SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                           --------------------------

                                    FORM 10-K

                        For annual and transition reports
                     pursuant to sections 13 or 15(d) of the
                         Securities Exchange Act of 1934

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

For the fiscal year ended June 30, 2003

                                       OR

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

For the transition period from ________ to ________.

                           Commission File No. 0-9624

                    INTERNATIONAL THOROUGHBRED BREEDERS, INC.
                    -----------------------------------------
             (Exact name of registrant as specified in its charter)


                Delaware                            22-2332039
      -----------------------------       ------------------------------
      (State or other jurisdiction       (IRS Employer Identification No.)
           of incorporation)


       211 Benigno Boulevard, Suite 210, Bellmawr, New Jersey       08031
       ------------------------------------------------------      -------
              (Address of principal executive offices)            (Zip Code)

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

Securities registered pursuant to Section 12 (b) of the Act: None
Securities  registered  pursuant to Section 12 (g) of the Act: Common Stock, par
value $2.00

Indicate by check mark whether 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 past 90 days. Yes X No__

Indicate by check mark if disclosure of delinquent  filers  pursuant to Item 405
of Regulation  S-K is not contained  herein,  and will not be contained,  to the
best  of  the  registrant's   knowledge,  in  definitive  proxy  or  information
statements  incorporated  by  reference  in Part  III of this  Form  10-K or any
amendment to this Form 10-K.[ X ]

The  aggregate   market  value  of  the   registrant's   common  stock  held  by
non-affiliates  of the  registrant  as of September  30, 2003 was  approximately
$497,180. Shares of common stock held by each executive officer and director and
by each person who owns 10% or more of our  outstanding  common  stock have been
excluded  since such persons may be deemed  affiliates.  This  determination  of
affiliate  status  is not  necessarily  a  conclusive  determination  for  other
purposes.

As of  October  14,  2003,  there  were  8,252,133  outstanding  shares  of  the
registrant's common stock.





                                TABLE OF CONTENTS


                                     PART I

Item 1.   Business                                                      1
Item 2.   Properties                                                    8
Item 3.   Legal Proceedings                                             8
Item 4.   Submission of Matters to a Vote of Security Holders           8

                                         PART II

Item 5.   Market for the Registrant's Common Equity and Related
          Stockholder Matters                                           9
Item 6.   Selected Financial Data                                      10
Item 7.   Management's Discussion and Analysis of Financial
          Condition and Results of Operations                          11
Item 7A.  Quantitative and Qualitative Disclosures about
          Market Risk                                                  20
Item 8.   Financial Statements and Supplementary Data                  20
Item 9.   Changes in and Disagreements with Accountants
          on Accounting and Financial Disclosure                       52
Item 9A.  Controls and Procedures                                      52

                                    PART III

Item 10.  Directors and Executive Officers of the Registrant           53
Item 11.  Executive Compensation                                       56
Item 12.  Security Ownership of Certain Beneficial Owners and
          Management                                                   59
Item 13.  Certain Relationships and Related Transactions               61

                                     PART IV

Item 14.  Exhibits, Financial Statement Schedule, and
          Report on Form 8-K                                           63





           CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS

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

          o    general economic and business conditions;
          o    competition;
          o    execution of our new business strategy;
          o    changes in laws regulating our 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.







                    INTERNATIONAL THOROUGHBRED BREEDERS, INC.

                                     PART I

     Item 1. Business.

     General

     International  Thoroughbred  Breeders,  Inc., a Delaware  corporation,  was
incorporated  on October  31,  1980.  Until the  January  1999 sale of  Freehold
Raceway  and leasing to a third party of Garden  State Park,  we were  primarily
engaged, through various operating subsidiaries,  in the ownership and operation
of standardbred  and  thoroughbred  racetracks in New Jersey.  For the period of
approximately  22 months after our January 1999 sale of Freehold Raceway and our
leasing  of Garden  State Park to a third  party,  our focus  concentrated  upon
working out the Company's  debt problems,  by selling our real  properties in an
orderly  fashion rather than  permitting  such assets to be lost by foreclosure.
Our efforts in that regard were successful, and in two transactions,  one in May
2000 and the other in November 2000, we sold all of our real properties and paid
our indebtedness in full. Since November 2000, we have evaluated and continue to
look for business  opportunities.  We are committed to remaining as an operating
company.

     To that end, as of April 30,  2001,  we  acquired,  by a bareboat  charter,
operations  of an offshore  gaming  vessel,  the M/V Palm Beach  Princess.  This
vessel sails twice daily from the Port of Palm Beach,  Florida and,  once beyond
the  three-mile  territorial  limit,  engages in a casino  gaming  business.  We
acquired  this  business  pursuant  to a bareboat  charter for a one- year term,
which is continuing on a month-to-month  basis,  and, by negotiating to purchase
the  substantial  debt  secured by a mortgage  against  the  vessel,  we plan to
negotiate  an  acquisition  of the vessel and related  assets.  The  business of
operating  the  cruise  vessel  includes  a  variety  of  shipboard  activities,
including casino gaming, dining, music and other entertainment.

     Current Operations

     Effective  April 30,  2001,  we entered  into a bareboat  charter  with MJQ
Corporation, pursuant to which we charter the vessel M/V Palm Beach Princess for
the purpose of operating a casino  cruise  business from the Port of Palm Beach,
Florida.  Under the bareboat charter agreement,  as amended, we are obligated to
pay  $50,000  per  month  as a  charter  hire  fee to the  vessel's  owner,  MJQ
Corporation.  In order to obtain the bareboat charter,  we entered into a letter
of intent as of April 30, 2001, and then concluded a Master Settlement Agreement
dated  February  22, 2002 with the Chapter 11 Trustee  (the  "Trustee")  for the
Bankruptcy  Estate of Robert E. Brennan,  MJQ Corporation and others,  including
Francis W.  Murray,  our  Chairman,  who is also a director  and  officer of MJQ
Corporation.  (See Item 13, Certain Relationships and Related Transactions.) The
Master  Settlement  Agreement  by its  terms was  subject  to  bankruptcy  court
approval,  and on April 1, 2002,  the approval of the United  States  Bankruptcy
Court for the District of New Jersey,  having  jurisdiction  over the bankruptcy
estate of Robert E. Brennan, was obtained.

     In accordance with the Master Settlement  Agreement,  through a subsidiary,
we entered into a Purchase and Sale  Agreement  which  provides for our purchase
from the Trustee of the

                                        1




promissory note of MJQ Corporation,  having an original balance of principal and
interest of approximately $12 million and secured by a ship mortgage against the
M/V Palm Beach Princess (the "Ship Mortgage Obligation").  At June 30, 2003, the
interest  accrued on this note was $4,464,984.  The purchase price payable by us
for the Ship Mortgage  Obligation is $13.75 million. We began making payments on
account of such purchase price effective April 30, 2001, in monthly installments
of $250,000. Such monthly installments continued under the terms of the Purchase
and Sale Agreement  through July 31, 2002, at which time a $9.75 million balloon
payment was to be due. However,  before July 31, 2002, we exercised our right to
extend the time for payment of the balance of the purchase price for up to three
(3) additional  months,  to October  31,2002,  by paying fees of $70,000 for the
first one month extension,  an additional $80,000 for the second month extension
and an additional  $100,000 for the third month extension.  On October 30, 2002,
the Master  Settlement  Agreement was amended to provide for a further extension
of the due date for payment of the $9.75 million  balance under the Purchase and
Sale  Agreement  until  January  6, 2003,  in  consideration  of our  payment of
$220,000 as an extension  fee. On January 3, 2003,  we did not have the funds to
complete the purchase by January 6, 2003 and the Trustee  denied our request for
a further  extension of the January 6, 2003 due date.  Therefore,  on January 3,
2003, in order to protect our invested deposits and operation of the vessel, our
subsidiary  filed a  voluntary  petition  for  relief  under  Chapter  11 of the
Bankruptcy Code. MJQ Corporation,  the entity which ownes the vessel, also filed
for relief under Chapter 11 of the Bankruptcy Code.

     Our  transaction  with  the  Brennan  Bankruptcy  Trustee,   including  our
agreement to purchase the Ship  Mortgage  Obligation,  is an  opportunity  which
arose out of the Brennan Bankruptcy Trustee's claims against MJQ Corporation and
others,  including Mr. Murray, alleging that MJQ Corporation had received a loan
(the Ship Mortgage  Obligation)  from an entity which,  in turn,  received funds
from  offshore  trusts  created  by  Robert E.  Brennan  (the  Company's  former
chairman).  The Brennan Bankruptcy Trustee acquired the Ship Mortgage Obligation
through a settlement of litigation which the Brennan  Bankruptcy Trustee brought
against those offshore trusts. We learned of the opportunity to acquire the Ship
Mortgage  Obligation  and of the  opportunity to acquire,  at least  temporarily
(through the bareboat charter),  the vessel and MJQ Corporation's  casino cruise
business, through Mr. Murray's connection as a director of MJQ Corporation.

     Under the bareboat charter,  we have (on a month-to-month  basis) the right
to operate the M/V Palm Beach  Princess,  which,  once  outside  the  three-mile
territorial coastal limit, operates a casino gaming business.

     The Palm  Beach  Princess  is a  large,  ocean  going  cruise  ship  with a
passenger  capacity of approximately  850 for coastal  voyages.  The ship is 420
feet  long,  6,659  gross  tons,  and  registered  in the  Republic  of  Panama.
Originally built in 1964, the ship was substantially reconstructed, refurbished,
and upgraded in 1973,  1984 and 1997.  The ship fully  complies with the highest
standards of the International Convention on Safety of Life at Sea as applicable
to large  passenger  ships,  and is  regularly  subjected  to safety  and health
inspections by the United States Coast Guard and the United States Public Health
Service.

     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

                                        2





Palm Beach Princess  offers a range of amenities and services to her passengers,
including  a  full  casino,   sit-down   buffet  dining,   live  musical  shows,
discotheque,  bars and lounges,  swimming pool and sundecks. The casino occupies
15,000 square feet aboard the ship and is equipped with  approximately  400 slot
machines,  all major table games (blackjack,  dice,  roulette and poker),  and a
sports wagering book.

     Pursuant to the bareboat charter between MJQ Corporation,  the owner of the
vessel,  and  a  subsidiary  of  ours,  the  vessel  is  provided  to  us  on  a
month-to-month basis, unless earlier terminated.  As charterer of the vessel, we
are responsible for  maintaining  the vessel,  all machinery,  boilers and other
equipment on the vessel,  and are responsible for making all necessary  repairs.
We are responsible  for all expenses of operations,  including all taxes payable
in respect thereof. As charterer,  we have the use of all equipment on board the
vessel at the time it was delivered to us, and are  responsible  for re-delivery
of the  vessel  and  equipment  at the end of the  charter  period  in the  same
condition as when we received it,  ordinary wear and tear excepted.  We are also
responsible  for replacing any items of equipment  that need to be replaced and,
to the extent  equipment may be leased,  we are  responsible  for all rental and
other  liabilities of MJQ  Corporation  under such leases during the term of the
charter.  We are to keep all  insurance  in place for the vessel and  equipment.
Further,  MJQ Corporation is to continue to conduct for us certain operations of
the vessel until such time as we obtain,  through our operating subsidiary,  all
permits, licenses and registrations required in connection with the operation of
the  vessel,   including  but  not  limited  to,  the  federal  water  pollution
certification,  registration  under the Gambling  Devices Act,  registration for
Florida sales tax, and Florida alcoholic beverage  licensing.  All costs of such
operations  incurred by MJQ Corporation on our behalf are to be reimbursed by us
to MJQ  Corporation.  Pending  consummation of our purchase of the Ship Mortgage
Obligation,  we have not obtained such permits, licenses or registrations in our
own or our subsidiary's name.

     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 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

                                        3





Company's wholly owned subsidiary, and MJQ Corporation. On the effective date of
the Plan (the "Effective Date"), all claims,  debts,  liens,  security interests
and  encumbrances  of and against the Debtors and against all  property of their
respective  bankruptcy  estates,  which  arose  before  confirmation,   will  be
discharged,  except as  otherwise  provided in the Plan or  confirmation  order.
Post-confirmation, each of the Debtors will continue as reorganized debtors.

     The Plan includes the following  principal  features:  (i) On the Effective
Date,  all  administrative  expense  claims and tax claims will be paid in full;
(ii) All pre-petition 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; and (iii)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 which
will consist of (a) the balance of the  purchase  price that had been payable by
ITG Vegas for the  purchase of the ship  mortgage  against  the  Vessel,  in the
amount of  $9,750,000;  (b) the  balance of the  Company's  indebtedness  to the
Brennan  Trustee in  respect of the  purchase  of stock in the  Company,  in the
principal amount of $1,511,035.70,  plus interest thereon from December 13, 2002
to January  23, 2003 at 9% per annum and  thereafter  at 11% per annum until the
Effective  Date;  (c) a new  obligation  of the Company  for the  purchase of an
additional  450,000 shares of the Company's stock from the Brennan  Trustee,  at
$0.50 per share,  or  $225,000;  (d) a  forbearance  fee of $350,000  also shall
accrue to the Brennan  Trustee on the Effective  Date, of which $100,000 will be
payable on the  Effective  Date and the  balance of  $250,000  will be due on or
about the third anniversary of the Effective Date.

     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 foresaid debt.


     Prior Operations

     In April of 1998,  our Board of Directors  authorized  the  exploration  of
strategic opportunities for our business, including a possible merger or sale of
all of our racetrack and hotel assets.  The Board ultimately decided that a sale
of our assets was the preferred alternative.

     On January 28, 1999, we completed the sale of Freehold Raceway, the sale of
a ten acre  parcel at Garden  State  Park and the  lease of  Garden  State  Park
facilities to subsidiaries of Greenwood Racing,  Inc. The purchase price was $46
million,  with up to an additional  $10 million in Contingent  Promissory  Notes
which  would  become  payable  only upon,  among  other  things,  the New Jersey
Legislature's approval of off-track betting facilities or telephone

                                        4





account  pari-mutuel  wagering on horse racing by certain dates and  Greenwood's
obtaining  necessary  licenses to operate by January 24, 2002. Such  contingency
did not occur.

     On  May  22,  2000,  through  our  wholly-owned  subsidiary,  Orion  Casino
Corporation,  we closed on the sale of the non-operating  former El Rancho Hotel
and Casino in Las Vegas, Nevada to Turnberry/Las Vegas Boulevard,  LLC. The sale
price was $45 million and was paid by: (i) previous  cash  deposits  totaling $2
million; and (ii) the balance of the sale price paid in cash at the closing. The
proceeds  from the El Rancho  sale  were  principally  used by us to reduce  the
outstanding  balances  on our loan from  Credit  Suisse  First  Boston  Mortgage
Capital LLC to $14.7 million and to purchase a promissory  note,  secured by the
rights to 100% of the distributable cash of the buyer in the event of a default,
of the buyer in the  amount of $23  million,  which will be  convertible  at our
option into a 33 1/3% equity interest in the buyer.  The interest  payable under
such note will be  dependent  upon,  and payable  solely out of, the buyer's net
cash flow  available for  distribution  to its equity  owners.  After the equity
investors  in the  Company  have  received  total  distributions  equal to their
capital  contributions plus an agreed upon return on their invested capital, the
next $23 million of  distributable  cash will be paid to us. We will  thereafter
receive payments under the Note equal to 33 1/3% of all distributable cash until
the maturity date, which occurs on the thirtieth  anniversary of our purchase of
the Note.  We may convert the  Promissory  Note,  at our option,  into a 33 1/3%
equity  interest  in the  buyer  during  a  six-month  period  beginning  on the
fifteenth  anniversary of the issuance of the Note. If not then  converted,  the
Note will convert into a 33 1/3% equity  interest in the buyer on the  thirtieth
anniversary of its issuance. We have elected to defer the gain on the sale until
such time  that  collectability,  under  the $23  million  Note  purchased  from
Turnberry after the closing, can be determined.

     On November 30, 2000,  through our wholly-owned  subsidiary,  GSRT, LLC, we
closed on the sale of our Garden  State Park  property,  located in Cherry Hill,
New Jersey,  to Realen-  Turnberry/Cherry  Hill, LLC. The purchase price was $30
million and was paid by: (i) previous cash deposits totaling $1 million;  (ii) a
Promissory Note in the face amount of $10 million;  and (iii) the balance of the
purchase  price paid in cash at the closing.  The cash  proceeds  from such sale
were  principally  used by us to repay in full the  outstanding  balances on our
debt to Credit Suisse First Boston Mortgage Capital LLC of  approximately  $14.3
million  and to repay in full  approximately  $3.75  million  of  principal  and
interest  on the debt to the  Chapter 11  Bankruptcy  Trustee  for the estate of
Robert E. Brennan  which had been incurred to purchase  2,904,016  shares of our
common stock.

     Under the $10 Million Note,  the interest  payable will be dependent  upon,
and payable solely out of, the buyer's net cash flow available for  distribution
to its equity  owners.  After the equity  investors  in the buyer 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
fifteenth anniversary of the issuance of the Note. We may convert the Promissory
Note, at our option,  into a 33 1/3% equity interest in  Realen-Turnberry/Cherry
Hill during the  six-month  period  prior to the  fifteenth  anniversary  of the
issuance  of the  Note.  If not then  converted,  the Note  will be  payable  at
maturity 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-Turnberry/Cherry  Hill's  assets over
the sum of its

                                        5





liabilities  (other than the Note) and any unreturned  equity  investment of its
owners.  We have  elected  to defer  the gain on the sale  until  such time that
collectability under the $10 million Note from  Realen-Turnberry/Cherry Hill can
be determined.

     During June 2001, we held  auctions at which all of the personal  property,
including  equipment,  furniture,  furnishings  and art  work,  that we owned at
Garden State Park was sold for approximately $1.2 million in cash.

     Employees

     As  of  June  30,  2003,  we  employed  8  full-time  corporate  executive,
administrative  and  clerical  personnel.  All of the crew of the M/V Palm Beach
Princess (226 persons) and office and  management  personnel of MJQ  Corporation
(78  persons)  are made  available  to us for  operation  of the  casino  cruise
business under an arrangement  between us and MJQ Corporation by which all costs
of such personnel are borne by us.

     Competition

     From July 1, 2001 to December 9, 2001 the M/V Palm Beach  Princess  was the
only vessel  operating a coastal gaming business from the Port of Palm Beach and
our  closest  competition  was  approximately  50 miles away in Ft.  Lauderdale,
Florida.  From  December 10, 2001 until April 29, 2002,  when it returned to its
home port of Boston  Massachusetts,  another  coastal  gaming  vessel,  the S.S.
Horizon Edge, operated from Riviera Beach Marina, which is in close proximity to
the Port of Palm Beach. This vessel was 186 feet and had a passenger capacity of
500 people. The M/V Palm Beach Princess is considerably  larger at 420 feet with
a  passenger  capacity of 850 people.  The  Horizon  Edge  operated on a similar
schedule as the Palm Beach  Princess,  that is, two five hour cruises per day, 7
days a week, however,  due to its smaller size it canceled more cruises than the
Palm Beach Princess for inclement  weather.  From June,  2002 until February 15,
2003,  the coastal  gaming vessel Texas  Treasure II (formerly the M/V Contessa)
was operating from the Port of Palm Beach in competition with the M/V Palm Beach
Princess.  This vessel is  approximately  400 feet,  was built in 1968 and has a
passenger  capacity  of  approximately  700 people.  This vessel had  previously
operated in competition  with the Palm Beach Princess from May 13, 1999 until it
discontinued operations on May 15, 2000. We may compete with other vessels which
may from time to time be located  in the port on the basis of cruise  schedules,
passenger  services,  amenities,  prices,  and  percentages  of gaming win.  Our
agreement with the Port of Palm Beach District (see Item 2 - Properties,  below)
gives us a competitive  advantage as to preferred  cruise  scheduling  times and
convenience  of passenger  parking areas.  A 300 passenger  high-speed  ferry is
scheduled  to begin  carrying  passengers  late in 2003 on daily  round trips to
Freeport, Grand Bahamas where gaming is conducted.

     There is no  assurance  that  other  competing  vessels  will not enter the
gaming  business at the  existing  Port of Palm Beach,  at a new and larger port
facility in Palm Beach or at another port facility in the future.

     In addition to competing  with other  vessels in the coastal  gaming cruise
business, we


                                        6





compete  with a variety of other  entertainment  activities  in and around  Palm
Beach, Florida, including, but not limited to, land-based Indian gaming casinos,
poker rooms, dog racing,  state-sponsored lotteries,  short-term cruises, resort
attractions,   various  sports   activities  and  numerous  other   recreational
activities.  There is no assurance that we will be able to successfully  compete
with such other activities.

     Weather and Seasonal Fluctuations

     The success of our casino cruise business depends to significant  extent on
the weather conditions. In particular,  inclement weather, or the threat of such
weather,  has  a  direct  effect  on  passenger  counts,  potentially  adversely
affecting  our  revenues.  On  relatively  rare  occasions,  bad  weather or sea
conditions  may result in the  cancellation  of  cruises.  Our  business is also
subject to seasonal  fluctuations.  Our peak seasons are the late fall,  winter,
and early  spring  seasons  due to the  increased  local  population  as well as
increased tourist populations.

     Federal and State Regulations - Florida

     The effect of  amendments  in 1994 to the Federal  Gambling Ship Act and in
1992 to the  Federal  Johnson  Act was to  repeal  the prior  prohibition  under
Federal law of gambling  aboard  ships  performing  coastal  voyages  beyond the
jurisdiction  of state  territorial  waters  (three  miles on the United  States
Atlantic  coast),  and to permit  individual  states to enact laws regulating or
prohibiting  gambling aboard ships performing coastal voyages from ports located
in such states.  From time to time in prior years, bills have been introduced in
the Florida legislature which, if enacted, would prohibit coastal gaming cruises
from  Florida  ports.  No such  bills  have  been  enacted  and no such  bill is
currently pending.  There is a risk that the State of Florida may at some future
date regulate or prohibit the coastal cruise gaming business.  In addition,  the
Federal  government  could  determine to enact  regulations  or  prohibition  of
coastal gaming cruises.

     Further,  from time to time,  bills have been  introduced  seeking to place
passenger  surcharges  on cruises  originating  from  ports  within the State of
Florida. Originally, this surcharge was intended to fund a trust fund to be used
for statewide beach  restoration and  management.  Such bills were  subsequently
amended so that the gaming cruise  industry would not be taxed.  However,  there
can be no assurance  that similar  bills  designed to tax  passengers on cruises
such as those offered by us will not be  introduced in the future.  In addition,
while current law and regulations do not now prohibit casino  advertising,  from
time  to  time  bills  have  been  introduced  which,  in  part,   prohibit  the
advertisement  of any  form of  gambling  in any  newspaper,  circular,  poster,
pamphlet,  radio, telegraph,  telephone or otherwise.  There can be no assurance
that such bills will not be  reintroduced  or enacted in the  future.  There has
also been  litigation  instituted in the State of Florida  against gaming cruise
operators for  allegedly  causing a public  nuisance.  There can be no assurance
that  further  litigation  will  not be  instituted  in  the  future  which,  if
successful, could adversely affect the industry in which we operate.


                                        7





     Item 2. Properties.

     We lease approximately  4,000 square feet of office space in Bellmawr,  New
Jersey which serves as our corporate headquarters. The lease is for a three year
period, expiring on May 31, 2004, and provides for an option to extend such term
for an additional three year period commencing June 1, 2004. We also lease, on a
month to month  basis,  approximately  200 square  feet of office  space in Toms
River, New Jersey which serves as a satellite executive office.

     Through our subsidiary,  ITG Vegas, Inc. ("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, on May 5, 2003. The term of the initial
lease is five years at $183,200 per year payable monthly.  We were also required
to make tenant  improvements  to the new space in a minimum  amount of $333,000,
however the actual cost to make the improvements was approximately  $950,000. We
will  have the  right to a credit  of up to a  minimum  amount  of  improvements
required of $333,000 of construction  costs against the initial term of our five
year lease.

     Item 3. 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 Item 1 under this section and Footnote 2).

     Item 4. Submission of Matters to a Vote of Security Holders.

     We did not submit  any  matters to a vote of  security  holders  during the
fourth quarter of fiscal year 2003.


                                        8




                                     PART II


Item 5.  Market  for the  Registrant's  Common  Equity and  Related  Stockholder
         Matters

     Our common  stock has been traded  infrequently  on the Pink  Sheets  since
September  15,  1998.  The  following  table sets  forth,  for the fiscal  years
indicated,  the high and low sales  prices for each share of our common stock on
the Pink Sheets based upon information supplied by the Pink Sheets.

     Fiscal Year                             High  Low
     -----------                             ----  ---

         2002
                        First Quarter        .30   .17
                        Second Quarter       .28   .17
                        Third Quarter        .50   .20
                        Fourth Quarter       .50   .23
         2003
                        First Quarter        .45   .16
                        Second Quarter       .21   .16
                        Third Quarter        .18   .14
                        Fourth Quarter       .28   .15

     On June 30, 2003, there were approximately  30,000 holders of record of the
shares of our outstanding common stock.

     We have not paid any dividends  since our inception.  The  declaration  and
payment of dividends in the future will be  determined by our board of directors
in  light  of  conditions  then  existing,  including  our  earnings,  financial
condition and capital requirements. We do not anticipate paying dividends in the
foreseeable future.

                                       9



Item 6 - SELECTED FINANCIAL DATA

                    INTERNATIONAL THOROUGHBRED BREEDERS, INC.
                                AND SUBSIDIARIES

                                                                               Years Ended June 30,
                                                         ------------------------------------------------------------------------
                                                             2003        2002           2001            2000             1999
                                                         ----------  -----------   -------------    ------------    -------------


                                                                                                    
Income (Loss) Before Discontinued Operations (1)(5)    $  5,233,826 $  1,982,603  $   (2,402,142)  $  (6,980,831)  $ (16,034,769)

Income From Discontinued Operations (3)                $          0 $          0  $            0   $           0   $   8,144,072

Net Income (Loss)                                      $  5,233,826 $  1,982,603  $   (2,402,142)  $  (6,980,831)  $  (7,890,697)

Per Common Share - Basic and Diluted:

Income (Loss) Before Discontinued Operations           $       0.54 $       0.17  $        (0.24)  $       (0.78)  $       (1.38)

Gain on Sale of Net Assets of
   Discontinued Operations                             $  --        $  --         $    --          $    --         $        0.32

Income From Discontinued Operations                    $  --        $  --         $    --          $    --         $        0.39

Net Income (Loss)                                      $       0.54 $       0.17  $        (0.24)  $       (0.78)  $       (0.67)

Weighted Average Number of Shares                         9,720,275   11,480,272       9,987,114       8,980,244      11,554,476

                                                                                      June 30,
                                                        -------------------------------------------------------------------------
                                                            2003         2002           2001             2000           1999
                                                        ------------ ------------  --------------   -------------   -------------

Working Capital (Deficiency) (2)                       $    650,328 $ (2,200,346) $     (190,643)  $ (17,792,740)  $ (33,069,102)

Total Assets                                           $ 53,535,809 $ 45,928,295  $   41,391,208   $  58,166,739   $  76,588,565

Long-Term Debt                                         $          0 $          0  $      482,000   $     482,000   $           0

Stockholders' Equity                                   $ 37,586,067 $ 33,961,313  $   31,973,709   $  33,870,852   $  40,846,683


(1)  The Company  commenced  operation of a casino cruise vessel as of April 30,
     2001  which  materially  affects  the  comparability  of a  portion  of the
     information reflected in the above data.

(2)  The working  capital  presentation  in Fiscal 2002 reclassed to long term a
     $750,000 deposit that was previously presented as current in Fiscal 2001.

(3)  Prior to June 30, 1998, the Company decided to sell its racing  operations.
     As  a  result,   such  operations  have  been  classified  as  discontinued
     operations  for June 30,  1999.  As a result,  the (loss)  from  operations
     primarily consists of corporate expenses,  charges and write-offs for years
     June 30, 1999 through June 30, 2000.

(4)  The Company did not pay cash dividends during any of the fiscal years shown
     above.

(5)  See  Management's  Discussion  and  Analysis of  Financial  Conditions  and
     Results of Operations  and the  consolidated  financial  statements and the
     notes thereto for additional information for each of the three years in the
     period ended June 30, 2003.


                                       10




Item 7. 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-K,  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 this 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    Chapter 11 proceedings  affecting our Palm Beach Princess business and
          our  ability  to   successfully   consummate  a  Chapter  11  plan  of
          re-organization;

     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;

     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 twelve month period ended June 30, 2003
included approximately $8.5 million in cash generated by the Palm Beach Princess
operations.  Such cash flow was used,  in part, to fund $500,000 of the payments
on account of the purchase  price of the Ship  Mortgage  Obligation  against the
Palm Beach Princess,  $470,000 in fees that were recorded as operating  expenses
of the parent to extend the closing  under the  Purchase  and Sale  Agreement as
described  below and  approximately  $1,350,000 for leasehold  improvements  and
equipment  in  connection  with the Port of Palm Beach lease.  We have  explored
gaming  related  business  opportunities  in various  foreign  countries and may
continue to incur expenses for exploring potential business opportunities in the
future.  Approximately  $306,000 has been funded and expensed in various foreign
projects  during the twelve  months ended June 30, 2003.  Until January 3, 2003,
all of our cash flow during the current fiscal year had come from the Palm Beach
Princess vessel.

     On January 3, 2003, ITG Vegas,  Inc.("ITGV"),  our subsidiary operating the
Palm Beach Princess,  and MJQ Corporation ("MJQ"), an entity owned by Francis W.
Murray,  filed  voluntary  petitions  for relief under  Chapter 11 of the United
States  Bankruptcy Code (the "Bankruptcy  Code") in the United States Bankruptcy
Court for the Southern District of Florida, Palm Beach Division (the "Bankruptcy
Court"), In re: ITG Vegas, Inc., Case No. 03-30038.  The petition does not cover
the parent company, ITB, nor any other of ITB's subsidiaries. The Parent Company
has used all the available  funds that we had prior to the bankruptcy  filing to
pay some of our expenses and needs to find  immediate  financing in order to pay
remaining existing liabilities as well as future expenses.  Since the bankruptcy
filing, the only source of funds to the Parent Company has been

                                       11



limited to loans made by Company officers,  collection of a loan previously made
to a South  American  gaming  project and refunds  from vendors and tax agencies
relating to our prior racetrack  operations.  The Bankruptcy filing has severely
limited our ability to make timely  payments by our parent to its  creditors and
corporate  vendors  which has  affected  our ability to retain the  professional
services  and  vendors  who serve our  company.  The Palm  Beach  Princess  will
continue  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.

     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 (the "Effective Date"), all claims, debts, liens,
security  interests and  encumbrances of and against the Debtors and against all
property  of  their   respective   bankruptcy   estates,   which  arose   before
confirmation,  will be discharged,  except as otherwise  provided in the Plan or
confirmation  order.  Post-confirmation,  each of the Debtors  will  continue as
reorganized debtors.

     The Plan includes the following  principal  features:  (i) On the Effective
Date,  all  administrative  expense  claims and tax claims will be paid in full;
(ii) All pre-petition 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; and (iii)
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 which
will consist of (a) the balance of the  purchase  price that had been payable by
ITG Vegas for the  purchase of the ship  mortgage  against  the  Vessel,  in the
amount of  $9,750,000;  (b) the  balance of the  Company's  indebtedness  to the
Brennan  Trustee in  respect of the  purchase  of stock in the  Company,  in the
principal amount of $1,511,035.70,  plus interest thereon from December 13, 2002
to January  23, 2003 at 9% per annum and  thereafter  at 11% per annum until the
Effective  Date;  (c) a new  obligation  of the Company  for the  purchase of an
additional  450,000 shares of the Company's stock from the Brennan  Trustee,  at
$0.50 per share,  or  $225,000;  (d) a  forbearance  fee of $350,000  also shall
accrue to the Brennan  Trustee on the Effective  Date, of which $100,000 will be
payable on the  Effective  Date and the  balance of  $250,000  will be due on or
about the third anniversary of the Effective Date.

     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 foresaid debt.

     Under the Plan, the maximum  amount of funds  permitted to be upstreamed by
ITG Vegas to the Parent  Company is $100,000 per month as a tax sharing  payment
(See Note 2 below).  The Parent  Company has no other source of funds  presently
available  without the consent of the Brennan  Trustee.  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.

     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

                                       12



charter fee payable to the vessel's owner,  fuel costs and wages,  are fixed and
cannot be reduced  when  passenger  loads  decrease or when rising fuel or labor
costs cannot be fully passed through to customers. Passenger and gaming revenues
earned from the vessel must be high enough to cover such expenses.

     Unless and until ITGV  successfully  emerges  from its  Chapter 11 case and
pays in full all the debts to the Brennan Trustee,  our possible sources of cash
include the two promissory  notes we received when we sold our Garden State Park
real property in November,  2000 and our Las Vegas real  property in May,  2000.
One  such   Note  is  in  the   face   amount   of  $10   million,   issued   by
Realen-Turnberry/Cherry  Hill,  LLC, the  purchaser of the Cherry Hill  property
(the "$10 Million Note"), and the other promissory note is in the face amount of
$23 million, issued by Turnberry/Las Vegas Boulevard,  LLC, purchaser of our Las
Vegas real property  (the "$23 Million  Note").  Under both Notes,  interest and
principal  payments  will be  dependent  upon,  and  payable  solely out of, the
obligor's net cash flow available for  distribution to its equity owners.  After
the obligor's equity investors have received  aggregate  distributions  equal to
their  capital  contributions  plus an  agreed  upon  return  on their  invested
capital,  the  next $10  million  of  distributable  cash in the case of the $10
Million Note, and the next $23 million of distributable  cash in the case of the
$23  Million  Note,  will be paid to us, and  following  our receipt of the face
amount  of the Note we will  receive  33 1/3% of all  distributable  cash of the
obligor until maturity of the Note. The probable  timing and amounts of payments
under these Notes  cannot be  predicted.  We are  attempting  to borrow on these
Notes for  additional  working  capital  but such  borrowing  is  expected to be
difficult  to obtain as long as the timing and  amounts  of  payments  under the
Notes remain unpredictable.

     Our  working  capital as of June 30,  2003 was  $650,328  as  compared to a
negative ($2,200,346) at June 30, 2002. The change in working capital during the
past twelve months was  primarily  caused by an increase in cash provided by the
operating  activities which is limited to disbursement by the Bankruptcy  Court,
the use of cash to make  payments of $500,000 on the Ship  Mortgage  Obligation,
pay the  extension  fees  of  $470,000  on the  purchase  and to  fund  on-going
development  projects  partially  offset  by  the  cash  provided  by  operating
activities.  Other  transactions  affecting working capital that did not require
the use of cash was the  purchase of the spare parts  inventory in the amount of
$1,103,125  because the amount due for the  inventory was offset by amounts owed
to the Company  from the seller that were  previously  classified  as other long
term  assets.  In  addition,  the debt  incurred  in the  amount  of  $1,648,403
including  interest  of $34,330  for the  purchase  of  3,228,145  shares of the
Company's common stock from the Brennan Trustee did not require the use of cash.

Results of Operations for the Years Ended June 30, 2003 and 2002

     Revenue  for the  year  ended  June  30,  2003  increased  $5,509,060  from
$26,055,591  in Fiscal 2002 to  $31,564,651 in Fiscal 2003 primarily as a result
of increased revenues generated by the Palm Beach Princess operations during the
comparable  periods.  Expenses  increased  $2,251,587 from $23,933,738 in Fiscal
2002 to  $26,185,325  in Fiscal 2003 primarily the result of an increase in Palm
Beach Princess  operating costs during the comparable  periods,  financing costs
incurred  during  the  third  and  fourth  quarters  of  Fiscal  2003  primarily
associated  with the  amended  Purchase  and Sale  Agreement  for the Palm Beach
Princess  operation in the amount of $1,338,649,  and costs  associated with the
bankruptcy  filing of $841,348,  partially  offset by a decrease in  development
costs and a decrease in corporate general and administrative expenses during the
comparable periods.

     During the year ended June 30, 2003,  our net income was $5,233,827 or $.54
per share on weighted average outstanding shares of 9,720,275 as compared to net
income for the comparable period in prior fiscal year of $1,982,603 or $0.17 per
share on  weighted  average  outstanding  shares of  11,480,272.  The  change of
$3,251,224  was primarily  the result of the increased  revenues and expenses as
discussed above.


                                       13





     During the year ended June 30, 2003,  total revenue from vessel  operations
was $31,080,921 as compared to $25,473,777 for the year ended June 30, 2002. The
increase  in  revenue of  $5,607,144  during the  comparable  periods  primarily
resulted from an increase in casino  gaming and on board  revenue  primarily the
result of an increase in the passenger  count, an increase in the average amount
bet by each  passenger,  and an  increase  in the number of  cruises  during the
comparable  periods  partially  offset by a decrease in fare revenues  primarily
associated  with the  competitive  pricing  related to the ship  competing  with
another gaming vessel for a portion of operations in Fiscal 2003. Total expenses
before  income  taxes  for the  comparable  periods  increased  $3,275,111  from
$20,466,948  for the year ended June 30, 2002 to $23,742,059  for the year ended
June 30, 2003  primarily as a result of an increase in the number of  passengers
and the number of cruises which increased  operating  costs,  increases in sales
and marketing  expenses  associated  with  competition,  a $600,000  increase in
accrued employee bonus  compensation  costs related to our full calendar year of
operation,  $869,760 in financing  fees,  costs  associated  with the bankruptcy
filing of $841,348 and a decrease in other  operating  expenses.  Income  before
taxes  from  operation  of the  vessel  for the year  ended  June  30,  2003 was
$7,338,863  as compared to $5,006,829  for the year ended June 30, 2002.  Out of
the 711 scheduled  cruises during the year ended June 30, 2003, 2 were cancelled
for weather or mechanical  difficulties  as compared to Fiscal 2002 where out of
710  scheduled  cruises,  13 cruises were  cancelled  for weather or  mechanical
difficulties.  During the year ended June 30,  2003 the vessel was placed in wet
dock for 5 days,  whereas the vessel was placed in dry dock for 6 days in fiscal
2002.

     The Palm Beach Princess business is subject to seasonal  fluctuations.  Our
peak  seasons  are the winter  and spring  seasons  due to the  increased  local
population as well as increased tourist populations.

The following is a comparative  summary of income and expenses of the Palm Beach
Princess operation for the years ended June 30, 2003 and 2002:

                                                      Years Ended
                                                        June 30,
                                      -----------------------------------------

              Description                   2003          2002        Change
- -----------------------------------   -------------  -------------  -----------

Passenger Count                             262,346        232,803       29,543
Number of Cruises                               709            697           12

Revenue:
  Fare                                $   2,952,066  $   3,199,389  $  (247,323)
  On Board                                1,773,926      1,711,631       62,294
  Casino                                 26,354,930     20,562,757    5,792,173
                                       ------------ --------------   ---------
  Total Revenue                          31,080,921     25,473,777    5,607,144
                                       ------------ --------------   ---------

Expenses:
  Casino Operating Expenses               7,889,140      7,147,301      741,839
  Hotel and Gift Shop Expenses              849,022        871,893      (22,871)
  Sales, Marketing and Advertising
   Expenses                               3,171,856      2,934,483      237,373
  Maritime and Legal Expenses             5,960,421      6,151,650     (191,229)
  Administrative and Finance Expenses     5,871,620      3,361,621    2,506,000
                                        ------------ --------------  ----------
  Total Expenses                         23,742,059     20,466,948    3,275,111
                                        ------------ --------------  ----------
     Income Before Income Tax Expense $   7,338,863  $   5,006,829  $ 2,332,033
                                        ============ ==============  ==========

     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

                                       14




15,000 square feet aboard the ship and is equipped with  approximately  400 slot
machines,  all major table games (blackjack,  dice,  roulette and poker),  and a
sports wagering book.

     From time to time the M/V Palm Beach Princess faces  competition from other
gaming vessels which operate from the same port as the Palm Beach Princess. From
June 2002 until February 15, 2003 another coastal gaming vessel,  Texas Treasure
II operated from the Port of Palm Beach in  competition  with the M/V Palm Beach
Princess.  This vessel was  approximately  400 feet, was built in 1968 and had a
passenger capacity of approximately 700 people. The Palm Beach Princess has been
operating  without  any  direct  competition  since  February  16,  2003.  A 300
passenger  high-speed  ferry is scheduled to begin carrying  passengers  late in
2003 on daily round trips to Freeport, Grand Bahamas where gaming is conducted.

     For the year ended June 30, 2003,  our net income was  $5,233,827  or $0.54
per  share as  compared  to net  income  for the  year  ended  June 30,  2002 of
$1,982,603 or $0.17 per share.

Results of Operations for the Year Ended June 30, 2002 and 2001

     Revenue  for the  year  ended  June 30,  2002  increased  $21,134,500  from
$4,921,091 in Fiscal 2001 to $26,055,591 in Fiscal 2002 primarily as a result of
revenues  generated by the Palm Beach Princess  operations.  Expenses  increased
$16,610,505  from  $7,323,233  in Fiscal  2001 to  $23,933,738  in  Fiscal  2002
primarily as the result of total  operating  expenses of $20,466,948  associated
with the Palm Beach  Princess  during the twelve  month period in Fiscal 2002 as
compared to  $3,767,710  for the two month period of  operations in Fiscal 2001.
General and Administrative  expenses for the parent decreased $904,762 primarily
as a  result  of a  Fiscal  2001  $500,000  non-cash  compensation  cost  of the
2,500,000  shares of Common  Stock issued to Francis W.  Murray,  the  Company's
Chief  Executive  Officer and Fiscal  2001  remediation  costs of  approximately
$300,000 associated with the sale of Freehold Raceway.

     During the year ended June 30, 2002,  our net income was $1,982,603 or $.17
per share on weighted average  outstanding shares of 11,480,272 as compared to a
loss for the comparable  period in prior fiscal year of  ($2,402,142) or ($0.24)
per share on weighted  average  outstanding  shares of 9,987,114.  The change of
$4,384,745  was  primarily  the  result  of the net  income  from a full  year's
operation of the vessel.

     During  the year  ended June 30,  2002,  our first full year of  operation,
passenger  count was 256,021 and total  revenue from the vessel was  $25,473,777
which included casino revenue of $20,562,757,  passenger fares of $3,199,389 and
on board revenue of $1,711,631.  Casino  operating  expenses which also includes
food,  beverage and entertainment for the twelve month period were $7,147,301 or
35% of casino revenue. Sales, marketing and advertising expenses were $2,934,483
and on board gift shop, catering and cabin expenses were $871,893.  Maritime and
maintenance   costs  to  operate   the  ship  were   $6,151,650.   Finance   and
administrative expenses were $3,361,621.  State Income Tax expense was $139,250.
Net income  from  operation  of the vessel for the year ended June 30,  2002 was
$4,867,579.  Out of the 710  scheduled  cruises  during  the year ended June 30,
2002, 13 cruises were cancelled for weather or mechanical  difficulties.  During
the twelve month period the vessel was placed in dry dock for 6 days in October,
which is a slow seasonal period, for general maintenance and repairs.

     From July 1, 2001 to December 4, 2001 the M/V Palm Beach  Princess  was the
only vessel  operating a coastal gaming business from the Port of Palm Beach and
our  closest  competition  was  approximately  50 miles away in Ft.  Lauderdale,
Florida.  From December 10, 2001 until April 29, 2002,  another  coastal  gaming
vessel, the S.S. Horizon Edge,  operated from Riviera Beach Marina,  which is in
close  proximity  to the Port of Palm Beach.  This vessel was 186 feet and had a
passenger  capacity of 500 people.  The M/V Palm Beach Princess is  considerably
larger at 420 feet with a passenger  capacity of 850


                                     15




people.  The  Horizon  Edge  operated  on a similar  schedule  as the Palm Beach
Princess, that is, two five hour cruises per day, 7 days a week, however, due to
its smaller  size it canceled  more  cruises  than the Palm Beach  Princess  for
inclement  weather.  Another  coastal  gaming  vessel,  Texas Treasure II, began
operating in  approximately  June 2002 until February 2003 from the Port of Palm
Beach  in  competition  with  the M/V  Palm  Beach  Princess.  This  vessel  was
approximately  400  feet,  was  built in 1968 and had a  passenger  capacity  of
approximately 700 people.

Recently Issued Accounting Standards

     In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based
Compensation  - Transition  and  Disclosure - an Amendment of FASB Statement No.
123".  SFAS No. 148 amends FASB Statement No. 123,  "Accounting  for Stock-Based
Compensation",  to provide  alternative methods of transition for an entity that
voluntarily changes to the fair-value-based method of accounting for stock-based
employee  compensation.  It  also  amends  the  disclosure  provisions  of  that
statement  to require  prominent  disclosure  about the effects on reported  net
income and earnings per share and the entity's  accounting policy decisions with
respect  to  stock-based  employee  compensation.   Certain  of  the  disclosure
requirements  are required  for all  companies,  regardless  of whether the fair
value  method or  intrinsic  value  method is used to  account  for  stock-based
employee compensation arrangements.  This amendment to SFAS 123 became effective
for financial  statements for fiscal years ended after December 15, 2002 and for
interim periods beginning after December 15, 2002. Accordingly,  we have adopted
the disclosure provisions of this statement in fiscal 2003.

Other Information - Risk Factors

     You  should  consider  the  following  risk  factors  that  pertain  to our
business. The realization of any of these risks could result in significant harm
to our results of operations,  financial condition,  cash flows, business or the
market price of our common  stock.  Keep these risk factors in mind when reading
"forward-looking" statements elsewhere in this Form 10-K.

We derive substantially all of our revenues from our offshore gaming operations.

     Substantially  all of our revenues are currently derived from our operation
of the M/V Palm Beach Princess.  Certain of our operating  costs,  including the
charter fee payable to the vessel's owner,  fuel costs and wages,  are fixed and
cannot be reduced  when  passenger  loads  decrease or when rising fuel or labor
costs cannot be fully passed through to customers. Passenger and gaming revenues
earned from the vessel must be high enough to cover such expenses. While we have
generated  sufficient  revenues  from the M/V  Palm  Beach  Princess  to pay its
expenses,  there  is no  guarantee  that we will be able to  continue  to  cover
operating  expenses of that  business as well as the new  monthly  debt  service
payments of $400,000 to the Brennan Trustee, and our failure to do so could have
materially adverse consequences.

                                       16



Emerging from Chapter 11 Bankruptcy.

     Our  operations  are  limited  and  restricted  by  the   finalization  and
confirmation of the Plan of  Reorganization in ITGV's Chapter 11 bankruptcy case
and our agreements with the Brennan Trustee.  Moreover,  until the plan has been
fully  performed  and all debts to the Brennan  Trustee and all other  creditors
have  been  paid if full,  we will  still be  limited  in  operation  due to the
restriction of funds available from ITGV to the Parent Company.

Risk of default under the settlement with 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.

Revenues from our investments in real estate developments are uncertain.

     When we sold our real estate property located in Las Vegas,  Nevada in May,
2000, we used proceeds from that sale to purchase a promissory note, in the face
amount of $23 million,  issued by the  purchaser of the  property.  And, when we
sold our real estate  property in Cherry Hill,  New Jersey in November,  2000, a
portion  of the  purchase  price  was paid to us in the form of the  purchaser's
promissory note in the face amount of $10 million.  Each such promissory note is
payable solely from distributable cash generated by the purchaser's  development
or sale of the property  purchased  from us, and, in each case, we could receive
more or less  than the face  amount of the note.  The times and  amounts  of all
payments  under  these  notes  are  uncertain  and  depend   entirely  upon  the
profitability  of each  purchaser's  development (or resale) of the subject real
property.

We face competition to our gaming operations.

     We currently  compete with a variety of other  vacation  activities  in and
around Palm Beach, Florida, including short-term cruises, resort attractions and
sporting and other recreational activities.  We also expect competition in other
areas  surrounding  Palm Beach in the future.  Within fifty miles of the Port of
Palm Beach,  there are a number of smaller  marinas that are capable of handling
other coastal gaming  vessels,  although any such vessels  necessarily  would be
substantially smaller than the Palm Beach Princess. Our operations could compete
directly  with  the  other  Palm  Beach  vessel  and in  the  future  we  expect
competition  to increase  as new gaming  operators  enter our  market,  existing
competitors  expand  their  operations,  gaming  activities  expand in  existing
jurisdictions   and  gaming  is  legalized  in  new   jurisdictions.   Increased
competition  will result from expanded gaming in existing  jurisdictions  and as
gaming is legalized in new jurisdictions.

                                       17




     In general,  gaming  activities  include  traditional  land-based  casinos,
dockside gaming, casino gaming on Indian land,  state-sponsored lotteries, video
poker in restaurants,  bars and hotels, pari-mutuel betting on horse racing, dog
racing and jai-alai and sports  bookmaking.  Our operations  compete with all of
these forms of gaming and will  compete with any new forms of gaming that may be
legalized in the future, as well as with other types of entertainment.  Over the
past few years,  there has been an attempt to  legalize  gaming  throughout  the
state of Florida.  While this  movement has yet to be  successful,  it is likely
that the gaming  industry  will  continue  to pursue  legalization  of gaming in
Florida,  and we believe that the legalization of gaming in Florida would have a
material adverse impact on our operations.  In addition,  we are also subject to
competition from other gaming  establishments in other jurisdictions,  including
but not limited to Atlantic City, New Jersey,  Las Vegas,  Nevada,  the Bahamas,
and  riverboat  gambling  on  the  Mississippi  river.  Such  competition  could
adversely  affect our  ability to compete  for new gaming  opportunities  and to
maintain revenues.

We are potentially subject to a number of gaming regulations and statutes.

     Under Federal law,  individual states are permitted to regulate or prohibit
coastal gaming. The state of Florida does not currently regulate coastal gaming.
However,  from  time to time in prior  years,  legislation  has been  introduced
which, if enacted, would prohibit the coastal gaming business. There is the risk
that Florida may at some future date regulate the coastal gaming business.  Such
regulation could adversely harm our business.

     In  addition,  the Federal  government  has also  previously  considered  a
Federal tax on casino  revenues and may consider  such tax or other  regulations
that  would  affect  our  gaming  business  in the  future.  From  time to time,
legislators  and special  interest groups have proposed  legislation  that would
expand,   restrict  or  prevent  gaming  operations  in  Florida  and  in  other
jurisdictions  throughout  the country.  Any such taxes,  expansion of gaming or
restriction  on or prohibition  of our gaming  operations  could have a material
adverse effect on our operating results.

We are subject to non-gaming regulations.

     The M/V Palm Beach  Princess and any other  vessels which we may operate in
the  future  must  comply  with  various  international  and  U.S.  Coast  Guard
requirements as to ship design,  on-board facilities,  equipment,  personnel and
general safety. Our inability to maintain compliance with such regulations could
force us to incur additional costs to retain compliance or require us to buy new
vessels. In addition, we are subject to certain Federal,  state and local safety
and health laws,  regulations and ordinances that apply to non-gaming businesses
generally,  such  as  the  Clean  Air  Act,  the  Clean  Water  Act,  and  other
environmental   rules  and  regulations.   The  coverage  and  compliance  costs
associated  with such  laws,  regulations  and  ordinances  may result in future
additional costs to our operations.

We rely on patrons primarily from Florida and tourists from the Northeastern
United States.

     We derive a  substantial  portion of our  revenues  from  patrons  from the
southern  and  central  portions  of Florida as well as from  tourists  visiting
Florida  from other  parts of the United  States,  particularly  the  Northeast.
Adverse  economic  conditions  in any of these  markets,  or the  failure of our
vessel to  continue  to attract  customers  from these  geographic  markets as a
result of increased  competition  in such markets,  or other factors such as the
recent  terrorist  attacks which may lead to a decline in tourist travel,  could
have a material  adverse effect on our operating

                                       18




results.  Conditions  and other factors beyond our control  include  competition
from other amusement  properties,  changes in regional and local  population and
disposable income  composition,  seasonality,  changes or cancellations in local
tourist,  athletic or cultural events, changes in travel patterns or preferences
which may be  affected  by  increases  in  gasoline  prices,  changes in airline
schedules  and  fares,  strikes  and  weather  patterns,  and  our  need to make
renovations, refurbishments and improvements to our vessel.

Weather and other conditions could seriously disrupt our operations.

     Our gaming  operations  are  subject  to unique  risks,  including  loss of
service  because of  casualty,  mechanical  failure,  extended or  extraordinary
maintenance  requirements,  flood, hurricane or other severe weather conditions.
Our vessel  faces  additional  risks from its movement and the movement of other
vessels  on  waterways.  Palm  Beach,  Florida  is  subject  to  severe  storms,
hurricanes and occasional flooding.  As a result of such weather conditions,  as
well as the ordinary or extraordinary maintenance requirements of our vessel, if
we are unable to operate our vessel,  our results of operations  will be harmed.
The loss of our vessel  from  service  for any  period of time  could  adversely
affect our revenues.

We depend on our management to execute our business plan.

     Our success is  dependent  upon the efforts of our current  management,  in
particular that of our President and Chief Executive Officer, Francis W. Murray.
Since the business of gaming has expanded significantly over the past few years,
competition for qualified employees will be intense.  There is no assurance that
such persons can be retained or readily replaced, and there is no assurance that
we will be able to continue to add qualified personnel as required.  The loss of
the  services  of any of our  executive  officers  could  adversely  affect  our
business.

We experience quarterly fluctuations in operating results.

     Our  quarterly  operating  results are expected to fluctuate  significantly
because of seasonality and other factors.  We expect to generate the majority of
our income during our third and fourth fiscal  quarters ending March 31 and June
30. Such  fluctuations  could  affect our stock price,  particularly  during the
first and second fiscal quarters.

Our stock price faces volatility as a result of a number of factors.

     The market price of our stock is dependent upon future  operating  results,
and therefore, is highly dependent on specific developments  including,  but not
limited  to,  successfully  emerging  from the ITGV  bankruptcy,  or  defeat  of
relevant gaming legislation or related  initiatives,  weather patterns,  and the
general vibrancy of the economy and the Florida tourism industry.  Announcements
concerning  legislation  approving  or  defeating  gaming  legislation,  various
governmental   actions,   developments   in  the  gaming   industry   generally,
announcements by our competition,  weather patterns,  and other general economic
matters or tourism industry may have a significant impact on the market price of
our common stock.

Terrorist Attacks of September 11, 2001

     The  terrorist  attacks  of  September  11,  2001  adversely  impacted  our
operations and have effected our ability to borrow the approximately $10 million
dollars needed in order to make the balloon  payment of the purchase of the Ship
Mortgage  Obligation  due on October 31, 2002 and to pay for the purchase of the
stock that was due to the Trustee on July 1, 2002.  These attacks

                                       19



as well as any  similar  attacks  and/or  future  security  alerts  could have a
material adverse effect on our future operations.


Item 7A. Quantitative and Qualitative Disclosures about Market Risk.

     Not Applicable

Item 8. Financial Statements and Supplemental Data.



                          INDEX TO FINANCIAL STATEMENTS


          Report of Independent Public Accountants .................21
          Balance Sheets............................................22
          Statements of Operations .................................24
          Statements of Stockholders' Equity .......................25
          Statements of Cash Flow ..................................26


                                       20




               REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

To the Board of Directors and Stockholders of
International Thoroughbred Breeders, Inc.
Bellmawr, New Jersey


     We  have  audited  the   accompanying   consolidated   balance   sheets  of
International  Thoroughbred Breeders,  Inc. and subsidiaries as of June 30, 2003
and 2002 and the related  consolidated  statements of operations,  stockholders'
equity and cash flows for each of the three years ended June 30, 2003,  2002 and
2001. These  consolidated  financial  statements are the  responsibility  of the
Company's  management.  Our  responsibility  is to  express  an opinion on these
consolidated financial statements based on our audit.

     We conducted our audits in accordance with U.S. generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable  assurance about whether the  consolidated  financial  statements are
free of material  misstatement.  An audit includes  examining,  on a test basis,
evidence  supporting the amounts and disclosures in the  consolidated  financial
statements.  An audit also includes assessing the accounting principles used and
significant  estimates  made by  management,  as well as evaluating  the overall
consolidated  financial  statement  presentation.  We  believe  that our  audits
provide a reasonable basis for our opinion.

     In our opinion,  the consolidated  financial  statements  referred to above
present  fairly,   in  all  material   respects,   the  financial   position  of
International  Thoroughbred  Breeders,  Inc. and its subsidiaries as of June 30,
2003 and 2002 and the results of their  operations  and their cash flows for the
three years ended June 30, 2003, 2002 and 2001 in conformity with U.S. generally
accepted accounting principles.



                               STOCKTON BATES, LLP




Philadelphia, Pennsylvania
August 22, 2003



                                       21



                    INTERNATIONAL THOROUGHBRED BREEDERS, INC.
                                AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS
                          AS OF JUNE 30, 2003 AND 2002

                                     ASSETS


                                                              June 30,
                                                     -------------------------
                                                         2003          2002
                                                     -----------   -----------
CURRENT ASSETS:
     Cash and Cash Equivalents                      $  6,123,641  $    796,609
     Accounts Receivable                                 193,689        37,684
     Prepaid Expenses                                    488,414       190,639
     Spare Parts Inventory                             1,078,740             0
     Other Current Assets                                390,458       391,596
     Net Assets of Discontinued
       Operations - Current                               98,588       123,569
                                                     ------------  ------------
     TOTAL CURRENT ASSETS                              8,373,530     1,540,097
                                                     ------------  ------------


EQUIPMENT:
     Leasehold Improvements -
       Port of Palm Beach                                953,110             0
     Equipment                                         1,278,175       723,420
                                                     ------------  ------------
                                                       2,231,285       723,420
     LESS: Accumulated Depreciation
             and Amortization                            306,494       113,061
                                                     ------------  ------------

     TOTAL EQUIPMENT, NET                              1,924,791       610,359
                                                     ------------  ------------



OTHER ASSETS:
     Notes Receivable                                 33,000,000    33,000,000
     Deposit on Purchase of Palm Beach
       Princess Mortgage                               4,000,000     3,500,000
     Deposits and Other Assets -
       Non-Related Parties                               535,239       374,724
     Deposits and Other Assets -
       Related Parties                                 5,702,249     6,903,115
                                                     ------------  ------------
     TOTAL OTHER ASSETS                               43,237,488    43,777,839
                                                     ------------  ------------


TOTAL ASSETS                                        $ 53,535,809  $ 45,928,295
                                                     ============  ============

See Notes to Consolidated Financial Statements.

                                       22




                    INTERNATIONAL THOROUGHBRED BREEDERS, INC.
                                AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS
                          AS OF JUNE 30, 2003 AND 2002

                      LIABILITIES AND STOCKHOLDERS' EQUITY


                                                              June 30,
                                                     --------------------------
                                                         2003          2002
                                                     ------------   -----------
CURRENT LIABILITIES:
     Accounts Payable                               $   2,264,499  $  1,324,351
     Accrued Expenses                                   2,341,209     1,353,811
     Short-Term Debt                                    2,934,330     1,062,280
     Short-Term Debt - Related Parties                    183,164             0
                                                     -------------  ------------
     TOTAL CURRENT LIABILITIES                          7,723,202     3,740,442
                                                     -------------  ------------


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 and 362,488
      Issued and Outstanding, respectively             36,248,875    36,248,775
     Common Stock, $2 Par Value, Authorized
      25,000,000 Shares, Issued, 11,480,278
      and 11,480,275, respectively and
      Outstanding, 8,252,133 and
      11,480,275, respectively                         22,960,555    22,960,549
     Capital in Excess of Par                          20,191,984    20,192,090
     (Deficit) (subsequent to June 30, 1993,
     date of quasi-reorganization)                    (40,189,608)  (45,423,434)
                                                     -------------  ------------
                                                       39,211,806    33,977,980
     LESS:
     Treasury Stock, 3,228,145 Shares, at Cost         (1,614,073)            0
     Deferred Compensation, Net                           (11,666)      (16,667)
                                                     -------------  ------------
     TOTAL STOCKHOLDERS' EQUITY                        37,586,067    33,961,313
                                                     -------------  ------------


TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY          $  53,535,809  $ 45,928,295
                                                     =============  ============

See Notes to Consolidated Financial Statements.

                                       23


                    INTERNATIONAL THOROUGHBRED BREEDERS, INC.
                                AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF OPERATIONS
                FOR THE YEARS ENDED JUNE 30, 2003, 2002 AND 2001



                                                        June 30,
                                        ---------------------------------------
                                            2003          2002          2001
                                        ------------  ------------  ------------
REVENUE:
     Revenue from Operations          $ 31,141,386  $ 25,501,806  $  4,588,592
     Other Income                                0        78,163       209,939
     Interest Income Related Party         342,226       350,833       101,788
     Interest Income                        81,039       124,789        20,772
                                       ------------  ------------  ------------
          TOTAL REVENUES                31,564,651    26,055,591      4,921,091
                                       ------------  ------------  ------------

EXPENSES:
     Cost of Revenues:
      Operating Expenses                18,404,361    17,734,777     3,273,163
      Depreciation & Amortization          254,082       139,294        42,097
     General & Administrative Expenses-
      Palm Beach Princess                3,587,886     2,666,666       452,450
     General & Administrative Expenses-
      Parent                             1,452,047     2,152,414     3,057,176
     ITG Vegas Bankruptcy Costs            841,348             0             0
     Development Costs                     306,952       933,814             0
     Interest and Financing Expenses     1,338,649       306,773       498,347
                                       ------------  ------------  ------------
          TOTAL EXPENSES                26,185,325    23,933,738     7,323,233
                                       ------------  ------------  ------------

INCOME BEFORE TAX PROVISION              5,379,326     2,121,853    (2,402,142)
     State Income Tax Expense              145,500       139,250             0
                                       ------------  ------------  ------------

NET INCOME                            $  5,233,826  $  1,982,603  $ (2,402,142)
                                       ============  ============  ============


NET BASIC AND DILUTED INCOME
   PER COMMON SHARE                   $       0.54  $       0.17  $      (0.24)
                                       ============  ============  ============

WEIGHTED AVERAGE COMMON
   SHARES OUTSTANDING                    9,720,275    11,480,272     9,987,114
                                       ============  ============  ============



See Notes to Consolidated Financial Statements.

                                       24



                    INTERNATIONAL THOROUGHBRED BREEDERS, INC.
                                AND SUBSIDIARIES

                 CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
                FOR THE YEARS ENDED JUNE 30, 2003, 2002 AND 2001


                                                                                Preferred                  Common
                                                                          ----------------------- ---------------------------
                                                                          Number of                Number of
                                                                           Shares      Amount        Shares        Amount
                                                                          --------- ------------- ------------- -------------

                                                                                                    
BALANCE - JUNE 30, 2000                                                    362,484  $ 36,248,375    11,884,270  $ 23,768,539

   Treasury Shares Retired                                                  ---         ---         (2,904,016)   (5,808,032)
   Shares Issued for Compensation                                           ---         ---          2,500,000     5,000,000
   Shares Issued for Fractional Exchanges With Respect to the
      One-for-twenty Reverse Stock Split effected on March 13, 1992              3           300            13            26
   Amortization of Deferred Compensation Costs                              ---         ---           ---           ---
   Net (Loss) for the Year Ended June 30, 2001                              ---         ---           ---           ---

                                                                          --------- ------------- ------------- -------------
BALANCE - JUNE 30, 2001                                                    362,487  $ 36,248,675    11,480,267  $ 22,960,533

   Shares Issued for Fractional Exchanges With Respect to the
      One-for-twenty Reverse Stock Split effected on March 13, 1992              1           100             8            16
   Amortization of Deferred Compensation Costs                              ---         ---           ---           ---
   Net Income for the Year Ended June 30, 2002                              ---         ---           ---           ---

                                                                          --------- ------------- ------------- -------------
BALANCE - JUNE 30, 2002                                                    362,488  $ 36,248,775    11,480,275  $ 22,960,549
   Purchase of Shares for Treasury in connection with REB Trustee           ---         ---           ---           ---
   Shares Issued for Fractional Exchanges With Respect to the
      One-for-twenty Reverse Stock Split effected on March 13, 1992              1           100             3             6
   Amortization of Deferred Compensation Costs                              ---         ---           ---           ---
   Net Income for the Year Ended June 30, 2003                              ---         ---           ---           ---

                                                                          --------- ------------- ------------- -------------
BALANCE - JUNE 30, 2003                                                    362,489  $ 36,248,875    11,480,278  $ 22,960,555
                                                                          ========= ============= ============= =============



                                                                        Capital                  Treasury     Deferred
                                                                       in Excess                   Stock       Compen-
                                                                        of Par      (Deficit)     At Cost       sation    Total
                                                                      ------------ ------------- ----------  ----------  -----------

                                                                                                         
BALANCE - JUNE 30, 2000                                              $ 26,144,540 $ (45,003,895) (7,260,040)   (26,667) $33,870,852

   Treasury Shares Retired                                             (1,452,008)     ---        7,260,040    ---          ---
   Shares Issued for Compensation                                      (4,500,000)     ---         ---         ---          500,000
   Shares Issued for Fractional Exchanges With Respect to the
      One-for-twenty Reverse Stock Split effected on March 13, 1992          (326)     ---         ---         ---          ---
   Amortization of Deferred Compensation Costs                            ---          ---         ---           5,000        5,000
   Net (Loss) for the Year Ended June 30, 2001                            ---        (2,402,142)   ---         ---       (2,402,142)

                                                                      ------------ ------------------------- ----------  -----------
BALANCE - JUNE 30, 2001                                              $ 20,192,206 $ (47,406,037)          0    (21,667) $31,973,710

   Shares Issued for Fractional Exchanges With Respect to the
      One-for-twenty Reverse Stock Split effected on March 13, 1992          (116)     ---         ---         ---          ---
   Amortization of Deferred Compensation Costs                            ---          ---                       5,000        5,000
   Net Income for the Year Ended June 30, 2002                            ---         1,982,603    ---         ---        1,982,603

                                                                      ------------ ------------------------- ----------  -----------
BALANCE - JUNE 30, 2002                                              $ 20,192,090 $ (45,423,434)          0    (16,667) $33,961,313

   Purchase of Shares for Treasury in connection with REB Trustee         ---          ---       (1,614,073)   ---       (1,614,073)
   Shares Issued for Fractional Exchanges With Respect to the
      One-for-twenty Reverse Stock Split effected on March 13, 1992          (106)     ---         ---         ---          ---
   Amortization of Deferred Compensation Costs                            ---          ---         ---           5,001        5,001
   Net Income for the Year Ended June 30, 2003                            ---         5,233,826    ---         ---        5,233,826

                                                                      ------------ ------------------------- ----------  -----------
BALANCE - JUNE 30, 2003                                              $ 20,191,984 $ (40,189,608) (1,614,073)   (11,666) $37,586,067
                                                                      ============ ========================= ==========  ===========



See Notes to Consolidated Financial Statements.

                                       25




                   INTERNATIONAL THOROUGHBRED BREEDERS, INC.
                                AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                FOR THE YEARS ENDED JUNE 30, 2003, 2002 AND 2001

                                                                                                June 30,
                                                                      -----------------------------------------------------------
                                                                             2003                 2002                 2001
                                                                      -----------------    -----------------    -----------------

                                                                                                     
CASH FLOWS FROM OPERATING ACTIVITIES:                               $        5,233,826   $        1,982,603   $       (2,402,142)
                                                                      -----------------    -----------------    -----------------
  Adjustments to reconcile income to net cash provided
   by operating activities:
     Depreciation and Amortization                                             254,082              144,294               47,097
     (Gain) on Sale of Fixed Assets                                                  0              (77,577)             (81,733)
     Compensation for Common Shares Issued                                           0                    0              500,000
     Changes in Operating Assets and Liabilities -
      Increase (Decrease) in Restricted Cash & Investments                           0                    0            1,656,743
      (Increase) Decrease in Accounts Receivable                              (156,010)             805,703             (415,731)
      Decrease (Increase) in Other Assets                                       21,247             (304,316)            (720,559)
      (Increase) Decrease in Prepaid Expenses                                 (297,773)             171,409              750,273
      Increase (Decrease) in Accounts Payable and Accrued Expenses           2,217,821             (151,167)           2,876,062
                                                                      -----------------    -----------------    -----------------
     CASH PROVIDED BY OPERATING ACTIVITIES BEFORE
      DISCONTINUED OPERATIONS                                                7,273,193            2,570,949            2,210,010
     CASH (USED IN) PROVIDED BY DISCONTINUED OPERATING ACTIVITIES               14,939                    0           (1,011,785)
                                                                      -----------------    -----------------    -----------------
     NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES                     7,288,132            2,570,949            1,198,225
                                                                      -----------------    -----------------    -----------------

CASH FLOWS FROM INVESTING ACTIVITIES:
    Deposits on Purchase of Palm Beach Princess Mortgage                      (500,000)          (2,750,000)            (750,000)
    Deposits on Purchase of Additional Vessel                                 (300,000)                   0
    Investment in Port Lease                                                  (250,000)                   0
    Proceeds from Auction of Garden State Park Fixed Assets                          0            1,216,481                    0
    Capital Expenditures                                                    (1,363,809)            (480,615)                   0
    Loans made on Development Projects                                               0             (922,751)          (2,095,105)
    Decrease (Increase) in Other Investment Activity                           314,846             (108,040)             (17,983)
                                                                      -----------------    -----------------    -----------------
     CASH (USED IN) INVESTING ACTIVITIES
      BEFORE DISCONTINUED INVESTING ACTIVITIES                              (2,098,963)          (3,044,925)          (2,863,088)
     CASH PROVIDED BY DISCONTINUED INVESTING ACTIVITIES                              0                    0           20,000,000
                                                                      -----------------    -----------------    -----------------
     NET CASH (USED IN) PROVIDED BY INVESTING ACTIVITIES                    (2,098,963)          (3,044,925)          17,136,912
                                                                      -----------------    -----------------    -----------------

CASH FLOWS FROM FINANCING ACTIVITIES:
    Proceeds from Related Party Loans                                          183,164                    0                    0
    Proceeds from Bank Financing                                               200,000                    0            1,650,000
    Principal Payments on Short Term Notes                                    (248,144)            (100,000)         (17,654,555)
    Decrease in Balances Due to/From Subsidiaries                               17,783                9,298           17,747,801
                                                                      -----------------    -----------------    -----------------
     CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES
      BEFORE DISCONTINUED FINANCING ACTIVITIES                                 152,803              (90,702)           1,743,246
     CASH (USED IN) DISCONTINUED FINANCING ACTIVITIES                          (17,783)              (9,298)         (19,005,177)
                                                                      -----------------    -----------------    -----------------
     NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES                       135,020             (100,000)         (17,261,931)
                                                                      -----------------    -----------------    -----------------

NET INCREASE IN CASH AND CASH EQUIVALENTS                                    5,324,189             (573,976)           1,073,206
      LESS CASH AND CASH EQUIVALENTS  FROM DISCONTINUED OPERATIONS               2,843                9,298               16,962
     CASH AND CASH EQUIVALENTS AT BEGINNING OF THE PERIOD                      796,609            1,361,287              271,119
                                                                      -----------------    -----------------    -----------------

     CASH AND CASH EQUIVALENTS AT END OF THE PERIOD                 $        6,123,641   $          796,609   $        1,361,287
                                                                      =================    =================    =================

     Supplemental Disclosures of Cash Flow Information:
      Cash paid during the period for:
      Interest                                                      $          412,431   $           13,200   $          109,681
      Income Taxes                                                  $          115,983   $                0   $                0


     Supplemental Schedule of Non-Cash Investing and Financing Activities:
          On November 13, 2002 parts  inventory in the amount of $1,103,125  was
     recorded on the balance sheet as part of a non-cash  transaction  offset by
     existing liabilities.
          On Decemberr  13, 2002,  the Company  issued a promissory  note in the
     amount of $1,648,403  including  interest of $34,330 to purchase  3,228,145
     shares of its Common Stock.

See Notes to Consolidated Financial Statements.

                                       26





                    INTERNATIONAL THOROUGHBRED BREEDERS, INC.
                                AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES


     (A) Nature of  Operations - ITGV 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 400 slot machines,  all major
table games (blackjack, dice, roulette and poker), and a sports wagering book.

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

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

     (D) Spare Parts  Inventory - Spare parts  inventory  consists of  operating
supplies,  maintenance materials and spare parts. The inventories are carried at
cost. Should the Trustee be able to exercise his right to take possession of the
vessel,  the Company may be required to forfeit the spare parts inventory if the
book value of the assumed  liabilities exceeds the current assets at the time of
his  possession.  It is necessary that these parts be readily  available so that
the daily cruise operations are not cancelled due to mechanical failures.

     (E)  Depreciation and Amortization - Depreciation of property and equipment
were computed by the  straight-line  method at rates  adequate to allocate their
cost or  adjusted  fair  value  in  accordance  with U.  S.  generally  accepted
accounting   principles  over  the  estimated  remaining  useful  lives  of  the
respective  assets.  Amortization  expense  consists  of the  write off of major
vessel repairs and maintenance  work normally  completed at dry dock in the fall
of each year.  These expenses are written off during a one year period following
the dry dock period.  For the years ended June 30, 2003 and 2002,  the amortized
expense was $55,650 and $83,475, respectively.

     The Company has adopted the provisions of Statement of Financial Accounting
Standards  No. 121 ("SFAS 121")  "Accounting  for the  Impairment  of Long-Lived
Assets  and for  Long-Lived  Assets to Be  Disposed  Of."  SFAS 121  establishes
accounting   standards  for  the  impairment  of  long-lived   assets,   certain
identifiable  intangibles  and  goodwill  related to those assets to be held and
used for long-lived assets and certain  identifiable  intangibles to be disposed
of.  The  Company  reviews  the  carrying  values of its  long-lived  assets for
possible  impairment  whenever events or changes in circumstances  indicate that
the carrying  amount of the assets may not be recoverable  based on undiscounted
estimated future operating cash flows.


                                       27



                    INTERNATIONAL THOROUGHBRED BREEDERS, INC.
                                AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

     (F) Net Assets of Discontinued  Operations - At June 30, 2003 and 2002, the
remaining net assets and  liabilities of Garden State Park and Freehold  Raceway
were classified as "Net Assets of Discontinued Operations."

     (G) Recent  Accounting  Pronouncements  - In December 2002, the FASB issued
SFAS  No.  148,  "Accounting  for  Stock-Based  Compensation  -  Transition  and
Disclosure - an Amendment of FASB  Statement No. 123".  SFAS No. 148 amends FASB
Statement  No.  123,  "Accounting  for  Stock-Based  Compensation",  to  provide
alternative  methods of transition for an entity that voluntarily changes to the
fair-value-based method of accounting for stock-based employee compensation.  It
also amends the  disclosure  provisions of that  statement to require  prominent
disclosure  about the effects on reported  net income and earnings per share and
the entity's  accounting  policy decisions with respect to stock-based  employee
compensation.  Certain  of the  disclosure  requirements  are  required  for all
companies, regardless of whether the fair value method or intrinsic value method
is used to account for  stock-based  employee  compensation  arrangements.  This
amendment to SFAS 123 became effective for financial statements for fiscal years
ended after December 15, 2002 and for interim  periods  beginning after December
15,  2002.  Accordingly,  we have  adopted  the  disclosure  provisions  of this
statement in fiscal 2003.

     Presently,  the Company does not have any circumstances  that would require
the  implementation  of these standards.  Accordingly,  the Company believes the
adoption of these  statements  will have no impact on its financial  position or
results of operations.

     (H) Revenue  Recognition - The Company  recognizes the revenues  associated
with the casino operation on the Palm Beach Princess as they are earned.

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

     (J) 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 June 30, 2003, funds classified as cash and cash equivalents,
which  are  primarily  those  of  the  Palm  Beach  Princess   operations  under
debtor-in-possession,   are  only  available  under  bankruptcy  court  approval
guidelines.

     (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.

                                       28



                    INTERNATIONAL THOROUGHBRED BREEDERS, INC.
                                AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

     (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) Net Income  (Loss)  per Common  Share - In March  1997,  the  Financial
Accounting  Standards Board issued Statement of Financial  Accounting  Standards
No. 128, "Earnings Per Share" ("SFAS 128"). SFAS 128 provides a different method
of  calculating  earnings  per share than was used in APB  Opinion  15. SFAS 128
provides for the  calculation  of basic and diluted  earnings  per share.  Basic
earnings  per share  includes  no dilution  and is  computed by dividing  income
available to common stockholders by the weighted average number of common shares
outstanding  for the period.  Diluted  earnings per share reflects the potential
dilution of securities that could share in the earnings of an entity.

     Income (Loss) per common share is computed by dividing net income (loss) 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 have accounted for the  transaction on the cost method of accounting
for treasury stock.  Options and warrants to purchase 4,046,500 shares of Common
Stock at various  prices per share,  for the years  ended June 30, 2003 and 2002
were not included in the  computation  of income per share  because the exercise
price of those  options  and  warrants  were above  market  value.  Options  and
warrants  to purchase  3,104,000  shares of Common  Stock at various  prices per
share,  for the year ended June 30, 2001 were not included in the computation of
loss per share for those periods as their effect would have been anti-dilutive.

(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 unrelate 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. As described in Note 12 below 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.

                                       29



                    INTERNATIONAL THOROUGHBRED BREEDERS, INC.
                                AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

     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.

     On the  effective  date of the Plan (the  "Effective  Date"),  all  claims,
debts, liens, security interests and encumbrances of and against the Debtors and
against all property of their respective bankruptcy estates,  which arose before
confirmation,  will be discharged,  except as otherwise  provided in the Plan or
confirmation  order.  Post-confirmation,  each of the Debtors  will  continue as
reorganized debtors.

     The Plan includes 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 will be 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. In addition,  an amount equal
to  $70,000  will be paid  monthly  into  escrow as further  collateral  for the
holders of such debt.  Through  October 14, 2003,  $1,286,051 has been placed in
escrow towards the payments required for distribution.

     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 Debtors 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 Companys 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;

                                       30


                    INTERNATIONAL THOROUGHBRED BREEDERS, INC.
                                AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

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

     The amounts  described in  subparagraphs  (a), (b) and (c) are collectively
called the  "Payment  Obligations".  A  forbearance  fee of $350,000  also shall
accrue to the Brennan  Trustee on the Effective  Date, of which $100,000 will be
payable on the  Effective  Date and the balance of  $250,000  will be due on the
earliest to occur of the date the Payment  Obligation is paid in full, the third
anniversary  of the  Effective  Date,  or any date on which ITG Vegas shall have
monitized  its  receivable  from OC Realty,  LLC, an affiliate of the  Company's
Chairman and CEO.

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

     6.  Restrictions are imposed under the Plan on ITG Vegas making payments to
affiliated  entities,  including the parent company.  Payment of indebtedness to
affiliated entities of ITG Vegas generally will be subordinated and intercompany
advances  and  transfers  from  ITG to  affiliated  entities  generally  will be
prohibited,  except that, if no default exists in the obligations to the Brennan
Trustee,  (i) $50,000 per month may be paid by ITG Vegas to MJQ  Corporation  in
respect of the bareboat  charter fee for use of the Vessel and (ii) $100,000 per
month will be  permitted  to be paid by ITG Vegas to the  Company  under the Tax
Sharing  Agreement  between  them.  The  Company  will enter into a Tax  Sharing
Agreement with ITG Vegas effective on the Effective Date,  pursuant to which ITG
Vegas will  compensate  the Company for the tax savings  realized as a result of
ITG Vegass inclusion in the Companys 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 upstreamed by ITG Vegas to the
Company is $100,000 per month under the Tax Sharing Agreement (and, beginning in
2005, 25% of ITG's annual Free Cash Flow, as defined).  The Company has no other
source of funds presently  available.  For these reasons, and since the $100,000
per month tax sharing payment will be suspended at any time when the Debtors are
not current in payment of their obligations to the

                                       31



                    INTERNATIONAL THOROUGHBRED BREEDERS, INC.
                                AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Brennan  Trustee,  no  assurance  can be given that the Company  will be able to
function as a going concern and pay its debts as they become due.

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

     ITG Vegas and the Company are  attempting to negotiate a document  entitled
Amendment to Master Settlement  Agreement with the Brennan Trustee,  which would
incorporate  the  above-described  terms and other  modifications  to the Master
Settlement  Agreement  previously  entered  into  by the  Brennan  Trustee,  the
Company,  Palm  Beach  Princess,  Inc.  (predecessor  of ITG Vegas,  Inc.),  MJQ
Corporation  and  others.  In the  event  the  parties  are  unable  to  reach a
definitive amendment agreement in that respect, the Term Sheet filed on Form 8-K
with the Securities  and Exchange  Commission on September 22, 2003 and attached
as Exhibit A to the Plan,  together with certain  additions  and  clarifications
announced on the record at the  confirmation  hearing,  will remain in effect as
the  modification  to Master  Settlement  Agreement.

     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  Companys  indirect  stock  ownership  of ITG  Vegas is not
affected by the Plan.

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

(3) NOTES RECEIVABLE

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


                                       32



                    INTERNATIONAL THOROUGHBRED BREEDERS, INC.
                                AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

     In  addition,  we sold two large  bronze  sculptures  located at the Garden
State Park  property to Realen,  in exchange  for Realen's  promissory  note due
November 30, 2002, in the principal  amount of $700,000.  The Chapter 11 Trustee
for the  Bankruptcy  Estate of  Robert E.  Brennan  claimed  ownership  of those
sculptures,  and we settled the  resulting  litigation  over the  sculptures  by
agreeing that the first $350,000 in principal payments made by Realen under such
note would be remitted to the Brennan Bankruptcy Trustee (together with one-half
of the interest paid by Realen under such note).  The remaining  $350,000 of the
$700,000 note is  classified in other current  assets on our balance sheet as of
June 30, 2003. As part of the settlement of the sculpture litigation,  the party
who sold us the  sculptures,  agreed to reduce the amount of our  obligation for
payment of the balance of the sculpture price (described in Note 10(A) below) by
the  same  principal  amount,  $350,000,  given up by us to the  Trustee.  As of
October  14,  2003,  Realen had not made the payment due to ITB in the amount of
$350,000  which was due on November 30, 2002.  On January 30, 2003,  the Trustee
instituted  litigation  against Realen and the Company  demanding payment of the
first $350,000. On August 18, 2003 the judge granted a summary judgement against
Realen-Turnberry/  Cherry Hill, LLC in the sculpture  litigation and dismissed a
cross claim that Realen-Turnberry/Cherry Hill, LLC had brought against ITB.

                                       33



                    INTERNATIONAL THOROUGHBRED BREEDERS, INC.
                                AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(4)  DEPOSITS  AND  OTHER  ASSETS -  RELATED  PARTIES
     The following  items are  classified as deposits and other assets (See Note
     17 - Related Party Transactions):


                                                                                       June 30,
                                                                              -------------------------
                                                                                   2003        2002
                                                                              ------------  -----------

                                                                                      
Loans to the Ft Lauderdale Project (OC Realty, LLC)             $  2,034,405                $ 2,067,363
Loan Transferred from Golf Course Project to OC Realty, LLC          735,584                        -0-
Note Receivable from Francis W. Murray *                           2,600,749                        -0-
Accounts Receivable from Francis W. Murray                            35,099                        -0-
Loans to Francis W. Murray                                            93,000                        -0-
Loan from Francis W. Murray                                         (250,000)
Accrued Wages due and Advances from Francis W. Murray               (404,204)
Advances (from) MJQ Corporation (FWM ownership)                     (330,813)
Advances to OC Realty, LLC                                            77,162
                                                                  -----------
Total Loans to OC Realty, LLC/Francis W. Murray                               $ 4,590,982

Accrued Interest on Loans to the Ft. Lauderdale Project (OC
Realty, LLC)                                                         606,553                    458,711
Accrued Interest Transferred from Golf Course Project to OC
Realty, LLC                                                     $    287,327
                                                                  -----------
Total Accrued Interest on Loans to OC Realty, LLC                                 893,880

Loans including accrued interest to the Golf Course Project in
California                                                                            -0-       911,169
Deposits on Port Lease                                                                -0-        75,000
Advances to MJQ Corporation (MJQ ownership)                                           -0-       521,583
Accounts Receivable from Frank Leo                                                 23,441        13,804
Accounts Receivable from Francis W. Murray                                            -0-        19,236
Goodwill on Purchase of GMO Travel                                                193,946           -0-

Assets Assigned from Leo Equity Group, Inc. (See Note 17):

Note Receivable from Michael J Quigley III*                                           -0-     2,600,749
Accounts Receivable from MJQ Corp                                                     -0-        21,000
Accounts Receivable from Ft Lauderdale Project                                        -0-         8,000
Loans to Francis W Murray                                                             -0-        93,000
Accounts Receivable from GMO Travel                                                   -0-       113,500
                                                                               -----------  ------------
         Total Deposits and Other Assets                                      $ 5,702,249   $ 6,903,115
                                                                               ===========  ============

* 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.

                                       34



                    INTERNATIONAL THOROUGHBRED BREEDERS, INC.
                                AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(5) DEPOSITS AND OTHER ASSETS - NON RELATED PARTIES

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


                                                  June 30,
                                          -----------------------
                                              2003        2002
                                          ----------  -----------
Loans to South American Gaming Projects   $      -0-  $   349,472
Port Lease Rights                            250,000          -0-
Deposit on Ship Purchase (See Note 10-D)     200,000          -0-
Other Misc. Assets                            85,239       25,252
                                           ----------  -----------
         Total                            $  535,239  $   374,724
                                           ==========  ===========

(6) DISCONTINUED OPERATIONS

     On January 28, 1999, we completed the sale of the real property and certain
related assets at Freehold  Raceway and a ten-acre  parcel of land at the Garden
State Park facility. On November 30, 2000, the Company, through its wholly-owned
subsidiary,  GSRT, LLC, closed on the sale (the "Garden State  Transaction")  of
the Garden State Park  property  (the "Garden  State Park  Property")  in Cherry
Hill, New Jersey, to Realen-Turnberry/Cherry  Hill, LLC ("Realen"). The purchase
price was $30 million and was paid by: (i)  previous  cash  deposits  totaling a
$1,000,000;  (ii) a  promissory  note in the face  amount  of $10  million  (the
"Note");  and  (iii)  the  balance  of the  purchase  price  paid in cash at the
closing.  The  Company has elected to defer the gain on the sale until such time
that collectability under the $10,000,000 note from Realen can be determined.

     The cash proceeds of the Garden State  Transaction were principally used by
the Company to repay in full the  outstanding  balances on the Company's debt to
Credit  Suisse  First  Boston   Mortgage   Capital  LLC  ("Credit   Suisse")  of
approximately  $14.3 million and to repay in full approximately $3.75 million of
principal and interest on the debt to the Chapter 11 Bankruptcy  Trustee for the
estate of Robert E. Brennan which was incurred to purchase  2,904,016  shares of
the Company's Common Stock.

     In June  2001,  the  Company  conducted  a five-day  public  auction of the
equipment,  furnishings  and artwork  that were not  included in the sale of the
Garden State Park to Realen.  Net proceeds after  commission of the Garden State
Park equipment,  furnishings and artwork were in the amount of $1,110,113  which
are classified as accounts  receivable at June 30, 2001.  Proceeds from the sale
were received in September 2001.

                                       35



                    INTERNATIONAL THOROUGHBRED BREEDERS, INC.
                                AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

     The  net  assets  of the  operations  to be  disposed  of  included  in the
accompanying consolidated balance sheets as of June 30, 2003 and 2002 consist of
the following:

                                                          June 30,
                                                  ------------------------
Classified As:                                        2003         2002
                                                  -----------   ----------
Current Assets                                   $   399,785   $   415,166
Current Liabilities                                 (301,197)     (291,597)
                                                  -----------   ----------
         Net Assets of Discontinued Operations   $    98,588   $   123,569
                                                  ===========   ==========

     Cash flows from discontinued  operations for the years ended June 30, 2003,
2002 and 2001 consist of the following:


                                                                      June 30,
                                                        -----------------------------------

                                                           2003      2002          2001
                                                        ---------- --------    ------------

                                                                     
Cash Flows From Discontinued Operating Activities:

      Income                                           $     -0-   $   -0-    $         -0-
                                                        ---------  --------    ------------

      Adjustments to reconcile income to net cash
      provided by discontinued operating activities

        Changes in Operating Assets and Liabilities
        of Discontinued Operations:

            Decrease (Increase) in Accounts Receivable    12,539       -0-       (1,030,285)

            Increase (Decrease) in Accounts and Purses
             Payable and Accrued Expenses                  2,400       -0-            1,000

            Increase in Deferred Revenue                     -0-       -0-           17,500
                                                        ---------  --------    ------------

      Net Cash Provided by Discontinued Operating
      Activities                                          14,939       -0-       (1,011,785)
                                                        ---------  --------    -------------

Cash Flows From Discontinued Investing Activities:

      Proceeds from Sale of Garden State Park                -0-       -0-       20,000,000
                                                        ---------  --------    ------------

      Net Cash (Used In) Provided by Discontinued
      Investing Activities                                   -0-       -0-       20,000,000
                                                        ---------  --------    ------------

Cash Flows from Discontinued Financing Activities:

      (Decrease) in Balances Due To/From Continuing
      Operations                                         (17,782)   (9,298)     (19,005,177)
                                                        ---------  --------    -------------

      Net Cash (Used In) Discontinued Financing
      Activities                                         (17,782)   (9,298)     (19,005,177)
                                                        ---------  --------    -------------

      Net (Decrease) Increase in Cash and Cash
      Equivalents From Discontinued Operations            (2,843)   (9,298)         (16,962)

        Cash and Cash Equivalents at Beginning of
        Year From Discontinued Operations                  2,527    11,825           28,787
                                                        ---------  --------    ------------

        Cash and Cash Equivalents at End of Year From
        Discontinued Operations                        $    (316)  $ 2,527    $      11,825
                                                        =========   =======    ============


                                       36



                    INTERNATIONAL THOROUGHBRED BREEDERS, INC.
                                AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(7) ACQUISITIONS AND DISPOSITIONS

     o    Fiscal 2003

     There were no acquisitions  or dispositions  during the year ended June 30,
2003.

     o    Fiscal 2002

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

     o    Fiscal 2001

     On November 30, 2000,  the Company,  through its  wholly-owned  subsidiary,
GSRT,  LLC, closed on the sale of the Garden State Park property in Cherry Hill,
New Jersey, to Realen-Turnberry/Cherry Hill, LLC ("Realen"). (See Note 3.)

     In June  2001,  the  Company  conducted  a five-day  public  auction of the
equipment,  furnishings and artwork that were excluded in the sale of the Garden
State Park to Realen.

(8) INVESTMENTS

     Interest  income for the fiscal years ended June 30, 2003,  2002,  and 2001
was $81,039, $124,789, and $20,772, respectively.  Related party interest income
for the fiscal years ended June 30, 2003, 2002, and 2001 was $3420226  $350,833,
and $101,772,  respectively.  There were no realized  gains or losses  resulting
from the sale of trading securities for fiscals 2003, 2002 and 2001.

(9) LAND, BUILDINGS AND EQUIPMENT

     Land,  buildings and equipment are recorded at cost.  Depreciation is being
computed  over the  estimated  remaining  useful  lives using the  straight-line
method.

Major classes of land, buildings and equipment consist of the following:

                                                               June 30,
                               Estimated Useful     ------------------------
                                Lives in Years         2003           2002
- ---------------------------- ---------------------  ----------    ----------

Leasehold Improvements              15-40          $   953,110   $      -0-

Equipment and Artwork                5-15            1,278,175      723,420
                                                     ---------    ----------

Totals                                               2,231,285      723,420

Less Accumulated Depreciation
 and Amortization                                      306,494      113,061
                                                     ---------    ----------

                                                   $ 1,924,791   $  610,359
                                                     =========    ==========

                                       37



                    INTERNATIONAL THOROUGHBRED BREEDERS, INC.
                                AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(10) NOTES AND MORTGAGES PAYABLE

     Notes and Mortgages Payable are summarized below:


                                                         June 30, 2003         June 30, 2002
                                       Interest %  ------------------------ ---------------------
                                       Per Annum      Current    Long-Term   Current    Long-Term
                                       ----------- ------------ ----------- ----------  --------

                                                                        
International Thoroughbred Breeders,
Inc.:
- ------------------------------------
MCJEM, INC. (A)                           15%      $    132,000 $      -0- $   132,000 $     -0-

Chapter 11 Trustee (the "Trustee") for
the Bankruptcy Estate of Robert E.
Brennan (B)                               11%         1,511,036        -0-         -0-       -0-

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

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

First Insurance Funding Corp.(E)        6.95%            28,117        -0-         -0-       -0-

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

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

Other                                 Various            25,000        -0-      30,280       -0-

ITG Vegas, Inc.:
- ------------------------------------
International Game Technology (G)          8%            16,709        -0-         -0-       -0-

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

Garden State Park:
- ------------------------------------
Service America Corporation (I)            6%           160,000        -0-     160,000       -0-
                                                    ------------ ---------- ----------- ---------

                 Totals                            $  3,277,494 $      -0- $ 1,222,280 $     -0-

 Net Assets of Discontinued
  Operations - Long Term                                    -0-        -0-         -0-       -0-

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

Related Party Notes                                    (183,164)       -0-         -0-       -0-
                                                    ------------ ---------- ----------- ---------
Totals                                             $  2,934,330 $      -0- $ 1,062,280 $     -0-
                                                    ============ ========== =========== =========

The effective Prime Rate at June 30, 2003 was 4%.


     (A) On February  24, 2000,  the Company  sold several  pieces of artwork to
Robert E. Brennan Jr., son of the Company's  former Chairman and Chief Executive
Officer.  The $218,000  sales price of the artwork was in excess of the original
cost of  $186,600.  The  Company  recorded a $31,400  gain on the sale in Fiscal
2000. In addition,  the Company purchased two large bronze sculptures located on
the Garden State Park property that were  previously on loan to the Company from
Mr. Brennan Jr. The purchase price of the sculptures was $700,000. In connection
with the

                                       38



                    INTERNATIONAL THOROUGHBRED BREEDERS, INC.
                                AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

transaction,  the Company signed a $482,000 promissory note with Mr. Brennan Jr.
which  represented  the purchase price of the sculptures less the sales price of
the artwork  sold to Mr.  Brennan  Jr. On July 27,  2000 the Company  received a
notice  from the  Chapter  11  Trustee  for the  bankruptcy  estate of Robert E.
Brennan  (the  "Chapter 11 Trustee")  asserting  certain  ownership  rights in a
number  of items on loan to the  Company,  including  the  sculptures  mentioned
above.  After the Chapter 11 Trustee  claimed  ownership of the  sculptures,  an
arrangement  was  agreed to  between  the  Company  and the  Chapter  11 Trustee
pursuant to which the Company was  permitted to resell the  sculptures to Realen
in May 2001, free and clear of any claim by the Chapter 11 Trustee,  in exchange
for a $700,000  promissory  note of Realen due  November  30, 2002 (the  "Realen
Sculpture Note").  Pursuant to the agreement between the Company and the Chapter
11 Trustee,  payments by Realen under the Realen  Sculpture Note were to be held
in escrow pending  determination of the Chapter 11 Trustee's claims. On December
29, 2000, the Chapter 11 Trustee instituted suit against the Company seeking the
right to all payments and proceeds of the Realen  Sculpture Note.  After the end
of the fiscal year, in September  2001, a settlement  agreement was entered into
among the  Company,  Robert E.  Brennan,  Jr., the Chapter 11 Trustee and others
pursuant to which,  among other things, the litigation by the Chapter 11 Trustee
against the Company  was  dismissed  with  prejudice  and the first  $350,000 of
principal  plus  one-half of the interest  received  under the  $700,000  Realen
Sculpture  Note will be paid to the  Chapter  11  Trustee.  The  balance  (up to
$350,000  in  principal  plus  one-half  of the  interest)  will  be paid to the
Company. As a result of this settlement,  the Company and Mr. Brennan Jr. agreed
that (i) all claims of the Company  against Mr.  Brennan Jr.  arising out of his
sale of the  sculptures to the Company will be released and (ii) the  promissory
note issued by the Company to Mr.  Brennan Jr. will be amended (x) to reduce the
principal  amount  of such  promissory  note from  $482,000  to  $132,000,  with
interest on that sum at the rate of 15% annum to accrue from  November  30, 2001
only if the principal of such note is not paid in full by December 10, 2001, (y)
to make such  promissory  note due and payable on November 30, 2002,  and (z) to
permit the Company to defer payment of the promissory note to such later date as
the Company shall have received  payment in full of the Realen  Sculpture  Note.
The effect of the aforesaid  settlement is therefore  that the Company's loss of
the amount to be paid under the  settlement  agreement to the Chapter 11 Trustee
will be borne by Brennan  Jr. by  reduction  to the  Company's  promissory  note
payable to him.

     (B) On December 13, 2002, we issued a twelve month  promissory  note in the
amount of $1,648,403  including  interest of $34,330 (the "Stock Purchase Note")
bearing interest at 9% (increases to 11% after default) to Donald F. Conway, the
Chapter  11  Trustee  (the  "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. At June 30, 2003, the principal  balance on the note was  $1,511,036.  The
Stock  Purchase Note is secured by a security  interest in proceeds and payments
receivable  under the $10 million  Realen Note. A principal  payment of $137,367
was made in December  2002. We are currently in default on the monthly  payments
of principal and interest from January 13, 2003 through  October 14, 2003.  (See
Note 12)

     (C) On January 26, 2001,  we borrowed  $1,000,000  from Michael J. Quigley,
III at an annual  interest  rate of 10%.  Principal and interest on the note was
due on or about April 25, 2001. On May 14, 2001, the loan was modified to be due
on demand. The loan is secured by a pledge of the $10 million Realen Note, which
is subordinate  to the security  interest of the Trustee which

                                       39



                    INTERNATIONAL THOROUGHBRED BREEDERS, INC.
                                AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

secures the Stock  Purchase  Note and by a pledge of the $23  million  Turnberry
Note. As of October 14, 2003,  the remaining  balance of $900,000 of the loan is
due on demand.

     (D) On March 19, 2003, we issued a two month  promissory note in the amount
of  $200,000  bearing  interest  at prime plus .25% to Florida  Bank,  N.A.  The
proceeds of such note were used to fund a escrow  deposit in  connection  with a
charter/purchase  of an offshore gaming vessel.  The escrow deposit was returned
to us on May 7, 2003 following the expiration of the negotiation  period, and we
have satisfied the note to Florida Bank, N.A. (See Note 20)

     (E) Our  directors  and  officers  liability  policy was  financed by First
Insurance  Funding  Corp.  for a $314,677  one year  promissory  note at a 6.95%
interest rate. At June 30, 2003, the principal balance on the note was $28,117.

     (F) On March 1, 2003,  we issued a promissory  note for a line of credit up
to $225,000 bearing interest at 8% to Francis X. Murray. The outstanding balance
on the line of credit note at June 30, 2003 was  $159,164.  On February 3, 2003,
we issued a promissory  note for $20,000  bearing  interest at 12% to William H.
Warner,  Secretary of the Company.  On June 30, 2003, Mr. Warner advanced to the
Company an additional  $4,000. The proceeds from the all the related party loans
were used as working capital.

     (G) On December 6, 2002,  Palm Beach  Princess,  Inc.  issued a twenty four
month  promissory  note in the  amount  of  $21,000  bearing  interest  at 8% to
International Game Technology for the purchase of gaming equipment. A payment of
$2,100  was  paid  on  delivery  of the  equipment  and 23  consecutive  monthly
installments  of  $854.80  were to be paid on the  balance.  As a result  of the
institution  of  proceedings by our  subsidiary,  ITGV,  under Chapter 11 of the
bankruptcy code, payments have been delayed until the effective date of the Plan
of  Reorganization  (See Note 2). At June 30, 2003, the principal balance on the
note was $16,709.

     (H) On April 30 2003, ITG Vegas,  Inc. issued a one year promissory note in
the amount of $161,958 bearing interest at prime plus 2% to Corporate  Interiors
for the purchase of office  furniture.  Monthly payments of $13,496.46 are being
paid on the  note.  At June 30,  2003,  the  principal  balance  on the note was
$121,468.

     (I) In  connection  with the January 28,  1999 lease  transactions  for the
Garden State Park facility,  the Company  purchased  equipment located at Garden
State Park and a liquor license owned by an  unaffiliated  third party,  Service
America  Corporation  (the "Holder"),  for $500,000  financed by a five (5) year
promissory note at a 6% interest rate. Yearly principal payments of $80,000 plus
interest were due on December 28, 2002 and on December 28, 2003. The payment due
on December 28, 2002 has not been made as of October 14, 2003.

(11) INCOME TAX EXPENSE

     In the event the Company  incurs  income  taxes in the  future,  any future
income tax benefits  resulting from the utilization of net operating  losses and
other  carryforwards  existing at June 30, 1993 to the extent  resulting  from a
quasi-reorganization  of the Company's assets effective June 30,

                                       40



                    INTERNATIONAL THOROUGHBRED BREEDERS, INC.
                                AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1993,  including  those assets  associated  with the possible sale of the Garden
State Property,  will be excluded from the results of operations and credited to
paid in capital.

     The Company's income tax expense for the years ended June 30, 2003 and 2002
relates to state income taxes for its Palm Beach Princess operations.

     The Company has net operating loss carryforwards  aggregating approximately
$147,000,000  at June 30, 2003  expiring in the years June 30, 2004 through June
30, 2021.  SFAS No. 109 requires the  establishment  of a deferred tax asset for
all deductible temporary  differences and operating loss carryforwards.  Because
of the  uncertainty  that  the  Company  will  generate  income  in  the  future
sufficient  to fully or partially  utilize  these  carryforwards,  however,  the
deferred  tax  asset of  approximately  $58,800,000  is  offset  by a  valuation
allowance of the same amount. Accordingly, no deferred tax asset is reflected in
these financial statements.

     Certain amounts of the net operating loss  carryforward  may be limited due
to possible changes in the Company's stock ownership.  In addition,  the sale of
Common Stock by the Company to raise  additional  operating funds, if necessary,
could limit the  utilization  of the  otherwise  available  net  operating  loss
carryforwards.  The grant and/or  exercise of stock options by others would also
impact the number of shares which could be sold by the Company or by significant
stockholders without affecting the net operating loss carryforwards.

The Company has the following  carryforwards  to offset future taxable income at
June 30, 2003:

            Net Operating Loss                   Year End
               Carryforwards                 Expiration Dates
               -------------                 ----------------

               $ 20,000,000                     6/30/2004

                 15,600,000                     6/30/2005

                 11,700,000                     6/30/2006

                  4,300,000                     6/30/2007

                 95,400,000                     6/30/2008
              --------------                through 6/30/2021
               $147,000,000
              =============

(12) COMMITMENTS AND CONTINGENCIES

     See Note 2 for additional commitments and contingencies with respect to the
Chapter 11 Bankruptcy filing.

     See Note 17 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

                                       41



                    INTERNATIONAL THOROUGHBRED BREEDERS, INC.
                                AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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  which as of June 30,  2003 total
$404,204 due to a lack of funds resulting from the institution of proceedings by
our subsidiary, ITGV, under Chapter 11 of the bankruptcy code.

     We are responsible for remediation  costs  associated with an environmental
site on the Freehold Raceway property. We have accrued what we believe to be the
total cost of  remediation.  At June 30,  2003,  the  remaining  balance of such
accrual was  $130,398  for  remediation  costs.  The  remediation  work has been
delayed 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 delays may cause.

     In connection with the January 28, 1999 lease  transactions  for the Garden
State Park  facility,  we purchased a liquor  license  owned by an  unaffiliated
third party,  Service America  Corporation,  for $500,000 financed by a five (5)
year  promissory  note at a 6% interest  rate. At December 31, 2002,  the unpaid
principal  balance was  $160,000.  Yearly  principal  payments  of $80,000  plus
interest are due on December 28, 2002 and December 28, 2003.  The payment due on
December 28, 2002 has not been made as of October 14, 2003.

     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 and a related Stock Purchase  Agreement,  and, through our Palm Beach
Princess, Inc. subsidiary, a Purchase and Sale Agreement, described below. These
agreements  followed many months of negotiation  with the Trustee of the details
of the transactions outlined in the letter of intent that had been signed by the
parties  effective  April 30, 2001. It was on the basis of the letter of intent,
initially,  and then the Master Settlement Agreement that we have been operating
the vessel M/V Palm Beach Princess and conducting a casino cruise business since
April 30, 2001.

     As permitted by the Master Settlement  Agreement with the Trustee,  we have
entered into a bareboat charter with MJQ Corporation,  pursuant to which we have
chartered  the vessel M/V Palm Beach  Princess  for the  purpose of  operating a
casino cruise business from the Port of Palm Beach, Florida.  Under the bareboat
charter  agreement,  we are obligated to pay $50,000 per month as a charter hire
fee  to the  vessel's  owner,  MJQ  Corporation.  Other  parties  to the  Master
Settlement Agreement include MJQ Corporation, Leo Equity Group, Inc. and Francis
W. Murray,  our Chairman,  who is also a director and officer of MJQ Corporation
and a director of Leo Equity Group,  Inc. In October 2002, Mr. Murray  purchased
the stock of MJQ  Corporation  and  effective  October 27, 2002 we purchased the
stock of Leo Equity Group, Inc. (See Note 17 , Related Party Transactions.)

     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 provides for our purchase from the Trustee of
the promissory note of MJQ Corporation,  having an original balance of principal
and  interest of  approximately  $15.7  million  and secured by a ship  mortgage
against  the M/V Palm Beach  Princess  (the  "Ship  Mortgage  Obligation").  The
purchase price payable by us for the Ship Mortgage Obligation is $13.75 million.
We began

                                       42



                    INTERNATIONAL THOROUGHBRED BREEDERS, INC.
                                AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

making  payments on account of such purchase price  effective April 30, 2001, in
monthly installments of $250,000.  Such monthly installments continued under the
terms of the Purchase and Sale Agreement  through July 31, 2002, at which time a
$9.75 million balloon payment was to be due.  However,  before July 31, 2002, we
exercised  our  right to  extend  the time for  payment  of the  balance  of the
purchase price for up to three (3) additional  months,  to October  31,2002,  by
paying fees of $70,000 for the first one month extension,  an additional $80,000
for the second month  extension and an  additional  $100,000 for the third month
extension.  On October 30, 2002, the Master Settlement  Agreement was amended to
provide for a further extension of the due date for payment of the $9.75 million
balance  under the  Purchase  and Sale  Agreement  until  January  6,  2003,  in
consideration  of our  payment of $220,000  as an  extension  fee. On January 3,
2003,  we did not have the funds to complete the purchase by January 6, 2003 and
the Trustee  denied our request for a further  extension  of the January 6, 2003
due date.  Therefore,  on  January 3, 2003,  in order to  protect  our  invested
deposits  and  operation  of  the  vessel,  ITGV,  successor  by  merger  to our
subsidiary the Palm Beach Princess,  Inc., filed a voluntary petition for relief
under Chapter 11 of the Bankruptcy Code. MJQ Corporation,  the entity which owns
the vessel,  also filed for relief under Chapter 11 of the Bankruptcy  Code. The
Trustee is the  largest  creditor in the  MJQ/ITGV  cases,  and his  position is
secured  by a mortgage  against  the  vessel.  In order to  re-organize  under a
Chapter 11 plan on a basis under which we would  continue to operate the vessel,
we will need to pay or provide for payment of a minimum of $9.75 million payable
to the Trustee plus approximately $1.3 million of debt to unsecured creditors of
ITGV (excluding debt to related parties).  Through October 14, 2003,  $1,286,051
has been  placed  in escrow  towards  payments  required  to be  distributed  to
creditors.  The Bankruptcy  Court has required and approved ITGV to pay interest
on said $9.75  million  monthly to the  Trustee at an  interest  rate of 12% per
year. Interest of $384,658 has been paid through June 30, 2003.

     The second agreement which we entered into with the Trustee pursuant to the
Master Settlement Agreement is a Stock Purchase Agreement. Under this Agreement,
which  superseded  all prior  agreements and  understandings  between us and the
Trustee for the purchase of our common stock held or claimed by the Trustee,  we
agreed to purchase up to approximately 2,235,000 shares of our common stock at a
purchase price of $0.50 per share on July 11, 2002. We desired to purchase these
shares in order to preserve our net operating loss carryforwards which otherwise
may be lost if the  shares  are  transferred.  As  collateral  security  for our
payment of the  purchase  price for these  shares,  we granted to the  Trustee a
security  interest in all proceeds of (including all payments that might be made
in the future under) the $10 million Realen Note,  described in Note 2 above. We
were unable to pay the purchase price under the Stock Purchase Agreement on July
11, 2002 (which  price,  at that date,  was $892,500 for 1,785,000  shares).  On
October 30, 2002,  the Stock  Purchase  Agreement  was amended to provide for an
extension of the due date on the purchase of the shares until  December 13, 2002
at which time the Trustee  agreed to accept  payment of the  purchase  price for
3,228,145 shares  (including  additional  shares over which the Trustee obtained
control)  in the form of a twelve  month  promissory  note  bearing  interest at
9%(increasing  to 11%  after  default)  in the  amount of  $1,648,402  including
interest of $34,330. (See Note 10(B).) Should the Trustee obtain control over an
additional  450,000 shares, we are further obligated to purchase those shares at
$0.50 per share.  A principal  payment of $137,367 was made in December 2002. We
are currently in default on all monthly  payments of principal and interest that
were due to the Trustee from January 13, 2003 through May 13, 2003.

                                       43



                    INTERNATIONAL THOROUGHBRED BREEDERS, INC.
                                AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

     In February 2003, an unrelated party deposited $200,000 to our escrow agent
on behalf of the Company for an option to charter a second  gaming  vessel which
would operate out of the Port of Palm Beach.  These funds were replaced on March
19,  2003 by a loan  obtained  from the  Florida  Bank,  N.A.  in the  amount of
$200,000.  The Company assumed a Promissory Note negotiated by Francis W. Murray
in the amount of $25,000 due on May 24, 2003.  This note was negotiated to cover
legal and transactions fees for the $200,000 escrow advance on the gaming vessel
and the stock option agreement.

The following summarizes  commitments on non-cancelable  contracts and leases as
of June 30, 2003:


                                         Year Ended June 30,
                      -----------------------------------------------------
                                                                               There-
                          2004        2005      2006       2007       2008     after      Total
                      -----------  --------- ----------  --------- ---------   ------  -----------

                                                                 
Employee Contracts
(excluding severance
agreements)           $ 1,190,500 $ 722,884  $  155,000  $     -0- $     -0-  $  -0-  $  2,068,383

Operating Leases          331,119   209,891     197,941    116,603    97,169     -0-       889,550

Casino Contracts          142,137       -0-         -0-        -0-       -0-     -0-       142,137
                      -----------  --------- ----------  --------- ---------  ------  --------------
               Total  $ 1,663,756 $ 932,775  $  352,941  $ 116,603 $  97,169  $  -0-  $  3,100,071
                      ===========  ========= ==========  ========= =========  ======  ==============

     The above chart does not include  payments to the Brennan Trustee which are
     still being negotiated.

LEGAL PROCEEDINGS

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

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

(13) FAIR VALUE OF FINANCIAL INSTRUMENTS

     As of June 30, 2003, 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

                                       44



                    INTERNATIONAL THOROUGHBRED BREEDERS, INC.
                                AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

approximated fair value for the majority of these  instruments  because of their
short-term  maturity.  The carrying  amounts of long term debt  approximate fair
value since the Company's interest rates approximate  current interest rates. On
our $33 million notes receivable,  we have elected to defer the gain on the sale
and the  interest  to be  accrued  until  such time that  collectability  can be
determined (See Note 3).

(14) RETIREMENT PLANS

     The Company  maintains a Retirement  Plan under the  provisions  of section
401(k) of the Internal  Revenue Code of 1986,  as amended (the "Code")  covering
all its non-union  full time  employees who have  completed one year of service.
The Company's basic contribution under the plan is 4% of each covered employee's
compensation for such calendar year. In addition,  the Company contributes up to
an additional  50% of the first 4% of  compensation  contributed  by any covered
employee to the plan (an employee's maximum contribution is $12,000 factored for
inflation annually).  The Company's expense totaled $34,021, $40,901 and $36,863
for the fiscal years ended June 30, 2003, 2002 and 2001, respectively.

(15) STOCK OPTIONS AND WARRANTS

     (A) EMPLOYEE AND NON-EMPLOYEE OPTIONS

     On October 16, 2000, the Company  awarded  options to purchase 6,500 shares
of  the  Company's  Common  Stock  to  various   employees  as  part  of  annual
compensation.  On January  7, 2002,  Mr.  Francis W.  Murray and Mr.  William H.
Warner  were  awarded   options  to  purchase   2,000,000  and  75,000   shares,
respectively, of the Company's Common Stock, expiring December 31, 2010, with an
exercise  price of $0.26875 per share.  These options  replaced  options for the
same number of shares which had been granted to them in December,  2000 under an
Incentive  Stock Option Plan.  Such Incentive  Stock Option Plan and the options
granted under it  terminated  under the Plan's  requirement  that if approval of
Plan by the Company's  common  stockholders  shall not be obtained within twelve
months from the date the Incentive Plan was adopted by the Board,  the Incentive
Plan and all options then outstanding under it automatically  will terminate and
be of no force or effect.

     The Company's 1994 Employees' Stock Option Plan ("Option Plan"), remains in
effect.  The Option Plan was approved by the Company's Board and stockholders in
December 1994, and permits the grant of options to purchase up to 475,000 shares
of Common Stock, at a price per share no less than 100% of the fair market value
of the Common  Stock on the date the option is  granted.  The price  would be no
less than 110% of fair market  value in the case of an  incentive  stock  option
granted to any  individual  who owns more than 10% of the Company's  outstanding
Common Stock.  The Option Plan provides for the granting of both incentive stock
options  intended to qualify  under section 422 of the Code,  and  non-qualified
stock  options  which do not  qualify.  No option may have a term longer than 10
years  (limited  to five  years in the  case of an  option  granted  to a 10% or
greater  stockholder  of  the  Company).  Options  under  the  Option  Plan  are
non-transferable  except in the event of death and are only  exercisable  by the
holder  while  employed by the  Company.  Unless the Option  Plan is  terminated
earlier by the Board,  the Option Plan will  terminate in June 2004.  As of June
30, 2003, no options were outstanding under this Option Plan.

                                       45



                    INTERNATIONAL THOROUGHBRED BREEDERS, INC.
                                AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

     In  addition to the  non-qualified  options  granted to Messrs.  Murray and
Warner described above, the Company has granted  non-qualified stock options for
the purchase of Common Stock to employees  and directors of the Company that are
not part of the above  mentioned  Option Plan.  These  options have been granted
with terms of five and ten years.  These options have been granted at prices per
share that have been below, equal to or above the fair market value on the grant
date. At June 30, 2003,  total employee  options  outstanding were 3,111,500 and
total non-employee options outstanding were 225,000.

     The  following  table  contains  information  on stock  options for options
granted  from the Plan and options  granted  outside the Plan for the three year
period ended June 30, 2003:

                                                   Stock Options
                                                   -------------

                                                      Exercise          Weighted
                                      Number        Price Range         Average
                                    of Shares        Per Share          Price
                                 ---------------  ---------------      ---------

  Outstanding at June 30, 2000        1,355,000     $1.00 - $5.00      $ 4.37

  Granted during FYE 6/01             2,081,500    $0.269 - $1.00      $ 0.283
                                 ---------------
  Outstanding at June 30, 2001        3,436,500    $0.269 - $5.00      $ 1.89

  Canceled during FYE 6/02           (2,175,000)   $0.269 - $5.00      $ 0.489

  Granted during FYE 6/02             2,075,000    $0.269              $ 0.269
                                 ---------------
  Outstanding at June 30, 2002
   and 2003                           3,336,500    $0.269 - $5.00      $ 1.59
                                 ===============


                                                       Exercise        Weighted
                                                      Price Range      Average
                                   Option shares      Per Share         Price
                                  ---------------  -----------------  ---------

 Exercisable at June 30:

 2001                                3,436,500      $ 0.269 - $5.00     $1.89
                                  ---------------  -----------------  ---------

 2002                                3,336,500      $ 0.269 - $5.00     $1.59
                                  ---------------  -----------------  ---------

 2003                                3,336,500      $ 0.269 - $5.00     $1.59
                                  ---------------  -----------------  ---------

                                                   -----------------
 Options available for future
 grant under the Plan at June 30:                       1994 Plan
                                                   -----------------

 2001                                                   475,000

 2002                                                   475,000

 2003                                                   475,000

                                       46



                    INTERNATIONAL THOROUGHBRED BREEDERS, INC.
                                AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following table summarizes information about stock options outstanding at
June 30, 2003:


                                                                          Ranges                      Total
                                                         -------------------------------------    -------------

                                                                                       
Range of exercise prices                                 $0.20 - 0.50  $1.00 - 4.625     $5.00     $0.20 - 5.00
                                                         ------------  -------------     -----     ------------

Outstanding options:

   Number outstanding at June 30, 2003                      2,281,500        755,000   300,000        3,336,500
                                                        ---------------------------------------   --------------
   Weighted average remaining contractual life (years)           7.14           2.82      3.50             5.48
                                                        ---------------------------------------   --------------
   Weighted average exercise price                               0.29           4.17      5.00             1.59
                                                        ---------------------------------------   --------------

Exercisable options:

   Number outstanding at June 30, 2003                      2,281,500        755,000   300,000        3,336,500
                                                        ---------------------------------------   --------------
   Weighted average exercise price                               0.29           4.17      5.00             1.59
                                                        ---------------------------------------   --------------


     Prior to July 1, 2002 we accounted  for all stock  option  grants under the
recognition  and measurement  provisions of APB Opinion No. 25,  "Accounting for
Stock Issued to Employees", and related Interpretations. No stock-based employee
compensation  cost is reflected in net income  before  fiscal 2003, as all stock
option  grants had an exercise  price equal or greater  than the market value of
the  underlying  common stock on the date of grant.  Effective  July 1, 2002, we
adopted  within  our  financial  statements  the  provisions  of SFAS  No.  123,
"Accounting  for  Stock-Based  Compensation"  by applying  the fair value method
prospectively  for stock options grants made on or after that date. Stock option
grants  under the 1995 Plan vest over  periods  ranging from six months to three
years. Therefore, the cost related to stock-based employee compensation included
in the determination of net income for fiscal 2003 is less than that which would
have been  recognized  if the fair value  based  method had been  applied to all
stock option  grants since the  original  effective  date of SFAS No. 123. As of
January 1, 2003,  we adopted the  provisions  of SFAS No. 148,  "Accounting  for
Stock-Based  Compensation  -  Transition  and  Disclosure".   Accordingly,   the
following table illustrates the effect on net income and net income per share if
the fair value method had been applied to all outstanding stock option grants in
each period.


                                                Years Ended June 30,
                                                --------------------
                                         2003          2002          2001
                                         ----          ----          ----
Net Income (Loss): As Reported

Income (Loss)                     $   5,233,827 $  1,982,603 $  (2,402,142)
                                    ------------  -----------   ------------
Net Income (Loss)                 $   5,233,827 $  1,982,603 $  (2,402,142)
                                    ------------  -----------   ------------


Pro Forma Net Income (Loss)

Income (Loss)                     $   5,233,827 $  1,671,353  $ (2,498,508)
                                    ------------  -----------   ------------
Net Income (Loss)                 $   5,233,827 $  1,671,353  $ (2,498,508)
                                    ------------  -----------   ------------

Net Income (Loss) Per Share -
Basic and Diluted: As Reported

Income (Loss)                     $        0.54 $       0.17  $      (0.24)
                                    ------------ -----------   ------------
Net Income (Loss)                 $        0.54 $       0.17  $      (0.24)
                                    ------------ -----------   ------------

                                       47



                    INTERNATIONAL THOROUGHBRED BREEDERS, INC.
                                AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Pro Forma Net Income (Loss) Per Share

Income (Loss)                     $        0.54 $       0.15  $      (0.25)
                                    ------------  -----------   ------------

Net Income (Loss)                 $        0.54 $       0.15  $      (0.25)
                                    ------------  -----------   ------------

(B) WARRANTS

     During the fiscal  years ended June 30,  1996,  1997 and 1999,  the Company
issued 925,000, 746,847 and 932,153, respectively of warrants to purchase Common
Stock in connection with financing activities.  During Fiscal 2002, 1,894,000 of
those warrants  expired.  All  outstanding  warrants are exercisable at June 30,
2003. The fair value of warrants issued during the year ended June 30, 1999 were
accounted for as financing expense.

     Warrants have been granted to acquire Common Stock at various prices above,
below  and at fair  market  value  at the date of  grant.  The  following  table
contains information on warrants for the three-year period ended June 30, 2003:

                                                            Warrants
                                                            --------

                                                            Exercise    Weighted
                                              Number      Price Range   Average
                                            Of Shares      Per Share     Price
                                            ---------      ---------     -----

Outstanding at June 30, 1999, 2000 and 2001  2,604,000   $2.50  - $5.25  $4.25

Expired During Fiscal 2002                  (1,894,000)  $4.375 - $5.25  $4.68
                                           ------------
Outstanding at  June 30, 2002 and 2003         710,000   $2.50  - $4.00  $3.08
                                           ============

(16) DIVIDENDS

     The Company is required  to pay to the  holders of the  Company's  Series A
Convertible  Preferred  Stock  ("Preferred  Stock") a cash dividend from any net
racetrack earnings, as defined, of Garden State Park. No dividends were required
for fiscals 2003,  2002 and 2001.  Since the Company has sold Garden State Park,
no dividends  will ever be paid on the Preferred  Stock except on liquidation of
the Company. The Preferred Stock has liquidation rights of $100 per share.

(17) 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,

                                       48



                    INTERNATIONAL THOROUGHBRED BREEDERS, INC.
                                AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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 June 30,
2003,  we had lent  $2,034,405 in total to MJQ  Development  and we have accrued
interest  in the amount of  $606,553 on the loan.  Upon the  acquisition  of the
property,  OC Realty assumed MJQ  Development's  indebtedness to us. These loans
bear  interest at 12% and will be  repayable  out of the first  proceeds,  after
payment of bank debts,  generated by the sale of the condominiums.  We will also
have the right to receive, as participation  interest,  from available cash flow
of OC Realty if the project is successful,  a priority  return of our investment
and a priority profits interest for up to three times our investment.  Repayment
of these loans and our  participation  interest will be subject to repayment of,
first,  bank debt of  approximately  $5.5 million (at  present)  incurred in the
purchase of the real property and, second,  construction  financing  expected to
amount to $25 to $30 million and third, capital invested in OC Realty by a joint
venture  partner 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.

     In order to raise the capital which with to proceed in the  development  of
the Ft. Lauderdale property, OC Realty has placed the Ft. Lauderdale property in
a joint  venture in connection  with which the other joint venture  partner will
fund up to $6.5 million for development and receive a 50% equity  interest.  Our
loan will be payable out of 100% of the cash flows after  repayment  of debt and
the new investor's  capital  investment and the  participation  interest will be
payable out of OC Realty's 50% interest.

     On January 26, 2001, we borrowed $1,000,000 from Michael J. Quigley, III at
an annual interest rate of 10%. Principal and interest on the note was due on or
about  April 25,  2001.  On May 14,  2001,  the loan was  modified  to be due on
demand.  The  principal  balance on the note at June 30, 2003 is $900,000 and we
have accrued interest through that date in the amount of $231,014. As collateral
for the  loan,  we  pledged  the $10  million  Realen  Note and the $23  million
Turnberry Note. On February 20, 2002 Mr. Quigley released his security  interest
in the Realen Note in connection  with the Master  Settlement  Agreement.  As of
October 14, 2003, the loan is due on demand. (See Note 10.)

     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

                                       49




                    INTERNATIONAL THOROUGHBRED BREEDERS, INC.
                                AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

has been an officer and director of MJQ Corporation.  Francis X. Murray, the son
of  Francis W.  Murray,  is  President  and a director  of MJQ  Corporation  and
President of our subsidiary,  ITG Vegas, Inc., which operates the vessel.  Under
the bareboat charter agreement, we are obligated to pay $50,000 per month as the
charter hire fee to MJQ Corporation.  All costs of operating the vessel incurred
by MJQ Corporation on our behalf are to be reimbursed by us to MJQ  Corporation.
In  addition,  as  described  in Note 6 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.

     Also  we  entered  into an  agreement  to  purchase  all of the  shares  of
outstanding  stock of Leo Equity  Group,  Inc. Mr.  Francis W. Murray has been a
director of Leo Equity Group,  Inc. Closing on the Leo Equity Group,  Inc. stock
purchase  occurred  effective October 27, 2002. The purchase price payable by us
for the stock in Leo Equity Group,  Inc. was $250,000,  payable without interest
in 10 monthly  installments of $25,000 each. As of March 31, 2003, this note was
paid in full. We also agreed to reduce the exercise price of previously  granted
options held by the seller, Frank A. Leo (our former director and chairman),  to
purchase  200,000 shares of our common stock,  from $4.00 per share to $0.50 per
share,  while  conditioning  exercise  of such  options  upon our  first  having
consummated  the purchase of the shares  required to be purchased by us from the
Trustee under the Stock Purchase Agreement.  The purpose of such acquisition was
to enable us to obtain the lease and operating  agreement  with the Port of Palm
Beach District which had been owned by Leo Equity Group,  Inc. During the period
we made the $25,000 monthly installments to Mr. Leo and before the note was paid
in full, we made advances on Mr. Leo's behalf. These advances totaled $23,439 as
of June 30, 2003.

     The  Master  Settlement  Agreement  with the  Chapter  11  Trustee  for the
Bankruptcy  Estate of Robert  E.  Brennan  included  a final  settlement  by the
Trustee with numerous parties. Among those parties were Frank A. Leo, Leo Equity
Group,  Inc.,  Michael J.  Quigley III and MJQ  Corporation.  During the quarter
ended March 31, 2002 we charged Leo Equity Group  $3,000,000 and MJQ Corporation
$1,000,000  for their  portion of expenses  incurred by us and a success fee for
the efforts of International  Thoroughbred Breeders, Inc. in 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.
That $2.6 million debt from Mr. Quigley was assumed by Francis W. Murray when he
purchased the MJQ Corporation  shares and is a non-recourse  obligation which is
payable solely from pledged shares of his stock in MJQ  Corporation.  Mr. Murray
purchased the MJQ Corporation stock subject to our lien securing payment of that
debt.  We have  deferred all income from these  transactions  until such time as
payment is received.

     On July 12, 2002, we borrowed  $300,000 from Francis W. Murray at an annual
interest rate of 6%. The note is due on demand and interest is payable  monthly.
As of June 30, 2003,

                                       50



                    INTERNATIONAL THOROUGHBRED BREEDERS, INC.
                                AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

the balance of the note was  $250,000  and is  classified  as Deposits and Other
Assets - Related Parties on the balance sheet as an offset to previous  advances
to Mr. Murray.

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

     Francis X. Murray,  President of our ITG Vegas, Inc.  subsidiary and son of
Francis W. Murray, our President,  CFO and CEO has agreed to loan the company up
to $225,000 in the form of a line of credit. As of June 30, 2003 and October 14,
2003 these loans totaled $159,164. (See Note 10)

     Mr.  Francis X. Murray  guaranteed  on the  Company's  behalf,  a loan from
Florida Bank, N.A. in the amount of $200,000 which was also used as a deposit on
the second  gaming  vessel  (which  deposit was  returned to the bank on July 7,
2003). The Company agreed to indemnify Mr. Murray for the guaranteed  obligation
with respect to this loan.

(18) 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.

(19) QUARTERLY FINANCIAL DATA (UNAUDITED)

     The following  quarterly  financial  data is unaudited,  but in our opinion
includes  all  necessary  adjustments  for a fair  presentation  of the  interim
results:

                                                 Fiscal 2003
                               -------------------------------------------------

                              4th Quarter   3rd Quarter  2nd Quarter 1st Quarter

Revenues                     $  9,347,965  $ 8,890,400  $ 6,907,111  $ 6,419,175

Net Income                   $  2,347,241  $ 1,878,471  $   595,001  $   413,114

Net Income Per Share         $       0.21  $      0.23  $      0.06  $      0.04

                                                 Fiscal 2002
                               -------------------------------------------------

                              4th Quarter   3rd Quarter  2nd Quarter 1st Quarter

Revenues                     $  6,783,534  $ 8,050,016  $ 5,060,359  $ 6,161,682

Net Income                   $    501,828  $ 1,852,916  $  (827,269) $   455,128

Net Income (Loss) Per Share  $       0.04  $      0.16  $     (0.07) $      0.04


                                       51



                    INTERNATIONAL THOROUGHBRED BREEDERS, INC.
                                AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(20) SUBSEQUENT EVENTS

     (A) On  July 7,  2003,  the  $200,000  note to the  Florida  Bank,  N.A was
satisfied (See Note 10-D).

     (B) On  September  12, 2003,  the United  States  Bankruptcy  Court for the
Southern  District  of Florida  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 an affiliated  entity,
MJQ  Corporation  (the sole  stockholder  of which is  Francis  W.  Murray,  the
Registrant's  Chairman and Chief  Executive  Officer)  (ITG Vegas,  Inc. and MJQ
Corporation  being  hereinafter  called the "Debtors").  ITG Vegas,  Inc. is the
Registrant's  principal operating subsidiary.  It operates the vessel Palm Beach
Princess (the  "Vessel"),  a casino and  entertainment  cruise ship based at the
Port of Palm  Beach,  Florida.  The  Vessel  is  owned  by MJQ  Corporation  and
chartered,  under a bareboat  charter,  to ITG Vegas, Inc. The Plan is a plan of
reorganization  under  Chapter  11 of the  Bankruptcy  Code  which  was  jointly
proposed by the Debtors. (See Note 2)


Item  9.  Changes  in and  Disagreements  with  Accountants  on  Accounting  and
          Financial Disclosure

     None

Item 9A. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

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

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

CHANGES IN INTERNAL CONTROLS

     There  have not been any  significant  changes  in the  Company's  internal
controls or in other  factors that could  significantly  affect  these  controls
subsequent to the date of their evaluation.

                                       52


                                    PART III

Item 10. Directors and Executive Officers of the Registrant.

     Set  forth  below  is  certain  information  regarding  our  directors  and
executive officers:


Name                            Age      Position
- ----                            ---      --------
Francis W. Murray                 62     Chairman of the Board, President and
                                         Chief Executive Officer
James J. Murray                   64     Director
Walter ReDavid                    77     Director
Robert J. Quigley                 74     Director

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

     Set forth below is certain  biographical  information  with respect to each
director, including his principal occupation and employment during the past five
years.  The Company  does not stand  committees  such as audit or  compensation,
instead, the full board performs such roles.

     Francis  W.  Murray.  Mr.  Murray  has been a  director  since 1996 and our
President,  Chief Executive  Officer and Chairman of the Board since October 10,
2000. On October 15, 2002,  Mr. Murray  assumed the position of Chief  Financial
Officer. From time to time from November 1995 until June 1999, Mr. Murray served
as President of the Company's  subsidiaries  International  Thoroughbred  Gaming
Development Corporation ("ITG") and Orion Casino Corporation. From November 1993
through June 1995,  Mr. Murray served as a consultant to ITG. From December 1988
through  November  1993,  Mr.  Murray was the co-owner and  President of the New
England  Patriots  and  co-founder  of the  St.  Louis  NFL  Partnership,  which
attempted to obtain an expansion NFL franchise for the city of St. Louis.

     James J.  Murray.  Mr.  Murray  was  elected by the Board of  Directors  on
February 22, 1999.  Mr.  Murray  previously  served as a director of the Company
from November 6, 1996 to January 15, 1997.  Mr. Murray is a member of the Ronald
McDonald House of Charities Local Operations Advisory Council and past President
of Jim Murray,  Ltd., a sports promotion and marketing firm. In 1969, Mr. Murray
joined the  Philadelphia  Eagles'  public  relations  staff and two years  later
became the NFL team's administrative  assistant.  In 1974, just five years after
joining the  organization,  he was named the Eagles'  General  Manager and spent
more than nine years in that post,  during  which the Eagles'  appeared in Super
Bowl XV. He also  served as  Director  of  Marketing  for our Garden  State Park
subsidiary from 1985-1987.  Mr. Murray is the brother of Francis W. Murray,  who
is a director and our  President,  Chief  Executive  Officer and Chairman of the
Board.

     Walter  ReDavid.  Mr. ReDavid was elected to the board on July 3, 2001. Mr.
ReDavid is a past Registrar of Wills and has served on various  Delaware County,
Pennsylvania  township boards.  Mr. ReDavid has been practicing general law as a
sole practitioner for over 50 years.

                                       53




     Robert J. Quigley.  Mr. Quigley has been a director since 1980. Since 2002,
Mr. Quigley has served as an officer of one of our subsidiaries which was formed
to develop  foreign gaming  opportunities.  From February 1996 until October 15,
1997,  and again from 1999 until  October 10, 2000,  Mr.  Quigley  served as our
President.  Mr.  Quigley  also  served as  President  from 1988 until July 1992.
Between  November 1995 and May 1996,  Mr.  Quigley served as our Chairman of the
Board and acting Chief  Executive  Officer.  From July 1992 until November 1995,
Mr.  Quigley  was  President  and  Chief   Operating   Officer  of  Retama  Park
Association, Inc., a racetrack facility in San Antonio, Texas.

Executive and Other Key Officers

              Our executive and other key officers, in addition to
                         Mr. Francis W. Murray, include:
- --------------------------------------------------------------------------------
Name                       Age   Position
- ----                       ---   --------

William H. Warner          58    Secretary

Christine E. Rice Newell   58    Assistant Treasurer and Controller

Francis X. Murray          37    Vice President and CEO of ITG Vegas, Inc.
                                 (ITGV) (surviving company of merger of Palm
                                 Beach Princess, Inc. And ITGV)

Jerry Winters              43    Treasurer and CFO of ITG Vegas, Inc.

Stephen Flood              43    Vice President of Casino Operations, ITG Vegas,
                                 Inc.
- --------------------------------------------------------------------------------

     William H. Warner.  Mr. Warner was appointed our Secretary in October 2000.
Mr.  Warner  served as  Treasurer  and Chief  Financial  Officer from 1983 until
October 15, 2002. Mr. Warner  resigned from his Treasurer and CFO positions over
his  concerns  that the Company may not  maintain  its  Director  and  Officer's
insurance  policy in the  future.  The  limits of the policy  have been  reduced
significantly from Fiscal 2001 levels due to cash flow shortages.  Mr. Warner is
a certified public  accountant,  and prior to joining us, was employed in public
accounting for 11 years.

     Christine E. Rice Newell. Ms. Rice Newell has been our Assistant  Treasurer
and  Controller  since  1990.  From 1986 until  1990,  Ms.  Rice  Newell was our
Corporate Accounting Manager. Ms. Rice Newell is a certified public accountant.

     Francis X. Murray.  Mr.  Murray,  son of our Chairman and CEO,  has,  since
April 2001, been Vice President of our ITGV subsidiary,(surviving company of the
merger of Palm Beach Princess, Inc. and ITGV) which operates the cruise ship M/V
Palm Beach Princess and related

                                       54




offshore gaming  business.  He has also been President of MJQ Corporation  since
May of 1999, which corporation owns the M/V Palm Beach Princess and operated the
cruise and offshore gaming business from May 1999 until chartering the vessel to
Palm  Beach  Princess,  Inc.  in April,  2001.  Prior  thereto,  Mr.  Murray was
President  (January 1999 to May 1999),  and Vice  President and General  Manager
(February  1998 to January  1999) of Palm Beach  Casino  Line, a division of Leo
Equity Group,  Inc.  which operated the vessel M/V Palm Beach  Princess;  and in
1997-98 was a consultant for Leo Equity Group, Inc.

     Jerry Winters.  Mr. Winters has been Treasurer and Chief Financial  Officer
of our ITG Vegas, Inc. subsidiary since its inception in April 2001. He has also
been Treasurer and CFO of MJQ Corporation  since March 1999. Prior thereto,  Mr.
Winters  was CFO for Home Care  America,  Inc.  (March  1998 to March  1999) and
regional CFO for Vencor,  Inc.,  (March 1996 to March,  1998).  Mr. Winters is a
certified public accountant.

     Stephan  Flood.  Mr.  Flood  joined the  previous  owners of the Palm Beach
Princess in May 1994. From 1997 he served as a casino manager until January 2000
when he assumed his current position of Vice President,  Casino  Operations.  In
that  position,  Mr. Flood is  responsible  for  management and direction of all
aspects of the company's casino operations, including casino marketing, tracking
and customer  service.  Prior to joining the company Mr. Flood was employed in a
range of casino  positions by Norwegian Cruise Line,  Premier  Cruises,  Lucayan
Beach Casino and Charlie  Chester's  London Casino.  He holds licenses issued by
British casino regulatory authorities.

Section 16(a) Beneficial Ownership Reporting Compliance

     Pursuant  to Section  16(a) of the  Securities  Exchange  Act of 1934,  our
executive  officers  and  directors  are  required to file  reports with the SEC
relating to their ownership of and transactions in our equity securities.  Based
on our records and other  information,  we believe that all Section 16(a) filing
requirements  were met for  fiscal  year  2003.

Involvement in Certain Legal Proceedings

     In  February,  2002,  Robert J.  Quigley  and  William H.  Warner,  without
admitting  or  denying  the  allegations,  settled  a  cease  and  desist  order
instituted by the Securities and Exchange Commission relating to filings made in
Fiscal 1997, which included findings by the Commission that Messrs.  Quigley and
Warner  committed and caused  violations of the  reporting,  record  keeping and
internal  control  provisions  of  the  Securities  Exchange  Act of  1934  (the
"Exchange  Act") by causing the Company to  improperly  disclose and account for
certain  related  party  transactions   involving  the  Company's  former  chief
executive officer.  Without admitting or denying the Commission's  findings, Mr.
Quigley  consented  to the  issuance  of an order that he cease and desist  from
causing any  violation or future  violation of Section 13(a) of the Exchange Act
and Rules 12b- 20 and 13a-13  thereunder  and from  committing any violation and
any future violation of Rule

                                       55




13b2-2. Also without admitting or denying the Commission's  findings, Mr. Warner
consented  to the issuance of an order that he cease and desist from causing any
violation or future violation of Sections 13(a),  13(b)(2)(A) and 13(b)(2)(B) of
the Exchange Act and Rules 12b-20 and 13a-13  thereunder and from committing any
violations and any future violations of Rules 13b2-1 and 13b2-2.

Item 11. Executive Compensation

     The  following  table sets forth the cash  compensation  as well as certain
other  compensation  paid or accrued during fiscal years 2003,  2002 and 2001 to
the  individuals  who served as our chief  executive  officer during fiscal year
2003 and other  executive  officers of the Company who earned more than $100,000
during fiscal year 2003 (collectively, the "Named Executives"):


                                                                         Long-Term
                                                                        Compensation
                                         Annual Compensation               Awards
                                         -------------------               ------
                                                                         Securities         All
Name and                                                   Other Annual  Underlying        Other
Principal Position       Year    Salary         Bonus      Compensation    Options     Compensation
                                   ($)           ($)           ($)           (#)            ($)
- ------------------       ----    ----------      ---         ---------       ---           ---------

                                                                         
Francis W. Murray,       2003    402,596(1)      -0-         11,503(3)       -0-           14,733(5)
President, Chief         2002    387,404         -0-         17,049      2,000,000(4)      18,658
Executive Officer and    2001    278,654       500,000(2)    17,011          -0-           18,537
Chief Financial
Officer

Francis X. Murray,       2003    301,154        88,628(7)    11,647(8)       -0-          21,137(9)
Vice President of ITG    2002    277,885       135,320       11,423          -0-          21,930
Vegas, Inc.              2001     63,462(6)     12,000        1,904          -0-           1,074

William H. Warner,       2003    171,635         -0-          9,780(10)      -0-          10,717(12)
Secretary                2002    176,346         -0-          3,244         75,000(11)    18,650
                         2001    123,693         -0-           -0-           -0-          15,430

(1)  Consists of $212,692.48 in salary paid to Mr. Murray and $189,904 of salary
     earned through June 30, 2003 but deferred.

(2)  In recognition of Mr. F. W. Murray's  efforts in successfully  settling the
     significant  litigation in Delaware  involving Mr.  DeSantis,  successfully
     closing the transactions  involving the sale of our real properties located
     in Las Vegas,  Nevada and Cherry  Hill,  New Jersey,  paying off all of our
     bank debt and acquiring  valuable interests in the profits from development
     of the  properties  sold,  we  awarded a bonus to Mr.  Murray of  $500,000,
     payable  solely in shares of our  common  stock  valued at $0.20 per share,
     which was  determined by the Board of Directors to equal or exceed the fair
     market value per share of our common stock. Accordingly,  such compensation
     was paid in the form of 2,500,000 shares of our common stock.

(3)  Consists of monthly automobile lease payments.

(4)  Represents the number of shares under options  granted in fiscal 2002. Such
     options  replaced  options  for the same  number of  shares  which had been
     granted in fiscal 2001 and terminated in fiscal 2002.

                                       56




(5)  Fiscal  2003  amounts  consist of $2,733 of life and  long-term  disability
     insurance  premiums paid by the Company with respect to term life insurance
     payable  to  beneficiaries  designated  by Mr.  F. W.  Murray  and  $12,000
     contributed by the Company under the Company's 401(k) plan.

(6)  Includes compensation in Fiscal 2001 from April 30, 2001 to June 30, 2001.

(7)  Bonus earned through June 30, 2003 but deferred.

(8)  Consists of monthly automobile lease payments.

(9)  Fiscal 2003 amounts consist of $877 of life insurance  premiums paid by the
     Company  with  respect  to term life  insurance  payable  to  beneficiaries
     designated by Mr. F. X. Murray,  $1,315.39 contributed by the Company under
     MJQ's 401(k) plan and $19,822 of golf  membership  dues as provided with an
     MJQ employment contract.

(10) Consists of monthly automobile allowance which was deferred by Mr. Warner.

(11) Represents the number of shares under options  granted in fiscal 2002. Such
     options  replaced  options  for the same  number of  shares  which had been
     granted in fiscal 2001 and terminated in fiscal 2002.

(12) Fiscal  2003  amounts  include  $1,967  of life  and  long-term  disability
     insurance  premiums paid by the Company with respect to term life insurance
     payable to beneficiaries designated by Mr. Warner and $8,750 contributed by
     the Company under the Company's 401(k) plan.


Stock Options Grants

     There were no stock options granted to the Named  Executives  during Fiscal
Year 2003.

Stock Option Exercises and Holdings

     The  following  table sets  forth the value of options  held by each of the
Named  Executives at June 30, 2003. None of the Named  Executives  exercised any
options during fiscal year 2003.


     Aggregated Option Exercises in 2003 and Option Values at June 30, 2003
- --------------------------------------------------------------------------------------------------------

                                             Number of Securities Underlying   Value of Unexercised
                                             Unexercised Options               In-the-Money Options
                                             at June 30, 2003 (#)              at June 30, 2003 ($)(1)

                   Shares        Value
                   Acquired on   Realized
Name               Exercise (#)  ($)         Exercisable       Unexercisable   Exercisable  Unexercisable

                                                                                      
Francis W. Murray        --       --           2,300,000                   0             0              0
William H. Warner        --       --              75,000                   0             0              0
- ---------------------------------------------------------------------------------------------------------

(1) The value of  unexercised  in-the-money  options is based on the  difference
between the last  reported  sale price of a share of common stock as reported on
the Pink Sheets on June 27, 2003 ($0.28) and the exercise  price of the options,
multiplied by the number of options.

                                       57




Compensation of Directors

     Outside  directors are provided  compensation of $1,000 for each regular or
special meeting of the Board in which each outside director  participates either
in person or by telephone.

Employment Contracts

     Effective December 1, 2000, we entered into a five-year employment contract
with Mr. Francis W. Murray as 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 contract,  on December 28, 2000, Mr. Murray was awarded  options to purchase
2,000,0000  shares of our common stock under an stock  incentive  plan which was
subject to stockholder  approval.  Such options  terminated in fiscal 2002 since
the Plan was not submitted for shareholder  approval,  and  replacement  options
were  granted  in fiscal  2002 with an  exercise  price of  $0.26875  per share,
expiring December 31, 2010.

     In  connection  with  the  bareboat  charter  with MJQ  Corporation  we are
obligated to honor several  employment  contracts between key executives and MJQ
Corporation.  Should  we be  successful  in  purchasing  from  the  Trustee  the
promissory  note  of  MJQ  Corporation,  it is  our  intention  to  honor  these
employment  contracts.  A  contract  for Named  Executive,  Francis  X.  Murray,
provides  for a base salary of  $275,000,  $290,000  and  $310,000  respectively
during calendar years 2001, 2002 and 2003.  Additionally  the contract  provides
for an annual  bonus of up to 30% of the  executive's  base  salary  if  certain
EBITDA  performance  goals are met,  membership to a golf club and other expense
allowances.

Compensation Committee Interlocks and Insider Participation

     Mr. Francis W. Murray, a member of the Compensation  Committee of the Board
of Directors, currently serves as our President and Chief Executive Officer. See
also "Item 13. Certain  Relationships  and Related  Transactions" for additional
information with respect to Mr. Murray.


                                       58





Item 12. Security Ownership of Certain Beneficial Owners and Management.

Security Ownership of Certain Beneficial Owners

     The  following  table sets forth  certain  information  with respect to the
beneficial  ownership,  as of October 10, 2003, of each person who we knew to be
the  beneficial  owner  of  more  than  5% of  our  common  stock.  Each  of the
stockholders  named below has sole voting and  investment  power with respect to
such shares, unless otherwise indicated.

- --------------------------------------------------------------------------------
                                               Common Stock
                                     ---------------------------------
Name and Address of
Beneficial Owner                Number of Shares               Percent
- ----------------                ----------------               -------
The Family Investment Trust         1,090,731          (1)     16.2%
Henry Brennan, Trustee
340 North Avenue
Cranford, NJ 07016

Francis W. Murray                   4,800,000          (2)     43.5%
211 Benigno Boulevard
Suite 210
Bellmawr, NJ 08031

Frank A. Leo                          736,201          (3)      6.7%
44 Minebrook Rd
Colts Neck, NJ 07722
- --------------------------------------------------------------------------------
(1)  Henry  Brennan is the brother of Robert E. Brennan,  our former  president,
     whose adult sons are the beneficiaries of the trust.
(2)  Includes  2,300,000  shares of common stock  issuable  upon the exercise of
     warrants.
(3)  Includes 200,000 shares purchasable under stock options.

Security Ownership of Management

     The  following  table sets forth  certain  information  with respect to the
beneficial  ownership,  as of October 10, 2003, of (i) each  director,  (ii) the
Named  Executives  and (iii) all of our directors  and  executive  officers as a
group. Each of the stockholders named below has sole voting and investment power
with respect to such shares, unless otherwise indicated.

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

Name of Beneficial Owner         Number of Shares(1)      Percent of Class
- ------------------------         -------------------      ----------------
Francis W. Murray                     4,800,000     (2)   43.5%
James J. Murray                          25,000     (3)   *
Walter ReDavid                             0              *
Robert J. Quigley                       105,830     (4)   *
William H. Warner                        75,124     (5)   *
All executive officers and
directors as a group (6 persons)      5,010,954           46.6%
- --------------------------------------------------------------------------------
*Less than 1 percent.

                                       59




(1)  With  respect  to each  stockholder,  includes  any  shares  issuable  upon
     exercise of any options or warrants  held by such  stockholder  that are or
     will become exercisable within sixty days of October 14, 2003.
(2)  Includes 2,300,000 shares issuable upon the exercise of stock options.
(3)  Consists of shares of common stock issuable upo the exercise of options.
(4)  Includes  100,000  shares of common  stock  issuabl  upon the  exercise  of
     options.
(5)  Includes 75,000 shares issuable upon the exercise of stock options.


     Equity Compensation Plan Information

     The following table contains  information on Equity Compensation Plans that
have been and have not been approved by security holders at June 30, 2003:


                                                                   Number of securities
                                                                   remaining available for
                      Number of                                    future issuance under
                      Securities to be        Weighted average     equity compensation
                      issued upon exercise    exercise price of    plans (excluding
                      of outstanding options, outstanding options, securities reflected in
                      warrants and rights     warrants and rights  column (a)
Plan Category                 (a)                     (b)                    (c)
- --------------------- ----------------------- -------------------- -----------------------

                                                                  
Equity compensation
plans approved by             -0-                    N/A                   N/A
security holders

Equity compensation
plans not approved by      4,046,500                                       -0-
security holders
Total                      4,046,500                                       -0-


     Set forth below is a summary of the material terms of stock options granted
by the Company which were not approved by the Company's securityholders.

     Pursuant to a  Non-qualified  Stock Option  Agreement dated January 7, 2002
between the Company  and each of Francis W.  Murray and William H.  Warner,  the
Company  granted an option to purchase  2,000,000  shares of Common Stock to Mr.
Murray and to purchase 75,000 shares of Common Stock to Mr. Warner, in each case
for a purchase price of $0.26875 per share.  The options vested  immediately and
expire December 31, 2010. The options are not transferable other than by will or
the laws of descent and distribution,  and, during the lifetime of the optionee,
are exercisable only by the optionee.  The options remain exercisable  following
termination of employment, until their scheduled expiration date.

     In Fiscal 1997, the Company granted a  non-qualified  stock option to Frank
A. Leo, its then chairman,  to purchase  200,000 shares of Common Stock at $4.00
per share.  In fiscal 2002,  in  connection  with the  agreement to purchase Mr.
Leo's stock in Leo Equity Group, Inc., the Company agreed to reduce the purchase
price for shares under Mr. Leo's stock option to $0.50

                                       60




per  share  and  imposed,  as a  condition  of  exercise  of  such  option,  the
requirement  that the  Company  first  shall have  consummated  its  purchase of
Company  Common Stock from the Chapter 11 Trustee for the  Bankruptcy  Estate of
Robert E. Brennan pursuant to the Stock Purchase  Agreement dated as of February
22,  2002,  between the Company and such  Trustee.  Mr.  Leo's  option  survived
termination of his employment and expires December 20,2006.

     In connection with prior agreements with former officers and directors, the
Company  granted  options to purchase  925,000  shares of Common Stock at prices
ranging from $4.00 to $5.00 per share.  These  options  expire at various  times
from January 2006 to January 2007.

     In Fiscal 1999, the Company granted  warrants to purchase 435,000 shares of
Common Stock at $2.50 per share in connection  with obtaining  financing.  These
warrants  expire in May 2004.  In Fiscal  1996 the Company  granted  warrants to
purchase  275,000 shares of Common Stock at $4.00 per share as a finder's fee in
connection with the purchase of its El Rancho property. These warrants expire in
April 2006.

Item 13. Certain Relationships and Related 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 June 30,
2003,  we had lent  $2,034,405 in total to MJQ  Development  and we have accrued
interest  in the amount of  $606,553 on the loan.  Upon the  acquisition  of the
property, OC Realty assumed MJQ Development's indebtedness to us. These

                                       61




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  Reality  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
in OC Reality by a joint venture partner 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.

     On January  26,  2001,  the Company  borrowed  $1,000,000  from  Michael J.
Quigley,  III at an annual  interest rate of 10%.  Principal and interest on the
loan was due on or about April 25, 2001. On May 14, 2001,  the loan was modified
to be due on demand.  As collateral  for the loan,  the Company  pledged the $33
million in notes receivable from the sale of the El Rancho and Garden State Park
properties.  On February 22, 2002, Mr. Quigley released his security interest in
the Garden State Park Note in connection with the Master  Settlement  Agreement.
(See Note 10.)

     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 a casino cruise  business from the Port of
Palm Beach,  Florida.  Francis W.  Murray,  our  Chairman,  President  and Chief
Executive Officer,  is an officer and director of MJQ Corporation,  and his son,
Francis X. Murray,  is President  and a director of MJQ  Corporation.  Under the
charter agreement, we are obligated to pay $50,000 per month as the charter hire
fee to MJQ  Corporation.  All costs of  operating  the  vessel  incurred  by MJQ
Corporation  on our behalf are to be  reimbursed  by us to MJQ  Corporation.  In
addition,  in order to maintain  the  bareboat  charter,  we have entered into a
Master Settlement Agreement with the Chapter 11 Trustee of the Bankruptcy Estate
of Robert E. Brennan,  MJQ  Corporation and others,  and a related  Purchase and
Sale  Agreement,  providing for our purchase from the Trustee of the  promissory
note of MJQ Corporation,  having a balance of principal and interest outstanding
of  approximately  $15.7  million  as of June  30,  2002 and  secured  by a ship
mortgage against the Palm Beach Princess vessel,  for a purchase price of $13.75
million.  See Notes 10 and 17. Pursuant to the Master Settlement Agreement , MJQ
Corporation and its officers and directors  (including Francis W. Murray and his
son) exchanged  mutual  releases with the Trustee and others having claim to the
Ship Mortgage Obligation.

     On July 12, 2002, we borrowed  $300,000 from Francis W. Murray at an annual
interest rate of 6%. The note is due on demand and interest is payable monthly.


                                       62




                                     PART IV

Item 14. Exhibits, Financial Statement Schedules, and Reports On Form 8-K.

(a)  The following documents are filed as part of this report

     1.   Financial Statements.

          See index to Financial Statements at Item 8 on page 18 of this report.

     2.   Financial Statement Schedules.

          See index to Financial Statements at Item 8 on page 18 of this report.

     3.   Exhibits.

         The following exhibits are filed as part of, or incorporated by
     reference into, this report:


  Exhibit
  Number  Description
  ------  -----------

     3.1  Certificate of Incorporation, as amended (incorporated by reference to
          Exhibit 3(a) to the Registrant's  Registration  Statement on Form S-1,
          File No. 2-70153, filed December 5, 1980).


     3.2  Amendment  to  the  Certificate  of  Incorporation   (incorporated  by
          reference to Exhibit  3(a)(11) to Amendment No. 3 to the  Registrant's
          Registration Statement on Form S-1, File No. 2-70153).

     3.3  Amended  and  Restated  By-Laws  of the  Registrant  (incorporated  by
          reference  to Exhibit 3.3 to the  Registrant's  Annual  Report on Form
          10-K for the fiscal year ended June 30, 1997).

     10.1 Registration  Rights  Agreement  dated as of May 23, 1997  between the
          Registrant and CSFB  (incorporated by reference to Exhibit 10.4 to the
          Registrant's Current Report on Form 8-K dated May 23, 1997).

     10.2 * Employment  Agreement by and between the  Registrant  and Francis W.
          Murray dated as of December 1, 2000

     10.3 Note  Purchase   Agreement  Between  Orion  Casino   Corporation,   as
          Purchaser, and Turnberry/Las Vegas Boulevard, LLC, as Issuer, Dated as
          of March 1, 2000  (incorporated  by  reference  to Exhibit 10.2 to the
          Registrant's Current Report on Form 8-K dated May 22, 2000).


                                       63



  Exhibit
  Number  Description
  ------  -----------

     10.4 $23,000,000.00  Promissory Note dated May 18, 2000, from Turnberry/Las
          Vegas  Boulevard,  LLC (the "Maker") to Orion Casino  Corporation (the
          "Payee")   (incorporated   by   reference   to  Exhibit  10.3  to  the
          Registrant's Current Report on Form 8-K dated May 22, 2000).

     10.5 Security   Agreement,   dated  as  of  May  18,  2000,  by  and  among
          Turnberry/Las Vegas Boulevard,  LLC (the "Joint Venture"), the members
          of the Joint  Venture  parties to this  Agreement  (said members being
          collectively called the "Pledgers"),  and Orion Casino Corporation,  a
          Nevada  corporation  (the  "Purchaser")  (incorporated by reference to
          Exhibit 10.4 to the Registrant's  Current Report on Form 8-K dated May
          22, 2000).

     10.6 Note Agreement  between GSRT, LLC, and  Realen-Turnberry/Cherry  Hill,
          LLC,  as Issuer,  dated as of  November  29,  2000.  (incorporated  by
          reference to Exhibit 10.1 to the  Registrant's  Current Report on Form
          8-K dated November 30, 2000)

     10.7 $10,000,000.00  Promissory  Note dated November 29, 2000, from Realen-
          Turnberry/Cherry Hill, LLC to GSRT, LLC. (incorporated by reference to
          Exhibit  10.2 to the  Registrant's  Current  Report  on Form 8-K dated
          November 30, 2000)

     10.8 Security  Agreement,  dated as of  November  29,  2000,  by and  among
          Realen-     Turnberry/Cherry    Hill,    LLC,    its    sole    member
          Realen-Turnberry/Cherry  Hill Associates and GSRT, LLC.  (incorporated
          by  reference to Exhibit 10.3 to the  Registrant's  Current  Report on
          Form 8-K dated November 30, 2000)

     10.9 Amended and Restated  Bareboat  Charter  between Palm Beach  Princess.
          Inc. and MJQ Corporation

     10.10Master  Settlement  Agreement  dated  February  22,  2002,  among  the
          Chapter 11 Trustee for the Bankruptcy Estate of Robert E. Brennan, the
          Company,  and, among others, MJQ Corporation,  Leo Equity Group, Inc.,
          Francis W. Murray, Frank A. Leo and Michael J. Quigley, III

     10.11Purchase and Sale  Agreement  dated  February  22, 2002,  between Palm
          Beach  Princess,  Inc.  and the Chapter 11 Trustee for the  Bankruptcy
          Estate of Robert E. Brennan

     10.12Stock Purchase  Agreement dated February 22, 2002, between the Company
          and the  Chapter 11  Trustee  for the  Bankruptcy  Estate of Robert E.
          Brennan

     10.13* Non-Qualified  Stock Option Agreement dated January 7, 2002, between
          the Company and Francis W. Murray

     10.14* Non-Qualified  Stock Option Agreement dated January 7, 2002, between
          the Company and William H. Warner

                                       64



  Exhibit
  Number  Description
  ------  -----------

     10.15 * Stock Option granted to Francis W. Murray on January 15, 1997

     10.16 * Stock Option granted to Frank A. Leo on December 20, 1996

     10.17Joint  Amended  Plan of  Reorganization  of ITG  Vegas,  Inc.  and MJQ
          Corporation  (incorporated  by  reference  to Exhibit  2.1 on Form 8-K
          dated September 9, 2003)

     21   Subsidiaries.

     31.1 Certification  pursuant to 18 U.S.C. Section 1350, as adopted pursuant
          to Section 302 of the Sarbanes-Oxley Act of 2002.

     31.2 Certification  pursuant to 18 U.S.C. Section 1350, as adopted pursuant
          to Section 302 of the Sarbanes-Oxley Act of 2002.

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

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

- ---------------------------------------------------------
* Constitutes a management contract or compensation plan.

(b)  Reports on Form 8-K.

     No reports on Form 8-K were filed by the Registrant during the last quarter
of fiscal year 2003.


                                       65




                                   SIGNATURES


     Pursuant  to the  requirements  of  Section  13 or 15(d) 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,  in Bellmawr,  New
Jersey, this 14th day of October, 2003.

              INTERNATIONAL THOROUGHBRED BREEDERS, INC.


              By:/s/ Francis W. Murray
                 ------------------------------------------------------------
                 Francis W. Murray
                 Chairman of the Board, President and Chief Executive Officer

     Pursuant  to the  requirements  of  Section  13 or 15(d) of the  Securities
Exchange Act of 1934,  this report has been signed by the  following  persons on
behalf of the Registrant and in the capacities and on the dates indicated.

     Signature                    Title                            Date
     ---------                    -----                            ----

/s/ Francis W. Murray         Chairman of the Board, President October 14, 2003
- ----------------------------  and Chief Executive Officer
Francis W. Murray             (Principal Executive Officer)


/s/ Francis W. Murray         Chief Financial Officer          October 14, 2003
- ----------------------------  (Principal Financial and
Francis W. Murray             Accounting Officer)


/s/ James J. Murray           Director                         October 14, 2003
- ----------------------------
James J. Murray

/s/ Robert J. Quigley         Director                         October 14, 2003
- ----------------------------
Robert J. Quigley

/s/ Walter ReDavid            Director                         October 14, 2003
- ----------------------------
Walter ReDavid

                                       66




                                                                    Exhibit 31.1


                      CERTIFICATION PURSUANT TO RULE 13a-14
               OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED,
                             AS ADOPTED PURSUANT TO
                  SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Francis W. Murray, the President and Chief Executive Officer of International
Thoroughbred Breeders, Inc., certify that:

1.   I  have  reviewed  this  annual  report  on  Form  10-K  of   International
     Thoroughbred Breeders, Inc.;

2.   Based on my  knowledge,  this  annual  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 annual report;

3.   Based on my  knowledge,  the  financial  statements,  and  other  financial
     information included in this annual 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 annual report.


Date:  October 14 , 2003               /s/Francis W. Murray
                                       -------------------------------------
                                       Francis W. Murray
                                       President and Chief Executive Officer


                                                                    Exhibit 31.2


                      CERTIFICATION PURSUANT TO RULE 13a-14
               OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED,
                             AS ADOPTED PURSUANT TO
                  SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Francis W. Murray, the Chief Financial Officer and Treasurer of International
Thoroughbred Breeders, Inc., certify that:

1.   I  have  reviewed  this  annual  report  on  Form  10-K  of   International
     Thoroughbred Breeders, Inc.;

2.   Based on my  knowledge,  this  annual  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 annual report;

3.   Based on my  knowledge,  the  financial  statements,  and  other  financial
     information included in this annual 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 annual report.


Date:  October 14 , 2003               /s/ Francis W. Murray
                                       -------------------------------------
                                       Francis W. Murray
                                       Chief Financial Officer and Treasurer





                                  EXHIBIT INDEX


    Exhibit
    Number            Description
    ------            -----------

     3.1  Certificate of Incorporation, as amended (incorporated by reference to
          Exhibit 3(a) to the Registrant's  Registration  Statement on Form S-1,
          File No. 2-70153, filed December 5, 1980).


     3.2  Amendment  to  the  Certificate  of  Incorporation   (incorporated  by
          reference to Exhibit  3(a)(11) to Amendment No. 3 to the  Registrant's
          Registration Statement on Form S-1, File No. 2-70153).

     3.3  Amended  and  Restated  By-Laws  of the  Registrant  (incorporated  by
          reference  to Exhibit 3.3 to the  Registrant's  Annual  Report on Form
          10-K for the fiscal year ended June 30, 1997).

     10.1 Registration  Rights  Agreement  dated as of May 23, 1997  between the
          Registrant and CSFB  (incorporated by reference to Exhibit 10.4 to the
          Registrant's Current Report on Form 8-K dated May 23, 1997).

     10.2 * Employment  Agreement by and between the  Registrant  and Francis W.
          Murray dated as of December 1, 2000

     10.3 Note  Purchase   Agreement  Between  Orion  Casino   Corporation,   as
          Purchaser, and Turnberry/Las Vegas Boulevard, LLC, as Issuer, Dated as
          of March 1, 2000  (incorporated  by  reference  to Exhibit 10.2 to the
          Registrant's Current Report on Form 8-K dated May 22, 2000).


     10.4 $23,000,000.00  Promissory Note dated May 18, 2000, from Turnberry/Las
          Vegas  Boulevard,  LLC (the "Maker") to Orion Casino  Corporation (the
          "Payee")   (incorporated   by   reference   to  Exhibit  10.3  to  the
          Registrant's Current Report on Form 8-K dated May 22, 2000).

     10.5 Security   Agreement,   dated  as  of  May  18,  2000,  by  and  among
          Turnberry/Las Vegas Boulevard,  LLC (the "Joint Venture"), the members
          of the Joint  Venture  parties to this  Agreement  (said members being
          collectively called the "Pledgers"),  and Orion Casino Corporation,  a
          Nevada  corporation  (the  "Purchaser")  (incorporated by reference to
          Exhibit 10.4 to the Registrant's  Current Report on Form 8-K dated May
          22, 2000).

     10.6 Note Agreement  between GSRT, LLC, and  Realen-Turnberry/Cherry  Hill,
          LLC,  as Issuer,  dated as of  November  29,  2000.  (incorporated  by
          reference to Exhibit 10.1 to the  Registrant's  Current Report on Form
          8-K dated November 30, 2000)

     10.7 $10,000,000.00  Promissory  Note dated November 29, 2000, from Realen-
          Turnberry/Cherry Hill, LLC to GSRT, LLC. (incorporated by reference to
          Exhibit  10.2 to the  Registrant's  Current  Report  on Form 8-K dated
          November 30, 2000)

                                       68




    Exhibit
    Number            Description
    ------            -----------

     10.8 Security  Agreement,  dated as of  November  29,  2000,  by and  among
          Realen-     Turnberry/Cherry    Hill,    LLC,    its    sole    member
          Realen-Turnberry/Cherry  Hill Associates and GSRT, LLC.  (incorporated
          by  reference to Exhibit 10.3 to the  Registrant's  Current  Report on
          Form 8-K dated November 30, 2000)

     10.9 Amended and Restated  Bareboat  Charter  between Palm Beach  Princess.
          Inc. and MJQ Corporation

     10.10Master  Settlement  Agreement  dated  February  22,  2002,  among  the
          Chapter 11 Trustee for the Bankruptcy Estate of Robert E. Brennan, the
          Company,  and, among others, MJQ Corporation,  Leo Equity Group, Inc.,
          Francis W. Murray, Frank A. Leo and Michael J. Quigley, III

     10.11Purchase and Sale  Agreement  dated  February  22, 2002,  between Palm
          Beach  Princess,  Inc.  and the Chapter 11 Trustee for the  Bankruptcy
          Estate of Robert E. Brennan

     10.12Stock Purchase  Agreement dated February 22, 2002, between the Company
          and the  Chapter 11  Trustee  for the  Bankruptcy  Estate of Robert E.
          Brennan

     10.13* Non-Qualified  Stock Option Agreement dated January 7, 2002, between
          the Company and Francis W. Murray

     10.14* Non-Qualified  Stock Option Agreement dated January 7, 2002, between
          the Company and William H. Warner

     10.15 * Stock Option granted to Francis W. Murray on January 15, 1997

     10.16 * Stock Option granted to Frank A. Leo on December 20, 1996

               10.17Joint Amended Plan of  Reorganization of ITG Vegas, Inc. and
                    MJQ Corporation (incorporated by reference to Exhibit 2.1 on
                    Form 8-K dated September 9, 2003)

     21   Subsidiaries.

     31.1 Certification  pursuant to 18 U.S.C. Section 1350, as adopted pursuant
          to Section 302 of the Sarbanes-Oxley Act of 2002.

     31.2 Certification  pursuant to 18 U.S.C. Section 1350, as adopted pursuant
          to Section 302 of the Sarbanes-Oxley Act of 2002.

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

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

- ---------------------------------------------------------
* Constitutes a management contract or compensation plan.

                                       70




                    INTERNATIONAL THOROUGHBRED BREEDERS, INC.
                                AND SUBSIDIARIES

                                   EXHIBIT 21


     The  following   table   indicates  the   subsidiaries   of   International
Thoroughbred  Breeders,  Inc.  and their  states of  incorporation.  All of such
subsidiaries are wholly owned.

Name                                                      State of Incorporation
- ----                                                      ----------------------

Atlantic City Harness, Inc.                                      New Jersey

Circa 1850, Inc.                                                 New Jersey

Garden State Race Track, Inc.                                    New Jersey

GSRT, LLC                                                        Delaware

Holdfree Racing Association                                      New Jersey

International Thoroughbred Breeders Management, Inc.             New Jersey

International Thoroughbred Gaming Development Corporation        New Jersey

ITG - Brazil, Inc.                                               Delaware

ITG - Venezuela, Inc.                                            Delaware

Olde English Management Co., Inc.                                New Jersey

Orion Casino Corporation                                         Nevada

Palm Beach Princess, Inc.                                        Delaware

ITG Vegas, Inc                                                   Nevada

South America Thoroughbred Company, LLC                          Delaware

ITG Peru, LLC                                                    Delaware

Premier Lottery Co., LLC                                         Delaware

Palm Beach Entertainment, Inc.                                   Delaware

                                       70





                                                                    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  Annual  Report  on Form  10-K of
International  Thoroughbred  Breeders,  Inc. (the  "Company") for the year ended
June 30, 2003 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
 October 14, 2003

                                       71




                                                                    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  Annual  Report  on Form  10-K of
International  Thoroughbred  Breeders,  Inc. (the  "Company") for the year ended
June 30, 2003 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
  October 14, 2003

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