FORM 10-Q

                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

                                   (Mark One)

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

For the quarterly period ended                   March 31, 2005
                               -------------------------------------------------
                                                        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)

       Suite 1300, 1105 N. Market Street, Wilmington, Delaware 19899-8985
--------------------------------------------------------------------------------
               (Address of principal executive offices) (Zip Code)

                                 (302) 427-7599
--------------------------------------------------------------------------------
              (Registrant's telephone number, including area code)
--------------------------------------------------------------------------------
         (Former name, former address and former fiscal year, if changed
                              since last report.)

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

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

                      APPLICABLE ONLY TO CORPORATE ISSUERS:

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


          Class                           Outstanding at May 20, 2005
------------------------------            ---------------------------
Common Stock, $ 2.00 par value                  10,567,487 Shares
<PAGE>

                    INTERNATIONAL THOROUGHBRED BREEDERS, INC.


                                    FORM 10-Q


                                QUARTERLY REPORT
                    FOR THE NINE MONTHS ENDED MARCH 31, 2005
                                   (Unaudited)


                                TABLE OF CONTENTS

                                                                         PAGE
PART I.           FINANCIAL INFORMATION

     Item 1.  Financial Statements:

              Consolidated Balance Sheets
                     as of March 31, 2005 and June 30, 2004...............1-2

              Consolidated Statements of Operations
                     for the Three Months and Nine Months ended
                     March 31, 2005 and 2004 .............................3

              Consolidated Statement of Stockholders' Equity
                     for the Nine Months ended March 31, 2005.............4

              Consolidated Statements of Cash Flows
                     for the Nine Months ended
                     March 31, 2005 and 2004..............................5

              Notes to Financial Statements...............................6-23

     Item 2.  Management's Discussion and Analysis of
                     Financial Condition and Results of Operations........24-33

     Item 3. Quantitative and Qualitative Disclosures About Market Risk...33

     Item 4. Controls and Procedures......................................33


PART II.          OTHER INFORMATION

     Item 1.  Legal Proceedings...........................................34

     Item 6.  Exhibits and Reports on Form 8-K............................34

SIGNATURES................................................................35

CERTIFICATIONS............................................................36-39




<PAGE>
                    INTERNATIONAL THOROUGHBRED BREEDERS, INC.
                                AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS
                     AS OF MARCH 31, 2005 AND JUNE 30, 2004

                                     ASSETS
<TABLE>
                                                                          March 31,
                                                                             2005            June 30,
                                                                         (UNAUDITED)          2004
                                                                       -------------     -------------
<CAPTION>
<S>                                                                  <C>               <C>
CURRENT ASSETS:
       Cash and Cash Equivalents                                     $    1,495,777    $    7,508,632
       Accounts Receivable                                                  529,015           223,411
       Prepaid Expenses                                                   1,921,873           738,504
       Other Current Assets                                                 315,526           153,625
       Assets of Discontinued Operations                                    401,785           400,835
                                                                       -------------     -------------
         TOTAL CURRENT ASSETS                                             4,663,976         9,025,007
                                                                       -------------     -------------


VESSELS, EQUIPMENT & LIVESTOCK:
       Vessel - Palm Beach Princess                                      17,500,000                 0
       Leasehold Improvements - Port of Palm Beach                          991,587           913,394
       Equipment                                                          3,012,766         2,217,322
       Livestock                                                            328,992                 -
       Vessel Not Placed in Service - Big Easy (formerly Empress II)     11,273,480                 -
       Vessel Not Placed in Service - Royal Star                          2,712,338         1,321,494
                                                                       -------------     -------------
                                                                         35,819,163         4,452,210
       LESS: Accumulated Depreciation and Amortization                    2,197,476           916,186
                                                                       -------------     -------------

         TOTAL VESSELS, EQUIPMENT & LIVESTOCK- NET                       33,621,687         3,536,024
                                                                       -------------     -------------



OTHER ASSETS:
       Notes Receivable                                                  14,328,651        14,778,651
       Mortgage Contract Receivable - Related Party                               -        13,750,000
       Deposits and Other Assets - Related Parties                        8,161,438         8,410,940
       Deposits and Other Assets - Non-Related Parties                    1,237,564           334,975
       Spare Parts Inventory                                              1,016,180           978,119
                                                                       -------------     -------------
         TOTAL OTHER ASSETS                                              24,743,833        38,252,685
                                                                       -------------     -------------


TOTAL ASSETS                                                         $   63,029,496    $   50,813,716
                                                                       =============     =============
</TABLE>


See Notes to Consolidated Financial Statements.

                                        1

<PAGE>

                    INTERNATIONAL THOROUGHBRED BREEDERS, INC.
                                AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS
                     AS OF MARCH 31, 2005 AND JUNE 30, 2004

                      LIABILITIES AND STOCKHOLDERS' EQUITY

<TABLE>
                                                             March 31,
                                                                2005           June 30,
                                                            (UNAUDITED)         2004
                                                           -------------     -----------
<CAPTION>
CURRENT LIABILITIES:
<S>                                                      <C>               <C>
       Accounts Payable                                  $    4,133,810    $    1,104,721
       Accrued Expenses                                       3,307,622         2,169,197
       Short-Term Debt                                        3,163,444         4,186,012
       Deferred Interest - Short-Term                           491,636           514,440
       Vessel Lease Payable - Current Portion                   879,238                 -
       Short-Term Debt - Related Parties                        183,164           183,164
       Liabilities of Discontinued Operations                   317,998           310,798
                                                           -------------     -------------
         TOTAL CURRENT LIABILITIES                           12,476,912         8,468,332
                                                           -------------     -------------

LONG-TERM LIABILITIES:
       Vessel Lease Payable - Long Term Portion              13,120,762                 -
       Long-Term Debt - Net of Current Portion                  310,216         4,095,827
       Deferred Interest - Long-Term                          1,625,608         1,957,920
       Advances From Related Parties                            650,967           285,649
                                                           -------------     -------------
         TOTAL LONG-TERM LIABILITIES                         15,707,553         6,339,396
                                                           -------------     -------------

DEFERRED INCOME                                               1,630,815         5,439,951

COMMITMENTS AND CONTINGENCIES                                     -                 -


STOCKHOLDERS' EQUITY:
       Series A Preferred Stock, $100 Par Value,
        Authorized 500,000 Shares, 362,489
        Issued and Outstanding                               36,284,375        36,248,875
       Common Stock, $2 Par Value, Authorized 25,000,000
        Shares,Issued, 11,482,563, and Outstanding,
        11,482,563 and 7,802,134, respectively               22,965,126        22,960,557
       Capital in Excess of Par                              20,151,914        20,191,982
       (Deficit) (subsequent to June 30, 1993,
        date of quasi-reorganization)                       (45,726,745)      (46,989,638)
                                                           -------------     -------------
                                                             33,674,670        32,411,776
       LESS:
        Treasury Stock, 915,077 and 3,678,146 Shares,
         respectively, at Cost                                 (457,538)       (1,839,073)
        Deferred Compensation, Net                               (2,916)           (6,666)
                                                           -------------     -------------
         TOTAL STOCKHOLDERS' EQUITY                          33,214,216        30,566,037
                                                           -------------     -------------


TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY               $   63,029,496    $   50,813,716
                                                           =============     =============
</TABLE>
See Notes to Consolidated Financial Statements.

                                        2
<PAGE>

                    INTERNATIONAL THOROUGHBRED BREEDERS, INC.
                                AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF OPERATIONS
           FOR THE THREE AND NINE MONTHS ENDED MARCH 31, 2005 AND 2004
                                   (UNAUDITED)


<TABLE>
                                                                   Three Months Ended                  Nine Months Ended
                                                                         March 31,                          March 31,
                                                              ------------------------------     -------------------------------
                                                                   2005             2004              2005              2004
                                                              -------------     ------------     -------------     -------------
<CAPTION>
<S>                                                         <C>               <C>              <C>               <C>
OPERATING REVENUES:
       Gaming                                               $    8,489,580    $   7,989,901    $   20,137,067    $   20,432,796
       Fare                                                      1,076,323        1,076,704         2,244,606         2,358,272
       On Board                                                    599,464          544,548         1,489,931         1,395,253
       Other                                                       115,618           86,554           302,697           232,112
                                                              -------------     ------------     -------------     -------------
         NET OPERATING REVENUES                                 10,280,985        9,697,707        24,174,301        24,418,433
                                                              -------------     ------------     -------------     -------------

OPERATING COSTS AND EXPENSES:
       Gaming                                                    2,592,901        2,329,487         6,845,324         6,488,191
       Fare                                                      1,247,296        1,113,253         3,193,713         2,732,424
       On Board                                                    286,832          262,609           738,635           689,206
       Maritime & Legal Expenses                                 1,813,085        1,781,171         4,705,421         5,050,119
       General & Administrative Expenses                           306,958          937,503         1,791,198         2,737,332
       General & Administrative Expenses - Parent                  420,196          571,136         1,429,202         1,179,085
       Ship Development Costs - Big Easy                         1,109,310                -         1,738,375                 -
       Ship Development Costs - Royal Star                          12,336                -           118,754                 -
       Development Costs - Other                                   361,331          327,656         1,096,988           486,852
       Depreciation & Amortization                                 556,495          203,038         1,521,596           514,007
       ITG Vegas Bankruptcy Costs                                        -           20,078                 -           388,759
                                                              -------------     ------------     -------------     -------------
         TOTAL OPERATING COSTS AND EXPENSES                      8,706,740        7,545,931        23,179,206        20,265,975
                                                              -------------     ------------     -------------     -------------

OPERATING INCOME                                                 1,574,245        2,151,776           995,095         4,152,458
                                                              -------------     ------------     -------------     -------------

OTHER INCOME (EXPENSE):
       Interest and Financing Expenses                            (639,424)        (353,344)       (1,996,685)       (1,379,046)
       Interest and Financing Expenses - Related Party            (259,702)          (8,000)         (700,144)           15,979
       (Loss) on Impairment of Note Receivable                    (100,000)               -          (450,000)                -
       Interest Income                                               9,493           15,792            17,520            42,632
       Interest Income Related Parties                              69,505           64,993           213,396           208,882
       Other Income (Expense)                                            -           16,239               211            16,239
                                                              -------------     ------------     -------------     -------------
         TOTAL OTHER INCOME (EXPENSE)                             (920,128)        (264,320)       (2,915,702)       (1,095,314)
                                                              -------------     ------------     -------------     -------------


INCOME (LOSS) BEFORE TAX PROVISION                                 654,117        1,887,456        (1,920,607)        3,057,144
AND EXTRAORDINARY ITEM
       Income Tax (Benefit) Expense                                  5,000          122,400           (86,000)          170,000
                                                              -------------     ------------     -------------     -------------

INCOME (LOSS) BEFORE EXTRAORDINARY ITEM                            649,117        1,765,056        (1,834,607)        2,887,144

EXTRAORDINARY ITEM -  Fees charged to related
       parties for Master Settlement Agreement ( Note 12),
       less income tax of $440,000.                                      -                -         3,560,000                 -
                                                              -------------     ------------     -------------     -------------

NET INCOME                                                  $      649,117    $   1,765,056    $    1,725,393    $    2,887,144
                                                              =============     ============     =============     =============


NET BASIC INCOME PER COMMON SHARE                           $         0.06    $        0.23    $         0.17    $         0.36
                                                              =============     ============     =============     =============

NET DILUTED INCOME PER COMMON SHARE                         $         0.06    $        0.17    $         0.16    $         0.29
                                                              =============     ============     =============     =============

WEIGHTED AVERAGE COMMON
   SHARES OUTSTANDING - Basic                                   10,567,487        7,802,134        10,275,087         7,977,224
                                                              =============     ============     =============     =============

WEIGHTED AVERAGE COMMON
   SHARES OUTSTANDING - Diluted                                 11,221,096       10,108,167        10,871,605        10,129,978
                                                              =============     ============     =============     =============
</TABLE>

See Notes to Consolidated Financial Statements.

                                        3
<PAGE>

                    INTERNATIONAL THOROUGHBRED BREEDERS, INC.
                                AND SUBSIDIARIES

                 CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
                    FOR THE NINE MONTHS ENDED MARCH 31, 2005
                                   (UNAUDITED)
<TABLE>
                                                                Preferred                 Common
                                                      -------------------------  -------------------------
                                                       Number of                   Number of
                                                        Shares       Amount         Shares        Amount
                                                      ----------  -------------  ------------  ------------
<CAPTION>
<S>                                                     <C>      <C>              <C>         <C>
BALANCE - JUNE 30, 2004                                 362,489  $  36,248,875    11,480,279  $ 22,960,557

   Shares Issued for Fractional Exchanges With
     Respect to the One-for-twenty Reverse Stock
     Split effected on March 13, 1992                       355         35,500         2,283         4,568
   Shares Issued for Options Granted
   Options Issued at Less than Treasury Stock Cost            -              -             -             -
   Amortization of Deferred Compensation Costs                -              -             -             -
   Net Income for the Nine Months Ended March 31, 2005        -              -             -             -
                                                      ----------  -------------  ------------  ------------
BALANCE - MARCH 31, 2005                                362,844  $  36,284,375    11,482,562  $ 22,965,125
                                                      ==========  =============  ============  ============
</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, 2004                                $ 20,191,982   $ (46,989,638)   $ (1,839,073)  $  (6,666)  $  30,566,037

   Shares Issued for Fractional Exchanges With
     Respect to the One-for-twenty Reverse Stock
     Split effected on March 13, 1992                       (40,068)              -               -           -               -
   Shares Issued for Options Granted                              -               -         919,035           -         919,035
   Options Issued at Less than Treasury Stock Cost                -        (462,500)        462,500           -               -
   Amortization of Deferred Compensation Costs                    -               -               -       3,750           3,750
   Net Income for the Nine Months Ended March 31, 2005            -       1,725,393               -           -       1,725,393

                                                        ------------   -------------    ------------   -----------  -----------
BALANCE - MARCH 31, 2005                               $ 20,151,914   $ (45,726,745)   $   (457,538)  $  (2,916)  $  33,214,215
                                                        ============   =============    ============   ===========  ===========
</TABLE>

See Notes to Consolidated Financial Statements.

                                       4

<PAGE>

                    INTERNATIONAL THOROUGHBRED BREEDERS, INC.
                                AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                FOR THE NINE MONTHS ENDED MARCH 31, 2005 AND 2004
                                   (UNAUDITED)

<TABLE>
                                                                             March 31,
                                                                   ------------------------------
                                                                        2005             2004
                                                                   --------------   -------------
<CAPTION>
<S>                                                              <C>               <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
       INCOME BEFORE DISCONTINUED OPERATIONS                     $    1,725,393    $   2,887,144
       Adjustments to reconcile income to net cash
         provided by operating activities:
            Depreciation and Amortization                             1,521,596          514,007
            Gain on Sale of Assets                                            -                -
            Impairment of Note                                          450,000                -
            Increase in Deferred Income                                 190,863                -
            (Decrease) in Deferred Income - Related Parties          (4,000,000)               -
            Changes in Operating Assets and Liabilities -
              (Increase) in Restricted Cash & Investments                     -         (420,000)
              (Increase) in Accounts Receivable                        (305,604)         (29,880)
              (Increase) Decrease in Other Assets                      (161,901)         438,608
              (Increase) in Prepaid Expenses                         (1,183,370)        (104,816)
              Increase (Decrease) in Accounts Payable and
               Accrued Expenses                                       4,427,516       (1,913,932)
                                                                   -------------     ------------
       CASH PROVIDED BY OPERATING ACTIVITIES BEFORE
       DISCONTINUED OPERATIONS                                        2,664,493        1,371,131
       CASH PROVIDED BY DISCONTINUED OPERATING ACTIVITIES                 7,200            7,200
                                                                   -------------     ------------
       NET CASH PROVIDED BY OPERATING ACTIVITIES                      2,671,693        1,378,331
                                                                   -------------     ------------

CASH FLOWS FROM INVESTING ACTIVITIES:
    Purchase and Improvements of Vessels                            (12,664,325)      (1,084,163)
    Security Deposit on New Bare Boat Charter -
     Related Party MJQ Corp.                                                  -         (600,000)
    Loans Paid by Related Parties                                     3,523,175                -
    Capital and Livestock Expenditures                               (1,688,566)        (657,441)
    (Increase) Decrease in Other Investment Activity                   (902,589)         200,266
    Decrease in Other Investment Activity - Related Parties                   -            2,513
                                                                   -------------     ------------
       CASH (USED IN) INVESTING ACTIVITIES
       BEFORE DISCONTINUED INVESTING ACTIVITIES                     (11,732,305)      (2,138,825)
       CASH PROVIDED BY DISCONTINUED INVESTING ACTIVITIES                     -                -
                                                                   -------------     ------------
       NET CASH (USED IN) INVESTING ACTIVITIES                      (11,732,305)      (2,138,825)
                                                                   -------------     ------------

CASH FLOWS FROM FINANCING ACTIVITIES:
    Funds Received PDS Note                                           2,850,000                -
    Funds Received on Refinance of Note                                       -        6,400,000
    Principal Payments on Short Term Notes                              (60,220)      (4,765,124)
    Funds Received from Related Parties                                 545,054                -
    Principal Payments on Long Term Notes                              (286,127)               -
    Decrease in Balances Due to/From Discontinued
     Subsidiaries                                                         6,250            6,113
                                                                   -------------     ------------
       CASH PROVIDED BY FINANCING ACTIVITIES
       BEFORE DISCONTINUED FINANCING ACTIVITIES                       3,054,957        1,640,989
       CASH (USED IN) DISCONTINUED FINANCING ACTIVITIES                  (6,250)          (6,113)
                                                                   -------------     ------------
       NET CASH PROVIDED BY FINANCING ACTIVITIES                      3,048,707        1,634,876
                                                                   -------------     ------------

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                 (6,011,905)         874,382
          LESS CASH AND CASH EQUIVALENTS  FROM
            DISCONTINUED OPERATIONS                                        (950)          (1,087)
       CASH AND CASH EQUIVALENTS AT BEGINNING OF THE PERIOD           7,508,632        6,123,641
                                                                   -------------     ------------

       CASH AND CASH EQUIVALENTS AT END OF THE PERIOD            $    1,495,777    $   6,996,936
                                                                   =============     ============

       Supplemental Disclosures of Cash Flow Information:
           Cash paid during the period for:
           Interest                                              $    4,439,344    $     633,490
           Income Taxes                                          $            -    $     256,517

</TABLE>

                                        5

<PAGE>

                    INTERNATIONAL THOROUGHBRED BREEDERS, INC.
                                AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

(1)  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     (A) Nature of Operations -  International  Thoroughbred  Breeders,  Inc., a
Delaware corporation ("ITB" and together with its subsidiaries,  the "Company"),
was incorporated on October 31, 1980. Its principal  operating  subsidiary,  ITG
Vegas,  Inc. ("ITG Vegas") is currently  engaged in an entertainment  cruise and
casino ship business under a  sub-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 425 slot machines,  all major
table games (blackjack, dice, roulette and poker), and a sports wagering book.

     During the first quarter of Fiscal 2005, we re-entered the equine business.
We currently own 30 horses, a share of 8 horses,  and lease 2 other horses,  all
of different ages. Several are currently racing and a few are held as broodmares
but the majority are yearlings and two year olds in training.  It is our plan to
bring these horses into racing if we consider them competitive  after completion
of training.

     Using the funding provided by the PDS Transactions (see Note 2) and working
capital, our subsidiary, ITG Palm Beach, LLC ("ITGPB") began making alterations,
retrofits and improvements to the Empress II (subsequently renamed the Big Easy)
in our second  fiscal  quarter to prepare it for use as a casino cruise ship. It
is anticipated  that the Big Easy will begin passenger  service from the Port of
Palm Beach,  Florida during our fourth quarter.  The ship's  reconstruction  and
refurbishment  was  completed in April,  2005,  and we are  continuing to pursue
certification  for  passenger  operations  pursuant to the United  States  Coast
Guard's  Alternative  Compliance  Program.  Although the Alternative  Compliance
Program certification  procedure is less complex and time consuming than regular
Coast Guard  certification,  it is nevertheless a rigorous process involving the
jurisdiction  of at least four separate  departments  of the United States Coast
Guard and the ship's classification society,  Lloyd's Register.  During the past
nine  months the Company  incurred  approximately  $1,740,000  of start up costs
which, according to the appropriate accounting pronouncement, have been expensed
as they have been incurred.

     (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) Revenue Recognition - Casino revenue consists of gaming winnings net of
losses. Net income is the difference between wagers placed and winning payout to
patrons and is recorded  at the time wagers are made.  The vast  majority of the
wagers are in the form of cash and we do not grant credit to our  customers to a
significant  extent.  Fare revenues  consist of admissions to our vessel and are
recognized  as  earned.   On  board  revenues  consist  primarily  of  ancillary
activities  aboard  the  vessel  such as the sale of food and  beverages,  cabin
rental,  gift  shop,  spa  facility  and  skeet  shooting.  These  revenues  are
recognized on the date they are earned.

     (E) Accounting Periods - ITG Vegas ends its quarterly  accounting period on
the last  Sunday of each  quarter.  These end of the week cut offs  create  more
comparability  of the Company's  quarterly  operations,  by generally  having an
equal number of weeks (13) and week-end days in each quarter. Periodically, this
system  necessitates  a 14 week quarter.  The quarter  ending March 31, 2005 was
such a quarter for which the ITG Vegas, Inc.  subsidiary cut off was on April 3,
2005.  The  Company's  current  fiscal year will  include a 53 week year for its
subsidiary, ITG Vegas, Inc.

     (F) Spare Parts  Inventory - Spare parts  inventory  consists of  operating
supplies,  maintenance materials and spare parts. The inventories are carried at
cost.  It is necessary  that these parts be readily  available so that the daily
cruise operations are not cancelled due to mechanical failures.

     (G) Livestock - Livestock  consists of  thoroughbred  horses and the assets
are stated at the lower of cost or market. Costs of maintaining horses and other
direct horse related costs are expensed in the period

                                        6

<PAGE>


                    INTERNATIONAL THOROUGHBRED BREEDERS, INC.
                                AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

incurred. Stud fees are capitalized and become the basis of the resulting foal.

     (H)  Depreciation and Amortization - Depreciation of property and equipment
were computed by the  straight-line  method at rates  adequate to allocate their
cost or  adjusted  fair  value  in  accordance  with U.  S.  generally  accepted
accounting   principles  over  the  estimated  remaining  useful  lives  of  the
respective assets.  Amortization  expense includes the write off of major vessel
repairs and  maintenance  work completed at dry dock period.  These expenses are
written  off during a two year period  following  the dry dock  period.  For the
three months ended March 31, 2005 and 2004,  the  amortized  expense was $46,709
and  $42,486,  respectively.  For the nine months ended March 31, 2005 and 2004,
the amortized expense was $133,455 and $80,295, respectively.

     As a result of the PDS  transactions  (see  Footnote  2) we are leasing the
vessel M/V Palm Beach  Princess under a Capital lease  arrangement.  The Company
began  depreciating  the M/V Palm Beach Princess during the first quarter of our
current fiscal year.  Financing fees In connection with the PDS financings,  are
being amortized over the life of the loans.  For the three and nine months ended
March 31, 2005 the  amortized  expense  associated  with these finance costs was
$24,344 and $10,455, respectively.  There were no amortized fees recorded in the
three or nine months ended March 31, 2004,

     Long-lived assets and certain identifiable intangibles held and used by the
Company are reviewed for impairment  whenever events or changes in circumstances
warrant  such a  review.  The  carrying  value of a  long-lived  or  amortizable
intangible asset is considered  impaired when the anticipated  undiscounted cash
flow from such asset is  separately  identifiable  and is less than its carrying
value.  In that  event,  a loss is  recognized  based on the amount by which the
carrying value exceeds the fair value of the asset.  Losses on long-lived assets
to be disposed of are  determined in a similar  manner,  except that fair values
are reduced for the cost of  disposition.  Effective  January 4, 2002,  SFAS 142
requires  an annual  impairment  review  based on fair value for all  intangible
assets with indefinite lives.

     (I) Net Assets of Discontinued Operations - At March 31, 2005 and 2004, the
remaining net assets and  liabilities of Garden State Park and Freehold  Raceway
were  classified as "Assets of  Discontinued  Operations."  and  "Liabilities of
Discontinued Operations."

     (J) Recent  Accounting  Pronouncements  - In January  2003,  the  Financial
Accounting Standards Board ("FASB") issued Interpretation No. 46 ("FIN") No. 46,
"Consolidation of Variable Interest Entities". In December 2003, the FASB issued
FIN No. 46  (Revised)  ("FIN  46-R") to address  certain  FIN 46  implementation
issues. This interpretation requires that the assets,  liabilities,  and results
of operations of a Variable  Interest  Entity ("VIE") be  consolidated  into the
financial  statements of the enterprise  that has a controlling  interest in the
VIE. The provisions of this  interpretation  were effective  immediately for all
arrangements  entered into with new VIEs  created  after  January 31, 2003,  and
became  effective  during the period ended March 31, 2004 for any VIE created on
or before January 31, 2003. Based upon our review, we do not believe we have any
such entities or arrangements that would require disclosure or consolidation.

     (K) Income Taxes - The Company has adopted the  provisions  of Statement of
Financial  Accounting  Standards No. 109,  "Accounting  for Income Taxes" ("SFAS
109").  SFAS 109 requires a company to recognize  deferred tax  liabilities  and
assets  for the  expected  future  tax  consequences  of  events  that have been
recognized  in its  financial  statements  or tax  returns.  Under this  method,
deferred  tax  liabilities  and assets are  determined  based on the  difference
between the  financial  statement  carrying  amounts and tax bases of assets and
liabilities. Deferred tax assets and liabilities are adjusted for the effects of
changes in tax laws and rates on the date of enactment.

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

     (M) 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.



                                        7

<PAGE>


                    INTERNATIONAL THOROUGHBRED BREEDERS, INC.
                                AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

     (N)  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.

     (O)  Deferred  Income - The gain  from the sale of our  Garden  State  Park
property on  November  28, 2000 in the amount of  $1,439,951  has been  deferred
until  such  time as the note  receivable  on the sale  has been  collected.  In
connection  with the PDS  Transaction  we have  deferred the gain on the sale of
equipment of $190,863 over the term of the equipment  lease. The deferred income
recorded as of June 30, 2004 included fees charged to Leo Equity Group,  Inc. in
the amount of $3,000,000 and to Palm Beach  Maritime Corp.  (formerly MJQ Corp.)
in the amount of  $1,000,000 in connection  with the final  settlement  with the
Brennan  Trustee.  These amounts were deferred until the first quarter of Fiscal
2005 when we received payment for these charges.

     (P) Net Income per Common  Share - Basic  earnings per share is computed as
net income  available to common  shareholders  divided by the  weighted  average
number of common shares  outstanding  during the quarter.  Diluted  earnings per
share  reflects  the  potential  dilution  that could occur from  common  shares
issuable through stock options and warrants utilizing the treasury stock method.
Diluted earnings per share is calculated by using the weighted average number of
common shares outstanding adjusted to include the potentially dilutive effect of
these occurrences.

     (Q) Capitalized  Interest - during the nine months ended March 31, 2005, we
capitalized  interest  payments made under the Empress II (subsequently  renamed
the Big Easy) sublease in the amount of $1,530,197.  The interest  payments will
be capitalized until the vessel is placed in service, estimated to be during our
fourth fiscal quarter, ending on June 30, 2005.

(2)  PDS TRANSACTIONS

     (A) On July 7, 2004,  ITG Vegas and its  subsidiary,  ITG Palm  Beach,  LLC
("ITGPB") and its affiliated entities Palm Beach Maritime  Corporation  ("PBMC")
(formerly MJQ Corp.) and Palm Beach Empress,  Inc.("PBE")  closed on a series of
related  transactions (the "PDS  Transactions")  pursuant to which PBMC sold and
then leased back the casino cruise ship Palm Beach  Princess  ("Princess"),  PBE
leased (as lessee) the casino cruise ship Empress II  (subsequently  renamed the
Big Easy)  ("Big  Easy"),  ITG Vegas and ITGPB  obtained  long-term  charters to
operate,  and options to purchase,  the  Princess and Big Easy.  By way of these
sales/lease  transactions,  PBMC,  ITG  Vegas  and  the  Company  were  able  to
extinguish their joint debts to the Chapter 11 Trustee for the Bankruptcy Estate
of Robert E. Brennan ("the Brennan Trustee"). ITG Vegas's investment in the Ship
Mortgage Note,  described below, was converted into an investment in the options
to purchase the two vessels.

     All of the outstanding capital stock of PBMC is owned by Francis W. Murray,
the Chief  Executive  Officer of the Company.  PBMC owns 50% of the  outstanding
capital stock of PBE. The remaining 50% of the outstanding  capital stock of PBE
is owned by  Raymond  Parello  and has been  pledged  to the  Company  to secure
payment of the Second Cherry Hill Note described in Note 5 below.

     The following is a summary of the principal terms of the PDS  Transactions.
The summary  does not purport to be a complete  summary and is  qualified in its
entirety by reference to the documents  which were filed as exhibits to the Form
8-K filed on July 21, 2004.

     Sale-Leaseback   of  the  Princess.   Prior  to  the  closing  of  the  PDS
Transactions  (the "Closing"),  the Princess was owned by PBMC. On May 13, 1999,
PBMC issued to Cambridge  Capital Group,  Inc. a note in the original  principal
amount of  $12,000,000  (the  "Ship  Mortgage  Note"),  which  was  subsequently
acquired by Donald F. Conway,  as Chapter 11 Trustee of the Bankruptcy Estate of
Robert E. Brennan (the "Brennan Trustee"). The Ship Mortgage Note was secured by
a  Second  Naval  Mortgage  over the  Princess  (which  became a first  priority
mortgage when  obligations  secured by the first  mortgage were paid) (the "Ship
Mortgage").  Pursuant to a Purchase and Sale agreement  dated February 22, 2002,
ITG Vegas agreed to purchase the Ship  Mortgage  Note and Ship Mortgage from the
Brennan Trustee for a purchase price of $13,750,000 (the "Purchase Obligation").
In addition,  the Company was indebted to the Brennan Trustee in connection with
the  Company's  repurchase  of  3,678,145  shares of its common  stock (the "ITB
Obligation").

                                        8

<PAGE>


                    INTERNATIONAL THOROUGHBRED BREEDERS, INC.
                                AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

As of Closing,  the aggregate  outstanding amount of the Purchase Obligation and
ITB  Obligation  was  $7,916,451.71,  for all of which PBMC and the Company were
jointly and severally  liable.  At the Closing,  Cruise Holdings I, LLC ("Cruise
I"), a subsidiary of PDS Gaming Corporation ("PDS"), purchased the Princess from
PBMC for  $14,000,000,  $7,916,451.71  of which was paid by PBMC directly to the
Brennan Trustee to satisfy the Purchase Obligation and ITB Obligation.

     Also at  Closing,  Cruise I entered  into a Bareboat  Charter and Option to
Purchase (the "Princess  Charter") and a Master Lease  Agreement  (together with
Lease Schedule No. 1 thereto,  the "Princess Master Lease") to charter and lease
the Princess to PBMC and PBE for a period of five years.  The charter  hire/rent
payable  by  PBMC  and  PBE is  $178,500  per  month  for the  first  12  months
(equivalent to interest only on a capital lease  obligation of $14,000,000)  and
$391,762.80 for the remaining term (amortizing the capital lease obligation over
the next four years) of the  Princess  Charter.  In  addition,  PBMC and PBE are
required  to make  annual  cash flow sweep  payments  (equivalent  to  mandatory
principal  prepayments)  (the "Cash Flow Sweep") if the EBITDAR (earnings before
interest, taxes, depreciation, amortization and rents) from the operation of the
Princess and the Big Easy is less than $10,000,000 per year. Any Cash Flow Sweep
payments to be made under the Princess  Charter will  ultimately  be made by ITG
Vegas and ITGPB (as the operators of the Princess), as described below.

     The Princess  Charter  includes an option for PBMC to purchase the Princess
at the end of the term and is  structured  such that the  monthly  charter  hire
payments  under the  Princess  Charter  will reduce the  purchase  price for the
Princess  to zero in five years  (assuming  there are no payment  defaults)  and
title will  automatically  pass to PBMC at (or, if Cash Flow Sweep  payments are
made, before) the end of the term of the Princess Charter.

     PBMC  and  PBE  entered  into  a   Sub-Bareboat   Charter  (the   "Princess
Sub-Charter")  at Closing to charter the Princess to ITG Vegas and ITGPB for the
same five year period.  ITG Vegas will operate the  Princess,  with ITGPB having
joined in the  Sub-Bareboat  Charter in order to be jointly and severally liable
with ITG Vegas for charter  hire  thereunder.  The charter  hire  payable by ITG
Vegas and ITGPB to PBMC and PBE under the  Princess  Sub-Charter  is $50,000 per
month ($600,000 per year) plus one percent (1%) of the gross operating  revenues
of the Princess.  Under the Princess Sub-Charter,  PBMC granted to ITG Vegas and
ITGPB an option to purchase  PBMC's  right to acquire the Princess at the end of
the term,  for an exercise  price equal to the appraised  value of the Princess,
$17,500,000, to which certain amounts are to be credited as described below (the
"Princess Purchase Option").  As consideration for the Princess Purchase Option,
ITG Vegas will make Cash Flow Sweep  payments  on the same terms as PBMC and PBE
are required to make such payments under the Princess  Charter (and  effectively
will make such  payments  directly  to Cruise I on behalf of PBMC and PBE to the
extent any such  payments are due).  As further  consideration  for the Princess
Purchase Option,  ITG Vegas and ITGPB are to make payments of $178,500 per month
for the first 12 months and $391,762.80 for the remaining  four-year term of the
Princess Sub-Charter (i.e., the same amounts as the charter hire payable by PBMC
and PBE under the Princess Charter) (the "Princess Additional Payments"). If ITG
Vegas and ITGPB fail to make any Cash Flow Sweep payment or Princess  Additional
Payment when due, PBMC may terminate the Princess Purchase Option. Upon exercise
of the Princess Purchase Option, ITG Vegas and ITGPB will be entitled to credits
against the exercise price of the Princess  Purchase  Option for (i) ITG Vegas's
investment  of  $7,244,000  in the Ship  Mortgage  Note  (except  to the  extent
credited toward payment of the exercise price for the purchase option on the Big
Easy under the Big Easy Sub-Charter,  described below),  plus (ii) the aggregate
amount of all Cash Flow Sweep payments made under the Princess Sub-Charter, plus
(iii) the portion of the Princess  Additional  Payments  made for the 13th month
through the 60th month of the term of the  Princess  Sub-Charter  which would be
considered  principal  payments if such  Additional  Payments  were  payments of
principal and interest on a loan of  $14,000,000  amortized over 48 months at an
interest  rate of 15.3%.  In  addition,  the exercise  price for the  assignment
option may be offset by any debts owing by PBMC to ITG Vegas and/or ITGPB.

     Acquisition  of the Big  Easy.  On  March  1,  2004,  PBE  entered  into an
agreement  to  purchase  the vessel  known as the M/V  Empress II  (subsequently
renamed  the  Big  Easy)(the  "Empress  Sale  Agreement")  from  Empress  Joliet
Corporation  at a purchase  price of  $3,800,000.  The Big Easy has  required in
excess of $12 million of alterations,  retrofits and  improvements to prepare it
for use as a casino  cruise ship.  As of March 31, 2005,  ITG Vegas has incurred
$2,880,650 of that cost with the balance having been incurred by PBE. At Closing
of the PDS Transactions,  PBE assigned to Cruise Holdings II, LLC ("Cruise II"),
a  subsidiary  of PDS and  affiliate  of Cruise I, all of its rights,  title and
interest in and to the Empress Sale  Agreement,  and the sum of  $6,000,000  was
deposited in a blocked account to be used to pay costs of the

                                        9

<PAGE>


                    INTERNATIONAL THOROUGHBRED BREEDERS, INC.
                                AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

alterations,  retrofit and improvements of the Big Easy. Such deposit was funded
to the extent of $2,880,652 by ITG Vegas.

     Also at Closing,  Cruise II entered  into a Bareboat  Charter and Option to
Purchase (the "Empress  Charter") and a Master Lease  Agreement  (together  with
Lease Schedule No. 1 thereto,  the "Empress  Master Lease") to charter and lease
the Big Easy to PBMC and PBE for a period of five  years.  The  charter  hire is
$82,695 for the first 12 months  (equivalent  to  interest  only on a $6 million
capital lease obligation) and $171,702.54 for the remaining term (amortizing the
capital lease  obligation over the next four years) of the Big Easy Charter.  In
addition,  PBMC and PBE are  required to make  annual  Cash Flow Sweep  payments
(equivalent  to mandatory  prepayments  of principal)  based on the EBITDAR from
operation of the Princess and Big Easy,  as described in respect to the Princess
Charter above.

     The Empress Charter  includes an option for PBE to purchase the Big Easy at
the end of the term and is structured  the same as the Princess  Charter in that
the monthly  payments of charter hire under the Empress  Charter will reduce the
purchase price for the Big Easy to zero (assuming there are no payment defaults)
and title will automatically pass to PBE at (or, if Cash Flow Sweep payments are
made, before) the end of the term of the Empress Charter.

     PBMC and PBE also  entered  into a  Sub-Bareboat  Charter  (the  "Big  Easy
Sub-Charter")  at Closing  to charter  the Big Easy to ITG Vegas and ITGPB for a
five  year  period.  ITGPB  plans to  operate  the Big  Easy as a casino  cruise
business  from the Port of Palm  Beach,  with ITG  Vegas  having  joined  in the
Sub-Bareboat  Charter in order to be jointly and severally liable with ITGPB for
charter hire  thereunder.  The charter hire payable by ITG Vegas and ITGPB under
the Big Easy  Sub-Charter is $100,000 per month ($1.2 million per year) plus one
percent (1%) of the gross operating revenues of the Big Easy. Under the Big Easy
Sub-  Charter,  PBE granted to ITG Vegas and ITGPB an option to  purchase  PBE's
right to  acquire  the Big Easy at the end of the term,  for an  exercise  price
equal  to the  appraised  value  of the Big  Easy,  to be  determined  upon  the
retrofitting and  refurbishment of the Big Easy, to which certain amounts are to
be  credited  as  described   below  (The  "Big  Easy  Purchase   Option").   As
consideration  for the Big Easy Purchase  Option,  ITG Vegas will make Cash Flow
Sweep  payments  on the same  terms as PBMC and PBE are  required  to make  such
payments  under the Big Easy Charter (and  effectively  will make such  payments
directly to Cruise II on behalf of PBMC and PBE to the extent any such  payments
are due). As further  consideration for the Big Easy Purchase Option,  ITG Vegas
and ITGPB are to make  payments of $82,695 per month for the first 12 months and
$171,702.54 for the remaining term of the Big Easy  Sub-Charter  (i.e., the same
amounts as the charter hire payable by PBMC and PBE under the Big Easy  Charter)
(the "Big Easy  Additional  Payments").  If ITG Vegas and ITGPB fail to make any
Big Easy  Additional  Payments when due, PBE may terminate the Big Easy Purchase
Option.  Upon exercise of the Big Easy Purchase Option, ITG Vegas and ITGPB will
be  entitled  to credits  against the  exercise  price of the Big Easy  Purchase
Option for (i) ITG Vegas's  investment  in the Ship Mortgage Note (except to the
extent  credited toward payment of the exercise price for the purchase option on
the Princess under the Princess  Sub-Charter,  described  above),  plus (ii) the
amounts of costs for the  retrofit  and  improvements  to the Big Easy which are
paid by ITG  Vegas or ITGPB  plus  (iii) the  aggregate  amount of all Cash Flow
Sweep payments made under the Big Easy Sub-Charter, plus (iv) the portion of the
Big Easy  Additional  Payments made for the 13th month through the 60th month of
the  term of the Big  Easy  Sub-Charter  which  would  be  considered  principal
payments if such Additional  Payments were payments of principal and interest on
a loan of $6,000,000  amortized over 48 months at an interest rate of 16.54%. In
addition,  the  exercise  price for the  assignment  option may be offset by any
debts owing by PBMC to ITG Vegas and/or ITGPB.

     Lease of Gaming Equipment.  At Closing,  ITG Vegas and ITGPB entered into a
Master  Lease,  together  with three  Lease  Schedules  (the  "Gaming  Equipment
Lease"),  to lease certain new and used gaming equipment from PDS for use on the
two vessels.  A portion of the  equipment was  previously  owned and used by ITG
Vegas on the Princess and was sold to PDS at Closing, for $500,000,  pursuant to
a Warranty Bill of Sale and Transfer  Agreement and then leased back pursuant to
the Gaming Master Lease.  Each Schedule of the Gaming Equipment Lease has a term
of three years from the time the  equipment  under that Schedule is delivered to
and  accepted by ITG Vegas and ITGPB.  Aggregate  rent for all gaming  equipment
will be approximately  $1.4 million per year. ITG Vegas and ITGPB have an option
to purchase  the leased  equipment  at the end of the term for a purchase  price
equal to the fair  market  value of the  equipment  at such time  (less,  to the
extent any items of equipment were replaced during the previous 12-month period,
the excess of the then-current book value of the replacement  equipment over the
book value of the old equipment at the time of replacement).

                                       10

<PAGE>


                    INTERNATIONAL THOROUGHBRED BREEDERS, INC.
                                AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)


     Guaranty  Agreements.  As a condition to entering into the PDS Transaction,
PDS required ITB , ITG Vegas,  ITGPB,  PBMC and PBE to guaranty  performance  of
certain of the PDS Transactions.  ITB, ITG Vegas and ITGPB entered into Guaranty
Agreements  guarantying  the  obligations  of PBMC and PBE  under  the  Princess
Charter, Princess Master Lease, Big Easy Charter and Big Easy Master Lease. ITB,
PBMC and PBE entered into a Guaranty  Agreement  guarantying  the obligations of
ITG Vegas and ITGPB under the Gaming Equipment Lease.

     Additional Security. As security for the performance by ITG Vegas under the
Guaranty Agreements  described above and the Princess and Big Easy Sub-Charters,
ITG Vegas entered into a Collateral  Assignment of the Maritime  Office  Complex
Lease and Operating  Agreement  and Other Lease as well as a Leasehold  Mortgage
pursuant to which it assigned as collateral to Cruise I and Cruise II its rights
under its lease for space, and its operating rights, at the Port of Palm Beach.

     Limitation on Upstream  Payments to ITB.  Upstream payments by ITG Vegas to
the Company are limited under the Princess Sub-Charter and Big Easy Sub-Charter.
If the "YTD Result" (defined as 10/12ths of annualized EBITDAR from operation of
the two vessels) is greater than $8,000,000 at the end of any of the first three
fiscal  quarters or EBITDAR  from  operation  of the two vessels is greater than
$8,000,000  at the end of any fiscal year,  and if ITG Vegas and ITGPB have made
all payments due under the Princess Sub- Charter and Big Easy  Sub-Charter,  ITG
Vegas may make (i) tax sharing  payments to ITB  (payments  equal to the federal
income  tax  savings  to  ITG  Vegas  resulting  from  its  inclusion  in  ITB's
consolidated  group for federal  income tax purposes)  including any tax sharing
payments  previously  deferred as a result of the limitation  under the Princess
Sub-Charter or Big Easy  Sub-Charter,  and (ii) other payments to the Company in
an amount  which,  together with charter hire payments in excess of $100,000 per
month to PBMC and PBE for the two vessels,  shall not exceed  $200,000 per month
(a "Restricted Payment").  If ITG Vegas is prohibited from making any Restricted
Payment for any month,  once such payments are again  allowed,  such  Restricted
Payment may be made to the Company, provided that the total amount of Restricted
Payments  paid by ITG  Vegas to the  Company,  PBMC and PBE in any  twelve-month
period may not exceed $2,400,000.

     (B)  On  January  5,  2005,  Royal  Star  Entertainment,   LLC  ("RSE"),  a
wholly-owned  indirect  subsidiary  of ITB,  executed and delivered a promissory
note,  amended  as of  January  17,  2005 in the  original  principal  amount of
$2,850,000  (the  "Note"),  representing  a loan funded on January 17, 2005 (the
"Loan") in such  principal  amount.  Also on January 5, 2005, ITB entered into a
Guaranty Agreement dated as of January 6, 2005,  guarantying payment of all sums
due and to become due by RSE under the Note.  The Note is also  secured by RSE's
Preferred Mortgage dated as of January 17, 2005, encumbering the vessel owned by
RSE and  known as the  "Royal  Star."  The  lender  and  holder  of the Note and
Mortgage is Cruise Holdings IV, LLC, an affiliate of PDS Gaming Corporation.

     The Loan  evidenced  by the Note will be  repayable  on January  17,  2006.
Interest  on the Loan will be payable  monthly  at a rate of 10% per  annum.  At
closing,  RSE paid a closing fee to the lender in an amount equal to $78,375, or
2.75% of the principal  amount of the Note.  The sole member of RSE is ITG Vegas
and the proceeds of the Loan are to be used to make leasehold improvements under
the Maritime Office Complex Lease and Operating  Agreement between ITG Vegas and
the Port of Palm Beach  District,  or to make  improvements  to the vessel Royal
Star or to the vessel Big Easy  (formally  known as Empress  II), a vessel which
another subsidiary of ITG Vegas charters under a capital lease and charter.  The
Company continues to explore venues for use of the vessel Royal Star in a casino
cruise  operation.  If RSE  prepays  the Note in  connection  with a sale of the
vessel  Royal Star,  it will be required to pay a 5%  prepayment  premium to the
lender.

     On January 5, 2005,  RSE entered  into a Master Lease  Agreement  and Lease
Schedule  No. 1, each dated as of January 6, 2005  (collectively,  the  "Lease")
with PDS Gaming  Corporation  providing for the lease by RSE of slot machines to
be located on the vessel Royal Star. Also on January 5, 2005, ITB entered into a
Guaranty Agreement dated as of January 6, 2005,  agreeing to guaranty payment by
RSE of all sums  becoming  due under the  Lease.  The term of the Lease is three
years,  with rental  payments of $11,879 per month for the first four months and
$95,351.73 for the next thirty-two months. RSE paid a closing fee of $57,020.74,
and a security deposit in the amount of $95,351.73.

                                       11

<PAGE>

                    INTERNATIONAL THOROUGHBRED BREEDERS, INC.
                                AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)


     The foregoing is a summary of the  principal  terms of RSE's loan and lease
transactions.  The  summary  does not  purport to be a complete  summary  and is
qualified  in its  entirety by  reference  to the  documents  which are filed as
exhibits to the Company's Form 8-K dated January 6, 2005.

     (C)  See  Note 15  (Subsequent  Events)  in  connection  with a  third  PDS
financing which closed in April 2005.

(3)  DESCRIPTION OF LEASING ARRANGEMENTS

     As  described  in the  footnote 2 above,  the  Company  and  several of its
subsidiaries  have  entered  into sub charter  transactions  for two vessels and
lease transactions for equipment to be placed on three vessels.  The sub charter
for the Palm Beach  Princess,  which is currently in service,  will be accounted
for as a capital lease and the lease for the gaming  equipment  currently aboard
the vessels and the lease for new gaming  equipment  will be accounted for as an
operating lease.

     Principal  payments made will reduce the capital lease  purchase  liability
and the interest portion of each monthly payment will be expensed.  Depreciation
expense will be recorded for the Palm Beach Princess  using an estimated  useful
life of 20  years.  Sub  charter  fees of  $50,000  per  month  plus 1% of gross
revenues of the Palm Beach Princess will be expensed as incurred.

     The transaction described in note 2(A) also included the sub charter of the
Big Easy and a lease for gaming  equipment  aboard  that  vessel.  PDS placed $6
million in a reserve  account  which  included  $2,880,652  of our funds for the
improvements  to be made to the Big Easy. When such  improvements  are completed
the vessel will be appraised and the accounting  treatment for the  transactions
will be determined at that time.  Sub charter fees of $100,000 per month plus 1%
of gross  revenues will be expensed as incurred at the time the vessel is placed
in service.  The gaming  equipment  lease will be accounted  for as an operating
lease. The gaming equipment lease requires  interest only payments for the first
six months.  These payments for interest will be capitalized until the vessel is
placed in service and  subsequently  amortized  over the life of the  equipment.
Interest  payments  made on the Big Easy  sub-lease  and  payments  made for the
charter hire fees will be capitalized  until the vessel is placed in service and
subsequently amortized over the life of the vessel.

     The  transaction  described  in  Note  2(B)  included  a lease  for  gaming
equipment  aboard the vessel,  Royal Star.  The gaming  equipment  lease will be
accounted  for as an  operating  lease.  The  gaming  equipment  lease  requires
interest  only  payments  for the first  four  months of  $11,879  per month and
$95,351.73 for the next thirty-two months.

     See Note 15  (Subsequent  Events)  with respect to an  additional  lease of
gaming equipment.

     Vessels,  plant and  equipment  at March 31,  2005  include  the  following
amounts for capitalized leases:


       Vessel, Palm Beach Princess          $           17,500,000
       Less: allowance for depreciation                   (869,570)
                                                  -----------------
       Capital Leases                       $           16,630,430
                                                  =================


                                       12

<PAGE>


                    INTERNATIONAL THOROUGHBRED BREEDERS, INC.
                                AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

     The following is a schedule by years of future minimum lease payments under
capital leases together with the present value of the net minimum lease payments
as of March 31, 2005:

Period ending March 31,
                         2006               $             4,808,104
                         2007                             5,661,156
                         2008                             5,661,156
                         2009                             5,661,156
                         2010                             1,887,052
                                                -------------------
Total minimum lease payments                $            23,678,624
Less: amount representing interest                       (9,678,624)
                                                -------------------
Present value of net minimum lease payment  $            14,000,000
                                                ===================

     Operating Leases

     The  following  is a schedule by years of future  minimum  rental  payments
required under  operating  leases that have initial or remaining  non-cancelable
lease terms in excess of one year as of March 31, 2005:

Period ending March 31,
                         2006               $             2,099,310
                         2007                             2,337,848
                         2008                             1,947,276
                                                -------------------
Total minimum lease payments                $             6,384,434
                                                ===================

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

     On January 3, 2003, ITG Vegas, Inc. ("ITG Vegas"), our subsidiary operating
the Palm Beach  Princess,  and Palm Beach Maritime  Corp.("PBMC")  (formerly MJQ
Corp.),  which owned the Palm Beach Princess vessel,  an entity owned by Francis
W. Murray,  filed voluntary  petitions for relief under Chapter 11 of the United
States  Bankruptcy Code (the "Bankruptcy  Code") in the United States Bankruptcy
Court for the Southern District of Florida, Palm Beach Division (the "Bankruptcy
Court"),  In re: ITG Vegas, Inc., Case No. 03-30038.  The petition did not cover
the Parent  company,  ITB, nor any other of ITB's  subsidiaries.  The Palm Beach
Princess continued to operate as  "debtor-in-possession"  under the jurisdiction
of the Bankruptcy Court and in accordance with the applicable  provisions of the
Bankruptcy Code and orders of the Bankruptcy  Court.  We had previously  entered
into a Master  Settlement  Agreement to purchase from the Chapter 11 Trustee for
the  Bankruptcy  Estate  of  Robert  E.  Brennan  (the  "Brennan  Trustee")  the
promissory note of Palm Beach Maritime Corp. 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, ITG
Vegas  (together with Palm Beach  Maritime Corp) filed a voluntary  petition for
relief under Chapter 11 of the Bankruptcy Code.

     On September 12, 2003, the Bankruptcy  Court issued an order confirming the
Amended Joint Chapter 11 Plan of  Reorganization  in the Chapter 11 cases of ITG
Vegas,  Inc.  and Palm Beach  Maritime  Corp.  (ITG Vegas,  Inc.  and Palm Beach
Maritime Corp. being hereinafter  called the "Debtors").  The Plan was a plan of
reorganization  (the "Plan") under Chapter 11 of the  Bankruptcy  Code which was
jointly  proposed by the Debtors.  As of October 15, 2003, the effective date of
the Plan, all claims,  debts, liens,  security interests and encumbrances of and
against the Debtors and  against  all  property of their  respective  bankruptcy
estates, which arose before confirmation,  were discharged,  except as otherwise
provided  in the  Plan or  confirmation  order.  Post-confirmation,  each of the
Debtors continued as reorganized debtors.

     With the  consummation  of the PDS  Transactions  described above in Note 2
(A), all of our and the Debtors' indebtedness to the Brennan Trustee was paid in
full.

                                       13

<PAGE>


                    INTERNATIONAL THOROUGHBRED BREEDERS, INC.
                                AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

     On July 17, 2004,  the  Bankruptcy  Court issued a final decree closing the
Debtors' Chapter 11 cases.


(5)  NOTES RECEIVABLE

     (A)  Second Cherry Hill Note

     A portion  of the  proceeds  from the sale of the  non-operating  former El
Rancho  Hotel and  Casino in Las Vegas to  Turnberry/Las  Vegas  Boulevard,  LLC
("Turnberry")  on May 22, 2000 was used by us to purchase a  promissory  note of
the buyer in the face amount of $23,000,000 (the "Las Vegas Note"). The interest
rate under  such note was to be  adjusted  from time to time since the  interest
actually  payable  was to 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 had received
total  distributions  equal to their capital  contributions  plus an agreed upon
return on their invested capital, the next $23 million of Distributable Cash was
to be paid to us. We were to receive payments under the note equal to 33 1/3% of
all  Distributable  Cash until the maturity date, which was to occur on the 30th
anniversary  of our  purchase  of the note.  We had the  option to  convert  the
promissory  note 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 was to be converted into a 33 1/3% equity interest in
the  buyer  at the  30th  anniversary  of  its  issuance.  Fair  value  and  the
collectability of this note was determined by a real estate appraisal  completed
in July, 2003 for a bank in anticipation of financing for Turnberry.

     On June 16, 2004,  the Company sold the Las Vegas Note to Cherry Hill at El
Rancho LP (the  "Buyer"),  a limited  partnership  which is affiliated  with the
maker of the Las Vegas Note.

     In exchange for the Las Vegas Note, the Company received cash payments from
the Buyer of $2.8 million, a non-recourse loan from Turnberry Development,  LLC,
an  affiliate of the Buyer,  in the amount of $5 million and a  promissory  note
issued by Soffer/Cherry  Hill Partners,  L.P. ("Cherry Hill Partners"),  another
affiliate of the Buyer,  in the  principal  amount of  $35,842,027  (the "Second
Cherry Hill Note").  The principal  amount of the Second Cherry Hill Note equals
the difference between the unpaid principal plus all accrued and unpaid interest
(at 22%)  under the Las Vegas  Note,  less the $2.8  million in  purchase  price
payments  and $5  million  non-recourse  loan paid to the  Company.  As  further
consideration, the Company received the right to use aircraft owned or leased by
the  Buyer or its  affiliates,  for up to 64 hours in total,  which the  Company
valued at approximately $224,000.

     The Company is not liable for  repayment of the principal of the $5 million
loan included in the foregoing consideration.  However, the Company is obligated
to pay interest and fees on such loan aggregating $600,000 per year ($50,000 per
month) for five (5) years.

     The Second Cherry Hill Note received by the Company  matures in 2015 and is
similar to the Las Vegas Note which was sold,  in that it  generally  is payable
prior to maturity only from distributable cash of the maker. The maker under the
Second  Cherry Hill Note is one of the  principal  partners in the entity  which
purchased  the Garden  State Park real  property  from a Company  subsidiary  in
November of 2000,  and such  obligor  will only have funds with which to pay the
Second Cherry Hill Note out of its profits from the  development of Garden State
Park. The development of Garden State Park,  located in Cherry Hill, New Jersey,
was  delayed as a result of  community  opposition  to certain  elements  of the
development  plan, and, while the Company  believes that the development plan is
now  moving  forward,  the  timing  and  amount of  profits  there  also  remain
uncertain. The Company already holds a promissory note in the face amount of $10
million, received from the purchaser of Garden State Park in connection with the
sale of such real  property,  which the  Company  expects  will be fully paid in
time. While the Company expects that note to be fully paid, it is not optimistic
that this  Second  Cherry  Hill Note will be fully paid,  and  accordingly,  the
Company has written  down the Second  Cherry  Hill Note  (defined  above) on its
books.  The interest  portion of the Las Vegas Note  amounting to  approximately
$20,866,000 has never been included as income on the Company's books,  therefore
the interest  capitalized  under the Second Cherry Hill Note is not subject to a
write  down.  The  remaining  portion  of the Second  Cherry  Hill Note has been
written down to $4,578,651  which  resulted in an  impairment  charge of the new
note of  $12,786,589,  recorded in the fourth  quarter of the Company's June 30,
2004 fiscal year and  additional  impairment  charges of $200,000,  $150,000 and
$100,000, respectively,  recorded during the first, second and third quarters of
Fiscal 2005. The Company had previously  recorded  deferred income of $2,786,589
on the original sale of the El Rancho  property in May,  2000,  which amount was
used to reduce the

                                       14

<PAGE>


                    INTERNATIONAL THOROUGHBRED BREEDERS, INC.
                                AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

impairment charge to $10,000,000 at June 30, 2004. In its assessment of the fair
value of the Second Cherry Hill Note,  the Company  estimated  that its share of
proceeds  from the sale of the El Rancho  property  prior to July 31, 2005 would
generate  approximately  $500,000. As of March 31, 2005 the Company has recorded
an  impairment  loss on this note of $450,000 and if a sale does not occur prior
to July 31,  2005 it is  anticipated  that the Company  will take an  additional
impairment  write down  against  the  Cherry  Hill Note of $50,000 in the fourth
quarter of this fiscal year ending June 30, 2005.

     The  Second  Cherry  Hill Note is  secured  by a pledge  of stock  owned by
Raymond  Parello,  an affiliate of the Buyer,  in the Palm Beach Empress,  Inc.,
representing  fifty  percent  (50%) of the  stock in that  company.  Palm  Beach
Empress,  Inc. is the entity  formed to acquire the Big Easy,  the second vessel
which is chartered to a subsidiary of the Company, and which the Company expects
to operate as a casino  cruise  ship,  similar  to the  operation  of the casino
"cruise to nowhere"  business  conducted  by a subsidiary  of the Company  since
April of 2001. The other fifty percent (50%) of the stock in Palm Beach Empress,
Inc. is owned by PBMC, a corporation  owned by Francis W. Murray,  the Company's
Chief Executive Officer. PBMC presently owns and charters to a subsidiary of the
Company the Palm Beach Princess vessel,  the operation of which is the Company's
primary operating business.

     Mr. Parello will have the right to acquire the Second Cherry Hill Note from
the Company in exchange  for his stock in Palm Beach  Empress,  Inc.  Such "put"
option held by Mr. Parello  (giving him the right to put his stock in Palm Beach
Empress,  Inc.  to the  Company  in  exchange  for the  Cherry  Hill  Note) will
effectively limit the value to the Company of the Second Cherry Hill Note to the
value of Mr.  Parello's  one-half  interest  in Palm  Beach  Empress,  Inc.  Mr.
Parello's put right will be  exercisable  upon the later to occur of (1) payment
by or for the account of Cherry Hill  Partners of  $483,205.48  under the Second
Cherry  Hill  Note,  and (2)  payment  of the  entire  principal  balance of the
non-recourse loan received by our Orion subsidiary in the principal amount of $5
million, referred to above (upon which repayment the Company's obligation to pay
interest and fees of $600,000 per year on such loan would end).  Such put option
is set forth in the  Shareholders'  Agreement  among Palm Beach  Empress,  Inc.,
Raymond  Parello and PBMC, to which our Orion  subsidiary  has joined solely for
the purpose of confirming its agreement to the put option.

     In the event Mr. Parello receives any dividends or other  distributions on,
or proceeds from,  any sale of his shares in Palm Beach Empress,  Inc., the same
will be applied as a mandatory prepayment of the Second Cherry Hill Note.

     In addition, if, before July 31, 2005, there is a sale or other disposition
of the El Rancho Property,  or a sale or other  disposition of the entire direct
or indirect interest of the owner of such property,  then fifty percent (50%) of
any profit in excess of $10 million  realized on such sale also shall be paid to
us as a mandatory  prepayment of the Second Cherry Hill Note.  The July 31, 2005
deadline by which a sale of the El Rancho  Property would have to occur in order
to trigger a possible  prepayment to the Company will be extended to January 31,
2006 if a  portion,  but less than  all,  of the El  Rancho  Property  or of the
Owner's direct or indirect ownership interest is sold before July 31, 2005.

     (B)  Original Cherry Hill Note

     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.  Fair value and the collectability of this note was determined by a real
estate  appraisal  completed  in  March,  2002  for a bank  in  anticipation  of
financing for Turnberry.

                                       15

<PAGE>

                    INTERNATIONAL THOROUGHBRED BREEDERS, INC.
                                AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

(6)  DEPOSITS AND OTHER ASSETS - NON RELATED PARTIES

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

                                             March 31, 2005      June 30, 2004
                                         -------------------    --------------
Long-Term Prepaid Loan Costs          $              807,237 $               0
Port Lease Rights                                    250,000           250,000
Other Misc. Assets                                   180,327            84,975
                                         -------------------    --------------
         Total                        $            1,237,564 $         334,975
                                         ===================    ==============


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

     The following  items are  classified as Deposits and Other Assets - Related
Party Transactions (See Note 14):

                                                      March 31,         June 30,
                                                         2005             2004
                                                      ----------     ----------
Loans to the Ft Lauderdale Project (OC Realty, LLC) $  2,034,405    $ 2,034,405

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

Accrued Interest on Loans to the Ft. Lauderdale
  Project (OC Realty, LLC)                             1,404,931        911,350

Purchase Option Deposits on Vessels                    3,792,572              0

Goodwill on Purchase of GMO Travel                       193,946        193,946

Advances to PBMC                                               0        616,534

Note Receivable from Francis W. Murray                         0      2,600,749

Deposits on new lease for M/V Palm Beach Princess
  and the Big Easy with. Palm Beach Maritime Corp.
  ("PBMC") (formerly MJQ Corp.)                                0        880,783

Accounts Receivable from Francis W. Murray                     0         32,751

Loans to Francis W. Murray                                     0         93,000

Accrued Interest Transferred from Golf Course
  Project to OC Realty, LLC                                    0        287,327

Accounts Receivable from Frank Leo                             0         24,512
                                                     -----------     ----------
         Total Deposits and Other Assets -
                Related Parties                     $  8,161,438    $ 8,410,941
                                                     ===========     ==========

                                       16

<PAGE>


                    INTERNATIONAL THOROUGHBRED BREEDERS, INC.
                                AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

(8)  NOTES AND MORTGAGES PAYABLE

                  Notes and Mortgages Payable are summarized below:

<TABLE>
                                                              March 31, 2005                  June 30, 2004
                                         Interest %   ------------------------------    ---------------------------
                                         Per Annum        Current        Long-Term        Current        Long-Term
                                        ----------    --------------    ------------    -----------    ------------
<CAPTION>
<S>                                        <C>      <C>               <C>            <C>             <C>
International Thoroughbred Breeders,
Inc.:
--------------------------------------
Chapter 11 Trustee (the "Brennan
Trustee") for the Bankruptcy Estate of
Robert E. Brennan (A)                          12%  $            -0-  $          -0- $    4,038,838  $    4,024,142
Francis X. Murray (B)                           8%           159,164             -0-        159,164             -0-
William H. Warner (B)                          12%            24,000             -0-         24,000             -0-
Other                                      Various            29,104             -0-         25,000             -0-

ITG Vegas, Inc.:
----------------
Cruise Holdings IV, LLC (D)                    10%         2,850,000             -0-            -0-             -0-
International Game Technology (C)               8%           262,686         257,751        122,174          71,685
Other                                      Various            21,654          52,465            -0-             -0-

Garden State Park:
------------------
Service America Corporation (E)                 6%           160,000             -0-        160,000             -0-
                                                      --------------    ------------    -----------    ------------
                 Totals                             $      3,506,608  $      310,216 $    4,529,176  $    4,095,827

 Net Liabilities of Discontinued
  Operations - Long Term                                    (160,000)            -0-       (160,000)            -0-
 Related Party Notes                                        (183,164)            -0-       (183,164)            -0-
                                                      --------------    ------------    -----------    ------------
Totals                                              $      3,163,444  $      310,216 $    4,186,012  $    4,095,827
                                                      ==============    ============    ===========    ============
</TABLE>
The effective Prime Rate at June 30, 2004 was 4%.

     (A)  In  connection  with  the  PDS  transactions,  on  July  7,  2004  the
outstanding  principal  balance was paid by PBMC directly to the Brennan Trustee
to satisfy this obligation. (See Note 2)

     (B) On March 1, 2003,  we issued a promissory  note for a line of credit up
to $225,000 bearing interest at 8% to Francis X. Murray. The outstanding balance
on the line of credit note at March 31, 2005 was $159,164  and accrued  interest
was $26,553.  In Fiscal 2003,  we issued  promissory  notes for $24,000  bearing
interest at 12% to William H. Warner, Secretary of the Company. Interest is paid
monthly  on the note to Mr.  Warner.  The  proceeds  from Mr.  Murray's  and Mr.
Warner's notes were used as working capital.

     (C) On December  22,  2003,  ITG Vegas,  Inc.  issued a  twenty-four  month
promissory  note  in  the  amount  of  $231,716  bearing  interest  at  8.5%  to
International Game Technology for the purchase of gaming equipment. A payment of
$30,000  was  paid on  delivery  of the  equipment  and 24  consecutive  monthly
installments  of $10,532.85  are to be paid on the balance.  In March 2005,  ITG
Vegas,  Inc. issued an additional  thirty month promissory note in the amount of
$387,463  bearing  interest at 8.15% to  International  Game  Technology for the
purchase of fully  reconditioned  gaming equipment.  Thirty consecutive  monthly
installments of $14,319.49 are to be paid on the balance. At March 31, 2005, the
principal  balance on the two notes to  International  Game  Technology note was
$520,437  of which  $262,686  was  classified  as short term and the  balance of
$257,464 was classified as long term.

     (D)  On  January  5,  2005,  Royal  Star  Entertainment,   LLC  ("RSE"),  a
wholly-owned  subsidiary  of the Company,  executed  and  delivered a promissory
note, amended as of January 17, 2005 in the original

                                       17

<PAGE>


                    INTERNATIONAL THOROUGHBRED BREEDERS, INC.
                                AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

principal  amount of  $2,850,000  (the  "Note"),  representing  a loan funded on
January 17, 2005 (the "Loan") in such principal amount. Also on January 5, 2005,
ITB entered into a Guaranty  Agreement dated as of January 6, 2005,  guarantying
payment  of all sums due and to become  due by RSE  under the Note.  The Note is
also  secured  by  RSE's  Preferred  Mortgage  dated  as of  January  17,  2005,
encumbering  the vessel  owned by RSE and known as the "Royal  Star." The lender
and holder of the Note and Mortgage is Cruise  Holdings IV, LLC, an affiliate of
PDS Gaming  Corporation.  The Loan  evidenced  by the Note will be  repayable on
January 17, 2006.  Interest on the Loan will be payable monthly at a rate of 10%
per annum.  At closing,  RSE paid a closing fee to the lender in an amount equal
to $78,375, or 2.75% of the principal amount of the Note. The sole member of RSE
is ITG Vegas,  Inc., a wholly owned subsidiary of the Company,  and the proceeds
of the Loan were used to make leasehold  improvements  under the Maritime Office
Complex  Lease and  Operating  Agreement  between ITG Vegas and the Port of Palm
Beach  District,  and to make  improvements  to the vessel  Royal Star or to the
vessel  Big Easy  (formally  known  as  Empress  II),  a  vessel  which  another
subsidiary of ITG Vegas charters under a capital lease and charter.  The Company
and ITG Vegas  continue to explore  venues for use of the vessel Royal Star in a
casino cruise  operation.  If RSE prepays the Note in connection  with a sale of
the vessel Royal Star, it will be required to pay a 5% prepayment premium to the
lender.

     (E) In  connection  with the January 28,  1999 lease  transactions  for the
Garden State Park facility,  the Company  purchased a liquor license  located at
Garden  State  Park  owned  by an  unaffiliated  third  party,  Service  America
Corporation (the "Holder"),  for $500,000 financed by a five (5) year promissory
note at a 6% interest rate.  Yearly principal  payments of $80,000 plus interest
were due on December 28, 2002 and December 28, 2003 and have not been paid.  The
Company is  continuing  to negotiate new terms under this note and if successful
the  creditor  may seek to enforce  payment of the note.  In  additional  to the
principal   amount  due  of  $160,000   the  accrued  but  unpaid   interest  is
approximately $27,600 as of March 31, 2005.

(9)  COMMITMENTS AND CONTINGENCIES

     See Note 2 for additional commitments and contingencies with respect to the
PDS Transactions.

     See Note 14 for additional commitments and contingencies of the Company and
transactions with related parties.

     As of March 31, 2005, the cost of  refurbishing  and  retrofitting  the Nig
Easy and  placing it in service  was  approximately  $12.4  million of which the
Company  has   incurred   approximately   $9.2  million  and  PPE  has  incurred
approximately  $3.2 million.  ITG Vegas' ability to generate  sufficient working
capital with which to pay such costs have been adversely  affected by delays and
cost overruns in connection with  refurbishing and refitting the Big Easy and by
weather related and other uncertainties  affecting its operations.  As indicated
by the table at the end of this  footnote,  our debt service  requirements  have
increased significantly with the PDS financing due to the increase in amounts of
debt and rates involved. The increase in the amount is attributed in part to the
arrangement for procurement and refurbishment for a second vessel, the Big Easy.
We are dependent upon the expected additional revenue from the operations of the
second vessel to cover the increased financing costs.

     The Big Easy has been  undergoing  retrofit and  improvements  and had been
expected to be placed in service during our third fiscal  quarter.  The work was
being  done  on the  vessel  by  Atlantic  Dry  Dock  Corporation  ("Atlantic").
Additional  work had been  required  beyond the work which had been  planned and
beyond what had been paid for, and we have disputed  some of Atlantic's  charges
for that work.  Atlantic had refused to release the Big Easy to us until we paid
the full amount it claims we owe it,  totaling  $3.8  million.  We are disputing
that amount. In the meantime, in order to obtain the release of the Big Easy, we
borrowed an additional $4.35 million from PDS on April 5, 2005 (see Note 15) and
entered into an escrow  agreement with Atlantic and an independent  escrow agent
under which those funds plus  additional  funds  contributed  by the Company are
being held in escrow to pay amounts ultimately determined to be owed to Atlantic
and interest thereon.  As a result of such escrow,  the Big Easy was released by
Atlantic on April 6, 2005 and is  expected  to be placed in service ,  operating
out of the Port of Palm Beach,  during our fourth fiscal quarter ending June 30,
2005.  We are  continuing  to  pursue  certification  for  passenger  operations
pursuant to the United  States Coast  Guard's  Alternative  Compliance  Program.
Although the  Alternative  Compliance  Program  certification  procedure is less
complex  and time  consuming  than  regular  Coast  Guard  certification,  it is
nevertheless  a rigorous  process  involving the  jurisdiction  of at least four
separate   departments   of  the  United  States  Coast  Guard  and  the  ship's
classification society, Lloyd's Register.


                                       18

<PAGE>


                    INTERNATIONAL THOROUGHBRED BREEDERS, INC.
                                AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

     On January 5, 2005,  RSE entered  into a Master Lease  Agreement  and Lease
Schedule  No. 1, each dated as of January 6, 2005  (collectively,  the  "Lease")
with PDS Gaming  Corporation  providing for the lease by RSE of slot machines to
be located on the  vessel  Royal  Star.  Also on  January 5, 2005,  the  Company
entered  into a Guaranty  Agreement  dated as of January  6, 2005,  agreeing  to
guaranty  payment by RSE of all sums  becoming due under the Lease.  The term of
the Lease is three  years,  with  rental  payments  of $11,879 per month for the
first four months and $95,351.73 for the next thirty-two months. RSE also paid a
closing fee of $57,020.74,  and a security  deposit in the amount of $95,351.73.
See Note 15  (Subsequent  Events)  in  connection  with an April  2005  lease of
additional gaming equipment.

     In connection with the January 28, 1999 sale and 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  were due on December  28, 2002 and December 28, 2003 and have not been
paid. The Company  entered into a sale and lease  agreement for the lease of our
premises from Jan. 28, 1999 to May 29, 2001 and the sale of a 10 acre portion to
be used as an OTB facility.  Under the terms of our sale and lease agreement the
lessee/buyer  purchased  the liquor  license for $100,000  and was  obligated to
return it to us in exchange  for a repayment  of the  $100,000  price if, at the
expiration  of the lease,  June 27,  2002,  it did not have a use for the liquor
license at the OTB facility.  During the three year period Jan. 28, 1999 to Jan.
28, 2002 no OTB facility was built and the  lessee/buyer  did not have a use for
the liquor  license at that  property.  By the terms of the contract the Company
has the right to  re-acquire  the liquor  license for $100,000 and has exercised
such  right,  however  the  lessee/buyer  has  refused to  perform.  The Company
believes  it will need to take legal  action to enforce  its right to the liquor
license.

     Through ITG Vegas,  we have negotiated with the Port of Palm Beach District
a new operating agreement and lease of space in a new office complex constructed
at the Port of Palm  Beach  adjacent  to a new  cruise  terminal  effective,  as
modified,  May 5, 2003.  The term of the initial lease is five years at $183,200
per year payable monthly. Additionally, we have the right to renew the lease for
two (2)  additional  terms of 5 years  each.  We were  required  to make  tenant
improvements to the new space in a minimum amount of $333,000,  however that the
actual cost to make the improvements was  approximately  $950,000.  We will have
the right to a credit of up to the minimum  amount of  improvements  required of
$333,000 of construction costs against the initial term of our five year lease.

     Through our subsidiary,  Royal Star  Entertainment  LLC, we have negotiated
with the Port of Palm Beach District a second Operating Agreement dated December
18, 2003, as subsequently  amended.  This Operating  Agreement will permit us to
operate the Big Easy in passenger  service from the Cruise Terminal at the Port,
with  certain  berthing  and  scheduling  priorities.  The initial  term of this
Operating  Agreement is five years from the date of  commencement of sailings by
the Big Easy from the Port,  with  subsequent  renewal options of four and three
years.  Dockage  charge is based upon $1.85 per foot of the vessel per day and a
wharfage and terminal  charge per  passenger  which is normally  included in our
admission fare

     On August 6, 2004 we amended  the Lease and  Operating  Agreement  with the
Port of Palm Beach in order to permit our  construction  of a passenger  gangway
system  and  destination  signage on Port  property  and our  refurbishment  and
upgrading of the  passenger  cruise  terminal  facilities,  which  measures,  we
believe,  will enhance our ability to promote and market our cruise services. We
will  receive a  wharfage  credit  from the Port of Palm  Beach in the amount of
$75,000 with respect to our construction of the gangway. In addition,  we agreed
to pay the Port of Palm Beach $.50 per vehicle  parked in the passenger  parking
lot at the Port, for a minimum period of six months beyond the  commencement  of
cruise services at the Port of Palm Beach by the Big Easy.

     On March 1, 2004 we entered  into a Dockage  Space  Agreement  between  the
Company  and the City of Riviera  Beach for  approximately  160 feet of concrete
dock space at the City Marina. The term is for one year for a fee of $11,000 per
month.  The  lease is  renewable  subject  to the  approval  of the  City.  This
Agreement  is intended  only for the purpose of making  available  the  assigned
space for vessels  other than a  day-cruise  gaming ship.  Further,  the Company
understands that in the event it wishes to dock a day-cruise gaming ship that it
will be required to enter into a new agreement with the City.

     During the period that our subsidiary, ITG Vegas was in bankruptcy (January
3, 2003 to October 15, 2004) and thereafter,  the 8 employees previously paid by
ITB were paid by MJQ, Inc. ("MJQ"), a company

                                       19

<PAGE>


                    INTERNATIONAL THOROUGHBRED BREEDERS, INC.
                                AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

owned by Francis W. Murray, our CEO. The wage expense was recorded by ITB and an
accounts payable was recorded to MJQ. MJQ was  subsequently  fully reimbursed by
ITB for the wages. This arrangement was the result of the restrictions placed on
the flow of cash to ITB from ITGV by the bankruptcy court. As a result, employer
contributions and employee  deferrals to the ITB 401-K plan were suspended.  The
Company has not yet decided which action,  if any,  should be taken with respect
to the retirement benefits.

The following summarizes  commitments on non-cancelable  contracts and leases as
of March 31, 2005:
<TABLE>
                                                           Twelve Months Ended March 31,
                                   --------------------------------------------------------------------     There-
                                          2006     2007          2008          2009           2010         after         Total
                                   -----------   -----------   -----------   -----------   -----------    ---------   -------------
<CAPTION>
<S>                               <C>           <C>           <C>           <C>           <C>           <C>          <C>
Capital Lease - P.B. Princess     $  4,808,104  $  5,661,156  $  5,661,156  $  5,661,156  $  1,887,052  $         0  $   23,678,624
 Lease - Big Easy                    3,264,400     3,620,430     3,620,430     3,620,430     1,206,810            0      15,332,500
Notes and Mortgages:
   Principal                         3,506,604       193,484       107,567         9,165             0            0       3,816,820
    Interest                           333,377             0             0             0             0            0         333,377
Deferred Interest Payments             600,000       600,000       600,000       600,000             0            0       2,400,000
Employee Contracts                     507,756             0             0             0             0            0         507,756
Operating Leases:
    Casino Equipment                 1,388,439       182,311       131,914         9,717             0            0       1,712,381
    Administrative & Office          2,099,310     2,337,848     1,947,276             0             0            0       6,384,434
Purchase Obligations - Big Easy      6,469,000             0             0             0             0            0       6,469,000
Purchase Obligations                 1,231,244       101,966        61,006        61,006        61,006      223,687       1,739,915
Advances From Related Parties                0       650,967             0             0             0            0         650,967
                                   -----------   -----------   -----------   -----------   -----------    ---------   -------------
Total                             $ 24,208,234  $ 13,348,162  $ 12,129,349  $  9,961,474  $  3,154,868  $   223,687  $   63,025,774
                                   ===========   ===========   ===========   ===========   ===========    =========   =============
</TABLE>

(10) 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.

     In  connection  with the  retrofit and  improvements  made on the Big Easy,
Atlantic Dry Dock Corporation ("Atlantic") has brought suit "in rem" against M/V
Empress II (the "Big Easy") filed in the US District  Court,  Middle District of
Florida, Jacksonville Division alleging non-payment of their asserted claims. We
have  disputed  Atlantic's  charges for certain  portions of that work.  We have
placed $4.3 million  borrowed  from PDS in an escrow  account in order to obtain
release of the vessel until the disputed  amount can be  arbitrated or otherwise
resolved.

(11) FAIR VALUE OF FINANCIAL INSTRUMENTS

     As of March 31, 2005, in assessing the fair value of financial instruments,
the Company has used a variety of methods and  assumptions,  which were based on
estimates of market conditions and loan risks existing at that time. For certain
instruments,  including  cash  and  cash  equivalents,   investments,  non-trade
accounts  receivable and loans,  and short-term  debt, it was estimated that the
carrying amount  approximated  fair value for the majority of these  instruments
because of their  short-term  maturity.  The carrying  amounts of long term debt
approximate fair value since the Company's  interest rates  approximate  current
interest rates. On our original Cherry Hill note receivable in the amount of $10
million,  we have  elected to defer the gain on the sale and the  interest to be
accrued until such time that  collectability  can be  determined.  On our second
Cherry Hill note  receivable  we have  recorded  impairment  losses of $200,000,
$150,000 and $100,000

                                       20

<PAGE>


                    INTERNATIONAL THOROUGHBRED BREEDERS, INC.
                                AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

respectively,  during the first,  second and third  quarters  of Fiscal  2005 to
reflect the estimated  current  market value of this note. In its  assessment of
the fair value of the Second Cherry Hill Note,  the Company  estimated  that its
share of proceeds from a sale of the El Rancho  property  prior to July 31, 2005
would generate  approximately  $500,000.  If a sale does not occur prior to July
31, 2005 it is anticipated  that the Company will take an additional  impairment
write down against the Cherry Hill Note of approximately  $50,000 in this fiscal
year ending June 30, 2005. (See Note 5)

(12) EXTRAORDINARY ITEM

     The  Master  Settlement  Agreement  with the  Chapter  11  Trustee  for the
Bankruptcy Estate of Robert E. Brennan (the "Brennan  Trustee") included a final
settlement  by the Brennan  Trustee with numerous  parties.  Among those parties
were Leo Equity Group,  Inc.,  Michael J. Quigley,  III and Palm Beach  Maritime
Corp. ("PBMC") (formerly MJQ Corp.). During the quarter ended March 31, 2002 the
Company  charged  Leo  Equity  Group $3 million  and PBMC $1  million  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 Brennan  Trustee.  Prior to our  acquisition  of Leo Equity
Group,  Inc., Leo Equity Group, Inc.  assigned to us certain  receivables in the
approximate  amount of $3 million,  including the  receivables of  approximately
$2.6 million due it from Michael J. Quigley III, in payment of this  obligation.
We had  deferred all income from these  transactions  until such time as payment
was received.  During the first  quarter of Fiscal 2005 we received  payment for
the previously deferred income in the amount of $4,000,000.

(13) TREASURY SHARES

     On December 13, 2002, the Company issued a promissory note in the amount of
$1,648,403 to purchase 3,228,146 shares of its Common Stock under the control of
the  Chapter 11  Trustee  for the  bankruptcy  estate of Robert E.  Brennan.  In
connection  with our Chapter 11 Plan of  Reorganization,  effective  October 15,
2003, we purchased an additional  450,000 shares for $225,000.  The total amount
of our debt for the  purchase  of stock as of October  15,  2003 was  $1,873,413
which also included accrued  interest.  Such  indebtedness was combined with the
obligations to purchase the Ship Mortgage  Obligation,  and was payable over the
next three years  together with  interest at 12% per annum.  On July 7, 2004 the
Company  paid in full the amount due with  respect to the  purchase  of all such
shares. (See Note 2).

     On July 28, 2004 Mr.  Francis W. Murray  exercised his option to purchase 2
million  shares of our Common Stock at an exercise  price of $0.26875 per share.
The Company  issued 2 million  shares of Treasury  stock it held in exchange for
proceeds of $537,500.  Also on July 28, 2004 the Company issued 689,730 Treasury
shares to Mr.  Murray in payment of the  deferred  salary of $344,865 we owed to
him for the period from January 3, 2003 to November  18,  2003.  The issuance of
shares for deferred salary was approved by the Board of Directors at a time when
the market value was $.50 per share.

     On August 31,  2004 the Company  issued  73,339  Treasury  shares to Robert
Quigley  in  payment  of the  deferred  salary of $36,670 we owed to him for the
period from  January 3, 2003 to November  18,  2003.  The issuance of shares for
deferred salary was approved by the Board of Directors at a time when the market
value was $.50 per share.

(14) RELATED PARTY TRANSACTIONS

     See  Footnote  2  for  related   party   transactions   regarding  the  PDS
Transactions.

     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 an option to purchase  2,000,000 shares of our
Common Stock.  On January 4, 2003, we began  deferring  payments of compensation
due to Mr.  Murray  due to a lack of funds  resulting  from the  institution  of
proceedings  by our  subsidiary  ITG Vegas,  under Chapter 11 of the  bankruptcy
code. In November,  2003 the Company's Board of Directors  approved  issuance of
the  Company's  Common  Stock,  valued at $0.50 per share,  in exchange  for the
deferred salary of Mr. Murray.  In July, 2004, Mr. Murray elected to receive his
salary of $344,865  accrued from January 3, 2003 to November 18, 2003, which had
been deferred, in the form of 689,730 shares

                                       21

<PAGE>


                    INTERNATIONAL THOROUGHBRED BREEDERS, INC.
                                AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

of the Company's  Common Stock. On July 28, 2004 Mr. Francis W. Murray exercised
his 2 million  options at an exercise  price of $0.26875 per share.  The Company
issued 2 million  shares of Treasury  stock it held in exchange  for proceeds of
$537,500.  Also on July 28, 2004 the Company issued 689,730  Treasury  shares to
Mr. Murray in exchange for the deferred  salary of $344,865  which occurred from
January 3, 2003 until November 18, 2003.

     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.
In  Fiscal  2003,  the  limited  partnership's  indebtedness  to  us,  including
principal  and accrued  interest,  in the amount of  $929,541  was assumed by OC
Realty,  LLC, a Florida limited  liability  company which is owned by Francis W.
Murray and which owns the second  real estate  project  (Ocean  Club)  described
below. Such indebtedness became due December 31, 2004 and bears an interest rate
of 6% and is now  scheduled  to be paid upon the  completion  of the Ocean  Club
project.

     In the second project, Mr. Murray is participating in the development of an
oceanfront  parcel  of land,  located  in Fort  Lauderdale,  Florida,  which has
received all governmental  entitlements from the City of Fort Lauderdale and the
State of Florida to develop a  14-story  building  to include a 5-story  parking
garage,  approximately  6,000 square feet of commercial  space and a residential
9-story tower.  The property had been owned by MJQ  Development,  LLC, which was
owned by Michael J. Quigley,  III until  December 26, 2002 when the property was
acquired by OC Realty,  LLC, the entity owned by Mr. Murray.  Mr. Quigley has no
relationship to Robert J. Quigley, one of our directors. OC Realty is developing
a condominium  hotel resort on the property as discussed  above. As of March 31,
2005,  we had lent  $2,034,405 in total to MJQ  Development  and we have accrued
interest in the amount of $1,328,105 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 OC Realty's share of proceeds,
after payment of bank debts, generated by the sale of the condominiums.  We will
also have the right to receive, as participation  interest,  from available cash
flow of OC Realty,  if the  project  is  successful,  a  priority  return of our
investment and a priority profits interest for up to three times our investment.
Repayment  of these  loans and our  participation  interest  will be  subject to
repayment of, first,  bank debt of  approximately  $14 million (at present) and,
second,  construction  financing  expected  to amount to $25 to $30  million and
third,  any  capital  invested  by and fees  payable to joint  venture  partners
including OC Realty.  OC Realty's share of proceeds  thereafter  will range from
22.5% to 45%. 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. The Company has assessed the collectability of the
advances  made to OC  Reality  based on  comparable  sales of like  units in the
marketplace  which  suggest  demand  is  strong  and  prospective  sales  of the
project's condominium units will be adequate to meet its obligations and provide
sufficient  return  to OC  Realty  with  which  to pay OC  Realty's  debt to the
Company.

     From time to time  Francis W. Murray has  advanced  funds to the Company to
meet its operating expenses. Mr. Murray is normally reimbursed by the Company or
through miscellaneous advances it may make on his behalf or direct payments made
to him.  During the nine months ended March 31, 2005 Mr. Murray has advanced the
Company a net amount of $365,318, without interest.

     Effective January 1, 2005,  Francis W. Murray began deferring salary due to
him. As of March 31, 2005,  the Company owed Mr. Murray $91,152 in unpaid wages.
As of May 20, 2005, the Company owed Mr. Murray  $151,192 in unpaid wages.  This
unpaid amount is reflected in accrued expenses.

     During the months of January and February of 2005,  our Secretary  deferred
wages in the amount of  $26,920.  This  unpaid  amount is  reflected  in accrued
expenses.

     At a meeting of the Board of Directors of the Company held on June 29, 2004
the board authorized  reimbursement to Francis W. Murray for tax consequences he
would  incur as a result of the PDS  Transactions.  The  amount and form of such
reimbursement  will be determined by the full board of directors when data as to
such tax consequences becomes available.

     On July 7,  2004,  the  Company  entered  into a  five-year  charter of two
vessels, the Palm Beach Princess

                                       22

<PAGE>


                    INTERNATIONAL THOROUGHBRED BREEDERS, INC.
                                AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

and the  Empress  II  (subsequently  renamed  the Big  Easy) , under  the  terms
described in footnote 2 above.  The vessels are chartered to us by PBMC and Palm
Beach  Empress,  Inc.  Mr.  Murray is sole owner of PBMC and a 50% owner of Palm
Beach Empress, Inc. (See Note 2.)

     During the first quarter of Fiscal 2005, the Company  re-entered the equine
business.  In addition  to the  purchase of horses  from  outside  parties,  the
Company  has  purchased  14 horses  and 5 horses  on which we have a share,  the
majority  being one and two year olds,  from  Francis W.  Murray at prices to be
determined by an appraisal of their values. Payment for such horses will only be
made out of profits realized from the horses purchased from Mr. Murray,  if any.
It is our plan to bring these horses into racing if we consider them competitive
following the training  period,  to take advantage of the projected  increase in
purses  as a result  of the  introduction  of slot  machines  in  several  state
jurisdictions.

(15) SUBSEQUENT EVENTS

     On April 5, 2005, ITB and certain of its subsidiaries, ITG Vegas, Inc., ITG
Palm Beach,  LLC, and Royal Star  Entertainment,  LLC,  together with Palm Beach
Maritime Corporation, Palm Beach Empress, Inc., Francis W. Murray and Francis X.
Murray,  executed and delivered as joint and several co-borrowers,  a promissory
note payable to PDS in the amount of $4,350,000.  The note evidences a loan made
by PDS to the  Company,  the proceeds of which were placed in escrow in order to
obtain the  release of the vessel the Big Easy,  which  vessel was being held by
Atlantic Dry Dock Corp.  ("Atlantic"),  the dry dock company which had performed
the  retrofit and  improvements  of the Big Easy in preparing it to be placed in
service.

     The Big Easy had been  undergoing  retrofit and  improvements  and had been
expected to be placed in service during our third fiscal  quarter.  The work was
being done on the vessel by Atlantic.  Additional  work had been required beyond
the work which had been  planned and beyond what had been paid for,  and we have
disputed some of Atlantic's  charges for that work.  Atlantic refused to release
the Big Easy to us until we paid the full  amount it claims we owe it,  totaling
$3.8 million. We are disputing that amount. In the meantime,  in order to obtain
the release of the Big Easy, we borrowed $4.35 million from PDS and entered into
an escrow  agreement with Atlantic and an  independent  escrow agent under which
those funds plus additional  funds  contributed by the Company are being held in
escrow to pay amounts ultimately  determined to be owed to Atlantic and interest
thereon.  As a result of such  escrow,  the Big Easy was released by Atlantic on
April 6, 2005 and is expected to be placed in service, operating out of the Port
of Palm Beach, during our fourth fiscal quarter.

     This $4.35  million note bears  interest at 20% per annum,  is secured by a
pledge of our promissory note in the face amount of $10 million payable to us by
Realen-Turnberry/Cherry  Hill,  LLC,  and is due and  payable on the  earlier of
October 5, 2005 or such time as a long term loan refinancing is effectuated with
PDS. In  connection  with such  refinancing  of the note,  we are  obligated  to
negotiate with PDS in good faith the covenants,  collateral and other terms of a
long-term  loan which would  refinance all of our  indebtedness  and  subcharter
obligations  held by PDS and its affiliates,  upon the economic terms which have
been agreed to in principle.  Under those economic  terms, we would pay interest
on $6.6 million of our debt at 20% per annum, reducing to 15% per annum once our
annualized  EBIDTA reaches $17 million.  Of that $6.6 million of our debt, $2.25
million  would  represent  new  advances  to be made to us,  and  $4.35  million
represents  refinancing  of this note. Our other  indebtedness  to affiliates of
PDS,  consisting of capital  lease  obligations  in  connection  with the vessel
subcharters in the aggregate  original  principal  amount of $20 million,  and a
loan of $2.85  million  obtained by Royal Star  Entertainment  in January  2005,
would be  restructured  and the  maturity  of the $2.85  million  loan  would be
extended as part of the refinancing,  all upon  substantially  the same economic
terms as presently apply to those financings.

     In the event we do not pay in full the $4.35 million note before October 5,
2005, we are  obligated at that time to refinance  with PDS that note and all of
our  previous  obligations  to PDS and its  affiliates  mentioned  above  on the
economic terms  summarized above and with such collateral and other covenants as
are set forth in a form of master loan agreement  which is attached to the $4.35
million  note.  That form of loan  agreement is much more  restrictive  than our
present obligations to PDS and its affiliates.

     As further  consideration  to PDS in connection  with the  foregoing  $4.35
million loan, ITG Vegas,  Inc. and ITG Palm Beach, LLC entered into a three-year
lease of an additional $1.5 million of gaming  equipment.  Rental payments under
such lease are $50,000 per month for 36 months.


                                       23

<PAGE>


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 the Company's  Annual Report on Form 10-K, filed for the
year ended June 30, 2004,  could affect our future results and could cause those
results  to  differ  materially  from  those  expressed  in our  forward-looking
statements:

          o    general  economic and business  conditions  affecting the tourism
               business in Florida;
          o    competition;
          o    execution of our new business strategy;
          o    changes in laws regulating the gaming industry;
          o    the  timing  of the  installation  of slot  machines  in  Broward
               County's  three  race  tracks and one  jai-alai  as a result of a
               referendum   approved  on  March  8,  2005.   Broward  County  is
               contiguous  to Palm  Beach  County  in which  county  we  conduct
               operations;
          o    fluctuations  in  quarterly  operating  results  as a  result  of
               seasonal and weather considerations;
          o    events  directly or indirectly  relating to our business  causing
               our stock price to be volatile; and
          o    delays or  cost-overruns  in  connection  with  refurbishing  and
               refitting the vessels,  the Big Easy and the Royal Star, which we
               plan to place in service.

Background

     The  Company,  through its wholly  owned  subsidiary,  operates an offshore
gaming vessel,  the M/V Palm Beach  Princess  which we sub charter.  This vessel
sails  twice  daily from the Port of Palm Beach,  Florida  and,  once beyond the
state's  territorial  water  limits,  engages in a casino gaming  business.  The
business  of  operating  the  cruise  vessel  includes  a variety  of  shipboard
activities,  including dining,  music and other  entertainment as well as casino
gaming.  We are  expanding  that line of business,  for which on July 7, 2004 we
entered into a sub bareboat charter for a second vessel,  the "Big Easy".  After
refurbishing  and retrofitting  that vessel,  we expect to place the Big Easy in
service  during our fourth fiscal  quarter which ends on June 30, 2005.  The Big
Easy will be berthed and operated from the Port of Palm Beach.

     On July 7, 2004 the Company and several of our subsidiaries  entered into a
sublease  and sub  bareboat  charter and  equipment  lease  transaction  for the
purpose of operating and  acquiring the vessels Palm Beach  Princess and the Big
Easy.  The Palm Beach  Princess sub charter is being  accounted for as a capital
lease. The accounting  treatment for the Big Easy sub charter will be determined
after  completion of  improvements  and  appraisal of the vessel.  Through these
transactions,   payments  were  made  on  our  behalf  to  prepay  in  full  all
indebtedness to the Brennan Trustee.  (This  transaction is more fully described
in  footnote  2 of the  financial  statements).  We intend to expand  our gaming
operations  by placing  the Big Easy in  operations  during  our  fourth  fiscal
quarter and we continue to explore other gaming  opportunities both domestically
and  internationally.  During our last fiscal year we purchased a third  vessel,
M/V  Royal  Star,  however,  this  ship will  need  extensive  improvements  and
outfitting before being placed in service.  We are currently  exploring possible
locations  from which to operate the vessel and  possible  financing  sources to
permit us to make the necessary improvements.

     During the first quarter of Fiscal 2005, we re-entered the equine business.
We currently own 30 horses, a share of 8 horses, and are leasing 2 other horses,
all of  different  ages.  Some  are  currently  racing  and a few  are  held  as
broodmares  but the majority are yearlings and two year olds in training.  It is
our plan to bring  these  horses into  racing if we  consider  them  competitive
following the training  period to take  advantage of the  projected  increase in
purses  as a result  of the  introduction  of slot  machines  in  several  state
jurisdictions.  We are stabling and training the majority of these horses in New
Jersey and in Brazil.

     On January 6, 2003 our  subsidiary  which  operates the Palm Beach Princess
filed a voluntary  petition for relief under Chapter 11 of the  Bankruptcy  Code
because it did not have the funds to make the balloon  payment for its  purchase
of the Ship Mortgage on the Palm Beach  Princess.  On October 15, 2003 a Plan of
Reorganization  under  Chapter 11 was  approved  and on July 17,  2004 the court
issued a final decree closing the Chapter 11 case.


                                       24

<PAGE>


Liquidity and Capital Resources

     The Company's  cash flow from  operations is primarily  dependent  upon the
cash flows from our wholly owned  subsidiary  ITG Vegas  ("ITGV") which operates
the vessel, M/V Palm Beach Princess.

     ITGV's cash flow from operations of the vessel is seasonal. The period July
1 to December 31 is a seasonably slow period for vessel  operations.  The period
from  January 1 to June 30 has been a period of  increased  activity and profits
for the Palm Beach Casino Line  operation.  Certain of ITGV's  operating  costs,
including  leasing and charter fees, fuel costs and wages,  are fixed and cannot
be reduced when passenger counts decrease.

     During the first quarter and early in our second quarter of Fiscal 2005 our
operating  business was adversely  affected by four  hurricanes  passing over or
near  Florida.  We suffered  materially  from the direct  effects of  hurricanes
"Frances"  and "Jeanne" that left the area without  power,  resulting in curfews
and  limited  food,  water and life  resources.  These  two  storms  caused  the
evacuation of the population in our area,  and the four storms further  affected
tourism in the area,  severely reducing our pool of potential  passengers,  both
local residents and tourists.  Twenty-nine  (29) of our daily cruises during the
first quarter and four (4) of our daily cruises  during the second  quarter were
cancelled during the period of time that the hurricanes  threatened the area and
for short periods thereafter.  As a result of the seasonably slow period and the
hurricanes  our  revenues  and cash flows from  operations  during our first and
second  fiscal  quarters were  materially  impacted.  However,  during the third
fiscal quarter our revenues and cash flows for vessel  operations have recovered
to normal levels. For the nine months ended March 31, 2005 our operating revenue
was  sufficient  to cover  operating  expenses of the vessel,  the capital lease
payments on the Palm Beach Princess  vessel and the equipment lease payments and
the  charter  fees on the Big Easy  which  were  capitalized  to the cost of the
vessel. However the operating revenues were not sufficient to cover the start up
costs of the Big Easy,  the  improvements  made and the charter  fees on the Big
Easy, the Parent Company expenses and other  development  costs. We were able to
utilize  a portion  of the cash  received  from the sale of the Las Vegas  Note,
which  transaction  closed in June, 2004, and the $2.85 million of loan proceeds
received  on  January  5,  2005  from PDS  Gaming  Corporation  to help meet the
remainder of our cash needs during the first nine months of Fiscal 2005.

     Our cash flows  during our third  quarter and into our fourth  quarter also
have been  materially  impacted by the delay in putting the vessel "Big Easy" in
operation  caused  by the dry dock  company  not  releasing  the  vessel  due to
disputed charges and costs overruns. In April 2005, we borrowed $4.35 million to
obtain  release  of the  vessel,  but the  delay and  interest  on the loan will
adversely  effect our future cash flows.  We are taking  steps to conserve  cash
flows such as  extending  terms of our  payables  and not  paying  discretionary
employee  bonuses  which were  previously  accrued.  Additionally,  our Chairman
delayed  receiving  salary during the third quarter and into our current  fourth
fiscal  quarter and we were able to borrow funds from our Chairman to help cover
expenses.  Our Secretary  has delayed  receiving his salary during the first two
months of the third quarter.

     Costs associated with refurbishing and retrofitting the Big Easy vessel and
placing it in service  (including  marketing  expenses and other soft costs) are
expected to amount to  approximately  $12.4  million.  The Company has  incurred
approximately $9.2 million of those costs and PPE has contributed  approximately
$3.2 million.  Additional  amounts necessary to begin operations of the Big Easy
vessel are  expected to be provided  from  working  capital.  ITGV's  ability to
generate  sufficient  working  capital  with  which  to pay  such  costs  may be
adversely  affected by continual  delays in connection with Coast Guard approval
and by weather related and other  uncertainties  affecting its  operations.  The
costs associated with  refurbishing and retrofitting the Big Easy for placing it
in service  increased from our original  estimate due to upgrades to the vessel,
expansion  of our Mardi Gras theme build out, and  improvements  required by the
Coast Guard.  Further  delays in  commencing  the Big Easy will  materially  and
adversely  affect our cash flow because of the continuing  costs of carrying the
vessel.  In excess of 150 crew members and other  employees  have been hired and
trained to operate the Big Easy,  putting a severe drain on our cash flow and as
indicated  by the table  below,  our debt service  requirements  have  increased
significantly  with the PDS financing due to the increase in amounts of debt and
rates  involved.  The  increase in the amount is  attributable  in large part to
procurement  and  refurbishment  for the Big  Easy.  We are  dependent  upon the
expected  additional  revenue from the  operations of the second vessel to cover
the increased financing costs.

     In our last fiscal year,  the Company  purchased a third vessel,  the Royal
Star.  We  anticipate  that the  vessel  will need  extensive  improvements  and
outfitting costing between $5 and $6 million before being placed in service as a
gaming vessel. Until the amounts due to the Brennan Trustee were paid in full on
July 7, 2004,  expenditures  for  improvements  were  restricted  by the Brennan
Trustee.  On January 17, 2005 we borrowed $2,850,000 from PDS Gaming Corporation
and portions of these funds were used for improvements to the

                                       25

<PAGE>


Royal Star,  maritime office  improvements  and improvements to the Big Easy. We
are currently  negotiating with a financial institution to obtain the balance of
the funds  necessary  to make the required  improvements  and lease or otherwise
acquire the gaming equipment to place the ship in service.  No assurances can be
given that we will be successful in obtaining  the necessary  additional  funds.
Delays in  commencing  the  Royal  Star  operations  have and will  continue  to
adversely  affect our cash flows because of the continuing costs of carrying the
vessel.

     Under the PDS Transaction  signed on July 7, 2004 PBMC and PBE are required
to make annual and quarterly annualized payments based on seasonality factors of
cash flow sweep  payments  if the  EBITDAR  (earnings  before  interest,  taxes,
depreciation, amortization and rents) from the operation of the Princess and the
Big Easy is less than $10,000,000 per year. In October,  2004 the Company made a
required  payment  of  $190,415  which  was due for our  first  fiscal  quarter.
Payments for the second and third quarter are not required to be made.

     The  Company  anticipates  $2.5  million of capital  expenditures  for Port
improvements,  the timing of which is subject to financing.  The Company expects
to defer making the improvements until financing is in place.

The following summarizes  commitments on non-cancelable  contracts and leases as
of March 31, 2005:

<TABLE>
                                                      Twelve Months Ended March 31,
                                 -------------------------------------------------------------------     There-
                                    2006          2007          2008          2009          2010          after          Total
                                 ----------    ----------    ----------   -----------     ----------     ---------    -----------
<CAPTION>
<S>                            <C>           <C>           <C>           <C>            <C>             <C>          <C>
Capital Lease - P.B. Princess  $  4,808,104  $  5,661,156  $  5,661,156  $  5,661,156   $  1,887,052    $        0   $ 23,678,624
 Lease - Big Easy                 3,264,400     3,620,430     3,620,430     3,620,430      1,206,810             0     15,332,500
Notes and Mortgages:                                                                                                            0
   Principal                      3,506,604       193,484       107,567         9,165              0             0      3,816,820
    Interest                        333,377                                                                               333,377
Deferred Interest Payments          600,000       600,000       600,000       600,000              0             0      2,400,000
Employee Contracts                  507,756             0             0             0              0             0        507,756
Operating Leases:
    Casino Equipment              1,388,439       182,311       131,914         9,717              0             0      1,712,381
    Administrative & Office       2,099,310     2,337,848     1,947,276             0              0             0      6,384,434
Purchase Obligations - Big Easy   6,469,000             0             0             0              0             0      6,469,000
Purchase Obligations              1,231,244       101,966        61,006        61,006         61,006       223,687      1,739,915
Other Long-Term Debt - RP                         650,967                                                                 650,967
                                 ----------    ----------    ----------   -----------     ----------     ---------    -----------
Total                          $ 24,208,234  $ 13,348,162  $ 12,129,349  $  9,961,474   $  3,154,868    $  223,687   $ 63,025,774
                                 ==========    ==========    ==========   ===========     ==========     =========    ===========
</TABLE>


     Upstream  payments by ITGV to the Company  are limited  under the  Princess
Sub-Charter  and the Big Easy  Sub-Charter.  If the  "YTD  Result"  (defined  as
10/12's of annualized EBITDAR from operation of the two vessels) is greater than
$8 million at the end of any of the first three fiscal  quarters or EBITDAR from
operations  of the two  vessels  is  greater  than $8  million at the end of any
fiscal  year,  and if ITG Vegas and ITG Palm  Beach have made all  payments  due
under the Princess Sub-Charter and the Big Easy Sub- Charter, ITG Vegas may make
(i) tax sharing  payments to the Company  (payments  equal to the federal income
tax  savings  to ITG  Vegas  resulting  from  its  inclusion  in  the  Company's
consolidated  group for federal  income tax purposes)  including any tax sharing
payments  previously  deferred  as a result of  limitation  under  the  Princess
Sub-Charter or the Big Easy Sub-Charter,  and (ii) other payments to the Company
in an amount  which,  together  with charter hire payments in excess of $100,000
per month to PBMC and PBE for the two  vessels,  shall not exceed  $200,000  per
month (a  "Restricted  Payment").  If ITG Vegas is  prohibited  from  making any
Restricted  Payment for any month,  once such payments are again  allowed,  such
Restricted Payment may be made to the Company; provided that the total amount of
Restricted  Payments  (i.e.  payments  other than the tax sharing  payments  and
$100,000 per month in bareboat  charter  fees) paid by ITG Vegas to the Company,
PBMC and PBE in any twelve-month period may not exceed $2,400,000.


                                       26

<PAGE>


Outlook:

     Based on our historical level of operations for the Palm Beach Princess and
additional revenues  anticipated from the operations of the Big Easy, we believe
that once the Big Easy is placed in service, cash generated from operations will
be adequate to meet our anticipated lease/purchase and loan payment requirements
and  working  capital  needs.  No  assurances  can be given,  however,  that our
business  will  generate  sufficient  cash flow from  operations  or that future
borrowings will be available to enable us to service our lease/purchase and loan
payments  or to make  anticipated  capital  expenditures.  Our future  operating
performance  and our ability to make  payments  under our leases and other debts
will be subject to future  economic  conditions  and to financial,  business and
other factors, many of which are beyond our control.

     On July 7, 2004 we paid off the Brennan  Trustee and entered into long-term
sub charters in connection with capital lease  transactions  for two vessels and
equipment. As a result of these transactions, capital lease payments made to PDS
are at a higher rate of interest  (15.3% to 16.54%) than the  interest  that was
being paid to the Brennan Trustee (12%). The debt outstanding has also increased
significantly.  Additionally,  we must make charter  hire  payments for the Palm
Beach  Princess of $50,000 per month plus 1% of its gross  revenues  and charter
payments  for the Big Easy of $100,000  per month plus 1% of its gross  revenues
and aggregate gaming equipment lease payments to PDS of $222,400 per month after
the  initial  interest  only  payments  are made.  Also,  on January 17, 2005 we
borrowed an  additional  $2.85  million at 10% per annum,  adding an  additional
$95,352 of  payments  per  month,  after a four month  period of  interest  only
payments, to our debt service requirements per month. Additionally,  on April 5,
2005 we borrowed $4,350,000 from PDS at an interest rate of 20% per annum, which
is due on October 5, 2005,  adding  approximately  $72,500 per month to our debt
service.  Therefore our annual combined charter  payments  predicated on capital
lease  interest  payments  plus charter hire fees plus loan payments plus gaming
equipment rental will be significantly higher than the debt service payments and
equipment  rentals were for the year ended June 30, 2004. Under the terms of the
promissory  note,  PDS could  force the  refinance  of all of our debt at higher
interest rates (see Note 15).

     Effective July 7, 2004 we began leasing a second vessel,  the Big Easy. The
ship has  completed  its  refurbishing  and  retrofit  for use as an ocean going
casino  cruise ship and is expected to be placed in service in our fourth fiscal
quarter  ending June 30, 2005. We will continue to incur  substantial  costs for
the vessel and its personnel while we are waiting for Coast Guard certifications
and permits.  We anticipate  operating the vessel from the same port as the Palm
Beach Princess.  It is possible that  competition  from each vessel will have an
adverse effect on the operations of the other vessel.

     We will  continue  to incur costs on the  vessel,  Royal Star,  while it is
being  refurbished.  The  Company  will need  additional  financing  to make the
improvements  and we will  incur  additional  fees  and  interest  costs on such
financing. We are currently exploring locations from which to operate the vessel
when it is ready to be placed in service.

     During the first  quarter of this fiscal  year,  we  re-entered  the equine
business for which the Company was originally  established.  We currently own 30
horses,  own a share  in 8  horses,  and are  leasing  2  other  horses,  all of
different ages. Some are currently racing,  and a few are held as broodmares but
the majority  are  yearlings  and two year olds in  training.  It is our plan to
bring those horses into racing if we consider them competitive after training is
completed.  Our horse  operation has not produced any revenue during the period.
We have  purchased  livestock,  including  stud fees which total  $329,000 as of
March 31, 2005 and our  training  and  operational  expenses  are  approximately
$45,000 per month.  We do not expect to have any  significant  revenues from the
horse  operation  during  our 2005  Fiscal  year.  These  costs  could  increase
substantially in the near future if additional horses are purchased.

     Our  working  capital as of March 31, 2005 was a negative  $(7,812,936)  as
compared  to a positive  amount of $556,675 at June 30,  2004.  The  decrease in
working  capital of $8,369,100  during the past nine months was primarily due to
the net effect of cash  provided by operating  activities  of  $2,671,693,  less
disbursements  of  approximately  $13,350,000  for  purchasing  of the Big Easy,
improvements  made to the Big Easy and  Royal  Star  and for  purchase  of horse
livestock  and  equipment,  offset by the payoff of the  Brennan  Trustee on our
behalf,  which amount of  approximately  $4,000,000  was classified as a current
liability  as of June 30, 2004 and current  liabilities  recorded as a result of
our leasing arrangements with PDS of approximately $900,000.


                                       27

<PAGE>

Results of Operations for the Three Months Ended March 31, 2005 and 2004

     Overall

     Revenue for the three months ended March 31, 2005  increased  $583,278 from
$9,697,707 in Fiscal 2004 to $10,280,985 in Fiscal 2005 primarily as a result of
increase in revenues generated by the Palm Beach Princess  operations during the
comparable periods.  Operating expenses increased  $1,160,810 from $7,545,931 in
the three month period in Fiscal 2004 to $8,706,741 in Fiscal 2005  primarily as
the  result  of 1)  recording  start  up costs  for the Big  Easy of  $1,109,310
compared to last year when no start up costs were  recorded,  2) our  additional
payment of other  development  costs of  $318,179  as a result of our  continued
search,   both   domestically  and   internationally,   for  additional   gaming
opportunities  and our entry into the equine  business,  and 3) an  increase  in
Depreciation  and  Amortization  of $353,457 as a result of  depreciation  being
recorded on the Palm Beach Princess as a result of capital leasing  arrangements
effective in July, 2004.

     Operating  income for the three months ended March 31, 2005 was  $1,574,245
as compared to $2,151,776  for the  comparative  period of last year.  Operating
Income before  depreciation for the current period was $2,130,740 as compared to
$2,354,814 for the comparative period of last year.

     Other net expenses increased by $ 655,808 as a result of (1) an increase in
the interest  and  financing  due to the higher debt level on the vessel  leases
than that amount  previously  owed to the Brennan Trustee and an increase in the
rates of interest and (2) during the third  quarter of Fiscal 2005,  the Company
recorded an impairment  loss in the amount of $100,000 on the Second Cherry Hill
Note Receivable.

     Net Income for the three  months  ended March 31, 2005 was $649,117 or $.06
per diluted  share as compared to income of $1,765,056 or $.17 per diluted share
for the three months ended March 31, 2004.

     For the three months  earnings before  interest,  taxes,  depreciation  and
amortization and our unusual items of  extraordinary  income and vessel start up
costs  (Adjusted  EBITDA)  was  $3,252,386  as compared  to  $2,371.053  for the
comparable  period  last  year.  The  increase  in  Adjusted  EBITDA  was due to
increases from the vessel  operations  (see the discussion on Vessel  Operations
below).

Reconciliation of Non-GAAP Measures to GAAP

     Adjusted  EBITDA or  earnings  before  interest,  taxes,  depreciation  and
amortization  and unusual  items is not a measure of  performance  or  liquidity
calculated in accordance with generally accepted accounting  principles.  EBITDA
information  is  presented  as  a  supplemental  disclosure  because  management
believes  that it is a widely  used  measure of such  performance  in the gaming
industry. In addition, management uses Adjusted EBITDA as the primary measure of
the  operating  performance  of its  operations,  including  the  evaluation  of
operating  personnel.  Adjusted EBITDA should not be construed as an alternative
to operating income, as an indicator of the Company's operating performance,  or
as an  alternative  to cash flows  from  operating  activities,  as a measure of
liquidity,  or as any other measure of performance determined in accordance with
generally accepted  accounting  principles.  The Company has significant uses of
cash flows, including capital expenditures,  interest payments, taxes, lease and
debt principal repayments, which are not reflected in Adjusted EBITDA. It should
also be noted that other gaming  companies  that report EBITDA  information  may
calculate EBITDA in a different manner than the Company. A reconciliation of the
Company's  Adjusted  EBITDA and  unusual  items to net income  (GAAP),  is shown
below.

                                       28

<PAGE>


Reconciliation of Adjusted EBITDA to Net Income (GAAP)
<TABLE>
                                             Three Months Ended             Nine Months Ended
                                                  March 31,                      March 31,
                                         ----------------------------   --------------------------
                                              2005           2004           2005           2004
                                         -------------   ------------   ------------   -----------
<CAPTION>
<S>                                    <C>             <C>            <C>             <C>
Total Adjusted EBDITA                  $     3,252,386 $    2,371,053 $    4,374,030  $  4,682,704
     Depreciation & Amortization              (556,495)      (203,038)    (1,521,596)     (514,007)
     Interest & Financing Expenses            (899,126)      (361,344)    (2,696,828)   (1,363,067)
     Interest Income                            78,998         80,785        230,916       251,514
     Tax Benefit (Expense) on Income            (5,000)      (122,400)         86,000     (170,000)
                                         -------------   ------------   ------------   -----------
Net Income (Loss) before Unusual Items       1,870,763      1,765,056        472,522     2,887,144
     Extraordinary Item                              0              0      3,560,000             0
     Start Up Costs for Vessels             (1,121,646)             0    (1,857,129)             0
     Impairment Loss                          (100,000)             0      (450,000)             0
                                         -------------   ------------   ------------   -----------
Net Income (Loss)                      $       649,117 $    1,765,056 $    1,725,393  $  2,887,144
                                         =============   ============   ============   ===========
</TABLE>


     Vessel Operations

     During our third Fiscal  quarter  total net revenue from vessel  operations
was $10,165,367 as compared to $9,611,153 for the  comparative  quarter of 2004.
The  increase  in revenue of $554,214  during the  comparable  quarters  was the
result of a number of factors.  The operating subsidiary which operates the Palm
Beach Princess ends its quarterly  accounting  period on the last Sunday of each
quarter.  These end of the week cut offs normally create more  comparability  of
the Company's quarterly  operations by generally having an equal number of weeks
(13) and weekend days in each quarter. Periodically,  this system necessitates a
14 week quarter. Our third quarter of Fiscal 2005 was such a quarter. Therefore,
the number of cruises,  revenues  and  expenses  reported  for the third  Fiscal
quarter for this year include one  additional  week of operations as compared to
the third quarter of 2004. The average  revenue per week during the third Fiscal
quarter of 2005 was  $726,098 as compared  to  $739,319  during the  comparative
period of Fiscal 2004, or a decrease of 1.8%.  This was the result of a decrease
of the average number of passengers per week of 2.5% for Fiscal 2005,  partially
offset by a slight increase in the revenue per passenger to $118, as compared to
Fiscal 2004.  Casino operating  expenses which also includes food,  beverage and
entertainment increased $263,414 from $2,329,487,  or 29.2% of casino revenue in
Fiscal 2004 to  $2,592,901,  or 30.5% of casino revenue in Fiscal 2005 primarily
the result of  dividing  costs,  many of which are fixed by their  nature,  over
increased revenues.

     During the quarter a portion of the employee costs normally incurred by the
Palm Beach Princess for  operational  and  administrative  salary  expenses were
allocated to the Big Easy start up  operation.  These  allocations  were made to
more  accurately  reflect the cost of preparing the Big Easy for use as a casino
gaming vessel. Approximately $295,000 of salaries allocated to the Big Easy were
expensed as developmental  costs and approximately  $60,000 of salary costs were
capitalized  as part of the vessel costs.  These  capitalized  costs reflect the
value of vessel  improvements  completed by company  employees.  This allocation
should be taken into consideration when comparing operating results from year to
year for the Palm Beach Princess.

     Sales,  marketing and advertising expenses increased $184,421 from $960,941
in Fiscal 2004 to  $1,145,362  in Fiscal  2005.  The  increase was the result of
additional   advertising   and  promotions  to  attract   customers   after  the
cancellation  of cruises due to the  hurricanes,  inclement  weather and curfews
following the hurricanes in the quarter ending  September 30, 2004 and the first
week of the quarter  ending  December  31,  2004.  Maritime  and legal  expenses
increased  $31,914,  primarily as a result of recording one  additional  week of
operstions.  Finance expenses increased $574,330 from $165,380 in Fiscal 2004 to
$739,710 in Fiscal 2005 as a result of the  interest  paid on the capital  lease
and the charter hire  payments for the Palm Beach  Princess  which was effective
July 7, 2004.  Depreciation and amortization increased $352,025 from $200,197 in
Fiscal  2004 to  $552,222  in  Fiscal  2005.  As a result of the  capital  lease
arrangement for the Palm Beach Princess the Company is recording depreciation on
the vessel as compared to last year when the Company did not record depreciation
on the  vessel  because  it  operated  the  vessel  under  an  operating  lease.
Administration  expense  decreased  $535,048  from  $842,007  in Fiscal  2004 to
$306,959 in Fiscal 2005 due

                                       29

<PAGE>


in part to a reversal of bonus accrual during the current fiscal year,  $212,258
of bonus the Company had accrued during the first six months of this fiscal year
and $52,402 of bonus the Company had accrued as of June 30, 2004, which will not
be paid,  steps taken to reduce  expenses during this quarter and the allocation
of salaries to the Big Easy as stated  above.  Income  before income tax expense
for the third quarter of operation in Fiscal 2005 was  $2,728,296 as compared to
income before income tax of $3,069,361 in the comparable quarter of Fiscal 2004.

     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 third quarter
of Fiscal 2005 the ship completed 196 cruises compared to 174 cruises during the
same period last year.  During the current quarter no cruises were cancelled due
to inclement weather.

     The following is a  comparative  summary of income and expenses of the Palm
Beach  Princess  operation  for the 14 weeks  ended April 3, 2005 and for the 13
weeks ended March 28, 2004:
<TABLE>
                                                    Three Month Period Ended
                                                --------------------------------
             Description                        April 3, 2005     March 28, 2004     Change
---------------------------------------------   -------------    ---------------   -----------
<CAPTION>
<S>                                           <C>              <C>               <C>
Passenger Count                                       86,148             82,076         4,072
Number of Cruises                                        196                174            22
Revenue:
    Gaming                                    $    8,489,580   $      7,989,901  $    499,679
    Fare                                           2,680,977          2,557,525       123,452
    On Board                                       1,151,464          1,036,805       114,659
    Less: Promotional Allowances
    Fare                                          (1,604,654)        (1,480,821)     (123,833)
    On Board                                        (552,000)          (492,257)      (59,743)
                                                ------------     --------------    ----------
    Total Revenue                                 10,165,367          9,611,153       554,214
                                                ------------     --------------    ----------
Expenses:
    Casino Operating Expenses                      2,592,901          2,329,487       263,414
    Hotel and Gift Shop Expenses                     286,832            262,609        24,223
    Sales, Marketing and Advertising Expenses      1,145,362            960,941       184,421
    Maritime and Legal Expenses                    1,813,085          1,781,171        31,914
    Finance and Vessel Leasing Expenses              739,710            165,380       574,330
    Depreciation and Amortization                    552,222            200,197       352,025
    Administrative                                   306,959            842,007      (535,048)
                                                ------------     --------------    ----------
     Total Expenses                                7,437,071          6,541,792       895,279
                                                ------------     --------------    ----------
             Income Before Income Tax Expense $    2,728,296   $      3,069,361  $   (341,065)
                                                ============     ==============    ==========
</TABLE>


Results of Operations for the Nine Months Ended March 31, 2005 and 2004

     Overall

     Revenue from for the nine months ended March 31, 2005  decreased  $244,132,
or 1% from $24,418,433 in Fiscal 2004 to $24,174,301 in Fiscal 2005 primarily as
a result of decrease in revenues generated by the Palm Beach Princess operations
during the comparable  periods.  Operating  expenses  increased  $2,913,231 from
$20,265,975  in the nine month  period in Fiscal 2004 to  $23,179,206  in Fiscal
2005  primarily  the result of 1)  recording  start up costs for the Big Easy of
$1,738,375  and for the Royal  Star of  $118,754  wherein  last year no start up
costs were recorded , 2) an increase in other development costs of $610,137 as a
result  of our  continued  search  both  domestically  and  internationally  for
additional gaming  opportunities  and our entry into the equine business,  3) an
increase  in  Depreciation   and   Amortization  of  $966,985  as  a  result  of
depreciation being recorded on the Palm Beach Princess as a result of leasing

                                       30

<PAGE>


arrangements  effective in July,  2004.  The increase in operating  expenses was
offset in part by a decrease  in the  bankruptcy  costs of  $388,759  due to the
bankruptcy being finalized in July 2004.

     The Operating  Income for the nine months ended March 31, 2005 was $995,095
as compared to operating income of $4,152,458 for the comparative period of last
year. Operating Income before depreciation for the current period was $2,516,691
as compared to $4,666,465 for the comparative period of last year.

     Other net expenses  increased by  $1,820,387 as a result of (1) an increase
in the interest and  financing due to the higher debt level on the vessel leases
than that amount  previously  owed to the Brennan Trustee and an increase in the
rates of  interest  and (2)  during  the first  nine  months of Fiscal  2005 the
Company  recorded  an  impairment  loss in the amount of  $450,000 on the Second
Cherry Hill Note Receivable.

     For the nine months ended March 31, 2005 the (loss) before an extraordinary
item was  $1,920,607  as  compared to income of  $3,057,144  for the nine months
ended March 31, 2004.  During the first  quarter of the current  Fiscal year the
Company recorded  extraordinary income, net of tax, of $3,560,000.  This was the
result of the  collection of success fees charged to Leo Equity Group,  Inc. and
Palm Beach  Maritime  Corporation  (formerly  MJQ) for our efforts in connection
with the final settlement with the Chapter 11 Trustee for the Bankruptcy  Estate
of Robert E. Brennan.  We had deferred all income from these  transactions until
such time as payment was received.

     Net Income for the nine months ended March 31, 2005 was  $1,725,393 or $.16
per diluted  share as compared to  $2,887,144  or $.29 per diluted share for the
nine months ended March 31, 2004.

     For the nine months ended March 31, 2005 earnings before  interest,  taxes,
depreciation and amortization and our unusual items of extraordinary  income and
vessel start up costs (Adjusted EBITDA) was $4,374,030 as compared to $4,682,704
for the  corresponding  period.  The decrease in Adjusted EBITDA of $308,674 was
primarily  due to the  losses  sustained  in the first  quarter  because  of the
hurricanes  which is reflected in the nine month  operating  results,  partially
offset by better operating  results during our second and third fiscal quarters.
See the  reconciliation  of  Adjusted  EBITDA to net  income in the three  month
operating results paragraphs of this section.

     Vessel Operations

     Operations for the nine months were  materially  impacted by hurricanes and
inclement  weather which struck Florida and the Palm Beach area during our first
quarter of operations. The negative effect of those hurricanes on our operations
during the first quarter is also reflected in the financial results for the nine
months ended March 31, 2005.  During the nine months ended March 31, 2005, total
net operating  revenue from vessel  operations  was  $23,871,604  as compared to
$24,186,322 for the nine months ended March 31, 2004. The decrease in revenue of
$314,718  during  the  comparable  nine  months  was due to the loss of  revenue
reported in our first  fiscal  2005  quarter  due to the  hurricanes,  partially
offset by an additional  week of  operations  included in the nine month results
(see the Vessel Operations  results for the 3 months ended March 31, 2005 for an
explanation of our weekly accounting periods).  The average number of passengers
per cruise during the nine months increased  slightly from 388 in fiscal 2004 to
389 in fiscal 2005,  however,  the revenue per  passenger  declined from $121 in
fiscal  2004 to $117 in  fiscal  2005 for the nine  month  periods.  During  the
current nine month period gaming revenues decreased $295,729 from $20,432,796 in
the first nine months of fiscal 2004 to  $20,137,067 in the first nine months of
fiscal 2005. Net fare and on board income  decreased  $18,989.  Casino operating
expenses which also includes food, beverage and entertainment increased $357,133
from  $6,488,191 or 31.8% of casino  revenue in fiscal 2004 to $6,845,324 or 34%
of casino revenue in fiscal 2005 primarily the result of dividing costs, many of
which are fixed by their nature, over reduced revenues.

     During  the nine  month  period  ending  March 31,  2005 a  portion  of the
employee costs normally  incurred by the Palm Beach Princess for operational and
administrative  salary  expenses  were  allocated  to  the  Big  Easy  start  up
operation.  These  allocations were made to more accurately  reflect the cost of
preparing the Big Easy for use as a casino gaming vessel. Approximately $915,000
of salaries  allocated to the Big Easy were expensed as developmental  costs and
approximately  $160,000 of salary costs were  capitalized  as part of the vessel
costs.  These  capitalized  costs  reflect  the  value  of  vessel  improvements
completed  by  company   employees.   This  allocation   should  be  taken  into
consideration  when comparing  operating  results from year to year for the Palm
Beach Princess.


                                       31

<PAGE>


     Sales,   marketing  and  advertising   expenses   increased  $396,696  from
$2,527,627  in Fiscal 2004 to  $2,924,323  in Fiscal 2005.  The increase was the
result of additional  advertising and promotions to attract  customers after the
cancellation  of cruises due to the  hurricanes,  inclement  weather and curfews
following the hurricanes. Maritime and legal expenses decreased $344,698 or 6.8%
as a result of the  allocation of salary  expenses as stated above.  Finance and
vessel  lease  expenses  increased  $1,992,560  from  $218,000 in fiscal 2004 to
$2,210,560  in fiscal 2005 as a result of the interest paid on the capital lease
and the charter hire  payments for the Palm Beach  Princess  which was effective
July 7, 2004.  Depreciation and amortization  increased $1,207,708 from $300,743
in Fiscal 2004 to  $1,508,451  in Fiscal 2005.  As a result of the capital lease
arrangement for the Palm Beach Princess the Company is recording depreciation on
the vessel as compared to last year when the Company did not record depreciation
because it operated the vessel under an operating lease. Administrative expenses
decreased $1,354,941 from $2,876,139 in Fiscal 2004 to $1,521,198 in Fiscal 2005
due to the reversal of accrued  bonus during the first six months of this fiscal
year in the amount of  $212,258  and $57,402 of bonus the Company had accrued as
of June 30, 2004 but will not pay,  steps taken to reduce  expenses  during this
quarter,  and the allocation of salary  expenses as stated above.  Income before
income  tax  expense  for the first  quarter  of  operation  in Fiscal  2005 was
$3,417,692  as  compared  to  income  before  Income  Tax of  $6,036,297  in the
comparable nine month period of Fiscal 2004.

     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 nine months of
Fiscal 2005 the ship  completed  524  cruises and 33 cruises  were missed due to
hurricanes and inclement weather.  Whereas during the nine months of Fiscal 2004
the ship completed 517 cruises.

     The following is a  comparative  summary of income and expenses of the Palm
Beach  Princess  operation  for the 40 weeks  ended April 3, 2005 and for the 39
weeks ended March 28, 2004:

<TABLE>
                                                      Nine Month Period Ended
                                                  -------------------------------
             Description                           April 3, 2005    March 28, 2004     Change
---------------------------------------------     ---------------   --------------  ------------
<CAPTION>
<S>                                            <C>                <C>             <C>
Passenger Count                                         203,751          200,590          3,161
Number of Cruises                                           524              517              7
Revenue:
    Gaming                                     $     20,137,067   $   20,432,796  $    (295,729)
    Fare                                              5,857,985        5,777,102         80,883
    On Board                                          3,012,676        2,633,764        378,912
    Less: Promotional Allowances
    Fare                                             (3,613,379)      (3,418,829)      (194,550)
    On Board                                         (1,522,745)      (1,238,511)      (284,234)
                                                  -------------     ------------    -----------
    Total Revenue                                    23,871,604       24,186,322       (314,718)
                                                  -------------     ------------    -----------
Expenses:
    Casino Operating Expenses                         6,845,324        6,488,191        357,133
    Hotel and Gift Shop Expenses                        738,635          689,206         49,429
    Sales, Marketing and Advertising Expenses         2,924,323        2,527,627        396,696
    Maritime and Legal Expenses                       4,705,421        5,050,119       (344,698)
    Finance and Vessel Leasing Expenses               2,210,560          218,000      1,992,560
    Depreciation and Amortization                     1,508,451          300,743      1,207,708
    Administrative                                    1,521,198        2,876,139     (1,354,941)
                                                  -------------     ------------    -----------
    Total Expenses                                   20,453,912       18,150,025      2,303,887
                                                  -------------     ------------    -----------
             Income Before Income Tax Expense  $      3,417,692   $    6,036,297  $  (2,618,605)
                                                  =============     ============    ===========
</TABLE>

Horse Operations

     During the first  quarter of this fiscal  year,  we  re-entered  the equine
business.  We currently own 30 horses,  shares in 8 horses,  and lease 2 horses,
all of different ages. Some are currently racing, and a few are

                                       32

<PAGE>


held as broodmares but the majority are yearlings and two year olds in training.
It is our plan to bring those horses into racing if we consider them competitive
after training is completed.  We are stabling and training the majority of these
horses in New Jersey and in Brazil.  Additionally,  the Company has purchased 14
horses,  the  majority  being one and two year olds,  from  Francis W. Murray at
values to be determined by a current appraisal of their values. Payment for such
horses will only be made out of profits  realized from the horses purchased from
Mr.  Murray,  if any. Our horse  operation  has produced  insignificant  revenue
during the period.  Training and  operational  expenses of $297,118 for the nine
month period are reported in  Development  Costs-Other.  It is our plan to bring
these horses into racing if we consider them competitive  following the training
period to take advantage of the projected  increase in purses as a result of the
introduction of slot machines in several state jurisdictions.


ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     The Company is not subject to material interest rate risk, foreign currency
exchange rate risk,  commodity price risk or other relevant market rate or price
risks.


ITEM 4. - CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

     Controls and Procedures

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

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

     There have not been any significant changes that occurred during the fiscal
quarter  ended March 31,  2005 in the  Company's  internal  controls or in other
factors that could significantly affect these controls subsequent to the date of
their evaluation.


                                       33

<PAGE>


                    INTERNATIONAL THOROUGHBRED BREEDERS, INC.
                                AND SUBSIDIARIES

                                     PART II

                                OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

     In  connection  with the  retrofit and  improvements  made on the Big Easy,
Atlantic Dry Dock Corporation ("Atlantic") has brought suit "in rem" against M/V
Empress II (the "Big Easy") filed in the US District  Court,  Middle District of
Florida, Jacksonville Division alleging non-payment of their asserted claims. We
have  disputed  Atlantic's  charges for certain  portions of that work.  We have
placed $4.3 million  borrowed  from PDS in an escrow  account in order to obtain
release of the vessel until the disputed  amount can be  arbitrated or otherwise
resolved.

     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. Such Chapter 11 case was closed on July 17, 2004. (See Note 4)


ITEM 6. EXHIBITS

Exhibits          Description

31.1 CEO  Certification   pursuant  to  rule  13a-14(a)  and  15d-14(a)  of  the
     Securities Exchange Act of 1934

31.2 CFO  Certification   pursuant  to  rule  13a-14(a)  and  15d-14(a)  of  the
     Securities Exchange Act of 1934

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

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



                                       34

<PAGE>


                    INTERNATIONAL THOROUGHBRED BREEDERS, INC.
                                AND SUBSIDIARIES

                                   SIGNATURES



     Pursuant to the  requirements  of the Securities  Exchange Act of 1934, the
Registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned thereunto duly authorized.





                    INTERNATIONAL THOROUGHBRED BREEDERS, INC.



May 23, 2005             /s/Francis W. Murray
                         ----------------------------------------------------
                         Francis W. Murray, President, Chief Executive Officer
                         and Chief Financial Officer





                                       35

<PAGE>


                                                                    Exhibit 31.1

             CEO 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-15(e)  and  15d-15(e)  and internal
          control over financial reporting (as defined in Exchange Act Rules 13a
          - 15(f) and 15d - 15 (f) 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)   designed such internal control over financial reporting,  or
                    caused  such  disclosure   controls  and  procedures  to  be
                    designed  under  our  supervision,   to  provide  reasonable
                    assurance  regarding the reliability of financial  reporting
                    and the  preparation  of financial  statements  for external
                    purposes in accordance  with generally  accepted  accounting
                    principles:

               c)   evaluated the  effectiveness of the registrant's  disclosure
                    controls  and  procedures  and  presented in this report our
                    conclusions   about  the  effectiveness  of  the  disclosure
                    controls and procedures, as of the end of the period covered
                    by this report on such evaluation; and

               d)   disclosed  in this  report  any  change in the  registrant's
                    internal  control over  financial  reporting  that  occurred
                    during the  registrant's  most recent  fiscal  quarter  (the
                    registrant's fourth quarter in the case of an annual report)
                    that has  materially  affected,  or is reasonably  likely to
                    materially  affect,  the registrant's  internal control over
                    financial reporting.

     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 and material weaknesses in the
                    design or  operation  of internal  controls  over  financial
                    reporting  which are reasonably  likely to adversely  affect
                    the registrant's ability to record,  process,  summarize and
                    report financial information; 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 over financial reporting.





Date: May 23, 2005

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

                                       36

<PAGE>


                                                                    Exhibit 31.2

             CFO 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-15e  and  15d-15e)  and  internal
          control over financial reporting (as defined in Exchange Act Rules 13a
          - 15(F) and 15d - 15 (F) 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)   designed such internal control over financial reporting,  or
                    caused  such  disclosure   controls  and  procedures  to  be
                    designed  under  our  supervision,   to  provide  reasonable
                    assurance  regarding the reliability of financial  reporting
                    and the  preparation  of financial  statements  for external
                    purposes in accordance  with generally  accepted  accounting
                    principles:

               c)   evaluated the  effectiveness of the registrant's  disclosure
                    controls  and  procedures  and  presented in this report our
                    conclusions   about  the  effectiveness  of  the  disclosure
                    controls and procedures, as of the end of the period covered
                    by this report on such evaluation; and

               d)   disclosed  in this  report  any  change in the  registrant's
                    internal  control over  financial  reporting  that  occurred
                    during the  registrant's  most recent  fiscal  quarter  (the
                    registrant's fourth quarter in the case of an annual report)
                    that has  materially  affected,  or is reasonably  likely to
                    materially  affect,  the registrant's  internal control over
                    financial reporting.

     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 and material weaknesses in the
                    design or  operation  of internal  controls  over  financial
                    reporting  which are reasonably  likely to adversely  affect
                    the registrant's ability to record,  process,  summarize and
                    report financial information; 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 over financial reporting.


Date: May 23, 2005

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



                                       37

<PAGE>


                                                                    Exhibit 32.1

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

     In  connection  with the  filing  of the  Quarterly  Report on Form 10-Q of
International Thoroughbred Breeders, Inc. (the "Company") for the three and nine
months ended March 31, 2005 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 Executive Officer
May 23, 2005


                                       38

<PAGE>


                                                                    Exhibit 32.2

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

     In  connection  with the  filing  of the  Quarterly  Report on Form 10-Q of
International Thoroughbred Breeders, Inc. (the "Company") for the three and nine
months ended March 31, 2005 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
May 23, 2005



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