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, 2003
                              --------------------------------------------------
                                                   OR

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

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

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


                    International Thoroughbred Breeders, Inc.

--------------------------------------------------------------------------------

             (Exact name of registrant as specified in its charter)

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

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

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

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

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

                      APPLICABLE ONLY TO CORPORATE ISSUERS:

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


           Class                         Outstanding at February 14, 2004
------------------------------           --------------------------------
Common Stock, $ 2.00 par value                   8,252,134 Shares


<PAGE>



                    INTERNATIONAL THOROUGHBRED BREEDERS, INC.

                                    FORM 10-Q

                                QUARTERLY REPORT
                   FOR THE SIX MONTHS ENDED DECEMBER 31, 2003
                                   (Unaudited)

                                TABLE OF CONTENTS

                                                                         PAGE
PART I.           FINANCIAL INFORMATION

   Item 1.  Financial Statements:

            Consolidated Balance Sheets
                   as of December 31, 2003 and June 30, 2003..............1-2

            Consolidated Statements of Operations
                   for the Three Months and Six Months ended
                   December 31, 2003 and 2002 ............................3

            Consolidated Statement of Stockholders' Equity
                   for the Six Months ended December 31, 2003.............4

            Consolidated Statements of Cash Flows
                   for the Six Months ended
                   December 31, 2003 and 2002.............................5

            Notes to Financial Statements.................................6-25

   Item 2.  Management's Discussion and Analysis of
                   Financial Condition and Results of Operations....... ..26-32

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


PART II.          OTHER INFORMATION

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

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





<PAGE>

                    INTERNATIONAL THOROUGHBRED BREEDERS, INC.
                                AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS
                    AS OF DECEMBER 31, 2003 AND JUNE 30, 2003

                                     ASSETS

                                                  December 31,      June 30,
                                                     2003            2003
                                                  (UNAUDITED)
                                                 ------------   --------------
CURRENT ASSETS:
     Cash and Cash Equivalents                 $    3,364,395  $    6,123,641
     Restricted Cash                                  210,000               0
     Accounts Receivable                              270,222         193,689
     Prepaid Expenses                               1,028,397         488,414
     Spare Parts Inventory                          1,054,887       1,078,740
     Other Current Assets                             579,293         390,458
     Net Assets of Discontinued
      Operations - Current                             93,713          98,588
                                                 -------------   -------------
     TOTAL CURRENT ASSETS                           6,600,907       8,373,530
                                                 -------------   -------------


PLANT & EQUIPMENT:
     Leasehold Improvements -
      Port of Palm Beach                              987,774         953,110
     Equipment                                      1,759,362       1,278,175
     Vessel Not Placed in Service -
      Royal Star                                      741,265               0
                                                 -------------   -------------
                                                    3,488,401       2,231,285
     LESS: Accumulated Depreciation
            and Amortization                          575,904         306,494
                                                 -------------   -------------

       TOTAL PLANT EQUIPMENT- NET                   2,912,497       1,924,791
                                                 -------------   -------------



OTHER ASSETS:
     Notes Receivable                              33,000,000      33,000,000
     Morgage Contract Recveivable -
      Related Party                                13,750,000               0
     Deposit on Mortgage Contract
      Receivable                                            0       4,000,000
     Deposits and Other Assets -
      Related Parties                               6,723,870       6,687,266
     Deposits and Other Assets -
      Non-Related Parties                             369,285         535,239
                                                 -------------   -------------
     TOTAL OTHER ASSETS                            53,843,155      44,222,505
                                                 -------------   -------------


TOTAL ASSETS                                   $   63,356,559  $   54,520,826
                                                 =============   =============


See Notes to Consolidated Financial Statements.

                                        1
<PAGE>

                    INTERNATIONAL THOROUGHBRED BREEDERS, INC.
                                AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS
                    AS OF DECEMBER 31, 2003 AND JUNE 30, 2003

                      LIABILITIES AND STOCKHOLDERS' EQUITY

                                                  December 31,      June 30,
                                                     2003             2003
                                                  (UNAUDITED)
                                                 -------------   -------------
CURRENT LIABILITIES:
     Accounts Payable                          $    1,686,970  $    2,264,499
     Accrued Expenses                               2,071,216       2,341,209
     Short-Term Debt                                4,694,905       2,934,330
     Short-Term Debt - Related Parties                183,164         183,164
                                                 -------------   -------------
     TOTAL CURRENT LIABILITIES                      8,636,255       7,723,202
                                                 -------------   -------------

LONG-TERM LIABILITIES:
     Long-Term Debt - Net of Current Portion        6,434,020               0
     Long-Term Debt - Related Parties               1,574,080         985,017
                                                 -------------   -------------
     TOTAL LONG-TERM LIABILITIES                    8,008,100         985,017
                                                 -------------   -------------

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

COMMITMENTS AND CONTINGENCIES                           -               -


STOCKHOLDERS' EQUITY:
     Series A Preferred Stock, $100 Par
      Value, Authorized 500,000 Shares,
      362,489 Issued and Outstanding               36,248,875      36,248,875
     Common Stock, $2 Par Value, Authorized
      25,000,000 Shares, Issued, 11,480,279
      and 11,480,278, respectively and
      Outstanding, 8,252,134 and 8,252,133,
      respectively                                 22,960,557      22,960,555
     Capital in Excess of Par                      20,191,982      20,191,984
     (Deficit) (subsequent to June 30, 1993,
     date of quasi-reorganization)                (39,067,512)    (40,189,608)
                                                 -------------   -------------
                                                   40,333,902      39,211,806
     LESS:
      Treasury Stock, 3,678,146 and 3,228,146
       Shares, respectively, at Cost               (1,839,073)     (1,614,073)
     Deferred Compensation, Net                        (9,166)        (11,666)
                                                 -------------   -------------
     TOTAL STOCKHOLDERS' EQUITY                    38,485,664      37,586,067
                                                 -------------   -------------


TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY     $   63,356,559  $   54,520,826
                                                 =============   =============


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, 2003 AND 2002
                                   (UNAUDITED)

<TABLE>
                                                 Three Months Ended               Six Months Ended
                                                     December 31,                    December 31,
                                            ----------------------------   -------------------------------
                                                2003            2002            2003             2002
                                            ------------   -------------   -------------   ---------------
<CAPTION>
<S>                                       <C>            <C>             <C>             <C>
OPERATING REVENUES:
     Gaming                               $   5,948,208  $    5,802,971  $   12,442,895  $     10,998,707
     Fare                                       626,197         570,538       1,281,568         1,228,687
     On Board                                   425,606         398,680         850,705           852,884
                                            ------------   -------------   -------------   ---------------
       NET OPERATING REVENUES                 7,000,011       6,772,189      14,575,169        13,080,278
                                            ------------   -------------   -------------   ---------------

OPERATING COSTS AND EXPENSES:
     Gaming                                   2,079,088       1,859,085       4,158,704         3,803,778
     Fare                                       852,933         790,594       1,566,687         1,510,782
     On Board                                   231,356         201,787         426,597           397,008
     Maritime & Legal Expenses                1,519,678       1,362,763       3,268,948         2,780,687
     General & Administrative Expenses          809,083       1,091,880       1,719,518         1,848,169
     General & Administrative Expenses -
       Parent                                   385,428         487,139         615,589           973,994
     ITG Vegas Bankruptcy Costs                 110,119               0         368,681                 0
     Development Costs                          133,841          51,211         159,196           142,107
     Depreciation & Amortization                173,186          49,179         309,719           127,899
                                            ------------   -------------   -------------   ---------------
       TOTAL OPERATING COSTS AND EXPENSES     6,294,712       5,893,637      12,593,640        11,584,424
                                            ------------   -------------   -------------   ---------------

OPERATING INCOME                                705,300         878,552       1,981,529         1,495,853
                                            ------------   -------------   -------------   ---------------

OTHER INCOME (EXPENSE):
     Interest and Financing Expenses           (501,271)       (271,834)     (1,001,723)         (588,839)
     Interest Income                             98,780         114,300         170,729           214,048
     Other Income (Expense)                      90,227         (64,017)         19,161           (23,948)
                                            ------------   -------------   -------------   ---------------
       TOTAL OTHER INCOME (EXPENSE)            (312,264)       (221,551)       (811,833)         (398,739)
                                            ------------   -------------   -------------   ---------------


INCOME BEFORE TAX PROVISION                     393,036         657,001       1,169,696         1,097,114
     Less: State Income Tax Expense              30,000          62,000          47,600            89,000
                                            ------------   -------------   -------------   ---------------

NET INCOME                                $     363,036  $      595,001  $    1,122,096  $      1,008,114
                                            ============   =============   =============   ===============


NET INCOME PER COMMON SHARE:
     BASIC                                $        0.05  $         0.06  $         0.14  $           0.09
                                            ============   =============   =============   ===============

     DILUTED                              $        0.04  $         0.06  $         0.11  $           0.09
                                            ============   =============   =============   ===============

WEIGHTED AVERAGE COMMON
   SHARES OUTSTANDING - Basic                 7,849,227      10,527,710       8,063,818        11,164,480
                                            ============   =============   =============   ===============

WEIGHTED AVERAGE COMMON
   SHARES OUTSTANDING - Diluted               9,949,537      10,527,710      10,008,039        11,164,480
                                            ============   =============   =============   ===============
</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, 2003

<TABLE>
                                                            Preferred                    Common
                                                     ------------------------  ---------------------------
                                                     Number of                  Number of
                                                      Shares        Amount       Shares          Amount
                                                     ---------     ----------  ------------    -----------
<CAPTION>
<S>            <C> <C>                                <C>        <C>            <C>          <C>
BALANCE - JUNE 30, 2003                               362,489    $ 36,248,875   11,480,278   $ 22,960,555

   Shares Issued for Fractional Exchanges With
     Respect to the One-for-twenty Reverse Stock
     Split effected on March 13, 1992                  ---            ---                1              2
   Purchase of Shares for Treasury in connection
     with REB Trustee                                  ---            ---          ---            ---
   Amortization of Deferred Compensation Costs         ---            ---          ---            ---
   Net Income for the Six Months Ended
     December 31, 2003                                 ---            ---          ---            ---
                                                     ---------     ----------  ------------    -----------
BALANCE - DECEMBER 31, 2003                           362,489    $ 36,248,875   11,480,279   $ 22,960,557
                                                     =========     ==========  ============    ===========
</TABLE>

<TABLE>
                                                         Capital                        Treasury      Deferred
                                                        in Excess                        Stock        Compen-
                                                          of Par        (Deficit)       At Cost        sation        Total
                                                       -------------   ------------   -------------   ---------   ------------
<CAPTION>
<S>            <C> <C>                               <C>             <C>            <C>             <C>         <C>
BALANCE - JUNE 30, 2003                              $   20,191,984  $ (40,189,608) $   (1,614,073) $  (11,666) $  37,586,067

   Shares Issued for Fractional Exchanges With
     Respect to the One-for-twenty Reverse Stock
     Split effected on March 13, 1992                            (2)       ---            ---           ---          ---
   Purchase of Shares for Treasury in connection
     with REB Trustee                                      ---             ---            (225,000)     ---          (225,000)
   Amortization of Deferred Compensation Costs             ---             ---            ---            2,500          2,500
   Net Income for the Six Months Ended
     December 31, 2003                                     ---           1,122,096        ---           ---         1,122,096

                                                       -------------   ------------   -------------   ---------   ------------
BALANCE - DECEMBER 31, 2003                          $   20,191,982  $ (39,067,512) $   (1,839,073) $   (9,166) $  38,485,664
                                                       =============   ============   =============   =========   ============
</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, 2003 AND 2002
                                   (UNAUDITED)

<TABLE>
                                                                   December 31,
                                                           ----------------------------
                                                                 2003          2002
                                                           -------------   ------------
<CAPTION>
<S>                                                      <C>             <C>
CASH FLOWS FROM OPERATING ACTIVITIES:                    $    1,122,096  $   1,008,114
                                                           -------------   ------------
     Adjustments to reconcile income to net cash
      provided by operating activities:
       Depreciation and Amortization                            309,719        127,899
       Gain on Sale of Assets                                     3,853              0
       Changes in Operating Assets and Liabilities -
        (Increase) in Restricted Cash & Investments            (210,000)             0
        (Increase) in Accounts Receivable                       (76,532)      (216,015)
        (Increase) in Other Assets                             (164,982)        32,893
        (Increase) Decrease in Prepaid Expenses                (539,982)        27,605
        Increase (Decrease) in Accounts Payable and
         Accrued Expenses                                      (847,516)       548,547
                                                           -------------   ------------
     CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES
      BEFORE DISCONTINUED OPERATIONS                           (403,344)     1,529,043
     CASH PROVIDED BY DISCONTINUED OPERATING ACTIVITIES           4,800              0
                                                           -------------   ------------
     NET CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES       (398,544)     1,529,043
                                                           -------------   ------------

CASH FLOWS FROM INVESTING ACTIVITIES:
    Deposits on Purchase of Palm Beach Princess Mortgage              0      (500,000)
    Purchase of Royal Star                                     (741,265)             0
    Investment in Port Lease                                          0       (100,000)
    Capital Expenditures                                       (515,859)      (303,424)
    Decrease (Increase) in Other Investment Activity            861,324          4,936
                                                           -------------   ------------
     CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES
      BEFORE DISCONTINUED INVESTING ACTIVITIES                 (395,800)      (898,488)
     CASH PROVIDED BY DISCONTINUED INVESTING ACTIVITIES               0              0
                                                           -------------   ------------
     NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES       (395,000)      (898,488)
                                                           -------------   ------------

CASH FLOWS FROM FINANCING ACTIVITIES:
    Principal Payments on Short Term Notes                   (1,964,978)      (210,511)
    Decrease in Balances Due to/From Subsidiaries                 4,875           (437)
                                                           -------------   ------------
     CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES
      BEFORE DISCONTINUED FINANCING ACTIVITIES               (1,960,103)      (210,948)
     CASH (USED IN) DISCONTINUED FINANCING ACTIVITIES            (4,875)             0
                                                           -------------   ------------
     NET CASH (USED IN) FINANCING ACTIVITIES                 (1,964,978)      (210,948)
                                                           -------------   ------------

NET DECREASE IN CASH AND CASH EQUIVALENTS                    (2,759,322)       419,607
       LESS CASH AND CASH EQUIVALENTS  FROM
        DISCONTINUED OPERATIONS                                      75            437
     CASH AND CASH EQUIVALENTS AT BEGINNING OF THE PERIOD     6,123,641        796,610
                                                           -------------   ------------

     CASH AND CASH EQUIVALENTS AT END OF THE PERIOD      $    3,364,394  $   1,216,654
                                                           =============   ============

     Supplemental Disclosures of Cash Flow Information:
       Cash paid during the period for:
       Interest                                          $      434,949  $           0
       Income Taxes                                      $            0  $           0
</TABLE>



See Notes to Consolidated Financial Statements.

                                        5
<PAGE>


                    INTERNATIONAL THOROUGHBRED BREEDERS, INC.
                                AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

(1)  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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

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

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

     (D) 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.

     (E)  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  consists  of the  write off of major
vessel repairs and maintenance  work normally  completed at dry dock in the fall
of each year.  These  expenses are written off during a twenty four month period
following the dry dock period.  For the three and six months ended  December 31,
2003, the amortized expense was $37,809.  There was no amortized expenses during
the first quarter of this fiscal year.

     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.  The Company  performed an impairment test of its
intangible  assets  with  indefinite  lives  during  the  fiscal  year  2003 and
concluded that there was no impairment.

     (F) Net Assets of  Discontinued  Operations - At December 31, 2003 and June
30, 2003,  the  remaining  net assets and  liabilities  of Garden State Park and
Freehold Raceway were classified as "Net Assets of Discontinued Operations."



                                        6

<PAGE>

                    INTERNATIONAL THOROUGHBRED BREEDERS, INC.
                                AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

     (G)  Deferred  Income - The gain  from the sale of our  Garden  State  Park
property on November 28, 2000 in the amount of $1,439,951  and the gain from our
sale of the El Rancho  property on May 22, 2000 in the amount of $2,786,589 have
been  deferred  until such time as the notes  receivable  on the sales have been
collected.  Other amounts  included in Deferred  Income are  fees/charges to Leo
Equity Group, Inc. in the amount of $3,000,000 and to MJQ Corp. in the amount of
$1,000,000 in connection  with the final  settlement  with the Brennan  Trustee.
(See  Footnote 15 Related Party  Transactions)  These amounts have been deferred
until such time as the funds are received.

     (H) 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.

     (I) Cash and Cash  Equivalents  - The Company  considers  all highly liquid
investments  with  an  original  maturity  of  three  months  or less to be cash
equivalents.  As of  December  31,  2003,  funds  classified  as cash  and  cash
equivalents,  which are primarily  those of the Palm Beach  Princess  operations
under  debtor-in-possession,  are only available under bankruptcy court approval
guidelines.

     (J) Restricted Cash - Restricted cash represents  funds which have been put
in an escrow account  previously  established  for the benefit of our Chapter 11
pre-petition  creditors.  During the most recent quarter  payments of $1,257,000
were disbursed from this account.

     (K) 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.

     (L)  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.

     (M) Recently Issued Accounting Pronouncements

     In December 2002 the FASB issued SFAS No. 148,  "Accounting for Stock-Based
Compensation  - Transition  and  Disclosure - an Amendment of FASB Statement No.
123".  SFAS No. 148 amends FASB Statement No. 123,  "Accounting  for Stock-Based
Compensation",  to provide  alternative methods of transition for an entity that
voluntarily changes to the fair-value-based method of accounting for stock-based
employee  compensation.  It  also  amends  the  disclosure  provisions  of  that
statement  to require  prominent  disclosure  about the effects on reported  net
income and earnings per share and the entity's  accounting policy decisions with
respect  to  stock-based  employee  compensation.   Certain  of  the  disclosure
requirements  are required  for all  companies,  regardless  of whether the fair
value  method or  intrinsic  value  method is used to  account  for  stock-based
employee compensation arrangements. This amendment to

                                        7
<PAGE>


                    INTERNATIONAL THOROUGHBRED BREEDERS, INC.
                                AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

SFAS 123 became effective for financial  statements for fiscal years ended after
December 15, 2002 and for interim  periods  beginning  after  December 15, 2002.
Accordingly,  we have adopted the  disclosure  provisions  of this  statement in
fiscal 2003.  Presently,  the Company does not have any circumstances that would
require the implementation of these standards. Accordingly, the Company believes
the adoption of these  statements will have no impact on its financial  position
or results of operations

     In March 2003 the  Emerging  Issues Task Force  published  Issue No.  00-21
"Accounting for Revenue  Arrangements with Multiple  Deliverables"  (EITF00-21).
EITF  00-21  addresses  certain  aspects  of  the  accounting  by a  vendor  for
arrangements under which it performs multiple revenue generating  activities and
how to determine  whether such an arrangement  involving  multiple  deliverables
contains more than one unit of accounting  for purposes of revenue  recognition.
The  guidance in this Issue is  effective  for revenue  arrangements  entered in
fiscal periods beginning after June 15, 2003. The adoption of EITF 00-21 on July
1, 2003 did not have any impact on our financial statements..

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

     On January 3, 2003, ITG Vegas,  Inc.("ITGV"),  our subsidiary operating the
Palm Beach  Princess,  and MJQ  Corporation  ("MJQ"),  which owns the Palm Beach
Princess vessel, an 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  "Trustee")  the  promissory  note  of MJQ
Corporation for $13.75 million. We did not have funds necessary to complete that
purchase  by January 6, 2003,  the date  required  for payment of the balance of
such  purchase  price.  Therefore,  on January 3, 2003,  in order to protect our
invested  deposits  and  operation  of  the  vessel,  ITGV  (together  with  MJQ
Corporation)  filed a  voluntary  petition  for relief  under  Chapter 11 of the
Bankruptcy Code.

     On September 12, 2003, the Bankruptcy  Court issued an order confirming the
Amended Joint Chapter 11 Plan of  Reorganization  (the "Plan") in the Chapter 11
Cases  of ITG  Vegas,  Inc.  and  MJQ  Corporation  (ITG  Vegas,  Inc.  and  MJQ
Corporation  being  hereinafter  called  the  "Debtors").  The Plan is a plan of
reorganization  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 (the  "Effective
Date"),  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 will continue as reorganized debtors.

     The Plan included the following principal features:

     1. On the Effective Date, all Allowed Administrative Expense Claims and all
Allowed  Priority Tax Claims and Allowed  Priority  Non-Tax  Claims were paid in
full (to the extent not already paid).

                                        8

<PAGE>

                    INTERNATIONAL THOROUGHBRED BREEDERS, INC.
                                AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)


     2. All pre-petition non-insider (non-affiliate), non-insured unsecured debt
of the Debtors will be paid in two installments,  one-half on the Effective Date
and one-half (with interest  thereon at 8% per year from the Effective  Date) on
the six month  anniversary of the Effective  Date. The holders of such unsecured
pre-petition debt will receive security interests in the cash bank maintained on
board the Vessel (approximately $700,000) and in all of the shore side furniture
and  equipment  to secure the Plan  payments  to them.  During  the most  recent
quarter $1,254,000 were disbursed from an escrow account previously  established
for the benefit of the creditors.  In addition,  an amount equal to $70,000 will
be paid monthly into escrow as further collateral for the holders of such debt.

     3. All non-insider  claims covered by insurance will be entitled to payment
in accordance  with the insurance  coverages.  There are no policy limits on the
Debtors' liability coverages and the holders of these claims will be required to
pursue  the  insurance  proceeds  for  payment,   except  with  respect  to  the
deductible, for which the Debtors shall remain obligated.

     4. The Debtor's principal creditor,  Donald F. Conway as Chapter 11 Trustee
for the  Bankruptcy  Estate of Robert E. Brennan (the "Brennan  Trustee"),  will
receive  payment in full of all  obligations  over a period not to exceed  three
years. Significantly,  the Debtors' obligations to the Brennan Trustee have been
combined  with the Company's  indebtedness  to the Brennan  Trustee,  for all of
which the Debtors and the Company will be jointly and severally  liable.  All of
the  obligations to the Brennan Trustee will be secured by a first priority ship
mortgage  against  the Vessel  and,  with  certain  exceptions,  first  priority
security  interests in all of the other  assets of the  Debtors,  subject to the
security  interests  being  granted  in  favor  of  the  pre-petition  unsecured
creditors as described in paragraph 2 above.

     5. The payment  obligations  to the  Brennan  Trustee  will  consist of the
following:

          (a) The  balance of the  purchase  price that had been  payable by ITG
Vegas for the purchase of the ship mortgage against the Vessel, in the amount of
$9,750,000;

          (b) The balance of the Company's  indebtedness  to the Brennan Trustee
in respect of the purchase of stock in the Company,  in the principal  amount of
$1,511,035.70,  plus interest thereon from December 13, 2002 to January 23, 2003
at 9% per annum and thereafter at 11% per annum until the Effective Date;

          (c) A new  obligation of the Company for the purchase of an additional
450,000  shares of the Company's  stock from the Brennan  Trustee,  at $0.50 per
share, or $225,000;

     The amounts  described in subparagraphs  (a), (b) and (c)) are collectively
called the  "Payment  Obligations"  and totaling  $11,623,414  as of October 15,
2003. A forbearance  fee of $350,000 also accrued to the Brennan  Trustee on the
Effective Date.

     The Payment  Obligation  shall  accrue  interest at 12% per annum.  Monthly
payments of $400,000 will be required to be made to the Brennan  Trustee,  to be
applied  first to  interest  accrued and then to  principal.  In  addition,  the
Brennan  Trustee  shall be  entitled to payment of a Stay Bonus in the amount of
$200,000  if the Payment  Obligation  shall not have been paid in full within 12
months  after the  Effective  Date,  and an  additional  $100,000 if the Payment
Obligation shall not have been paid in full within 24 months after the Effective
Date.  Beginning  with ITG Vegas'  2004  internal  accounting  year  (commencing
December 29, 2003) and annually thereafter, 75% of ITG Vegas' Free Cash Flow (as
defined in the Plan)

                                        9
<PAGE>

                    INTERNATIONAL THOROUGHBRED BREEDERS, INC.
                                AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

for the period shall be paid to the Brennan  Trustee as a Sweep  Payment,  to be
applied first to accrued and unpaid  interest,  then to principal on the Payment
Obligation, and thereafter to any unpaid Stay Bonuses.


     6.  Restrictions are imposed under the Plan on ITG Vegas making payments to
affiliated  entities,  including the Parent company.  Payment of indebtedness to
affiliated entities of ITG Vegas generally will be subordinated and intercompany
advances  and  transfers  from  ITG to  affiliated  entities  generally  will be
prohibited,  except that, if no default exists in the obligations to the Brennan
Trustee,  (i) $50,000 per month may be paid by ITG Vegas to MJQ  Corporation  in
respect of the bareboat  charter fee for use of the Vessel and (ii) $100,000 per
month will be  permitted  to be paid by ITG Vegas to the  Company  under the Tax
Sharing  Agreement  between  them.  The  Company  will enter into a Tax  Sharing
Agreement with ITG Vegas effective on the Effective Date,  pursuant to which ITG
Vegas will  compensate  the Company for the tax savings  realized as a result of
ITG Vegas's  inclusion in the  Company's  consolidated  group of  companies  for
federal income tax purposes,  in the amount of $100,000 per month, provided that
no such  payments are  permitted to be made if any default  exists in respect of
the obligations to the Brennan Trustee.

     The maximum amount of funds permitted to be up streamed by ITG Vegas to the
Company is $100,000 per month under the Tax Sharing Agreement (and, beginning in
2005, 25% of ITG's annual Free Cash Flow, as defined).  The Company has no other
source of funds presently  available.  For these reasons, and since the $100,000
per month tax sharing payment will be suspended at any time when the Debtors are
not current in payment of their obligations to the Brennan Trustee, no assurance
can be given that the Company  will be able to  function as a going  concern and
pay its debts as they become due.

     The foregoing  summary of the Plan, the Payment  Obligations to the Brennan
Trustee and the terms  thereof  are not  intended  to be  complete.  For further
information about the Payment Obligations and collateral therefor, the covenants
of the Company and the  Debtors,  events of default and other terms agreed to in
principle among the Debtors,  the Company and the Brennan Trustee,  reference is
made to the Term Sheet for Plan of Reorganization which is attached as Exhibit A
to the Plan and  filed  with  the  Securities  and  Exchange  Commission  on the
Company's  Form 8-K filed on September  22, 2003.  Reference is also made to the
Amendment  to the  Master  Settlement  Agreement,  effective  October  15,  2003
attached as an exhibit to this Form 10-Q.

     ITG Vegas and the Company  negotiated a document,  executed on November 10,
2003 entitled Amendment to Master Settlement Agreement with the Brennan Trustee,
which  incorporated  the above-  described terms and other  modifications to the
Master Settlement  Agreement previously entered into by the Brennan Trustee, the
Company,  Palm  Beach  Princess,  Inc.  (predecessor  of ITG Vegas,  Inc.),  MJQ
Corporation and others.

     7.  All of the  outstanding  shares  of  stock in ITG  Vegas  are  owned by
International  Thoroughbred Gaming Development Corporation ("ITGD"),  which is a
wholly owned subsidiary of the Company. While ITGD will pledge all of its shares
of stock in ITG Vegas as additional  collateral to the Brennan  Trustee,  in all
other  respects  the  Company's  indirect  stock  ownership  of ITG Vegas is not
affected by the Plan.

     By reaching the foregoing  consensual plan of  reorganization  by agreement
with the Brennan  Trustee,  the Debtors  have  avoided the costs and delays of a
contested  confirmation hearing with their largest creditor and developed a Plan
believed to be feasible.

                                       10
<PAGE>

                    INTERNATIONAL THOROUGHBRED BREEDERS, INC.
                                AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

(3)  MORTGAGE CONTRACT RECEIVABLE - RELATED PARTY

     Effective  February 20, 2002 we entered into a Master Settlement  Agreement
with the Chapter 11 Trustee (the "Trustee") for the Bankruptcy  Estate of Robert
E. Brennan. In accordance with the Master Settlement Agreement, through our Palm
Beach  Princess,  Inc.  Subsidiary  (which has been merged into ITGV) we entered
into a Purchase  and Sale  Agreement  which  provide for our  purchase  from the
Brennan Trustee of the promissory note of MJQ Corporation  which is secured by a
ship mortgage  against the vessel M/V Palm Beach  Princess  (the "Ship  Mortgage
Obligation") for a purchase price of $13.75 million. Prior to the Effective Date
of  ITGV's  Plan of  Reorganization  (described  in Note 2  above),  Palm  Beach
Princess, Inc. and its successor by merger, ITGV, were not obligated to complete
the purchase of the Ship Mortgage Obligation and were not liable for any failure
to pay the purchase  price - the sole express  remedy of the Brennan  Trustee in
the event of a default was to terminate  the Purchase and Sale  Agreement,  keep
the Ship Mortgage  Obligation and cause  forfeiture of our installment  payments
previously  made. We therefore did not accrue the purchase  price as a liability
on our balance sheet.  In  negotiating a consensual  Chapter 11 Plan among ITGV,
MJQ Corporation,  the Brennan Trustee and other creditors, the Company agreed to
be liable for payment of the balance of the purchase  price of the Ship Mortgage
Obligation  (which was $9.75 million as of the Effective Date of the Plan).  The
parent company and ITGV agreed to be jointly and severally liable for payment of
all obligations to the Brennan Trustee.  As a result,  the unpaid portion of the
purchase price of the Ship Mortgage  Obligation and interest  accrued to October
15, 2003 (which was  capitalized)  are  recorded as  liabilities  on our balance
sheet,  and the mortgage  contract  receivable  is reflected as an asset,  after
October 15, 2003. The Ship Mortgage  Obligation will be delivered to the Company
upon full payment of our indebtedness to the Brennan Trustee,  at which time the
Company,  as owner of the Ship Mortgage  Obligation,  will be entitled to all of
the benefits  thereof.  If,  however,  we are unable to make all of the payments
when due under the Purchase and Sale  Agreement (as modified in connection  with
the Master  Settlement  Agreement) or otherwise  default in  performance  of the
terms of any of our  obligations to the Brennan  Trustee,  subject to applicable
grace  periods,  the  Brennan  Trustee  may  cause the  liquidation  of our only
operating  business,  the Palm Beach Casino Line, all of the assets of which are
pledged to secure our  indebtedness to the Brennan  Trustee,  and/or the Brennan
Trustee may sell the mortgage receivable.

(4)  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  under  such note will be
adjusted from time to time since the interest actually payable will be dependent
upon,  and  payable  solely  out of, the  buyer's  net cash flow  available  for
distribution  to its  equity  owners  ("Distributable  Cash").  After the equity
investors in the buyer have received total  distributions equal to their capital
contributions plus an agreed upon return on their invested capital, the next $23
million of  Distributable  Cash will be paid to us. We will  thereafter  receive
payments  under the note  equal to 33 1/3% of all  Distributable  Cash until the
maturity date, which occurs on the 30th anniversary of our purchase of the note.
We may  convert  the  promissory  note,  at our  option,  into a 33 1/3%  equity
interest  in  the  buyer  during  a six  month  period  beginning  at  the  15th
anniversary  of the issuance of the note. If not then  converted,  the note will
convert into a 33 1/3% equity  interest in the buyer at the 30th  anniversary of
its issuance. 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.

                                       11
<PAGE>

                    INTERNATIONAL THOROUGHBRED BREEDERS, INC.
                                AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

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

     In  addition,  we sold two large  bronze  sculptures  located at the Garden
State Park  property to Realen,  in exchange  for Realen's  promissory  note due
November 30, 2002, in the principal  amount of $700,000.  The Chapter 11 Trustee
for the  Bankruptcy  Estate of  Robert E.  Brennan  claimed  ownership  of those
sculptures,  and we settled the  resulting  litigation  over the  sculptures  by
agreeing that the first $350,000 in principal payments made by Realen under such
note would be remitted to the Brennan Bankruptcy Trustee (together with one-half
of the interest paid by Realen under such note).  The remaining  $350,000 of the
$700,000 note is  classified in other current  assets on our balance sheet as of
June 30, 2003. As part of the settlement of the sculpture litigation,  the party
who sold us the  sculptures,  agreed to reduce the amount of our  obligation for
payment of the balance of the sculpture price  (described in Note 7(A) below) by
the  same  principal  amount,  $350,000,  given up by us to the  Trustee.  As of
November 14,  2003,  Realen had not made the payment due to ITB in the amount of
$350,000  which was due on November 30, 2002.  On January 30, 2003,  the Trustee
instituted  litigation  against Realen and the Company  demanding payment of the
first $350,000. On August 18, 2003 the judge granted a summary judgement against
Realen-Turnberry/  Cherry Hill, LLC in the sculpture  litigation and dismissed a
cross claim that Realen-  Turnberry/Cherry Hill, LLC had brought against ITB. On
February 20, 2004 Turnbury paid $466,363 to the Company in full  satisfaction of
the note due us for the sale of the horse  statues at Garden  State  Park.  As a
result the Company is required to pay approximately $175,000 for satisfaction of
the note we owe on our original purchase of the statures. (See Note 16-C)

(5)  DEPOSITS AND OTHER ASSETS - NON RELATED PARTIES

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

                                           December 31, 2003    June 30, 2003
                                           -----------------   ---------------
Port Lease Rights                       $            250,000 $         250,000
Deposit on Ship Purchase (See Note 7-D)                  -0-           200,000
Other Misc. Assets                                   119,285            85,239
                                           -----------------   ---------------
         Total                          $            369,285 $         535,239
                                           =================   ===============

                                       12
<PAGE>

                    INTERNATIONAL THOROUGHBRED BREEDERS, INC.
                                AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

(6)  DEPOSITS AND OTHER ASSETS - RELATED PARTIES

     The following  items are  classified as Deposits and Other Assets - Related
Party Transactions (See Note 15):
<TABLE>

                                                                December 31,       June 30,
                                                                   2003              2003
                                                               -------------     -----------
<CAPTION>
<S>                                                         <C>                <C>
Loans to the Ft Lauderdale Project (OC Realty, LLC)         $      2,034,405   $   2,034,405
Loan Transferred from Golf Course Project to
 OC Realty, LLC                                                      735,584         735,584
Note Receivable from Francis W. Murray *                           2,600,749       2,600,749
Accounts Receivable from Francis W. Murray                            35,099          35,099
Loans to Francis W. Murray                                            93,000          93,000
Advances to OC Realty, LLC                                             4,974          77,162
Accrued Interest on Loans to the Ft. Lauderdale Project
(OC Realty, LLC)                                                     715,345         606,553
Accrued Interest Transferred from Golf Course Project to
OC Realty, LLC                                                       287,327         287,327
Accounts Receivable from Frank Leo                                    23,441          23,441
Goodwill on Purchase of GMO Travel                                   193,946         193,946
                                                               -------------     -----------
       Total Deposits and Other Assets - Related Parties    $      6,723,870   $   6,687,266
                                                               =============     ===========
</TABLE>

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



                                                        13

<PAGE>


                    INTERNATIONAL THOROUGHBRED BREEDERS, INC.
                                AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

(7)  NOTES AND MORTGAGES PAYABLE

     Notes and Mortgages Payable are summarized below:


<TABLE>
                                                              December 31, 2003             June 30, 2003
                                        Interest %       --------------------------    ------------------------
                                        Per Annum          Current       Long-Term       Current      Long-Term
                                       --------------    -----------    -----------    -----------    ---------
<CAPTION>
<S>                                      <C>           <C>           <C>             <C>            <C>
International Thoroughbred
Breeders, Inc.:
--------------------------
MCJEM, INC. (A)                                   15%  $     132,000 $          -0-  $     132,000  $      -0-
Chapter 11 Trustee for the Bankruptcy
Estate of Robert E. Brennan (B)                   12%      3,458,448      6,301,956      1,511,036         -0-
Michael J. Quigley, III (C)                       10%        900,000            -0-        900,000         -0-
Florida Bank, N.A. (D)                   Prime + .25%            -0-            -0-        200,000         -0-
First Insurance Funding Corp.(E)                6.95%          7,131                        28,117         -0-
Francis X. Murray (F)                              8%        159,165                       159,164         -0-
William H. Warner(F)                              12%         24,000            -0-         24,000         -0-
Other                                         Various         25,000                        25,000         -0-

ITG Vegas, Inc.:
----------------
International Game Technology (G)             Various        111,836        132,064         16,709         -0-
Corporate Interiors (H)                    Prime + 2%         40,489            -0-        121,468         -0-
Enter. Innovations (I)                             0%         20,000            -0-            -0-         -0-

Garden State Park:
------------------
Service America Corporation (J)                    6%        160,000            -0-        160,000         -0-
                                                         -----------    -----------    -----------    --------
                 Totals                                $   5,038,069 $    6,434,020  $   3,277,494  $      -0-

Net Assets of Discontinued
  Operations - Long Term                                         -0-            -0-            -0-         -0-
 Net Liabilities of Discontinued
  Operations - Long Term                                    (160,000)           -0-       (160,000)        -0-
 Related Party Notes                                        (183,164)           -0-       (183,164)        -0-
                                                         -----------    -----------    -----------    --------
                 Totals                                $   4,694,905 $    6,434,020  $   2,934,330  $      -0-
                                                         ===========    ===========    ===========    ========
</TABLE>

--------------------------------------------------------------------------------
The effective Prime Rate at December 31, 2003 and June 30, 2003 was 4%.






                                       14

<PAGE>

                    INTERNATIONAL THOROUGHBRED BREEDERS, INC.
                                AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

     (A) On February  24, 2000,  the Company  sold several  pieces of artwork to
Robert E. Brennan Jr., son of the Company's  former Chairman and Chief Executive
Officer.  The $218,000  sales price of the artwork was in excess of the original
cost of  $186,600.  The  Company  recorded a $31,400  gain on the sale in Fiscal
2000. In addition,  the Company purchased two large bronze sculptures located on
the Garden State Park property that were  previously on loan to the Company from
Mr. Brennan Jr. The purchase price of the sculptures was $700,000. In connection
with the  transaction,  the Company signed a $482,000  promissory  note with Mr.
Brennan Jr. which  represented  the purchase  price of the  sculptures  less the
sales price of the artwork sold to Mr.  Brennan Jr. On July 27, 2000 the Company
received  a notice  from the  Chapter 11 Trustee  for the  bankruptcy  estate of
Robert E. Brennan (the "Chapter 11 Trustee")  asserting certain ownership rights
in a number of items on loan to the Company,  including the sculptures mentioned
above.  After the Chapter 11 Trustee  claimed  ownership of the  sculptures,  an
arrangement  was  agreed to  between  the  Company  and the  Chapter  11 Trustee
pursuant to which the Company was  permitted to resell the  sculptures to Realen
in May 2001, free and clear of any claim by the Chapter 11 Trustee,  in exchange
for a $700,000  promissory  note of Realen due  November  30, 2002 (the  "Realen
Sculpture Note").  Pursuant to the agreement between the Company and the Chapter
11 Trustee,  payments by Realen under the Realen  Sculpture Note were to be held
in escrow pending  determination of the Chapter 11 Trustee's claims. On December
29, 2000, the Chapter 11 Trustee instituted suit against the Company seeking the
right to all payments and proceeds of the Realen  Sculpture Note.  After the end
of the fiscal year, in September  2001, a settlement  agreement was entered into
among the  Company,  Robert E.  Brennan,  Jr., the Chapter 11 Trustee and others
pursuant to which,  among other things, the litigation by the Chapter 11 Trustee
against the Company  was  dismissed  with  prejudice  and the first  $350,000 of
principal  plus  one-half of the interest  received  under the  $700,000  Realen
Sculpture  Note will be paid to the  Chapter  11  Trustee.  The  balance  (up to
$350,000  in  principal  plus  one-half  of the  interest)  will  be paid to the
Company. As a result of this settlement,  the Company and Mr. Brennan Jr. agreed
that (I) all claims of the Company  against Mr.  Brennan Jr.  arising out of his
sale of the  sculptures to the Company will be released and (ii) the  promissory
note issued by the Company to Mr.  Brennan Jr. will be amended (x) to reduce the
principal  amount  of such  promissory  note from  $482,000  to  $132,000,  with
interest on that sum at the rate of 15% annum to accrue from  November  30, 2001
only if the principal of such note is not paid in full by December 10, 2001, (y)
to make such  promissory  note due and payable on November 30, 2002,  and (z) to
permit the Company to defer payment of the promissory note to such later date as
the Company shall have received  payment in full of the Realen  Sculpture  Note.
The effect of the aforesaid  settlement is therefore  that the Company's loss of
the amount to be paid under the  settlement  agreement to the Chapter 11 Trustee
will be borne by Brennan  Jr. by  reduction  to the  Company's  promissory  note
payable to him. On February 20, 2004  Turnbury  paid  $466,363 to the Company in
full satisfaction of the note due us for the sale of the horse statues at Garden
State Park.  As a result the Company is required to pay  approximately  $175,000
for  satisfaction  of the note we owe on our original  purchase of the statures.
(See Note 16-C)

     (B) Balance as of June 30,  2003:  On December  13, 2002 we issued a twelve
month promissory note in the amount of $1,648,403  including interest of $34,330
to the Brennan  Trustee for the  Bankruptcy  Estate of Robert E. Brennan for the
purchase of 3,228,146 shares of our common stock held or claimed by the Trustee.
The first  principal  payment of $137,367 was also paid on that date.  The Stock
Purchase  Note is  secured by a  security  interest  in  proceeds  and  payments
receivable under the $10 million Realen Note.

     Balance  as  of  December  31,  2003:  In  connection   with  the  Plan  of
Reorganization we became liable for the purchase of the Ship Mortgage Obligation
in the amount of $9.75 million and that  obligation was combined with the unpaid
balance of the Stock Purchase Note, and an additional 450,000 shares for

                                       15
<PAGE>

                    INTERNATIONAL THOROUGHBRED BREEDERS, INC.
                                AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

$225,000 , plus accrued interest,  for a total amount due the Brennan Trustee of
$11,623,414  ("The Payment  Obligation").  Effective  October 15, 2003 we became
jointly  and  severally  liable  with ITG Vegas for the  payment of the  Payment
Obligation.  If we are unable to continue to make timely payments of the Payment
Obligation the 3,678,146  shares of stock,  which have been pledged as security,
could be sold by the  Brennan  Trustee  and the assets of ITG Vegas,  which also
secured the Payment  Obligation could be liquidated by the Brennan Trustee.  The
sale of said  shares  by the  Trustee  along  with  other  uncontrollable  stock
transfer  events could effect the  preservation  of our net  operating  loss tax
carry forwards (NOL's). As of 6/30/03 the Company had $147,000,000  available in
Net Operating Loss  carryforwards  which can be used to offset  taxable  income.
Loss of our NOL's would cause the  Company to pay  Federal  Income  taxes on its
reported taxable income and reduce reportable net income.

     (C) On January 26, 2001,  we borrowed  $1,000,000  from Michael J. Quigley,
III at an annual  interest  rate of 10%.  Principal and interest on the note was
due on or about April 25, 2001. On May 14, 2001, the loan was modified to be due
on demand. The loan is secured by a pledge of the $10 million Realen Note, which
is subordinate  to the security  interest of the Trustee which secures the Stock
Purchase Note and by a pledge of the $23 million  Turnberry Note. As of December
31, 2003, the remaining balance of $900,000 plus accrued interest of $292,876 is
due on demand.  The accrued  interest  is shown on the Balance  Sheet as accrued
expenses.  On February  20, 2004 the Company  paid in full its  indebtedness  to
Michael J. Quigley in the amount of $1,206,850 which included accrued  interest.
(See Note 16-B)

     (D) On March 19, 2003, we issued a two month  promissory note in the amount
of  $200,000  bearing  interest  at prime plus .25% to Florida  Bank,  N.A.  The
proceeds of such note were used to fund a escrow  deposit in  connection  with a
charter/purchase  of an offshore gaming vessel.  The escrow deposit was returned
to us on May 7, 2003 following the expiration of the negotiation  period, and we
have satisfied the note to Florida Bank, N.A.

     (E) Our  directors  and  officers  liability  policy was  financed by First
Insurance  Funding  Corp.  for a $128,388  one year  promissory  note at a 7.99%
interest  rate.  At December 31,  2003,  the  principal  balance on the note was
$7,131.

     (F) 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 December  31,  2003 was  $159,165.  On February 3,
2003, we issued a promissory note for $20,000 bearing interest at 12% to William
H. Warner,  Secretary of the Company.  On June 30, 2003, Mr. Warner  advanced to
the Company an  additional  $4,000.  The proceeds from the all the related party
loans were used as working capital.

     (G) On December 6, 2002,  Palm Beach  Princess,  Inc.  issued a twenty four
month  promissory  note in the  amount  of  $21,000  bearing  interest  at 8% to
International Game Technology for the purchase of gaming equipment. A payment of
$2,100  was  paid  on  delivery  of the  equipment  and 23  consecutive  monthly
installments  of  $854.80  were to be paid on the  balance.  As a result  of the
institution  of  proceedings by our  subsidiary,  ITGV,  under Chapter 11 of the
bankruptcy code, payments have been delayed until the effective date of the Plan
of  Reorganization.  (See Note 2) 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.  At December
31, 2003, the principal balance on the two notes was $243,900.

                                       16
<PAGE>

                    INTERNATIONAL THOROUGHBRED BREEDERS, INC.
                                AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

     (H) On April 30 2003, ITG Vegas,  Inc. issued a one year promissory note in
the amount of $161,958 bearing interest at prime plus 2% to Corporate  Interiors
for the purchase of office  furniture.  Monthly payments of $13,496.46 are being
paid on the note. At December 31, 2003,  the  principal  balance on the note was
$40,489.

     (I) On December 19, 2003, ITG Vegas,  Inc.  issued a five month  promissory
note in the  amount  of  $20,000  to  Entertainment  Innovations,  Inc.  for the
purchase  of gaming  equipment.  A payment of $4,000 was paid on delivery of the
equipment and 5 consecutive monthly installments of $4,000 are to be paid on the
balance. At December 31, 2003, the principal balance on the note was $20,000.

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

(8)  PURCHASE OF M/V ROYAL STAR

     During the  quarter  ended  December  31, 2003 our  subsidiary,  Royal Star
Entertainment,  LLC, a Delaware limited liability company,  purchased the vessel
M/V Royal Star  ("Royal  Star").  As of December  31, 2003 the Company has spent
$741,265 for the purchase and for legal and professional fees in connection with
the  purchase.  The Royal Star is a 232 foot vessel,  built in 1985 and operates
under the flag of St. Vincent and Grenadines. 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.  We are seeking  financing in
order to make these  improvements.  Financing  may be  restricted by the Brennan
Trustee, funds which we may wish to spend for improvements are restricted by the
Brennan Trustee and we must make simultaneous  dollar for dollar payments to the
BrennanTrustee  for each dollar spent on improvements.  In December 2003 we paid
the Trustee a prepayment  of  $1,200,000  on our  obligation  to him in order to
obtain his  permission  to  purchase  the Royal Star.  Depreciation  will not be
computed on the Royal Star until it is placed in service.

(9)  LONG TERM DEBT - RELATED PARTIES

     The following items are classified as short and long-term debt (See Note 15
- Related Party Transactions):

                                              December 31,       June 30,
                                                 2003             2003
                                             -------------    -----------
Loan from Francis W. Murray                  $     250,000    $   250,000
Accrued Wages due and Advances
  from Francis W. Murray                           719,095        404,204
Advances from MJQ Corporation (FWM ownership)      604,985        330,813
                                               -----------       --------
     Total Long Term Debt - Related Parties  $   1,574,080    $   985,017
                                               ===========       ========

(10) NET INCOME PER COMMON SHARE

     Income per common  share is computed by dividing net income by the weighted
average number

                                       17
<PAGE>

                    INTERNATIONAL THOROUGHBRED BREEDERS, INC.
                                AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

of shares of common  stock  outstanding.  On  December  13,  2002,  the  Company
purchased  3,228,145  shares of its Common Stock from the Trustee and on October
15, 2003 the effective  date of the court  approval of our Chapter 11 Bankruptcy
Plan,  we  purchased  an  additional  450,000  shares  from the Trustee and have
accounted  for the  transaction  on the cost method of  accounting  for treasury
stock. For the three and six months ended December 31, 2003, options to purchase
2,075,000  shares of Common  Stock at $.269 per share and  options  to  purchase
1,566,692  shares of Common  Stock at $.50 per share (which  includes  1,360,192
options having been  authorized but not issued) were used in the  computation of
diluted  income per share because the exercise price of those options were above
average market price,  however, the number of shares that would have been issued
from the exercise of stock options has been reduced by the number of shares that
could have been  purchased  from the proceeds at the average market price of the
Company's stock. The additional shares that would have been issued decreased the
stated earnings per share for the three and six month periods ended December 31,
2003.  Options  and  warrants to purchase  4,046,500  shares of Common  Stock at
various prices per share,  for the three and six months ended  December  31,2002
were not included in the  computation  of income per share  because the exercise
price of those options and warrants were above market value.


(11) COMMITMENTS AND CONTINGENCIES

     See Note 2 for additional commitments and contingencies with respect to the
Chapter 11 Plan of Re-Organization.

     See Note 3 for additional commitments and contingencies with respect to our
purchase of the Ship Mortgage Obligation from the Brennan Trustee.

     See Note 15 for additional commitments and contingencies of the Company and
transactions with related parties.

     Effective December 1, 2000, we entered into a five-year employment contract
with Francis W. Murray, our Chief Executive  Officer.  The contract provides for
annual compensation of $395,000,  a $1,500 monthly automobile expense allowance,
a country club annual dues allowance and travel and entertainment reimbursements
for business expenses reasonably incurred by him in addition to participation in
various other  benefits  provided to our  employees.  As part of his  employment
contract,  Mr. Murray was awarded  options to purchase  2,000,000  shares of our
Common  Stock.  Prior to  January  4, 2003 we were  deferring  a portion  of Mr.
Murray's  salary and on January 4, 2003,  we began  deferring  all  payments  of
compensation  due to Mr.  Murray  due to a lack  of  funds  resulting  from  the
institution  of  proceedings by our  subsidiary,  ITGV,  under Chapter 11 of the
bankruptcy code. The related liability as of December 31, 2003 totaled $420,404.

     With the sale of our  Freehold  Raceway  property  on January  28,  1999 we
assumed  full  responsibility  for the  costs  associated  with the  clean up of
petroleum  and related  contamination  caused by the  leakage of an  underground
storage  tank  which was  removed in 1990,  prior to our  purchase  of  Freehold
Raceway.  In  February  2000 the N.J.  Department  of  Environmental  Protection
approved our remedial  investigation  workplan  ("RIW").  Under the RIW numerous
test wells were  drilled  and the soil tested and  monitored  to  determine  the
extent and direction of the flow of underground  hazardous  material and reports
and conclusions of the tests were prepared for the State of New Jersey. However,
prior to obtaining a remedial action workplan from the State of New Jersey,  the
work was  stopped  due to a lack of funds  resulting  from  the  institution  of
proceedings by our subsidiary, ITGV, under Chapter 11 of the bankruptcy code. At
this time we are unable to predict the effects that such delay may cause, but it
is likely that some

                                       18
<PAGE>

                    INTERNATIONAL THOROUGHBRED BREEDERS, INC.
                                AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

retesting of the wells may be  necessary.  Prior to the delays it was  estimated
that the cost to remediate the site would be approximately  $750,000. As of June
30,  1999 we had  accrued  $362,000  and we  accrued  an  additional  amount  of
approximately  $388,000  during  fiscal  2001 as the  scope of the  project  was
further  defined.  Such  accruals  were made with the help of the  environmental
consulting  firm engaged by the Company.  These costs  include  drilling of test
wells and  monitoring,  lab testing,  engineering  and  administrative  reports,
equipment  and  remediation  of the site  through a "pump and treat"  plan.  The
Company has made  payments of  approximately  $93,600,  $200,000,  and  $323,000
during fiscal years 2000, 2001, 2002 respectively which were charged against the
accrued balances.  As of December 31, 2003 the accrued balance was $130,398.  It
is estimated  that  completion of the site clean up will take  approximately  18
months from the time the work is  reinstated.  It is  unlikely  that the Company
will  receive  any  insurance  reimbursement  for our costs of this  remediation
project.

     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 are due on December 28, 2002 and December 28, 2003.  The payment due on
December 28, 2002 has not been made as of February 19, 2003. 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  had the right
to (I) take  possession  of the liquor  license if during the three year  period
from Jan.  28, 1999 until Jan.  27, 2002 it had a use for the liquor  license at
the OTB facility  and (ii) to transfer the license to its name by paying  Garden
State Park $100,000. The leases/buyer has transferred the license to its name by
paying us $100,000.  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.  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.

     In the event the  Company  is  unable  to make all the  payments  under the
agreements with the Brennan Trustee or otherwise  defaults in performance of the
terms of such  indebtedness,  the  Company  stands  to lose  its only  operating
business. Subject to applicable grace periods, the Brennan Trustee can cause the
liquidation of our only operating business, the Palm Beach Princess line.

     Through ITGV, 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.  We are also 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.

                                       19
<PAGE>

                    INTERNATIONAL THOROUGHBRED BREEDERS, INC.
                                AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

     The  following  summarizes  commitments  on  non-cancelable  contracts  and
leases.
<TABLE>
                                        Twelve Months Ended December 31,
                        ---------------------------------------------------------------     There-
                            2004         2005           2006         2007       2008        after        Total
                        -----------  -----------    -----------   ---------   ---------    --------   ------------
<CAPTION>
<S>                    <C>          <C>            <C>           <C>         <C>          <C>        <C>
Minimum Amounts
due to Brennan
Trustee                $  4,455,000 $  5,060,000   $  2,595,000  $       --  $       --   $      --  $  12,110,000

Employee Contracts
(excluding severance
agreements)                 722,883      688,476             --                                          1,411,359

Boat Charter Fees           600,000      600,000        250,000          --          --          --      1,450,000

Operating Leases            279,267      209,891        151,296     116,602      38,867          --        795,923
                        -----------  -----------    -----------   ---------   ---------    --------   ------------
             Total     $  6,057,150 $  6,558,367   $  2,996,296  $  116,602  $   38,867   $      --  $  15,767,282
                        ===========  ===========    ===========   =========   =========    ========   ============
</TABLE>

LEGAL PROCEEDINGS

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

     Our  subsidiary,  ITG  Vegas,  Inc.,  successor  by  merger  to Palm  Beach
Princess, Inc., initiated proceedings under Chapter 11 of the Bankruptcy Code on
January 3, 2003. (See Note 2.)

(12) TREASURY SHARES PURCHASED

     On December 13, 2002, the Company issued a promissory note in the amount of
$1,648,403 to purchase  3,228,145 shares of its Common Stock from 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, and the total amount of our debt for the
purchases  of stock as of October 15, 2003 was  $1,873,413  which also  includes
accrued  interest.  Such  indebtedness  was  combined  with the  obligations  to
purchase the Ship Mortgage Obligation,  and is payable over the next three years
together  with  interest  at 12% per  annum.  (See Note 2). If we are  unable to
continue to make timely  payments on any of our debt to the Brennan  Trustee the
3,678,145 shares of stock, which have been pledged as security, could be sold by
the  Trustee and the Trustee  may cause the  liquidation  of our only  operating
business. The sale of said shares by the Trustee along with other uncontrollable
stock transfer  events could effect the  preservation  of our net operating loss
tax carry forwards (NOL's). As of 6/30/03 the Company had $147 million available
in Net Operating Loss carry forwards which can be used to offset taxable income.
Loss of our NOL's would cause the  Company to pay  Federal  Income  taxes on its
reported taxable income and reduce reportable net income.

(13) FAIR VALUE OF FINANCIAL INSTRUMENTS

     As of  December  31,  2003,  in  assessing  the  fair  value  of  financial
instruments, the Company has used a

                                       20
<PAGE>

                    INTERNATIONAL THOROUGHBRED BREEDERS, INC.
                                AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

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 $33 million notes receivable,  we have elected to defer the gain on the sale
and the  interest  to be  accrued  until  such time that  collectability  can be
determined (See Note 4).

(14) STOCK OPTIONS AND WARRANTS

     At a meeting of the Board of Directors of the Company  held  September  11,
2003, the Board unanimously  authorized future grants of stock options for up to
385,000 shares of common stock,  at an exercise price of $0.50 per share, to ITG
Vegas, Inc. management team, which included 180,000 shares earmarked for Francis
X. Murray, son of the Company's Chairman,  subject,  however, to confirmation of
ITG  Vegas'  Plan of  Reorganization  and  subject  to the prior  payment of all
obligations  of the  Company to the  Bankruptcy  Trustee.  Accordingly,  no such
options will be issued or granted until the  Bankruptcy  Trustee shall have been
paid in full, at which time the Company will be authorized  (but not  obligated)
to grant such options provided that the grantee is still employed by the Company
at that time.

     Also at the September 11, 2003 meeting of the Company's Board of Directors,
the Board  unanimously  authorized  the future  grant of options to  purchase an
additional  20,000 shares of common stock to Mr. Francis X. Murray, at $0.50 per
share,  subject to  confirmation  of ITG Vegas' Plan of  Reorganization  and the
prior payment of all  obligations of the Company to the Bankruptcy  Trustee.  No
such options shall be granted or issued until the Bankruptcy  Trustee shall have
been  paid in  full,  at which  time the  Company  will be  authorized  (but not
obligated) to grant such  options.  Such action was taken in order to compensate
Mr. F.X. Murray for his having personally  guaranteed a loan of $300,000 for the
Company and for his providing to the Bankruptcy  Trustee a personal guaranty for
portions of the Company's obligations.

     At a meeting of the Board of  Directors of the Company held on November 18,
2003, the Board authorized the future grant of options to purchase 25,000 shares
of common stock to each non-employee  director,  Mr. James Murray and Mr. Walter
ReDavid,  at $0.50 per share, as  compensation  for their services as directors,
subject,  however, to the prior payment of all obligations of the Company to the
Bankruptcy Trustee. Accordingly, no such options will be issued or granted until
the  Bankruptcy  Trustee shall have been paid in full, at which time the Company
will be authorized  (but not obligated) to grant such options  provided that the
grantee is still serving as a director of the Company at that time.

     Also at the November 18, 2003  meeting of the Board,  the Board  authorized
the future grant of shares of common stock to each of Mr.  Francis W. Murray and
Mr.  Robert J. Quigley as  compensation  in lieu of their  respective  salaries,
which have been  deferred  since  January 3, 2003,  and in payment of the unpaid
principal  of a $24,000  loan to the  Company  by Mr.  William  H.  Warner,  the
Company's Secretary.  The Company will be authorized to pay the accrued salaries
to Messrs.  Murray and Quigley and the unpaid loan  principal  to Mr.  Warner in
shares of common stock,  valued for such purpose at $0.50 per share,  subject to
the prior payment of all  obligations of the Company to the Bankruptcy  Trustee.
No such shares will be granted and none of the accrued compensation will be paid
until the  Bankruptcy  Trustee  shall have been paid in full,  at which time the
Company will be authorized  (but not  obligated)  to grant such shares  provided
that the grantee (Mr. Murray, Quigley or Warner, as applicable) agrees to accept
such shares  (valued at $0.50 per share) in payment of a portion,  specified  by
the grantee, of the Company's obligation to him.

                                       21
<PAGE>

                    INTERNATIONAL THOROUGHBRED BREEDERS, INC.
                                AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

     At December 31, 2003, total employee options outstanding were 3,111,500 and
total non-employee options outstanding were 425,000. At December 31, 2003 all of
the employee and non-employee options were exercisable.

     At December 31, 2003, total warrants outstanding were 710,000. All warrants
were exercisable at December 31, 2003.

(15) RELATED PARTY TRANSACTIONS

     During the third  quarter of Fiscal  2001,  we invested in two  projects in
which our Chairman,  President and Chief Executive  Officer,  Francis W. Murray,
also has a pecuniary interest. In connection with one such project, the Board of
Directors  approved  advances,  as  loans,  of up to $1.5  million  to a limited
partnership  in which  Francis W.  Murray  owned,  at that  time,  an 80% equity
interest and owned the general partner, the proceeds of which were to be used to
pay costs and expenses for development of a golf course in Southern  California.
Mr. Murray's equity interest in the limited partnership,  indirectly through his
ownership of the general partner,  as of December 26, 2002, was 64%. At December
26, 2002,  loans of $735,584 were outstanding on such project and we had accrued
$155,945  of  interest  due on the loans.  On  December  26,  2002,  the limited
partnership's  indebtedness  to us was  assumed  by OC  Realty,  LLC,  a Florida
limited liability company which is owned by Francis W. Murray and which owns the
second real estate project  described below.  Such  indebtedness is due December
31, 2004 and bears an interest rate of 6%.

     In the second project, Mr. Murray is participating in the development of an
oceanfront  parcel  of land,  located  in Fort  Lauderdale,  Florida,  which has
received all governmental  entitlements from the City of Fort Lauderdale and the
state of Florida to develop a  14-story  building  to include a 5-story  parking
garage,  approximately  6,000 square feet of commercial  space and a residential
9-story tower.  The property had been owned by MJQ  Development,  LLC, which was
owned by Michael J. Quigley,  III until  December 26, 2002 when the property was
acquired by OC Realty,  LLC, the entity owned by Mr. Murray.  Mr. Quigley has no
relationship to Robert J. Quigley, one of our directors. OC Realty is developing
a condominium  hotel resort on the property as discussed  above.  As of December
31, 2003, we had lent $2,034,405 in total to MJQ Development and we have accrued
interest in the amount of $715,3458  on the loan.  Upon the  acquisition  of the
property,  OC Realty assumed MJQ  Development's  indebtedness to us. These loans
bear  interest at 12% and will be  repayable  out of the first  proceeds,  after
payment of bank debts,  generated by the sale of the condominiums.  We will 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  $5.5 million (at  present)  incurred in the
purchase of the real property and, second,  construction  financing  expected to
amount to $25 to $30 million  and third,  capital  invested  by a joint  venture
partner (expected to be up to $6.5 million) plus a 15% per annum return thereon.
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.  Fair value and  collectability  of the original
investment  of  $2,034,405  and accrued  interest  was  determined  by the joint
venture through projections evidencing our collection upon build out and sale of
the project.

     In order to raise the capital with which to proceed in the  development  of
the Ft. Lauderdale property, OC Realty has placed the Ft. Lauderdale property in
a joint  venture in connection  with which the other joint venture  partner will
fund up to $6.5 million for development and receive a 50% equity  interest.  Our
loan and  participation  interest  will be payable out of OC Realty 50% share of
distributions  after repayment of debt and the new investor's capital investment
and 15% annual return thereon. The Company has assessed the

                                       22
<PAGE>

                    INTERNATIONAL THOROUGHBRED BREEDERS, INC.
                                AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

collectability  of the  advances  made to OC Reality  based on  projections  and
assessments of the future value and returns,  and believes the carrying value of
these amounts represents fair value.

     On January 26, 2001, we borrowed $1,000,000 from Michael J. Quigley, III at
an annual interest rate of 10%. Principal and interest on the note was due on or
about  April 25,  2001.  On May 14,  2001,  the loan was  modified  to be due on
demand.  The principal  balance on the note at December 31, 2003 is $900,000 and
we have  accrued  interest  through  that  date in the  amount of  $292,876.  As
collateral  for the loan,  we pledged  the $10  million  Realen Note and the $23
million  Turnberry Note. On February 20, 2002 Mr. Quigley  released his security
interest  in  the  Realen  Note  in  connection   with  the  Master   Settlement
Agreement.On  February  20, 2004 the Company  paid in full its  indebtedness  to
Michael J. Quigley in the amount of $1,206,850 which included accrued  interest.
(See Note 16-B)

     Effective  April 30,  2001,  we entered  into a bareboat  charter  with MJQ
Corporation,  pursuant  to which we are  chartering  the  vessel  M/V Palm Beach
Princess for the purpose of operating an  entertainment  casino cruise  business
from the Port of Palm Beach, Florida. Michael J. Quigley, III was a principal of
MJQ Corporation. In October 2002, Francis W. Murray, our Chairman, President and
Chief Executive  Officer  purchased the stock of MJQ Corporation and has been an
officer and director of MJQ Corporation.  Francis X. Murray,  the son of Francis
W. Murray,  is President and a director of MJQ  Corporation and President of our
subsidiary,  ITG Vegas,  Inc.,  which  operates  the vessel.  Under the bareboat
charter agreement, we are obligated to pay $50,000 per month as the charter hire
fee to MJQ  Corporation.  All costs of  operating  the  vessel  incurred  by MJQ
Corporation  on our behalf are to be  reimbursed  by us to MJQ  Corporation.  In
addition,  as described in Note 7B above, we have entered into an amended Master
Settlement  Agreement  with the Chapter 11 Trustee of the  Bankruptcy  Estate of
Robert E. Brennan,  MJQ  Corporation and others to purchase from the Trustee the
Ship  Mortgage  Obligation  of MJQ  Corporation,  having an original  balance of
principal and interest outstanding of approximately $15.7 million for a purchase
price of $13.75  million.  Pursuant  to the  Master  Settlement  Agreement,  MJQ
Corporation  and its  officers  and  directors  (including  Francis  W.  Murray)
exchanged  mutual releases with the Trustee and others having claims to the Ship
Mortgage Obligation.

     We entered into an  agreement to purchase all of the shares of  outstanding
stock of Leo Equity Group, Inc. Mr. Francis W. Murray has been a director of Leo
Equity Group, Inc. Closing on the Leo Equity Group, Inc. stock purchase occurred
effective  October 27, 2002.  The purchase  price payable by us for the stock in
Leo Equity Group,  Inc. was  $250,000,  payable  without  interest in 10 monthly
installments  of $25,000 each. As of March 31, 2003, this note was paid in full.
We also agreed to reduce the exercise price of previously  granted  options held
by the seller,  Frank A. Leo (our former  director  and  chairman),  to purchase
200,000  shares of our  common  stock,  from $4.00 per share to $0.50 per share,
while  conditioning  exercise of such options upon our first having  consummated
the purchase of the shares required to be purchased by us from the Trustee under
the Stock Purchase  Agreement.  Due to the uncertainties that these options will
be  exercisable,  the  Company  has not  recorded  any expense for the change in
exercise price.  The purpose of such  acquisition was to enable us to obtain the
lease and operating  agreement  with the Port of Palm Beach  District  which had
been  owned by Leo Equity  Group,  Inc.  During  the period we made the  $25,000
monthly  installments  to Mr. Leo and before the note was paid in full,  we made
advances on Mr. Leo's behalf.  These advances totaled $23,441 as of December 31,
2003.

     The  Master  Settlement  Agreement  with the  Chapter  11  Trustee  for the
Bankruptcy  Estate of Robert  E.  Brennan  included  a final  settlement  by the
Trustee with numerous parties. Among those parties were Frank A. Leo, Leo Equity
Group,  Inc.,  Michael J.  Quigley III and MJQ  Corporation.  During the quarter
ended March 31, 2002 we charged Leo Equity Group  $3,000,000 and MJQ Corporation
$1,000,000  for their  portion of expenses  incurred by us and a success fee for
the efforts of International Thoroughbred Breeders, Inc. in

                                       23
<PAGE>

                    INTERNATIONAL THOROUGHBRED BREEDERS, INC.
                                AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

connection with the final settlement with the 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 have deferred all income from these transactions until such
time as  payment  is  received.  That $2.6  million  debt from Mr.  Quigley is a
non-recourse obligation which is payable solely from pledged shares of his stock
in MJQ  Corporation  (the "MJQ Debt").  Mr. Francis W. Murray  purchased the MJQ
Corporation  stock  subject to our lien  securing  payment of the MJQ Debt.  The
Company has  assessed  the  collectablity  of the MJQ Debt in the amount of $2.6
million.  This amount is secured by the stock of MJQ Corporation  which owns the
Palm Beach  Princess  vessel.  Based on  appraisals  of the vessel,  the Company
believes the loan amounts are carried at fair value.

     Through  the  purchase  of Leo  Equity,  we also  purchased  the assets and
operations of GMO Travel which was a 100% owned  subsidiary  of Leo Equity.  GMO
Travel  provides  reservations  and travel  services for our Palm Beach Princess
subsidiary and other non-ship related travel activities. Travel services for the
Palm Beach Princess  include  reservations  and travel services for its numerous
foreign  employees and our customers,  many of which rely on air travel to reach
our location.  The goodwill  recorded in the amount of $193,946  represents  the
fair value of GMO Travel based on its  discounted  cash flows and the  synergies
and cost savings gained by the Palm Beach Princess.

     On July 12, 2002, we borrowed  $300,000 from Francis W. Murray at an annual
interest  rate  of  6%.  Repayment  is  restricted  due to  the  Amended  Master
Settlement  Agreement  signed with the Trustee and as of December 31, 2003,  the
balance  of the note of  $250,000  is  classified  as  Long-Term  Debt - Related
Parties on the balance sheet.

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

     Francis X. Murray,  President of our ITG Vegas, Inc.  subsidiary and son of
Francis W. Murray,  our President,  CFO and CEO agreed to loan the company up to
$225,000 in the form of a line of credit.  As of  December  31, 2003 these loans
totaled $159,165. (See Note 7F)

(16) SUBSEQUENT EVENTS

     (A)  International   Thoroughbred  Breeders,  Inc.  and  its  wholly  owned
subsidiary, Orion Casino Corporation (collectively,  the "Company") have entered
into a Letter of Intent with Cherry Hill at El Rancho LP, a limited  partnership
affiliated with Turnberry Associates, providing for monetization (through a sale
and a loan) of the promissory note payable to the Company by Turnberry/Las Vegas
Boulevard,  LLC in the face amount of $23 million  (the "Las Vegas  Note").  The
Letter of Intent sets forth the parties' mutual  understanding  and agreement in
principle with respect to terms and conditions upon which the Company would sell
the Las Vegas Note to Cherry Hill at El Rancho LP (the "Buyer").

     The following is a summary of the principal  terms of sale of the Las Vegas
Note. The summary does not purport to be a complete  summary and is qualified in
its entirety by reference to the complete Letter of Intent. The Letter of Intent
expressly states that it is legally binding upon the parties.

                                       24

<PAGE>

                    INTERNATIONAL THOROUGHBRED BREEDERS, INC.
                                AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

     In exchange for the Las Vegas Note,  the Company will receive cash payments
from the Buyer of $2.8 million, a non-recourse loan in the amount of $5 million,
and a promissory note of indeterminate  value and collectibility to be issued by
an  affiliate  of the Buyer.  The  Company  will not be liable for  payments  of
principal  on the $5 million  loan  included in the  foregoing  purchase  price.
However,  the Company will be  obligated  to pay  interest and fees  aggregating
$600,000 per year for five (5) years in order to obtain the loan. Closing of our
sale of the Las Vegas Note is expected to occur in March, 2004.

     (B) On  February  20,  2004 the Company  paid in full its  indebtedness  to
Michael J. Quigley in the amount of $1,206,850 which included accrued interest.

     (C) On February  20, 2004  Turnberry  paid  $466,363 to the Company in full
satisfaction  of the note due us for the sale of the  horse  statues  at  Garden
State Park.  As a result the Company is required to pay  approximately  $175,000
for satisfaction of the note we owe on our original purchase of the statues.

                                       25
<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, 2003

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

Forward-Looking Statements

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

          o    risk of default under the settlement  with the Brennan Trustee as
               a result of which,  subject  to  applicable  grace  periods,  the
               Brennan Trustee could cause the liquidation of our only operating
               business,  the Palm Beach  Princess line, and could sell stock in
               ITB that was pledged to him,  which may result in the loss of our
               NOL's;
          o    termination  of the bareboat  charter  under which we operate our
               gaming business;
          o    lack of cash flow for the Parent  Company to  continue to operate
               and pay its debts as a result of the  Chapter 11  proceedings  of
               our  operating   subsidiary  and  agreed  upon   restrictions  in
               connection with such subsidiary's indebtedness;
          o    general  economic and business  conditions  affecting the tourism
               business in Florida;
          o    competition;
          o    changes in laws regulating the gaming industry;
          o    fluctuations  in  quarterly  operating  results  as a  result  of
               seasonal and weather considerations; and
          o    events  directly or indirectly  relating to our business  causing
               our stock price to be volatile.

Liquidity and Capital Resources

     Cash flow and liquidity during the six month period ended December 31, 2003
included  approximately  $2.8 million in cash generated by the Palm Beach Casino
Line operation. Such cash flow was used together with our existing cash balances
as of June 30, 2003 to fund  payments  to the  Brennan  Trustee in the amount of
approximately $2,150,000, our indebtedness to the Brennan Trustee, and to prepay
finance  fees.  Additionally  we used  approximately  $741,265  in cash  for the
purchase of a second vessel and  approximately  $515,000 for the purchase of new
equipment for the vessel and our offices. During the most recent quarter we also
disbursed  $1,254,000 to our pre-petition  bankruptcy creditors and deposited an
additional $210,000 in an escrow account for the benefit of the creditors.

     On January 3, 2003, ITG Vegas,  Inc.("ITGV"),  our subsidiary operating the
Palm Beach Princess,  and MJQ Corporation ("MJQ"), 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 does not cover
the Parent company, ITB, nor any other of ITB's subsidiaries. The Parent Company
has used all the available  funds that we had prior to the bankruptcy  filing to
pay some of our expenses and needs to find  immediate  financing in order to pay
remaining existing liabilities as well as future expenses. Since the

                                       26
<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, 2003

bankruptcy  filing,  and until October 15, 2003, the only source of funds to the
Parent  Company was limited to loans made by Company  officers,  collection of a
loan previously made to a South American gaming project and refunds from vendors
and tax  agencies  relating to our prior  racetrack  operations.  The Palm Beach
Princess continued to operate as  "debtor-in-possession"  under the jurisdiction
of the  Bankruptcy  Court  until  the  Effective  Date,  October  15,  2003  and
subsequently as reorganized debtors in accordance with the applicable provisions
of the Bankruptcy Code and orders of the Bankruptcy Court.

     The  Bankruptcy  filing has  severely  limited  our  ability to make timely
payments by our Parent to its creditors and corporate vendors which has affected
our  ability to retain  the  professional  services  and  vendors  who serve our
company.  Since  January  2003 our  Chairman  and the  President  of our  Brazil
subsidiary  have deferred  their  salaries and other officers and employees have
not  received  reimbursement  of many of  their  business  expenses  in order to
conserve  cash.  Additionally  employee  benefits  have been  reduced and salary
increases  have been  restricted.  The Parent  Company has been forced to reduce
services  and its  budget.  The  majority  of our  vendors  continue  to provide
services however it may be likely that some will stop providing  services in the
near future if payment terms are not successfully  negotiated.  This may include
the  services  provided by our  professionals  or the  services  provided to our
stockholders through our stock transfer agent. Additionally,  we risk losing the
services  of some of our  employees.  The Company  believes  that it has several
options to cure such  deficiencies.  On  September  12,  2003 the United  States
Bankruptcy  Court for the  Southern  District of Florida  (Palm Beach  Division)
issued an order  confirming the Amended Joint Chapter 11 Plan of  Reorganization
(the "Plan") in the Chapter 11 cases of ITG Vegas,  Inc.,  the Company's  wholly
owned  subsidiary,  and MJQ  Corporation.  On the  effective  date of the  Plan,
October 15, 2003, and so long as the ITGV  subsidiary  remains  current with its
obligations  to the Donald F. Conway,  as Chapter 11 Trustee for the  bankruptcy
estate of Robert E. Brennan ("the Brennan  Trustee") then ITGV will be permitted
to upstream $100,000 per month to the Parent Company.  (See the paragraphs below
concerning the bankruptcy  order). The currently monthly budgeted cash expenses,
including payroll, but exclusive of the Chairman and the President of the Brazil
subsidiary,  of the Parent  company are  approximately  $100,000 per month.  The
Company  plans to negotiate  the payment of past bills while  keeping  essential
bills current.  The Company continues to incur expenses for exploring  potential
opportunities in various foreign  countries.  If the company were to discontinue
its  exploration  of  these  opportunities  additional  funds  could be used for
payment of Parent  Company  expenses  but the Company  would lose the  potential
business  opportunities.  So long as the Brennan Bankruptcy Trustee continues to
be our  principal  creditor,  payments to the Parent  company will be limited to
$100,000  per month.  We intend to  re-finance  that debt as soon as  reasonably
possible  in  order  to  eliminate  or  lessen  restrictions  on  our  operating
subsidiary's providing cash to the Parent Company.

     On October 15, 2003, the Chapter 11 Plan of Reorganization  (the "Plan") in
the Chapter 11 cases of ITG Vegas,  Inc., the Company's wholly owned subsidiary,
and MJQ Corporation became effective.  On the effective date 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,  will be discharged,  except as otherwise  provided in the Plan or
confirmation  order.  Post-confirmation,  each of the Debtors  will  continue as
reorganized debtors. See Note 2 to the financial statements for a summary of our
obligations in connection with the Plan.

     Monthly  payments of $400,000  with  interest at 12% will be required to be
made to the Brennan Trustee, to be applied first to interest accrued and then to
principal.  In addition,  the Brennan  Trustee shall be entitled to payment of a
Stay Bonus in the amount of $200,000 if the  Payment  Obligation  shall not have
been paid in full within 12 months after the Effective  Date,  and an additional
$100,000  if the Payment  Obligation  shall not have been paid in full within 24
months  after the  Effective  Date.  Beginning  with ITG  Vegas'  2004  internal
accounting year (commencing December 29, 2003) and annually  thereafter,  75% of
ITG Vegas' Free Cash Flow (as defined in the

                                       27
<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, 2003

Plan) for the period shall be paid to the Brennan  Trustee as a Sweep Payment to
be applied to the aforesaid debt.

     Under the Plan, the maximum  amount of funds  permitted to be upstreamed by
ITG Vegas to the Parent  Company  without the consent of the Brennan  Trustee is
$100,000  per  month  as a tax  sharing  payment  (See  Note 2 to the  financial
statements).  The  Parent  Company  has  no  other  source  of  funds  presently
available.  For these  reasons,  and since the  $100,000  per month tax  sharing
payment  will be  suspended  at any time when the  Debtors  are not  current  in
payment of their  obligations to the Brennan Trustee,  no assurance can be given
that the Company  will be able to function as a going  concern and pay its debts
as they become due.

     In the event the  Company  is  unable  to make all the  payments  under the
agreements with the Brennan Trustee or otherwise  defaults in performance of the
terms of such  indebtedness,  the  Company  stands  to lose  its only  operating
business. Subject to applicable grace periods, remedies available to the Brennan
Trustee, if we default,  include the liquidation of our only operating business,
the Palm  Beach  Princess  line.  Additionally,  if we default  (subject  to the
applicable grace periods) the 3,678,146 shares of stock which we are buying from
the Brennan Trustee,  all of which are pledged to the Brennan Trustee,  could be
sold by the Brennan Trustee.  The sale of these shares by the Trustee along with
other  uncontrollable stock transfer events could affect the preservation of our
net operating  loss tax carry  forwards  (NOL's).  As of 6/30/03 the Company had
$147,000,000  available in Net Operating Loss carryforwards which can be used to
offset taxable income.  Loss of our NOL's would cause the Company to pay Federal
Income taxes on its reported taxable income and reduce reportable net income.

     In connection with our purchase of a second vessel,  the Trustee required a
prepayment of $950,000 to be applied to the Ship Mortgage payment.  Additionally
we were  required to pay the final  installment  of the  forbearance  fee in the
amount of $250,000.  Our use of ITG-Vegas  funds to pay for  improvements of the
vessel is  restricted  by the Brennan  Trustee  and, if  permitted  to be spent,
ITG-Vegas  must make  simultaneous  dollar for dollar  payments  to the  Brennan
Trustee for each dollar spent on improvements.

     We are in default on the  principal  and  interest  payments due to Service
America in the  approximate  amount of $160,000  for the  purchase of the liquor
license at Garden State Park.  The Company is  continuing to negotiate new terms
under this note and if unsuccessful  the creditor may bring action to attempt to
collect this debt.

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

     Unless and until ITGV  successfully  emerges  from its  Chapter 11 case and
pays in full all the debts to the Brennan Trustee,  our possible sources of cash
(in addition to the $100,000 per month tax sharing  payments as mentioned above)
include the two promissory  notes we received when we sold our Garden State Park
real property in November,  2000 and our Las Vegas real  property in May,  2000.
One  such   Note  is  in  the   face   amount   of  $10   million,   issued   by
Realen-Turnberry/Cherry  Hill,  LLC, the  purchaser of the Cherry Hill  property
(the "$10 Million Note"), and the other promissory note is in the face amount of
$23 million, issued by Turnberry/Las Vegas Boulevard,  LLC, purchaser of our Las
Vegas real property  (the "$23 Million  Note").  Under both Notes,  interest and
principal  payments  will be  dependent  upon,  and  payable  solely out of, the
obligor's net cash flow available for  distribution to its equity owners.  After
the obligor's equity investors have received aggregate distributions equal to

                                       28
<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, 2003

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.

     Another  source of cash to the Company  would be the  collection  of a note
currently  due from Realen-  Turnberry/Cherry  Hill,  LLC from the sale of horse
statues at Garden State Park.  The amount due and owing is $350,000 plus accrued
interest,  however, when the collection of this note is made the Company will be
required  to pay an  offsetting  note due to the  original  seller  of the horse
statues  when they  were  sold to us in the  amount  of  $132,000  plus  accrued
interest.  The net funds that would be collected  would be $218,000 plus accrued
interest. The Company is negotiating with  Realen-Turnberry/Cherry  Hill LLC for
collection  of this note but the  timing of such  collection  is  uncertain.  On
February 20, 2004 Turnberry paid $466,363 to the Company in full satisfaction of
the note due us for the sale of the horse  statues at Garden  State  Park.  As a
result the Company is required to pay approximately $175,000 for satisfaction of
the note we owe on our original purchase of the statues.

     Our working capital as of December 31, 2003 was a (deficit) of ($2,035,355)
as compared to $650,328 at June 30, 2003. The decrease in working capital during
the past six months was primarily  the result of recording  the note  obligation
for the purchase of the ship  mortgage  from the Brennan  Trustee  which current
portion is  $3,458,448,  offset by positive  cash  generated  from the operating
activities of the casino vessel.

Results of Operations for the Three Months Ended December 31, 2003 and 2002

          Overall

     Revenue for the three months ended  December  31, 2003  increased  $227,822
from  $6,772,189  in Fiscal 2003 to  $7,000,011  in Fiscal 2004  primarily  as a
result of increased  revenues  generated by the Palm Beach  Princess  operations
during the  comparable  periods.  Operating  expenses  increased $ 401,075  from
$5,893,637 in the three month period in Fiscal 2003 to $6,294,712 in Fiscal 2004
primarily  the result of an  increase  in Palm Beach  Princess  operating  costs
during the  comparable  quarters.  Interest  and  financing  expenses  increased
$229,437 in  connection  with our  purchase of the Ship  Mortgage and our common
stock from the Brennan Trustee and costs  associated with the bankruptcy  filing
of  $110,119  that we  incurred,  partially  offset by a decrease  in  corporate
general and  administrative  expenses  during the  comparable  periods.

     For the second quarter of Fiscal 2004, our net income was $363,036 or $0.05
per share and $.04 per share on a diluted  basis as  compared  to income for the
comparable  period in the prior  fiscal year of $595,001 or $0.06 per share on a
basic and diluted basis.  During the three months ended December 31, 2003 we had
3,641,692 options whose exercise price was lower than our weighted average price
of common stock which caused a decrease in diluted earnings per share.

          Vessel Operations

     During the three  months ended  December  31, 2003,  total net revenue from
vessel  operations was $7,000,011 as compared to $6,772,189 for the three months
ended  December  31,  2002.  The  increase  in  revenue of  $227,822  during the
comparable quarters primarily resulted from an increase in casino gaming revenue
primarily  the result of an increase in the  passenger  count of 7%, offset by a
slight  decrease in the  average  revenue per  passenger  during the  comparable
periods.  Net fare and on board income increased $82,585 or 9%. Casino operating
expenses which also

                                       29
<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, 2003

includes food, beverage and entertainment increased $220,003 from $ 1,859,085 or
32% of gross casino  revenue in Fiscal 2003 to $2,079,088 or 35% of gross casino
revenue in Fiscal 2004  primarily  the result of the  increasedpassenger  count.
Sales, marketing and advertising expenses increased slightly due to the increase
in passenger count. Maritime and maintenance costs to operate the ship increased
$156,915 from $1,362,763 in Fiscal 2003 to $1,519,678 in Fiscal 2004. Bankruptcy
fees increased $110,119 as a result of our bankruptcy filing on January 3, 2003,
Interest and financing fees decreased $163,058 a a result of the interest on the
Trustee Note being recognized by the Parent Company, effective October 15, 2003.
Income  before state  income tax expense for the second  quarter of operation in
Fiscal 2004 was $1,165,577 as compared to $1,197,138 in the  comparable  quarter
of Fiscal 2003, a decrease of $31,561 for the quarter.

     The Palm  Beach  Princess  performs  fourteen  cruises  weekly,  that is, a
daytime  and an evening  cruise  each day.  Each  cruise is of five to six hours
duration.  During  each  cruise,  the  Palm  Beach  Princess  offers  a range of
amenities  and services to her  passengers,  including a full  casino,  sit-down
buffet dining, live musical shows, discotheque,  bars and lounges, swimming pool
and  sundecks.  The casino  occupies  15,000  square feet aboard the ship and is
equipped with approximately 400 slot machines, all major table games (blackjack,
dice, roulette and poker), and a sports wagering book. During the second quarter
of Fiscal 2004 the ship completed 176 cruises compared to 177 cruises during the
same period last year

     The following is a  comparative  summary of income and expenses of the Palm
Beach Princess operation for the three months ended December 31, 2003 and 2002:

                                                   Three Months Ended
                                                       December 31,
                                          -------------------------------------
             Description                    2003            2002        Change
--- ----------------------------------- -----------     -----------    --------
Passenger Count                              56,922          53,147       3,775
Number of Cruises                               176             177          (1)

Operating Revenue:
    Gaming                             $  5,948,208   $   5,802,971 $   145,237
    Fare                                  1,605,106       1,515,148      89,958
    On Board                                804,242         716,286      87,956
    Less: Promotional Allowances         (1,357,545)     (1,262,216)    (95,329)
                                        -----------     -----------    --------
    Net Operating Revenue                 7,000,011       6,772,189     227,822
                                        -----------     -----------    --------
Operating Costs and Expenses:
    Gaming                                2,079,088       1,859,085     220,003
    Fare                                    852,933         790,594      62,339
    On Board                                231,356         201,787      29,569
    Maritime and Legal Expenses           1,519,678       1,362,763     156,915
    General and Administrative Expenses     809,083       1,091,279    (282,196)
    Professional Fees - Bankruptcy          110,119             -0-     110,119
    Interest and Financing Fees              61,831         224,889    (163,058)
    Depreciation and Amortization           170,346          44,655     125,691
                                        -----------     -----------    --------
    Total Operating Costs and Expenses    5,834,434       5,575,052     259,382
                                        -----------     -----------    --------
         Income Before State Income
           Tax Expense                 $  1,165,577   $   1,197,138 $   (31,561)
                                        ===========     ===========    =========

                                       30
<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, 2003

Results of Operations for the Six Months Ended December 31, 2003 and 2002

          Overall

     Revenue for the six months  ended  December 31, 2003  increased  $1,494,891
from  $13,080,278  in Fiscal 2003 to  $14,575,169  in Fiscal 2004 primarily as a
result of increased  revenues  generated by the Palm Beach  Princess  operations
during the comparable  periods.  Operating  expenses  increased  $1,009,216 from
$11,584,424 in the six month period in Fiscal 2003 to $12,593,640 in Fiscal 2004
primarily  the result of an increase in gaming income and a 4.3% increase in the
passenger  count  during  the period and costs  associated  with the  bankruptcy
filing of  $368,681,  partially  offset by a decrease in  corporate  general and
administrative  expenses during the comparable  periods.  Net Income for the six
months  ended  December  31,  2003 was  $1,122,096  as compared to net income of
$1,008,114 for the comparative  period last year. The increase was the result of
an increase in operating income of $485,676  reduced by additional  interest and
financing  expense in  connection  with our  purchase of the Ship  Mortgage  and
purchase of our common stock from the Brennan Trustee.  Net Income per share for
the six months ended  December 31, 2003 was $.14 and on a diluted basis was $.11
as compared to net income per share for the six months  ended  December 31, 2002
of $.09 on a basic and diluted basis. For the six months ended December 31, 2003
we had  3,641,692  options  whose  exercise  price was lower  than our  weighted
average  price of the common stock which  caused a decrease in diluted  earnings
per share.

          Vessel Operations

     During  the  first  half of Fiscal  2004,  total net  revenue  from  vessel
operations  was  $14,575,169  as compared to  $13,080,278  for the first half of
Fiscal 2003. The increase in revenue of $1,494,891 during the comparable periods
primarily  resulted  from an  increase  in casino  gaming  and on board  revenue
primarily  the  result  of an  increase  in the  passenger  count of 4.3% and an
approximate  6.8%  increase in the  average  revenue  per  passenger  during the
comparable periods.  Net fare and on board income increased $50,702 or less than
2%.  Casino   operating   expenses  which  also  includes  food,   beverage  and
entertainment  increased $354,926 from $3,803,778 or 34% of gross casino revenue
in Fiscal  2003 to  $4,158,704  or 33% of gross  casino  revenue in Fiscal  2004
primarily  the result of the increased  passenger  count.  Sales,  marketing and
advertising  expenses increased slightly due to the increase in passenger count.
Maritime  and  maintenance  costs to operate the ship  increased  $488,261  from
$2,780,687 in Fiscal 2003 to $3,268,948  in Fiscal 2004,  also  primarily due to
the scheduled wet dock  maintenance  during the second  quarter.  Administrative
expenses  decreased  10% in Fiscal 2004.  Income  before state income taxes from
operation  of the  vessel  for  the six  months  ended  December  31,  2003  was
$2,516,934 as compared to $2,225,502 for the six months ended December 31, 2002.
During the six months ended  December 31, 2003 the ship completed 343 cruises as
compared to 356 cruises during the  corresponding  period last year. During this
year 12 cruises were missed due to wet dock maintenance.



                                       31
<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, 2003

     The following is a  comparative  summary of income and expenses of the Palm
Beach  Princess  operation for the six month periods ended December 31, 2003 and
2002:

                                                      Six Months Ended
                                                        December 31,
                                          -------------------------------------
             Description                    2003           2002        Change
--- -----------------------------------  ----------    -----------   ----------
Passenger Count                             118,409        113,532        4,877
Number of Cruises                               343            356          (13)

Operating Revenue:
    Gaming                             $ 12,442,895   $ 10,998,707  $ 1,444,188
    Fare                                  3,219,576      3,256,571      (36,995)
    On Board                              1,596,959      1,488,570      108,389
    Less: Promotional Allowances         (2,684,261)    (2,663,570)     (20,692)
                                         ----------    -----------    ---------
    Net Operating Revenue                14,575,169     13,080,278    1,494,891
                                         ----------    -----------    ---------
Operating Costs and Expenses:
    Gaming                                4,158,704      3,803,778      354,926
    Fare                                  1,566,687      1,510,782       55,905
    On Board                                426,597        397,008       29,589
    Maritime and Legal Expenses           3,268,948      2,780,687      488,261
    General and Administrative Expenses   1,605,044      1,767,048     (162,004)
    Professional Fees - Bankruptcy          368,681              0      368,681
    Interest and Financing Fees             362,830        479,771     (116,941)
    Depreciation and Amortization           300,743        115,702      185,041
                                         ----------    -----------    ---------
    Total Operating Costs and Expenses   12,058,234     10,854,776    1,203,458
                                         ----------    -----------    ---------
         Income Before State Income
           Tax Expense                 $  2,516,934   $  2,225,502  $   291,432
                                         ==========    ===========    =========


                                       32
<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, 2003

Item 4. - CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

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

     The Company's  management  with the  participation  of our chief  executive
officer and chief financial officer is continuing to perform  evaluations of the
design and  operation of the Company's  entire  system of internal  controls and
financial  reporting  over a period  of time  that  will be  adequate  for it to
determine,  whether,  as of the end of the Company's  current  fiscal year,  the
design and operation of our internal controls and procedures are effective.

CHANGES IN INTERNAL CONTROLS

     There were no changes that occurred  during the fiscal  quarter  covered by
this  Quarterly  Report  on Form 10- Q that  have  materially  affected,  or are
reasonablely  likely to materially  affect, our internal controls over financial
reporting.


                                       33
<PAGE>

                    INTERNATIONAL THOROUGHBRED BREEDERS, INC.
                                AND SUBSIDIARIES

                                     PART II

                                OTHER INFORMATION

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

          (a) Exhibits

Exhibit               Description of Exhibit
-------               ----------------------
10.1 Amendment to Master Settlement Agreement, October 15, 2003.

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

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

          (b) Reports on Form 8-K

               The Company did not file any reports on Form 8-K with  respect to
               the quarter ended December 31, 2003.


                                       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.



February 23, 2004    /s/Francis W. Murray
                     -----------------------------------------------------
                     Francis W. Murray, President, Chief Executive Officer
                     and Chief Financial Officer









                                       35

<PAGE>