SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------------------
FORM 10-K/A
(Amendment No. 1)
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, 2005
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)
Suite 1300, 1105 N. Market Street, Wilmington, Delaware 19899-8985
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(Address of principal executive offices) (Zip Code)
(302) 427-7599
--------------------------------------------------
(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/A or any
amendment to this Form 10-K/A. X
Indicate by check as to whether the registrant is an accelerated filer (as
defined in Exchange Act Rule 12b-2). Yes ___ No X
The aggregate market value of the registrant's common stock held by
non-affiliates of the registrant as of December 31, 2005 was approximately
$6,435,000. 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 13, 2005, there were 10,567,487 outstanding shares of the
registrant's common stock.
EXPLANATORY NOTE
This Amendment No. 1 on Form 10-K/A amends the Registrant's Annual Report on
Form 10-K for the year ended June 30, 2005 as filed by the Registrant on October
13, 2005 and is being filed to amend and/or restate Items 6, 7, 8 and Item 15,
Selected Financial Data, Managements's Discussion and Analysis, Financial
Statements and Supplemental Data, and Exhibits and Financial Statement
Schedules. The Company is filing this Amended Annual Report in response to
comments received from the SEC.
No attempt has been made on this Form 10-K/A to modify or update other
disclosures presented in the original report on Form 10-K, except as required to
reflect the effects of the restatement and reclassification of the Loss on
Impairment. The Form 10-K/A does not reflect events occurring after the filing
of the Form 10-K or modify or update those disclosures, including the exhibits
to the Form 10-K affected by subsequent events. Information not affected by the
restatement is unchanged and reflects the disclosures made at the time of the
original filing of the Form 10-K on October 13, 2005. Accordingly, this Form
10-K/A should be read in conjunction with our filings made with the Securities
and Exchange Commission subsequent to the filing of the original Form 10-K,
including any amendment to those filings.
The following represents the sections amended and the pages where the originally
filed information can be found in the Registrant's Annual Report on Form 10-K
for the year ended June 30, 2005.
PART II
Item 6. Selected Financial Data - Revised Schedule 14
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations - Revised Results of Operations
for the Years Ended June 30, 2005 and 2004, Consolidated, to
reflect changes made to the Consolidated Statement of
Operations for the years ended June 30, 2005 and 2004 19
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations - Added Critical Accounting
Policies and Estimates 27
Item 8. Financial Statements and Supplementary Data - Revised
Consolidated Statements of Operations For the Years Ended
June 30, 2005 and 2004 37
Item 8. Financial Statements and Supplementary Data - Revised Note
5-A - Notes Receivable, Second Cherry Hill Note 48
Item 8. Financial Statements and Supplementary Data - Revised Note 8
- Discontinued Operations 51
Item 8. Financial Statements and Supplementary Data - Revised Note
15 - Income Tax Expense 55
Item 8. Financial Statements and Supplementary Data - Revised Note
24 - Related Party Transactions 63
PART IV
Item 15. Exhibits and Financial Statement Schedules - Added Schedule
I, Condensed Financial Information of Registrant (Parent
Company Only) 82
FORM 10-K/A
AMENDMENT NO. 1
ANNUAL REPORT ON FORM 10-K
FOR FISCAL YEAR ENDED JUNE 30, 2005
Part II
Item 6. Financial Data Schedule
Item 6 - SELECTED FINANCIAL DATA
INTERNATIONAL THOROUGHBRED BREEDERS, INC.
AND SUBSIDIARIES
Years Ended June 30,
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2005 2004 2003 2002 2001
-------------- --------------- -------------- ------------- --------------
Revenue From Operations (1) $ 32,773,247 $ 32,962,239 $ 31,290,599 $ 25,473,777 $ 4,921,091
Net Income (Loss) $ (1,900,035) $ (6,800,030) $ 5,233,826 $ 1,982,603 $ (2,402,142)
Income (Loss) Per Common Share
Basic & Diluted $ (0.18) $ (0.86) $ 0.54 $ 0.17 $ (0.24)
Weighted Average Number of Shares 10,303,942 7,933,691 9,720,275 11,480,272 9,987,114
June 30,
---------------------------------------------------------------------------------
2005 2004 2003 2002 2001
-------------- --------------- -------------- ------------- --------------
Total Assets $ 83,363,665 $ 50,813,716 $ 54,822,023 $ 45,928,295 $ 41,391,208
Long-Term Debt $ 33,813,301 $ 6,339,396 $ 985,017 $ - $ 482,000
Stockholders' Equity $ 29,550,451 $ 30,566,037 $ 37,586,067 $ 33,961,313 $ 31,973,710
(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 Company recognized an impairment loss in Fiscal 2004 in the amount of
$10 million which materially affects the comparability of a portion of the
information reflected in the above data.
(3) The Company did not pay cash dividends during any of the fiscal years shown
above.
(4) 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, 2005.
1
FORM 10-K/A
AMENDMENT NO. 1
ANNUAL REPORT ON FORM 10-K
FOR FISCAL YEAR ENDED JUNE 30, 2005
Item 7. Management's Discussion And Analysis of Financial Conditions And Results
of Operations
Critical Accounting Policies and Estimates
Financial Reporting Release No. 60 requires all companies to include a
discussion of critical accounting policies or methods and estimates used in the
preparation of financial statements. We prepare our Consolidated Financial
Statements in conformity with accounting principles generally accepted in the
United States. Certain of our accounting policies, including the estimated lives
assigned to our assets, asset impairment, and the calculation of our income tax
liabilities, require that we apply significant judgment in defining the
appropriate assumptions for calculating financial estimates. By their nature,
these judgments are subject to an inherent degree of uncertainty. Our judgments
are based on our historical experience, terms of existing contracts, our
observance of trends in the industry and information available from other
outside sources, as appropriate. There can be no assurance that actual results
will not differ from our estimates. Note 1 to the Consolidated Financial
Statements describes the significant accounting policies we have selected for
use in the preparation of our financial statements and related disclosures. We
believe the following to be the most critical accounting estimates and
assumptions affecting our reported amounts and related disclosures.
Notes Receivable
Statement of Financial Accounting Standards No. 114, "Accounting by
Creditors for Impairment of a Loan" as amended, requires management judgments
regarding the future collectability of notes receivable and the underlying fair
market value of collateral. As a result of the sale of the Garden State Park
Racetrack property in Cherry Hill, NJ, and the sale of the non-operating former
El Rancho Hotel and Casino in Las Vegas, NV, portions of the proceeds from each
sale were paid in the form of promissory notes. During the fiscal year ended
June 30, 2004 we sold the note receivable we held on the Las Vegas, NV property
for cash and other future benefits and transferred the balance of the note to,
and it is now secured by, the Cherry Hill, NJ property (Second Cherry Hill
Note). We had previously received a note receivable from the sale of the Garden
State Park property in the amount of $10 million and together, these notes are
classified on the Balance Sheet as Long Term Notes Receivables in the amount of
$14,278,651 as of June 30, 2005. Estimates are required to be used by management
to assess the recoverability of our notes receivable. We regularly review our
receivables to determine if there has been any decline in value. These reviews
require management judgments that often include estimating the outcome of future
events and determining whether factors exist that indicate impairment has
occurred. We evaluate real estate appraisals, financial balance sheets for the
Cherry Hill development, earnings and cash forecasts of the Cherry Hill
investors. Our returns on the Cherry Hill Notes are subject to debt incurred by
the property and the developers capital contributions that precede the debt owed
to us. Our returns are also subject to factors affecting the profitability and
saleability of the project. Our assumptions, estimates and evaluations are
subject to the availability of reliable data and the uncertainty of predictions
concerning future events. Accordingly, estimates of recoverable amounts and
future cash flows are subjective and may not ultimately be achieved. Should the
underlying circumstances change, the estimated recoverable amounts and future
cash flows could change by a material amount.
When making our impairment review for the year ended June 30, 2004 for the
Note Receivable on the Las Vegas property we determined that a portion of the
Second Cherry Hill Note should be impaired by $12,786,589 (or a net of
$10,000,000 when offset by $2,786,589 of deferred gain on the sale of the Las
Vegas property) based on the collectability of the note when assigned from the
Las Vegas property to the Cherry Hill property since we already held a note in
the amount of $10,000,000 on that same property. Additionally during the year
ended June 30, 2005 an additional impairment charge of $500,000 was recorded on
the Second Cherry Hill Note because projected future events did not materialize.
2
FORM 10-K/A
AMENDMENT NO. 1
ANNUAL REPORT ON FORM 10-K
FOR FISCAL YEAR ENDED JUNE 30, 2005
Valuation of Vessels and Vessel Deposits - Related Parties
In July, 2004 we entered into Sub-Bareboat Charters of the vessels, Palm
Beach Princess and Big Easy and pursuant to a restructuring of the PDS Gaming
transaction in June, 2005, we now charter the vessels directly from our Chairman
and CEO. The charter and PDS Gaming loan agreement for the Palm Beach Princess
has been accounted for as a capital lease. In according with our lease and
purchase agreement for the Palm Beach Princess we have the right to purchase the
vessel for $17,500,000 at the end of the lease term. Payments made by us against
the PDS Gaming debt in the amount of $14,000,000 will be credited toward the
purchase price. The carrying value of the Palm Beach Princess of $17,500,000 is
less than the fair value appraisal on the vessel. The charter and PDS Gaming
loan agreement for the Big Easy has also been accounted for as a capital lease.
In accordance with our lease and purchase agreement for the Big Easy we have the
right to purchase the Big Easy for the appraised value of the vessel which would
be determined upon the refitting and refurbishing of the vessel. The Company had
an appraisal completed as of June 23, 2005 and it indicated an estimated fair
market value of approximately $40 million. Based on a July 2002 fair market
appraisal of the Palm Beach Princess of $20.5 million, management believed the
appraisal of the Big Easy could be overstated and looked for alternatives to
determine the capitalized fair value for the vessel. The Company determined that
it would capitalize 1) costs it had incurred for improvements it had made to the
Big Easy; 2) all payments required under the PDS Gaming loans for the Big Easy
of $12.6 million; and 3) all payments required under the charter hire fees, for
a total capitalized amount as of June 30, 2005 of $24,318,989. The Company has
Vessel Deposit credits in the amount of $10,228,758 which are available to use
against the purchase costs for the vessels. Should the Company elect not to
purchase one or either vessel at the end of the lease, the Company could lose
some or all of the value of the Vessel Deposit credits unless other terms are
negotiated with the owner of the vessels."
Results of Operations for the Years Ended June 30, 2005 and 2004
Consolidated
Revenue for the year ended June 30, 2005 decreased slightly by $188,992
from $32,962,239 in Fiscal 2004 to $32,773,247 in Fiscal 2005 primarily as a
result of a slight decrease in revenues generated by the Palm Beach Princess
operations during the comparable periods. Operating expenses decreased
$2,582,669 from $37,632,595 in Fiscal 2004 to $35,049,926 in Fiscal 2005
primarily as the result of: 1) the Company recording an impairment loss during
Fiscal 2005 of $500,000 on the Second Cherry Hill Note Receivable, whereas
during Fiscal 2004 the Company recorded an impairment loss of $10,000,000 on the
same note; 2) a decrease in the Palm Beach Princess operating expenses, before
depreciation, of $255,238 due to salary and benefit costs of approximately $1.3
million incurred on the Palm Beach Princess' payroll which were allocated to the
Big Easy during the period we were preparing the Big Easy for use as a casino
gaming vessel, partially offset by generally higher costs incurred by the Palm
Beach Princess and 3) a decrease in bankruptcy costs of $417,454 due to the
bankruptcy being completed at the end of fiscal 2004; partially offset by, 1)
recording start up costs for the Big Easy of $5,011,756 compared to last year
when no start up costs were recorded; 2) payments of other development costs of
$970,836 as a result of our continued search, both domestically and
internationally, for additional gaming opportunities, as compared to $700,580
spent on similar expenses during last year; 3) expenses of $447,989 incurred as
a result of our entry into the equine business; 4) an increase in depreciation
and amortization of $1,254,636 as a result of depreciation being recorded on the
Palm Beach Princess as a result of capital leasing arrangements effective in
July, 2004; and 5) an increase in the Parent Company General and Administrative
expenses of $321,129 due to an increase in the salary and related benefit
expenses due to the hiring of several new employees and increases in health
insurance coverage and 401-K expenses as compared to last year when the Parent
Company employees did not participate in a 401-K plan.
Operating (loss) for the year ended June 30, 2005 was a loss of
($2,276,679) as compared to an operating loss of ($4,670,356) for last year.
Operating loss before depreciation for the year was ($282,172) as compared to
($3,930,485) for the comparative year.
Other net expenses increased by $1,632,182 as a result of an increase in
the interest and financing expenses of $1,597,896 due to the higher debt levels
on the vessel leases than that amount previously owed
3
FORM 10-K/A
AMENDMENT NO. 1
ANNUAL REPORT ON FORM 10-K
FOR FISCAL YEAR ENDED JUNE 30, 2005
to the Brennan Trustee and an increase in the rates of interest on such leases.
In addition to the $3,845,888 of interest expense recorded in the statement of
operations, the Company incurred additional interest which was capitalized to
the Big Easy during that vessels' re-construction period in the amount of
$1,530,197 during the current Fiscal year, and $896,297 of interest paid on the
vessel capital lease which is classified in the Big Easy development costs. The
net (loss) before extraordinary item for the year ended June 30, 2005 was
($5,900,035) as compared to a (loss) of ($6,800,030) during Fiscal 2004.
During the first quarter of the 2005 Fiscal year the Company recorded
extraordinary income, net of tax, of $4,000,000. This was the result of the
collection of success fees charged to Leo Equity Group, Inc. and Palm Beach
Maritime Corporation (formerly MJQ) for our efforts in connection with the final
settlement with the Chapter 11 Trustee for the Bankruptcy Estate of Robert E.
Brennan. We had deferred all income from these transactions until such time as
payment was received.
The Net (Loss) for the year ended June 30, 2005 was ($1,900,035) or a
(loss) of ($.18) per diluted share as compared to a (loss) of ($6,800,030), or a
loss of ($.86) per diluted share for the year ended June 30, 2004.
For the year ended June 30, 2005 earnings before interest, taxes,
depreciation and amortization and our unusual items of extraordinary income,
impairment losses and vessel start up costs (Adjusted EBITDA) was $5,521,801 as
compared to $6,089,228 for the prior year. The decrease in Adjusted EBITDA of
$567,427 was primarily due to EBITDA levels for the Palm Beach Princess
decreasing from approximately $1.7 million in Fiscal 2004 to approximately $.6
million in Fiscal 2005 in the first quarter of the Fiscal year because of the
hurricanes, partially offset by better EBITDA results during our second and
third fiscal quarters for the Palm Beach Princess.
4
FORM 10-K/A
AMENDMENT NO. 1
ANNUAL REPORT ON FORM 10-K
FOR FISCAL YEAR ENDED JUNE 30, 2005
Item 8. Financial Statements and Supplemental Data.
Consolidated Statements of Operations
INTERNATIONAL THOROUGHBRED BREEDERS, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED JUNE 30, 2005, 2004 AND 2003
June 30,
---------------------------------------------------
2005 2004 2003
---------------- -------------- --------------
OPERATING REVENUES:
Gaming $ 27,350,154 $ 27,528,631 $ 26,354,929
Fare 2,999,130 3,151,182 2,952,066
On Board 2,003,746 1,921,583 1,773,926
Other 420,217 360,843 209,678
---------------- -------------- --------------
NET OPERATING REVENUES 32,773,247 32,962,239 31,290,599
---------------- -------------- --------------
OPERATING COSTS AND EXPENSES:
Gaming 9,136,981 8,805,157 7,889,140
Fare 4,310,927 3,868,705 3,381,534
On Board 987,397 925,980 849,022
Maritime & Legal Expenses 6,421,129 6,796,486 5,960,421
General & Administrative Expenses 3,007,640 3,722,984 4,121,811
General & Administrative Expenses - Parent 1,976,507 1,655,378 1,452,047
Ship Development Costs - Big Easy 5,011,756 - -
Ship Development Costs - Royal Star 284,257 - -
Equine Costs 447,989 - -
Development Costs - Other 970,836 700,580 306,952
Depreciation & Amortization 1,994,507 739,871 254,082
Loss on Impairment of Note Receivable 500,000 10,000,000 -
ITG Vegas Bankruptcy Costs - 417,454 841,348
---------------- -------------- --------------
TOTAL OPERATING COSTS AND EXPENSES 35,049,926 37,632,595 25,056,357
---------------- -------------- --------------
OPERATING INCOME (LOSS) (2,276,679) (4,670,356) 6,234,242
---------------- -------------- --------------
OTHER INCOME (EXPENSE):
Interest and Financing Expenses (2,518,214) (2,232,119) (1,334,463)
Interest and Financing Expenses - Related Party (1,327,674) (15,873) (4,186)
Interest Income 11,988 79,320 81,039
Interest Income Related Parties 292,583 247,785 342,226
Other Income 7,961 19,713 60,468
---------------- -------------- --------------
TOTAL OTHER INCOME (EXPENSE) (3,533,356) (1,901,174) (854,916)
---------------- -------------- --------------
INCOME (LOSS) BEFORE TAX PROVISION
AND EXTRAORDINARY ITEM (5,810,035) (6,571,530) 5,379,326
Income Tax Expense 90,000 228,500 145,500
---------------- -------------- --------------
INCOME (LOSS) BEFORE EXTRAORDINARY ITEM (5,900,035) (6,800,030) 5,233,826
EXTRAORDINARY ITEM - Fees charged to related
parties for Master Settlement Agreement ( Notes 15 & 21). 4,000,000 - -
---------------- -------------- --------------
NET INCOME (LOSS) $ (1,900,035) $ (6,800,030) $ 5,233,826
================ ============== ==============
BASIC AND DILUTED INCOME (LOSS) PER COMMON SHARE:
Income (Loss) before Extroardinary Item $ (0.57) $ (0.86) $ 0.54
Extraordinary Item 0.39 $ - -
---------------- -------------- --------------
Net Income (Loss) $ (0.18) $ (0.86) $ 0.54
================ ============== ==============
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING - Basic and Diluted 10,303,942 7,933,691 9,720,275
================ ============== ==============
See Notes to Consolidated Financial Statements.
5
FORM 10-K/A
AMENDMENT NO. 1
ANNUAL REPORT ON FORM 10-K
FOR FISCAL YEAR ENDED JUNE 30, 2005
(5) NOTES RECEIVABLE
(A) Second Cherry Hill Note
A portion of the proceeds from the sale of the non-operating former El
Rancho Hotel and Casino in Las Vegas to Turnberry/Las Vegas Boulevard, LLC
("Turnberry") on May 22, 2000 was used by us to purchase a promissory note of
the buyer in the face amount of $23,000,000 (the "Las Vegas Note"). The interest
rate under such note was to be adjusted from time to time since the interest
actually payable was to 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 had received
total distributions equal to their capital contributions plus an agreed upon
return on their invested capital, the next $23 million of Distributable Cash was
to be paid to us. We were to receive payments under the note equal to 33 1/3% of
all Distributable Cash until the maturity date, which was to occur on the 30th
anniversary of our purchase of the note. We had the option to convert the
promissory note 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 was to be converted into a 33 1/3% equity interest in
the buyer at the 30th anniversary of its issuance. Fair value and the
collectability of this note were determined by a real estate appraisal completed
in July, 2003 for a bank in anticipation of financing for Turnberry.
On June 16, 2004, the Company sold the Las Vegas Note to Cherry Hill at El
Rancho LP (the "Buyer"), a limited partnership which is affiliated with the
maker of the Las Vegas Note.
In exchange for the Las Vegas Note, the Company received cash payments from
the Buyer of $2.8 million, a non-recourse loan from Turnberry Development, LLC,
an affiliate of the Buyer, in the amount of $5 million and a promissory note
issued by Soffer/Cherry Hill Partners, L.P. ("Cherry Hill Partners"), another
affiliate of the Buyer, in the principal amount of $35,842,027 (the "Second
Cherry Hill Note"). The principal amount of the Second Cherry Hill Note equals
the difference between the unpaid principal plus all accrued and unpaid interest
(at 22%) under the Las Vegas Note, less the $2.8 million in purchase price
payments and $5 million non-recourse loan paid to the Company. As further
consideration, the Company received the right to use aircraft owned or leased by
the Buyer or its affiliates, for up to 64 hours in total, which the Company
valued at approximately $224,000.
The Company is not liable for repayment of the principal of the $5 million
loan included in the foregoing consideration. However, the Company is obligated
to pay interest and fees on such loan aggregating $600,000 per year ($50,000 per
month) for five (5) years.
The Second Cherry Hill Note received by the Company matures in 2015 and is
similar to the Las Vegas Note which was sold, in that it generally is payable
prior to maturity only from distributable cash of the maker. The maker under the
Second Cherry Hill Note is one of the principal partners in the entity which
purchased the Garden State Park real property from a Company subsidiary in
November of 2000, and such obligor will only have funds with which to pay the
Second Cherry Hill Note out of its profits from the development of Garden State
Park. The development of Garden State Park, located in Cherry Hill, New Jersey,
was delayed as a result of community opposition to certain elements of the
development plan, and, while the Company believes that the development plan is
now moving forward, the timing and amount of profits there also remain
uncertain. The Company already holds a promissory note in the face amount of $10
million, received from the purchaser of Garden State Park in connection with the
sale of such real property, which the Company expects will be fully paid in
time. While the Company expects that note to be fully paid, it is not optimistic
that this Second Cherry Hill Note will be fully paid, and accordingly, the
Company has written down the Second Cherry Hill Note (defined above) on its
books. The interest portion of the Las Vegas Note amounting to approximately
$20,866,000 has never been included as income on the Company's books, therefore
the interest capitalized under the Second Cherry Hill Note is not subject to a
write down. The remaining portion of the Second Cherry Hill Note has been
written down to $4,278,651 which resulted in an impairment charge of the new
note of $12,786,589, recorded in the fourth quarter of the Company's June 30,
2004 fiscal year and additional impairment charges of $500,000 in Fiscal 2005.
The Company had previously recorded deferred income of $2,786,589 on the
original sale of the El Rancho property in May, 2000, which amount was used to
reduce the impairment charge to $10,000,000 at June 30,
6
FORM 10-K/A
AMENDMENT NO. 1
ANNUAL REPORT ON FORM 10-K
FOR FISCAL YEAR ENDED JUNE 30, 2005
2004. In addition, if before July 31, 2005, there was a sale or other
disposition of the El Rancho Property, or a sale or other disposition of the
entire direct or indirect interest of the owner of such property, then fifty
percent (50%) of any profit in excess of $10 million realized on such sale also
shall be paid to us as a mandatory prepayment of the Second Cherry Hill Note. In
its assessment of the fair value of the Second Cherry Hill Note, the Company
estimated that its share of proceeds from the sale of the El Rancho property
prior to July 31, 2005 would generate approximately $500,000. As of June 30,
2005 the Company recorded an additional impairment loss on this note of $500,000
because a sale did not occur prior to July 31, 2005.
The Second Cherry Hill Note is secured by a pledge of stock owned by
Raymond Parello, an affiliate of the Buyer, in Palm Beach Empress, Inc.,
representing fifty percent (50%) of the stock in that company. Palm Beach
Empress, Inc. is the entity formed to acquire the Big Easy, the second vessel
which is chartered to a subsidiary of the Company, and which the Company expects
to operate as a casino cruise ship, similar to the operation of the casino
"cruise to nowhere" business conducted by a subsidiary of the Company since
April of 2001. The other fifty percent (50%) of the stock in Palm Beach Empress,
Inc. is owned by PBMC, a corporation owned by Francis W. Murray, the Company's
Chief Executive Officer. PBMC presently owns and charters to a subsidiary of the
Company the Palm Beach Princess vessel, the operation of which is the Company's
primary operating business.
Mr. Parello will have the right to acquire the Second Cherry Hill Note from
the Company in exchange for his stock in Palm Beach Empress, Inc. Such "put"
option held by Mr. Parello (giving him the right to put his stock in Palm Beach
Empress, Inc. to the Company in exchange for the Cherry Hill Note) will
effectively limit the value to the Company of the Second Cherry Hill Note to the
value of Mr. Parello's one-half interest in Palm Beach Empress, Inc. Mr.
Parello's "put" right will be exercisable upon the later to occur of (1) payment
by or for the account of Cherry Hill Partners of $483,205.48 under the Second
Cherry Hill Note, and (2) payment of the entire principal balance of the
non-recourse loan received by our Orion subsidiary in the principal amount of $5
million, referred to above (upon which repayment the Company's obligation to pay
interest and fees of $600,000 per year on such loan would end). Such "put"
option is set forth in the Shareholders' Agreement among Palm Beach Empress,
Inc., Raymond Parello and PBMC, to which our Orion subsidiary has joined solely
for the purpose of confirming its agreement to the "put" option.
In the event Mr. Parello receives any dividends or other distributions on,
or proceeds from, any sale of, his shares in Palm Beach Empress, Inc., the same
will be applied as a mandatory prepayment of the Second Cherry Hill Note.
The fair value of the Second Cherry Hill Note was determined using the
present value of the additional benefits derived from the sale of the note after
the cash proceeds of $7.8 million.
(8) 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 all the gain of $1,439,951 on the sale
of the property until such time that collectability under the $10,000,000 note
from Realen can be determined. The gain represented the sales price of cash and
notes in excess of our cost basis.
7
FORM 10-K/A
AMENDMENT NO. 1
ANNUAL REPORT ON FORM 10-K
FOR FISCAL YEAR ENDED JUNE 30, 2005
In connection with the January 28, 1999 sale and lease transactions for the
Garden State Park facility, we purchased a liquor license owned by an
unaffiliated third party, Service America Corporation, for $500,000 financed by
a five (5) year promissory note at a 6% interest rate. At December 31, 2002, the
unpaid principal balance was $160,000. Yearly principal payments of $80,000 plus
interest were due on December 28, 2002 and December 28, 2003 and have not been
paid. The Company entered into a sale and lease agreement for the lease of our
premises from Jan. 28, 1999 to May 29, 2001 and the sale of a 10 acre portion to
be used as an OTB facility. Under the terms of our sale and lease agreement the
lessee/buyer purchased the liquor license for $100,000 and was obligated to
return it to us in exchange for a refund of the $100,000 payment if, at the
expiration of the lease, June 27, 2002, it did not have a use for the liquor
license at the OTB facility. During the three year period Jan. 28, 1999 to Jan.
28, 2002 no OTB facility was built and the lessee/buyer did not have a use for
the liquor license at that property. By the terms of the contract the Company
has the right to re-acquire the liquor license for $100,000 and has exercised
such right, however the lessee/buyer has refused to perform. The carrying value
of the liquor license of $400,000 is shown in the "Assets of Discontinued
Operations" of the consolidated balance sheet. The Company believes it will need
to take legal action to enforce its right to the liquor license.
The net assets of the operations to be disposed of included in the
accompanying consolidated balance sheets as of June 30, 2005 and 2004 consist of
the following:
June 30,
------------------------
Classified As: 2005 2004
---- ----
Current Assets $ 401,747 $ 400,835
Current Liabilities (401,000) (310,798)
--------- ---------
Net Assets of Discontinued Operations $ 747 $ 90,037
========== =========
Cash flows from discontinued operations for the years ended June 30, 2005,
2004 and 2003 consist of the following:
June 30,
-----------------------------
2005 2004 2003
--------- ------- --------
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 -0- -0- 12,539
Increase (Decrease) in Accounts and Purses
Payable and Accrued Expenses 90,202 9,600 2,400
-------- ------- --------
Net Cash Provided by Discontinued Operating Activities 90,202 9,600 14,939
-------- ------- --------
Cash Flows from Discontinued Financing Activities:
(Decrease) in Balances Due To/From Continuing Operations (89,290) (8,550) (17,783)
-------- ------- --------
Net Cash (Used In) Discontinued Financing Activities (89,290) (8,550) (17,783)
-------- ------- --------
Net (Decrease) Increase in Cash and Cash Equivalents From
Discontinued Operations 912 1,050 (2,844)
Cash and Cash Equivalents at Beginning of Year From
Discontinued Operations 733 (317) 2,527
-------- ------- --------
Cash and Cash Equivalents at End of Year From
Discontinued Operations $ 1,645 $ 733 $ (317)
======== ======= ========
8
FORM 10-K/A
AMENDMENT NO. 1
ANNUAL REPORT ON FORM 10-K
FOR FISCAL YEAR ENDED JUNE 30, 2005
(15) INCOME TAX EXPENSE
The Company's income tax expense for the year ended June 30, 2005 and 2004
relates to state income taxes for its Palm Beach Princess operations and from
June 30, 2004 includes a Federal Alternative Minimum Tax on the Company's
consolidated income before the impairment loss on the sale of the El Rancho
note. The income tax expense for the years ended June 30, 2003 relates only to
state income taxes on the Palm Beach Princess operations.
During the year ended June 30, 2005, the Company recognized $4 million of
extraordinary income. This income was reported in the Company's federal and
state tax returns in a prior year and the extraordinary item was offset by
federal and state net operating loss carryforwards. Additionally, federal and
state income taxes were not recognized on the income as a result of Net
Operating Loss deductions available to the Company.
The Company has net operating loss carryforwards aggregating approximately
$111,300,000 at June 30, 2005 expiring in the years June 30, 2006 through June
30, 2026. 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 $44,500,000 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, 2005:
Net Operating Loss Year End
Carryforwards Expiration Dates
-------------- ----------------
$ 4,300,000 6/30/2006
9,000,000 6/30/2007
21,600,000 6/30/2008
5,280,000 6/30/2009
71,120,000 6/30/2010
------------ through 6/30/2026
$ 111,300,000
============
9
FORM 10-K/A
AMENDMENT NO. 1
ANNUAL REPORT ON FORM 10-K
FOR FISCAL YEAR ENDED JUNE 30, 2005
(24) RELATED PARTY TRANSACTIONS
See Footnote 2 for related party transactions regarding the PDS
Transactions.
See Footnote 19 with respect to the stock options granted to related
parties.
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.
In Fiscal 2003, the limited partnership's indebtedness to us, including
principal of $735,584 and accrued interest in the amount of $193,957 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 (Ocean Club) described
below. Such indebtedness was due December 31, 2004, but was extended by the
Board of Directors to December 31, 2007, and bears an interest rate of 6% and is
now scheduled to be paid upon the completion of the Ocean Club project. These
balances are shown in the "Deposits and Other Assets - Related Parties" section
of the balance sheet, see Note 7.
In the second project, Mr. Murray (through OC Realty) is participating in
the development of an oceanfront parcel of land, located in Fort Lauderdale,
Florida, which has received all governmental entitlements from the City of Fort
Lauderdale and the State of Florida to develop a 14-story building to include a
5-story parking garage, approximately 6,000 square feet of commercial space and
a residential 9- story tower. As of June 30,2005, we had lent $2,034,405 in
total to the project and we have accrued interest in the amount of $1,291,123 on
the loan. These balances are shown in the "Deposits and Other Assets - Related
Parties" section of the balance sheet, see Note 7. These loans bear interest at
12% and will be repayable out of OC Realty's share of proceeds, after payment of
bank debts, generated by the sale of condominiums. We will also have the right
to receive, as participation interest, from available cash flow of OC Realty, if
the project is successful, a priority return of our investment and a priority
profits interest for up to three times our investment. Repayment of these loans
and our participation interest will be subject to repayment of, first, bank debt
of approximately $14 million (at present) and, second, construction financing
expected to amount to $25 to $30 million and third, any capital invested by and
fees payable to joint venture partners including OC Realty. OC Realty's share of
proceeds thereafter will range from 22.5% to 45%. We have assessed the
collectability of the advances made to OC Reality based on comparable sales of
like units in the marketplace which suggest demand is strong and prospective
sales of the project's condominium units will be adequate to meet its
obligations and provide sufficient return to OC Realty with which to pay OC
Realty's debt to us.
Beginning on July 7, 2004, we entered into Sub-Bareboat Charters of the
vessels Palm Beach Princess and Big Easy with entities (Palm Beach Maritime
Corporation and Palm Beach Empress, Inc.) owned or controlled by our Chairman,
Francis W. Murray. Pursuant to our June 30, 2005 refinancing and restructuring
of the PDS transactions, we now charter the vessels, Palm Beach Princess and Big
Easy directly from Cruise Holdings I and Cruise Holdings II, respectively, which
companies are owned by Palm Beach Maritime Corporation and Palm Beach Empress,
Inc. Pursuant to the new charters, we pay Cruise Holdings I and Cruise Holdings
II, as owners of the vessels, charter fees of $50,000 per month for the Palm
Beach Princess and $100,000 per month for the Big Easy, plus 1% of our gross
revenues from operation of those vessels. We have the right to purchase either
or both vessels, at our option, for $17.5 million in the case of the Palm Beach
Princess (representing its appraised value at the time of $17.5 million and for
fair market value (to be determined by appraisal) in the case of the Big Easy.
Once we pay off the loans against the Palm Beach Princess and Big Easy, we will
be entitled to substantial credits against the purchase prices of the vessels: a
$14 million credit in the case of the Palm Beach Princess and a $12.6 million
credit in the case of the Big Easy, representing the original principal amounts
of the July 2004 sale - leaseback transactions involving those vessels, as well
as credits for our investment in the net Ship Mortgage Obligation of
approximately $7.2 million which can be applied to the purchase price of either
vessel, and a credit for the portions of the costs of refurbishing and
retrofitting the Big Easy which we paid, amounting to approximately $3 million,
that can be applied to the purchase price of the Big Easy.
10
FORM 10-K/A
AMENDMENT NO. 1
ANNUAL REPORT ON FORM 10-K
FOR FISCAL YEAR ENDED JUNE 30, 2005
At a meeting in June 2005 the Board of Directors approved compensating
Messrs. F.W. Murray and F.X. Murray $43,500 each for their personal guarantees
which they were required to provide in order to complete the PDS loan on April
5, 2005. Messrs. Murray were required by PDS to personally guarantee the PDS
loan, the proceeds of which were used by ITG Vegas to obtain the release of the
Big Easy vessel from dry dock. The Board determined that a 1% guarantor
compensation percentage would be used and paid as a guarantee fee.
From time to time Francis W. Murray has advanced funds to the Company to
meet its operating expenses. Mr. Murray is normally reimbursed directly by the
Company or through miscellaneous advances it may make on his behalf. During our
fourth quarter ended June 30, 2005, Mr. Murray or companies owned or controlled
by him made advances to the Company in the amount of approximately $2,150,000 to
fund the Company's working capital needs. Additionally, the Company has deferred
making payments to Mr. Murray or his companies, the majority of which were
during the last quarter, for charter hire fees on the Palm Beach Princess and
Big Easy vessels and for deferred salary. As of June 30, 2005, the total
advances and deferred payments due him were $2,983,272. The timing of the
repayment is unknown at this time. Approximately $1.7 million is due from the
parent company and could be repaid if it were to receive sufficient funds from
the sale of the Series B Preferred Stock. The balance is due from the ITG Vegas
and its subsidiaries and repayment is restricted by the PDS loan agreement until
such time as ITG Vegas achieves certain EBITDA levels. Interest to Mr. Murray is
not being recorded at this time.
The Company employs Tanuja Murray, daughter-in-law of Francis W. Murray.
Mrs. Murray holds a law degree and is acting in the capacity of assistant to the
Chairman involving the Company's exploration of gaming related business
opportunities and horse related business. Mrs. Murray earns $60,000 per year in
addition to the regular employee benefits paid by the Company.
On December 1, 2004 the Company retained Rachael F. Murray, wife of Francis
X. Murray, as an outside consultant for ITG Palm Beach, LLC, the Company
operating the Big Easy. Mrs. Murray's responsibilities are to develop and
coordinate musical and other live entertainment for the Big Easy. Mrs. Murray
invoiced the Company $18,750 during the fiscal year. The Company did not pay a
fee in July, 2005 due to continued Big Easy delays.
During the first quarter of Fiscal 2005, the Company re-entered the equine
business. In addition to the purchase of horses from outside parties, the
Company has purchased horses, the majority being one and two year olds, from
Francis W. Murray at prices to be determined by an appraisal of their values.
Payment for such horses will only be made out of profits realized from the
horses purchased from Mr. Murray, if any. It is our plan to bring these horses
into racing if we consider them competitive following the training period, to
take advantage of the projected increase in purses as a result of the
introduction of slot machines in several state jurisdictions.
Francis X. Murray, Vice President of our ITG Vegas, Inc. Subsidiary and son
of Francis W. Murray, our President, CFO and CEO agreed to loan us up to
$225,000 in the form of a line of credit. As of June 30, 2005, this loan
together with accrued interest at 8% totaled $188,306. (See Note 12 B)
11
FORM 10-K/A
AMENDMENT NO. 1
ANNUAL REPORT ON FORM 10-K
FOR FISCAL YEAR ENDED JUNE 30, 2005
PART 1V
Item 15. Exhibits and Financial Statement Schedules
(a) The following documents are filed as part of this report
2.Financial Statement Schedules.
Schedule I
INTERNATIONAL THOROUGHBRED BREEDERS, INC.
CONDENSED FINANCIAL INFORMATION OF REGISTRANT (PARENT COMPANY ONLY)
BALANCE SHEETS
AS OF JUNE 30, 2005 AND 2004
ASSETS
June 30,
-------------------------------------
2005 2004
---------------- ---------------
CURRENT ASSETS:
Cash and Cash Equivalents $ 52,411 $ 6,981
Prepaid Expenses 70,458 8,140
Other Current Assets 70,283 532
---------------- ---------------
CURRENT ASSETS $ 193,152 $ 15,653
---------------- ---------------
TOTAL EQUIPMENT - Net 89,298 100,495
---------------- ---------------
OTHER ASSETS:
Deposits and Other Assets - Non-Related 476,886 299,635
Mortgage Contract Receivable - Related Parties - 13,750,000
Deposits and Other Assets - Related Parties 4,334,189 4,311,603
Notes Receivable 10,000,000 10,000,000
---------------- ---------------
TOTAL OTHER ASSETS 14,811,075 28,361,238
---------------- ---------------
INVESTMENT IN AND AMOUNTS DUE FROM WHOLLY
OWNED SUBSIDIARIES 16,307,507 15,414,519
---------------- ---------------
TOTAL ASSETS $ 31,401,032 $ 43,891,905
================ ===============
LIBILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts Payable $ 271,660 $ 313,360
Accrued Expenses 1,063,447 661,182
Short-Term Debt - Related Party 196,164 183,164
Current Maturities of Long-Term Debt 25,000 4,063,838
Current Advances & Wages - Related Parties 236,851 -
---------------- ---------------
CURRENT LIABILITIES: 1,793,122 5,221,544
---------------- ---------------
LONG-TERM DEBT - Net of Current Portion 57,460 4,104,324
---------------- ---------------
DEFERRED INCOME - 4,000,000
---------------- ---------------
STOCKHOLDERS' EQUITY:
Series A Preferred Stock $100.00 Par Value 36,284,375 36,248,875
Common Stock $2.00 Par Value 22,965,125 22,960,557
Capital in Excess of Par 20,112,328 20,191,982
Retained Earnings (Deficit) (49,352,173) (46,989,638)
---------------- ---------------
TOTAL 30,009,655 32,411,776
---------------- ---------------
LESS:
Treasury Stock 457,538 1,839,073
Deferred Compensation, Net 1,666 6,666
---------------- ---------------
STOCKHOLDERS' EQUITY: 29,550,450 30,566,037
---------------- ---------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 31,401,032 $ 43,891,905
================ ===============
12
FORM 10-K/A
AMENDMENT NO. 1
ANNUAL REPORT ON FORM 10-K
FOR FISCAL YEAR ENDED JUNE 30, 2005
INTERNATIONAL THOROUGHBRED BREEDERS, INC.
CONDENSED FINANCIAL INFORMATION OF REGISTRANT (PARENT COMPANY ONLY)
FOR THE YEARS ENDED JUNE 30, 2005, 2004 AND 2003
STATEMENT OF OPERATIONS
June 30,
----------------------------------------------
2005 2004 2003
------------ ------------- -------------
------------ ------------- -------------
OPERATING COSTS AND EXPENSES: $ 1,819,304 $ 1,576,879 $ 1,442,361
------------ ------------- -------------
OTHER INCOME (EXPENSE):
Interest and Financing Expenses (289,078) (1,011,261) (268,169)
Interest Income Related Parties 29,496 63,270 72,777
Other Income 11 19,713 70
------------ ------------- -------------
OTHER INCOME (EXPENSE): (259,571) (928,278) (195,322)
------------ ------------- -------------
INCOME (LOSS) BEFORE TAX PROVISION
AND EXTRAORDINARY ITEM (2,078,875) (2,505,157) (1,637,684)
Income Tax Expense - 76,500 -
------------ ------------- -------------
INCOME (LOSS) BEFORE EXTRAORDINARY ITEM (2,078,875) (2,581,657) (1,637,684)
EXTRAORDINARY ITEM - Fees charged to related
parties for Master Settlement Agreement(nOTES 15& 12). 4,000,000 - -
------------ ------------- -------------
INCOME(LOSS) BEFORE EQUITY IN NET INCOME(LOSS) OF SUBSIDIARIES $ 1,921,125 $ (2,581,657) $ (1,637,684)
Equity in net income (Loss) of subsidiaries (4,283,958) (4,218,373) 6,871,510
------------ ------------- -------------
NET INCOME (LOSS) $ (2,362,833) $ (6,800,030) $ 5,233,826
============ ============ ============
STATEMENT OF CASH FLOWS
------------ ------------- -------------
CASH FLOWS (USED IN) OPERATING ACTIVITIES: $ (1,651,533) $ (2,505,776) $ (873,302)
------------ ------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital Expenditures (320) - (8,110)
Loans made on Development Projects 2,600,749 - -
Deposits on Purchase of Additional Vessel - - (300,000)
(Increase)Decrease in Other Investment Activity 58,739 200,000 (109,126)
(Increase)Decrease in Other Investment Activity - RP 1,206,533 (188,224) -
------------ ------------- -------------
CASH FLOWS PROVIDED BY (USED IN) INVESTING ACTIVITIES 3,865,701 11,776 (417,236)
------------ ------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Funds from Related Parties - ST 33,230 - 183,164
Proceeds from Bank Financing - - 200,000
Long-Term Deferred Financing Costs (235,990) - -
Principal Payments on Short Term Notes - (1,267,685) (203,364)
Principal Payments on Long Term Notes - Related Parties - (324,022) -
Principal Payments on Long Term Notes (1,241,669) - -
Increase (Decrease) in Balnces Due To/From Affilliates (724,289) 4,081,897 1,125,152
------------ ------------- -------------
CASH PROVIDED BY (USED IN) CONTINUING FINANCING ACTIVITIES (2,168,717) 2,490,191 1,304,952
------------ ------------- -------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 45,430 (3,809) 14,415
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 6,981 10,790 (3,625)
------------ ------------- -------------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 52,412 $ 6,981 $ 10,790
============ ============= =============
13
3.Exhibits.
The exhibits required under Item 601 of Regulation S-K that must be filed
with this Amendment No. 1 pursuant to Rule 12b-15 promulgated under the
Securities Exchange Act o 1934, as amended, are listed in the Exhibit Index
to this Report of Form 10-K/A, and are incorporated here by reference.
14
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 on Form 10-K/A
to be signed on its behalf by the undersigned, thereunto duly authorized, in
Bellmawr, New Jersey, this 27th day of March, 2006.
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 person s 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 April 3, 2006
---------------------- and Chief Executive Officer
Francis W. Murray (Principal Executive Officer)
/s/ Francis W. Murray Chief Financial Officer April 3, 2006
---------------------- (Principal Financial and
Francis W. Murray Accounting Officer)
/s/ James J. Murray Director April 3, 2006
----------------------
James J. Murray
/s/ Robert J. Quigley Director April 3, 2006
----------------------
Robert J. Quigley
/s/ Walter ReDavid Director April 3, 2006
----------------------
Walter ReDavid
15
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, certify that:
1. I have reviewed this report on Form 10-K/A, Amendment No. 1, of
International Thoroughbred Breeders, Inc.;
2. Based on my knowledge, this 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 report;
3. Based on my knowledge, the financial statements, and other
financial information included in this 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
report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused
such disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the period in which
this report is being prepared;
b) Evaluated the effectiveness of the registrant's disclosure
controls and procedures and presented in this report our conclusions
about the effectiveness of the disclosure controls and procedures, as of
the end of the period covered by this report based on such evaluation;
and
c) Disclosed in this report any change in the registrant's
internal control over financial reporting that occurred during the
registrant's most recent fiscal quarter (the registrant's fourth fiscal
quarter in the case of an annual report) that has materially affected, or
is reasonably likely to materially affect, the registrant's internal
control over financial reporting; and
5. The registrant's other certifying officer and I have disclosed,
based on our most recent evaluation of internal control over financial
reporting, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent
functions):
a) All significant deficiencies and material weaknesses in the
design or operation of internal control over financial reporting which
are reasonably likely to adversely affect the registrant's ability to
record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's internal
control over financial reporting.
Dated: April 3, 2006
Name: Francis W. Murray
Title: Chief Executive Officer
16
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, certify that:
1. I have reviewed this report on Form 10-K/A, Amendment No. 1, of
International Thoroughbred Breeders, Inc.;
2. Based on my knowledge, this 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 report;
3. Based on my knowledge, the financial statements, and other
financial information included in this 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
report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused
such disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the period in which
this report is being prepared;
b) Evaluated the effectiveness of the registrant's disclosure
controls and procedures and presented in this report our conclusions
about the effectiveness of the disclosure controls and procedures, as of
the end of the period covered by this report based on such evaluation;
and
c) Disclosed in this report any change in the registrant's
internal control over financial reporting that occurred during the
registrant's most recent fiscal quarter (the registrant's fourth fiscal
quarter in the case of an annual report) that has materially affected, or
is reasonably likely to materially affect, the registrant's internal
control over financial reporting; and
5. The registrant's other certifying officer and I have disclosed,
based on our most recent evaluation of internal control over financial
reporting, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent
functions):
a) All significant deficiencies and material weaknesses in the
design or operation of internal control over financial reporting which
are reasonably likely to adversely affect the registrant's ability to
record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's internal
control over financial reporting.
Dated: April 3, 2006
Name: Francis W. Murray
Title: Chief Financial Officer
17
Exhibit 32
CERTIFICATION PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
(18 U.S.C. SECTION 1350)
In connection with the Annual Report of International Thoroughbred
Breeders, Inc., a Delaware corporation (the "Company"), on Form 10-K/A
for the year ended June 30, 2005, as filed with the Securities and
Exchange Commission (the "Report"), Francis W. Murray, Chief Executive
Officer and Chief Financial Officer of the Company, does hereby certify,
pursuant to ss. 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. ss.
1350), that to his knowledge:
(1) The Report fully complies with the requirements of section
13(a) or 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 result of operations
of the Company.
Dated: April 3, 2006
Name: Francis W. Murray
Title: Chief Executive Officer and Chief
Financial Officer
18
EXHIBIT INDEX
Exhibit
Number Description
------- -----------
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. Certification pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
19