the
Company.  Mr.  James J. Murray  previously  served as a director for the Company
from November 4, 1996 until January 15, 1997.

     For additional information regarding related party transactions see Note 16
in the consolidated financial statements included in the Company's Form 10-K for
the fiscal year ended June 30, 1998.

(13)     STOCK TRADING INFORMATION

     Effective  August 7, 1998,  the  Company's  Common Stock and its  Preferred
Stock were delisted from trading on the American Stock Exchange ("AMEX") for the
failure to comply with certain  listing  criteria.  Neither the Common Stock nor
the Preferred Stock have been traded on AMEX since October 13, 1997, the date on
which trading was suspended  because the Company had not filed its Annual Report
on Form 10-K for fiscal 1997 within the  Securities  and  Exchange  Commission's
prescribed time period.  Application is being made to initiate  quotation of the
Common Stock and the Preferred  Stock on the OTC Bulletin Board. In the interim,
the stock is listed for quotation on the NQB Pink Sheets.





                                       17

<PAGE>


                    INTERNATIONAL THOROUGHBRED BREEDERS, INC.
                                AND SUBSIDIARIES

            MANAGEMENT'S ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS
                OF OPERATIONS FOR THE THREE AND NINE MONTHS ENDED
                                 MARCH 31, 1999

ITEM 2 -  MANAGEMENT'S  DISCUSSION  AND  ANALYSIS OF  FINANCIAL  CONDITIONS  AND
     RESULTS OF OPERATIONS

Liquidity and Capital Resources

     The  Company's  working  capital,  as of March 31,  1999,  was a deficit of
($27,416,103) which represents a decrease of approximately  $18,025,496 from the
March 31, 1998 working  capital  deficit of  ($45,441,599).  The decrease in the
deficit  was  caused in part by the  re-classification  of  certain  assets  and
current  liabilities in connection with the discontinued  racetrack  operations,
offset by the  retirement  of $24.5 million of the Credit Suisse debt and losses
incurred  from  operations.  On May 23,  1997,  the  Company  obtained  a credit
facility from Credit Suisse. This two-year $55 million facility was secured by a
pledge of certain of the  personal  and real  property  of the  Company  and its
subsidiaries. Proceeds of this facility were used to repay in full the Company's
$30 million credit facility with Foothill Capital  Corporation  ("Foothill") and
were used to provide  funds for  working  capital  and other  general  corporate
purposes,  including,  but not limited  to,  preliminary  development  of the El
Rancho  property.  Interest  under the Credit Suisse Credit  Facility is payable
monthly  in  arrears  at 7% over  the  LIBOR  rate.  Of the  remaining  facility
borrowings,  approximately  $16.8  million  was  placed  in  escrow  accounts  (
including  $10 million in an interest  reserve  account).  Financing and closing
fees of $4.3  million  were paid and $3.9  million  was used by the  Company for
general corporate  purposes and repayment of certain financial  obligations.  On
January 28, 1999, the credit facility was reduced to $30.5 million in connection
with the sale of certain  assets of Freehold  Raceway and the sale of a ten-acre
parcel land at the Garden State Park  facility.  At March 31, 1999, the interest
rate on the Credit  Suisse  Credit  Facility was 11.94%.  The Company was not in
compliance  with certain  non-financial  covenants of the Credit  Suisse  Credit
Facility  through  January 28,  1999,  however,  Credit  Suisse has waived those
violations.  The loan matures June 1, 1999 unless, under certain conditions (See
Note 1), an extension is granted.

     The Credit Suisse Credit Facility is evidenced by a convertible  promissory
note (the "CSFB Note") pursuant to which $10 million of the aggregate  principal
amount of the CSFB Note can be converted in certain circumstances,  including on
the maturity date of the CSFB Note,  upon the prepayment of at least $10 million
in an aggregate  principal  amount of the CSFB Note or upon  acceleration of the
CSFB Note, at the option of Credit Suisse,  into shares of the Company's  Common
Stock at a conversion price of $8.75 per share (subject to adjustment in certain
events).  In  addition,  pursuant to the Credit  Suisse loan  agreement,  Credit
Suisse was granted  warrants to purchase  1,044,000 shares of Common Stock at an
exercise  price of $4.375 per share  (subject to adjustment in certain  events).
Warrants to purchase 546,847 shares of Common Stock are immediately  exercisable
and warrants to purchase  497,153  shares of Common Stock became  exercisable on
January 28, 1999 in connection with the Delaware  Settlement.  The fair value of
the warrants of $1,242,883 was recorded as a financing expense. (See Notes 3 and
11-B)

     The net loss for the nine months  ended  March 31,  1999 was  ($5,439,345).
Cash flows used by operating activities amounted to approximately  $547,258. The
net loss  incurred by the Company  includes  approximately  $4,343,000  of other
non-cash expenses.

     Cash  provided by  investing  activities  was  $12,895,888  during the nine
months  ended  March  31,  1999,  primarily  the  result  of  cash  proceeds  of
approximately  $19,900,000  from the sale of certain assets of Freehold  Raceway
and the sale of a  ten-acre  parcel of land at the Garden  State Park  facility,
partially  offset by the  purchase of  2,904,016  shares of  Treasury  Stock for
$6,850,000. (See Notes 2, 3 and 7-B)

     Cash used in financing  activities was  $12,501,784  during the nine months
ended March 31, 1999,  consisting  principally  of amounts drawn from the Credit
Suisse interest escrow account in the amount of $9,311,725, a $2,500,000 payment
of the Credit Suisse note and principal  payments of  approximately  $13,000,000
primarily associated with the retirement of the Freehold debt.

     On January 28, 1999,  the Company  completed the sale of Freehold  Raceway,
the sale of a ten-acre parcel at the Garden State Park facility and the lease of
the Garden State Park  facilities to  subsidiaries  of Greenwood  Racing,  Inc.,
which  owns  Philadelphia  Park  racetrack,  the Turf  Clubs and  Phonebet  (the
"Greenwood Transaction"). The

                                                                18

<PAGE>


                    INTERNATIONAL THOROUGHBRED BREEDERS, INC.
                                AND SUBSIDIARIES

            MANAGEMENT'S ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS
                OF OPERATIONS FOR THE THREE AND NINE MONTHS ENDED
                                 MARCH 31, 1999

purchase  price was $46  million  ($1 million of which will be held in escrow to
cover certain  indemnification  and other  obligations of the Company),  with an
additional $10 million in contingent  promissory notes (the "Contingent  Notes")
which become  effective  upon,  among other  things,  New  Jersey's  approval of
off-track betting facilities or telephone account pari-mutuel  wagering on horse
racing.  Further  adjustments  could be made to increase the  purchase  price if
certain  additional  regulatory gaming changes are approved in New Jersey in the
future.  Greenwood Racing,  Inc. will guarantee the performance by the purchaser
of all obligations under the Contingent Notes, and following a consummation of a
joint venture with Greenwood  Racing,  Inc., Penn National  Gaming,  Inc. ("Penn
National"),  which owns Penn  National  Race  Course,  Pocono  Downs  Racetrack,
Charles Town Races and at least ten off-track  betting parlors in Pennsylvania),
will also guarantee the Contingent Notes.

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

     The Company  currently  estimates that the $1.475 million made available on
January 28, 1999 from the Credit Suisse Credit  Facility and the funds placed in
the various reserve accounts on that date, together with cash generated from the
Company's operations prior to the sale of the discontinued  operations,  will be
sufficient  to finance its current  operations  and  expected  expenditures  and
carrying costs of the El Rancho Property until June 1, 1999. On May 7, 1999, the
Company  notified their primary lender,  Credit Suisse,  of its intent to extend
the loan maturity date to June 1, 2000.  The Company will be required to deposit
sufficient  funds  into  an  escrow  account  to  cover  interest  and  fees  of
approximately $4 million. The Company is currently considering financing sources
for the funds required to extend the debt payment date. However, there can be no
assurance that the Company will be successful in such endeavors.

     The  Company's  Board  is  continuing  to  consider  all of  the  Company's
strategic  options  to  maximize  stockholder  value.  The  Company's  Board  is
considering  alternatives for the Company's future, including the acquisition of
one or more operating businesses.

     The accompanying  financial statements have been prepared assuming that the
Company  will  continue as a going  concern.  As  discussed in Footnote 1 to the
consolidated  financial  statements,   the  Company  has  sustained  a  loss  of
approximately  $18.3  million  for the year  ended  June 30,  1998 and a loss of
approximately  $5.4  million for the nine months  ended March 31,  1999,  all of
which raise  substantial doubt about its ability to continue as a going concern.
In  addition,  the debt to the  Company's  primary  lender is due June 1,  1999,
unless an extension is obtained.  Management's  plans in regard to these matters
are also described in Footnote 1 to the consolidated  financial statements.  The
consolidated  financial  statements  do not include any  adjustments  that might
result from the outcome of these uncertainties.


Inflation

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

Impact of Year 2000 on the Company's Systems

     The year 2000 issue is the result of computer  programs being written using
two digits rather than four to define the applicable  year,  which may result in
systems failures and disruptions to operations at January 1, 2000. Management is
in the  process of  determining  whether  all of the  Company's  accounting  and
operational systems are year 2000 compliant. Although there can be no assurance,
management does not expect the costs associated with any required conversions of
systems to ensure year 2000  compliance to be significant and expects to be Year
2000 compliant by its fiscal 1999 year end.



                                       19

<PAGE>


                    INTERNATIONAL THOROUGHBRED BREEDERS, INC.
                                AND SUBSIDIARIES

            MANAGEMENT'S ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS
                OF OPERATIONS FOR THE THREE AND NINE MONTHS ENDED
                                 MARCH 31, 1999


OPERATIONS
----------

Results of Operations for the Three Months Ended March  31, 1999
----------------------------------------------------------------

     On January 28, 1999,  the Company  completed the sale of Freehold  Raceway,
the sale of a ten-acre  parcel at Garden State Park, and the lease of the Garden
State Park  facilities to  subsidiaries of Greenwood  Racing,  Inc.,  which owns
Philadelphia  Park  racetrack,  the Turf Clubs,  and  Phonebet  (the  "Greenwood
Transaction.") Accordingly,  the operating results of the racetrack subsidiaries
have been  segregated  and reported as  discontinued  operations for each of the
periods  presented.  Also,  on  the  same  date,  the  Company  consummated  the
settlement  under the  Stipulation  and Agreement of Compromise,  Settlement and
Release  entered  into on  July  2,  1998 to  resolve  the  pending  stockholder
derivative  litigation in the Delaware  Court of Chancery.  Among other actions,
the Delaware Settlement contemplates the disposition of the El Rancho Property.

     For the third quarter of Fiscal 1999,  the Company's  loss from  continuing
operations was ($5,369,687) as compared to a loss from continuing operations for
the comparable  period in the prior fiscal year of ($4,088,000),  an increase in
the loss of $1,281,687. This increase in the loss from continuing operations was
primarily the result of: (i) an increase in amortization  and financing costs of
$2,023,021  associated  with the  reduction of debt during the quarter and costs
associated with the Delaware Settlement;  partially offset by (ii) a decrease in
general and administrative  expenses of $617,648 or 41% as compared to the prior
fiscal  quarter  primarily  as a result of a decrease in legal,  accounting  and
consulting  fees during the comparable  quarters;  and (iii) a decrease from the
prior fiscal  quarter in interest  expense of $271,819 or 15% as a result of the
reduced debt.

     Income from discontinued operations was $3,869,147 for the third quarter of
Fiscal 1999 as compared to income  from  discontinued  operations  for the third
quarter of Fiscal 1998 of  $1,401,825,  an increase of  $2,467,322.  The Company
recognized a net gain of  $3,621,507,  following the write down to fair value of
the remaining  assets of Garden State Park, on the sale of Freehold  Raceway and
the sale of a ten-acre parcel at the Garden State Park facility during the third
quarter.  Income from racetrack operations was significantly reduced as a result
of the termination of racing on January 28, 1999.

     During the third quarter of Fiscal 1999, the Company incurred a net loss of
($1,500,540)  as  compared  to a net  loss of  ($2,686,174)  for the  comparable
quarter in Fiscal 1998. The decrease in net loss of $1,185,634 was the result of
those differences described above.

Results of Operations for the Nine Months Ended March 31, 1999
--------------------------------------------------------------

     As discussed above, the operating results of the racetrack subsidiaries for
the nine  month  periods  have been  segregated  and  reported  as  discontinued
operations for each of the periods  presented as a result of the sale on January
28, 1999.

     For the  nine  months  ended  March  31,  1999,  The  Company's  loss  from
continuing  operations was  ($13,565,036)  as compared to a loss from continuing
operations for the comparable period in prior fiscal year of  ($13,509,950),  an
increase  in the loss of  $55,086.  This  increase  in the loss from  continuing
operations  was  primarily  the result of: (i) an increase in  amortization  and
financing  costs of  $2,232,105  associated  with  reducing  the debt during the
quarter and costs associated with the Delaware  Settlement;  (ii) an increase in
corporate  costs  associated  with the  information  statement  provided  to the
Company's stockholders in the second quarter of fiscal 1999; (iii) a decrease in
interest   income;   partially   offset  by  (iv)  a  decrease  in  general  and
administrative   expenses  of  $2,106,155  or  37%  primarily  as  a  result  of
non-employee  option  expense of $819,413  recognized in the prior fiscal year's
first quarter and an approximate  $1,368,000  decrease in legal,  accounting and
professional fees and employee severance costs.

     Income from  discontinued  operations was $8,125,691 and $5,582,058 for the
nine months ended March 31, 1999 and 1998, respectively.  The increase in income
was primarily the result of the net gain, following the write down to fair value
of the  remaining  assets of Garden  State  Park,  on the sale of the  racetrack
operations partially offset by the termination of racing as discussed above.

                                       20

<PAGE>


                    INTERNATIONAL THOROUGHBRED BREEDERS, INC.
                                AND SUBSIDIARIES

            MANAGEMENT'S ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS
                OF OPERATIONS FOR THE THREE AND NINE MONTHS ENDED
                                 MARCH 31, 1999


     During the nine months  ended March 31,  1999,  the Company  incurred a net
loss  of  ($5,439,345)  as  compared  to a net  loss  of  ($7,927,893)  for  the
comparable period in Fiscal 1998. The decrease in net loss of $2,488,548 was the
result of those differences described above.



                                       21

<PAGE>



                    INTERNATIONAL THOROUGHBRED BREEDERS, INC.
                                AND SUBSIDIARIES

                                     PART II

                                OTHER INFORMATION


Item 6.   Exhibits and Reports on Form 8-K

         During the  quarter  ended March 31,  1999,  the  registrant  filed the
following Current Reports on Form 8-K:



        Date                                  Subject Matter
----------------------         ---------------------------------------------


   January 28, 1999                   Sale and lease of racetrack assets




                                       22

<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.





May 14, 1999                 /s/William H. Warner
                             --------------------
                                   William H. Warner
                                   Treasurer
                                   (Principal Financial and Accounting Officer)



                                       23

<PAGE>