FORM 10-Q

                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

(Mark One)

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

For the quarterly period ended                  March 31, 2007
                               -------------------------------------------------
                                                     OR

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

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


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

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

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

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

                                 (302) 427-7599
--------------------------------------------------------------------------------
              (Registrant's telephone number, including area code)

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

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

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


     Indicate by check as to whether the registrant is a shell company (as
defined in Exchange Act Rule 12b-2).
Yes         No  X
    -----     ----

                      APPLICABLE ONLY TO CORPORATE ISSUERS:

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

             Class                          Outstanding at May 1, 2007
-----------------------------             ------------------------------
Common Stock, $2.00 par value                    11,367,487 Shares

<PAGE>




                    INTERNATIONAL THOROUGHBRED BREEDERS, INC.
                             (DEBTOR-IN-POSSESSION)
                                    FORM 10-Q

                                QUARTERLY REPORT
                    for the Three Months ended March 31, 2007
                                   (Unaudited)


                                TABLE OF CONTENTS

                                                                       PAGE
                                     PART I.
                              FINANCIAL INFORMATION

Item 1. Financial Statements:

         Consolidated Balance Sheets
                  as of March 31, 2007 and December 31, 2006............1-2

         Consolidated Statements of Operations
                  for the Three Months ended March 31, 2007 and 2006....3

         Consolidated Statement of Stockholders' Equity
                  for the Three Months ended March 31, 2007.............4

         Consolidated Statements of Cash Flows
                  for the Three Months ended March 31, 2007 and 2006....5

         Notes to Consolidated Financial Statements.....................6-19

Item 2. Management's Discussion and Analysis of
                  Financial Condition and Results of Operations.........20-29

Item 3. Quantitative and Qualitative Disclosures About Market Risk......30

Item 4. Controls and Procedures.........................................30

                                    PART II.
                                OTHER INFORMATION

Item 6. Exhibits  ......................................................31

SIGNATURES        ......................................................32

CERTIFICATIONS..........................................................33-35




<PAGE>

                    INTERNATIONAL THOROUGHBRED BREEDERS, INC.
                                AND SUBSIDIARIES

                             (Debtor-in-Possession)

                           CONSOLIDATED BALANCE SHEETS
                   AS OF MARCH 31, 2007 AND DECEMBER 31, 2006

                                     ASSETS
<TABLE>
                                                                  March 31,
                                                                    2007           December 31,
                                                                 (UNAUDITED)          2006
                                                               ---------------   ---------------
<CAPTION>
<S>                                                            <C>               <C>
 CURRENT ASSETS:
      Cash and Cash Equivalents                                $    1,628,550    $      871,236
      Accounts Receivable                                             280,938           335,500
      Prepaid Expenses                                              2,090,332         1,520,613
      Other Current Assets                                            199,730           153,136
      Assets of Discontinued Operations                                   436               436
                                                               ---------------   ---------------
           TOTAL CURRENT ASSETS                                     4,199,986         2,880,921
                                                               ---------------   ---------------


 VESSELS & EQUIPMENT
      Vessel - Palm Beach Princess - under Capital Lease           17,500,000        17,500,000
      Equipment                                                     4,008,459         3,912,135
      Leasehold Improvements                                          921,899           921,899
      Vessel - Big Easy - under Capital Lease - Not in Service     20,305,348        20,305,348
      Vessel - Royal Star - Not Placed in Service                   3,054,735         3,054,735
                                                               ---------------   ---------------
                                                                   45,790,441        45,694,117
      LESS: Accumulated Depreciation and Amortization               7,081,967         6,562,315
                                                               ---------------   ---------------
           TOTAL VESSELS & EQUIPMENT - NET                         38,708,474        39,131,802
                                                               ---------------   ---------------


 OTHER ASSETS:
      Notes Receivable                                              5,300,000         5,300,000
      Vessel Deposits - Related Parties                             9,733,136         9,733,136
      Deposits and Other Assets - Related Parties                   2,996,302         2,978,340
      Deposits and Other Assets - Non-Related Parties                 937,236           993,191
      Spare Parts Inventory                                           997,187         1,018,332
                                                               ---------------   ---------------
           TOTAL OTHER ASSETS                                      19,963,861        20,022,999
                                                               ---------------   ---------------


 TOTAL ASSETS                                                  $   62,872,321    $   62,035,722
                                                               ===============   ===============
</TABLE>


 See Notes to Consolidated Financial Statements.

                                        1

<PAGE>


                    INTERNATIONAL THOROUGHBRED BREEDERS, INC.
                                AND SUBSIDIARIES

                             (Debtor-in-Possession)

                           CONSOLIDATED BALANCE SHEETS
                   AS OF MARCH 31, 2007 AND DECEMBER 31, 2006

                      LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
                                                                   March 31,
                                                                     2007             December 31,
                                                                  (UNAUDITED)            2006
                                                               -------------------   -------------
<CAPTION>
<S>                                                            <C>                   <C>
 CURRENT LIABILITIES:
      Accounts Payable                                         $          408,035    $    213,206
      Accrued Expenses                                                  1,898,549       1,655,542
      Liabilities of Discontinued Operations                              417,800         415,400
                                                               -------------------   -------------
           TOTAL CURRENT LIABILITIES                                    2,724,384       2,284,148


 LIABILITIES SUBJECT TO COMPROMISE:
      Notes Payable PDS                                                38,334,810      35,429,982
      Equipment Operating Lease Payable - PDS                           2,125,530       2,125,530
      Notes Payable                                                       888,639         888,639
      Accounts Payable & Accrued Expenses                               9,395,549       9,396,731
      Vessel Capital Lease Payable - Long Term Portion -
       Related Party                                                    3,500,000       3,500,000
      Deferred Interest                                                 1,239,618       1,239,618
      Accrued Expenses -Bareboat  Charter - Related Party               2,071,532       1,531,472
      Related Party Liabilities                                         1,691,898       1,626,828
                                                               -------------------   -------------
           TOTAL LIABILITIES SUBJECT TO COMPROMISE:                    59,247,576      55,738,800
                                                               -------------------   -------------

           TOTAL LIABILITIES                                           61,971,960      58,022,948
                                                               -------------------   -------------

 DEFERRED INCOME                                                        1,469,810       1,487,726

 COMMITMENTS AND CONTINGENCIES                                                  -               -

 STOCKHOLDERS' EQUITY:
      Series A Preferred Stock, $100 Par Value,
         Authorized 500,000 Shares, 362,844
         Issued and Outstanding                                        36,284,375      36,284,375
      Series B Convertible Preferred Stock, $10 Par Value,
         Authorized 500,000 Shares, 500,000
         Issued and Outstanding                                         5,000,000       5,000,000
      Common Stock, $2 Par Value, Authorized 25,000,000 Shares,
        12,282,564,  Issued and Outstanding                            24,565,125      24,565,125
      Capital in Excess of Par                                         24,232,083      24,232,083
      (Deficit)                                                       (90,193,494)    (87,098,997)
                                                               -------------------   -------------
                                                                         (111,911)      2,982,586
      LESS:
         Treasury Stock, 915,077 Shares                                  (457,538)       (457,538)

                                                               -------------------   -------------
           TOTAL STOCKHOLDERS' EQUITY                                    (569,449)      2,525,048

 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                    $       62,872,321    $ 62,035,722
                                                               ===================   =============
</TABLE>


 See Notes to Consolidated Financial Statements.

                                        2

<PAGE>


                    INTERNATIONAL THOROUGHBRED BREEDERS, INC.
                                AND SUBSIDIARIES

                             (Debtor-in-Possession)

                      CONSOLIDATED STATEMENTS OF OPERATIONS
               FOR THE THREE MONTHS ENDED MARCH 31, 2007 AND 2006
                                  (UNAUDITED)

<TABLE>
                                                                March 31,
                                                     --------------------------------
                                                           2007               2006
                                                     ---------------   --------------
<CAPTION>
<S>                                                  <C>               <C>
 OPERATING REVENUES:
      Gaming                                         $    6,578,907    $   7,853,325
      Fare                                                  588,668          961,016
      On Board                                              376,436          428,032
      Other                                                 176,675          151,223
                                                     ---------------   --------------
           NET OPERATING REVENUES                         7,720,686        9,393,596
                                                     ---------------   --------------

 OPERATING COSTS AND EXPENSES:
      Gaming                                              2,300,278        3,207,918
      Fare                                                  745,788          794,972
      On Board                                              193,692          242,451
      Maritime & Legal Expenses                           1,964,175        2,760,359
      General & Administrative Expenses                     680,317          855,612
      General & Administrative Expenses - Parent            419,367          607,864
      Ship Carrying Costs - Big Easy                        458,740                -
      Ship Carrying Costs - Royal Star                      114,303          385,956
      Development Costs - Other                              23,348           73,074
      Depreciation & Amortization                           602,417        1,055,418
      Loss on Impairment of Assets                                -          400,000
      Bankruptcy Costs                                      112,250                -
                                                     ---------------   --------------
           TOTAL OPERATING COSTS AND EXPENSES             7,614,675       10,383,624
                                                     ---------------   --------------

 OPERATING INCOME (LOSS)                                    106,011         (990,028)
                                                     ---------------   --------------

 OTHER INCOME (EXPENSE):
      Interest and Financing Expenses                    (2,664,107)      (1,984,440)
      Interest and Financing Expenses - Related Party      (540,060)        (550,965)
      Cost of Warrants Granted for Financing                      -         (493,300)
      Interest Income                                         3,659              649
      Interest Income Related Parties                             -           71,785
                                                     ---------------   --------------
           TOTAL OTHER INCOME (EXPENSE)                  (3,200,508)      (2,956,271)
                                                     ---------------   --------------

 (LOSS) BEFORE TAX PROVISION                             (3,094,497)      (3,946,299)
       Income Tax Expense                                         -                -
                                                     ---------------   --------------

 NET (LOSS)                                          $   (3,094,497)   $  (3,946,299)
                                                     ===============   ==============

 BASIC AND DILUTED INCOME (LOSS) PER COMMON SHARE:   $        (0.27)   $       (0.35)
                                                     ===============   ==============

 WEIGHTED AVERAGE COMMON
    SHARES OUTSTANDING - Basic and Diluted               11,367,487       11,367,487
                                                     ===============   ==============
</TABLE>

 See Notes to Consolidated Financial Statements.


                                        3
<PAGE>

                    INTERNATIONAL THOROUGHBRED BREEDERS, INC.
                                AND SUBSIDIARIES

                             (Debtor-in-Possession)

                 CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
                    FOR THE THREE MONTHS ENDED MARCH 31, 2007
                                  (UNAUDITED)

<TABLE>
                                          Series A             Series B Convertible
                                          Preferred                 Preferred                 Common
                                  -------------------------  ----------------------  -------------------------
                                  Number of                  Number of                Number of
                                  Shares         Amount      Shares        Amount     Shares          Amount
                                  ----------   ------------  --------   -----------  -----------  ------------
<CAPTION>
<S>                                 <C>        <C>           <C>        <C>          <C>          <C>
BALANCE - DECEMBER 31, 2006         362,844    $36,284,375   500,000    $5,000,000   12,282,564   $24,565,125
   Warrants Issued as Compensation        -              -         -             -            -             -
Net (Loss) for the Three Months
   Ended March 31, 2007                   -              -         -             -            -             -

                                  ----------   ------------  --------   -----------  -----------  ------------
BALANCE - MARCH 31, 2007            362,844    $36,284,375   500,000    $5,000,000   12,282,564   $24,565,125
                                  ==========   ============  ========   ===========  ===========  ============
</TABLE>
<TABLE>
                                    Capital                         Treasury
                                    in Excess                       Stock
                                    of Par          (Deficit)       At Cost       Total
                                  --------------  --------------- ------------  -----------
<CAPTION>
<S>                                 <C>           <C>             <C>           <C>
BALANCE - DECEMBER 31, 2006         $24,232,083   $  (87,098,997) $  (457,538)  $2,525,048
   Warrants Issued as Compensation            -                -            -            -
Net (Loss) for the Three Months
   Ended March 31, 2007                       -       (3,094,497)           -   (3,094,497)

                                  --------------  --------------- ------------  -----------
BALANCE - MARCH 31, 2007            $24,232,083   $  (90,193,494) $  (457,538)  $ (569,449)
                                  ==============  =============== ============  ===========
</TABLE>

See Notes to Consolidated Financial Statements.

                                       4

<PAGE>

                    INTERNATIONAL THOROUGHBRED BREEDERS, INC.
                                AND SUBSIDIARIES

                             (Debtor-in-Possession)

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
               FOR THE THREE MONTHS ENDED MARCH 31, 2007 AND 2006
                                  (UNAUDITED)
<TABLE>
                                                                              March 31,
                                                                   -----------------------------
                                                                        2007          2006
                                                                   -------------   -------------
<CAPTION>
<S>                                                                <C>             <C>
 CASH FLOWS FROM OPERATING ACTIVITIES:
      (LOSS) BEFORE DISCONTINUED OPERATIONS                        $ (3,094,497)   $ (3,946,299)
      Adjustments to reconcile income (loss)
          to net cash (used in)provided by
          operating activities:
           Depreciation and Amortization                                602,417       1,055,418
           Expense of Options/Warrants Granted                                -         493,300
           Impairment of Assets                                               -         400,000
           Interest Added to Capital Lease Debt - PDS                 2,538,270               -
           Increase (Decrease) in Deferred Income                       (17,916)        (17,915)
           Changes in Operating Assets and Liabilities -
              (Increase) Decrease in Accounts Receivable                 69,477         (10,269)
              (Increase) Decrease in Other Assets                       (46,595)        307,248
              (Increase) Decrease in Prepaid Expenses                  (569,719)       (795,602)
              Increase (Decrease) in Accounts
                Payable and Accrued Expenses                          1,326,413       2,392,521
                                                                   -------------   -------------
      CASH (USED IN) OPERATING ACTIVITIES BEFORE
         DISCONTINUED OPERATIONS                                        807,850        (121,598)
      CASH PROVIDED BY DISCONTINUED OPERATING ACTIVITIES                  2,400           2,400
                                                                   -------------   -------------
      NET CASH (USED IN) OPERATING ACTIVITIES                           810,250        (119,198)
                                                                   -------------   -------------

 CASH FLOWS FROM INVESTING ACTIVITIES:
     Capital Expenditures                                               (75,179)        (45,901)
     (Increase) Decrease in Other Investment Activity                    55,955         (27,192)
     (Increase) in Other Investment Activity - Related Party                  -        (242,956)
                                                                   -------------   -------------
      NET CASH (USED IN) INVESTING ACTIVITIES                           (19,224)       (316,049)
                                                                   -------------   -------------

 CASH FLOWS FROM FINANCING ACTIVITIES:
     Funds Received from PDS Notes & Other Lenders                            -         124,883
     Advances (Paid) Received (to) From Related Parties                  (9,609)       (683,097)
     Principal Payments on Short Term Notes                             (24,103)        (41,311)
     Principal Payments on Long Term Notes                                    -         (26,715)
     Decrease in Balances Due to/from Discontinued Subsidiaries           2,400           2,400
                                                                   -------------   -------------
      CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES
        BEFORE DISCONTINUED FINANCING ACTIVITIES                        (31,312)       (623,840)
      CASH (USED IN) DISCONTINUED FINANCING ACTIVITIES                   (2,400)         (2,400)
                                                                   -------------   -------------
      NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES               (33,712)       (626,240)
                                                                   -------------   -------------

 NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                   757,314      (1,061,487)
           LESS CASH AND CASH EQUIVALENTS  FROM
             DISCONTINUED OPERATIONS                                          -             336
      CASH AND CASH EQUIVALENTS AT BEGINNING OF THE PERIOD              871,236       1,846,239
                                                                   -------------   -------------

      CASH AND CASH EQUIVALENTS AT END OF THE PERIOD               $  1,628,550    $    785,088
                                                                   =============   =============

      Supplemental Disclosures of Cash Flow Information:
           Cash paid during the period for:
           Interest                                                $      9,086    $      8,276
           Income Taxes                                            $          -    $          -
</TABLE>

     Supplemental Schedule of Non-Cash Investing and Financing Activities:
     During the Three Months Ended March 31, 2007, the PDS interest expense for
        the period in the amount of $2,538,270 added to the principal balance of
        the respective leases.

 See Notes to Consolidated Financial Statements.

                                        5
<PAGE>

                    INTERNATIONAL THOROUGHBRED BREEDERS, INC
                                AND SUBSIDIARIES
                             (DEBTOR-IN-POSSESION)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  (Unaudited)

(1)  CHAPTER 11 FILING, AND BASIS OF PRESENTATION

     Between  December 4, 2006 and December 7, 2006,  the Company and six of its
subsidiaries, herein referred to as the Debtors, along with four companies owned
or  controlled  by our  principal  stockholder  and  Chairman of the Board filed
voluntary  petitions for reorganization  under Chapter 11 of the U.S. Bankruptcy
Code in the U.S.  Bankruptcy  Court for the Southern  District of Florida  (Palm
Beach Division) (the "Chapter 11 Cases").  These cases were consolidated for the
purpose of joint administration and were assigned case number  06-16350-BKC-PGH.
We  filed  the  Chapter  11  Case  because  we  were  experiencing  difficulties
generating   sufficient   cash  flow  from  operations  to  meet  our  financial
obligations  under the  Promissory  Notes and  equipment  leases with PDS Gaming
Corporation after expiration of the Forbearance Agreements.

     Under   Chapter  11,  the  Company  is  operating   its   businesses  as  a
debtor-in-possession   ("DIP")  under  court   protection   from  creditors  and
claimants.  Since the  Chapter 11 filing,  all orders  sufficient  to enable the
Company  to  conduct  normal  business  activities,  have  been  entered  by the
Bankruptcy  Court.  While the Company is subject to Chapter 11, all transactions
not in the  ordinary  course  of  business  require  the prior  approval  of the
Bankruptcy Court.

     As a consequence of the Chapter 11 filing,  pending  litigation against the
Company is  generally  stayed,  and no party may take any action to collect  its
pre-petition  claims except pursuant to order of the Bankruptcy Court. April 18,
2007 was the last date by which  holders of pre-filing  date claims  against the
Debtors could file such claims.  Any holder of a claim that was required to file
such claim and did not do so may be barred from asserting such claim against the
Debtors and, accordingly,  may not be able to participate in any distribution on
account of such claim.  Differences  between  claim  amounts  identified  by the
Debtors and claims  filed by  claimants  will be  investigated  and  resolved in
connection  with the Debtors'  claims  resolution  process,  and only holders of
claims  that are  ultimately  allowed  for  purposes  of Chapter 11 case will be
entitled to distribution.  The Company has not yet completed its analysis of all
the proofs of claim. Since the treatment,  including payment,  of allowed claims
is subject to a confirmed plan of reorganization, the ultimate distribution with
respect to allowed claims is not presently ascertainable.

     Although we filed a timely  motion to extend the  exclusive  period for the
Debtors to file a plan(s) of  reorganization,  our largest secured  lender,  PDS
Gaming  Corporation,  filed a motion on April 11, 2006 objecting to the proposed
extension. If the exclusivity period is not extended, other parties in interest,
including the Creditor's Committee,  the secured lender or other creditors could
file a plan of reorganization. The companies have reached an agreement that will
give the  companies  and the  Official  Committee  of  Unsecured  Creditors  the
exclusive  right to file a Chapter  11 plan  through  August 1,  2007,  subject,
however,  to the  qualification  that  PDS  and one  other  specified  group  of
creditors  will also have the right to file a plan upon the  earlier of June 21,
2007, or the filing of a plan or motion seeking  approval of a sale or refinance
transaction to which PDS objects.

     A financial  institution  has provided a  commitment  for a secured loan to
fund the  majority  of the  proceeds  needed  to  create a new  special  purpose
subsidiary  to own and  operate  the  Palm  Beach  Princess  business,  with the
proceeds  from the  financing to be used to pay existing  creditors  and provide
working  capital to the Princess  business.  Such  commitment will be subject to
Bankruptcy Court approval, an additional equity infusion,  and satisfactory loan
documentation.

     We are in the process of  negotiating  a series of  transactions  that will
allow  for the  redeployment  of the  Big  Easy to a  foreign  jurisdiction.  We
anticipate  receiving  a  term  sheet  for  a  secured  loan  from  a  financial
institution  in order to fund a  portion  of the  proceeds  necessary  to fund a
special purpose affiliate of the company to own and operate the Big Easy in this
foreign  location.  We  anticipate  that the term  sheet  will be  subject to an
additional  equity  investment  from a  third-party,  successful  negotiation of
operating  agreements  and  satisfactory  loan  documentation.  Closing  of  the
transactions  will also be subject to bankruptcy  court approval.  Proceeds from
the  transaction  will be used to pay  existing  creditors  and provide  working
capital,  including  funding start up and relocation  expenses,  to the Big Easy
business.  No  assurances  can be  given  that we will be  successful  in  these
negotiations.

     The  consolidated  financial  statements  have  been  prepared  on a "going
concern" basis  accordance  with GAAP. The "going concern" basis of presentation
assumes that we will continue in operation for the  foreseeable  future and will
be able to realize our assets and discharge our liabilities in the normal course
of business. Because of the Chapter 11 case and the circumstances leading to the
filing  thereof,  our  ability to  continue  as a "going  concern" is subject to
substantial  doubt and is dependent upon, among other things,  confirmation of a
plan of reorganization, our ability to comply with the

                                       6
<PAGE>

terms of the DIP  Facility,  and our ability to generate  sufficient  cash flows
from operations, asset sales and financing arrangements to meet our obligations.
There can be no assurance that this can be accomplished  and if it were not, our
ability  to  realize  the  carrying  value  of  our  assets  and  discharge  our
liabilities  would be  subject to  substantial  uncertainty.  Therefore,  if the
"going  concern"  basis  were  not  used  for  the  Financial  Statements,  then
significant  adjustments  could be necessary to the carrying value of assets and
liabilities,   the  revenues  and  expenses  reported,  and  the  balance  sheet
classifications used.

     The consolidated financial statements have been prepared in accordance with
the American  Institute of Certified  Accountants'  Statement of Position  (SOP)
90-7,  "Financial  Reporting by Entities in Reorganization  Under the Bankruptcy
Code" and on a going concern basis, which contemplates continuity of operations,
realization of assets,  and liquidation of liabilities in the ordinary course of
business.  As a result of our Chapter 11 filing,  the  realization of assets and
liquidation of liabilities are subject to uncertainty.  Under SOP 90-7,  certain
liabilities   existing  prior  to  the  Chapter  11  filing  are  classified  as
Liabilities   Subject  to  Compromise  on  the   Consolidated   Balance  Sheets.
Additionally,  professional fees and expenses directly related to the Chapter 11
proceeding are reported separately as reorganization items.

(2)  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     (A) Nature of Operations -  International  Thoroughbred  Breeders,  Inc., a
Delaware corporation ("ITB" and together with its subsidiaries,  the "Company"),
was incorporated on October 31, 1980. Its principal  operating  subsidiary,  ITG
Vegas,  Inc. ("ITG Vegas") is currently  engaged in an entertainment  cruise and
casino  ship  business  under a  bareboat  charter  of the vessel M/V Palm Beach
Princess (the "Palm Beach Princess").  The Palm Beach Princess performs fourteen
cruises weekly from the Port of Palm Beach,  Florida,  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,  bars and  lounges,  swimming  pool and  sundecks.  The  casino  occupies
approximately   15,000  square  feet  aboard  the  ship  and  is  equipped  with
approximately 425 slot machines, 24 table games, including blackjack,  craps and
roulette, 5 poker tables, and a sports wagering book.

     Using the funding provided by the PDS Transactions and working capital, our
subsidiary,  ITG Palm  Beach,  LLC,  began  making  alterations,  retrofits  and
improvements to a second vessel, the Big Easy, to prepare it for use as a casino
cruise ship.  After  numerous  delays  caused by start up problems and hurricane
Wilma,  we began limited  regular  passenger  service also from the Port of Palm
Beach,  Florida on  November  12,  2005.  On  February  1, 2006 we  indefinitely
suspended operations of the Big Easy after two and one half months of operations
because the Coast Guard removed the vessel's Certificate of Inspection until the
installation of an insulating bulkhead was completed. The February 1, 2006 Coast
Guard  decision was the last in a series of  unforeseen  business  circumstances
which limited  management's  ability to introduce the Big Easy to the market and
necessitated   the  suspension  of  Big  Easy   commercial   cruise   operations
indefinitely.

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

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

     (D) Revenue Recognition - Casino revenue consists of gaming winnings net of
losses. Net income is the difference between wagers placed and winning payout to
patrons and is recorded  at the time wagers are made.  The vast  majority of the
wagers  are in the form of cash;  although,  to a  limited  extent,  we do grant
credit to our customers.  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  activities  and skeet  shooting.  These  revenues  are
recognized on the date they are earned.

     (E)  Accounting  Periods - The  subsidiary  which  operates  the Palm Beach
Princess  ends its  quarterly  accounting  periods  on the last  Sunday  of each
quarter.  These  end of the week  cut  offs  create  more  comparability  of the
Company's  operations,  by  generally  having an equal  number of weeks (13) and
week-end days in each quarter.  From time to time an additional week is included
in our accounting period.

     (F) Spare Parts  Inventory - Spare parts  inventory  consists of  operating
supplies,  maintenance materials and spare parts. The inventories are carried at
cost.  It is necessary  that these parts be readily  available so that the daily
cruise  operations are not cancelled due to mechanical  failures.  The inventory
was purchased  from Palm Beach Maritime  Corporation  ("PBMC") at a time when we
were operating the Palm Beach Princess under a bare boat charter with PBMC. PBMC
is owned by Mr.  Francis W. Murray.  Fair value of this inventory was determined
by  actual  invoice  prices  and  estimates  made  by the  Palm  Beach  Princess
engineers.

                                       7
<PAGE>

     (G) Deferred  Financing Costs - Deferred  financing costs that are incurred
by the  Company  in  connection  with  the  issuance  of Debt are  deferred  and
amortized to interest expense over the life of the underlying indebtedness using
the straight-line method.

     (H)  Depreciation and Amortization - Depreciation of property and equipment
were computed by the  straight-line  method at rates  adequate to allocate their
cost or  adjusted  fair  value  in  accordance  with U.  S.  generally  accepted
accounting   principles  over  the  estimated  remaining  useful  lives  of  the
respective assets.  Amortization  expense includes the write off of major vessel
repairs and  maintenance  work completed at dry dock period.  These expenses are
written  off during a two year period  following  the dry dock  period.  For the
quarter  ended March 31, 2007 and 2006,  the  amortized  expense was $82,765 and
$84,635.

     As a result of the PDS  transactions  we are  leasing  the  vessel M/V Palm
Beach  Princess and the Big Easy under capital lease  arrangements.  The Company
began  depreciating  the M/V Palm Beach Princess during our previous fiscal year
end of June 30, 2005 and began  depreciating  the Big Easy when it was placed in
service on October  18,  2005.  As a result of the Big Easy being  removed  from
service  during the quarter ended March 31, 2006 and the  unlikelihood  that the
vessel  will be  returned  to  service in the  immediate  future,  we  suspended
depreciating the vessel.

     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.  Beginning  with fiscal years starting
after December 15, 2001, SFAS 142 requires an annual  impairment review based on
fair value for all intangible assets with indefinite lives.

     (I) Net Assets of Discontinued Operations - At March 31, 2007 and 2006, the
remaining net assets and  liabilities of Garden State Park and Freehold  Raceway
were  classified as "Assets of  Discontinued  Operations."  and  "Liabilities of
Discontinued Operations."

     (J) Recent Accounting Pronouncements

     In July  2002,  the  FASB  issued  SFAS  No.  148,  "Accounting  for  Costs
Associated with Exit or Disposal Activities".  This statement requires companies
to recognize  costs  associated  with exit or disposal  activities when they are
incurred  rather than at the date of a commitment  to an exit or disposal  plan.
Management  recognized the costs incurred  associated with the suspension of the
Big Easy  operations on February 1, 2006 in our quarter ended March 31, 2006 and
future carrying costs will be recognized as incurred.

     In  December,  2004,  the FASB issued  Statement  No. 123  (revised  2004),
"Stock-Based Payment" (SFAS 123R). This statement replaces SFAS 123, "Accounting
for Stock-Based  Compensation",  and supersedes APB Opinion No. 25,  "Accounting
for Stock Issued to  Employees"  (APB 25). SFAS 123R is now effective for public
companies for the first interim or annual  reporting  period of the registrant's
first fiscal year  beginning on or after June 15, 2005. In  accordance  with the
new rule,  the  Company  will begin to  expense  the cost of  employee  services
received in exchange for an award of equity  instruments based on the grant-date
fair value of the award,  effective July 1, 2005. Until July 1, 2005 the Company
accounted for stock option grants using the intrinsic-value method in accordance
with APB 25. Under the intrinsic-value method, because the exercise price of the
stock  options  granted  was equal to or greater  than the  market  price of the
underlying  stock  on the  date  of  the  grant,  no  compensation  expense  was
recognized.  No options were granted  during the year ended December 31, 2006 or
quarter ended March 31, 2007.

     (K) Income Taxes - The Company has adopted the  provisions  of Statement of
Financial  Accounting  Standards No. 109,  "Accounting  for Income Taxes" ("SFAS
109").  SFAS 109 requires a company to recognize  deferred tax  liabilities  and
assets  for the  expected  future  tax  consequences  of  events  that have been
recognized  in its  financial  statements  or tax  returns.  Under this  method,
deferred  tax  liabilities  and assets are  determined  based on the  difference
between the  financial  statement  carrying  amounts and tax basis of assets and
liabilities. Deferred tax assets and liabilities are adjusted for the effects of
changes in tax laws and rates on the date of enactment. The Company has provided
a valuation  reserve  against the full amount of the net operating  loss benefit
because in the  opinion of  management  based upon the  earnings  history of the
Company, it is more likely than not that the benefits will not be realized.

     (L) Cash and Cash  Equivalents  - The Company  considers  all highly liquid
investments  with  an  original

                                       8
<PAGE>

maturity of three months or less to be cash equivalents.

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

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

     (O)  Deferred  Income - The gain  from the sale of our  Garden  State  Park
property on  November  28, 2000 in the amount of  $1,439,951  has been  deferred
until  such  time as the note  receivable  on the sale  has been  collected.  In
connection   with  the  PDS  Transaction  we  have  deferred  the  gain  on  the
sale/leaseback of equipment of $101,522 over the term of the equipment lease.

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

     (Q) Goodwill - Through the purchase of Leo Equity,  we 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,  some 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.  The Company  accounts for
goodwill in accordance with Statement of Financial Accounting Standards ("SFAS")
No. 142,  "Goodwill and Other  Intangible  Assets".  In accordance with SFAS No.
142,  amortization  of  goodwill  is not  required.  Goodwill is tested at least
annually for  impairment by comparing  the fair value of the recorded  assets to
their carrying  amount.  If the carrying amount of the goodwill exceeds its fair
value, an impairment loss is recognized.

(3)  DESCRIPTION OF LEASING ARRANGEMENTS

     The Company and  several of its  subsidiaries  have  entered  into  charter
transactions  for two vessels and lease  transactions  for  equipment  placed on
three vessels.

     The charter for the Palm Beach Princess, which is currently in service, has
been  accounted  for as a capital  lease.  Principal  payments on the Palm Beach
Princess  portion  of the loan ($14  million)  will  reduce  the  capital  lease
purchase  liability  and the interest  portion of each  monthly  payment will be
expensed.  Depreciation  expense  will be recorded  for the Palm Beach  Princess
using an  estimated  useful life of 20 years.  Charter  hire fees of $50,000 per
month plus 1% of gross  revenues of the Palm Beach  Princess have been accounted
for as additional  interest  expense to related  parties and will be expensed as
incurred.  The lease for the gaming  equipment  currently aboard the vessels and
the lease for new gaming equipment will be accounted for as an operating lease.

     We also charter the Big Easy and lease gaming equipment aboard that vessel.
As a result of the June 30, 2005 PDS  transaction  and the Amended and  Restated
Bareboat  Charter  and Option to  Purchase  Agreement  with Cruise II, a company
controlled by Francis W. Murray, we have accounted for the Big Easy charter as a
capital  lease.  Principal  payments on the Big Easy  portion of the PDS loan of
$12.6 million will reduce the capital lease purchase  liability and the interest
portion of each monthly payment will be expensed.  Charter hire fees of $100,000
per month have been  accounted  for as  additional  interest  expense to related
parties and will be expensed  as  incurred.  The  transaction  also  permits the
Company to purchase  the Big Easy for the  appraised  value of the vessel  which
shall be  determined  upon the  refitting and  refurbishing  of the vessel.  The
Company has determined the value of the Big Easy by  capitalizing  the total of:
1) the costs it had incurred for  improvements  it had made to the Big Easy; and
2) the present value of the payments  required under the PDS Gaming loans on the
date we recorded the capital lease.

     We also were leasing the gaming equipment aboard the vessel, Royal Star. In
November 2006 this lease was terminated.

                                       9
<PAGE>

     Vessels,  plant and  equipment  at March 31,  2007  include  the  following
amounts for capitalized leases:


Vessel, Palm Beach Princess                  $      17,500,000
Vessel, Big Easy                                    20,305,348
                                             -----------------
Less: allowance for depreciation                    (3,379,187)
                                             -----------------
Capital Leases                               $      34,426,161
                                             =================

     The following is a schedule of capital lease  liabilities  due at March 31,
2007:

                                                   March 31, 2007
                                      ---------------------------------------
Vessel                                  Short-Term   Long-Term       Total
------------------------------------- ------------- ----------- -------------
Palm Beach Princess                   $  17,449,263 $         - $  17,449,263
Big Easy                                 16,311,612           -    16,311,612
Royal Star                                3,590,063           -     3,590,063
                                      ------------- ----------- -------------
Amount due to PDS for vessels            37,350,938           -    37,350,938
Less: Royal Star Note shown in Notes
 Payable (See Note 10)                   (3,590,063)          -    (3,590,063)
Fair Market Valuation -
 Palm Beach Princess                              -   3,500,000     3,500,000
                                      ------------- ----------- -------------
Total Short and Long Term
 Vessel Leases Payable                $  33,760,875 $ 3,500,000 $  37,260,875
                                      ============= =========== =============

(4)  SERIES B PREFERRED STOCK

     On July 13, 2005 the Company began accepting subscriptions for the purchase
of shares of the  Company's  Series B  Convertible  Preferred  Stock,  par value
$10.00 per share (the "Series B Preferred Stock").  The subscriptions for Series
B Preferred Stock were received by the Company as part of a private  offering of
500,000  shares of its Series B  Preferred  Stock,  at a  subscription  price of
$15.00 per share. As of December 28, 2005 the Company had accepted subscriptions
for the purchase of 295,033 shares of Series B Preferred  Stock and had received
approximately  $4  million  in net  cash  proceeds.  On  December  29,  2005 our
Chairman,  Francis W. Murray,  purchased all of the remaining Series B Preferred
Stock which had not previously been sold in the private  offering,  amounting to
204,966  shares of Series B  Preferred  Stock,  on the same terms as the private
offering.  We sold the  Series B  Preferred  Stock to Mr.  Murray in  payment of
$3,074,500 of debt which the Company had owed to Mr. Murray. This amount has not
been included in the net cash proceeds amount of $4 million as indicated above.

     Subscribers  also  received  warrants for the purchase of 1.2 shares of the
Company's  common stock for each share of Series B Preferred Stock purchased (an
aggregate of 600,000 shares of the Company's  common stock based on purchases of
all 500,000  shares of the Series B Preferred  Stock).  The exercise price under
each  such  warrant  is $3.25  per  common  share,  and the  warrants  issued to
purchasers of the Series B Preferred  Stock are  exercisable for a term of three
(3) years beginning one year after issuance.

     The Series B Preferred  Stock will  automatically  be converted into common
stock upon the effective  date of a Registration  Statement  covering the common
shares issuable upon conversion which was filed with the Securities and Exchange
Commission on December 30, 2005. The initial conversion price is $2.00 per share
of common stock,  declining by $.02 for each full calendar quarter elapsing from
July 1, 2005 to the date on which the conversion  shall occur.  Upon conversion,
each share of Series B Preferred Stock will be converted into a number of shares
of common stock determined by dividing the subscription price, $15.00 per share,
by the conversion price then in effect. The Company will need to file an Amended
Form S-1 in the  future  and if the  registration  statement  becomes  effective
during the quarter ended December 31, 2008,  the conversion  price will be $1.82
and the outstanding  Series B Preferred Stock will be convertible into 4,120,880
shares of additional new common shares.

     Pursuant to the Subscription Agreement, the Company also agreed to increase
the size of its Board of Directors from four to seven  members,  and to fill two
of those  vacancies  with one person to be  designated  by MBC  Global,  LLC, an
Illinois limited  liability  company which has served as a financial  advisor to
the Company, and a second person to be designated by another group of purchasers
of the Series B Preferred Stock.

                                       10
<PAGE>

     The  majority of the net  proceeds of the sale of Series B Preferred  Stock
was used for working  capital of the subsidiary  companies which operate the Big
Easy and the Palm Beach Princess.

(5)  NOTES RECEIVABLE

     (A) Original Cherry Hill Note

     A portion of the proceeds  from the sale on November 30, 2000 of our Garden
State Park property in Cherry Hill, New Jersey, to Realen-Turnberry/Cherry Hill,
LLC ("Realen")  was paid in the form of a promissory  note in the face amount of
$10 million (the "Note.") All payments are dependent  upon,  and payable  solely
out of, the  buyer's  net cash flow  available  for  distribution  to its equity
owners. 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 is to be paid to us
along  with  331/3%  of all  Distributable  Cash  plus  accrued  interest  until
maturity.

     (B) Second Cherry Hill Note

     A portion  of the  proceeds  from the sale of the  non-operating  former El
Rancho  Hotel and  Casino in Las Vegas to  Turnberry/Las  Vegas  Boulevard,  LLC
("Turnberry")  on May 22, 2000 was used by us to purchase a  promissory  note of
the buyer in the face amount of $23,000,000 (the "Las Vegas Note").  On June 16,
2004,  the  Company  sold the Las Vegas Note to Cherry Hill at El Rancho LP (the
"Buyer"),  a limited  partnership  which is affiliated with the maker of the Las
Vegas Note.

     In exchange for the Las Vegas Note, the Company received cash payments from
the Buyer of $2.8 million, a non-recourse loan from Turnberry Development,  LLC,
an  affiliate of the Buyer,  in the amount of $5 million and a  promissory  note
issued by Soffer/Cherry  Hill Partners,  L.P. ("Cherry Hill Partners"),  another
affiliate of the Buyer,  in the  principal  amount of  $35,842,027  (the "Second
Cherry Hill Note").  The principal amount of the Second Cherry Hill Note equaled
the unpaid principal plus all accrued and unpaid interest (at 22%) under the Las
Vegas Note,  less the $2.8  million in purchase  price  payments  and $5 million
non-recourse loan paid to the Company.

     The Company is not liable for  repayment of the principal of the $5 million
loan,  however,  the Company is  obligated to pay interest and fees on such loan
aggregating $600,000 per year ($50,000 per month) for five (5) years. Due to our
negative  cash  position,  we have not made the $50,000 per month  payment since
January 2005.

     The Second Cherry Hill Note received by the Company  matures in 2015 and is
similar to the Las Vegas Note which was sold,  in that it  generally  is payable
prior to maturity only from distributable cash of the maker. The maker under the
Second  Cherry Hill Note is one of the  principal  partners in the entity  which
purchased  the Garden  State Park real  property  from a Company  subsidiary  in
November of 2000,  and such  obligor  will only have funds with which to pay the
Second Cherry Hill Note out of its profits from the  development of Garden State
Park.  While the Company  expected the $10,000,000 note to be fully paid, it was
not  optimistic  that this  Second  Cherry  Hill Note  will be fully  paid,  and
accordingly,  during the fiscal  years  ended June 30, 2004 and 2005 the Company
wrote down the Second Cherry Hill Note on its books to $4,278,651.

     The  Second  Cherry  Hill Note is  secured  by a pledge  of stock  owned by
Raymond  Parello,  an  affiliate  of the  Buyer,  in Palm Beach  Empress,  Inc.,
representing  fifty  percent  (50%) of the  stock in that  company.  Palm  Beach
Empress,  Inc. is the entity  formed to acquire the Big Easy,  the second vessel
which is chartered to a subsidiary of the Company. The other fifty percent (50%)
of the stock in Palm Beach Empress,  Inc. is owned by PBMC, a corporation  owned
by Francis W. Murray, the Company's Chief Executive Officer.

     (C) Impairment of Cherry Hill Notes

     Subsequent to December 31, 2006, the Company began negotiations to sell the
Cherry Hill Notes.  Although these  transactions have not consummated before the
filing of the Company's Form 10-K on April 17, 2007, the observable market price
representing  the fair  value of these  notes is  substantially  lower  than the
carrying  values  on  our  books.  In  prior  years,  the  fair  value  and  the
collectability  of these notes determined by financial  statements and financial
projections by the developer of the property  based upon the future  development
of the site incorporating our office park and hotel.  Recent economic conditions
have forced the developer to reconsider  their plans for the remaining  property
which resulted in cash flow  projections  for the property  being  substantially
lower than in prior years.  As a result of our recent  negotiations  to sell the
Cherry Hill Notes the Company recorded an impairment loss on the two Cherry Hill
Notes of $9,378,651 as of December 31, 2006 to more fully reflect the observable
market value of the loans.

                                       11
<PAGE>

(6)  VESSEL DEPOSITS AND DEPOSITS AND OTHER ASSETS - RELATED PARTIES

     (A) Vessel Deposits - Related Parties

     Beginning  on July 7, 2004,  we entered into  sub-bareboat  charters of the
vessels Palm Beach  Princess  and Big Easy with  entities  (Palm Beach  Maritime
Corporation  and Palm Beach Empress,  Inc.) owned or controlled by our Chairman,
Francis W. Murray.  Pursuant to our June 30, 2005 refinancing and  restructuring
of the PDS transactions, we now charter the vessels, Palm Beach Princess and Big
Easy directly from Cruise Holdings I and Cruise Holdings II, respectively, which
companies are owned by Palm Beach Maritime  Corporation  and Palm Beach Empress,
Inc. Pursuant to the new charters,  we pay Cruise Holdings I and Cruise Holdings
II, as owners of the  vessels,  charter  fees of $50,000  per month for the Palm
Beach  Princess and  $100,000  per month for the Big Easy,  plus 1% of our gross
revenues from operation of those vessels.  We have the right to purchase  either
or both vessels,  at our option, for $17.5 million in the case of the Palm Beach
Princess (representing its appraised value at the time of $17.5 million) and for
fair market value (to be  determined  by appraisal) in the case of the Big Easy.
Once we pay off the loans against the Palm Beach  Princess and Big Easy, we will
be entitled to substantial credits against the purchase prices of the vessels: a
$14  million  credit in the case of the Palm  Beach  Princess  and a $6  million
credit in the case of the Big Easy,  representing the original principal amounts
of the July 2004 sale - leaseback  transactions involving those vessels; as well
as  credits  for  our  investment  in  the  net  Ship  Mortgage   Obligation  of
approximately  $7.2 million which can be applied to the purchase price of either
vessel;  and a  credit  for  the  portions  of the  costs  of  refurbishing  and
retrofitting  the Big Easy in excess of $6 million  which we paid,  amounting to
approximately $2.5 million, that can be applied to the purchase price of the Big
Easy.

     (B) Deposits and Other Assets - Related  Parties and Allowance for Doubtful
Accounts:

     Mr. Murray  (through OC Realty) 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.  As of March 31, 2007,  we had lent  $2,784,394  in total to the
project.  These loans will be  repayable  out of OC Realty's  share of proceeds,
after payment of bank debts, generated by the sale of condominiums. We will also
have the right to receive, as participation  interest,  from available cash flow
of OC Realty, if the project is successful,  a priority return of our investment
and a priority profits interest for up to three times our investment.  Repayment
of these loans and our  participation  interest will be subject to repayment of,
first,  bank  debt of  approximately  $14  million  (at  present)  and,  second,
construction  financing  expected to amount to $25 to $30 million and third, any
capital  invested by and fees  payable to joint  venture  partners  including OC
Realty.  OC Realty's share of proceeds  thereafter will range from 22.5% to 45%.
At December 31, 2006, we assessed the  collectability of the advances made to OC
Realty  based  on  comparable  sales  of like  units  in the  marketplace  which
suggested a weakening of the real estate market for condominium  projects in the
Fort Lauderdale area.  Therefore,  at December 31, 2006 we recorded an allowance
for  doubtful  accounts  on the OC Realty  project of  $2,235,325  to more fully
reflect the observable market value of the loans.


                                                       March 31,   December 31,
                                                         2007          2006
                                                    ------------ -------------
Loans to the Ft Lauderdale Project (OC Realty, LLC) $  2,784,394 $   2,784,394
Goodwill on Purchase of GMO Travel                       193,946       193,946
Other Deposits                                            17,962             -
                                                    ------------ -------------
Total Deposits and Other Assets - Related Parties   $  2,996,302 $   2,978,340
                                                    ============ =============

(7)  DEPOSITS AND OTHER ASSETS - NON RELATED PARTIES

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

                                                      March 31,   December 31,
                                                         2007        2006
                                                    ----------- --------------
Long-Term Prepaid Loan Costs - Net of amortization  $   683,692 $      700,333
Port Lease Rights                                       250,000        250,000
Other Misc. Assets                                        3,544         42,858
                                                    ----------- --------------
         Total                                      $   937,236 $      993,191
                                                    =========== ==============

                                       12
<PAGE>

(8)  VESSELS AND EQUIPMENT

     Vessels  owned  and/or  leased  and  equipment  consist  of the  following:
Depreciation  is being  computed  over the estimated  remaining  useful lives as
indicated  using  the  straight-line  method.  Depreciation  on the Big Easy was
suspended during the March 2006 quarter.

                                 Estimated Useful      March 31,   December 31,
                                  Lives in Years         2007          2006
-------------------------------  ---------------- --------------  -------------
Leased Vessel -
  Palm Beach Princess                  20         $   17,500,000  $  17,500,000
Leased Vessel - Not in Service -
  Big Easy                             N/A            20,305,348     20,305,348
Vessel Not Placed in Service -
  Royal Star                           N/A             3,054,735      3,054,735
Equipment                              5-15            4,008,459      3,912,135
Leasehold Improvements                 15-40             921,899        921,899
                                                  --------------  -------------
Total                                                 45,790,441     45,694,117

Less Accumulated Depreciation
  and Amortization                                    (7,081,967)    (6,562,315)
                                                  --------------  -------------
                                                  $   38,708,474  $  39,131,802
                                                  ==============  =============

(9)  LIABILITIES SUBJECT TO COMPROMISE

     As discussed in Note 1, International  Thoroughbred Breeders, Inc. has been
operating as a  debtor-in-possession  under  Chapter 11 of the  Bankruptcy  Code
since December 4, 2006. The Company has been authorized by the Bankruptcy  Court
overseeing the proceeding to operate its business in the ordinary course.

     As a result of the Chapter 11 filing, all actions to collect the payment of
pre-petition  indebtedness  are subject to compromise or other treatment under a
plan of  reorganization.  Generally,  actions  to enforce  or  otherwise  effect
payment of pre-Chapter 11 liabilities are stayed.  Although  pre-petition claims
are generally  stayed,  as part of the first day orders and  subsequent  motions
granted by the Bankruptcy  Court,  the  Bankruptcy  Court approved the Company's
motions to pay certain pre-petition  obligations including,  but not limited to,
employee wages and other related benefits.

     These  amounts  represent  the  Company's  estimate  of known or  potential
pre-petition   claims  to  be  resolved  in  connection   with  the   bankruptcy
proceedings.  Such claims remain  subject to future  adjustments,  based on such
things as (i) negotiations;  (ii) actions taken by the Bankruptcy  Court;  (iii)
further  developments  with respect to any disputed  claims;  (iv)  rejection of
executory contracts and leases; (v) the determination of the value of collateral
securing  claims;  or (vi) other events.  Payment terms for these claims will be
established in connection with the Company's confirmed plan of reorganization.

                                       13

<PAGE>

(10) NOTES AND MORTGAGES PAYABLE

     (a) Notes and Mortgages Payable - Subject to Compromise

     Notes and Mortgages Payable Subject to Compromise are summarized below. The
capital lease  transactions  with PDS other than the Royal Star loan are carried
under lease liabilities.

<TABLE>
                                                    March 31, 2007         December 31, 2006
                                  Interest %   -----------------------  ----------------------
                                  Per Annum      Current    Long-Term     Current    Long-Term
                                  -----------  -----------  ----------  -----------  ---------
<CAPTION>
<S>                               <C>          <C>          <C>         <C>          <C>
International Thoroughbred
Breeders, Inc.:

PDS Gaming (A)                            20%  $   541,102  $      -0-  $   541,102  $     -0-
Francis X. Murray (B)                      8%      382,864         -0-      382,864        -0-
William H. Warner (B)                     12%       37,000         -0-       37,000        -0-
MBC Global (C)                             9%      200,000         -0-      200,000        -0-
Westminister Investments (C)               9%      150,000         -0-      150,000        -0-
Ryan Moore Trust (C)                       9%       25,000         -0-       25,000        -0-
James B. Moore Trust (C)                   9%       25,000         -0-       25,000        -0-
Other                                 Various       38,654         -0-       38,654        -0-

ITG Vegas, Inc.:

PDS Gaming (A)                        various   34,173,092         -0-   31,617,252        -0-
PDS Gaming (A)                          22.5%    3,620,616         -0-    3,271,628        -0-
International Game Technology (D)          8%      404,928         -0-      404,928        -0-
Others                                Various       45,057         -0-       45,057        -0-
                                               -----------  ----------  -----------  ---------
Totals                                          39,643,313         -0-   36,738,485        -0-

PDS Gaming (A)                                 (38,334,810)        -0-  (35,429,982)       -0-
                                               -----------  ----------  -----------  ---------
Related Party Notes                               (419,864)        -0-     (419,864)       -0-
                                               -----------  ----------  -----------  ---------
Totals                                         $   888,639  $      -0-  $   888,639  $     -0-
                                               ===========  ==========  ===========  =========
</TABLE>

         (A) On June 30, 2005, we entered into various loan  agreements with our
primary  lender,  PDS,  which had the effect of reclassing  our capital  leasing
arrangements  on two  vessels  to  promissory  notes.  At March  31,  2007,  the
outstanding balance represents the unpaid principal,  interest and fees added to
the debt, subject to compromise,  on the vessel promissory notes was $34,068,272
at various  interest rates. In accounting for the add-on  financing,  we applied
guidance as set forth in EITF 96-19,  "Debtor's Accounting for a Modification of
Exchange  of  Debt  Instruments".   We  believe  this  add-on  financing  was  a
modification of the existing debt rather than an extinguishment of the old debt.
The  present  value  of the  cash  flows  required  to fund the new debt has not
increased by more than 10%.  Therefore,  in  accordance  with EITF 96-19 the new
debt has been  treated as an exchange or  modification  of the debt.  We did not
write off any deffered financing costs which were on the books at that time.

     On December 9, 2005, the Company  executed and delivered a promissory  note
in the original  principal amount of $541,102 to PDS Gaming. The proceeds of the
note were used to make our  December  9, 2005  interest  payment  due on the PDS
Transactions.  The interest rate is 20% until such time as the annualized EBITDA
for the various vessels  operated by the Company reach $20 million at which time
the interest rate will be reduced to 15%. At March 31, 2007, accrued interest on
the debt is $104,820.

     On  January  5,  2005,   the  Company  and  its   subsidiary,   Royal  Star
Entertainment,  LLC  ("RSE"),  executed and  delivered a promissory  note in the
original  principal  amount of $2,850,000  (the "Note").  The Note is secured by
RSE's Preferred Ship Mortgage. The lender and holder of the Note and Mortgage is
Cruise Holdings IV, LLC, an affiliate of PDS Gaming Corporation. At closing, RSE
paid a closing  fee to the lender in an amount  equal to $78,375 or 2.75% of the
principal  amount  of the  Note.  The  proceeds  of the Loan  were  used to make
improvements  to the vessel  Royal Star or to the vessel Big Easy.  The Note was
originally due on January 17, 2006, however,  the PDS re-financing  completed on
June 30, 2005 extended the terms of this note to July 1, 2009. The interest rate
is 20% until such time as the annualized EBITDA for the various vessels operated
by the Company reach $17 million at which time the interest rate will be reduced
to 15%. We are currently  paying a default  interest rate of 22.5%. At March 31,
2007, the balance  represents the unpaid  principal,  interest and fees added to
the debt totaling $3,620,616.

                                       14

<PAGE>

     (B) On March 1,  2003,  we  issued a  promissory  note for a line of credit
bearing  interest at 8% to Francis X. Murray.  At March 31, 2007 the outstanding
balance on the line of credit was $382,864 and accrued interest was $45,216.  In
fiscal 2003 and fiscal 2005, we issued  promissory notes for $24,000 and $13,000
respectively,  bearing  interest at 12% to William H.  Warner,  Secretary of the
Company. The proceeds from both notes were used for working capital.

     (C) On November 9, 2005, we borrowed $400,000 from four (4) private parties
and agreed to issue our promissory  notes evidencing the loans. In consideration
of the loans we also agreed to issue 3-year warrants to purchase 100,000 shares,
in the aggregate of our common stock, exercisable at $2.50 per share. The loans,
bearing interest at 9% per year, and the principal were due on December 9, 2005.
The terms of the note required the Company to issue penalty warrants on December
9, 2005 to purchase  100,000  shares of our common stock at an exercise price of
$2.50 per share.  Furthermore,  if the notes are not paid by the 9th day of each
month  thereafter,  we are  required  to issue  additional  penalty  warrants to
purchase  200,000 shares of common stock at the lesser of $2.50 per share or the
then  current  market price per share for each month  beginning  January 9, 2006
until these notes are paid.  As of December 31, 2006, we have reserved or issued
warrants for the  issuance of 2.4 million  shares of common stock as a result of
this borrowing.  Proceeds of the loans were used to pay interest then due on our
secured  indebtedness for borrowed money to PDS Gaming  Corporation.  Due to our
Bankruptcy filing we have not accrued interest on the notes or issued additional
penalty warrants.

     (D) 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  were to be paid on the balance.  In March 2005, ITG
Vegas,  Inc. issued an additional  thirty month promissory note in the amount of
$387,463  bearing  interest at 8.15% to  International  Game  Technology for the
purchase of fully  reconditioned  gaming equipment.  Thirty consecutive  monthly
installments of $14,319.49 were to be paid on the balance. At March 31, 2007 and
December 31, 2006, the principal balance on the two notes to International  Game
Technology  was $404,928  which was  classified as short term. At March 31, 2007
and December 31, 2006 the balance on the notes  includes past due payments.  The
Company is  negotiating  new terms  under these  notes and if  unsuccessful  the
creditor may seek to enforce payment of the notes.

     (b) Notes and Mortgages Payable - Not subject to Compromise

     In connection with the January 28, 1999 lease  transactions  for the Garden
State Park facility,  the Company  purchased a liquor license  located at Garden
State Park owned by an unaffiliated  third party,  Service  America  Corporation
(the "Holder"), for $500,000 financed by a five (5) year promissory note at a 6%
interest rate.  Yearly  principal  payments of $80,000 plus interest were due on
December 28, 2002 and December 28, 2003 and have not been paid.  The Company has
been  unsuccessful in negotiating new terms under this note and the creditor may
seek to enforce  payment of the note. In additional to the principal  amount due
of  $160,000  the accrued but unpaid  interest  is  approximately  $42,000 as of
December 31, 2006 and $46,000 as of March 31, 2007.  These amount are classified
in the Liabilities of Discontinued  Operations in the current  liability section
of the Balance Sheet.

(11) RELATED PARTY DEBT

     The  following  schedule  represents  related party debt (See Footnote 15 -
Related Party Transactions):

                                          March 31, 2007     December 31, 2006
                                       -------------------- --------------------
                                        Short-     Long-     Short-     Long-
                                          Term      Term      Term      Term
                                       -------- ----------- -------- -----------
Accrued Wages due to and
 Advances  from Francis W. Murray      $      0 $   899,318 $      0 $   808,164
Accrued Expenses Subject to Compromise        0     792,580        0     818,664
Accrued Bareboat Charter Fees                 0   2,071,532        0   1,531,472
                                       -------- ----------- -------- -----------
         Total Debt - Related Parties  $      0 $ 3,763,430 $      0 $ 3,158,300
                                       ======== =========== ======== ===========

(12) LEGAL PROCEEDINGS

     As a consequence of our Chapter 11 Filing,  all pending  litigation against
the Debtors was stayed  automatically by Section 362 of the Bankruptcy Code and,
absent  further order of the Bankruptcy  Court,  no party may take any action to
recover on  pre-petition  claims against the Debtors.  In addition,  pursuant to
Section  365  of  the  Bankruptcy   Code,  the  Debtors  may  reject  or  assume
pre-petition  executory  contracts  and unexpired  leases,  and other parties to
contracts  or leases that are rejected may assert  rejection  damages  claims as
permitted by the Bankruptcy Code.

                                       15
<PAGE>

     Through our  subsidiary,  Royal Star  Entertainment  LLC, we had negotiated
with the Port of Palm Beach District a second  agreement that would permit us to
operate the Big Easy in passenger  service from the Cruise Terminal at the Port,
with  certain  berthing  and  scheduling  priorities.  The initial  term of this
agreement  was five years from the date of  commencement  of sailings by the Big
Easy from the Port, with subsequent  renewal options of four and three years. We
were  required to commence  sailings on or before  October 31, 2005.  Due to the
suspension of the Big Easy operations,  the Port of Palm Beach District voted on
April 10, 2006 to terminate this  agreement,  and on April 19, 2006 the District
filed suit in Florida Circuit Court for declaratory  judgement of termination of
the  agreement  and for other relief.  Royal Star  Entertainment,  LLC filed its
answer denying that the District was entitled to terminate the  agreement.  This
lawsuit was stayed upon Royal Star  Entertainment,  LLC's  filing of a voluntary
petition for reorganization  under Chapter 11 of the Bankruptcy Code on December
4, 2006, and will be adjudicated in the course of our reorganization.

     On November 17, 2006 a Complaint  was filed in the United  States  District
Court for the Northern District of Illinois by Westminster Investments,  LLC and
certain other plaintiffs against International  Thoroughbred Breeders, Inc., its
Chairman Francis W. Murray,  its Vice President Scott Kaplan, and its subsidiary
ITG Vegas' Chief Executive  Officer Francis X. Murray,  alleging  non-payment to
the plaintiffs by International Thoroughbred Breeders of a promissory note dated
November 9, 2005 in the amount of four hundred  thousand  dollars plus interest,
and  alleging  fraud  by  the  individual  defendants  in  connection  with  the
promissory  note.  This lawsuit was stayed  against  International  Thoroughbred
Breeders  upon its  filing of a  voluntary  petition  for  reorganization  under
Chapter 11 of the  Bankruptcy  Code on December  7, 2006.  The  automatic  stay,
however, was not applicable to the individual defendants;  accordingly, with the
permission of the Bankruptcy Court,  International Thoroughbred Breeders engaged
counsel  for the limited  purpose of filing a motion to transfer  the lawsuit to
the United  States  District  Court for the Southern  District of Florida.  This
motion was denied on May 2,  2007,  and the  defendants  are  considering  their
options.

(13) COMMITMENTS AND CONTINGENCIES

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

     See  Footnote 17 with  respect to events and  developments  after March 31,
2007.

     The  vessels we lease and the Royal Star are subject to the  provisions  of
the  International  Convention on Safety of Life at Sea as Amended ("SOLAS 74"),
which  was  adopted  in  1974  by the  International  Maritime  Organization,  a
specialized  agency of the United  Nations that is  responsible  for measures to
improve the safety and security of international shipping, and to prevent marine
pollution  from ships.  SOLAS 74 is the current  basic  safety  standard for all
ships engaged in international service. The Convention was substantially amended
in 1992  and  2000 in  order  to  upgrade  and  improve  shipboard  fire  safety
standards.  The  Amendments  are  applicable to all  passenger  ships engaged in
international  service,  including  retroactively  those  ships such as the Palm
Beach Princess that were built prior to 1980. Under the terms of the Amendments,
full  compliance  by older ships with SOLAS 74  standards is to be phased in and
implemented over the years and completed no later than October 1, 2010. The Palm
Beach  Princess,  in  compliance  with the SOLAS 74  requirements  to date,  has
previously  completed  substantial  upgrading and installation of fire sprinkler
and smoke detection  systems and other fire safety  construction  standards.  By
2010 the ship must  comply  with the final  phase of the  implementation  of the
SOLAS  74  Amendments,  most  notably  being  requirements  that no  combustible
material be used in ships' structures and that certain other interior  structure
and space  standards be met. The precise nature and scope of necessary work will
be determined in conjunction with the ship's classification  society, Det norske
Veritas.  To accomplish such work may entail substantial cost in order to remove
all wood and other  combustible  materials now used in the structure of the Palm
Beach Princess, to refit the ship with non-combustible  materials, and otherwise
to upgrade interior  structure and spaces.  We have not yet obtained an estimate
of such cost. The Bareboat Charter and Option to Purchase Agreement for the Palm
Beach Princess permits us to purchase the vessel for $17.5 million at the end of
the charter period on July 1, 2009. We will be allowed  credits for the payments
made on the PDS lease of $14  million,  provided  such  payments  are made,  and
credits of up to $7.2 million  against the purchase of the Palm Beach  Princess.
(However,  use of the $7.2  million as a credit  toward the Palm Beach  Princess
purchase  would  decrease  the credits  allowed for the purchase of the Big Easy
since the $7.2  million  credit can be used for the  purchase of either  vessel)
(See Note 6A) We will need to make a  determination  if it will be  economically
feasible to purchase  the Palm Beach  Princess at the end of the charter  period
considering  the costs which may be involved in readying  the vessel for "SOLAS"
requirements.

     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

                                       16
<PAGE>

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 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.  However,  we now  estimate  that  the  total  cost of  clean up to be
approximately  $830,000  including  costs we have already spent according to the
environmental consulting firm handling this matter. 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  $617,000  during  prior fiscal
years 2000, 2001 and 2002. As of March 31, 2007 we have accrued $211,000 for the
additional  work. It is estimated that completion of the site clean up will take
approximately  18 months from the time the work is reinstated.  The Company will
not  receive  any  insurance  reimbursement  for our  costs of this  remediation
project.

     As a result of our Chapter 11 filings in December 2006, our commitments and
non-cancellable  contracts  are not able to be  determined  in that  most of our
contracts and leases are stayed by the bankruptcy  filing,  the current  amounts
are being  approved  and paid by the orders of the  Bankruptcy  Court and future
amounts due cannot be reasonably determined.

(14) FAIR VALUE OF FINANCIAL INSTRUMENTS

     In assessing the fair value of financial instruments,  the Company has used
a variety of methods and  assumptions,  which were based on  estimates of market
conditions  and loan risks  existing  at that  time.  For  certain  instruments,
including cash and cash equivalents,  investments, non-trade accounts receivable
and loans,  and  short-term  debt,  it was  estimated  that the carrying  amount
approximated fair value for the majority of these  instruments  because of their
short-term  maturity.  The carrying  amounts of long term debt  approximate fair
value since the Company's interest rates approximate  current interest rates. On
our original Cherry Hill note  receivable in the amount of $10 million,  we have
elected to defer the gain on the sale and the interest to be accrued  until such
time that  collectability  can be  determined.  On our second  Cherry  Hill note
receivable  we recorded a $10.5 million  impairment  loss during the fiscal year
ended June 30, 2004 and 2005 to reflect the  estimated  current  market value of
this note.  (See Note 5-B).  As of December  31,  2006 we recorded a  $9,378,651
impairment  loss on the original and second Cherry Hill Notes to more accurately
reflect the  current  market  value of these  notes (see  footnote 5 - C). As of
December 31, 2006 we recorded an allowance  for doubtful  accounts in the amount
of $2,235,525 on the OC Realty Note. (See Footnote 6 - B)

(15) RELATED PARTY TRANSACTIONS

     See  Footnote  6  Regarding  Vessel  Deposits,  Deposits  and  Other  Asset
Transactions with Mr. Francis W. Murray

     During the quarter ended March 31, 2007 Mr.  Murray  continued to defer his
yearly  salary of $395,000  and the majority of the charter fees due on the Palm
Beach Princess and the Big Easy.  During the quarter we accrued  charter fees on
the Palm Beach  Princess in the amount of $254,550  and accrued  charter fees on
the Big Easy in the  amount  of  $300,000.  Additionally,  we  accrued  interest
expense on the unpaid  charter fees for the Palm Beach Princess in the amount of
$8,612.

     During the March 31, 2007 quarter we made payments against the charter fees
to Mr. Francis W. Murray in the amount of $23,102.

                                       17

<PAGE>

(16) DEBTORS' FINANCIAL STATEMENTS

     The  Company's  bankruptcy  filing  included  the  Company  and six of it's
operating   subsidiaries   and  excluded   several   inactive  or   non-material
subsidiaries. Presented below are the condensed combined financial statements of
the  Debtors.  These  statements  reflect  the  financial  position,  results of
operations  and  cash  flows  of  the  combined   Debtors,   including   certain
transactions  and  resulting  assets and  liabilities  between  the  Debtors and
non-Debtor  subsidiaries  of the Company,  which are eliminated in the Company's
consolidated financial statements.


                    INTERNATIONAL THOROUGHBRED BREEDERS, INC.
                             (Debtor-in-Possession)

              CONDENSED COMBINED FINANCIAL INFORMATION OF ENTITIES
                          IN REORGANIZATION PROCEEDINGS
                   AS OF MARCH 31, 2007 AND DECEMBER 31, 2006

                                 BALANCE SHEETS
                                     ASSETS

                                              March 31,     December 31,
                                                2007           2006
                                           -------------  --------------
Total Current Assets                       $   4,127,567  $    2,847,060

Total Vessels & Equipment - Net               38,708,474      39,131,803

Total Other Assets                            19,595,164      19,654,302
                                           -------------  --------------
Total Assets                                  62,431,205      61,633,165
                                           =============  ==============

                      LIABILITIES AND STOCKHOLDERS' EQUITY


Current Liabilities                            1,888,971       1,366,580

Liabilities Subject to Compromise             59,247,577      54,930,635

Deferred Income                                   29,859          47,775

Stockholders' Equity                           1,264,798       5,288,175
                                           -------------  --------------
Total Liabilities and Stockholders' Equity $  62,431,205  $   61,633,165
                                           =============  ==============

              CONDENSED COMBINED FINANCIAL INFORMATION OF ENTITIES
                          IN REORGANIZATION PROCEEDINGS
               FOR THE THREE MONTHS ENDED MARCH 31, 2007 AND 2006

                             STATEMENT OF OPERATIONS

                                                      March 31,
                                           -----------------------------
                                                 2007           2006
                                           -------------  --------------
Operating Revenues                         $   7,544,012  $    9,242,373

Operating Costs and Expenses                  (7,128,538)     (9,942,171)

Other Income (Expense)                        (3,200,508)     (2,956,271)
                                           -------------  --------------
Net (Loss)                                    (2,785,034)     (3,656,069)
                                           =============  ==============

                             STATEMENT OF CASH FLOWS


Cash Flows From (Used In) Operating
 Activities                                $   1,201,653  $      133,516

Cash Flows Provided by (Used In) Investing
 Activities                                      (19,224)       (314,573)

Cash Flows (Used In) Provided by Financing
 Activities                                     (463,890)       (841,880)
                                           -------------  --------------
Net Increase (Decrease) In Cash and Cash
 Equivalents                                     718,539      (1,022,937)

     Cash and Cash Equivalents at
       Beginning of Year                         894,609       1,819,699
                                           -------------  --------------
     Cash and Cash Equivalents at
       End of Year                         $   1,613,148  $      796,762
                                           =============  ==============


                                       18

<PAGE>

(17) SUBSEQUENT EVENTS

     (A) The  companies  have reached an agreement  that will give the companies
and the Official Committee of Unsecured  Creditors the exclusive right to file a
Chapter 11 plan through August 1, 2007,  subject,  however, to the qualification
that PDS and one other  specified group of creditors will also have the right to
file a plan upon the earlier of June 21, 2007, or the filing of a plan or motion
seeking approval of a sale or refinance transaction to which PDS objects.

     (B)  Subsequent to March 31, 2007, a financial  institution  has provided a
commitment  for a secured loan to fund the  majority of the  proceeds  needed to
create a new  special  purpose  subsidiary  to own and  operate  the Palm  Beach
Princess  business,  with  the  proceeds  from the  financing  to be used to pay
existing  creditors and provide working capital to the Princess  business.  Such
commitment will be subject to Bankruptcy  Court approval,  an additional  equity
infusion, and satisfactory loan documentation.

     (C) On April 12, 2007, Robert J. Quigley retired and resigned as a Director
of the Company and as an officer of several dormant subsidiaries.

                                       19

<PAGE>

Item 2. Management's Discussion and Analysis of Financial Conditions and Results
     of Operations

Forward-Looking Statements

     We have made  forward-looking  statements in this Form 10-Q,  including the
information  concerning possible or assumed future results of our operations and
those  preceded  by,  followed by or that include  words such as  "anticipates,"
"believes," "expects," "intends," or similar expressions.  For those statements,
we claim  the  protection  of the safe  harbor  for  forward-looking  statements
contained in the Private  Securities  Litigation  Reform Act of 1995. You should
understand that the following  important factors, in addition to those discussed
elsewhere in this document and other factors  particularly  under "Risk Factors"
as  discussed  in the  Company's  Annual  Report on Form 10-K for the year ended
December  31,  2006  filed  with  the  United  States  Securities  and  Exchange
Commission  could  affect our future  results and could  cause those  results to
differ materially from those expressed in our forward-looking statements:

     o    future  effects  from our  filing  for  Chapter  11  protection  which
          occurred on December 4, 2006;

     o    the  potential  adverse  impact  of  our  Chapter  11  filing  on  our
          operation,  management and employees,  and the risks  associated  with
          operating businesses under Chapter 11 protection;

     o    our ability to develop,  confirm and  consummate  a Chapter 11 plan of
          reorganization;

     o    our ability to reduce our overall leveraged position;

     o    customer and vendor response to our Chapter 11 filing;

     o    limited access to capital resources;

     o    general  economic  and  business  conditions   affecting  the  tourism
          business in Florida;

     o    increased competition from new and existing forms of gaming;

     o    our ability to sell or reposition the Big Easy and the Royal Star on a
          timely and cost effective manner in the future,  or as an alternative,
          sell or sub charter the vessels to other parties;

     o    changes in laws regulating the gaming industry;

     o    fluctuations  in quarterly  operating  results as a result of seasonal
          and weather considerations;

     o    events  directly or  indirectly  relating to our business  causing our
          stock price to be volatile; and

     o    the  vessels  we  charter  and  the  Royal  Star  are  subject  to the
          provisions  of the  International  Convention on Safety of Life at Sea
          amended ("SOLAS 74"), which may require  substantial  capital expenses
          in the future.

Overview

     Between  December 4, 2006 and  December  7, 2006,  the Company and 6 of its
subsidiaries (the "Debtors") filed voluntary petitions for reorganization  under
Chapter  11 of the U.S.  Bankruptcy  Code in the U.S.  Bankruptcy  Court for the
Southern District of Florida (Palm Beach Division) (the "Chapter 11 Cases"). The
cases  were  consolidated  for the  purpose  of  joint  administration  and were
assigned case number 06-16350-BKC-PGH.  We filed the Chapter 11 Cases because we
were experiencing  difficulties  generating sufficient cash flow from operations
to meet our  financial  obligations  under the  Promissary  Notes and  equipment
leases  with  PDS  Gaming   Corporation  after  the  expiration  of  Forbearance
Agreements.

     Under   Chapter  11,  the  Company  is  operating   its   businesses  as  a
debtor-in-possession   ("DIP")  under  court   protection   from  creditors  and
claimants.  Since the  Chapter 11 filing,  all orders  sufficient  to enable the
Company  to  conduct  normal  business  activities,  have  been  entered  by the
Bankruptcy  Court.  While the Company is subject to Chapter 11, all transactions
not in the  ordinary  course  of  business  require  the prior  approval  of the
Bankruptcy Court.

     As a consequence of the Chapter 11 filing,  pending  litigation against the
Company is  generally  stayed,  and no party may take any action to collect  its
pre-petition claims except pursuant to order of the Bankruptcy Court. April 18,

                                       20
<PAGE>

2007 was the last date by which  holders of pre-filing  date claims  against the
Debtors could file such claims.  Any holder of a claim that was required to file
such claim and did not do so may be barred from asserting such claim against the
Debtors and, accordingly,  may not be able to participate in any distribution on
account of such claim.  Differences  between  claim  amounts  identified  by the
Debtors and claims  filed by  claimants  will be  investigated  and  resolved in
connection  with the Debtors'  claims  resolution  process,  and only holders of
claims  that are  ultimately  allowed  for  purposes  of Chapter 11 case will be
entitled to distribution.  The Company has not yet completed its analysis of all
the proofs of claim. Since the treatment,  including payment,  of allowed claims
is subject to a confirmed plan of reorganization, the ultimate distribution with
respect to allowed claims is not presently ascertainable.

     The  companies  have reached an agreement  that will give the companies and
the Official  Committee of Unsecured  Creditors  the  exclusive  right to file a
Chapter 11 plan through August 1, 2007,  subject,  however, to the qualification
that PDS and one other  specified group of creditors will also have the right to
file a plan upon the earlier of June 21, 2007, or the filing of a plan or motion
seeking approval of a sale or refinance transaction to which PDS objects.

     A financial  institution  has provided a  commitment  for a secured loan to
fund the  majority  of the  proceeds  needed  to  create a new  special  purpose
subsidiary  to own and  operate  the  Palm  Beach  Princess  business,  with the
proceeds  from the  financing to be used to pay existing  creditors  and provide
working  capital to the Princess  business.  Such  commitment will be subject to
Bankruptcy Court approval, an additional equity infusion,  and satisfactory loan
documentation.

     We are in the process of  negotiating  a series of  transactions  that will
allow  for the  redeployment  of the  Big  Easy to a  foreign  jurisdiction.  We
anticipate  receiving  a  term  sheet  for  a  secured  loan  from  a  financial
institution  in order to fund a  portion  of the  proceeds  necessary  to fund a
special purpose affiliate of the company to own and operate the Big Easy in this
foreign  location.  We  anticipate  that the term  sheet  will be  subject to an
additional  equity  investment  from a  third-party,  successful  negotiation of
operating  agreements  and  satisfactory  loan  documentation.  Closing  of  the
transactions  will also be subject to bankruptcy  court approval.  Proceeds from
the  transaction  will be used to pay  existing  creditors  and provide  working
capital,  including  funding start up and relocation  expenses,  to the Big Easy
business.

     Our ability to  continue as a going  concern is  predicated  upon  numerous
issues, including our ability to achieve the following:

     o    having a plan of reorganization confirmed by the Bankruptcy Court in a
          timely manner;

     o    being able to successfully  implement our business plans and otherwise
          offset the negative effects that the Chapter 11 filing has had and may
          continue to have on our business,  including the  impairment of vendor
          relations;

     o    operating  within  the  framework  of  our  DIP  Facility,   including
          limitations  on capital  expenditures  and  financial  covenants,  our
          ability to generate  cash flows from  operations or seek other sources
          of financing; and

     o    attracting, motivating and/or retaining key executives and associates.

These  challenges  are in addition to those  operational,  regulatory  and other
challenges that we face in connection with our business.

     On December 7, 2006  following  first day hearings of December 6, 2006, the
Bankruptcy  Court entered  orders  granting us authority to, among other things,
pay certain pre-petition and post-petition  employee wages,  salaries,  benefits
and  other  employee  obligations,  pay  selected  critical  vendors  and  other
providers for the post-petition delivery of goods and services.

     We lease through a bareboat  charter and operate,  through our wholly owned
subsidiary,  ITG  Vegas,  Inc.  ("ITGV"),  the  gaming  vessel,  M/V Palm  Beach
Princess.  The M/V Palm Beach  Princess  sails twice daily from the Port of Palm
Beach,  Florida.  Once beyond the state's  territorial  water  limits the vessel
engages in a casino gaming business. The business of operating the cruise vessel
includes a variety of shipboard activities, such as dining, music, casino gaming
and other entertainment.

     We also lease through a bareboat  charter and on a limited basis  operated,
through our wholly owned subsidiary,  ITG Palm Beach, LLC ("ITGBP"),  the gaming
vessel,  Big Easy. After retrofitting and refurbishing the Big Easy, this vessel
was  initially  placed into service on October 18,  2005,  also from the Port of
Palm Beach  Florida,  although we did not commence  regular  (although  limited)
operations until November 12, 2005. We were having challenges attracting

                                       21
<PAGE>

customers  to the Big Easy given her  inconsistent  schedule  of  sailings.  The
initial  delay  in  receiving  a  Certificate   of  Inspection   and  subsequent
inconsistencies  in scheduling  caused  significant  negative cash flow and made
advertising  and  promotional  efforts  difficult  from  both  a  financial  and
practical  planning  perspective.  The lack of a consistent  commercial  service
schedule  inhibited  customer  support and resulted in  suspending  the Big Easy
operations indefinitely. Currently the Big Easy is in wet dock storage.

     ITGV charters the M/V Palm Beach  Princess  from Cruise  Holdings I, LLC, a
company  owned by PBMC,  for a five year period  ending  July 2009.  The charter
provides for the payment to Cruise  Holdings I, LLC of $50,000 per month plus 1%
of the  gross  operating  revenues  of the M/V Palm  Beach  Princess.  Under the
charter, ITG Vegas has the option to purchase the M/V Palm Beach Princess at the
end of the term, for an exercise  price equal to the appraised  value of the M/V
Palm Beach  Princess,  $17,500,000,  to which certain amounts are to be credited
against the purchase price.

     ITGPB  charters the Big Easy from Cruise  Holdings II, LLC, a company owned
by PBE,  for a five year period  ending  July 2009.  The  charter  provides  for
payments to Cruise  Holdings  II, LLC of $100,000 per month plus 1% of the gross
operating  revenues  of the Big Easy.  Under the Big Easy  charter,  PBE granted
ITGPB an option to purchase the Big Easy at the end of the term, for an exercise
price  equal  to  the  appraised  value  of the  Big  Easy,  which  is yet to be
determined,  following the  retrofitting  and  refurbishment of the Big Easy, to
which certain  amounts are to be credited  against the purchase  price.  The Big
Easy is currently in wet dock storage following a brief period of operations. We
continue to explore possible locations from which to potentially operate the Big
Easy,  however,  our  negative  cash  position  has  restricted  our  efforts to
re-position the vessel.

     During our 2004 fiscal  year we  purchased  a third  vessel,  the M/V Royal
Star.  The Royal Star is currently in wet dock storage and we are limited by our
negative cash position to make any further improvements on the vessel.

Liquidity and Capital Resources

     Our cash flow from  operations is primarily  dependent  upon the cash flows
from ITG Vegas, which operates the vessel,  M/V Palm Beach Princess.  During the
three  months  ended March 31,  2007,  our  operations  generated  approximately
$750,000 of cash which was only possible by deferring our interest  payments due
to PDS and our  bareboat  charter  fees.  During the past few fiscal  years,  we
extended the terms of our vendor payables and as a result,  our accounts payable
and accrued expenses  exceeded our cash by approximately $12 million as of March
31, 2007. We continued to defer payments on the vessel leases, on notes payable,
charter hire fees and continue to defer the salary of our Chairman.

     During the current  quarter  our Palm Beach  Princess  operation  generated
approximately  $2.1 million in cash flow.  The majority of these funds were used
to support the other  subsidiaries  and holding company  operations.  During the
quarter approximately  $700,000 was advanced to the subsidiary operating the Big
Easy and  approximately  $790,000 was advanced to the holding  company and other
subsidiaries in Chapter 11 reorganization. The funds remaining resulted in a net
increase in Cash and Cash Equivalents of $757,314.

     During the quarter ended March 31, 2006 the Palm Beach  Princess  operation
generated   approximately   $1.96   million   cash  flow.   During  the  quarter
approximately $2.1 million was advanced to the subsidiary operating the Big Easy
and  approximately  $300,000  was  advanced  to the  holding  company  and other
subsidiaries.  For the quarter  ended  March 31,  2006 the  Company  sustained a
decrease in cash of approximately $1.1 million.

     The condensed,  consolidated  cash flow table  presented below compares the
cash generated or (used) by the Palm Beach Princess,  the Big Easy and the other
companies in Chapter 11  reorganization  as compared to the quarter  ended March
31, 2006.

<TABLE>
                                                    Three Months Ended
                                                     March 31, 2007
                                      --------------------------------------------------
                                       Palm                     Holding Co.
                                       Beach                        &
                                       Princess    Big Easy     Other Subs      Total
                                         ($)          ($)          ($)          ($)
                                      --------------------------------------------------
<CAPTION>
<S>                                    <C>         <C>            <C>        <C>
Cash Flows from Operating
Activities:

Net Income (Loss)                       (160,140)  (2,052,489)    (881,868)  (3,094,497)

Adjustments to reconcile income
(loss) to net cash (used in)provided
by operating activities:

     Depreciation & Amortization         600,687            -        1,730      602,417

     Compensation for Options
     Granted                                   -            -            -            -

     Impairment of Assets                      -            -            -            -

OtherIncrease in Deferred Income         (17,916)           -            -      (17,916)

     Interest Added to Capital
     Lease Debt - PDS                  1,061,758    1,190,934      285,578    2,538,270

Changes in Assets and Liabilities:

     Decrease (Increase) in
     Accounts Receivable                  62,490       (3,798)      10,785       69,477

     (Increase) Decrease in Other
     Assets                              (46,595)           -            -      (46,595)

     (Increase) in Prepaid Expenses     (317,629)    (222,378)     (29,712)    (569,719)

     (Decrease) Increase in
     Accounts Payable & Accrued
     Expenses                          1,045,436      369,781      (88,804)   1,326,413
                                      ----------- ------------ ------------ ------------
Cash (Used In) Provided by
Operating Activities                   2,228,091     (717,950)    (702,291)     807,850
                                      ----------- ------------ ------------ ------------
Cash Flows from Investing Activities:

Fare Capital Expenditures                (75,022)        (507)         350      (75,179)

     (Increase) Decrease in Other
     Investment Activity                       -       53,887        2,068       55,955

     (Increase) Decrease in Other
     Investment Activity - Related
     Party                                     -            -            -            -
                                      ----------- ------------ ------------ ------------
Cash Provided by (Used In)
Investing Activities:                    (75,022)      53,380        2,418      (19,224)
                                      ----------- ------------ ------------ ------------
Cash Flows from Financing Activities:

     Proceeds from PDS & Other
     Lenders                                   -            -            -            -

     Funds (to) from Related
     Parties                                 547            -      (10,156)      (9,609)

     Principal Payments on Short
     Term Notes                          (10,451)           -      (13,652)     (24,103)

     Principal Payments on Long
     Term Notes                                -            -            -            -
                                      ----------- ------------ ------------ ------------
Cash Provided by (Used In)
Financing Activities                      (9,904)           -      (23,808)     (33,712)
                                      ----------- ------------ ------------ ------------
Net Increase (Decrease) in Cash and
Cash Equivalents From Discontinued
Operations                                     -            -        2,400        2,400
                                      ----------- ------------ ------------ ------------
Net Increase (Decrease) in Cash and
Cash Equivalents Before
Inter-Company Transfers                2,143,165     (664,570)    (721,281)     757,314
                                      =========== ============ ============ ============
</TABLE>

<TABLE>
                                                      Three Months Ended
                                                        March 31, 2006
                                      --------------------------------------------------
                                        Palm                    Holding Co.
                                        Beach                       &
                                        Princess    Big Easy    Other Subs      Total
                                          ($)         ($)          ($)           ($)
                                      --------------------------------------------------
<CAPTION>
<S>                                    <C>         <C>           <C>          <C>
Cash Flows from Operating
Activities:

Net Income (Loss)                      2,028,520   (3,793,236)   (2,181,583)  (3,946,299)

Adjustments to reconcile income
(loss) to net cash (used in)provided
by operating activities:

     Depreciation & Amortization         641,435      411,104         2,879    1,055,418

     Compensation for Options
     Granted                                   -            -       493,300      493,300

     Impairment of Assets                      -            -       400,000      400,000

OtherIncrease in Deferred Income         (17,915)           -             -      (17,915)

     Interest Added to Capital
     Lease Debt - PDS                          -            -             -            -

Changes in Assets and Liabilities:

     Decrease (Increase) in
     Accounts Receivable                   6,667        8,575       (25,511)     (10,269)

     (Increase) Decrease in Other
     Assets                               28,932      278,316             -      307,248

     (Increase) in Prepaid Expenses     (596,778)    (116,303)      (82,521)    (795,602)

     (Decrease) Increase in
     Accounts Payable & Accrued
     Expenses                            837,876      731,799       822,846    2,392,521
                                       ---------- ------------ ------------- ------------
Cash (Used In) Provided by
Operating Activities                   2,928,737   (2,479,745)     (570,590)    (121,598)
                                       ---------- ------------ ------------- ------------
Cash Flows from Investing Activities:

Fare Capital Expenditures                (45,901)           -             -      (45,901)

     (Increase) Decrease in Other
     Investment Activity                 (99,975)      33,328        39,456      (27,191)

     (Increase) Decrease in Other
     Investment Activity - Related
     Party                               (29,972)           -      (212,985)    (242,957)
                                       ---------- ------------ ------------- ------------
Cash Provided by (Used In)
Investing Activities:                   (175,848)      33,328      (173,529)    (316,049)
                                       ---------- ------------ ------------- ------------
Cash Flows from Financing Activities:

     Proceeds from PDS & Other
     Lenders                                   -            -       124,883      124,883

     Funds (to) from Related
     Parties                            (744,544)      (4,798)       66,245     (683,097)

     Principal Payments on Short
     Term Notes                          (18,218)     (23,093)            -      (41,311)

     Principal Payments on Long
     Term Notes                          (25,869)        (846)            -      (26,715)
                                       ---------- ------------ ------------- ------------
Cash Provided by (Used In)
Financing Activities                    (788,631)     (28,737)      191,128     (626,240)
                                       ---------- ------------ ------------- ------------
Net Increase (Decrease) in Cash and
Cash Equivalents From Discontinued
Operations                                     -            -         2,400        2,400
                                       ---------- ------------ ------------- ------------
Net Increase (Decrease) in Cash and
Cash Equivalents Before
Inter-Company Transfers                1,964,258   (2,475,154)     (550,591)  (1,061,487)
                                       ========== ============ ============= ============
</TABLE>

     We continue  to pay the  carrying  costs to  maintain  the Big Easy and the
Royal Star in wet dock storage. We expect that the future carrying costs for the
wet dock  storage  and slot  machine  leases for  machines on the Big Easy to be
approximately $200,000 per month. We have retained a third-party slip broker who
is marketing these vessels for sale.

     As of March 31, 2007 Cash and Cash  Equivalents were $1,628,550 as compared
to $871,236 as of December 31, 2006.  Our working  capital at March 31, 2007 was
$1,475,602.   This  amount  represents   working  capital  generated  since  our
Bankruptcy  filing on December 4, 2006.  Prior to our  Bankruptcy  filing we had
working capital  deficiency  however,  we are currently  showing working capital
available  only  because the  liabilities  which caused the  deficiency  are now
classified in the Liabilities Subject to Compromise section of the Balance Sheet
and not considered a current liability.

     As a result of our Chapter 11 filings in December 2006, our commitments and
non-cancellable  contracts  are not able to be  determined  in that  most of our
contracts and leases are stayed by the bankruptcy  filing,  the current  amounts
are being  approved  and paid by the orders of the  Bankruptcy  Court and future
amounts due cannot be reasonably determined. As of March 31, 2007, monthly court
approved commitments for the vessels total approximately $570,000

Outlook

     We  intend  to  reorganize   around  our  successful  Palm  Beach  Princess
operation.  We consider this operation to be a viable  foundation for the future
expansion of our Company. We believe we will: (i) require additional  financing;
and/or (ii) may be forced to sell other company assets; and/or (iii) re-position
or sell the Big Easy and the Royal Star vessels in order to reduce or payoff the
PDS debt.

     We  anticipate  receiving a commitment  for a secured loan from a financial
institution in order to fund the majority of the proceeds  necessary to create a
new  special  purpose  subsidiary  to own and  operate  the Palm Beach  Princess
business.  We anticipate that the commitment will be subject to bankruptcy court
approval,   an  additional   equity  infusion  from  us  or  a  third-party  and
satisfactory loan documentation. Proceeds from the financing will be used to pay
existing  creditors  and  provide  working  capital to the Palm  Beach  Princess
business.

     We are in the process of  negotiating  a series of  transactions  that will
allow  for the  redeployment  of the  Big  Easy to a  foreign  jurisdiction.  We
anticipate  receiving  a  term  sheet  for  a  secured  loan  from  a  financial
institution  in order to fund a  portion  of the  proceeds  necessary  to fund a
special purpose affiliate of the company to own and operate the Big


                                       22
<PAGE>

Easy in this foreign location. We anticipate that the term sheet will be subject
to an additional equity investment from a third-party, successful negotiation of
operating  agreements  and  satisfactory  loan  documentation.  Closing  of  the
transactions  will also be subject to bankruptcy  court approval.  Proceeds from
the  transaction  will be used to pay  existing  creditors  and provide  working
capital,  including  funding start up and relocation  expenses,  to the Big Easy
business.  No  assurances  can be  given  that we will be  successful  in  these
negotiations.

     At this time, however, it is impossible to predict accurately the effect of
the Chapter 11 reorganization on the Company, when we may emerge from Chapter 11
and what our  capital  structure  will be.  The  rights  and  claims of  various
creditors and security holders will be determined by our plan of reorganization.
No  assurance  can be given as to what values,  if any,  will be ascribed in the
bankruptcy  proceedings to each of these constituencies.  We anticipate that, in
any plan of  reorganization  ultimately  confirmed by the Bankruptcy  Court, our
common and preferred stock could be negatively  effected,  diluted or cancelled.
Accordingly,  we urge that  appropriate  caution be  exercised  with  respect to
existing and future investments in any of such securities and claims.

Critical Accounting Policies and Estimates

     Financial  Reporting  Release No. 60 requires  all  companies  to include a
discussion of critical  accounting policies or methods and estimates used in the
preparation  of  financial  statements.  We prepare our  Consolidated  Financial
Statements in conformity with accounting  principles  generally  accepted in the
United States. Certain of our accounting policies, including the estimated lives
assigned to our assets, asset impairment,  and the calculation of our income tax
liabilities,  require  that  we  apply  significant  judgment  in  defining  the
appropriate  assumptions for calculating  financial estimates.  By their nature,
these judgments are subject to an inherent degree of uncertainty.  Our trends in
the industry and information  available from other outside sources,  are used as
appropriate.  There can be no assurance that actual results will not differ from
our estimates.  Note 2 to the Consolidated  Financial  Statements  describes the
significant  accounting  policies we have selected for use in the preparation of
our financial statements and related disclosures. We believe the following to be
the most critical  accounting  estimates and assumptions  affecting our reported
amounts and related disclosures.

Notes Receivable

     Statement  of  Financial  Accounting  Standards  No.  114,  "Accounting  by
Creditors for Impairment of a Loan" as amended,  requires  management  judgments
regarding the future  collectability of notes receivable and the underlying fair
market value of  collateral.  Estimates are required to be used by management to
assess the  recoverability  of our notes  receivable.  We  regularly  review our
receivables  to determine if there has been any decline in value.  These reviews
require management judgments that often include estimating the outcome of future
events and  determining  whether  factors  exist that  indicate  impairment  has
occurred. In the past, we evaluated real estate appraisals and financial balance
sheets,  earnings  and cash  forecasts.  Our returns are also subject to factors
affecting the  profitability  and saleability of the project.  Our  assumptions,
estimates and evaluations  are subject to the  availability of reliable data and
the uncertainty of predictions concerning future events. Accordingly,  estimates
of  recoverable  amounts  and  future  cash  flows  are  subjective  and may not
ultimately  be  achieved.   Should  the  underlying  circumstances  change,  the
estimated  recoverable  amounts and future cash flows could change by a material
amount.

     (A) Cherry Hill Notes

     As a result of the sale of the Garden  State  Park  Racetrack  property  in
Cherry Hill NJ, and the sale of the non-  operating  former El Rancho  Hotel and
Casino in Las Vegas,  NV,  portions of the proceeds  from each sale were paid in
the form of promissory notes. During the fiscal year ended June 30, 2004 we sold
the note  receivable  we held on the Las Vegas,  NV property  for cash and other
future  benefits  including a second  note  payable  solely from  profits of the
Cherry Hill, NJ property.  We had previously received a note receivable from the
sale of the  Garden  State  Park  property  in the  amount  of $10  million  and
together,  these notes were  classified  on the Balance Sheet as Long Term Notes
Receivables in the amount of $14,278,651 as of December 31, 2005.

     Subsequent to December 31, 2006, the Company began negotiations to sell the
Cherry Hill Notes.  Although these  transactions have not consummated before the
filing of the Company's  Form 10-K on April 17, 2007,  the offered price made to
us for these notes is substantially lower than the carrying values on our books.
In prior  years,  the fair  value  and the  collectability  of these  notes  was
determined by financial statements and financial projections by the developer of
the property  based upon the future  development  of the site  incorporating  an
office park and hotel.  Recent economic  conditions have forced the developer to
reconsider  their plans for the remaining  property  which resulted in cash flow
projections for the property being substantially lower than in prior years. As a
result of our  ongoing  negotiations  to sell the Cherry  Hill Notes the Company
recorded an  impairment  loss on the two Cherry Hill Notes of  $9,378,651  as of
December 31, 2006 to more fully reflect in the loan's observable market value.

                                       23
<PAGE>

     (B) OC Realty Note - Related Party

     We have made three  loans in the  approximate  amount of $2.7  million to a
project (OC Realty) in which Mr. Murray is participating  for the development of
an oceanfront parcel of land, located in Fort Lauderdale,  Florida. This project
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.  Two of these loans in the approximate  amount of $2 million bear
interest  at 12% and will be  repayable  out of OC Realty's  share of  proceeds,
after payment of bank debts, generated by the sale of 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 our investment. Repayment of these loans and
our participation  interest will be subject to repayment of, first, bank debt of
approximately  $20 million (at  present)  and,  second,  construction  financing
expected to amount to $50 million  and third,  any capital  invested by and fees
payable to joint  venture  partners  including OC Realty.  OC Realty's  share of
proceeds  thereafter  will  range  from  22.5%  to  45%.  We have  assessed  the
collectability  of the advances made to OC Realty based on  comparable  sales of
like units in the marketplace  which suggest a weakening  demand for prospective
sales of the project's  condominium units. At December 31, 2006, $2.8 million is
the  estimated  fair value of the note after  recording a reserve  allowance  of
$2,235,523  for the year ended  December  31,  2006  leaving  an asset  value we
believe to be fully realizable.

Valuation of Vessels and Vessel Deposits - Related Parties

     We charter vessels, the Palm Beach Princess and the Big Easy, directly from
companies  owned or controlled by our Chairman and CEO. The Amended and Restated
Bareboat  Charter and Option to Purchase  Agreement for the Palm Beach  Princess
has been  accounted for as a capital  lease.  In  accordance  with our lease and
purchase agreement for the Palm Beach Princess we have the right to purchase the
vessel for  $17,500,000  at the end of the lease term,  and up to $14 million of
principal payments made by us and allocable to the Palm Beach Princess debt will
be credited toward the purchase price.

     For the Big Easy the Company determined that it would capitalize;  1) costs
it had incurred for  improvements  it had made to the Big Easy;  2) all payments
required  under the PDS Gaming loans for the Big Easy of $12.6  million;  and 3)
all  payments  required  under the charter  hire fees,  for a total  capitalized
amount  as of June  30,  2005 of  $24,318,989.  Effective  November  1,  2005 we
determined that the amount and timing of the receipt of the charter hire fees of
$100,000,  plus 1% of the gross  revenues,  which we had estimated to be $30,000
per month could not be reasonably  determined  considering the problems with the
Big Easy  operation  and the  suspension  from  service  on  February  1,  2006.
Therefore the capitalized value of the Big Easy was reduced,  effective November
1, 2005,  by $4 million to $20.3 million and the liability for payments due were
also reduced by $4 million. The charter hire fees are being expensed as incurred
effective November 1, 2005.

     The Company has credits in the amount of $9,733,136  which are available to
use against the purchase costs for the vessels.  See footnote 6 to our financial
statements with respect to the credits which are available  against the purchase
costs of the vessels.  Should the Company lose its ability to purchase either or
both of the vessels due to the bankruptcy filing or elect not to purchase one or
both of the vessel at the end of the lease,  the Company  could lose some or all
of the value of the credits unless other terms are negotiated  with the owner of
the vessels.

Results of Operations for the Quarter Ended March 31, 2007 and 2006

     The  following  are the most  important  factors and trends that affect our
operating performance:

     o    The impact of our filing of  voluntary  petitions  for  reorganization
          under Chapter 11 of the U. S. Bankruptcy Code. See Footnote 1.

     o    We are currently  exclusively  dependent upon operating  revenues from
          the Palm Beach  Princess to pay the wet dock storage,  interest,  debt
          service and equipment  lease costs of the Big Easy, the Royal Star and
          the expenses of the parent  company.  The cash currently  generated by
          the Palm Beach Princess is insufficient to pay these costs.

     o    Increased Competition:

          On March 8, 2005 the citizens of Broward County  approved a referendum
          that  amended  Florida's  constitution  to  permit  slot  machines  at
          pari-mutuel  facilities in Broward  County.  Currently there are three
          race tracks and one jai-alai facility in the County. Broward County is
          contiguous  to Palm Beach County in which we conduct  operations.  The
          Florida legislature has passed legislation which permits

                                       24
<PAGE>

          1,500 slot machines at each of the four (4) pari-mutuel  facilities in
          Broward County. On November 15, 2006 Gulfstream Park Racing and Casino
          opened  with  approximately  500 slot  machines,  now has  1,200  slot
          machines  and is  expected  to have  1,500 slot  machines  in the near
          future,  Mardi Gras  Racetrack  & Gaming  Center  (formerly  Hollywood
          Greyhound)  operates  with 1,500 slot machines and Pampano Park Racing
          operates with 1,500 slot machines. Neither the timing of the expansion
          of the slot machines at these  locations,  the installation at the one
          other location nor the impact to our Company, can be predicted at this
          time.

          From  February  16, 2003 until  January 15, 2007 we operated  the Palm
          Beach Princess  without  competition,  except for our operation of the
          Big Easy from mid November 2005 until  February 2006. In January 2007,
          the coastal gaming vessel Sun Cruz VI began operating from the Port of
          Palm Beach in competition with the Palm Beach Princess. This vessel is
          a 165 foot catamaran , has a passenger  capacity of 600 people, has 38
          table  games  and  approximately  300 slot  machines.  The  vessel  is
          scheduled to make two cruises each day.

          During  the period  January 1, 2007  through  May 13,  2007  passenger
          counts have  declined  approximately  22% and revenues  have  declined
          approximately 21% at the Company's Palm Beach Princess  operation from
          the comparative  period of 2006. The Company attributes these declines
          to a lack of funds  for  marketing  and  advertising  during  the last
          approximately  year and one half due to our cash shortages,  increased
          competition  from slot  machines  placed at the  three  racetracks  in
          Broward  County,  another day cruise casino vessel  operating from the
          Port of Palm  Beach  since  January  15,  2007,  and the effect of our
          bankruptcy filing on our customers.

     o    The impact of  hurricanes  and  inclement  weather also may affect our
          operating  performance.  During the first  quarter of the fiscal  year
          ended June 30,  2005 and the second  quarter of the fiscal  year ended
          December  31, 2005 we were  adversely  affected by several  hurricanes
          passing over or near Florida.  During the quarter ended  September 30,
          2004, our operations were negatively impacted by the direct effects of
          hurricanes  "Frances"  and "Jeanne," and during the three months ended
          December  31,  2005 our  operations  were  negatively  impacted by the
          direct  effect of  hurricane  Wilma.  These  hurricanes  left the area
          without power,  resulting in curfews and limited food,  water and life
          resources,  the  evacuation of the population in our area, and further
          affected tourism in the area,  severely reducing our pool of potential
          passengers.


                                       25

<PAGE>


Consolidated

     The table below  compares the revenues,  expenses and net (Loss) before tax
provision  for the Palm  Beach  Princess  and the Big  Easy  vessels  and  other
operating  subsidiary  companies  as  shown  on the  Consolidated  Statement  of
Operations  for quarter  ended  March 31, 2007 as compared to the quarter  ended
March 31, 2006. This table separately identifies the vessel operations since the
Big Easy operated during a portion of the quarter ended March 31, 2006.

                                              Three Months Ended
                                                March 31, 2007
                                ----------------------------------------------
                                                        Holding Co.
                                  Palm Beach                &
                                   Princess   Big Easy  Other Subs     Total
                                     ($)         ($)        ($)         ($)
                                ----------  ----------- ----------  ----------
Operating Revenues:
    Gaming                       6,578,907            -          -   6,578,907
    Fare                           588,668            -          -     588,668
    On Board                       376,436            -          -     376,437
    Other                                -            -    176,674     176,674
                                ----------  ----------- ----------  ----------
Net Operating Revenues           7,544,012            -    176,674   7,720,686
                                ----------  ----------- ----------  ----------
Operating Costs and  Expenses:

    Gaming                       2,300,279            -          -   2,300,279
    Fare                           582,469            -    163,319     745,788
    On Board                       193,692            -          -     193,692
    Maritime & Legal             1,964,175            -          -   1,964,175
    General & Administrative
     Expense                       648,196            -    451,487   1,099,683
    Development & Carrying Costs         -      458,740     23,348     482,088
    Royal Star Carrying Costs            -            -    114,303     114,303
    Bankruptcy Costs                80,000       15,250     17,000     112,250
    Impairment of Notes                  -            -          -           -
    Depreciation & Amortization    600,687            -      1,730     602,417
                                ----------  ----------- ----------  ----------
Total Operating Costs &
  Expenses                       6,369,498      473,990    771,187   7,614,675
                                ----------  ----------- ----------  ----------
Operating Income (Loss)          1,174,514     (473,990)  (594,513)    106,011
                                ----------  ----------- ----------  ----------
Other Income (Expense)
    Interest & Financing
     Expenses                   (1,098,252)  (1,278,499)  (287,356) (2,664,107)
    Cost of Warrants Granted             -            -          -           -
    Interest & Financing
     Expenses-Related Party       (240,060)    (300,000)         -    (540,060)
    Interest Income                  3,659            -          -       3,659
    Interest Income -
     Related Party                       -            -          -           -
                                ----------  ----------- ----------  ----------
Total Other Income (Expenses)   (1,334,653)  (1,578,499)  (287,356) (3,200,508)
                                ----------  ----------- ----------  ----------
(Loss) Before Tax Provision       (160,139)  (2,052,489)  (881,869) (3,094,497)
                                ==========  =========== ==========  ==========


                                                    Three Months Ended
                                                      March 31, 2006
                                -----------------------------------------------
                                                         Holding Co.
                                Palm Beach                   &
                                 Princess    Big Easy    Other Subs   Total
                                    ($)        ($)          ($)        ($)
                                ---------- -----------  ----------- -----------
Operating Revenues:
    Gaming                       7,790,587      62,738            -   7,853,325
    Fare                           954,684       6,332            -     961,016
    On Board                       418,614       9,418            -     428,032
    Other                                -           -      151,223     151,223
                                ---------- -----------  ----------- -----------
Net Operating Re venues          9,163,885      78,488      151,223   9,393,596
                                ---------- -----------  ----------- -----------
Operating Costs and  Expenses:

    Gaming                       2,338,677     869,241            -   3,207,918
    Fare                           599,192      86,804      108,976     794,972
    On Board                       220,734      21,717            -     242,451
    Maritime & Legal             1,803,439     956,920            -   2,760,359
    General & Administrative
      Expense                      514,981     329,282      619,213   1,463,476
    Development & Carrying Costs         -           -       73,074      73,074
    Royal Star Carrying Costs            -           -      385,956     385,956
    Bankruptcy Costs                     -           -            -           -
    Impairment of Notes -                -           -      400,000     400,000
    Depreciation & Amortization    641,435     411,104        2,879   1,055,418
                                ---------- -----------  ----------- -----------
Total Operating Costs &
  Expenses                       6,118,458   2,675,068    1,590,098  10,383,624
                                ---------- -----------  ----------- -----------
Operating Income (Loss)          3,045,427  (2,596,580)  (1,438,875)   (990,028)
                                ---------- -----------  ----------- -----------
Other Income (Expense)
    Interest & Financing
     Expense                      (840,636)   (895,657)    (248,147) (1,984,440)
    Cost of Warrants Granted             -           -     (493,300)   (493,300)
    Interest & Financing
     Expenses - Related Party     (241,460)   (300,000)      (9,505)   (550,965)
    Interest Income                    649           -            -         649
    Interest Income -
     Related Party                  64,541           -        7,244      71,785
                                ---------- -----------  ----------- -----------
Total Other Income (Expenses)   (1,016,906) (1,195,657)    (743,708) (2,956,271)
                                ---------- -----------  ----------- -----------
(Loss) Before Tax Provision      2,028,521  (3,792,237)  (2,182,583) (3,946,299)
                                ========== ===========  =========== ===========

                                       26

<PAGE>

     Revenue for the quarter ended March 31, 2007 decreased from  $9,393,596 for
the quarter  ended March 31, 2006 to  $7,720,686  in the quarter ended March 31,
2007  primarily  as a result of decrease in the  revenues  generated by the Palm
Beach  Princess.  The Big Easy which was put in limited  service on November 12,
2005 only operated the month of January during the March 2006 quarter.

     Operating expenses decreased  approximately $2.8 million,  from $10,383,624
during the three months ended March 31, 2006 to $7,614,675  for the three months
ended March 31, 2007 primarily the result of:

     o    a decrease in the operating cost of the Big Easy of $2,201,078  during
          the quarter  because during the 2007 quarter we paid only the carrying
          costs  of  keeping  the  vessel  in wet dock as  compared  to the 2006
          quarter  when we operated the vessel for the month of January 2006 and
          incurred operating losses and expenses to terminate the operations;

     o    a decrease in the carry  costs for our Royal Star vessel of  $271,653,
          which the vessel has been in wet dock storage since its purchase;

     o    a decrease in Depreciation  and  Amortization of $453,001 since we are
          no longer recording depreciation on the Big Easy vessel during its wet
          dock period;

     o    a decrease in  impairment  on the Cherry Hill Notes of $400,000.  Last
          year we recorded an impairment where as this year there was none;

     o    a decrease in the Parent Company administrative expense of $167,726 ;

     o    a decrease in other development costs of $49,726; offset by

     o    an  increase  in the  operating  costs of the Palm Beach  Princess  of
          $211,788;

     o    an increase in the bankruptcy costs of $112,250.

     The  Operating  Income for the quarter ended March 31, 2007 was $106,011 as
compared to a loss of ($990,028) for the comparative  three month period of last
year.

     Other  expenses  increased  by  approximately  $244,237  as a result  of an
increase in the interest and financing  expense due to addition interest expense
primarily  the  result  of  higher  interest  rates on the PDS  loans due to the
penalty  interest  being  accrued.  We continued to accrue  interest  during our
Debtor-in-Possession  operation in  accordance  with the  American  Institute of
Certified Accountants Statement of Position (SOP) 90-7.

     The Net (Loss) for the quarter  ended March 31,  2007 was  ($3,094,497)  as
compared to a loss of ($3,946,299) for the three months ended March 31, 2006.

     Palm Beach Princess

     During the current quarter net operating revenue from vessel operations was
$7,544,012 as compared to $9,163,885  for the quarter ended March 31, 2006.  The
decrease in revenue of  approximately  $1.6 million or 18% is due to a decreased
passenger count partially offset by an increase in the net revenue per passenger
of $6.78. Passenger counts have decreased 17,573 or 22% from the compared period
of  last  year.  We  believe  this  is due in  part  to our  continued  lack  of
advertising and marketing.  Beginning in approximately October 2005 we curtailed
our  advertising   and  marketing   because  we  were   experiencing   financial
difficulties in bringing the Big Easy vessel into service.

     During  the first  quarter  of 2006 we  operated  the Palm  Beach  Princess
without any major direct competition, (except for competing against our Big Easy
vessel  during  January  2006 on a  limited  basis)  in close  proximity  to our
operation. In late 2006 three racetracks in Broward County began installing slot
machines which are now permitted by legislation. Broward County is contiguous to
Palm Beach County in which we conduct operations.  The legislation permits 1,500
slot machines at each of the four (4) pari-mutuel  facilities in Broward County.
On November 15, 2006 Gulfstream Park Racing and Casino opened with approximately
500 slot  machines,  now has 1,200 slot  machines  and is expected to have 1,500
slot machines in the near future, Mardi Gras Racetrack & Gaming Center (formerly
Hollywood  Greyhound)  operates with 1,100 slot machines and Pampano Park Racing
operates  with 1,500 slot  machines.  Additionally,  in mid  January  2007,  the
coastal gaming vessel Sun Cruz VI began operating from the Port of Palm Beach in
competition  with the Palm Beach  Princess.  This vessel is a 165 foot catamaran
that  has  a  passenger  capacity  of  600  people,  with  38  table  games  and
approximately  300 slot  machines.  The vessel is  scheduled to make two cruises
each day.

                                       27
<PAGE>

     During the month of March 2007 we experienced  unusual rough seas. Although
we did not lose any cruises during the month passenger counts were off by 31% as
compared to the previous  year.  Passenger  counts were down  approximately  15%
during January and February but the large  decrease in March further  negatively
impacted our results for the quarter.

     During January 2006 a portion of the employee  costs  normally  incurred by
the Palm Beach Princess for operational and administrative  salary expenses were
allocated  to the  Big  Easy  operation.  These  allocations  were  made to more
accurately  reflect  the cost of the Big Easy  used as a casino  gaming  vessel.
Approximately  $162,000 of salaries  were  allocated  to the Big Easy during the
three months of 2006.  There was no  allocation  during the 2007  quarter.  This
allocation should be taken into consideration  when comparing  operating results
from year to year for the Palm Beach Princess.

     Casino   operating   expenses  which  also  includes  food,   beverage  and
entertainment  decreased  $38,398 from  $2,338,677  or 30% of casino  revenue to
$2,300,279 or 35% of casino revenue.

     Sales,  marketing and advertising  expenses decreased $16,723.  The amounts
incurred for marketing  and  advertising  decreased  because the company did not
have sufficient funds to spend due to our negative cash position.

     On Board  expenses  decreased  by $27,042  as a result of fewer  passengers
during the current quarter.

     Maritime and legal expenses  increased  $160,736 as we incurred  additional
expenses for fuel, engine parts and repairs, dockage and fees for harbor pilots.

     Administrative  expenses  increased  $127,493.  During the 2006  quarter we
reversed  accrued  bonuses  of  approximately  $235,000  which had the effect of
decreasing   administrative   expenses  for  2006.   Without   considering  this
adjustment,   administrative   expenses  actually   decreased  by  approximately
$107,000.

     Finance expenses increased $324,870 as a result of the higher interest rate
due to default interest being charged. In accordance with the American Institute
of Certified Accountants' Statement of Position (SOP) 90-7, "Financial Reporting
by Entities in  Reorganization  Under the Bankruptcy Code" we continue to accrue
interest expense on the PDS secured debt.

     Depreciation  and  amortization  decreased  $40,748  as a  result  of  less
amortization the dry dock expenses as compared to 2006.

     As a result of our Bankruptcy, the subsidiary which operates the Palm Beach
Princess incurred Bankruptcy fees of $80,000 during the current quarter.

     The loss before  income tax  provision for the quarter ended March 31, 2007
was ($160,140) as compared to income before income tax provision,  of $2,028,521
in the comparable three month period ended March 31, 2006.


                                       28

<PAGE>


     The following is a  comparative  summary of income and expenses of the Palm
Beach Princess operation for the 13 weeks ended April 1, 2007 and April 2, 2006:

                                                  13 Weeks Ended
                                     ------------------------------------------
             Description             April 1, 2007  April 2, 2006     Change
------------------------------------ -------------  -------------- ------------
Passenger Count                             61,498          79,071      (17,573)
Number of Cruises                              178             173            5
Average Number of Passengers
 per Cruise                                    345             457         (112)
Net Revenue per Passenger            $      122.67  $       115.89 $       6.78

Revenue:

    Gaming                           $   6,578,907  $    7,790,587 $ (1,211,680)
    Fare                                 1,988,553       2,450,167     (461,614)
    On Board                               832,438       1,109,233     (276,795)
    Less: Promotional Allowances
    Fare                                (1,399,885)     (1,495,483)      95,598
    On Board                              (456,001)       (690,619)     234,618
                                     -------------  -------------- ------------
    Net Operating Revenue                7,544,012       9,163,885   (1,619,873)
                                     -------------  -------------- ------------
Expenses:

    Gaming                               2,300,279       2,338,677      (38,398)
    Fare                                   582,469         599,192      (16,723)
    On Board                               193,692         220,734      (27,042)
    Maritime and Legal Expenses          1,964,175       1,803,439      160,736
    Administrative                         642,474         514,981      127,493
    Bare Boat Charter -
     Related Party                         240,060         241,460       (1,400)
    Finance Expenses - Net               1,100,316         775,446      324,870
    Depreciation and Amortization          600,687         641,435      (40,748)
    Bankruptcy Fees                         80,000               -       80,000
                                     -------------  -------------- ------------
    Total Expenses                       7,704,152       7,135,364      568,788
                                     -------------  -------------- ------------
    Net (Loss) Income Before Income
     Tax Provision                   $    (160,140) $   2,028,521  $ (2,188,661)
                                     =============  ============== ============

                                       29

<PAGE>

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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

ITEM 4. CONTROLS AND PROCEDURES

Controls and Procedures

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

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

     There have not been any significant changes that occurred during the fiscal
quarter  ended March 31,  2007 in the  Company's  internal  controls or in other
factors that could significantly affect these controls subsequent to the date of
their evaluation.

                                       30

<PAGE>

                    INTERNATIONAL THOROUGHBRED BREEDERS, INC.
                                AND SUBSIDIARIES

                                     Part II

                                OTHER INFORMATION


ITEM 6. EXHIBITS

Exhibit                       Description of Exhibit

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

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

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



                                       31

<PAGE>



                    INTERNATIONAL THOROUGHBRED BREEDERS, INC.
                                AND SUBSIDIARIES

                                   SIGNATURES


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



                    INTERNATIONAL THOROUGHBRED BREEDERS, INC.




May 18, 2007     /s/ Francis W. Murray
                 -----------------------------------------------------
                 Francis W. Murray, President, Chief Executive Officer and Chief
                 Financial Officer



                                       32

<PAGE>



                                                                    Exhibit 31.1

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

I, Francis W. Murray, certify that:

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

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

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

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

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

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

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

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

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

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

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

Date: May 18, 2007
------------------
                        /s/  Francis W. Murray
                        ----------------------------------
                        Chairman/Chief Executive Officer



                                       33

<PAGE>



                                                                    Exhibit 31.2



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

I, Francis W. Murray, certify that:

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

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

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

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

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

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

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

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

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

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

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

Date: May 18, 2007
------------------
                           /s/ Francis W. Murray
                           ---------------------------------
                           Chief Financial Officer


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                                                                      Exhibit 32

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

     In  connection  with the  filing  of the  Quarterly  Report on Form 10-Q of
International  Thoroughbred Breeders,  Inc. (the "Company") for the three months
ended March 31, 2007 as filed with the Securities and Exchange Commission on the
date hereof (the "Report"), I, Francis W. Murray, Chief Financial Officer of the
Company,  hereby certify pursuant to 18 U.S.C.  ss.1350,  as adopted pursuant to
Section  906 of the  Sarbanes-Oxley  Act  of  2002,  that,  to  the  best  of my
knowledge:

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

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



/s/ Francis W. Murray
----------------------
Name: Francis W. Murray
Title: Chief Financial Officer
May 18, 2007


                                       35

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