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                   December 31, 2002
                               -------------------------------------------------
                                                        OR

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

For the transition period from                     to
                              ---------------------  ---------------------------

Commission file number                0-9624
                      ----------------------------------------------------------


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

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

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

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

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

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

                      APPLICABLE ONLY TO CORPORATE ISSUERS:

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


           Class                          Outstanding at February 14, 2003
------------------------------            --------------------------------
Common Stock, $ 2.00 par value                    8,252,133 Shares


<PAGE>



                    INTERNATIONAL THOROUGHBRED BREEDERS, INC.

                                    FORM 10-Q

                                QUARTERLY REPORT
                   FOR THE SIX MONTHS ENDED DECEMBER 31, 2002
                                   (Unaudited)

                                TABLE OF CONTENTS

                                                                        PAGE
PART I.           FINANCIAL INFORMATION

     Item 1.  Financial Statements:

              Consolidated Balance Sheets
                     as of December 31, 2002 and June 30, 2002..........1-2

              Consolidated Statements of Operations
                     for the Three Months and Six Months ended
                     December 31, 2002 and 2001 ........................3

              Consolidated Statement of Stockholders' Equity
                     for the Six Months ended December 31, 2002.........4

              Consolidated Statements of Cash Flows
                     for the Six Months ended
                     December 31, 2002 and 2001.........................5

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

     Item 2.  Management's Discussion and Analysis of
                     Financial Condition and Results of Operations......18-23

     Item 4.  Controls and Procedures...................................24


PART II.          OTHER INFORMATION

     Item 6.  Exhibits and Reports on Form 8-K..........................25

SIGNATURES        ......................................................26

CERTIFICATIONS..........................................................27-29




<PAGE>

                    INTERNATIONAL THOROUGHBRED BREEDERS, INC.
                                AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS
                    AS OF DECEMBER 31, 2002 AND JUNE 30, 2002

                                     ASSETS

                                             December 31,
                                                2002         June 30,
                                             (UNAUDITED)       2002
                                            ------------    ------------
CURRENT ASSETS:
     Cash and Cash Equivalents            $   1,216,654   $     796,610
     Accounts Receivable                        253,696          37,682
     Prepaid Expenses                           470,655         190,639
     Spare Parts Inventory                    1,098,849               0
     Other Current Assets                       391,711         391,596
     Net Assets of Discontinued
       Operations - Current                     118,332         123,569
                                            ------------    ------------
     TOTAL CURRENT ASSETS                     3,549,897       1,540,096
                                            ------------    ------------

EQUIPMENT:
     Leasehold Improvements -
       Port of Palm Beach                       256,406               0
       Equipment                                752,540         723,420
                                            ------------    ------------
                                              1,008,946         723,420
     LESS: Accumulated Depreciation
             and Amortization                   182,810         113,061
                                            ------------    ------------

     TOTAL EQUIPMENT, NET                       826,136         610,359
                                            ------------    ------------

OTHER ASSETS:
     Notes Receivable                        33,000,000      33,000,000
     Deposit on Purchase of Palm Beach
       Princess Mortgage                      4,000,000       3,500,000
     Deposits and Other Assets -
       Non-Related Parties                      435,032         374,724
     Deposits and Other Assets -
       Related Parties                        5,989,042       6,903,115
                                            ------------    ------------
     TOTAL OTHER ASSETS                      43,424,074      43,777,839
                                            ------------    ------------


TOTAL ASSETS                              $  47,800,107   $  45,928,294
                                            ============    ============


See Notes to Consolidated Financial Statements.

                                        1
<page>

                    INTERNATIONAL THOROUGHBRED BREEDERS, INC.
                                AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS
                    AS OF DECEMBER 31, 2002 AND JUNE 30, 2002

                      LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
                                                            December 31,
                                                                2002         June 30,
                                                            (UNAUDITED)       2002
                                                           ------------   ------------
<CAPTION>
<S>                                                        <C>            <C>
CURRENT LIABILITIES:
     Accounts Payable                                     $  1,587,596   $  1,324,351
     Accrued Expenses                                        1,839,109      1,353,811
     Short-Term Debt                                         2,789,006      1,062,280
                                                           ------------   ------------
     TOTAL CURRENT LIABILITIES                               6,215,711      3,740,442
                                                           ------------   ------------

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

LONG-TERM DEBT                                                       0              0
                                                           ------------   ------------

COMMITMENTS AND CONTINGENCIES                                  -                -

STOCKHOLDERS' EQUITY:
     Series A Preferred Stock, $100 Par Value,
      Authorized 500,000 Shares, 362,489 and 362,488
      Issued and Outstanding, respectively                  36,248,875     36,248,775
     Common Stock, $2 Par Value,
      Authorized 25,000,000 Shares,
      Issued, 11,480,278 and 11,480,275, respectively and
     Outstanding, 8,252,133 and 11,480,275, respectively    22,960,555     22,960,549
     Capital in Excess of Par                               20,191,984     20,192,090
     (Deficit) (subsequent to June 30, 1993,
     date of quasi-reorganization)                         (44,415,320)   (45,423,435)
                                                           ------------   ------------
                                                            34,986,094     33,977,979
     LESS:
     Treasury Stock, 3,228,145 Shares, at Cost              (1,614,072)             0
     Deferred Compensation, Net                                (14,166)       (16,667)
                                                           ------------   ------------
     TOTAL STOCKHOLDERS' EQUITY                             33,357,856     33,961,312
                                                           ------------   ------------

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                $ 47,800,107   $ 45,928,294
                                                           ============   ============
</TABLE>


See Notes to Consolidated Financial Statements.

                                        2

<PAGE>


                    INTERNATIONAL THOROUGHBRED BREEDERS, INC.
                                AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF OPERATIONS
          FOR THE THREE AND SIX MONTHS ENDED DECEMBER 31, 2002 AND 2001
                                   (UNAUDITED)


<TABLE>
                                                     Three Months Ended                       Six Months Ended
                                                         December 31,                            December 31,
                                            --------------------------------------    --------------------------------------
                                                  2002                 2001                 2002                 2001
                                            -----------------    -----------------    -----------------    -----------------
<CAPTION>
<S>                                       <C>                  <C>                  <C>                  <C>
REVENUE:
     Revenue from Operations              $        6,792,811   $        4,889,025   $       13,112,238   $       10,906,372
     Other Income                                          0               77,277                    0               78,056
     Interest Income                                 114,300               94,057              214,048              238,393
                                            -----------------    -----------------    -----------------    -----------------
                           TOTAL REVENUES          6,907,111            5,060,359           13,326,286           11,222,821
                                            -----------------    -----------------    -----------------    -----------------

EXPENSES:
     Cost of Revenues:
     Operating Expenses                            4,258,222            4,141,188            8,547,563            8,551,270
     Depreciation & Amortization                      49,179               13,251              127,899               24,045
     General & Administrative Expenses -
      Palm Beach Princess                          1,132,525              858,519            1,848,770            1,456,194
     General & Administrative Expenses -
      Parent                                         487,139              540,230              973,994            1,080,620
     Development Costs                                51,211              194,988              142,107              241,603
     Interest and Financing Expenses                 271,834              139,452              588,839              215,935
                                            -----------------    -----------------    -----------------    -----------------
                           TOTAL EXPENSES          6,250,110            5,887,628           12,229,172           11,569,667
                                            -----------------    -----------------    -----------------    -----------------

INCOME (LOSS) BEFORE TAX PROVISION                   657,001             (827,269)           1,097,114             (346,846)
     State Income Tax Expense                         62,000                    0               89,000               22,000
                                            -----------------    -----------------    -----------------    -----------------

NET INCOME (LOSS)                         $          595,001   $         (827,269)  $        1,008,114   $         (368,846)
                                            =================    =================    =================    =================

NET BASIC AND DILUTED INCOME (LOSS)
   PER COMMON SHARE                       $             0.06   $            (0.07)  $             0.09   $            (0.03)
                                            =================    =================    ================     =================

WEIGHTED AVERAGE COMMON
   SHARES OUTSTANDING                             10,527,710           11,480,272           11,164,480           11,480,270
                                            =================    =================    ================     ================
</TABLE>

See Notes to Consolidated Financial Statements.

                                        3


<PAGE>

                    INTERNATIONAL THOROUGHBRED BREEDERS, INC.
                                AND SUBSIDIARIES

                 CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
                   FOR THE SIX MONTHS ENDED DECEMBER 31, 2002

<TABLE>

                                                                Preferred                 Common
                                                          ---------------------  ------------------------
                                                          Number of               Number of
                                                           Shares     Amount       Shares       Amount
                                                          ---------  ----------  ------------  ----------
<CAPTION>
<S>                                                        <C>     <C>            <C>        <C>
BALANCE - JUNE 30, 2002                                    362,488 $ 36,248,775   11,480,275 $ 22,960,549

   Purchase of Shares for Treasury in
    connection with REB Trustee
   Shares Issued for Fractional Exchanges
    With Respect to the One-for-twenty
    Reverse Stock Split effected on March 13, 1912               1          100            3            6
   Amortization of Deferred Compensation Costs              ---         ---          ---          ---
   Net Income for the Six Months Ended December 31, 2002    ---         ---          ---          ---

                                                          ---------  ----------  ------------  ----------
BALANCE - DECEMBER 31, 2002                                362,489 $ 36,248,875   11,480,278 $ 22,960,555
                                                          =========  ==========  ============  ==========
</TABLE>

<TABLE>

                                                            Capital                    Treasury     Deferred
                                                           in Excess                     Stock       Compen-
                                                             of Par       (Deficit)     At Cost       sation       Total
                                                           -----------  -------------  -----------  ----------  ------------
<CAPTION>
<S>                                                      <C>           <C>            <C>          <C>         <C>
BALANCE - JUNE 30, 2002                                  $ 20,192,090  $ (45,423,435) $          0 $  (16,667) $ 33,961,312

   Purchase of Shares for Treasury in
    connection with REB Trustee                                                         (1,614,072)              (1,614,073)
   Shares Issued for Fractional Exchanges
    With Respect to the One-for-twenty
    Reverse Stock Split effected on March 13, 1912               (106)      ---                         ---          ---
   Amortization of Deferred Compensation Costs                ---           ---                         2,501         2,501
   Net Income for the Six Months Ended December 31, 2002      ---          1,008,114                     ---      1,008,115

                                                           -----------  -------------  -----------  ----------  ------------
BALANCE - DECEMBER 31, 2002                              $ 20,191,984  $ (44,415,320) $ (1,614,072 $  (14,166) $ 33,357,856
                                                           ===========  =============  ===========  ==========  ============
</TABLE>


See Notes to Consolidated Financial Statements.
                                       4

<PAGE>

                    INTERNATIONAL THOROUGHBRED BREEDERS, INC.
                                AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
               FOR THE SIX MONTHS ENDED DECEMBER 31, 2002 AND 2001
                                   (UNAUDITED)
<TABLE>
                                                                     Six Months Ended
                                                                       December 31,
                                                              -----------------------------
                                                                   2002            2001
                                                              -------------    ------------
<CAPTION>
<S>                                                         <C>              <C>
CASH FLOWS FROM OPERATING ACTIVITIES:                       $    1,008,114   $    (368,846)
                                                              -------------    ------------
 Adjustments to reconcile income (loss) to net cash
 provided by operating activities:
      Depreciation and Amortization                                127,899          26,545
      (Gain) on Sale of Fixed Assets                                     0         (77,577)
      Changes in Operating Assets and Liabilities -
       (Increase) Decrease in Accounts Receivable                 (216,015)        549,798
       (Increase) in Other Assets                                   32,893        (291,342)
        Decrease (Increase) in Prepaid Expenses                     27,605        (131,691)
        Increase in Accounts Payable and Accrued Expenses          548,547       1,110,234
                                                              -------------    ------------
     CASH PROVIDED BY OPERATING ACTIVITIES                       1,529,043         817,121
                                                              -------------    ------------

CASH FLOWS FROM INVESTING ACTIVITIES:
    Deposits on Purchase of Palm Beach Princess Mortgage          (500,000)     (1,000,000)
    Investment in Port Lease                                      (100,000)              0
    Proceeds from Auction of Garden State Park Fixed Assets              0       1,258,476
    Capital Expenditures                                          (303,424)       (313,820)
    Loans made on Development Projects                                   0        (739,894)
    Increase in Other Investment Activity                            4,936          13,551
                                                              -------------    ------------
     CASH (USED IN) INVESTING ACTIVITIES                          (898,488)       (781,687)
                                                              -------------    ------------

CASH FLOWS FROM FINANCING ACTIVITIES:
    Principal Payments on Short Term Notes                        (210,511)        (76,383)
    Decrease in Balances Due to/From Subsidiaries                     (437)          7,003
                                                              -------------    ------------
     CASH (USED IN) FINANCING ACTIVITIES                          (210,948)        (69,380)
                                                              -------------    ------------

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS               419,607         (33,946)
          LESS CASH AND CASH EQUIVALENTS  FROM
            DISCONTINUED OPERATIONS                                    437         (19,007)
     CASH AND CASH EQUIVALENTS AT BEGINNING OF THE PERIOD          796,610       1,361,287
                                                              -------------    ------------
     CASH AND CASH EQUIVALENTS AT END OF THE PERIOD         $    1,216,654   $   1,308,334
                                                              =============    ============

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


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

See Notes to Consolidated Financial Statements.

                                        5

<PAGE>


                    INTERNATIONAL THOROUGHBRED BREEDERS, INC.
                                AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

(1)  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     BASIS OF PRESENTATION

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

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

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

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

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

     (D)  Depreciation and Amortization - Depreciation of property and equipment
were computed by the  straight-line  method at rates  adequate to allocate their
cost or adjusted fair value in accordance  with  generally  accepted  accounting
principles over the estimated  remaining useful lives of the respective  assets.
Amortization  expense  consists  of the write off of major  vessel  repairs  and
maintenance work normally

                                        6

<PAGE>


                    INTERNATIONAL THOROUGHBRED BREEDERS, INC.
                                AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

completed at dry dock in the fall of each year.  These  expenses are written off
during a one year period following the dry dock period. For the six months ended
December 31, 2002, the amortized expense was $55,650.

     (E) Net Assets of  Discontinued  Operations - At December 31, 2002 and June
30, 2002,  the  remaining  net assets and  liabilities  of Garden State Park and
Freehold Raceway were classified as "Net Assets of Discontinued Operations."

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

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

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

     (I)  Use  Of  Estimates  -  The  preparation  of  financial  statements  in
conformity with generally accepted accounting  principles requires management to
make estimates and  assumptions  that affect the reported  amounts of assets and
liabilities and disclosure of contingent  assets and liabilities at the dates of
the  financial  statements  and the  reported  amounts of revenues  and expenses
during the reporting periods. Actual results could differ from those estimates.

     (J) Net Income per Common  Share - Income per common  share is  computed by
dividing  net income by the  weighted  average  number of shares of common stock
outstanding.  For the three months ended December 31, 2002 and 2001 the weighted
average number of shares outstanding is 10,527,710 and 11,480,272, respectively.
For the six months ended December 31, 2002 and 2001 the weighted  average number
of shares  outstanding is 11,164,480 and 11,480,270,  respectively.  On December
13, 2002, the Company  purchased  3,228,145  shares of its Common Stock from the
Chapter 11  Trustee  for the  Bankruptcy  Estate of Robert E.  Brennan  and have
accounted  for the  transaction  on the cost method of  accounting  for treasury
stock.  Options and  warrants to purchase  4,046,500  of Common Stock at various
prices per share,  for the three and six months ended December 31, 2002 were not
included in the  computation  of income per share because the exercise  price of
those  options and  warrants  were above market  value.  Options and warrants to
purchase  4,046,500 of Common Stock at various  prices per share,  for the three
and six months ended  December 31, 2001 were not included in the  computation of
diluted loss per share as their effect would be anti-dilutive.

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



                                        7

<PAGE>


                    INTERNATIONAL THOROUGHBRED BREEDERS, INC.
                                AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

(2)  NOTES RECEIVABLE

     A portion  of the  proceeds  from the sale of the  non-operating  former El
Rancho  Hotel and  Casino in Las Vegas to  Turnberry/Las  Vegas  Boulevard,  LLC
("Turnberry") on May 22, 2000 was used by us to purchase a Turnberry  promissory
note in the face amount of  $23,000,000.  The interest rate under such note will
be  adjusted  from time to time  since the  interest  actually  payable  will be
dependent  upon,  and payable solely out of, the buyer's net cash flow available
for distribution to its equity owners  ("Distributable  Cash"). After the equity
investors in the buyer have received total  distributions equal to their capital
contributions plus an agreed upon return on their invested capital, the next $23
million of  Distributable  Cash will be paid to us. We will  thereafter  receive
payments  under the note  equal to 33 1/3% of all  Distributable  Cash until the
maturity date, which occurs on the 30th anniversary of our purchase of the note.
We may  convert  the  promissory  note,  at our  option,  into a 33 1/3%  equity
interest  in  the  buyer  during  a six  month  period  beginning  at  the  15th
anniversary  of the issuance of the note. If not then  converted,  the note will
convert into a 33 1/3% equity  interest in the buyer at the 30th  anniversary of
its issuance.

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

     In  addition,  we sold two large  bronze  sculptures  located at the Garden
State Park  property to Realen,  in exchange  for Realen's  promissory  note due
November 30, 2002, in the principal  amount of $700,000.  The Chapter 11 Trustee
for the  Bankruptcy  Estate of  Robert E.  Brennan  claimed  ownership  of those
sculptures,  and we settled the  resulting  litigation  over the  sculptures  by
agreeing that the first $350,000 in principal payments made by Realen under such
note would be remitted to the Brennan Bankruptcy Trustee (together with one-half
of the interest paid by Realen under such note).  The remaining  $350,000 of the
$700,000 note is  classified in other current  assets on our balance sheet as of
December 31, 2002 and June 30, 2002. As part of the  settlement of the sculpture
litigation, the party who sold us the sculptures, agreed to reduce the amount of
our obligation for payment of the balance of the sculpture  price  (described in
Note 5(A) below) by the same principal amount,  $350,000,  given up by us to the
Trustee.  As of February 19, 2003, Realen had not made the payment in the amount
of $700,000 which was due on November 30, 2002.


                                        8

<PAGE>


                    INTERNATIONAL THOROUGHBRED BREEDERS, INC.
                                AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

(3)  DEPOSITS AND OTHER ASSETS - RELATED PARTIES

     The following items are classified as deposits and other assets (See Note 9
     - Related Party Transactions):
<TABLE>

                                                                             December 31,    June 30,
                                                                                 2002         2002
                                                                             -----------   -----------
<CAPTION>
<S>                                                           <C>           <C>           <C>
Loans to the Ft Lauderdale Project (OC Realty, LLC)           $   2,034,304 $             $  2,067,363
Loan Transferred from Golf Course Project to OC Realty,LLC          735,584                        -0-
Accounts Receivable from Francis W. Murray                           34,085                        -0-
Loans to Francis W. Murray                                           93,000                        -0-
Loan from Francis W. Murray                                        (275,000)                       -0-
Advances from OC Realty, LLC                                       (111,419)
                                                                -----------
Total Loans to OC Realty, LLC/Francis W. Murray                                2,510,554
Accrued Interest on Loans to the Ft. Lauderdale Project
(OC Realty, LLC)                                                    489,848                    458,711
Accrued Interest Transferred from Golf Course Project to
OC Realty, LLC                                                $     163,299
                                                                -----------
Total Accrued Interest on Loans to OC Realty, LLC                                653,147
Loans including accrued interest to the Golf Course Project                          -0-       911,169
in California
Deposits on Port Lease                                                               -0-        75,000
Advances (from)/to MJQ Corporation                                               (35,468)      521,583
Accounts Receivable from Frank Leo                                                10,060        13,804
Accounts Receivable from Francis W Murray                                            -0-        19,236
Port Lease Rights                                                                250,000           -0-

Assets Assigned from Leo Equity Group, Inc. (See Note 9):

Note Receivable from Michael J Quigley III *                                   2,600,749     2,600,749
Accounts Receivable from MJQ Corp                                                    -0-        21,000
Accounts Receivable from Ft Lauderdale Project                                       -0-         8,000
Loans to Francis W Murray                                                            -0-        93,000
Accounts Receivable from GMO Travel                                                  -0-       113,500
                                                                             -----------   -----------
         Total Deposits and Other Assets                                    $  5,989,042  $  6,903,115
                                                                             ===========   ===========
</TABLE>

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

                                        9

<PAGE>


                    INTERNATIONAL THOROUGHBRED BREEDERS, INC.
                                AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

(4)  DEPOSITS AND OTHER ASSETS - NON RELATED PARTIES

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

                                            December 31,   June 30,
                                                2002         2002
                                             ---------    ---------

Loans to South American Gaming Projects  $     349,472 $    349,472
Other Misc. Assets                              85,560       25,252
                                             ---------    ---------
         Total                           $     435,032 $    374,724
                                             =========    =========

(5)  NOTES AND MORTGAGES PAYABLE

     Notes and Mortgages Payable are summarized below:
<TABLE>

                                                December 31, 2002           June 30, 2002
                                   Interest   ---------------------    -----------------------
                                    % Per
                                    Annum      Current    Long-Term      Current     Long-Term
                                  ----------  ----------   -------     -----------    ------
<CAPTION>
<S>                                <C>      <C>          <C>          <C>           <C>
International Thoroughbred
Breeders Inc.:
--------------------------
MCJEM, INC. (A)                        15%  $    132,000 $     -0-    $    132,000  $    -0-

Chapter 11 Trustee (the
"Trustee") for the Bankruptcy
Estate of Robert E. Brennan (B)         9%     1,511,036       -0-             -0-       -0-

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

First Insurance Funding Corp.(D)     6.95%       168,702       -0-             -0-       -0-

Frank A. Leo (E)                        0%        75,000       -0-             -0-       -0-

Other                              Various         2,268       -0-          30,280       -0-

Garden State Park:
------------------
Service America Corporation (F)         6%       160,000       -0-         160,000       -0-
                                              ----------   -------     -----------    ------
    Totals                                  $  2,949,006 $     -0-    $  1,222,280  $    -0-

Less:
Net Liabilities of Discontinued
  Operations - Current                          (160,000)      -0-        (160,000)      -0-
                                              ----------   -------     -----------    ------
    Totals                                  $  2,789,006 $     -0-    $  1,062,280  $    -0-
                                              ==========   =======     ===========    ======
</TABLE>

     (A) Our promissory  note payable to MCJEM,  INC.  represents the balance of
the  purchase  price  owing from our  purchase  of two large  bronze  sculptures
located on the Garden State Park property.  This note is due upon  collection of
our note receivable from Realen in the amount of $350,000. (See Note 2.)

                                       10

<PAGE>


                    INTERNATIONAL THOROUGHBRED BREEDERS, INC.
                                AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)


     (B) On December 13, 2002, we issued a twelve month  promissory  note in the
amount of  $1,648,403  (the "Stock  Purchase  Note")  bearing  interest at 9% to
Donald F. Conway,  the Chapter 11 Trustee  (the  "Trustee")  for the  Bankruptcy
Estate of Robert E. Brennan for the  purchase of 3,228,146  shares of our common
stock held or claimed by the Trustee.  The first  principal  payment of $137,367
was also paid on that date. At December 31, 2002,  the principal  balance on the
note was $1,511,036.  The Stock Purchase Note is secured by a security  interest
in proceeds and payments  receivable  under the $10 million  Realen Note.  As of
February 14,  2003,  we are in default on the note as no further  payments  have
been made to the Trustee on the note. (See Note 6.)

     (C) On January 26, 2001,  we borrowed  $1,000,000  from Michael J. Quigley,
III at an annual  interest  rate of 10%.  Principal and interest on the note was
due on or about April 25, 2001. On May 14, 2001, the loan was modified to be due
on demand. The loan is secured by a pledge of the $10 million Realen Note, which
is subordinate  to the security  interest of the Trustee which secures the Stock
Purchase Note and by a pledge of the $23 million Turnberry Note.(See Note 6.)

     (D) Our  directors  and  officers  liability  policy was  financed by First
Insurance  Funding  Corp.  for a $314,677  one year  promissory  note at a 6.95%
interest  rate.  At December 31,  2002,  the  principal  balance on the note was
$168,702.

     (E) In  connection  with the  purchase  of Leo  Equity  Group,  Inc.  stock
effective  October 27, 2002, the Company issued a promissory  note in the amount
of $250,000.  The Company began making monthly  payments of $25,000 in July 2002
when the Stock Purchase Agreement was originally signed. (See Note 6.)

     (F) In  connection  with the January 28,  1999 lease  transactions  for the
Garden State Park facility,  the Company  purchased  equipment located at Garden
State Park and a liquor license owned by an  unaffiliated  third party,  Service
America  Corporation  (the "Holder"),  for $500,000  financed by a five (5) year
promissory note at a 6% interest rate. Yearly principal payments of $80,000 plus
interest are due on December 28, 2002 and December 28, 2003.  The payment due on
December 28, 2002 has not been made as of February 19, 2003.

(6)  COMMITMENTS AND CONTINGENCIES

     See Note 9 for additional  commitments and contingencies of the Company and
transactions with related parties.

     Effective December 1, 2000, we entered into a five-year employment contract
with Francis W. Murray, our Chief Executive  Officer.  The contract provides for
annual compensation of $395,000,  a $1,500 monthly automobile expense allowance,
a country club annual dues allowance and travel and entertainment reimbursements
for business expenses reasonably incurred by him in addition to participation in
various other  benefits  provided to our  employees.  As part of his  employment
contract,  Mr. Murray was awarded  options to purchase  2,000,000  shares of our
Common Stock.  On January 4, 2003, we began  deferring  payments of compensation
due to Mr. Murray.

     We are responsible for remediation  costs  associated with an environmental
site on the Freehold Raceway property. We have accrued what we believe to be the
total cost of remediation.  At December 31, 2002, the remaining  balance of such
accrual was $130,398 for remediation costs. These accrued costs

                                       11

<PAGE>


                    INTERNATIONAL THOROUGHBRED BREEDERS, INC.
                                AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

are expected to be incurred during the next twenty months.

     In connection with the January 28, 1999 lease  transactions  for the Garden
State Park  facility,  we purchased a liquor  license  owned by an  unaffiliated
third party,  Service America  Corporation,  for $500,000 financed by a five (5)
year  promissory  note at a 6% interest  rate. At December 31, 2002,  the unpaid
principal  balance was  $160,000.  Yearly  principal  payments  of $80,000  plus
interest are due on December 28, 2002 and December 28, 2003.  The payment due on
December 28, 2002 has not been made as of February 19, 2003.

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

     As permitted by the Master Settlement  Agreement with the Trustee,  we have
entered into a bareboat charter with MJQ Corporation,  pursuant to which we have
chartered  the vessel M/V Palm Beach  Princess  for the  purpose of  operating a
casino cruise business from the Port of Palm Beach, Florida.  Under the bareboat
charter  agreement,  we are obligated to pay $50,000 per month as a charter hire
fee  to the  vessel's  owner,  MJQ  Corporation.  Other  parties  to the  Master
Settlement Agreement include MJQ Corporation, Leo Equity Group, Inc. and Francis
W. Murray,  our Chairman,  who is also a director and officer of MJQ Corporation
and a director of Leo Equity Group,  Inc. In October 2002, Mr. Murray  purchased
the stock of MJQ  Corporation  and  effective  October 27, 2002 we purchased the
stock of Leo Equity Group, Inc. (See Note 9, Related Party Transactions.)

     In accordance with the Master Settlement Agreement,  through our Palm Beach
Princess,  Inc.  subsidiary we entered into a Purchase and Sale Agreement  which
provides  for our  purchase  from  the  Trustee  of the  promissory  note of MJQ
Corporation,  having  an  outstanding  balance  of  principal  and  interest  of
approximately  $15.7  million as of June 30, 2002 and secured by a ship mortgage
against  the M/V Palm Beach  Princess  (the  "Ship  Mortgage  Obligation").  The
purchase price payable by us for the Ship Mortgage Obligation is $13.75 million.
We began making  payments on account of such purchase price  effective April 30,
2001, in monthly installments of $250,000.  Such monthly installments  continued
under the terms of the Purchase  and Sale  Agreement  through July 31, 2002,  at
which time a $9.75 million balloon payment was to be due.  However,  before July
31, 2002,  we exercised  our right to extend the time for payment of the balance
of the purchase price for up to three (3) additional months, to October 31,2002,
by paying  fees of  $70,000  for the first one month  extension,  an  additional
$80,000 for the second month extension and an additional  $100,000 for the third
month  extension.  On October 30,  2002,  the Master  Settlement  Agreement  was
amended to provide  for a further  extension  of the due date for payment of the
$9.75  million  balance under the Purchase and Sale  Agreement  until January 6,
2003,  in  consideration  of our  payment of $220,000  as an  extension  fee. On
January 3, 2003,  we did not have the funds to complete  the purchase by January
6, 2003 and the  Trustee  denied  our  request  for a further  extension  of the
January 6, 2003 due date. Therefore, on January 3, 2003, in order to protect our
invested deposits and operation of the vessel,  ITGV, successor by merger to our
subsidiary the Palm Beach Princess,  Inc., filed a voluntary petition for relief
under Chapter 11 of the Bankruptcy Code. MJQ Corporation, the entity which ownes
the vessel,  also filed for relief under Chapter 11 of the Bankruptcy  Code. The
Trustee is the largest creditor in the

                                       12

<PAGE>


                    INTERNATIONAL THOROUGHBRED BREEDERS, INC.
                                AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

MJQ/ITGV cases, and is secured by a mortgage against the vessel.  Therefore,  in
order to  re-organize  under a Chapter 11 plan on a basis  under  which we would
continue to operate the vessel,  we will need to pay or provide for payment of a
minimum  of $9.75  million  payable to the  Trustee.  The  Bankruptcy  Court has
required ITGV to pay interest on said $9.75 million monthly to the trustee at an
interest rate of 12% per year.

     The second agreement which we entered into with the Trustee pursuant to the
Master Settlement Agreement is a Stock Purchase Agreement. Under this Agreement,
which  superseded  all prior  agreements and  understandings  between us and the
Trustee for the purchase of our common stock held or claimed by the Trustee,  we
agreed to purchase up to approximately 2,235,000 shares of our common stock at a
purchase price of $0.50 per share on July 11, 2002. We desired to purchase these
shares in order to preserve our net operating loss carryforwards which otherwise
may be lost if the  shares  are  transferred.  As  collateral  security  for our
payment of the  purchase  price for these  shares,  we granted to the  Trustee a
security  interest in all proceeds of (including all payments that might be made
in the future under) the $10 million Realen Note,  described in Note 2 above. We
were unable to pay the purchase price under the Stock Purchase Agreement on July
11, 2002 (which  price,  at that date,  was $892,500 for 1,785,000  shares).  On
October 30, 2002,  the Stock  Purchase  Agreement  was amended to provide for an
extension of the due date on the purchase of the shares until  December 13, 2002
at which time the Trustee  agreed to accept  payment of the  purchase  price for
3,228,145 shares  (including  additional  shares over which the Trustee obtained
control) in the form of a twelve month promissory note bearing interest at 9% in
the amount of  $1,648,402.  (See Note 5(B).) Should the Trustee  obtain  control
over an additional  450,000 shares,  we are further  obligated to purchase those
shares at $0.50 per share. A principal  payment of $137,367 was made on December
13, 2002.  We are  currently  in default on the two  payments of  principal  and
interest that were due to the Trustee through February 13, 2003 in the amount of
$296,368.

     Through  a  subsidiary,  we have  negotiated  with the  Port of Palm  Beach
District a new operating  agreement  and lease of space in a new office  complex
constructed  at the  Port  of  Palm  Beach  adjacent  to a new  cruise  terminal
effective  April  25,  2002.  The term of the  initial  lease  is five  years at
$183,200  per  year  payable  monthly.  We are  also  required  to  make  tenant
improvements  to the new  space in a  minimum  amount of  $333,000,  however  we
estimate  that the actual cost to make the  improvements  will be  approximately
$600,000.  As of  February  14,  2003,  we have made  payments  in the amount of
$335,288 on such improvements and we will continue payments on the project under
the protection of the Bankruptcy Court. We will have the right to a credit of up
to the minimum amount of improvements required of $333,000 of construction costs
against the initial term of our five year lease.

     In other  transactions  related  to our  acquisition  of the Ship  Mortgage
Obligation,  we entered into an agreement to purchase the outstanding  shares of
stock in Leo Equity  Group,  Inc.  in order to acquire  control of the lease and
operating agreement with the Port of Palm Beach District. Leo Equity Group, Inc.
owned the  agreement  with the Port of Palm  Beach  under  which the Palm  Beach
Princess vessel had been  operating,  and by our agreement to purchase the stock
in Leo Equity Group,  Inc., the shareholder of Leo Equity Group, Inc.  permitted
us to negotiate a new long-term  agreement with the Port which would replace Leo
Equity Group's agreement with the Port. Effective October 27, 2002, we completed
the purchase of the stock of Leo Equity Group, Inc. The purchase price we agreed
to pay for the stock in Leo Equity  Group,  Inc.  was  $250,000,  payable in ten
consecutive  monthly  installments  of $25,000  each,  without  interest.  As of
December  31,  2002,  the  remaining  balance on the  purchase  of the stock was
$75,000. As further  consideration,  we also agreed to reduce the exercise price
of the seller's  previously  granted  options to purchase  200,000 shares of our
common  stock,   to  $0.50  per  share.   (See  Note  9  below,   Related  Party
Transactions.)

                                       13

<PAGE>


                    INTERNATIONAL THOROUGHBRED BREEDERS, INC.
                                AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

     In addition to the  commitments  described  above, we are in the process of
negotiating other potential acquisitions of gaming related businesses in foreign
countries. While we explore each business opportunity,  including performance of
due diligence,  and pending negotiation of definitive  agreements,  we have lent
approximately $600,000 to persons and entities having rights to certain of these
gaming  opportunities.  If such  acquisitions  are concluded,  the businesses in
foreign  countries would involve a significant  additional  investment and would
entail substantial risks,  including  political risks. There can be no assurance
that definitive  agreements will be concluded or that we would be able to obtain
necessary  funds to proceed,  and there is no assurance  that we will be able to
recover our loans should we not proceed.


LEGAL PROCEEDINGS

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

     Our  subsidiary,  ITG  Vegas,  Inc.,  successor  by  merger  to Palm  Beach
Princess, Inc., initiated proceedings under Chapter 11 of the Bankruptcy Code on
January 3, 2003. (See Note 10.)

(7)  FAIR VALUE OF FINANCIAL INSTRUMENTS

     As of  December  31,  2002,  in  assessing  the  fair  value  of  financial
instruments, we have used a variety of methods and assumptions, which were based
on  estimates of market  conditions  and loan risks  existing at that time.  For
certain instruments, including cash and cash equivalents, investments, non-trade
accounts  receivable and loans,  and short-term  debt, it was estimated that the
carrying amount  approximated  fair value for the majority of these  instruments
because of their  short-term  maturity.  The carrying  amounts of long term debt
approximate  fair value since our interest rates  approximate  current  interest
rates that would be available to us in the market place.

     Management  believes that the carrying  amounts of the two long-term  notes
receivable  approximate  fair value and will continue to evaluate the fair value
of these instruments.

(8)  STOCK OPTIONS AND WARRANTS

     (A)  EMPLOYEE AND NON-EMPLOYEE OPTIONS

     At December 31, 2002, total employee options outstanding were 3,111,500 and
total non-employee options outstanding were 225,000. At December 31, 2001 all of
the employee and the non-employee options were exercisable.

     (B)  WARRANTS

     At December 31, 2002, total warrants outstanding were 710,000. All warrants
were exercisable at December 31, 2002.



                                       14

<PAGE>


                    INTERNATIONAL THOROUGHBRED BREEDERS, INC.
                                AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

(9)  RELATED PARTY TRANSACTIONS

     During the third  quarter of Fiscal  2001,  we invested in two  projects in
which our Chairman,  President and Chief Executive  Officer,  Francis W. Murray,
also has a pecuniary interest. In connection with one such project, the Board of
Directors  approved  advances,  as  loans,  of up to $1.5  million  to a limited
partnership  in which  Francis W.  Murray  owned,  at that  time,  an 80% equity
interest and owned the general partner, the proceeds of which were to be used to
pay costs and expenses for development of a golf course in Southern  California.
Mr. Murray's equity interest in the limited partnership,  indirectly through his
ownership of the general partner,  as of December 26, 2002, was 64%. At December
26, 2002,  $735,584 had been loaned to such project and we had accrued  $163,299
of interest due on the loan.  On December 26,  2002,  the limited  partnership's
indebtedness to us was assumed by OC Realty,  LLC, a Florida  limited  liability
company  which is owned by Francis W.  Murray  and which  ownes the second  real
estate project  described below.  Such indebtedness is due December 31, 2004 and
bears an interest rate of 6%

     In the second project, Mr. Murray is participating in the development of an
oceanfront  parcel  of land,  located  in Fort  Lauderdale,  Florida,  which has
received all governmental  entitlements from the City of Fort Lauderdale and the
state of Florida to develop a  14-story  building  to include a 5-story  parking
garage,  approximately  6,000 square feet of commercial  space and a residential
9-story tower.  The property had been owned by MJQ  Development,  LLC, which was
owned by Michael J. Quigley,  III until  December 26, 2002 when the property was
acquired by OC Realty,  LLC, the entity owned by Mr. Murray.  Mr. Quigley has no
relationship to Robert J. Quigley, one of our directors. OC Realty is developing
a condominium  hotel resort on the  property.  At December 31, 2002, we had lent
$2,034,304  in total to MJQ  Development  and we have  accrued  interest  in the
amount of $489,848 on the loan. Upon the acquisition of the property,  OC Realty
assumed MJQ  Development's  indebtedness to us. These loans bear interest at 12%
and will be repayable  out of the first  proceeds,  after payment of bank debts,
generated by the sale of the condominiums. We will have the right to convert our
loan  into  an  equity  interest  (subject  to  receiving  certain  third  party
approvals),  which  would  entitle  us to  receive  a  priority  return  of  our
investment and a priority profits interest for up to three times our investment.
Repayment  of these loans (and  receipt of any return if we convert our loans to
equity) will be subject to repayment of, first, bank debt of approximately  $5.5
million (at present)  incurred in the purchase of the real property and, second,
construction financing expected to amount to $25 to $30 million. At the time the
loans  to  MJQ  Development  were  approved,  Mr.  Murray  stood  to  receive  a
substantial contingent benefit from MJQ Development for his participation in the
project.

     On January 26, 2001, we borrowed $1,000,000 from Michael J. Quigley, III at
an annual interest rate of 10%. Principal and interest on the note was due on or
about  April 25,  2001.  On May 14,  2001,  the loan was  modified  to be due on
demand.  The principal  balance on the note at December 31, 2002 is $900,000 and
we have  accrued  interest  through  that  date in the  amount of  $192,247.  As
collateral  for the loan,  we pledged  the $10  million  Realen Note and the $23
million  Turnberry Note. On February 20, 2002 Mr. Quigley  released his security
interest in the Realen Note in connection with the Master Settlement  Agreement.
(See Note 5.)

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

                                       15

<PAGE>


                    INTERNATIONAL THOROUGHBRED BREEDERS, INC.
                                AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

Francis X. Murray,  the son of Francis W. Murray, is President and a director of
MJQ Corporation and President of our subsidiary, ITG Vages, Inc., which operates
the vessel.  Under the  bareboat  charter  agreement,  we are  obligated  to pay
$50,000  per  month as the  charter  hire fee to MJQ  Corporation.  All costs of
operating  the  vessel  incurred  by MJQ  Corporation  on our  behalf  are to be
reimbursed by us to MJQ Corporation.  In addition, as described in Note 6 above,
we have entered into an amended Master Settlement  Agreement with the Chapter 11
Trustee of the  Bankruptcy  Estate of Robert E.  Brennan,  MJQ  Corporation  and
others  to  purchase  from the  Trustee  the  Ship  Mortgage  Obligation  of MJQ
Corporation,   having  a  balance  of  principal  and  interest  outstanding  of
approximately  $15.7  million as of December  31,  2002 for a purchase  price of
$13.75 million. Pursuant to the Master Settlement Agreement, MJQ Corporation and
its officers  and  directors  (including  Francis W.  Murray)  exchanged  mutual
releases  with the  Trustee  and  others  having  claims  to the  Ship  Mortgage
Obligation.

     Also,  as set  forth in Note 6  above,  we  entered  into an  agreement  to
purchase all of the shares of  outstanding  stock of Leo Equity Group,  Inc. Mr.
Francis W. Murray has been a director of Leo Equity Group,  Inc.  Closing on the
Leo Equity Group, Inc. stock purchase  occurred  effective October 27, 2002. The
purchase  price  payable  by us for the  stock  in Leo  Equity  Group,  Inc.  is
$250,000,  payable without interest in 10 monthly  installments of $25,000 each.
As of December 31, 2002, the remaining  balance on the purchase of the stock was
$75,000.  We also  agreed to reduce the  exercise  price of  previously  granted
options held by the seller, Frank A. Leo (our former director and chairman),  to
purchase  200,000 shares of our common stock,  from $4.00 per share to $0.50 per
share,  while  conditioning  exercise  of such  options  upon our  first  having
consummated  the purchase of the shares  required to be purchased by us from the
Trustee under the Stock Purchase Agreement.  The purpose of such acquisition was
to enable us to obtain the lease and operating  agreement  with the Port of Palm
Beach District which had been owned by Leo Equity Group, Inc.

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

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

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

     For  additional   information  regarding  related  party  transactions  see
Footnote 15 in the consolidated

                                       16

<PAGE>


                    INTERNATIONAL THOROUGHBRED BREEDERS, INC.
                                AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

financial  statements  included in the  Company's  Form 10-K for the fiscal year
ended June 30, 2002.

(10) SUBSEQUENT EVENTS

     (A) On January 3, 2003, ITG Vegas,  Inc.("ITGV"),our  subsidiary  operating
the Palm Beach Princess and MJQ Corporation ("MJQ"), the entity owned by Francis
W. Murray  which owns the vessel,  filed  voluntary  petitions  for relief under
Chapter 11 of the United States  Bankruptcy Code (the "Bankruptcy  Code") in the
United States Bankruptcy Court for the Southern District of Florida,  Palm Beach
Division (the  "Bankruptcy  Court"),  In re: ITG Vegas,  Inc., Case No. 03-30038
(BKC-PGH), January 3, 2003. The petition does not cover the parent company, ITB,
nor any other of ITB's  subsidiaries.  The Palm Beach  Princess is continuing to
operate as "debtor-in-possession" under the jurisdiction of the Bankruptcy Court
and in accordance  with the  applicable  provisions of the  Bankruptcy  Code and
orders of the Bankruptcy Court.

     (B) In February 2003, we borrowed $58,750 from two corporate officers.  The
loans are due on demand.  These funds were used for working capital requirements
of the parent company.


                                       17

<PAGE>


                    INTERNATIONAL THOROUGHBRED BREEDERS, INC.
                                AND SUBSIDIARIES

                  MANAGEMENT'S ANALYSIS OF FINANCIAL CONDITIONS
             AND RESULTS OF OPERATIONS FOR THE THREE AND SIX MONTHS
                             ENDED DECEMBER 31, 2002


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

Forward-Looking Statements

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

          o    debtor in possession  operation of the Palm Beach Princess vessel
               and  ability  to  successfully  develop  a  Chapter  11  plan  of
               re-organization ;
          o    termination  of the bareboat  charter  under which we operate our
               gaming business;
          o    general  economic and business  conditions  affecting the tourism
               business in Florida;
          o    competition;
          o    execution of our new business strategy;
          o    changes in laws regulating the gaming industry;
          o    fluctuations  in  quarterly  operating  results  as a  result  of
               seasonal and weather considerations; and
          o    events  directly or indirectly  relating to our business  causing
               our stock price to be volatile.

Liquidity and Capital Resources

     Cash flow and liquidity during the six month period ended December 31, 2002
included approximately $2.4 million in cash generated by the Palm Beach Princess
operations.  Such cash flow was used,  in part, to fund $500,000 of the payments
on account of the purchase  price of the Ship  Mortgage  Obligation  against the
Palm  Beach  Princess  and  $470,000  of fees to extend  the  closing  under the
Purchase  and Sale  Agreement  as  described  below,  and also to explore  other
potential  business  opportunities.  We are exploring  gaming  related  business
opportunities  in various  foreign  countries  and expect to  continue  to incur
expenses for exploring  potential  business  opportunities in the future.  As of
December 31, 2002, we have made loans of  approximately  $350,000 in relation to
the foreign projects and an additional  $142,107 has been funded and expensed in
various foreign  projects  during the six months ended December 31, 2002.  Until
January 3, 2003,  all of our cash flow during the  current  fiscal year had come
from the Palm Beach Princess vessel.

     On January 3, 2003,  our only  source of cash from  operations  was cut off
when ITG Vegas,  Inc.("ITGV"),our  subsidiary operating the Palm Beach Princess,
and MJQ Corporation  ("MJQ"), an unrelated affiliate owned by Francis W. Murray,
filed voluntary petitions for relief under Chapter 11 of

                                       18

<PAGE>


                    INTERNATIONAL THOROUGHBRED BREEDERS, INC.
                                AND SUBSIDIARIES

                  MANAGEMENT'S ANALYSIS OF FINANCIAL CONDITIONS
             AND RESULTS OF OPERATIONS FOR THE THREE AND SIX MONTHS
                             ENDED DECEMBER 31, 2002


the United States  Bankruptcy Code (the "Bankruptcy  Code") in the United States
Bankruptcy Court for the Southern District of Florida,  Palm Beach Division (the
"Bankruptcy  Court"),  In re: ITG Vegas,  Inc., Case No. 03-30038.  The petition
does not cover the parent company, ITB, nor any other of ITB's subsidiaries.  We
have used all the available funds that we had prior to the bankruptcy  filing to
pay some of our  expenses and need to find  immediate  financing in order to pay
remaining  existing  liabilities  as well as  future  expenses.  The Palm  Beach
Princess   will  continue  to  operate  as   "debtor-in-possession"   under  the
jurisdiction  of the  Bankruptcy  Court and in  accordance  with the  applicable
provisions of the Bankruptcy Code and orders of the Bankruptcy Court.

     Under our bareboat charter of the vessel,  ITG Vegas,  Inc. is obligated to
pay  $50,000  per  month as the  charter  hire fee to the  vessel's  owner,  MJQ
Corporation.  In order to obtain the  bareboat  charter,  we  negotiated  and on
February 20, 2002 entered into a Master Settlement Agreement with the Chapter 11
Trustee of the  Bankruptcy  Estate of Robert E.  Brennan  (the  "Trustee"),  MJQ
Corporation  and others.  Pursuant to the Master  Settlement  Agreement  we have
incurred the following financial commitments:

          o    For  the  purchase  of the  Ship  Mortgage  Obligation,  we  paid
               $250,000 per month through July 31, 2002, and an additional $9.75
               million balloon payment was due at that time. As permitted by the
               Master  Settlement  Agreement we extended the date for payment of
               the balloon payment on a  month-to-month  basis until October 31,
               2002 by paying  extension fees of $70,000 for the first month, an
               additional  $80,000  for  the  second  month  and  an  additional
               $100,000  for the third month.  On October 30,  2002,  the Master
               Settlement  Agreement  was  amended  to  provide  for  a  further
               extension  of the due date for the  Purchase  and Sale  Agreement
               until  January 6, 2003 by paying  $220,000 in extension  fees. We
               did not have the  necessary  funds to  complete  the  purchase by
               January 6,  2003.  Therefore,  on  January  3, 2003,  in order to
               protect our invested  deposits  and our  operation of the vessel,
               ITGV filed a voluntary  petition for relief  under  Chapter 11 of
               the  Bankruptcy  Code.  Prior  to  the  bankruptcy   filing,  our
               subsidiary,  Palm Beach Princess, Inc. which operated the vessel,
               was merged into ITGV. MJQ Corporation also filed for relief under
               Chapter 11 of the  Bankruptcy  Code.  The  Trustee is the largest
               creditor  in  the  MJQ  Corp./ITGV  cases,  and is  secured  by a
               mortgage against the vessel.  Therefore,  in order to re-organize
               under a Chapter 11 plan on a basis under which we would  continue
               to operate the vessel, we will need to pay or provide for payment
               of a  minimum  of  $9.75  million  payable  to the  Trustee.  The
               Bankruptcy  Court has required ITGV to pay interest on said $9.75
               million  monthly to the  trustee at an  interest  rate of 12% per
               year.

          o    We were obligated to purchase  approximately  1,785,000 shares of
               our common  stock from the Trustee at $0.50 per share  (aggregate
               purchase price of approximately  $892,500),  on July 11, 2002 and
               we were unable to make such  payment.  On October 30,  2002,  the
               Stock Purchase  Agreement was amended to provide for an extension
               of the due date on the purchase of the shares until  December 13,
               2002, at which time the Trustee  agreed to accept  payment of the
               purchase price for 3,228,145 shares (including  additional shares
               over which the  Trustee  has  obtained  control) in the form of a
               twelve month promissory note in the amount of $1,648,402  bearing
               interest at 9% per year.  Should the Trustee  obtain control over
               an  additional  450,000  shares,  we  are  further  obligated  to
               purchase those shares at $0.50 per share. A principal  payment of
               $137,367  was made on December  13,  2002.  We are  currently  in
               default on the two payments of principal  and interest  that were
               due to the Trustee  under such note through  February 13, 2003 in
               the amount of $296,368.

                                       19

<PAGE>


                    INTERNATIONAL THOROUGHBRED BREEDERS, INC.
                                AND SUBSIDIARIES

                  MANAGEMENT'S ANALYSIS OF FINANCIAL CONDITIONS
             AND RESULTS OF OPERATIONS FOR THE THREE AND SIX MONTHS
                             ENDED DECEMBER 31, 2002



     ITGV is committed to making the tenant  improvements to new office space at
the Port of Palm Beach.  Total  costs of such  improvements  are  expected to be
approximately  $600,000. As of February 19, 2003, ITGV had expended $335,288 for
such improvements.

     ITGV's cash flow from operations of the vessel is seasonal. The period July
1st to December 31st is a seasonably slow period for the vessel  operation.  The
period from January 1st to June 30th has been a period of increased activity and
profits for the vessel. Certain of ITGV's operating costs, including the charter
fee payable to the vessel's owner, fuel costs and wages, are fixed and cannot be
reduced when passenger  loads decrease or when rising fuel or labor costs cannot
be fully passed through to customers.  Passenger and gaming revenues earned from
the vessel must be high enough to cover such expenses.

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

     While  management  believes  that the $10 Million  Note and the $23 Million
Note  owned  by us have  substantial  value  and,  ultimately,  should  generate
significant  cash  payments  to us, the  timing of receipt of any such  payments
cannot be accurately predicted and we may not receive substantial payments under
the notes for one year or more.  We will  seek to  borrow  against  the notes in
order to obtain funds for our short term  obligations  and current  expenses and
also for capital expenditures of any new business we enter.  However,  there can
be no assurance that we will be able to borrow the necessary funds.

     Our working capital as of December 31, 2002 was a negative  ($2,665,814) as
compared to a negative  ($2,200,346)  at June 30, 2002.  The decrease in working
capital  during the past six months was  primarily  caused by the use of cash to
make  payments of $500,000 on the Ship  Mortgage  Obligation,  pay the extension
fees of $470,000  on the  purchase  and to fund  on-going  development  projects
partially   offset  by  the  cash  provided  by  operating   activities.   Other
transactions  affecting working capital that did not require the use of cash was
the purchase of the spare parts  inventory in the amount of  $1,103,125  and the
assumption  of  additional  debt  primarily  from the  Trustee  in the amount of
$1,648,403.



                                       20

<PAGE>


                    INTERNATIONAL THOROUGHBRED BREEDERS, INC.
                                AND SUBSIDIARIES

                  MANAGEMENT'S ANALYSIS OF FINANCIAL CONDITIONS
             AND RESULTS OF OPERATIONS FOR THE THREE AND SIX MONTHS
                             ENDED DECEMBER 31, 2002


Results of Operations for the Three Months Ended December 31, 2002 and 2001

     Revenue for the three months ended December 31, 2002  increased  $1,846,752
from  $5,060,359  in Fiscal 2002 to  $6,907,111  in Fiscal 2003  primarily  as a
result of increased  revenues  generated by the Palm Beach  Princess  operations
during the comparable  quarters.  Expenses increased $362,482 from $5,887,628 in
the three month period in Fiscal 2002 to $6,250,110 in Fiscal 2003 primarily the
result  of an  increase  in Palm  Beach  Princess  operating  costs  during  the
comparable  quarters and financing  costs incurred  during the second quarter of
Fiscal 2003 primarily  associated  with the amended  Purchase and Sale Agreement
for the Palm  Beach  Princess  operation  in the amount of  $220,000,  partially
offset by a decrease in  development  costs and a decrease in corporate  general
and administrative  expenses during the comparable quarters primarily the result
of the relocation costs during the prior fiscal year.

     During the three months ended December 31, 2002,  total revenue from vessel
operations  was  $6,772,189 as compared to $4,957,317 for the three months ended
December 31, 2001.  The increase in revenue of $1,814,872  during the comparable
quarters  primarily  resulted  from an  increase  in casino  gaming and on board
revenue  primarily  the result of an  increase  in the  passenger  count and the
number of cruises during the comparable  periods  partially offset by a decrease
in fare revenues  primarily  associated with competitive  pricing related to the
ship  competing  with another gaming vessel for the full quarter of operation in
Fiscal 2003 as compared to only 20 days in Fiscal 2002.  Total  expenses  before
income taxes for the comparable  periods increased  $665,029 from $4,910,624 for
the three months  ended  December  31, 2001 to  $5,575,653  for the three months
ended  December  31, 2002  primarily as a result of an increase in the number of
passengers and the number of cruises which increased operating costs,  increases
in sales and marketing expenses associated with competition, a $231,000 increase
in accrued employee bonus  compensation  costs related to our full calendar year
of  operation  and  $220,000  in  financing  fees  offset by a decrease in other
operating  expenses.  Income before income tax expense for the second quarter of
operation in Fiscal 2003 was $1,196,536 as compared to $46,693 in the comparable
quarter of Fiscal 2002.

     The Palm  Beach  Princess  performs  fourteen  cruises  weekly,  that is, a
daytime  and an evening  cruise  each day.  Each  cruise is of five to six hours
duration.  During  each  cruise,  the  Palm  Beach  Princess  offers  a range of
amenities  and services to her  passengers,  including a full  casino,  sit-down
buffet dining, live musical shows, discotheque,  bars and lounges, swimming pool
and  sundecks.  The casino  occupies  15,000  square feet aboard the ship and is
equipped with approximately 400 slot machines, all major table games (blackjack,
dice, roulette and poker), and a sports wagering book. During the second quarter
of  Fiscal  2003,  out of the 177  scheduled  cruises,  none were  cancelled  as
compared to Fiscal 2002 where out of 168 scheduled  cruises,  13 were  cancelled
for weather or mechanical difficulties.


                                       21

<PAGE>


                    INTERNATIONAL THOROUGHBRED BREEDERS, INC.
                                AND SUBSIDIARIES

                  MANAGEMENT'S ANALYSIS OF FINANCIAL CONDITIONS
             AND RESULTS OF OPERATIONS FOR THE THREE AND SIX MONTHS
                             ENDED DECEMBER 31, 2002


     The following is a  comparative  summary of income and expenses of the Palm
Beach Princess operation for the three month periods ended December 31, 2002 and
2001:

                                                  Three Months Ended
                                                     December 31,
                                        -------------------------------------
         Description                        2002          2001       Change
-------------------------------------   -----------   -----------   ---------
Passenger Count                              53,147        45,613       7,534
Number of Cruises                               177           155          22
Revenue:

    Fare                               $    570,538  $    574,542  $   (4,004)
    On Board                                398,680       347,374      51,306
    Casino                                5,802,971     4,035,401   1,767,570
                                        -----------   -----------   ---------
    Total Revenue                         6,772,189     4,957,317   1,814,872
                                        -----------   -----------   ---------
Expenses:
    Casino Operating Expenses             1,859,085     1,587,544     271,541
    Hotel and Gift Shop Expenses            201,787       217,660     (15,873)
    Sales, Marketing and Advertising        790,594       669,424     121,170
    Maritime and Legal Expenses           1,362,763     1,478,489    (115,726)
    Administrative and Finance            1,361,424       957,507     403,917
                                        -----------   -----------   ---------
    Total Expenses                        5,575,653     4,910,624     665,029
                                        -----------   -----------   ---------
      Income Before Income Tax Expense $  1,196,536  $     46,693  $1,149,843
                                        ===========   ===========   =========

     For the second quarter of Fiscal 2003, our net income was $595,001 or $0.06
per share as compared to a loss for the  comparable  period in prior fiscal year
of ($827,269) or ($0.07) per share.

Results of Operations for the Six Months Ended December 31, 2002 and 2001

     Revenue for the six months  ended  December 31, 2002  increased  $2,103,465
from  $11,222,821  in Fiscal 2002 to  $13,326,286  in Fiscal 2003 primarily as a
result of increased  revenues  generated by the Palm Beach  Princess  operations
during the comparable  periods.  Expenses increased $659,505 from $11,569,667 in
the six month period in Fiscal 2002 to  $12,229,172 in Fiscal 2003 primarily the
result  of an  increase  in Palm  Beach  Princess  operating  costs  during  the
comparable  quarters and financing  costs incurred  during the second quarter of
Fiscal 2003 primarily  associated  with the amended  Purchase and Sale Agreement
for the Palm  Beach  Princess  operation  in the amount of  $470,000,  partially
offset by a decrease in  development  costs and a decrease in corporate  general
and administrative  expenses during the comparable quarters primarily the result
of relocation costs incurred during the prior fiscal year.

     During the first half of Fiscal 2003, total revenue from vessel  operations
was  $13,080,278 as compared to  $10,898,355  for the first half of Fiscal 2002.
The increase in revenue of $2,181,922  during the comparable  periods  primarily
resulted from an increase in casino  gaming and on board  revenue  primarily the
result of an increase in the  passenger  count and the number of cruises  during
the comparable periods partially offset by a decrease in fare revenues primarily
associated with the competitive  pricing discussed above.  Total expenses before
income taxes for the comparable  periods increased $840,381 from $10,014,997 for
the six months ended December 31, 2001 to $10,885,377 for the six months ended

                                       22

<PAGE>


                    INTERNATIONAL THOROUGHBRED BREEDERS, INC.
                                AND SUBSIDIARIES

                  MANAGEMENT'S ANALYSIS OF FINANCIAL CONDITIONS
             AND RESULTS OF OPERATIONS FOR THE THREE AND SIX MONTHS
                             ENDED DECEMBER 31, 2002


December  31,  2002  primarily  as a result  of an  increase  in the  number  of
passengers and the number of cruises which increased operating costs,  increases
in sales  and  marketing  expenses  associated  with  competition,  the  accrued
employee bonus compensation costs discussed above and $470,000 in financing fees
offset by a decrease  in other  operating  expenses.  Income  before  taxes from
operation  of the  vessel  for  the six  months  ended  December  31,  2002  was
$2,224,901  as compared to $883,359 for the six months ended  December 31, 2001.
Out of the 356 scheduled cruises during the first half of Fiscal 2003, none were
cancelled  for  weather or  mechanical  difficulties  as compared to Fiscal 2002
where out of 355  scheduled  cruises,  17 cruises were  cancelled for weather or
mechanical difficulties.

     The following is a  comparative  summary of income and expenses of the Palm
Beach  Princess  operation for the six month periods ended December 31, 2002 and
2001:

                                                   Six Months Ended
                                                      December 31,
                                          -------------------------------------
           Description                      2002          2001         Change
-------------------------------------   ------------   -----------   ----------
Passenger Count                              113,532       102,778       10,754
Number of Cruises                                356           330           26
Revenue:

    Fare                               $   1,228,687  $  1,305,344  $   (76,657)
    On Board                                 852,884       792,912       59,972
    Casino                                10,998,707     8,800,100    2,198,607
                                        ------------   -----------   ----------
    Total Revenue                         13,080,278    10,898,355    2,181,922
                                        ------------   -----------   ----------
Expenses:
    Casino Operating Expenses              3,803,778     3,424,170      379,609
    Hotel and Gift Shop Expenses             397,008       450,729      (53,721)
    Sales, Marketing and Advertising       1,510,782     1,398,839      111,943
    Maritime and Legal Expenses            2,780,687     2,968,095     (187,408)
    Administrative and Finance             2,363,122     1,773,164      589,958
                                        ------------   -----------   ----------
    Total Expenses                        10,885,377    10,014,997      840,381
                                        ------------   -----------   ----------
    Income Before Income Tax Expense   $   2,224,901  $    883,359  $ 1,341,541
                                        ============   ===========   ==========

     During the first half of Fiscal 2003, our income was $1,008,114 or $.09 per
share  as  compared  to a loss  for the  comparable  period  in  Fiscal  2002 of
($368,846)  or ($0.03) per share.  The change of  $1,376,960  was  primarily the
result of the increase in net income from operation of the vessel.


                                       23

<PAGE>


                    INTERNATIONAL THOROUGHBRED BREEDERS, INC.
                                AND SUBSIDIARIES

                  MANAGEMENT'S ANALYSIS OF FINANCIAL CONDITIONS
             AND RESULTS OF OPERATIONS FOR THE THREE AND SIX MONTHS
                             ENDED DECEMBER 31, 2002


Item 4. - CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

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

     As of February 18, 2003, we completed an evaluation,  under the supervision
and with the  participation  of our  management,  including our chief  executive
officer and chief  financial  officer,  of the  effectiveness  of the design and
operation of our disclosure controls and procedures. Based on the foregoing, our
chief executive officer and chief financial officer concluded that the Company's
disclosure controls and procedures were effective.

CHANGES IN INTERNAL CONTROLS

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



                                       24

<PAGE>



                    INTERNATIONAL THOROUGHBRED BREEDERS, INC.
                                AND SUBSIDIARIES

                                     PART II

                                OTHER INFORMATION

Item 6. Exhibits and Reports on Form 8-K

     The  Company  did not file any  reports  on Form  8-K with  respect  to the
quarter ended December 31, 2002.


                                       25

<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.



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




                                       26

<PAGE>



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

I, Francis W. Murray, certify that:

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

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

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

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

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

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

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

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

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

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

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

Date: February 19, 2003

                        /s/Francis W. Murray____________
                        Chairman/Chief Executive Officer/Chief Financial Officer

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                                                                   Exhibit 99.1

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

     In  connection  with the  filing  of the  Quarterly  Report on Form 10-Q of
International  Thoroughbred Breeders, Inc. (the "Company") for the three and six
months  ended  December  31,  2002 as filed  with the  Securities  and  Exchange
Commission  on the date hereof  (the  "Report"),  I,  Francis W.  Murray,  Chief
Executive Officer of the Company,  hereby certify pursuant to 18 U.S.C. ss.1350,
as adopted pursuant to Section 906 of the  Sarbanes-Oxley  Act of 2002, that, to
the best of my knowledge:

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

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



 /s/ Francis W. Murray
     ------------------------
     Name:  Francis W. Murray
     Title: President and CEO
     February 19, 2003

                                       28

<PAGE>


                                                                   Exhibit 99.2

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

     In  connection  with the  filing  of the  Quarterly  Report on Form 10-Q of
International  Thoroughbred Breeders, Inc. (the "Company") for the three and six
months  ended  December  31,  2002 as filed  with the  Securities  and  Exchange
Commission  on the date hereof  (the  "Report"),  I,  Francis W.  Murray,  Chief
Financial Officer of the Company,  hereby certify pursuant to 18 U.S.C. ss.1350,
as adopted pursuant to Section 906 of the  Sarbanes-Oxley  Act of 2002, that, to
the best of my knowledge:

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

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



 /s/ Francis W. Murray
     ------------------------------
     Name: Francis W. Murray
     Title: Chief Financial Officer
     February 19, 2003


                                       29

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