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, 2004
                               -------------------------------------------------
                                       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 St., PO Box 8985, Wilmington, Delaware, 19899-8985
--------------------------------------------------------------------------------
               (Address of principal executive offices) (Zip Code)

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

                211 Benigno Blvd., Suite 210, Bellmawr, NJ 08031
--------------------------------------------------------------------------------
              (Former name, former address and former fiscal year,
                         if changed since last report.)

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

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

                      APPLICABLE ONLY TO CORPORATE ISSUERS:

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

           Class                            Outstanding at May 19, 2004
------------------------------              ---------------------------
Common Stock, $ 2.00 par value                     7,802,134 Shares
<PAGE>

                    INTERNATIONAL THOROUGHBRED BREEDERS, INC.

                                    FORM 10-Q

                                QUARTERLY REPORT
                    FOR THE NINE MONTHS ENDED MARCH 31, 2004
                                   (Unaudited)

                                TABLE OF CONTENTS

                                                                          PAGE
PART I.  FINANCIAL INFORMATION

         Item 1.  Financial Statements:

                  Consolidated Balance Sheets
                         as of March 31, 2004 and June 30, 2003............1-2

                  Consolidated Statements of Operations
                         for the Three Months and Nine Months ended
                         March 31, 2004 and 2003...........................3

                  Consolidated Statement of Stockholders' Equity
                         for the Nine Months ended March 31, 2004..........4

                  Consolidated Statements of Cash Flows
                         for the Nine Months ended
                         March 31, 2004 and 2003...........................5

                  Notes to Financial Statements............................6-24

         Item 2.  Management's Discussion and Analysis of
                         Financial Condition and Results of Operations.....25-32

         Item 4.  Controls and Procedures..................................32


PART II. OTHER INFORMATION

         Item 6.  Exhibits and Reports on Form 8-K.........................33

SIGNATURES.................................................................34

CERTIFICATIONS    .........................................................35-37

<PAGE>


                    INTERNATIONAL THOROUGHBRED BREEDERS, INC.
                                AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS
                     AS OF MARCH 31, 2004 AND JUNE 30, 2003


                                     ASSETS

                                                       March 31,       June 30,
                                                         2004           2003
                                                     (UNAUDITED)
                                                     ------------    -----------
CURRENT ASSETS:
     Cash and Cash Equivalents                      $   7,223,936  $   6,123,641
     Restricted Cash                                      420,000              0
     Accounts Receivable                                  223,571        193,689
     Prepaid Expenses                                     593,230        488,414
     Spare Parts Inventory                                992,211      1,078,740
     Other Current Assets                                  38,379        390,458
     Assets of Discontinued Operations                    400,873        399,785
                                                      ------------   -----------
      TOTAL CURRENT ASSETS                              9,892,200      8,674,727
                                                      ------------   -----------


PLANT & EQUIPMENT:
     Leasehold Improvements - Port of Palm Beach          913,394        953,110
     Equipment                                          1,975,323      1,278,175
     Vessel Not Placed in Service - Royal Star          1,084,163              0
                                                      ------------   -----------
                                                        3,972,880      2,231,285
     LESS: Accumulated Depreciation and Amortization      736,455        306,494
                                                      ------------   -----------
      TOTAL PLANT & EQUIPMENT - NET                     3,236,425      1,924,791
                                                      ------------   -----------


OTHER ASSETS:
     Notes Receivable                                  26,600,000     33,000,000
     Mortgage Contract Receivable - Related Party      13,750,000              0
     Deposit on Mortgage Contract Receivable                    0      4,000,000
     Deposits and Other Assets - Related Parties        7,498,636      6,687,266
     Deposits and Other Assets - Non-Related Parties      334,975        535,239
                                                      ------------   -----------
      TOTAL OTHER ASSETS                               48,183,611     44,222,505
                                                      ------------   -----------


TOTAL ASSETS                                        $  61,312,236  $  54,822,023
                                                      ============   ===========


See Notes to Consolidated Financial Statements.

                                        1
<PAGE>


                    INTERNATIONAL THOROUGHBRED BREEDERS, INC.
                                AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS
                     AS OF MARCH 31, 2004 AND JUNE 30, 2003

                      LIABILITIES AND STOCKHOLDERS' EQUITY

                                                   March 31,        June 30,
                                                     2004             2003
                                                  (UNAUDITED)
                                                 -------------   -------------
CURRENT LIABILITIES:
     Accounts Payable                          $    1,525,576  $    2,264,499
     Accrued Expenses                               1,279,696       2,341,209
     Short-Term Debt                                4,099,454       2,934,330
     Short-Term Debt - Related Parties                183,164         183,164
     Liabilities of Discontinued Operations           308,397         301,197
                                                 -------------   -------------
      TOTAL CURRENT LIABILITIES                     7,396,287       8,024,399
                                                 -------------   -------------

LONG-TERM LIABILITIES:
     Long-Term Debt - Net of Current Portion        5,180,433               0
     Long-Term Debt - Related Parties                 257,014         985,017
                                                 -------------   -------------
      TOTAL LONG-TERM LIABILITIES                   5,437,447         985,017
                                                 -------------   -------------

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

COMMITMENTS AND CONTINGENCIES                            -               -


STOCKHOLDERS' EQUITY:
     Series A Preferred Stock, $100 Par Value,
      Authorized 500,000 Shares, 362,489
      Issued and Outstanding                       36,248,875      36,248,875
     Common Stock, $2 Par Value, Authorized
      25,000,000 Shares, Issued, 11,480,279
      and 11,480,278, respectively and
      Outstanding, 7,802,134 and 8,252,133,
      respectively                                 22,960,557      22,960,555
     Capital in Excess of Par                      20,191,982      20,191,984
     (Deficit) (subsequent to June 30, 1993,
       date of quasi-reorganization)              (37,302,464)    (40,189,608)
                                                 -------------   -------------
                                                   42,098,950      39,211,806
     LESS:
      Treasury Stock, 3,678,146 and
       3,228,146 Shares,
       respectively, at Cost                       (1,839,073)     (1,614,073)
     Deferred Compensation, Net                        (7,915)        (11,666)
                                                 -------------   -------------
      TOTAL STOCKHOLDERS' EQUITY                   40,251,962      37,586,067
                                                 -------------   -------------


TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY     $   61,312,236  $   54,822,023
                                                 =============   =============


See Notes to Consolidated Financial Statements.

                                       2
<PAGE>


                    INTERNATIONAL THOROUGHBRED BREEDERS, INC.
                                AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF OPERATIONS
           FOR THE THREE AND NINE MONTHS ENDED MARCH 31, 2004 AND 2003
                                   (UNAUDITED)


<TABLE>
                                                       Three Months Ended               Nine Months Ended
                                                            March 31,                       March 31,
                                                  ------------------------------   -----------------------------
                                                        2004            2003            2004           2003
                                                  --------------   -------------   -------------   -------------
<CAPTION>
<S>                                             <C>              <C>             <C>              <C>
OPERATING REVENUES:
     Gaming                                     $     7,989,901  $    7,498,768  $    20,432,796  $   18,528,671
     Fare                                             1,076,704         889,464        2,358,272       2,118,151
     On Board                                           544,548         442,085        1,395,253       1,294,969
     Other                                               86,554          78,826          232,112         145,998
                                                  --------------   -------------   --------------   -------------
        NET OPERATING REVENUES                        9,697,707       8,909,143       24,418,433      22,087,789
                                                  --------------   -------------   --------------   -------------

OPERATING COSTS AND EXPENSES:
     Gaming                                           2,329,487       1,976,157        6,488,191       5,548,638
     Fare                                             1,113,253         951,004        2,732,424       2,526,678
     On Board                                           262,609         220,803          689,206         617,811
     Maritime & Legal Expenses                        1,781,171       1,665,867        5,050,119       4,446,554
     General & Administrative Expenses                  937,503         955,077        2,737,332       3,106,225
     General & Administrative Expenses - Parent         571,136         309,809        1,179,085       1,265,466
     ITG Vegas Bankruptcy Costs                          20,078         300,130          388,759         300,130
     Development Costs                                  327,656         153,507          486,852         295,614
     Depreciation & Amortization                        203,038          34,991          514,007         164,140
                                                  --------------   -------------   --------------   -------------
        TOTAL OPERATING COSTS AND EXPENSES            7,545,931       6,567,345       20,265,975      18,271,256
                                                  --------------   -------------   --------------   -------------

OPERATING INCOME                                      2,151,776       2,341,798        4,152,458       3,816,533
                                                  --------------   -------------   --------------   -------------

OTHER INCOME (EXPENSE):
     Interest and Financing Expenses                   (361,344)       (387,186)      (1,363,067)       (976,025)
     Interest Income                                     80,785          40,391          251,514         254,439
     Other Income                                        16,239           4,468           16,239               0
                                                  --------------   -------------   --------------   -------------
        TOTAL OTHER INCOME (EXPENSE)                   (264,320)       (342,327)      (1,095,314)       (721,586)
                                                  --------------   -------------   --------------   -------------

INCOME BEFORE TAX PROVISION                           1,887,456       1,999,471        3,057,144       3,094,947
     Less: Income Tax Expense                           122,400         121,000          170,000         210,000
                                                  --------------   -------------   --------------   -------------

NET INCOME                                      $     1,765,056  $    1,878,471  $     2,887,144  $    2,884,947
                                                  ==============   =============   ==============   =============

NET INCOME PER COMMON SHARE:
     BASIC                                      $          0.23  $         0.23  $          0.36  $         0.28
                                                  ==============   =============   ==============   =============
     DILUTED                                    $          0.17  $         0.23  $          0.29  $         0.28
                                                   ==============   =============  ==============   =============
WEIGHTED AVERAGE COMMON
   SHARES OUTSTANDING - Basic                         7,802,134       8,252,133        7,977,224      10,207,869
                                                  ==============   =============   ==============   =============
WEIGHTED AVERAGE COMMON
   SHARES OUTSTANDING - Diluted                      10,108,167       8,252,133       10,129,978      10,207,869
                                                  ==============   =============   ==============   =============
</TABLE>
See Notes to Consolidated Financial Statements.

                                        3

<PAGE>

                    INTERNATIONAL THOROUGHBRED BREEDERS, INC.
                                AND SUBSIDIARIES

                 CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
                    FOR THE NINE MONTHS ENDED MARCH 31, 2004


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

   Shares Issued for Fractional Exchanges With Respect
    to the One-for-twenty Reverse Stock Split effected
    on March 13, 1992                                        ---         ---                    1              2
   Purchase of Shares for Treasury in connection with
    REB Trustee                                              ---         ---            ---            ---
   Amortization of Deferred Compensation Costs               ---         ---            ---            ---
   Net Income for the Nine Months Ended March 31, 2004       ---         ---            ---            ---

                                                         ------------  ------------  -------------  -------------
BALANCE - MARCH 31, 2004                                     362,489  $ 36,248,875     11,480,279  $  22,960,557
                                                         ============  ============  =============  =============
</TABLE>

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

   Shares Issued for Fractional Exchanges With Respect
    to the One-for-twenty Reverse Stock Split effected
    on March 13, 1992                                                (2)         ---            ---          ---          ---
   Purchase of Shares for Treasury in connection with
    REB Trustee                                               ---                ---         (225,000)       ---       (225,000)
   Amortization of Deferred Compensation Costs                ---                ---            ---         3,750         3,750
   Net Income for the Nine Months Ended March 31, 2004        ---             2,887,144         ---          ---      2,887,144

                                                            ------------    ------------   -----------   ---------   -----------
BALANCE - MARCH 31, 2004                                  $  20,191,982   $ (37,302,464) $ (1,839,073) $   (7,915) $ 40,251,962
                                                            ============    ============   ===========   =========   ===========
</TABLE>


See Notes to Consolidated Financial Statements.

                                       4

<PAGE>


                    INTERNATIONAL THOROUGHBRED BREEDERS, INC.
                                AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                FOR THE NINE MONTHS ENDED MARCH 31, 2004 AND 2003
                                   (UNAUDITED)

<TABLE>
                                                                          March 31,
                                                               ------------------------------
                                                                    2004            2003
                                                               -------------   --------------
<CAPTION>
<S>                                                          <C>             <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
     INCOME BEFORE DISCONTINUED OPERATIONS                   $    2,887,144  $     2,884,947
     Adjustments to reconcile income to net cash provided
        by operating activities:
      Depreciation and Amortization                                 514,007          164,140
      Changes in Operating Assets and Liabilities -
       (Increase) in Restricted Cash & Investments                 (420,000)               0
       (Increase) in Accounts Receivable                            (29,880)        (226,278)
        Decrease  in Other Assets                                   438,608           29,783
       (Increase) in Prepaid Expenses                              (104,816)        (515,792)
       (Decrease) Increase in Accounts Payable and
                    Accrued Expenses                             (1,800,432)       1,909,029
                                                               -------------   --------------
     CASH PROVIDED BY OPERATING ACTIVITIES BEFORE
      DISCONTINUED OPERATIONS                                     1,484,631        4,245,829
     CASH PROVIDED BY DISCONTINUED OPERATING ACTIVITIES               7,200                0
                                                               -------------   --------------
     NET CASH PROVIDED BY OPERATING ACTIVITIES                    1,491,831        4,245,829
                                                               -------------   --------------

CASH FLOWS FROM INVESTING ACTIVITIES:
    Deposits on Purchase of Palm Beach Princess Mortgage                  0         (500,000)
    Purchase and Improvements of Royal Star                      (1,084,163)               0
    Security Deposit on New Bare Boat Charter-
     Related Party MJQ Corp.                                       (600,000)               0
    Deposits on Purchase of Additional Vessel                             0         (300,000)
    Investment in Port Lease                                              0         (250,000)
    Capital Expenditures                                           (657,441)        (885,185)
    Decrease in Other Investment Activity                           200,266          262,129
    Decrease in Other Investment Activity - Related Parties         116,013                0
                                                               -------------   --------------
     CASH (USED IN) INVESTING ACTIVITIES
      BEFORE DISCONTINUED INVESTING ACTIVITIES                   (2,025,325)      (1,673,056)
     CASH PROVIDED BY DISCONTINUED INVESTING ACTIVITIES                   0                0
                                                               -------------   --------------
     NET CASH (USED IN) INVESTING ACTIVITIES                     (2,025,325)      (1,673,056)
                                                               -------------   --------------

CASH FLOWS FROM FINANCING ACTIVITIES:
    Funds Received on Refinance of Note                           6,400,000                0
    Proceeds from Related Party Loans                                     0          207,346
    Proceeds from Bank Financing                                          0          200,000
    Principal Payments on Short Term Notes                       (4,765,124)        (140,029)
    Decrease in Balances Due to/From Subsidiaries                     6,113                0
                                                               -------------   --------------
     CASH PROVIDED BY FINANCING ACTIVITIES
      BEFORE DISCONTINUED FINANCING ACTIVITIES                    1,640,989          267,317
     CASH (USED IN) DISCONTINUED FINANCING ACTIVITIES                (6,113)               0
                                                               -------------   --------------
     NET CASH PROVIDED BY FINANCING ACTIVITIES                    1,634,876          267,317
                                                               -------------   --------------

NET INCREASE IN CASH AND CASH EQUIVALENTS                         1,101,382        2,840,090
      LESS CASH AND CASH EQUIVALENTS  FROM
       DISCONTINUED OPERATIONS                                       (1,087)           1,217
     CASH AND CASH EQUIVALENTS AT BEGINNING OF THE PERIOD         6,123,641          796,610
                                                               -------------   --------------

     CASH AND CASH EQUIVALENTS AT END OF THE PERIOD          $    7,223,936  $     3,637,917
                                                               =============   ==============

     Supplemental Disclosures of Cash Flow Information:
       Cash paid during the period for:
       Interest                                              $      633,490  $       282,082
       Income Taxes                                          $      256,517  $         3,448

</TABLE>
Supplemental Schedule of Non-Cash Investing and Financing Activities:
     On October 15, 2003, the Company issued a promissory  note in the amount of
$9,750,000,  reclassed  a  deposit  of  $4,000,000  and  recorded  an  asset  of
$13,750,000  to record the purchase of the Ship Mortgage  Obligation  associated
with the Palm Beach Princess.
     On October 15, 2003, the Company issued a promissory  note in the amount of
$225,000 to purchase an additional 450,000 shares of its Common Stock.


See Notes to Consolidated Financial Statements.

                                       5

<PAGE>

                    INTERNATIONAL THOROUGHBRED BREEDERS, INC.
                                AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)


(1)  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     (A) Nature of  Operations  - ITG Vegas,  Inc.  ("ITGV"),  a  subsidiary  of
International   Thoroughbred   Breeders,   Inc.,  is  currently  engaged  in  an
entertainment  cruise and casino ship business  under a bareboat  charter of the
vessel  M/V Palm Beach  Princess  (the "Palm  Beach  Princess").  The Palm Beach
Princess  performs  fourteen  cruises weekly,  that is, a daytime and an evening
cruise  each day.  Each  cruise is of five to six hours  duration.  During  each
cruise,  the Palm Beach Princess offers a range of amenities and services to her
passengers, including a full casino, sit-down buffet dining, live musical shows,
discotheque,  bars and lounges,  swimming pool and sundecks. The casino occupies
15,000 square feet aboard the ship and is equipped with  approximately  430 slot
machines,  all major table games (blackjack,  dice,  roulette and poker),  and a
sports wagering book.

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

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

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

     (E)  Depreciation and Amortization - Depreciation of property and equipment
were computed by the  straight-line  method at rates  adequate to allocate their
cost or adjusted fair value in accordance  with  generally  accepted  accounting
principles over the estimated  remaining useful lives of the respective  assets.
Amortization  expense  consists  of the write off of major  vessel  repairs  and
maintenance work normally  completed at dry dock in the fall of each year. These
expenses are written off during a one year period following the dry dock period.
For the nine months ended March 31, 2004, the amortized expense was $80,295.

     Long-lived assets and certain identifiable intangibles held and used by the
Company are reviewed for impairment  whenever events or changes in circumstances
warrant  such a  review.  The  carrying  value of a  long-lived  or  amortizable
intangible asset is considered  impaired when the anticipated  undiscounted cash
flow from such asset is  separately  identifiable  and is less than its carrying
value.  In that  event,  a loss is  recognized  based on the amount by which the
carrying value exceeds the fair value of the asset.  Losses on long-lived assets
to be disposed of are  determined in a similar  manner,  except that fair values
are reduced for the cost of  disposition.  Effective  January 4, 2002,  SFAS 142
requires  an annual  impairment  review  based on fair value for all  intangible
assets with indefinite  lives.  The Company  performed an impairment test of its
intangible  assets  with  indefinite  lives  during  the  fiscal  year  2003 and
concluded that there was no impairment.

     (F) Assets and Liabilities of  Discontinued  Operations - At March 31, 2004
and June 30, 2003, the remaining net assets and liabilities of Garden State Park
and  Freehold   Raceway  were  classified  as  either  "Assets  of  Discontinued
Operations" or "Liabilities of Discontinued Operations."

     (G)  Deferred  Income - The gain  from the sale of our  Garden  State  Park
property on November 28, 2000 in the amount of $1,439,951  and the gain from our
sale of the El Rancho property on May 22,


                                       6
<PAGE>

                    INTERNATIONAL THOROUGHBRED BREEDERS, INC.
                                AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)


2000 in the amount of $2,786,589 have been deferred until such time as the notes
receivable on the sales have been collected.  Other amounts included in Deferred
Income are  fees/charges  to Leo Equity Group,  Inc. in the amount of $3,000,000
and to MJQ  Corp.  in the  amount of  $1,000,000  in  connection  with the final
settlement   with  the  Brennan   Trustee.   (See   Footnote  15  Related  Party
Transactions)  These amounts have been deferred until such time as the funds are
received.

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

     (I) Cash and Cash  Equivalents  - The Company  considers  all highly liquid
investments  with  an  original  maturity  of  three  months  or less to be cash
equivalents.   As  of  March  31,  2004,  funds  classified  as  cash  and  cash
equivalents,  which are primarily  those of the Palm Beach  Princess  operations
under  debtor-in-reorganization,  are  only  available  under  bankruptcy  court
approval guidelines.

     (J) Restricted Cash - Restricted cash represents  funds which have been put
in an escrow account  previously  established  for the benefit of our Chapter 11
pre-petition  creditors.  During the nine month  period  ending  March 31,  2004
payments of $1,254,000 were disbursed from this account.

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

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

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


                                       7
<PAGE>

                    INTERNATIONAL THOROUGHBRED BREEDERS, INC.
                                AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)


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

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

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

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

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

     On September 12, 2003, the Bankruptcy  Court issued an order confirming the
Amended Joint Chapter 11 Plan of  Reorganization  (the "Plan") in the Chapter 11
Cases  of ITG  Vegas,  Inc.  and  MJQ  Corporation  (ITG  Vegas,  Inc.  and  MJQ
Corporation  being  hereinafter  called  the  "Debtors").  The Plan is a plan of
reorganization  under  Chapter  11 of the  Bankruptcy  Code  which  was  jointly
proposed by the Debtors.

     As of October 15,  2003,  the  effective  date of the Plan (the  "Effective
Date"),  all claims,  debts,  liens,  security interests and encumbrances of and
against the Debtors and  against  all  property of their


                                        8
<PAGE>

                    INTERNATIONAL THOROUGHBRED BREEDERS, INC.
                                AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)


respective bankruptcy estates, which arose before confirmation, were discharged,
except   as   otherwise   provided   in  the   Plan   or   confirmation   order.
Post-confirmation, each of the Debtors will continue as reorganized debtors.

     The Plan included the following principal features:

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

     2. All pre-petition non-insider (non-affiliate), non-insured unsecured debt
of the Debtors will be paid in two installments,  one-half on the Effective Date
and one-half (with interest  thereon at 8% per year from the Effective  Date) on
the six month  anniversary of the Effective  Date. The holders of such unsecured
pre-petition debt will receive security interests in the cash bank maintained on
board the Vessel (approximately $700,000) and in all of the shore side furniture
and equipment to secure the Plan payments to them.  During the nine months ended
March 31, 2004  payments of $1,254,000  were  disbursed  from an escrow  account
previously established for the benefit of the creditors.  In addition, an amount
equal to $70,000 will be paid monthly into escrow as further  collateral for the
holders of such debt.

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

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

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

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

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

          (c) A new  obligation of the Company for the purchase of an additional
450,000  shares of the Company's  stock from the Brennan  Trustee,  at $.50 per
share, or $225,000;

          The  amounts   described  in  subparagraphs   (a),  (b)  and  (c)  are
collectively  called the "Payment  Obligations"  and totaling  $11,623,414 as of
October 15,  2003.  A  forbearance  fee of


                                        9
<PAGE>

                    INTERNATIONAL THOROUGHBRED BREEDERS, INC.
                                AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)


$350,000 also accrued to the Brennan Trustee on the Effective Date.

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

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

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

     The foregoing  summary of the Plan, the Payment  Obligations to the Brennan
Trustee and the terms  thereof  are not  intended  to be  complete.  For further
information about the Payment Obligations and collateral therefor, the covenants
of the Company and the  Debtors,  events of default and other terms agreed to in
principle among the Debtors,  the Company and the Brennan Trustee,  reference is
made to the Amendment to the Master Settlement Agreement,  effective October 15,
2003 attached as an exhibit to our Form 10-Q for the quarter ended  December 31,
2003.

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


                                       10
<PAGE>

                    INTERNATIONAL THOROUGHBRED BREEDERS, INC.
                                AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)


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

(3)  MORTGAGE CONTRACT RECEIVABLE - RELATED PARTY

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

(4)  NOTES RECEIVABLE

     A portion  of the  proceeds  from the sale of the  non-operating  former El
Rancho  Hotel and  Casino in Las Vegas to  Turnberry/Las  Vegas  Boulevard,  LLC
("Turnberry") on May 22, 2000 was used by us to purchase a Turnberry  promissory
note in the face  amount  of  $23,000,000.  The  Company  and its  wholly  owned
subsidiary, Orion Casino Corporation (collectively,  the "Company") have entered
into a Letter of Intent with Cherry Hill at El Rancho LP, a limited  partnership
affiliated with Turnberry Associates, providing for monetization (through a sale
and a loan) of the promissory note payable to the Company by Turnberry/Las Vegas
Boulevard,  LLC in the face amount of $23 million  (the "Las Vegas  Note").  The
Letter of Intent sets forth the parties  mutual  understanding  and agreement in
principle with respect to terms and conditions upon which the Company would sell
the Las Vegas Note to Cherry Hill at El Rancho LP (the  "Buyer")  and is legally
binding upon the parties.


                                       11
<PAGE>

                    INTERNATIONAL THOROUGHBRED BREEDERS, INC.
                                AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)


     The following is a summary of the principal  terms of sale of the Las Vegas
Note. The summary does not purport to be a complete  summary and is qualified in
its entirety by reference to the complete Letter of Intent.

     In exchange for the Las Vegas Note,  the Company will receive cash payments
from the Buyer of $2.8 million, a non-recourse loan in the amount of $5 million,
and a promissory note of indeterminate  value and collectibility to be issued by
an  affiliate  of the Buyer.  The  Company  will not be liable for  payments  of
principal  on the $5 million  loan  included in the  foregoing  purchase  price.
However,  the Company will be  obligated  to pay  interest and fees  aggregating
$600,000 per year for five (5) years in order to obtain the loan. Closing of our
sale of the Las Vegas  Note is  expected  to occur  prior to June 30,  2004.  In
February 2004 the Company received $6.4 million of the intended proceeds.

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

     In  addition,  we sold two large  bronze  sculptures  located at the Garden
State Park  property to Realen,  in exchange  for Realen's  promissory  note due
November 30, 2002, in the principal  amount of $700,000.  The Chapter 11 Trustee
for the Bankruptcy Estate of Robert E. Brennan (the "Trustee") claimed ownership
of those sculptures, and we settled the resulting litigation over the sculptures
by agreeing that the first  $350,000 in principal  payments made by Realen under
such note would be  remitted  to the  Trustee  (together  with  one-half  of the
interest  paid by Realen  under such  note).  As part of the  settlement  of the
sculpture litigation,  the party who sold us the sculptures agreed to reduce the
amount of our  obligation  for  payment of the  balance of the  sculpture  price
(described in Note 5(A) below) by the same principal amount,  $350,000, given up
by us to the Trustee.

     On  February  20,  2004  Turnberry  paid  $466,363  to the  Company in full
satisfaction of the note plus accrued  interest due us for the sale of the horse
statues at Garden State Racetrack.  As a result,  on March 10, 2004, the Company
paid $176,970 in  satisfaction  of the note we owed on our original  purchase of
the statues.


                                       12
<PAGE>

                    INTERNATIONAL THOROUGHBRED BREEDERS, INC.
                                AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)


(5)  DEPOSITS AND OTHER ASSETS - NON-RELATED PARTIES

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

                                          March 31, 2004   June 30, 2003
                                          --------------   --------------
Port Lease Rights                       $       250,000  $       250,000

Deposit on Ship Purchase (See Note 7-E)             -0-          200,000

Other Misc. Assets                               84,975           85,239
                                           -------------   --------------
 Total                                  $       334,975  $       535,239
                                           =============   ==============

(6)  DEPOSITS AND OTHER ASSETS - RELATED PARTIES

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


                                                 March 31,       June 30,
                                                   2004            2003
                                                -----------    ------------

Loans to the Ft Lauderdale Project
(OC Realty, LLC)                              $  2,034,405   $   2,034,405

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

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

Security Deposits on new lease for M/V
Palm Beach Princess and a second Vessel            600,000             -0-

Accounts Receivable from Francis W. Murray          35,099          35,099

Loans to Francis W. Murray                          93,000          93,000

Advances to OC Realty, LLC                          51,470          77,162

Accrued Interest on Loans to the
Ft. Lauderdale Project (OC Realty, LLC)            842,704         606,553

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

Accounts Receivable from Frank Leo                  24,352          23,441

Goodwill on Purchase of GMO Travel                 193,946         193,946
                                                -----------    ------------
   Total Deposits and Other Assets -
            Related Parties                   $  7,498,636   $   6,687,266
                                                ===========    ============

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


                                       13
<PAGE>

                    INTERNATIONAL THOROUGHBRED BREEDERS, INC.
                                AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)


(7)  NOTES AND MORTGAGES PAYABLE

     Notes and Mortgages Payable are summarized below:
<TABLE>
                                                         March 31, 2004           June 30, 2003
                                                    -------------------------------------------------
                                       Interest %
                                        Per Annum     Current    Long-Term     Current     Long-Term
                                      ------------- -------------------------------------------------
<CAPTION>
<S>                                   <C>          <C>         <C>          <C>           <C>
International Thoroughbred Breeders,
Inc.:
-------------------------------------
Chapter 11 Trustee for the Bankruptcy
Estate of Robert E. Brennan (A)                12% $ 3,917,470 $  5,079,094 $  1,511,036  $   -0-

Francis X. Murray (B)                           8%     159,164          -0-      159,164      -0-

William H. Warner(B)                           12%      24,000          -0-       24,000      -0-

Other                                      Various      25,000          -0-       53,117      -0-

MCJEM, INC. (C)                                15%         -0-          -0-      132,000      -0-

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

Florida Bank, N.A. (E)                Prime + .25%         -0-          -0-      200,000      -0-

ITG Vegas, Inc.:
-------------------------------------
International Game Technology (F)          Various     122,283      101,339       16,709      -0-

Corporate Interiors (G)                 Prime + 2%         -0-          -0-      121,468      -0-

Other                                           0%      34,701          -0-          -0-      -0-

Garden State Park:
-------------------------------------
Service America Corporation (H)                 6%     160,000          -0-      160,000      -0-
                                                    ----------------------------------------------
                 Totals                            $ 4,442,618 $  5,180,433 $  3,277,494  $   -0-

 Net Liabilities of Discontinued
  Operations - Long Term                              (160,000)         -0-     (160,000)     -0-

 Related Party Notes                                  (183,164)         -0-     (183,164)     -0-
                                                    ----------------------------------------------

                 Totals                            $ 4,099,454 $  5,180,433 $  2,934,330  $   -0-
                                                    ==============================================

</TABLE>
--------------------------------------------------------------------------------
The effective Prime Rate at March 31, 2004 and June 30, 2003 was 4%.

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

                                       14
<PAGE>

                    INTERNATIONAL THOROUGHBRED BREEDERS, INC.
                                AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)


     Balance as of March 31, 2004: In connection with the Plan of Reorganization
we became liable for the purchase of the Ship Mortgage  Obligation in the amount
of $9.75 million and that obligation was combined with the unpaid balance of the
Stock  Purchase  Note,  and an  additional  450,000  shares for  $225,000 , plus
accrued  interest,  for a total  amount due the Brennan  Trustee of  $11,623,414
("The Payment  Obligation").  Effective  October 15, 2003 we became  jointly and
severally liable with ITG Vegas for the payment of the Payment Obligation. If we
are unable to  continue to make timely  payments of the Payment  Obligation  the
3,678,146 shares of stock, which have been pledged as security, could be sold by
the Brennan Trustee and the assets of ITG Vegas,  which also secured the Payment
Obligation could be liquidated by the Brennan  Trustee.  The sale of said shares
by the Trustee  along with other  uncontrollable  stock  transfer  events  could
effect the preservation of our tax net operating loss carry forwards (NOL's). As
of June 30, 2003 the Company had  $147,000,000  available  in tax net  operating
loss carry  forwards  which can be used to offset  taxable  income.  Loss of our
NOL's  would  cause the  Company to pay  Federal  Income  taxes on its  reported
taxable income and reduce reportable net income.  At March 31, 2004,  $4,421,591
of the long term  portion of the note will be due  durring  the  period  between
April 1, 2005 through  March 31, 2006 and  $657,503,  will be due the  following
twelve month period beginning April 1, 2006. (See Note 2)

     (B) On March 1, 2003,  we issued a promissory  note for a line of credit up
to $225,000 bearing interest at 8% to Francis X. Murray. The outstanding balance
on the line of credit note at March 31, 2004 was  $187,560.  In fiscal 2003,  we
issued  promissory  notes for  $24,000  bearing  interest  at 12% to  William H.
Warner,  Secretary of the Company. The outstanding balance on the notes at March
31, 2004 was $24,000. The proceeds from both notes were used as working capital.

     (C) On March 10, 2004 the Company paid the amount due on the Note to MCJEM,
Inc. in full from the proceeds of the Las Vegas Note. (See Note 4.)

     (D) On January 26, 2001,  we borrowed  $1,000,000  from Michael J. Quigley,
III at an annual  interest  rate of 10%.  Principal and interest on the note was
due on or about April 25, 2001. On May 14, 2001, the loan was modified to be due
on demand.  On February  20, 2004 the Company paid in full its  indebtedness  to
Michael J.  Quigley,  III in the amount of  $1,206,850  which  included  accrued
interest.

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

     (F) On December 6, 2002,  Palm Beach  Princess,  Inc.  issued a twenty-four
month  promissory  note in the  amount  of  $21,000  bearing  interest  at 8% to
International Game Technology for the purchase of gaming equipment. A payment of
$2,100  was  paid  on  delivery  of the  equipment  and 23  consecutive  monthly
installments  of  $854.80  were to be paid on the  balance.  As a result  of the
institution  of  proceedings by our  subsidiary,  ITGV,  under Chapter 11 of the
bankruptcy code, payments have been delayed until the effective date of the Plan
of  Reorganization  (See Note 2). On December 22, 2003, ITG Vegas, Inc. issued a
twenty-four  month promissory note in the amount of $231,716 bearing interest at
8.5% to International  Game Technology for the purchase of gaming  equipment.  A
payment of $30,000  was paid on  delivery of the  equipment  and 24  consecutive
monthly  installments of $10,532.85 are to be paid on the balance.  At March 31,
2004,  the  principal  balance on the

                                       15
<PAGE>

                    INTERNATIONAL THOROUGHBRED BREEDERS, INC.
                                AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)


International Game Technology note was $122,282.

     (G) On April 30 2003, ITG Vegas,  Inc. issued a one year promissory note in
the amount of $161,958 bearing interest at prime plus 2% to Corporate  Interiors
for the purchase of office furniture.  Monthly payments of $13,496.46 were being
paid on the note.

     (H) 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
are due on December 28, 2002 and December 28, 2003. The payments due on December
28, 2002 and 2003 have not been made as of May 15, 2004.

(8)  PURCHASE OF M/V ROYAL STAR

     During the  quarter  ended  December  31, 2003 our  subsidiary,  Royal Star
Entertainment,  LLC, a Delaware limited liability company,  purchased the vessel
M/V Royal Star ("Royal Star").  As of March 31, 2004 the Company has capitalized
$1,084,163  for the purchase and for legal and  professional  fees in connection
with the  purchase  and has  expensed an  additional  approximated  $133,000 for
administrative  start-up  costs.  The Royal Star is a 232 foot vessel,  built in
1985 and operates  under the flag of St. Vincent and  Grenadines.  We anticipate
that the vessel will need extensive  improvements and outfitting costing between
$5 and $6 million  before  being  placed in service as a gaming  vessel.  We are
seeking  financing  in  order  to  make  these  improvements.  Financing  may be
restricted  by the  Brennan  Trustee.  Funds  which  we may  wish to  spend  for
improvements are restricted by the Brennan Trustee and we must make simultaneous
dollar for dollar  payments  to the Brennan  Trustee  for each  dollar  spent on
improvements. In December 2003 we paid the Trustee a prepayment of $1,200,000 on
our  obligation  to him in order to obtain his  permission to purchase the Royal
Star.  Depreciation will not be computed on the Royal Star until it is placed in
service.

(9)  LONG TERM DEBT - RELATED PARTIES

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


                                                        March 31,       June 30,
                                                          2004            2003
                                                      --------------------------

Loan from Francis W. Murray                           $     250,000  $   250,000

Accrued Wages due and Advances from Francis W. Murray         7,014      404,204

Advances from MJQ Corporation (FWM ownership)                   -0-      330,813
                                                        ------------   ---------

   Total Long Term Debt - Related Parties             $     257,014  $   985,017
                                                        ============   =========


(10) NET INCOME PER COMMON SHARE

     Income per common  share is computed by dividing net income by the weighted
average number of shares of common stock outstanding.  On December 13, 2002, the
Company  purchased  3,228,145 shares of its Common Stock from the Trustee and on
October  15,  2003 the  effective  date of the court  approval of our Chapter 11
Bankruptcy Plan, we purchased an additional  450,000 shares

                                       16
<PAGE>

                    INTERNATIONAL THOROUGHBRED BREEDERS, INC.
                                AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)


from the Trustee and have  accounted for the  transaction  on the cost method of
accounting  for  treasury  stock.  For the three and nine months ended March 31,
2004,  options to purchase  2,075,000  shares of Common Stock at $.269 per share
and on  options to  purchase  661,500  shares of Common  Stock at $.50 per share
(which includes 455,000 options having been authorized but not issued) were used
in the  computation  of diluted  income per share because the exercise  price of
those options were below theaverage market price,  however, the number of shares
that would have been issued from the exercise of stock  options has been reduced
by the number of shares that could have been  purchased from the proceeds at the
average market price of the Company's stock. An additional  121,388 shares to be
issued  to Mr.  Quigley  and Mr.  Warner  (See  Note  14) were  also  considered
outstanding for the diluted income per share calculation.  The additional shares
that would have been  issued  decreased  the stated  earnings  per share for the
three and nine month  periods  ended March 31,  2004.  Options  and  warrants to
purchase  4,046,500  shares of Common Stock at various prices per share, for the
three and nine months ended March 31, 2003 were not included in the  computation
of income per share because the exercise price of those options and warrants was
above market value.

(11) COMMITMENTS AND CONTINGENCIES

     See Note 2 for commitments and contingencies with respect to the Chapter 11
Plan of  Re-Organization.  See Note 3 for  commitments  and  contingencies  with
respect  to our  purchase  of the Ship  Mortgage  Obligation  from  the  Brennan
Trustee.  In the event the Company is unable to make all the payments  under the
agreements with the Brennan Trustee or otherwise  defaults in performance of the
terms of such  indebtedness,  the  Company  stands  to lose  its only  operating
business. Subject to applicable grace periods, the Brennan Trustee can cause the
liquidation of our only operating business, the Palm Beach Princess line.

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

     Effective December 1, 2000, we entered into a five-year employment contract
with Francis W. Murray, our Chief Executive  Officer.  The contract provides for
annual compensation of $395,000,  a $1,500 monthly automobile expense allowance,
a country club annual dues allowance and travel and entertainment reimbursements
for business expenses reasonably incurred by him in addition to participation in
various other  benefits  provided to our  employees.  As part of his  employment
contract,  Mr. Murray was awarded  options to purchase  2,000,000  shares of our
Common Stock.  On January 4, 2003, we began  deferring  payments of compensation
due to Mr.  Murray  due to a lack of funds  resulting  from the  institution  of
proceedings by our subsidiary,  ITGV,  under Chapter 11 of the bankruptcy  code.
During the quarter all of the accrued but unpaid wages in the amount of $662,154
were paid to Mr. Murray.

     With the sale of our  Freehold  Raceway  property  on January  28,  1999 we
assumed  full  responsibility  for the  costs  associated  with the  clean up of
petroleum  and related  contamination  caused by the  leakage of an  underground
storage  tank  which was  removed in 1990,  prior to our  purchase  of  Freehold
Raceway.  In  February  2000 the N.J.  Department  of  Environmental  Protection
approved our remedial  investigation  workplan  ("RIW").  Under the RIW numerous
test wells were  drilled  and the soil tested and  monitored  to  determine  the
extent and direction of the flow of underground  hazardous  material and reports
and conclusions of the tests were prepared for the State of New Jersey. However,
prior to obtaining a remedial action workplan from the State of New Jersey,  the
work was


                                       17
<PAGE>

                   INTERNATIONAL THOROUGHBRED BREEDERS, INC.
                                AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)


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
estimatedthat the cost to remediate the site would be approximately $750,000. As
of June 30, 1999 we had accrued $362,000 and we accrued an additional  amount of
approximately  $388,000  during  fiscal  2001 as the  scope of the  project  was
further  defined.  Such  accruals  were made with the help of the  environmental
consulting  firm engaged by the Company.  These costs  include  drilling of test
wells and  monitoring,  lab testing,  engineering  and  administrative  reports,
equipment  and  remediation  of the site  through a "pump and treat"  plan.  The
Company has made  payments of  approximately  $93,600,  $200,000,  and  $323,000
during fiscal years 2000, 2001, 2002 respectively which were charged against the
accrued balances.  As of March 31, 2004 the accrued balance was $130,398.  It is
estimated that completion of the site clean up will take approximately 18 months
from the time the work is  reinstated.  It is  unlikely  that the  Company  will
receive any insurance reimbursement for our costs of this remediation project.

     In connection with the January 28, 1999 sale and lease transactions for the
Garden  State  Park  facility,  we  purchased  a  liquor  license  owned  by  an
unaffiliated third party, Service America Corporation,  for $500,000 financed by
a five (5) year promissory note at a 6% interest rate. At December 31, 2002, the
unpaid principal balance was $160,000. Yearly principal payments of $80,000 plus
interest were due on December 28, 2002 and 2003 and these payments have not been
made as of May 14, 2004. The Company entered into a sale and lease agreement for
the lease of our  premises  from Jan. 28, 1999 to May 29, 2001 and the sale of a
10 acre portion to be used as an OTB  facility.  Under the terms of our sale and
lease  agreement the  lessee/buyer  had the right to (i) take  possession of the
liquor license if during the three year period from Jan. 28, 1999 until Jan. 27,
2002  it had a use for the  liquor  license  at the  OTB  facility  and  (ii) to
transfer  the  license to its name by paying  Garden  State Park  $100,000.  The
lesee/buyer  had  transferred  the  license  to its name by paying us  $100,000.
During the three year period Jan.  28, 1999 to Jan. 28, 2002 no OTB facility was
built and the  lessee/buyer  did not have a use for the liquor  license.  By the
terms of the contract the Company has the right to re-acquire the liquor license
for $100,000 and has exercised such right. However, the lessee/buyer has refused
to perform.  The Company  believes it will need to take legal  action to enforce
its right to the liquor license.

     Through ITGV, we have negotiated with the Port of Palm Beach District a new
operating  agreement and lease of space in a new office  complex  constructed at
the Port of Palm Beach adjacent to a new cruise terminal effective, as modified,
May 5, 2003.  The term of the initial  lease is five years at $183,200  per year
payable  monthly.  We are also required to make tenant  improvements  to the new
space in a minimum amount of $333,000.  The actual cost to make the improvements
was approximately  $950,000.  We have the right to a credit of up to the minimum
amount of improvements required of $333,000 against the initial term of our five
year lease.

     On March 1, 2004 we entered  into a Dockage  Space  Agreement  between  the
Company  and the City of Riviera  Beach for  approximately  160 feet of concrete
dock space at the City Marina. The term is for one year for a fee of $10,000 per
month.  The  lease is  renewable  subject  to the  approval  of the  City.  This
Agreement  is intended  only for the purpose of making  available  the  assigned
space for vessels  other than a  day-cruise  gaming ship.  Further,  the Company
understands that in the event it wishes to dock a day-cruise gaming ship that it
will be required to enter into a new agreement with the City.

                                       18
<PAGE>

                   INTERNATIONAL THOROUGHBRED BREEDERS, INC.
                                AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)


     The  following  summarizes  commitments  on  non-cancelable  contracts  and
leases.

<TABLE>
                                       Twelve Months Ended March 31,
                       ------------------------------------------------------------   There-
                          2005          2006          2007        2008      2009      after       Total
                       ----------    ----------    ----------   --------   -------   -------   -----------
<CAPTION>
<S>                 <C>           <C>            <C>          <C>        <C>       <C>       <C>
Minimum Amounts due
to Brennan Trustee  $  5,120,000  $  5,020,000   $   687,000  $      --  $     --  $     --  $ 10,827,000

Employee Contracts       722,883       688,476            --                                    1,411,359

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

Operating Leases         279,267       209,891       151,296    116,602    38,867        --       795,923
                       ----------    ----------    ----------   --------   -------   -------   -----------

              Total $  6,722,150  $  6,518,367   $ 1,088,296  $ 116,602  $ 38,867  $     --  $ 14,484,282
                       ==========    ==========    ==========   ========   =======   =======   ===========
</TABLE>

LEGAL PROCEEDINGS

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

     Our  subsidiary,  ITG  Vegas,  Inc.,  successor  by  merger  to Palm  Beach
Princess, Inc., initiated proceedings under Chapter 11 of the Bankruptcy Code on
January 3, 2003. (See Note 1.)

(12) TREASURY SHARES PURCHASED

     On December 13, 2002, the Company issued a promissory note in the amount of
$1,648,403 to purchase  3,228,145 shares of its Common Stock from the Chapter 11
Trustee for the bankruptcy  estate of Robert E. Brennan.  In connection with our
Chapter 11 Plan of  Reorganization,  effective October 15, 2003, we purchased an
additional 450,000 shares for $225,000, and the total amount of our debt for the
purchases  of stock as of October 15, 2003 was  $1,873,413  which also  includes
accrued  interest.  Such  indebtedness  was  combined  with the  obligations  to
purchase the Ship Mortgage Obligation,  and is payable over the next three years
together  with  interest  at 12% per  annum.  (See Note 2). If we are  unable to
continue to make timely  payments on any of our debt to the Brennan  Trustee the
3,678,145 shares of stock, which have been pledged as security, could be sold by
the  Trustee and the Trustee  may cause the  liquidation  of our only  operating
business. The sale of said shares by the Trustee along with other uncontrollable
stock  transfer  events could effect the  preservation  of our tax net operating
loss carry  forwards  (NOL's).  As of June 30, 2003 the Company had $147 million
available in tax net operating  loss carry  forwards which can be used to offset
taxable income.  Loss of our NOL's would cause the Company to pay Federal Income
taxes on its reported taxable income and reduce reportable net income.

                                       19
<PAGE>

                    INTERNATIONAL THOROUGHBRED BREEDERS, INC.
                                AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)


(13) FAIR VALUE OF FINANCIAL INSTRUMENTS

     As of March 31, 2004, 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  theCompany's  interest rates  approximate  current
interest  rates.  On our notes  receivable  from  Turnberry and Realen,  we have
elected to defer the gain on the sale and the interest to be accrued  until such
time that collectability can be determined (See Note 4).

(14) STOCK OPTIONS AND WARRANTS

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

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

     At a meeting of the Board of  Directors of the Company held on November 18,
2003, the Board authorized the future grant of options to purchase 25,000 shares
of common stock to each non-employee  director,  Mr. James Murray and Mr. Walter
ReDavid,  at $.50 per share,  as  compensation  for their services as directors,
subject,  however, to the prior payment of all obligations of the Company to the
Bankruptcy Trustee. Accordingly, no such options will be issued or granted until
the  Bankruptcy  Trustee shall have been paid in full, at which time the Company
will be authorized  (but not obligated) to grant such options  provided that the
grantee is still serving as a director of the Company at that time.

     Also at the November 18, 2003  meeting of the Board,  the Board  authorized
the future grant of shares of common stock to each of Mr.  Francis W. Murray and
Mr. Robert J. Quigley as  compensation in lieu of their  respective  salaries if
they  continued to defer payment of their deferred  salary  existing on November
18, 2003. In the case of Mr.  Quigley,  his salary which had been

                                       20
<PAGE>

                    INTERNATIONAL THOROUGHBRED BREEDERS, INC.
                                AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)


     deferred  since  January 3, 2003  accounted  to $36,669 as of November  18,
2003.  Mr. Murray has  subsequently  elected to take has accrued  salary in cash
payments. The Board also authorized payment of the unpaid principal of a $24,000
loan to the Company by Mr.  William H. Warner,  the  Company's  Secretary in the
form of a future  grant of shares.  The Company  will be  authorized  to pay any
accrued  salary to Mr.  Quigley and the unpaid loan  principal to Mr.  Warner in
shares of common  stock,  valued for such purpose at $.50 per share,  subject to
the prior payment of all  obligations of the Company to the Bankruptcy  Trustee.
No such shares will be granted until the Bankruptcy Trustee shall have been paid
in full,  at which time the Company will be  authorized  (but not  obligated) to
grant such shares  provided  that the grantee  (Mr.  Quigley or Mr.  Warner,  as
applicable)  agrees to accept such shares  (valued at $.50 per share) in payment
of a portion, specified by the grantee, of the Company's obligation to him.

     At March 31, 2004,  total employee  options  outstanding were 3,111,500 and
total non-employee  options  outstanding were 425,000.  At March 31, 2004 all of
the employee and non-employee options were exercisable.

     At March 31, 2004, total warrants  outstanding  were 710,000.  All warrants
were exercisable at March 31, 2004.

(15) RELATED PARTY TRANSACTIONS

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

     In the second project, Mr. Murray is participating in the development of an
oceanfront  parcel  of land,  located  in Fort  Lauderdale,  Florida,  which has
received all governmental  entitlements from the City of Fort Lauderdale and the
state of Florida to develop a  14-story  building  to include a 5-story  parking
garage,  approximately  6,000 square feet of commercial  space and a residential
9-story tower.  The property had been owned by MJQ  Development,  LLC, which was
owned by Michael J. Quigley,  III until  December 26, 2002 when the property was
acquired by OC Realty,  LLC, the entity owned by Mr. Murray.  Mr. Quigley has no
relationship to Robert J. Quigley, one of our directors. OC Realty is developing
a condominium  hotel resort on the property as discussed  above. As of March 31,
2004,  we had lent  $2,034,405 in total to MJQ  Development  and we have accrued
interest  in the amount of  $842,704 on the loan.  Upon the  acquisition  of the
property,  OC


                                       21
<PAGE>

                    INTERNATIONAL THOROUGHBRED BREEDERS, INC.
                                AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)


Realty assumed MJQ  Development's  indebtedness to us. These loans bear interest
at 12% and will be repayable  out of the first  proceeds,  after payment of bank
debts, generated by the sale of the condominiums. We will also have the right to
receive, as participation interest, from available cash flow of OC Realty if the
project  is  successful,  a  priority  return of our  investment  and a priority
profits interest for up to three times our investment.  Repayment of these loans
and our participation interest will be subject to repayment of, first, bank debt
of approximately  $5.5 million (at present) incurred in the purchase of the real
property and, second,  construction  financing  expected to amount to $25 to $30
million and third,  capital invested by a joint venture partner  (expected to be
up to $6.5 million) plus a 15% per annum return  thereon.  At the time the loans
to MJQ  Development  were  approved,  Mr.  Murray stood to receive a substantial
contingent  benefit from MJQ Development for his  participation  in the project.
Fair value and  collectability  of the original  investment  of  $2,034,405  and
accrued  interest  was  determined  by the  joint  venture  through  projections
evidencing our collection upon build out and sale of the project.

     In order to raise the capital with which to proceed in the  development  of
the Ft. Lauderdale  property,  OC Realty placed the Ft. Lauderdale property in a
joint  venture in connection  with which the other joint venture  partner was to
fund up to $6.5 million for development and receive a 50% equity  interest.  Our
loan and participation  interest will be payable out of OC Realty's 50% share of
distributions  after repayment of debt and the new investor's capital investment
and  15%  annual  return  thereon.   However,  the  joint  venture  partner  has
discontinued its funding obligation for the project.  OC Realty has loaned funds
to the joint venture to meet its current requirements. In addition, OC Realty is
in  discussions  with third parties to replace its joint venture  partner and is
considering entering into a development  agreement with a nationally  recognized
developer to aid the marketability of the project.  The Company has assessed the
collectability  of the advances made to OC Realty based on  comparable  sales of
like units in the  marketplace  which suggest  demand is strong and  prospective
sales of the project's inventory of units will be more than adequate to meet its
obligations including our outstanding notes payable.

     Effective  April 30,  2001,  we entered  into a bareboat  charter  with MJQ
Corporation,  pursuant  to which we are  chartering  the  vessel  M/V Palm Beach
Princess for the purpose of operating an  entertainment  casino cruise  business
from the Port of Palm Beach, Florida. Michael J. Quigley, III was a principal of
MJQ Corporation. In October 2002, Francis W. Murray, our Chairman, President and
Chief Executive  Officer  purchased the stock of MJQ Corporation and has been an
officer and director of MJQ Corporation.  Francis X. Murray,  the son of Francis
W. Murray,  is President and a director of MJQ Corporation and Vice President of
our subsidiary,  ITG Vegas, Inc., which operates the vessel.  Under the bareboat
charter  agreement,  which is on a month to month basis, we are obligated to pay
$50,000  per  month as the  charter  hire fee to MJQ  Corporation.  All costs of
operating  the  vessel  incurred  by MJQ  Corporation  on our  behalf  are to be
reimbursed by us to MJQ Corporation. In addition, as described in Note 3 and 7-A
above,  we have entered into an amended  Master  Settlement  Agreement  with the
Chapter  11  Trustee  of  the  Bankruptcy  Estate  of  Robert  E.  Brennan,  MJQ
Corporation and others to purchase from the Trustee the Ship Mortgage Obligation
of MJQ  Corporation,  having an  original  balance  of  principal  and  interest
outstanding  of  approximately  $15.7  million  for a  purchase  price of $13.75
million.  Pursuant to the Master Settlement  Agreement,  MJQ Corporation and its
officers and directors  (including  Francis W. Murray) exchanged mutual releases
with the Trustee and others having claims to the Ship Mortgage Obligation.

     On November 13, 2002, the Company and MJQ  Corporation  signed an agreement
and  bill of sale  which  transferred  maintenance  materials  and  spare  parts
inventory previously maintained by


                                       22
<PAGE>

                    INTERNATIONAL THOROUGHBRED BREEDERS, INC.
                                AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)


MJQ  Corporation to Palm Beach  Princess,  Inc. The value of the parts inventory
sold and assigned was  $1,103,125.  Payment for the inventory was made by way of
offsets  on  amounts  previously  due  to  Palm  Beach  Princess,  Inc.  by  MJQ
Corporation.  Fair value of this  inventory  was  determined  by actual  invoice
prices and estimates made by the Palm Beach Princess ship engineers.

     Subsequent  to our receipt of $6.4 million on February 20, 2004 from Cherry
Hill at El Rancho,  LP, the entity  affiliated with Turnberry  Associates,  (See
Note 3) we used a  portion  of the  funds to (i) repay the loan due on a note to
Mr. Michael J. Quigley in the amount of $1,206,850; (ii) pay the amount due in a
note to MCJEM,  Inc. in the amount of $176,970;  (iii) pay Mr. Francis W. Murray
for his deferred salary in the amount of $662,154; (iv) reduce advances given to
the Company by Mr.  Murray and his  entities  in the amount of $371,536  and (v)
place a $600,000 deposit on new bare boat charters for the vessel M/V Palm Beach
Princess and a second vessel.

     We entered into an  agreement to purchase all of the shares of  outstanding
stock of Leo Equity Group, Inc. Mr. Francis W. Murray had been a director of Leo
Equity Group, Inc. Closing on the Leo Equity Group, Inc. stock purchase occurred
effective  October 27, 2002.  The purchase  price payable by us for the stock in
Leo Equity Group,  Inc. was  $250,000,  payable  without  interest in 10 monthly
installments  of $25,000 each. As of March 31, 2003, this note was paid in full.
We also agreed to reduce the exercise price of previously  granted  options held
by the seller,  Frank A. Leo (our former  director  and  chairman),  to purchase
200,000  shares of our  common  stock,  from  $4.00 per share to $.50 per share,
while  conditioning  exercise of such options upon our first having  consummated
the purchase of the shares required to be purchased by us from the Trustee under
the Stock Purchase  Agreement.  Due to the uncertainties that these options will
be  exercisable,  the  Company  has not  recorded  any expense for the change in
exercise price.  The purpose of such  acquisition was to enable us to obtain the
lease and operating  agreement  with the Port of Palm Beach  District  which had
been owned by Leo Equity Group, Inc.

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

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

                                       23
<PAGE>

                    INTERNATIONAL THOROUGHBRED BREEDERS, INC.
                                AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)


MJQ Corporation  stock subject to our lien securing payment of the MJQ Debt. The
Campany has  reviewed the balance  sheet of MJQ Corp and believes  that the fair
value of the Palm  Beach  Princess  and it's  other  assets  exceeds  MJQ Corp's
liabilities by an amount  sufficient to assure payment of debt in its evaluation
of the  collectibility of the amount payable to which is secured by stock of MJQ
Corporation.

     On January 26, 2001, we borrowed $1,000,000 from Michael J. Quigley, III at
an annual interest rate of 10%. Principal and interest on the note was due on or
about  April 25,  2001.  On May 14,  2001,  the loan was  modified  to be due on
demand.  On February 20, 2002 Mr. Quigley released his security  interest in the
Realen Note in connection with the Master Settlement Agreement.  On February 20,
2004 the  Company  paid in full its  indebtedness  to Michael J.  Quigley in the
amount of $1,206,850 which included accrued interest.

     On July 12, 2002, we borrowed  $300,000 from Francis W. Murray at an annual
interest  rate  of  6%.  Repayment  is  restricted  due to  the  Amended  Master
Settlement  Agreement  signed  with the Trustee  and as of March 31,  2004,  the
$250,000  balance on the note is classified as Long-Term Debt - Related  Parties
on the balance sheet.

     Francis X. Murray, Vice President of our ITG Vegas, Inc. subsidiary and son
of Francis W. Murray,  our President,  CFO and CEO agreed to loan the company up
to  $225,000  in the form of a line of credit.  As of March 31, 2004 these loans
totaled $159,164. (See Note 7-B)

(16) SUBSEQUENT EVENTS

     In connection with our bankruptcy plan of reorganization, on April 15, 2004
a final  distribution  to our  unsecured  creditors  was made in the  amount  of
$769,650.


                                       24
<PAGE>

                    INTERNATIONAL THOROUGHBRED BREEDERS, INC.
                                AND SUBSIDIARIES

               MANAGEMENT'S ANALYSIS FOR THE THREE AND NINE MONTHS
                              ENDED MARCH 31, 2004


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

Forward-Looking Statements

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

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

Liquidity and Capital Resources

     Cash flow and  liquidity  during the nine month period ended March 31, 2004
included two major sources of cash.  Operationally we generated approximately $4
million in cash from the  operations  of the Palm Beach  Casino Line  operation.
Additionally, in February 2004 we received $6.4 million on advances as part of a
Letter of Intent signed with Cherry Hill at El Rancho LP, a limited  partnership
affiliated  with  Turnberry  Associates  to  provide  for  monetization  of  the
promissory note payable to the Company by  Turnberry/Las  Vegas  Boulevard,  LLC
(Las Vegas Note) in the face amount of $23 million. Additionally during the most
recent quarter  Turnberry paid $466,363 in full  satisfaction  of a note due the
Company for the sale of horse  statues at Garden  State Park.  Such cash inflows
were used in part to pay down a significant  portion of our  outstanding  debts.
Payments to the  Brennan  Trustee in the amount of  $3,100,000  were made on his
indebtedness for principal and interest and $350,000 was used to pay Forbearance
fees to the  trustee.  On  February  20,  2004  the  Company  paid  in full  its
indebtedness  to Michael J. Quigley in the amount of $1,206,850  which  included
accrued interest. On March 10, 2004 the Company paid in full its indebtedness to
MCJEM, Inc. in the amount of $176,970 which included accrued interest.

     During the third  quarter the Company  reduced the amounts  that we owed to
Francis W. Murray for deferred  salary of $662,154 and reduced  advances made by
him and entities owned by Mr. Murray to the


                                       25
<PAGE>

                    INTERNATIONAL THOROUGHBRED BREEDERS, INC.
                                AND SUBSIDIARIES

               MANAGEMENT'S ANALYSIS FOR THE THREE AND NINE MONTHS
                              ENDED MARCH 31, 2004


Company.  Additionally we used approximately $1,084,000 in cash for the purchase
of and ongoing  improvements to a second vessel and  approximately  $660,000 for
the purchase of equipment  for our vessels and our offices.  In February 2004 we
placed a $600,000  deposit on new bare boat  charters  for a the vessel M/V Palm
Beach  Princess  and a second  vessel.  During  the nine  month  period  we also
disbursed  $1,254,000 to our pre-petition  bankruptcy creditors and deposited an
additional  $420,000  in an  escrow  account  for  future  disbursement  to  our
creditors.

     On January 3, 2003, ITG Vegas, Inc. ("ITGV"),  our subsidiary operating the
Palm Beach Princess,  and MJQ Corporation ("MJQ"), an entity owned by Francis W.
Murray,  filed  voluntary  petitions  for relief under  Chapter 11 of the United
States  Bankruptcy Code (the "Bankruptcy  Code") in the United States Bankruptcy
Court for the Southern District of Florida, Palm Beach Division (the "Bankruptcy
Court"), in re: ITG Vegas, Inc., Case No. 03-30038.  The petition does not cover
the Parent Company ITB, nor any other of ITB's subsidiaries.  The Parent Company
had used all of the available  funds that we had prior to the bankruptcy  filing
to pay some of our expenses  however  during the most recent quarter we received
an  initial  $6.4  million  on the  monetization  of our Las  Vegas  Note  which
permitted  the parent  Company to pay the  majority  of its  remaining  existing
liabilities and to establish reserve funds to pay future expenses.

     The  Bankruptcy  filing had  severely  limited  our  ability to make timely
payments by our Parent to its CEO,  creditors  and  corporate  vendors which has
affected our ability to retain the  professional  services and vendors who serve
our company.  On September 12, 2003 the United States  Bankruptcy  Court for the
Southern  District of Florida (Palm Beach Division)  issued an order  confirming
the Amended Joint Chapter 11 Plan of Reorganization  (the "Plan") in the Chapter
11 cases of ITG Vegas,  Inc.,  the Company's  wholly owned  subsidiary,  and MJQ
Corporation. On the effective date of the Plan, October 15, 2003, and so long as
the ITGV  subsidiary  remains  current  with its  obligations  to the  Donald F.
Conway,  as Chapter 11 Trustee for the  bankruptcy  estate of Robert E.  Brennan
("the  Brennan  Trustee")  then ITGV will be permitted to upstream  $100,000 per
month to the Parent Company. (See the paragraphs below concerning the bankruptcy
order).  The currently  monthly budgeted cash expenses,  including  payroll (but
exclusive of the Chairman)  are  approximately  $100,000 per month.  The Company
continues to incur  expenses for exploring  potential  opportunities  in various
foreign  countries.  If the company were to discontinue its exploration of these
opportunities  additional  funds  could be used for  payment  of Parent  Company
expenses but the Company would lose the  potential  business  opportunities.  So
long as the Brennan Bankruptcy  Trustee continues to be our principal  creditor,
payments to the Parent  company from the Palm Beach  Princess will be limited to
$100,000  per month.  We intend to  re-finance  that debt as soon as  reasonably
possible  in  order  to  eliminate  or  lessen  restrictions  on  our  operating
subsidiary to provide cash to the Parent Company.

     On October 15, 2003, the Chapter 11 Plan of Reorganization  (the "Plan") in
the Chapter 11 cases of ITG Vegas,  Inc., the Company's wholly owned subsidiary,
and MJQ Corporation became effective.  On the effective date all claims,  debts,
liens,  security  interests  and  encumbrances  of and  against  the Debtors and
against all property of their respective bankruptcy estates,  which arose before
confirmation,  were  discharged,  except as  otherwise  provided  in the Plan or
confirmation  order.  Post-confirmation,  each of the Debtors  will  continue as
reorganized debtors. See Note 2 to the financial statements for a summary of our
obligations in connection with the Plan.


                                       26
<PAGE>

                    INTERNATIONAL THOROUGHBRED BREEDERS, INC.
                                AND SUBSIDIARIES

               MANAGEMENT'S ANALYSIS FOR THE THREE AND NINE MONTHS
                              ENDED MARCH 31, 2004


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

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

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

     In the event the  Company  is  unable  to make all the  payments  under the
agreements with the Brennan Trustee or otherwise  defaults in performance of the
terms of such  indebtedness,  the  Company  stands  to lose  its only  operating
business. Subject to applicable grace periods, remedies available to the Brennan
Trustee, if we default,  include the liquidation of our only operating business,
the Palm  Beach  Princess  line.  Additionally,  if we default  (subject  to the
applicable grace periods) the 3,678,146 shares of stock which we are buying from
the Brennan Trustee,  all of which are pledged to the Brennan Trustee,  could be
sold by the Brennan Trustee.  The sale of these shares by the Trustee along with
other  uncontrollable stock transfer events could affect the preservation of our
tax net  operating  loss tax carry  forwards  (NOL's).  As of June 30,  2003 the
Company had  $147,000,000  available in tax net  operating  loss carry  forwards
which can be used to offset  taxable  income.  Loss of our NOL's would cause the
Company to pay Federal  Income taxes on its reported  taxable  income and reduce
reportable net income.

     International  Thoroughbred Breeders, Inc. and its wholly owned subsidiary,
Orion Casino Corporation (collectively the "Company") have entered into a Letter
of Intent  with Cherry  Hill at El Rancho LP, a limited  partnership  affiliated
with  Turnberry  Associates,  providing for  monetization  (through a sale and a
loan) of the  promissory  note  payable to the  Company by  Turnberry/Las  Vegas
Boulevard,  LLC in the face amount of $23  million  (the "Las Vegas  Note").  In
exchange for the Las Vegas Note, the Company will receive cash payments from the
Buyer of $2.8 million,  a non-recourse  loan in the amount of $5 million,  and a
promissory note of  indeterminate  value and  collectibility  to be issued by an
affiliate of the Buyer. The Company will not be liable for payments of principal
of the $5 million loan included in the foregoing  purchase price.  However,  the
Company will be obligated to pay interest and fees aggregating $600,000 per year
for five (5) years in order to obtain the loan.  In  February  2004 the  Company
received $6.4 million of the intended  proceeds.  Closing on the  transaction is
expected to occur prior to June 30,  2004.  The proceeds  from this  transaction
have  permitted  the  parent  Company  to pay  the  majority  of its  previously
outstanding  payables,  payoff  several  of the  notes  due by the  Company  and
establish reserve funds for working capital.


                                       27
<PAGE>

                    INTERNATIONAL THOROUGHBRED BREEDERS, INC.
                                AND SUBSIDIARIES

               MANAGEMENT'S ANALYSIS FOR THE THREE AND NINE MONTHS
                              ENDED MARCH 31, 2004


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

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

     Unless and until ITGV  successfully  emerges  from its  Chapter 11 case and
pays in full all the debts to the Brennan Trustee, a possible source of cash (in
addition to the  $100,000  per month tax sharing  payments as  mentioned  above)
include the promissory  note we received when we sold our Garden State Park real
property in  November,  2000.  This Note is in the face  amount of $10  million,
issued by  Realen-Turnberry/Cherry  Hill,  LLC, the purchaser of the Cherry Hill
property  (the "$10  Million  Note").  Under the Note,  interest  and  principal
payments will be dependent  upon,  and payable  solely out of, the obligor's net
cash flow available for  distribution to its equity owners.  After the obligor's
equity investors have received  aggregate  distributions  equal to their capital
contributions plus an agreed upon return on their invested capital, the next $10
million of  distributable  cash will be paid to us, and following our receipt of
the face amount of the Note we will receive 33 1/3% of all distributable cash of
the obligor  until  maturity  of the Note.  The  probable  timing and amounts of
payments under this Note cannot be predicted.

     Our  working  capital as of March 31,  2004 was  $2,495,912  as compared to
$650,328 at June 30, 2003. The increase in working  capital during the past nine
months  was  primarily  the  result  of  positive   operating  results  and  the
monetization  of the Las Vegas  Note,  offset by those  disbursements  disclosed
above and  recording the note  obligation  for the purchase of the ship mortgage
from the Brennan Trustee of which the current portion is $3,917,470.

Results of Operations for the Three Months Ended March 31, 2004 and 2003

     Overall

     Revenue for the three months ended March 31, 2004  increased  $788,564 from
$8,909,143 in Fiscal 2003 to $9,697,707 in Fiscal 2004  primarily as a result of
increased  revenues  generated by the Palm Beach Princess  operations during the
comparable   periods.   Overall  operating   expenses  increased  $978,585  from
$6,567,345 in the three month period in Fiscal 2003 to $7,545,930 in Fiscal 2004
primarily as the result of an increase in Palm Beach  Princess  operating  costs
during the comparable quarters.  The Parent Company's general and administrative
expenses increased  $261,327 as a result of legal fees and administrative  costs
incurred  in  connection  with costs  associated  with the  purchase of the Ship
Mortgage  and our common  stock from the Brennan  Trustee and our search for new
funding for working capital. Development costs increased $174,149 as a result of
increased  activity in the  Company's  exploration  of  business  opportunities.
Bankruptcy   costs   decreased   $280,052   as  a  result  of  fewer  legal  and
administrative  costs as a result of the  bankruptcy  order being  finalized  in
October, 2003.

     For the third quarter of Fiscal 2004, our net income was $1,765,057 or $.23
per share and $.17 per



                                       28
<PAGE>

                    INTERNATIONAL THOROUGHBRED BREEDERS, INC.
                                AND SUBSIDIARIES

               MANAGEMENT'S ANALYSIS FOR THE THREE AND NINE MONTHS
                              ENDED MARCH 31, 2004


share on a diluted basis as compared to income for the comparable  period in the
prior fiscal year of $1,878,471 or $.23 per share on a basic and diluted  basis.
During the three  months  ended  March 31,  2004,  we  included  in the  diluted
earnings per share calculation, 2,857,838 options whose exercise price was lower
than our  weighted  average  price of the common  stock or shares that have been
authorized but not issued.

     Vessel Operations

     During the three months ended March 31, 2004, total net revenue from vessel
operations  was  $9,611,153 as compared to $8,830,318 for the three months ended
March 31,  2003.  The  increase  in revenue of  $780,835  during the  comparable
quarters  primarily resulted from an increase in casino gaming revenue primarily
the result of an increase  in the  passenger  count of 6.8%,  offset by a slight
decrease in the average revenue per passenger during the comparable periods. Net
fare and on board income  increased  $289,703 as a result of increased  passager
count.  Casino  operating  expenses  which  also  includes  food,  beverage  and
entertainment  increased $353,330 from $1,976,157 or 26% of gross casino revenue
in Fiscal 2003 to  $2,329,487  or 29% of gross  casino  revenue in Fiscal  2004.
Maritime and Legal costs to operate the ship increased  $115,305 from $1,665,867
in Fiscal 2003 to $1,781,171 in Fiscal 2004. Expenses incurred in the Chapter 11
proceeding  decreased $280,052 as a result of our plan of re-organization  being
approved on September 12, 2003.  Interest and financing fees decreased  $236,968
as a result of the interest on the Trustee Note being  recognized  by the Parent
Company,  effective October 15, 2003. Income before state income tax expense for
the third  quarter of  operation  in Fiscal 2004 was  $3,069,362  as compared to
$2,521,180 in the comparable quarter of Fiscal 2003, an increase of $548,182 for
the quarter.

     The Palm  Beach  Princess  performs  fourteen  cruises  weekly,  that is, a
daytime  and an evening  cruise  each day.  Each  cruise is of five to six hours
duration.  During  each  cruise,  the  Palm  Beach  Princess  offers  a range of
amenities  and services to her  passengers,  including a full  casino,  sit-down
buffet dining, live musical shows, discotheque,  bars and lounges, swimming pool
and  sundecks.  The casino  occupies  15,000  square feet aboard the ship and is
equipped with approximately 430 slot machines, all major table games (blackjack,
dice,  roulette and poker), and a sports wagering book. During the third quarter
of Fiscal 2004 the ship completed 174 cruises compared to 177 cruises during the
same period last year.

                                       29

<PAGE>

                   INTERNATIONAL THOROUGHBRED BREEDERS, INC.
                                AND SUBSIDIARIES

               MANAGEMENT'S ANALYSIS FOR THE THREE AND NINE MONTHS
                              ENDED MARCH 31, 2004


     The following is a  comparative  summary of income and expenses of the Palm
Beach  Princess  operation  for the three month periods ended March 31, 2004 and
2003:

                                                      Three Months Ended
                                                           March 31,
                                          --------------------------------------
              Description                     2004          2003        Change
 --------------------------------------   -----------   -----------  ----------
 Passenger Count                               82,076        76,855       5,221
 Number of Cruises                                174           177          (3)

  Operating Revenue:

    Gaming                              $   7,989,901  $  7,498,768  $  491,133

    Fare                                    2,557,525     2,345,527     211,998

    On Board                                1,036,805       845,164     191,641

    Less: Promotional Allowances           (1,973,078)   (1,859,142)   (113,936)
                                          -----------   -----------   ---------
    Net Operating Revenue                   9,611,153     8,830,317     780,836
                                          -----------   -----------   ---------
 Operating Costs and Expenses:

    Gaming                                  2,329,487     1,976,157     353,330

    Fare                                      960,941       872,179      88,761

    On Board                                  262,609       220,803      41,806

    Maritime and Legal Expenses             1,781,171     1,665,867     115,305

    General and Administrative Expenses       937,503       955,077     (17,574)

    Professional Fees - Bankruptcy             20,078       300,130    (280,052)

    Interest and Financing Fees                49,806       286,774    (236,968)

    Depreciation and Amortization             200,197        32,151     168,046
                                          -----------   -----------   ---------
    Total Operating Costs and Expenses      6,541,792     6,309,138     232,654
                                          -----------   -----------   ---------
         Income Before State Income
                 Tax Expense            $   3,069,361  $  2,521,179  $  548,182
                                          ===========   ===========   =========

Results of Operations for the Nine Months Ended March 31, 2004 and 2003

     Overall

     Revenue for the nine months ended March 31, 2004 increased  $2,330,645 from
$22,087,789  in Fiscal 2003 to  $24,418,434 in Fiscal 2004 primarily as a result
of increased revenues generated by the Palm Beach Princess operations during the
comparable periods.  Operating expenses increased $1,994,719 from $18,271,256 in
the nine month period in Fiscal 2003 to $20,265,975 in Fiscal 2004 primarily the
result of a 5.3%  increase in the  passenger  count  during the period and costs
associated with the bankruptcy filing of $388,759,  partially offset by a slight
decrease in corporate general and administrative  expenses during the comparable
periods.  Development  costs  increased  by  $191,238 to $486,852 as a result of
increased activity in the Company's exploration for new business  opportunities.
Net Income for the nine months ended March 31, 2004 was

                                       30
<PAGE>

                    INTERNATIONAL THOROUGHBRED BREEDERS, INC.
                                AND SUBSIDIARIES

               MANAGEMENT'S ANALYSIS FOR THE THREE AND NINE MONTHS
                              ENDED MARCH 31, 2004


$2,887,144 as compared to net income of $2,884,947  for the  comparative  period
last year. The slight increase was the result of an increase in operating income
reduced by  additional  interest and financing  expense in  connection  with our
purchase of the Ship  Mortgage and purchase of our common stock from the Brennan
Trustee. Net Income per share for the nine months ended March 31, 2004 was $.36,
and on a diluted  basis was $.29,  as  compared  to net income per share for the
nine months ended March 31, 2003 of $.28 on a basic and diluted  basis.  For the
nine months  ended March 31, 2004 we included in the diluted  earnings per share
calculation,  2,857,838 options whose exercise price was lower than our weighted
average  price of the common stock or shares that have been  authorized  but not
issued.

     Vessel Operations

     During the nine  months  ended March  2004,  total net revenue  from vessel
operations was  $24,186,322 as compared to $21,910,595 for the nine months ended
March 31, 2003.  The  increase in revenue of  $2,275,727  during the  comparable
periods  primarily  resulted  from an increase in casino  gaming  primarily  the
result of an increase in the  passenger  count of 5.3% and an  approximate  3.4%
increase in the average revenue per passenger during the comparable periods. Net
fare and on board income also increased $340,406 or 10.0% due to the increase in
passager count. Casino operating expenses which also includes food, beverage and
entertainment  increased $939,553 from $5,548,638 or 30% of gross casino revenue
in Fiscal 2003 to  $6,488,191  or 32% of gross  casino  revenue in Fiscal  2004.
Maritime and legal costs to operate the ship increased  $603,566 from $4,446,554
in Fiscal 2003 to $5,050,119 in Fiscal 2004, also primarily due to the scheduled
wet  dock  maintenance  during  the  second  quarter.   Administrative  expenses
decreased 11% in Fiscal 2004. Income before state income taxes from operation of
the vessel for the nine months ended March 31, 2004 was  $5,586,147  as compared
to $4,746,682  for the nine months ended March 31, 2003.  During the nine months
ended March 31, 2004 the ship  completed  520 cruises as compared to 530 cruises
during the  corresponding  period last year.  During  this year 12 cruises  were
missed due to wet dock maintenance.

                                       31
<PAGE>

                    INTERNATIONAL THOROUGHBRED BREEDERS, INC.
                                AND SUBSIDIARIES

               MANAGEMENT'S ANALYSIS FOR THE THREE AND NINE MONTHS
                              ENDED MARCH 31, 2004


     The following is a  comparative  summary of income and expenses of the Palm
Beach  Princess  operation  for the nine month  periods ended March 31, 2004 and
2003:

                                                  Nine Months Ended
                                                       March 31,
                                         ---------------------------------------
             Description                    2004          2003         Change
 --------------------------------------  ----------   -----------   ------------
 Passenger Count                            200,485       190,387        10,098
 Number of Cruises                              520           530           (10)

 Operating Revenue:

    Gaming                             $ 20,432,796  $ 18,497,475   $ 1,935,321

    Fare                                  5,777,102     5,602,098       175,004

    On Board                              2,633,764     2,333,733       300,031

    Less: Promotional Allowances         (4,657,340)   (4,522,711)     (134,629)
                                         ----------   -----------   -----------
    Net Operating Revenue                24,186,322    21,910,595     2,275,727
                                         ----------   -----------   -----------

 Operating Costs and Expenses:

    Gaming                                6,488,191     5,548,638       939,553

    Fare                                  2,527,627     2,382,961       144,666

    On Board                                689,206       617,811        71,395

    Maritime and Legal Expenses           5,050,119     4,446,554       603,566

    General and Administrative Expenses   2,542,695     3,423,421      (880,726)

    Professional Fees - Bankruptcy          388,759       300,130        88,629

    Interest and Financing Fees             412,636       296,545       116,091

    Depreciation and Amortization           500,940       147,853       353,087
                                         ----------   -----------   -----------
    Total Operating Costs and Expenses   18,600,173    17,163,913     1,436,261
                                         ----------   -----------   -----------
         Income Before State Income
                 Tax Expense           $  5,586,147  $  4,746,682   $   839,466
                                         ==========   ===========   ===========

Item 4. - CONTROLS AND PROCEDURES

     Under the  direction  of our Chief  Executive  Officer and Chief  Financial
Officer,  we  evaluated  our  disclosure  controls and  procedures  and internal
control over financial  reporting and concluded that (i) our disclosure controls
and  procedures  were  effective  as of March  31,  2004,  and (ii) no change in
internal  control over  financial  reporting  occurred  during the quarter ended
March  31,  2004,  that has  materially  affected,  or is  reasonably  likely to
materially affect, such internal control over financial reporting.

                                       32
<PAGE>

                   INTERNATIONAL THOROUGHBRED BREEDERS, INC.
                                AND SUBSIDIARIES

                                     PART II

                                OTHER INFORMATION

Item 6. Exhibits and Reports on Form 8-K

(a)  The following exhibits are filed as part of this Form 10-Q:

         Number                    Description
         ------                    -----------
          31.1 Certification of the Chief Executive  Officer and Chief Financial
               Office  pursuant to Rule13a-14 of the Securities  Exchange Act of
               1984 pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

          32.1 Certification  of the Chief Executive  Officer pursuant to 18 USC
               Section  1350,  as  adopted   pursuant  to  Section  906  of  the
               Sarbanes-Oxley Act of 2002

          32.2 Certification  of the Chief Financial  Officer pursuant to 18 USC
               Section  1350,  as  adopted   pursuant  to  Section  906  of  the
               Sarbanes-Oxley Act of 2002

(b)  Report on Form 8-K

           Date                                Subject Matter
     -----------------            ----------------------------------------
     February 24, 2004            Letter of Intent for Financing Agreement

                                       33
<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 24, 2004                 /s/Francis W. Murray
                             ----------------------------------
                             Francis W. Murray
                             President, Chief Executive Officer
                             and Chief Financial Officer



                                       34
<PAGE>

                                                                    Exhibit 31.1

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

I, Francis W. Murray, certify that:

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

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

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

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

               a)   designed such disclosure controls and procedures,  or caused
                    such disclosure controls and procedures to be designed under
                    our  supervision,   to  ensure  that  material   information
                    relating   to   the   registrant   and   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,  and  presented in this report our
                    conclusions   about  the  effectiveness  of  the  disclosure
                    controls and procedures, as of the end of the period covered
                    by this report based on such evaluation; and

               c)   disclosed  in this  report  any  change in the  registrant's
                    internal  control over  financial  reporting  that  occurred
                    during the registrant's  most recent fiscal quarter that has
                    materially  affected,  or is reasonably likely to materially
                    affect,  the  registrant's  internal  control over financial
                    reporting; and

     5.   The registrant's other certifying officers and I have disclosed, based
          on our most recent  evaluation  of  internal  control  over  financial
          reporting, to the registrant's auditors and the audit committee of the
          registrant's board of directors:

               a)   all significant  deficiencies and material weaknesses in the
                    design or  operation  of  internal  control  over  financial
                    reporting  which are reasonably  likely to adversely  affect
                    the registrant's ability to record,  process,  summarize and
                    report financial information; and

               b)   any fraud, whether or not material, that involves management
                    or  other  employees  who  have a  significant  role  in the
                    registrant's internal control over financial reporting; 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 24, 2004   /s/Francis W. Murray
      ------------   --------------------------------------------------------
                     Chairman/Chief Executive Officer/Chief Financial Officer


                                       35
<PAGE>


                                                                    Exhibit 32.1

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

     In  connection  with the  filing  of the  Quarterly  Report on Form 10-Q of
International  Thoroughbred Breeders,  Inc. (the "Company") for the period ended
March 31, 2004 as filed with the Securities and Exchange  Commission on the date
hereof (the  "Report"),  I, Francis W. Murray,  Chief  Executive  Officer of the
Company,  hereby certify pursuant to 18 U.S.C.  ss.1350,  as adopted pursuant to
Section  906 of the  Sarbanes-Oxley  Act  of  2002,  that,  to  the  best  of my
knowledge:

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

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



/s/Francis W. Murray
------------------------
Name:  Francis W. Murray
Title: President and CEO

May 24, 2004
------------
Date

                                       36
<PAGE>


                                                                    Exhibit 32.2

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

     In  connection  with the  filing  of the  Quarterly  Report on Form 10-Q of
International  Thoroughbred Breeders,  Inc. (the "Company") for the period ended
March 31, 2004 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 24, 2004
------------
Date


                                    37