FORM 10-Q

                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

(Mark One)

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

For the quarterly period ended        December 31, 2001
                              --------------------------------------------------
                                       OR

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

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

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

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

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

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

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


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

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

                      APPLICABLE ONLY TO CORPORATE ISSUERS:

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


           Class                         Outstanding at February 15, 2002
------------------------------         ------------------------------------
Common Stock, $ 2.00 par value                   11,480,272 Shares


<PAGE>



                    INTERNATIONAL THOROUGHBRED BREEDERS, INC.

                                    FORM 10-Q

                                QUARTERLY REPORT
                   FOR THE SIX MONTHS ENDED DECEMBER 31, 2001
                                   (Unaudited)

                                TABLE OF CONTENTS


PART I.   FINANCIAL INFORMATION                                      PAGE

          Item 1. Financial Statements:

                  Consolidated Balance Sheets
                         as of December 31, 2001 and June 30, 2001....1-2

                  Consolidated Statements of Operations
                         for the Three Months and Six Months ended
                         December 31, 2001 and 2000 ..................3

                  Consolidated Statement of Stockholders' Equity
                         for the Six Months ended December 31, 2001...4

                  Consolidated Statements of Cash Flows
                         for the Six Months ended
                         December 31, 2001 and 2000...................5

                  Notes to Financial Statements.......................6-14

          Item 2. Management's  Discussion and Analysis of Financial
                   Condition and Results of Operations................15-19

PART II.  OTHER INFORMATION

          Item 6. Exhibits and Reports on Form 8-K....................20

SIGNATURES............................................................21



<PAGE>
                    INTERNATIONAL THOROUGHBRED BREEDERS, INC.
                                AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS
                    AS OF DECEMBER 31, 2001 AND JUNE 30, 2001

                                     ASSETS

                                             December 31,
                                                 2001               June 30,
                                             (UNAUDITED)              2001
                                          -----------------    -----------------
CURRENT ASSETS:
     Cash and Cash Equivalents          $        1,294,783   $         1,361,287
     Accounts Receivable                           293,587               843,385
     Prepaid Expenses                              493,739               362,048
     Refundable Deposit on Palm
      Beach Princess Mortgage                    1,750,000               750,000
     Other Current Assets                        1,080,460             1,032,311
     Net Assets of Discontinued
      Operations - Current                               0             1,007,398
                                          -----------------    -----------------
          TOTAL CURRENT ASSETS                   4,912,569             5,356,429
                                          -----------------    -----------------


LAND, BUILDINGS AND EQUIPMENT:
     Land and Buildings                                  0               214,097
     Equipment and Artwork                         603,246               289,426
                                          -----------------    -----------------
                                                   603,246               503,523
     LESS: Accumulated Depreciation
            and Amortization                       111,354               285,004
                                          -----------------    -----------------

          TOTAL LAND, BUILDINGS AND
               EQUIPMENT, NET                      491,892               218,519
                                          -----------------    -----------------



OTHER ASSETS:
     Note Receivable                            23,000,000            23,000,000
     Note Receivable of Discontinued
      Operations - Long-Term                    10,000,000            10,000,000
     Deposits and Other Assets                   3,678,457             2,816,260
                                          -----------------    -----------------
          TOTAL OTHER ASSETS                    36,678,457            35,816,260
                                          -----------------    -----------------


TOTAL ASSETS                            $       42,082,918   $        41,391,208
                                          =================    =================


See Notes to Consolidated Financial Statements.

                                        1
<PAGE>

                    INTERNATIONAL THOROUGHBRED BREEDERS, INC.
                                AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS
                    AS OF DECEMBER 31, 2001 AND JUNE 30, 2001

                      LIABILITIES AND STOCKHOLDERS' EQUITY

                                                December 31,
                                                    2001            June 30,
                                                 (UNAUDITED)          2001
                                                --------------    ------------
CURRENT LIABILITIES:
     Accounts Payable                          $    3,475,495   $   2,549,539
     Accrued Expenses                               1,431,814       1,247,534
     Short-Term Debt                                1,284,766       1,000,000
     Net Liabilities of Discontinued
      Operations - Current                             39,606               0
                                                --------------    ------------
          TOTAL CURRENT LIABILITIES                 6,231,681       4,797,073
                                                --------------    ------------


DEFERRED INCOME                                     4,243,874       4,138,426
                                                --------------    ------------

LONG-TERM DEBT                                              0         482,000
                                                --------------    ------------

COMMITMENTS AND CONTINGENCIES


STOCKHOLDERS' EQUITY:
     Series A Preferred Stock, $100
       Par Value, Authorized 500,000 Shares,
       Issued and Outstanding,362,487 Shares       36,248,675      36,248,675
     Common Stock, $2 Par Value,
      Authorized 25,000,000 Shares,
      Issued and Outstanding, 11,480,272
      and 11,480,267, respectively                 22,960,543      22,960,533
     Capital in Excess of Par                      20,192,196      20,192,206
     (Deficit) (subsequent to June 30, 1993,
        date of quasi-reorganization)             (47,774,884)    (47,406,038)
                                                --------------    ------------
                                                   31,626,530      31,995,376
     LESS:
        Deferred Compensation, Net                    (19,167)        (21,667)
                                                --------------    ------------
          TOTAL STOCKHOLDERS' EQUITY               31,607,363      31,973,709
                                                --------------    ------------


TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY     $   42,082,918   $  41,391,208
                                                ==============    ============


See Notes to Consolidated Financial Statements.

                                        2
<PAGE>
                    INTERNATIONAL THOROUGHBRED BREEDERS, INC.
                                AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF OPERATIONS
          FOR THE THREE AND SIX MONTHS ENDED DECEMBER 31, 2001 AND 2000


<TABLE>


                                                                     Three Months Ended            Six Months Ended
                                                                         December 31,                December 31,
                                                                 ---------------------------  --------------------------
                                                                      2001           2000         2001           2000
                                                                 -------------   -----------  -----------    -----------
<CAPTION>
<S>                                                             <C>             <C>          <C>            <C>
REVENUE:

     Revenue from Operations                                    $   4,889,025   $         0  $ 10,906,372   $          0
     Other Income                                                      77,277        50,398        78,056        126,804
     Interest Income                                                   94,057        24,727       238,393         55,537
                                                                 -------------   -----------  ------------   ------------
              TOTAL REVENUES                                        5,060,359        75,125    11,222,821        182,341
                                                                 -------------   -----------  ------------   ------------

EXPENSES:
     Cost of Revenues:
        Operating Expenses                                          4,141,188             0     8,551,270              0
        Depreciation & Amortization                                    13,251             0        24,045              0
     General & Administrative Expenses - Palm Beach Princess          858,519             0     1,456,194              0
     General & Administrative Expenses - Parent                       540,230       410,774     1,080,620        952,766
     Development Costs                                                194,988       181,264       241,603        211,264
     Interest and Financing Expenses                                  139,452       391,730       215,935        396,707
                                                                 -------------   -----------  ------------   ------------
              TOTAL EXPENSES                                        5,887,628       983,768    11,569,667      1,560,737
                                                                 -------------   -----------  ------------   ------------

LOSS BEFORE TAX PROVISION                                            (827,269)     (908,643)     (346,846)    (1,378,396)
   State Income Tax Expense                                                 0             0        22,000              0
                                                                 -------------   -----------  ------------   ------------

NET LOSS                                                        $    (827,269)  $  (908,643) $   (368,846)  $ (1,378,396)
                                                                 =============   ===========  ============   ============


NET BASIC AND DILUTED LOSS PER COMMON SHARE                     $        (.07)  $      (.10) $       (.03)  $       (.15)
                                                                 =============   ===========  ============   ============

WEIGHTED AVERAGE COMMON
   SHARES OUTSTANDING                                              11,480,272     8,980,262    11,480,270      8,980,259
                                                                 =============   ===========  ============   ============

</TABLE>



See Notes to Consolidated Financial Statements.

                                        3
<PAGE>

                    INTERNATIONAL THOROUGHBRED BREEDERS, INC.
                                AND SUBSIDIARIES

                 CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
                   FOR THE SIX MONTHS ENDED DECEMBER 31, 2001
<TABLE>


                                                       Preferred                           Common
                                             -------------------------------  ---------------------------
                                               Number of                          Number of
                                                Shares            Amount           Shares         Amount
                                             --------------    -------------  --------------  -------------
<CAPTION>
<S>                                                <C>       <C>                 <C>         <C>
 BALANCE - JUNE 30, 2001                           362,487   $   36,248,675      11,480,267  $  22,960,533

    Shares Issued for Fractional
       Exchanges With Respect to the
       One-for-twenty Reverse Stock Split
       effected on March 13, 1992                        0                0               5             10
    Amortization of Deferred
       Compensation Costs                              ---              ---             ---            ---
    Net (Loss) for the Six Months Ended
       December 31, 2001                               ---              ---             ---            ---

                                             --------------    -------------  --------------   ------------
 BALANCE - DECEMBER 31, 2001                       362,487   $   36,248,675      11,480,272  $  22,960,543
                                             ==============    =============  ==============   ============
</TABLE>


<TABLE>

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

    Shares Issued for Fractional
       Exchanges With Respect to the
       One-for-twenty Reverse Stock Split
       effected on March 13, 1992                      (10)           ---        ---            ---
    Amortization of Deferred
       Compensation Costs                              ---            ---      2,500          2,500
    Net (Loss) for the Six Months Ended
       December 31, 2001                               ---       (368,846)       ---       (368,846)

                                               ------------  -------------  ---------   ------------
 BALANCE - DECEMBER 31, 2001                  $ 20,192,196  $ (47,774,884) $ (19,167)  $ 31,607,363
                                               ============  =============  =========   ============
</TABLE>




See Notes to Consolidated Financial Statements.

                                       4

<PAGE>
                   INTERNATIONAL THOROUGHBRED BREEDERS, INC.
                                AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
               FOR THE SIX MONTHS ENDED DECEMBER 31, 2001 AND 2000
<TABLE>

                                                                                             Six Months Ended
                                                                                                December 31,
                                                                                         ---------------------------
                                                                                             2001          2000
                                                                                         ------------   ------------
<CAPTION>
<S>                                                                                     <C>            <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  LOSS BEFORE DISCONTINUED OPERATIONS                                                   $   (368,846)  $ (1,378,396)
                                                                                         ------------   ------------
  Adjustments to reconcile loss to net cash provided by (used in) operating
activities:
                         Depreciation and Amortization                                        26,545         29,039
                         (Gain) on Sale of Fixed Assets                                      (77,577)             0
                         Changes in Operating Assets and Liabilities -
                            Decrease in Restricted Cash & Investments                              0        477,414
                            (Increase) Decrease in Accounts Receivable                       549,798        425,258
                            (Increase) Decrease in Other Assets                             (291,342)        10,142
                            (Increase) Decrease in Prepaid Expenses                         (131,691)       192,495
                            Increase (Decrease) in Accounts Payable and Accrued Expenses   1,110,234       (381,938)
                            Increase in Deferred Revenue                                           0         61,583
                                                                                         ------------   ------------

     CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES BEFORE
        DISCONTINUED OPERATIONS                                                              817,121       (564,403)

     CASH USED IN DISCONTINUED OPERATING ACTIVITIES                                                0       (897,847)
                                                                                         ------------   ------------
     NET CASH PROVIDED BY (USED IN) BY OPERATING ACTIVITIES                                  817,121     (1,462,250)
                                                                                         ------------   ------------

CASH FLOWS FROM INVESTING ACTIVITIES:
    Refundable Deposits on Palm Beach Princess                                            (1,000,000)             0
    Proceeds from Auction of Garden State Park Fixed Assets                                1,258,476              0
    Capital Expenditures                                                                    (313,820)          (259)
    Loans made on Development Projects                                                      (739,894)             0
    Decrease in Other Investment Activity                                                     13,551        353,336
                                                                                         ------------   ------------
     CASH (USED IN) PROVIDED BY INVESTING ACTIVITIES
       BEFORE DISCONTINUED INVESTING ACTIVITIES                                             (781,687)       353,077
     CASH PROVIDED BY DISCONTINUED INVESTING ACTIVITIES                                            0     20,000,000
                                                                                         ------------   ------------
     NET CASH (USED IN) PROVIDED BY INVESTING ACTIVITIES                                    (781,687)    20,353,077
                                                                                         ------------   ------------

CASH FLOWS FROM FINANCING ACTIVITIES:
    Proceeds from Short-Term Loans                                                                 0        150,000
    Principal Payments on Short Term Notes                                                   (76,383)   (18,462,401)
    Decrease in Balances Due to/From Discontinued Subsidiaries                                (6,548)    18,353,207
                                                                                         ------------   ------------
     CASH (USED IN) FINANCING ACTIVITIES
       BEFORE DISCONTINUED FINANCING ACTIVITIES                                              (82,931)        40,806
     CASH (USED IN) DISCONTINUED FINANCING ACTIVITIES                                              0    (19,086,321)
                                                                                         ------------   ------------
     NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES                                     (82,931)   (19,045,515)
                                                                                         ------------   ------------

NET DECREASE IN CASH AND CASH EQUIVALENTS                                                    (47,497)      (154,688)
          LESS CASH AND CASH EQUIVALENTS AT END OF THE PERIOD
            FROM DISCONTINUED OPERATIONS                                                     (19,007)       (15,832)
     CASH AND CASH EQUIVALENTS AT BEGINNING OF THE PERIOD
       BEFORE DISCONTINUED OPERATIONS                                                      1,361,287        271,119
                                                                                         ------------   ------------

     CASH AND CASH EQUIVALENTS AT END OF THE PERIOD                                     $  1,294,783   $    100,599
                                                                                         ============   ============

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

Supplemental Schedule of Non-Cash Investing and Financing Activities:
During the six months ended December 31, 2001, a non-cash  transaction reduced a
long-term note payble and a long-term note receivable by $350,000.

See Notes to Consolidated Financial Statements.

                                        5

<PAGE>


                    INTERNATIONAL THOROUGHBRED BREEDERS, INC.
                                AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

(1)  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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

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

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

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


     (E) Net Assets of Discontinued  Operations - At June 30, 2001 the remaining
net assets  and  liabilities  of Garden  State Park and  Freehold  Raceway  were
classified as "Net Assets of  Discontinued  Operations" and at December 31, 2001
were classified as "Net Liabilities of Discontinued Operations."

     (F) Revenue Recognition - We recognize the revenues and expenses associated
with the  casino  operation  on the Palm  Beach  Princess  as they are earned or
incurred.

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

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

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

     (J) Net Loss per Common Share - Income  (Loss) per common share is computed
by dividing  net loss by the weighted  average  number of shares of common stock
outstanding.  Options and warrants to purchase  5,740,500 shares of Common Stock
at various prices per share, for the each of the periods

                                       6
<PAGE>



                    INTERNATIONAL THOROUGHBRED BREEDERS, INC.
                                AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)



presented  were not  included in the  computation  of diluted  loss per share as
their effect would be anti- dilutive.

(2)  NOTES RECEIVABLE

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

     A portion of the proceeds  from the sale on November 30, 2000 of our Garden
State Park property in Cherry Hill, New Jersey, to Realen-Turnberry/Cherry Hill,
LLC ("Realen")  was paid in the form of a promissory  note in the face amount of
$10 million (the  "Note.")  Under the Note,  the interest  rate will be adjusted
from time to time since the interest  actually  payable will be dependent  upon,
and payable solely out of, the buyer's net cash flow available for  distribution
to its equity owners ("Distributable  Cash"). After the buyer's equity investors
have received aggregate  distributions equal to their capital contributions plus
an agreed  upon  return  on their  invested  capital,  the next $10  million  of
Distributable Cash will be paid to us. We will thereafter receive payments under
the Note equal to 33 1/3% of all  Distributable  Cash until the  maturity  date,
which occurs on the 15th anniversary of the issuance of the Note. We may convert
the  promissory  note, at our option,  into a 33 1/3% equity  interest in Realen
during the six month period prior to the 15th anniversary of the issuance of the
Note. If not then  converted,  the Note will be payable at maturity on said 15th
anniversary  in an  amount  equal to (i) the  difference,  if any,  between  $10
million and total payments previously made to us under the Note and (ii) 33 1/3%
of any excess of the fair market  value of  Realen's  assets over the sum of its
liabilities  (other than the Note) and any unreturned  equity  investment of its
owners. In addition,  we sold two large bronze sculptures  located on the Garden
State Park property to Realen.(See  Note 4-A) At December 31, 2001,  $350,000 is
classified in long-term deposits and other assets on the balance sheet.

(3)  DISCONTINUED OPERATIONS

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

                                       7
<PAGE>


                    INTERNATIONAL THOROUGHBRED BREEDERS, INC.
                                AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)


     The net assets of the operations  disposed of included in the  accompanying
consolidated balance sheets as of December 31, 2001 and June 30, 2001 consist of
the following:
<TABLE>

                                                        December 31,      June 30,
                                                            2001            2001
                                                       ------------     ------------
<CAPTION>
<S>                                                    <C>             <C>
Classified As:

Current Assets                                         $    431,645    $  1,542,100

Current Liabilities                                        (471,251)       (534,702)
                                                         ----------     ------------
  Net Assets of Discontinued Operations -Current                -0-       1,007,398

  Net Liabilities of Discontinued Operations -Current        39,606             -0-

  Note Receivable of Discontinued Operations -Long-Term  10,000,000      10,000,000
                                                         ----------     ------------
    Net Assets of Discontinued Operations              $  9,960,394    $ 11,007,398
                                                         ==========     ============
</TABLE>

(4)  NOTES AND MORTGAGES PAYABLE

         Notes and Mortgages Payable are summarized below:
<TABLE>

                                                            December 31, 2001                          June 30, 2001
                                                  -------------------------------------      ---------------------------------
                                      Interest
                                        % Per                                 Long-                                 Long-
                                        Annum             Current              Term             Current              Term
                                     -----------      ----------------     ------------      --------------     --------------
<CAPTION>
<S>                                      <C>        <C>                 <C>                <C>                <C>
International Thoroughbred
Breeders Inc.:

Robert E. Brennan Jr. (A)                    15%    $          132,000  $           -0-    $            -0-   $        482,000
Michael J. Quigley, III (B)                  10%             1,000,000                            1,000,000                -0-
Other                                    Various               152,766              -0-                 -0-                -0-

Garden State Park:

Service America Corporation (C)               6%               240,000              -0-             240,000                -0-
                                                      ----------------     ------------      --------------     --------------
    Totals                                          $        1,524,766  $           -0-    $      1,240,000   $        482,000

Less:
Net Liabilities of Discontinued
  Operations - Current                                        (240,000)             -0-            (240,000)               -0-
                                                      ----------------     ------------      --------------     --------------
    Totals                                          $        1,284,766  $           -0-    $      1,000,000   $        482,000
                                                      ================     ============      ==============     ==============
</TABLE>

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

                                       8
<PAGE>


                    INTERNATIONAL THOROUGHBRED BREEDERS, INC.
                                AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)


sculptures to Realen-Turnberry/Cherry Hill, LLC.

     (B) On January 26, 2001,  we borrowed  $1,000,000  from Michael J. Quigley,
III at an annual interest rate of 10%. On May 14, 2001, the loan was modified to
be due on demand.  Principal  and interest on the note was due on or about April
25,  2001.  As  collateral  for the loan,  we pledged  the $33  million in notes
receivable from the sale of the El Rancho and Garden State Park properties.

     (C) In  connection  with the January 28,  1999 lease  transactions  for the
Garden State Park facility,  we purchased equipment located at Garden State Park
and a liquor  license  owned by an  unaffiliated  third party,  Service  America
Corporation (the "Holder"),  for $500,000 financed by a five (5) year promissory
note at a 6% interest  rate.  We have paid  $260,000 as of December 31, 2001 and
yearly  principal  payments of $80,000  plus  interest are due on December 28 of
each year until December 28, 2003 when all outstanding principal will be due. We
have not made a scheduled  principal  payment of $80,000  plus  interest  due on
December 28, 2001.  As of February 14, 2002,  the Holder has not given notice in
order to  accelerate  the  debt,  but  could do so and take  enforcement  action
against us at any time.

(5)  COMMITMENTS AND CONTINGENCIES

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

     On January 26, 2001, we borrowed $1,000,000 from Michael J. Quigley, III, a
related party, at an annual interest rate of 10%.  Principal and interest on the
note was due on April 25, 2001,  however, on May 14, 2001, the loan was modified
to be due on demand.  As collateral  for the loan, we pledged the $33 million in
notes  receivable  from  the  sale  of the  El  Rancho  and  Garden  State  Park
properties.

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

     Commencing in the third quarter of Fiscal 1999,  the Company and certain of
its officers and directors and former officers and directors  received subpoenas
from the  Securities  and Exchange  Commission  (the "SEC")  relating to certain
transactions and reports. We have fully cooperated with the SEC's investigation.
We were advised by the staff of the SEC that they intend to  recommend  that the
SEC bring actions against the Company and certain  current and former  officers.
The Company and certain  current and former  officers  have reached an agreement
with the staff without admitting or denying the allegations, subject to approval
by the SEC of which there can be no assurances, which would settle this matter.

     We are responsible for remediation  costs  associated with an environmental
site on the Freehold  Raceway  property.  We have accrued what it believes to be
the total cost of  remediation.  At December 31, 2001, the remaining  balance of
such  accrual was  $270,000  for  remediation  costs.  These  accrued  costs are
expected to be incurred during the next approximate twenty months.


                                       9
<PAGE>
                    INTERNATIONAL THOROUGHBRED BREEDERS, INC.
                                AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)


     In connection with the January 28, 1999 lease  transactions  for the Garden
State Park  facility,  we purchased a liquor  license  owned by an  unaffiliated
third party,  Service America  Corporation,  for $500,000 financed by a five (5)
year  promissory  note at a 6% interest  rate. At December 31, 2001,  the unpaid
principal  balance was  $240,000.  Yearly  principal  payments  of $80,000  plus
interest  are due on December 28 of each year until  December  28, 2003 when all
outstanding  principal  will be due.  We have  not  made a  scheduled  principal
payment of $80,000 plus  interest  due on December 28, 2001.  As of February 14,
2002, the Holder has not given notice in order to accelerate the debt, but could
do so and take enforcement action against us at any time. The liquor license was
transferred to the lessee in  consideration  of a $100,000  payment to us. Since
the lessee was not  awarded a license to own and  operate an  off-track  betting
facility prior to January 28, 2002 as required by the sales contract, the lessee
may be required by us to transfer the liquor license back to us in consideration
of our repayment of such $100,000 to the lessee.

     The Chapter 11 Trustee (the "Trustee") for the bankruptcy  estate of Robert
E.  Brennan  has  asserted   certain   claims   challenging   the  ownership  of
approximately  2,300,000  shares of our  Common  Stock  (the  "Shares")  held by
certain  individuals.  In order to preserve our net operating loss carryforwards
which otherwise may be lost due to the Shares being transferred, we have entered
into an agreement with the Trustee  whereby we will pay the Trustee a minimum of
$.50 per share or a maximum of $1 per share for the  Trustee's  release of claim
to the Shares in the event that the Trustee is awarded a judgement  granting him
an ownership  interest in the Shares and executes on such  judgement.  The price
per share is based upon the average  trading price per share during the previous
thirty day period prior to the Trustee  being awarded the judgement but will not
be less than the  agreed  upon $.50 per share or more than $1 per  share.  It is
expected  that this  agreement  with the  Trustee  will be  replaced  by another
agreement,  in connection with the settlement  being negotiated with the Trustee
involving the purchase by our subsidiary of the Ship Mortgage  Obligation on the
vessel M/V Palm Beach  Princess,  pursuant to which we would  purchase  from the
Trustee,  on or about July 1,  2002,  approximately  2,235,000  shares of common
stock at a purchase  price of $0.50 per share and  acquire an option to purchase
up to 2,315,731 additional shares of our common stock at $0.50 per share.

     Effective  April 30,  2001,  we entered  into a bareboat  charter  with MJQ
Corporation, pursuant to which we charter the vessel M/V Palm Beach Princess for
the purpose of operating a casino cruise business out of the Port of Palm Beach,
Florida.  Under the bareboat charter agreement,  we are obligated to pay $50,000
per month as the charter hire fee to the vessel's  owner,  MJQ  Corporation.  In
order to obtain the  bareboat  charter,  we have entered into a letter of intent
with the Chapter 11 Trustee of the  Bankruptcy  Estate of Robert E. Brennan (the
"Brennan  Bankruptcy  Trustee"),  MJQ Corporation and others which  contemplates
that,  subject  to the  negotiation,  execution  and  delivery  of  satisfactory
definitive agreements, we would purchase from the Brennan Bankruptcy Trustee the
promissory note of MJQ  Corporation,  having a balance of principal and interest
outstanding of  approximately  $14.8 million as of December 31, 2001 and secured
by a ship  mortgage  against  the M/V Palm Beach  Princess  (the "Ship  Mortgage
Obligation"),  for a purchase price of $13.75 million. Such purchase price would
be payable in consecutive monthly  installments of $250,000 through a date to be
negotiated,  but expected to be no earlier  than July 31,  2002,  with a balloon
payment due at that time. If the date for the final balloon  payment is July 31,
2002,  the  amount  of such  payment  at  that  time  would  be  $10.5  million.
Accordingly,  we expect  that we will need to generate  $300,000  per month from
operation  of the vessel to pay the  monthly  bareboat  charter  fee and monthly
installments to the Brennan Bankruptcy Trustee of the purchase price of the Ship
Mortgage  Obligation,  at least until July 31, 2002, and expect to have the need
for  approximately $10 million in financing in order to make the balloon payment
of the purchase  price of the Ship Mortgage  Obligation due

                                       10
<PAGE>

                    INTERNATIONAL THOROUGHBRED BREEDERS, INC.
                                AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)


as early as July 31,  2002.  We plan to seek  refinancing  of the  vessel at the
earliest  possible time in order to finance such balloon  payment.  From time to
time we have been  delinquent in our monthly  payment of $250,000 due at the end
of each month.  At January 1, 2002, two monthly  payments were  delinquent for a
total of $500,000.  The payment of $500,000  was made on January 28,  2002.  The
payment due January 31, 2002 has not been made as of February 19, 2002.

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  material  adverse  effect on our financial  position,  results of
operations, or cash flows.

(6)  FAIR VALUE OF FINANCIAL INSTRUMENTS

     As of  December  31,  2001,  in  assessing  the  fair  value  of  financial
instruments, we have used a variety of methods and assumptions, which were based
on  estimates of market  conditions  and loan risks  existing at that time.  For
certain  instruments,  including cash and cash  equivalents,  investments,  non-
trade accounts  receivable and loans, and short-term debt, it was estimated that
the  carrying  amount   approximated  fair  value  for  the  majority  of  these
instruments because of their short-term  maturity.  The carrying amounts of long
term debt  approximate fair value since our interest rates  approximate  current
interest rates that would be available to us in the market place.

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

(7)  STOCK OPTIONS AND WARRANTS

     (A)  EMPLOYEE AND NON-EMPLOYEE OPTIONS

     At December 31, 2001, total employee options outstanding were 3,136,500 and
total  non-employee   options   outstanding  were  300,000.   All  employee  and
non-employee options were exercisable at December 31, 2001.

     (B)  WARRANTS

     At December  31, 2001,  total  warrants  outstanding  were  2,604,000.  All
warrants were exercisable at December 31, 2001.

(8)  RELATED PARTY TRANSACTIONS

     During the third  quarter of Fiscal  2001,  we invested in two  projects in
which our Chairman,  President and Chief Executive  Officer,  Francis W. Murray,
also has a pecuniary  interest.  In connection  with one such  project,  we have
agreed to advance,  as a loan, up to $1.5 million,  the proceeds of which are to
be used to pay costs and expenses for  development  of a golf course in Southern
California. A limited partnership,  the general partner of which is owned by Mr.
Murray,  has  acquired  an option to  purchase  certain  real estate in Southern
California  on which it  intends to  construct  a golf  club.  The  project is a
long-

11
<PAGE>


                    INTERNATIONAL THOROUGHBRED BREEDERS, INC.
                                AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)



term one,  requiring  environmental,  engineering and other studies,  regulatory
approvals,  other governmental  entitlements and substantial additional funding.
Loans by us to the limited  partnership  will bear interest at an annual rate of
12%, and we will have the right to convert our loans into a 50% equity  interest
in the  limited  partnership  (which  percentage  interest  would be  reduced if
additional  investments  by others  are made in the  limited  partnership).  Mr.
Murray's  equity  interest in the limited  partnership,  indirectly  through his
ownership  of the  general  partner,  presently  is 80%,  and  will  be  reduced
proportionally  if we  exercises  our right to convert  our loans  into  equity.
During  the three and six  months  ended  December  31, we loaned an  additional
$2,747 and  $21,343,  respectively,  on this  project.  At  December  31,  2001,
approximately  $714,900 has been loaned to such project.  Additional loans by us
may be required in the future in order to maintain our rights.

     In the second project, Mr. Murray is participating in the development of an
oceanfront  parcel  of land,  located  in Fort  Lauderdale,  Florida,  which has
received  all  governmental  entitlements  from the City of Fort  Lauderdale  to
develop a 14-story  building to include a 5-story parking garage,  approximately
6,000 square feet of  commercial  space and a  residential  9-story  tower.  The
property owner,  MJQ Development  which is owned by Michael J. Quigley,  III, is
developing a condominium hotel resort. Mr. Quigley has no relationship to Robert
J. Quigley, one of our directors and former president.  During the three and six
months ended  December 31, 2001, we loaned an additional  $308,652 and $718,551,
respectively  and we have accrued interest in the amount of $93,238 and $228,179
for the three and six months  ended  December 31,  2001,  respectively,  on this
project.  At December 31, 2001, we have lent  $2,709,150 to the property  owner.
These  loans will bear  interest at 12% and will be  repayable  out of the first
proceeds,   after  payment  of  bank  debts,   generated  by  the  sale  of  the
condominiums. We will have the right to convert our loan into an equity interest
(subject to receiving certain third party approvals),  which would entitle us to
receive a priority  return of our  investment  and a priority  profits  interest
equal to three times our  investment.  Repayment  of these loans (and receipt of
any return if we convert our loans to equity) will be subject to  repayment  of,
first,  bank webt of approximately  $3.8 million incurred in the purchase of the
real property and, second,  construction  financing expected to amount to $25 to
$30  million.  If the  project is  successful,  Mr.  Murray  stands to receive a
contingent  benefit,  which  could  be  substantial,  from  the  owner  for  his
participation  in the  project,  but only after the  Company  and the owner have
received priority returns of their investment and priority shares of profits.

     On January 26, 2001, we borrowed $1,000,000 from Michael J. Quigley, III at
an annual interest rate of 10%. On May 14, 2001, the loan was modified to be due
on demand.  Principal  and  interest  on the note was due on or about  April 25,
2001. As collateral for the loan, we pledged the $33 million in notes receivable
from the sale of the El Rancho and Garden State Park properties.

     Effective  April 30,  2001,  we entered  into a bareboat  charter  with MJQ
Corporation,  pursuant  to which we are  chartering  the  vessel  M/V Palm Beach
Princess for the purpose of operating an  entertainment  casino cruise  business
from the Port of Palm Beach, Florida.  Michael J. Quigley, III is a principal of
MJQ Corporation.  Francis W. Murray, our Chairman, President and Chief Executive
Officer, is an officer and director of MJQ Corporation,  and his son, Francis X.
Murray,  is President  and a director of MJQ  Corporation  and  President of our
subsidiary,  Palm Beach  Princess,  Inc.,  which operates the vessel.  Under the
charter agreement, we are obligated to pay $50,000 per month as the charter hire
fee to MJQ  Corporation.  All costs of  operating  the  vessel  incurred  by MJQ
Corporation on our behalf are to be reimbursed by us to MJQ  Corporation.  As of
December 31, 2001 we owed MJQ  Corporation  $1,650,688 for such  expenses.  Such
amounts are  classified as current  accounts  payable on our balance  sheet.  In

                                       12

                    INTERNATIONAL THOROUGHBRED BREEDERS, INC.
                                AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)


addition, in order to obtain the bareboat charter, we have entered into a letter
of intent  with the  Chapter 11 Trustee  of the  Bankruptcy  Estate of Robert E.
Brennan (the  "Trustee"),  MJQ Corporation and others which  contemplates  that,
subject to the  negotiation,  execution and delivery of satisfactory  definitive
agreements,  we would  purchase  from the  Trustee  the  promissory  note of MJQ
Corporation,   having  a  balance  of  principal  and  interest  outstanding  of
approximately  $14.8  million  as of  December  31,  2001 and  secured by a ship
mortgage   against  the  Palm  Beach   Princess   vessel  (the  "Ship   Mortgage
Obligation"),  for a purchase price of $13.75 million. Pursuant to the letter of
intent  (which  is  subject  to  change  during  negotiation  of the  definitive
agreements),  such  purchase  price would be payable in 12  consecutive  monthly
installments of $250,000, a 13th payment of $10.5 million on April 30, 2002, and
a final  payment of $250,000 on July 1, 2002.  Pursuant to the letter of intent,
MJQ Corporation and its officers and directors  (including Francis W. Murray and
his son) would  exchange  mutual  releases  with the Trustee  and others  having
claims to the Ship Mortgage Obligation.

     For  additional   information  regarding  related  party  transactions  see
Footnote  5 of this  Form 10-Q and  Footnote  14 in the  consolidated  financial
statements included in our Form 10-K for the fiscal year ended June 30, 2001.

(9)  SUBSEQUENT EVENTS

     (A) On January 28, 2002,  $906,455 of funds classified on the balance sheet
as other current assets and previously held in escrow as a result of the sale of
Freehold Racetrack and the lease of the Garden State Property,  were released to
us.  $500,000 of these funds were used for payments  that were to have been made
pursuant to a letter of intent with the Brennan bankruptcy Trustee on account of
our purchase of the Ship Mortgage  Obligation.  The balance of $406,455 was used
for working capital.

     (B) We are  considering a possible  acquisition of gaming related  business
opportunities  in South  America.  While we explore each  business  opportunity,
including  performance of due diligence,  and pending  negotiation of definitive
agreements,  we have lent  $45,000  to persons  and  entities  having  rights to
certain of these  gaming  opportunities.  We are in the  process of  negotiating
terms of participation in these business  opportunities  and expect the loans to
be  repaid  in  the  event  definitive   agreements  are  not  reached  for  our
participation or if we determine not to proceed.  If successful,  the businesses
in South America would involve a significant investment,  expected to be between
$6  million  to $8  million,  and  would  entail  substantial  risks  (including
political  risks).  The  Board  of  Directors  has  authorized  us to lend up to
$500,000 in gaming related  business  opportunities  in South  America,  pending
completion  of  due  diligence  and  conclusion  of  definitive  agreements.  As
indicated,  significantly  greater amounts of investment will be required should
we proceed  with  these  projects.  There can be no  assurance  that  definitive
agreements will be concluded or that we would be able to obtain  necessary funds
to proceed,  and there is no assurance that we will be able to recover our loans
should it not proceed.


                                       13

<PAGE>


                    INTERNATIONAL THOROUGHBRED BREEDERS, INC.
                                AND SUBSIDIARIES

                  MANAGEMENT'S ANALYSIS OF FINANCIAL CONDITIONS
             AND RESULTS OF OPERATIONS FOR THE THREE AND SIX MONTHS
                             ENDED DECEMBER 31, 2001


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

Forward-Looking Statements

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

     termination  of the  bareboat  charter  under  which we operate  our gaming
     business;
     general economic and business conditions  affecting the tourism business in
     Florida;
     competition;
     execution of our new business strategy;
     changes in laws regulating the gaming industry;
     fluctuations  in  quarterly  operating  results as a result of seasonal and
     weather  considerations;  and events directly or indirectly relating to our
     business causing our stock price to be volatile.


Liquidity and Capital Resources

     Cash flow and liquidity during the six month period ended December 31, 2001
were influenced by receipt of approximately $1.2 million from the auction of all
of the  personal  property  (including  equipment,  furniture,  furnishings  and
artwork) that we owned at Garden State Park,  and receipt of $906,455  which had
been held in  escrow  from the 1999 sale of  Freehold  Raceway  and the lease of
Garden State Park.  Such cash flow was used,  in part,  to fund  portions of the
payments on account of the purchase price of the ship mortgage  against the Palm
Beach Princess,  described below, to make loans of an additional $739,900 to the
Southern  California  golf  course  and Fort  Lauderdale,  Florida  real  estate
development  projects during the six months ended December 31, 2001 as described
in Note 8 - Related Party Transactions,  and to explore other potential business
opportunities.  We are  exploring  business  opportunities  in South America and
expect  to  continue  to  incur  expenses  for  exploring   potential   business
opportunities in the future (see Note 9 - Subsequent Events).

     The sources of cash described above were of a non-recurring  nature. We are
currently  dependent  upon the  operations  of the Palm Beach  Princess  vessel,
described below, for substantially all of our cash flow

     Effective  April 30,  2001,  we entered  into a bareboat  charter  with MJQ
Corporation, pursuant to which we charter the vessel M/V Palm Beach Princess for
the purpose of operating a casino cruise business out of the Port of Palm Beach,
Florida.  Under the bareboat charter agreement,  we are obligated to pay $50,000
per month as the charter hire fee to the vessel's  owner,  MJQ  Corporation.  In
order to obtain the  bareboat  charter,  we have entered into a letter of intent
with the Chapter 11 Trustee of the  Bankruptcy  Estate of Robert E. Brennan (the
"Brennan  Bankruptcy  Trustee"),  MJQ Corporation and others which  contemplates
that,  subject  to the  negotiation,  execution  and  delivery  of  satisfactory
definitive agreements,

                                       14

<PAGE>


                    INTERNATIONAL THOROUGHBRED BREEDERS, INC.
                                AND SUBSIDIARIES

                  MANAGEMENT'S ANALYSIS OF FINANCIAL CONDITIONS
             AND RESULTS OF OPERATIONS FOR THE THREE AND SIX MONTHS
                             ENDED DECEMBER 31, 2001


we would purchase from the Brennan Bankruptcy Trustee the promissory note of MJQ
Corporation,   having  a  balance  of  principal  and  interest  outstanding  of
approximately  $14.8  million  as of  December  31,  2001 and  secured by a ship
mortgage  against the M/V Palm Beach Princess (the "Ship Mortgage  Obligation"),
for a purchase price of $13.75 million.  Such purchase price would be payable in
consecutive  monthly  installments of $250,000  through a date to be negotiated,
but expected to be no earlier than July 31, 2002,  with a balloon payment due at
that  time.  If the date for the final  balloon  payment is July 31,  2002,  the
amount of such  payment at that time  would be $10.5  million.  Accordingly,  we
expect that we will need to generate  $300,000  per month from  operation of the
vessel to pay the monthly bareboat  charter fee and monthly  installments to the
Brennan   Bankruptcy  Trustee  of  the  purchase  price  of  the  Ship  Mortgage
Obligation,  at least  until  July 31,  2002,  and  expect  to have the need for
approximately  $10 million in financing in order to make the balloon  payment of
the  purchase  price of the Ship  Mortgage  Obligation  due as early as July 31,
2002. We are in the process of seeking financing for the vessel in order to make
such balloon payment.

     We currently  estimate that  approximately  $200,000 per month is needed to
cover overhead expenses of International Thoroughbred Breeders. In addition, the
cash  flow  from  operations  of the  vessel  is  seasonal  and we may  generate
sufficient funds in some months and not in others.

     Substantially  all of our revenues are currently derived from our operation
of the M/V Palm Beach Princess.  Certain of our operating  costs,  including the
charter fee payable to the vessel's owner,  fuel costs and wages,  are fixed and
cannot be reduced  when  passenger  loads  decrease or when rising fuel or labor
costs cannot be fully passed through to customers. Passenger and gaming revenues
earned from the vessel must be high enough to cover such  expenses.  We have not
generated  sufficient  revenues  from the M/V  Palm  Beach  Princess  to pay our
expenses  (including  the charter fee) and to timely make the $250,000 per month
payments to the Brennan  Bankruptcy Trustee on account of the purchase price for
the Ship Mortgage  Obligation during the three and six months ended December 31,
2001.  However,  we were able to make all the $250,000 payments due December 31,
2001 (the  payment for  January  31,  2002 has not been made as of February  19,
2002) with funding from the parent company and by extending trade payables.

     The period July 1st to December  31st is a  seasonably  slow period for the
vessel operation.  The period from January 1st to June 30th has been a period of
increased  activity and profits for the vessel.  Although we believe we can meet
all our  obligations  during the next six months,  there is no guarantee that we
will be able to continue to make all the required  payments,  or that we will be
able to finance the balloon payment expected to be due to the Brennan Bankruptcy
Trustee  and the  failure  to do so in the  future  could  materially  harm  our
revenues and cause us to lose our only operating asset.

     On July 18, 2001, we sold our condominium unit and an ownership interest in
the Ocala Jockey Club that was located in Reddick,  Florida. The sales price was
$94,000 and the proceeds after closing fees and other  expenses were $81,645.  A
gain of $77,577 was recognized during the first quarter of Fiscal 2002.

     Other possible sources of cash include the two promissory notes we received
when we sold our Garden  State Park real  property in November  2000 and our Las
Vegas real  property  in May,  2000.  One such Note is in the face amount of $10
million,  issued by  Realen-Turnberry/Cherry  Hill,  LLC,  the  purchaser of the
Cherry Hill property (the "$10 Million Note"),  and the other promissory note is
in the face amount of $23 million, issued by Turnberry/Las Vegas Boulevard, LLC,
purchaser of our Las Vegas real  property (the "$23 Million  Note").  Under both
Notes, interest and principal payments will be

                                       15

<PAGE>


                    INTERNATIONAL THOROUGHBRED BREEDERS, INC.
                                AND SUBSIDIARIES

                  MANAGEMENT'S ANALYSIS OF FINANCIAL CONDITIONS
             AND RESULTS OF OPERATIONS FOR THE THREE AND SIX MONTHS
                             ENDED DECEMBER 31, 2001


dependent upon, and payable solely out of, the obligor's net cash flow available
for distribution to its equity owners. After the obligor's equity investors have
received aggregate  distributions  equal to their capital  contributions plus an
agreed  upon  return  on  their  invested  capital,  the  next  $10  million  of
distributable cash in the case of the $10 Million Note, and the next $23 million
of  distributable  cash in the case of the $23 Million Note, will be paid to us,
and following our receipt of the face amount of the Note we will receive 33 1/3%
of all  distributable  cash of the  obligor  until  maturity  of the  Note.  The
probable  timing and amounts of payments  under these Notes cannot be predicted.
If we need additional working capital,  we may attempt to borrow on these Notes,
but such  borrowing  is expected to be difficult to obtain as long as the timing
and amounts of payments  under the Notes  remain  unpredictable.  An  additional
source of cash could be the net proceeds  from the sale of the Garden Start Park
liquor license that is available to us. (See Note 4)

     In conjunction  with the settlement  agreement  being  negotiated  with the
Brennan  Bankruptcy  Trustee,  we expect to commit to purchase  from the Brennan
Bankruptcy Trustee approximately 2,235,000 shares of common stock in the Company
at a purchase price of $0.50 per share, for an aggregate purchase price expected
to be approximately $1,117,500. We believe that such stock purchase is desirable
in order to prevent the Brennan  Bankruptcy  Trustee  from  selling  such shares
since the sale could adversely affect our tax loss  carryforward.  The letter of
intent between us and the Brennan Bankruptcy Trustee  contemplates that we would
be obligated to consummate  such purchase on July 1, 2002. Such letter of intent
also provides for us to pledge payments due or to become due to us under the $10
Million Note as collateral security for our obligation to pay the purchase price
of those  shares of common  stock.  We hope to be able to fund such  purchase by
borrowing  against either the $10 Million and or the $23 Million  Notes,  but no
assurance  can be given that we will be able to borrow  against  either of these
Notes.

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

Discussion of Statement of Cash Flows for the Six Months Ended December 31,2001.

     Cash flows  provided by  operating  activities  were  $817,121  for the six
months  ended  December  31,  2001 as  compared  to cash  (used)  for  operating
activities in the amount of ($1,462,250)  for the same period last year.  During
the six months ended  December  31, 2001 we suffered a net (loss) of  ($368,846)
however an increase in accounts payable and accrued expenses of $1,110,234 and a
decrease in accounts receivable of $549,798 offset by other adjustments produced
cash flows from  operations  for the current  period.  The  increase in accounts
payable and accrued  expenses  from July 1, 2001 to December 31, 2001 was due in
part because we began operating the Palm Beach Princess on April 30, 2001 and as
of June 30, 2001 had only  operated for two months in addition to our  extending
the trade  payables  during  the six month  period  due to a slow  period in the
operating cycle.  The decrease in accounts  receivable was caused in part by the
collection of $314,745 due to us from the corporate  artwork and other  personal
property included in the June 2001 auction of assets. The proceeds were used for
working capital purposes.

                                       16

<PAGE>


                    INTERNATIONAL THOROUGHBRED BREEDERS, INC.
                                AND SUBSIDIARIES

                  MANAGEMENT'S ANALYSIS OF FINANCIAL CONDITIONS
             AND RESULTS OF OPERATIONS FOR THE THREE AND SIX MONTHS
                             ENDED DECEMBER 31, 2001


     Our working capital as of December 31, 2001 was a negative  ($1,319,112) as
compared  to a  positive  working  capital of  $559,356  at June 30,  2001.  The
negative  change in working  capital during the past six months of  ($1,878,468)
was caused by the (loss) in  operations of  ($368,846),  an increase in accounts
payable  and  accrued  expenses  of  $1,110,234,  and  a  decrease  in  accounts
receivable   of   $549,798   during   the  most   recent   six  months  and  the
re-classification of debt in the amount of $132,000 and additional net borrowing
of approximately $154,000.

     Cash used in investing  activities was $781,687 during the six months ended
December 31, 2001. In June 2001, we held an auction at which all of the personal
property,  including  equipment,  furniture,  furnishings  and art work, that we
owned at Garden  State  Park was sold for  approximately  $1.2  million in cash,
which was  received  during  the past six months  and used for  working  capital
purposes  and to make  additional  loans  (which as of December 31, 2001 totaled
$2,709,150)  for  the  Ft.  Lauderdale  project.  (See  Note 8 -  Related  Party
Transactions.)  Additionally,  cash was used for the refundable deposits made on
the Palm Beach  Princess Ship Mortgage  Obligation in the amount of  $1,000,000,
the  additional  loans of $726,343 by us on  development  projects,  and capital
expenditures  of $313,820  which were primarily  associated  with the Palm Beach
Princess operations during the six months ended December 31, 2001.

     Cash used in financing  activities  was $82,931 during the six months ended
December 31, 2001, primarily consisting of payments on short term notes.

Results of Operations for the Three Months Ended December 31, 2001 and 2000

     Revenue for the three months ended December 31, 2001  increased  $4,985,234
from $75,125 in Fiscal 2001 to $5,060,359  in Fiscal 2002  primarily as a result
of revenues generated by the Palm Beach Princess operations.  Expenses increased
$4,903,860  from $983,768 in the three month period in Fiscal 2001 to $5,887,628
primarily  the result of operating  expenses of $4,971,698  associated  with the
Palm Beach  Princess  during the second  quarter  of Fiscal  2002.  General  and
Administrative  expenses for the parent increased $129,456 primarily as a result
of increased compensation costs.

     Effective  April 30, 2001, we chartered the vessel M/V Palm Beach  Princess
for the purpose of operating an entertainment  and casino cruise business out of
the Port of Palm  Beach,  Florida.  During  the second  quarter of Fiscal  2002,
passenger count was 45,609,  total revenue from the vessel was $4,957,317  which
included casino revenue of $4,035,401,  passenger fares of $574,542 and on board
revenue  of  $347,374.  Casino  operating  expenses  which also  includes  food,
beverage and  entertainment for the three month period were $1,587,543 or 40% of
casino revenue.  Sales,  marketing and advertising expenses were $669,424 and on
board gift  shop,  catering  and cabin  expenses  were  $217,660.  Maritime  and
maintenance   costs  to  operate   the  ship  were   $1,478,489.   Finance   and
administrative  expenses were  $1,018,582.  The net loss for the second  quarter
from the operation of the vessel was ($14,380).

     From  October 1, 2001  through  October  5, 2001,  the ship was in dry dock
during  its slow  seasonal  period  for its annual  preventive  maintenance  and
underwent  substantial  repairs.  Our  business  is  also  subject  to  seasonal
fluctuations.  Our peak  seasons  are the winter and spring  seasons  due to the
increased local population as well as increased tourist populations.



                                       17

<PAGE>


                    INTERNATIONAL THOROUGHBRED BREEDERS, INC.
                                AND SUBSIDIARIES

                  MANAGEMENT'S ANALYSIS OF FINANCIAL CONDITIONS
             AND RESULTS OF OPERATIONS FOR THE THREE AND SIX MONTHS
                             ENDED DECEMBER 31, 2001


     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.  Out of the 171  scheduled  cruises
during the second  quarter,  13 cruises were cancelled for weather or mechanical
difficulties.

     From July 1, 2001 to December 4, 2001 the M/V Palm Beach  Princess  was the
only vessel  operating a coastal gaming business from the Port of Palm Beach and
our  closest  competition  was  approximately  50 miles away in Ft.  Lauderdale,
Florida.  On  December  10,  2001,  following  weather  delays  which  cancelled
scheduled initial cruises, another coastal gaming vessel, the S.S. Horizon Edge,
began  operating  from Riviera Beach Marina,  in close  proximity to the Port of
Palm Beach. This vessel is 186 feet and has a passenger  capacity of 500 people.
The M/V Palm Beach Princess is considerably  larger at 421 feet with a passenger
capacity of 850 people.  The Horizon Edge operates on a similar  schedule as the
Palm  Beach  Princess,  that is, two five hour  cruises  per day, 7 days a week,
however, due to its smaller size it must cancel more cruises than the Palm Beach
Princess  for  inclement  weather.  Additionally,  the  Port  of Palm  Beach  is
currently  constructing  a new  terminal and larger port  facilities  which will
enable the port to handle  increased  capacity,  including  possibly  additional
gaming cruise vessels.  There is no assurance that other competing  vessels will
not enter the gaming  business at the existing Port of Palm Beach,  at a new and
larger  port  facility  under  construction  in Palm  Beach or at  another  port
facility  in  the  future.  We are  currently  assessing  the  impact  this  new
competition will have on our financial statements.

     For the second  quarter of Fiscal 2002,  our loss was  ($827,269) or ($.07)
per share on weighted average  outstanding shares of 11,480,272 as compared to a
loss for the comparable period in prior fiscal year of ($908,643) or ($0.10) per
share on weighted average outstanding shares of 8,980,262.

Results of Operations for the Six Months Ended December 31, 2001 and 2000

     Revenue for the six months ended  December 31, 2001  increased  $11,040,480
from $182,341 in Fiscal 2001 to $11,222,821 in Fiscal 2002 primarily as a result
of revenues generated by the Palm Beach Princess operations.  Expenses increased
$10,008,930  from  $1,560,737  in  the  six  month  period  in  Fiscal  2001  to
$11,569,667 primarily the result of operating expenses of $10,014,997 associated
with the Palm Beach Princess during the second half of Fiscal 2002.  General and
Administrative  expenses for the parent increased $127,854 primarily as a result
of increased compensation costs.

     As described  above,  the Palm Beach  Princess  performs  fourteen  cruises
weekly. During the first half of Fiscal 2002, passenger count was 102,778, total
revenue  from the  vessel  was  $10,898,355  which  included  casino  revenue of
$8,808,100,  passenger  fares of  $1,305,343  and on board  revenue of $792,912.
Casino operating  expenses which also includes food,  beverage and entertainment
for the three month  period were  $3,424,169  or 39% of casino  revenue.  Sales,
marketing  and  advertising  expenses  were  $1,398,839  and on board gift shop,
catering and cabin expenses were  $450,729.  Maritime and  maintenance  costs to
operate the ship were  $2,968,095.  Finance  and  administrative  expenses  were
$1,773,164.  Net income  before  taxes from  operation of the vessel for the six
months ended  December 31, 2001 was $883,358.  Out of the 355 scheduled  cruises
during the first half of Fiscal 2002,  17 cruises were  cancelled for weather or
mechanical  difficulties.  The dry dock period as described  above also affected
operations for the six months ended December 31, 2001.

     See Results of Operations  for the Three Months Ended December 31, 2001 and
2000 for information dealing with new competition.

                                       18

<PAGE>


                    INTERNATIONAL THOROUGHBRED BREEDERS, INC.
                                AND SUBSIDIARIES

                  MANAGEMENT'S ANALYSIS OF FINANCIAL CONDITIONS
             AND RESULTS OF OPERATIONS FOR THE THREE AND SIX MONTHS
                             ENDED DECEMBER 31, 2001


     During the first half of Fiscal 2002, our loss was ($368,846) or ($.03) per
share on weighted average outstanding shares of 11,480,270 as compared to a loss
for the comparable  period in prior fiscal year of  ($1,378,396)  or ($0.15) per
share on weighted average  outstanding shares of 8,980,259.  The decrease in net
loss of $1,009,550  was primarily the result of the net income from operation of
the vessel.



                                       19

<PAGE>



                    INTERNATIONAL THOROUGHBRED BREEDERS, INC.
                                AND SUBSIDIARIES

                                     PART II

                                OTHER INFORMATION

Item 6. Exhibits and Reports on Form 8-K

     The  Company  did not file any  reports  on Form  8-K with  respect  to the
quarter ended December 31, 2001.


                                       20

<PAGE>


                    INTERNATIONAL THOROUGHBRED BREEDERS, INC.
                                AND SUBSIDIARIES

                                   SIGNATURES



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





                                     INTERNATIONAL THOROUGHBRED BREEDERS, INC.



February 19, 2002      /s/Francis W. Murray
                       ----------------------------------------------------
                       Francis W. Murray, President, and
                          Chairman of the Board




February 19, 2002      /s/William H. Warner
                       -------------------------------------
                       William H. Warner
                       Secretary/Treasurer
                       (Principal Financial and Accounting Officer)





                                       21

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