FORM 10-Q/A
AMENDMENT NO. 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended September 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 number 0-9624
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International Thoroughbred Breeders, Inc.
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(Exact name of registrant as specified in its charter)
Delaware 22-2332039
- --------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
Suite 1300, 1105 N. Market Street, Wilmington, Delaware 19899-8985
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(Address of principal executive offices)(Zip Code)
(302) 427-7599
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(Registrant's telephone number, including area code)
(Former name, former address and former fiscal year, if
changed since last report.)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the last 90 days. Yes X No___
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act.) Yes___ No X
Indicate by check as to whether the registrant is a shell company (as
defined in Exchange Act Rule 12b-2). Yes ___ No X
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the close of the latest practicable date.
Class Outstanding at March 15, 2006
- ------------------------------ -----------------------------
Common Stock, $ 2.00 par value 11,367,487 Shares
INTERNATIONAL THOROUGHBRED BREEDERS, INC.
FORM 10-Q/A
QUARTERLY REPORT
for the Three Months ended September 30, 2005
(Unaudited)
EXPLANATORY NOTE
This Amendment No. 1 on Form 10-Q/A amends the Registrant's Quarterly Report on
Form 10-Q for the quarter ended September 30, 2005 as filed by the Registrant on
November 21, 2005 and is being filed to amend and/or restate Financial
Statements, footnotes 2 and 5, and Management's Discussion and Analysis. The
Company is filing this Amended Quarterly Report in response to comments received
from the SEC.
No attempt has been made to this Form 10-Q/A to modify or update other
disclosures presented in the original report on Form 10-Q, except as required to
reflect the effects of the restatement of the Loss for the quarter ended
September 30, 2005. The Form 10-Q/A does not reflect events occurring after the
filing of the Form 10-Q or modify or update those disclosures. Information not
affected by the restatement is unchanged and reflects the disclosures made at
the time of the original filing of the Form 10-Q on November 21, 2005.
Accordingly, this Form 10-Q/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-Q 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 Quarterly Report on Form 10-Q
for the quarter ended September 30, 2005.
Page No. Of Origin-
PART I. FINANCIAL INFORMATION ally filed information
Item 1. Financial Statements:
Restated Consolidated Balance Sheets
as of September 30, 2005 and June 30, 2005......................1-2
Restated Consolidated Statements of Operations
for the Three Months ended September 30, 2005 and 2004............3
Restated Consolidated Statement of Stockholders' Equity
for the Three Months ended September 30, 2005.....................4
Restated Consolidated Statements of Cash Flows
for the Three Months ended September 30, 2005 and 2004............5
Notes to Consolidated Financial Statements
Footnote 2..............................................................8-10
Footnote 5.............................................................17-19
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations..................34-35
Revised Results of Operations for the quarter ended September 30, 2005
to reflect changes made to the Amended Consolidated
Statement of Operations for the quarter ended September 30, 2005
INTERNATIONAL THOROUGHBRED BREEDERS, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF SEPTEMBER 30, 2005 AND JUNE 30, 2005
Restated
September 30,
2005 June 30,
(UNAUDITED) 2005
------------ ------------
CURRENT ASSETS:
Cash and Cash Equivalents $ 2,044,886 $ 1,204,384
Accounts Receivable 53,529 1,879,088
Prepaid Expenses 1,631,554 1,392,315
Other Current Assets 372,769 443,481
Assets of Discontinued Operations 401,710 401,747
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TOTAL CURRENT ASSETS 4,504,448 5,321,015
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VESSELS, EQUIPMENT & LIVESTOCK:
Vessel - Palm Beach Princess - under Capital Lease 17,500,000 17,500,000
Equipment 3,164,503 3,118,284
Leasehold Improvements 1,170,788 987,267
Livestock 328,247 328,247
Vessel Not Placed in Service - Big Easy - under Capital Lease 24,318,989 24,318,989
Vessel Not Placed in Service - Royal Star 3,011,292 2,971,141
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49,493,819 49,223,928
LESS: Accumulated Depreciation and Amortization 3,166,917 2,625,763
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TOTAL VESSELS, EQUIPMENT & LIVESTOCK- NET 46,326,902 46,598,165
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OTHER ASSETS:
Notes Receivable 14,278,651 14,278,651
Vessel Deposits - Related Parties 10,262,758 10,228,758
Deposits and Other Assets - Related Parties 4,558,028 4,482,171
Deposits and Other Assets - Non-Related Parties 1,001,635 1,435,923
Spare Parts Inventory 999,998 1,018,982
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TOTAL OTHER ASSETS 31,101,070 31,444,485
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------------- ------------
TOTAL ASSETS $ 81,932,420 $ 83,363,665
============= ============
See Notes to Consolidated Financial Statements.
1
INTERNATIONAL THOROUGHBRED BREEDERS, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF SEPTEMBER 30, 2005 AND JUNE 30, 2005
LIABILITIES AND STOCKHOLDERS' EQUITY
Restated
September 30,
2005 June 30,
(UNAUDITED) 2005
------------ -----------
CURRENT LIABILITIES:
Accounts Payable $ 5,068,244 $ 5,505,374
Accrued Expenses 3,707,751 2,710,584
Short-Term Debt 935,717 1,090,479
Vessel Lease Payable - Current Portion 6,164,293 5,020,136
Current Advances From Related Parties 3,276,705 2,983,271
Deferred Interest - Short-Term 504,053 497,685
Short-Term Debt - Related Parties 496,164 196,164
Liabilities of Discontinued Operations 403,400 401,000
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TOTAL CURRENT LIABILITIES 20,556,327 18,404,693
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LONG-TERM LIABILITIES:
Vessel Lease Payable - Long Term Portion 27,581,056 29,530,585
Long-Term Debt - Net of Current Portion 2,623,611 2,683,432
Deferred Interest - Long-Term 1,370,396 1,501,185
Long-Term Advances From Related Parties 77,650 98,099
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TOTAL LONG-TERM LIABILITIES 31,652,713 33,813,301
------------- ------------
DEFERRED INCOME 1,577,304 1,595,220
COMMITMENTS AND CONTINGENCIES - -
STOCKHOLDERS' EQUITY:
Series A Preferred Stock, $100 Par Value,
Authorized 500,000 Shares, 362,844
Issued and Outstanding 36,284,375 36,284,375
Series B Convertible Preferred Stock, $10 Par Value,
Authorized 500,000 Shares, 197,300
Issued and Outstanding 1,973,000 -
Common Stock, $2 Par Value, Authorized 25,000,000 Shares,
Issued, 11,482,564 and Outstanding, 10,567,487 22,965,125 22,965,125
Capital in Excess of Par 20,960,486 20,112,328
(Deficit) (subsequent to June 30, 1993,
date of quasi-reorganization) (53,578,956) (49,352,173)
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28,604,030 30,009,655
LESS:
Treasury Stock, 915,077 Shares (457,538) (457,538)
Deferred Compensation, Net (416) (1,666)
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TOTAL STOCKHOLDERS' EQUITY 28,146,076 29,550,451
------------- ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 81,932,420 $ 83,363,665
============= ============
See Notes to Consolidated Financial Statements.
2
INTERNATIONAL THOROUGHBRED BREEDERS, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2005 AND 2004
(UNAUDITED)
Restated
---------------------------
September 30, September 30,
2005 2004
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OPERATING REVENUES:
Gaming $ 6,232,595 $ 5,329,507
Fare 627,080 540,665
On Board 467,529 411,328
Other 63,863 96,822
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NET OPERATING REVENUES 7,391,067 6,378,322
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OPERATING COSTS AND EXPENSES:
Gaming 2,142,029 2,114,088
Fare 975,632 960,198
On Board 218,295 211,113
Maritime & Legal Expenses 1,846,962 1,467,781
General & Administrative Expenses 611,824 1,004,193
General & Administrative Expenses - Parent 573,730 427,583
Ship Development Costs - Big Easy 2,332,773 -
Ship Development Costs - Royal Star 350,569 -
Equine Costs 241,504 -
Development Costs - Other 274,019 524,814
Depreciation & Amortization 657,198 398,879
Loss on Impairment of Note Receivable - 200,000
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TOTAL OPERATING COSTS AND EXPENSES 10,224,535 7,308,649
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OPERATING INCOME (LOSS) (2,833,468) (930,327)
------------- ------------
OTHER INCOME (EXPENSE):
Interest and Financing Expenses (1,321,432) (1,011,600)
Interest and Financing Expenses - Related Party (151,438) (155,991)
Interest Income 13,667 74,343
Interest Income Related Parties 64,541 3,974
Other Income 8,347 241
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TOTAL OTHER INCOME (EXPENSE) (1,386,315) (1,089,033)
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INCOME (LOSS) BEFORE TAX PROVISION
AND EXTRAORDINARY ITEM (4,219,783) (2,019,360)
Income Tax Expense (Benefit) 7,000 (42,000)
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INCOME (LOSS) BEFORE EXTRAORDINARY ITEM (4,226,783) (1,977,360)
EXTRAORDINARY ITEM - Fees charged to related
parties for Master Settlement Agreement ( Note 13). - 3,560,000
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NET INCOME (LOSS) $ (4,226,783) $ 1,582,640
============= ============
INCOME (LOSS) PER COMMON SHARE:
Basic:
Income (Loss) before Extroardinary Item $ (0.40) $ (0.20)
Extraordinary Item - 0.37
------------- ------------
Net Income (Loss) $ (0.40) $ 0.16
============= ============
Diluted:
Income (Loss) before Extroardinary Item $ (0.40) $ (0.19)
Extraordinary Item - 0.35
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Net Income (Loss) $ (0.40) $ 0.15
============= ============
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING - Basic 10,567,487 9,718,796
============= ============
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING - Diluted 10,567,487 10,258,358
============= ============
See Notes to Consolidated Financial Statements.
3
INTERNATIONAL THOROUGHBRED BREEDERS, INC.
AND SUBSIDIARIES
RESTATED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2005
(UNAUDITED)
Series A Series B Convertible
Preferred Preferred Common
---------------------- --------------------- -------------------------
Number of Number of Number of
Shares Amount Shares Amount Shares Amount
------- ------------ ------- ----------- --------- ------------
BALANCE - JUNE 30, 2005 362,844 $ 36,284,375 - $ - 11,482,564 $ 22,965,125
Series B Convertible Preferred
Shares Issued 197,300 1,973,000
Compensation for Options Granted
to Non-Employees
Beneficial Conversion Feature of
Convertible Preferred Stock
Amortization of Deferred Compensation Costs - - - - - -
Net (Loss) for the Three Months Ended
September 30, 2005 - as Restated - - - - - -
------- ------------ ------- ----------- --------- ------------
BALANCE - SEPTEMBER 30, 2005 362,844 $ 36,284,375 197,300 $ 1,973,000 11,482,56 $ 22,965,125
======= ============ ======= =========== ========= ============
Capital Treasury Deferred
in Excess Stock Compen-
of Par (Deficit) At Cost sation Total
------------ ------------- ---------- -------- -------------
BALANCE - JUNE 30, 2005 $ 20,112,328 $ (49,352,173) $ (457,538) $ (1,666) $ 29,550,451
Series B Convertible Preferred
Shares Issued 656,915 2,629,915
Compensation for Options Granted
to Non-Employees 130,843 130,843
Beneficial Conversion Feature of
Convertible Preferred Stock 60,400 60,400
Amortization of Deferred Compensation Costs - - - 1,250 1,250
Net (Loss) for the Three Months Ended
September 30, 2005 - as Restated - (4,226,783) - - (4,226,783)
------------ ------------- ---------- -------- -------------
BALANCE - SEPTEMBER 30, 2005 $ 20,960,486 $ (53,578,956 $ (457,538) $ (416) $ 28,146,076
============ ============= ========== ======== =============
See Notes to Consolidated Financial Statements.
4
INTERNATIONAL THOROUGHBRED BREEDERS, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2005 AND 2004
(UNAUDITED)
Restated
September 30, September 30,
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2005 2004
------------- ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
INCOME (LOSS) BEFORE DISCONTINUED OPERATIONS $ (4,226,783) $ 1,582,640
Adjustments to reconcile income (loss) to net cash (used in)
provided by operating activities:
Depreciation and Amortization 657,198 398,879
Compensation for Options Granted 191,243 -
Impairment of Note - 200,000
Increase in Deferred Income (17,916) 190,863
(Decrease) in Deferred Income - Related Parties - (4,000,000)
Changes in Operating Assets and Liabilities -
Decrease in Accounts Receivable ($1.3 million received from PDS) 1,825,554 4,596
(Increase) Decrease in Other Assets 70,712 (14,278)
(Increase) in Prepaid Expenses (239,239) (259,740)
Increase in Accounts Payable and Accrued Expenses 508,586 298,865
------------- ------------
CASH (USED IN) OPERATING ACTIVITIES BEFORE
DISCONTINUED OPERATIONS (1,230,645) (1,598,175)
CASH PROVIDED BY DISCONTINUED OPERATING ACTIVITIES 2,400 2,400
------------- ------------
NET CASH (USED IN) OPERATING ACTIVITIES (1,228,245) (1,595,775)
------------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase and Improvements of Big Easy - Related Party - (3,701,297)
Purchase and Improvements of Royal Star (40,151) (771,196)
Note Receivable Collected - Related Party - 2,600,748
Advances Collected - Related Party - 921,789
Livestock Expenditures - (275,971)
Capital Expenditures (229,031) (295,313)
(Increase) Decrease in Other Investment Activity 24,276 (64,911)
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES (244,907) (1,586,151)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from Sale of Series B Preferred Stock 2,959,500 -
Fees Paid on Sale of Series B Preferred Stock (244,500) -
Advances Received from Related Parties 100,073 -
Principal Payments on Short Term Notes (11,026) (6,029)
Principal Payments on Long Term Notes (490,432) -
Principal Payments on Long Term Debt - Related Parties - (313,195)
Decrease in Balances Due to/From Discontinued Subsidiaries 2,438 1,687
------------- ------------
CASH (USED IN) FINANCING ACTIVITIES
BEFORE DISCONTINUED FINANCING ACTIVITIES 2,316,054 (317,537)
CASH (USED IN) DISCONTINUED FINANCING ACTIVITIES (2,438) (1,687)
------------- ------------
NET CASH (USED IN) FINANCING ACTIVITIES 2,313,616 (319,224)
------------- ------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 840,464 (3,501,150)
LESS CASH AND CASH EQUIVALENTS FROM
DISCONTINUED OPERATIONS 38 (713)
CASH AND CASH EQUIVALENTS AT BEGINNING OF THE PERIOD 1,204,384 7,508,632
------------- ------------
CASH AND CASH EQUIVALENTS AT END OF THE PERIOD $ 2,044,886 $ 4,006,769
============= ============
Supplemental Disclosures of Cash Flow Information:
Cash paid during the period for:
Interest $ 1,434,991 $ 654,862
Income Taxes $ - $ -
See Notes to Consolidated Financial Statements.
5
FORM 10-Q/A
AMENDMENT NO. 1
QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTER ENDED SEPTEMBER 30, 2005
(2) UNREGISTERED SALES OF EQUITY SECURITIES
On July 13, 2005 the Company began accepting subscriptions for the purchase
of shares of the Company's Series B Convertible Preferred Stock, par value
$10.00 per share (the "Series B Preferred Stock"). The subscriptions for Series
B Preferred Stock have been received by the Company as part of a private
offering of up to 500,000 shares of its Series B Preferred Stock, at a
subscription price of $15.00 per share ($7.5 million, in the aggregate, if all
500,000 shares of Series B Preferred Stock are sold in the offering). Under the
Subscription Agreement, each such subscriber will be entitled to receive, in
addition to shares of Series B Preferred Stock at $15.00 per share, a stock
purchase warrant for the purchase of 1.2 shares of the Company's common stock
for each share of Series B Preferred Stock purchased. Accordingly, if all
500,000 shares of Series B Preferred Stock are subscribed for, warrants to
purchase an aggregate of 600,000 shares of the Company's common stock would then
be issuable. The exercise price under each such warrant will be $3.25 per common
share, and the warrants issued to purchasers of the Series B Preferred Stock
will be exercisable for a term of three (3) years beginning one year after
issuance. As of September 30, 2005 the Company has accepted subscriptions for
the purchase of 197,300 shares of Series B Preferred Stock and has received
approximately $2.7 million in net proceeds.
The Series B Preferred Stock has been established by the Board of Directors
pursuant to its authority under the Company's Certificate of Incorporation to
fix the relative rights and preferences of the authorized but unissued preferred
stock of the Company. Upon accepting subscriptions for purchases of the Series B
Preferred Stock, the Company has entered into a Registration Rights Agreement
with the purchasers, pursuant to which the Company has agreed to file a
Registration Statement under the Securities Act of 1933, as amended, in order to
register the resale of the shares of common stock of the Company issuable upon
conversion of the Series B Preferred Stock and the shares of common stock
issuable upon exercise of the accompanying stock purchase warrants, and to use
its best efforts to cause such Registration Statement to be declared effective.
The Series B Preferred Stock will automatically be converted into common
stock upon the effective date of the Registration Statement covering the common
shares issuable upon conversion. The initial conversion price is $2.00 per share
of common stock, declining by $.02 for each full calendar quarter elapsing from
July 1, 2005 to the date on which the conversion shall occur. Upon conversion,
each share of Series B Preferred Stock will be converted into a number of shares
of common stock determined by dividing the subscription price, $15.00 per share,
by the conversion price then in effect. Based upon the initial conversion price
of $2.00 and the subscription price of $15.00 for each share of Series B
Preferred Stock, the number of common shares initially issuable upon conversion
is 7.5 shares of common stock for each share of Series B Preferred Stock, or up
to 3,750,000 additional new common shares if the Series B Preferred Stock
offering is fully subscribed.
During the quarter our net loss was increased by a non-cash expense of
$60,400 as the result of the accounting for the sale of Series B convertible
preferred stock. This non-cash item, known as a "Beneficial Conversion Feature",
is the result of the application of the Emerging Issues Task Force's (EITF)
Issues 98-5 and 00-27. The beneficial conversion feature was calculated as the
difference between the effective conversion price and the fair value of the
common stock, multiplied by the estimated number of common shares into which the
security is convertible. The number of common shares the Preferred Stock is
convertible into has been estimated, assuming a conversion before March 31,
2006, at a price of $1.96 per share. Upon conversion, each share of Series B
Preferred Stock will be converted into a number of shares of common stock
determined by dividing the subscription price of $15 per share by the conversion
price then in effect. We have estimated that as of March 31, 2006 a total of
3,826,530 shares of Common Stock would be issued upon conversion of all the
Series B Preferred Stock, which represents an additional 76,530 shares
6
FORM 10-Q/A
AMENDMENT NO. 1
QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTER ENDED SEPTEMBER 30, 2005
above the original number had the price been $2. The value assigned to the
beneficial conversion feature on the Preferred Stock was credited to paid in
capital and charged to earnings as interest expense for those Preferred Stock
securities sold during the quarter.
The stock purchase warrants to be issued to purchasers of the Series B
Preferred Stock may be exercised, beginning one year after issuance, at any time
over the next three years, at an exercise price of $3.25 per share payable at
the time of exercise. In lieu of paying the exercise price, the holder has the
right to effectuate a cashless exercise in which the Company would issue to the
holder a number of shares of common stock computed by using the following
formula: X=Y (A-B)/A, where X equals the number of shares of common stock to be
issued to the holder; Y equals the number of shares of common stock for which
the warrant is being exercised; A equals the market price of one share of common
stock; and B equals the warrant exercise price. As a result, the holder may
receive a number of shares representing the unrealized appreciation in the
warrant.
Pursuant to the Subscription Agreement, the Company also agreed to increase
the size of its Board of Directors from four to seven members, and to fill two
of those vacancies with one person to be designated by MBC Global, LLC, an
Illinois limited liability company which introduced some of the purchasers of
the Series B Preferred Stock to the Company, and a second person to be
designated by another group of purchasers of the Series B Preferred Stock. As of
the date hereof, the Company has increased the size of its Board to seven
members and expects to fill the vacancies thereby created in due course.
The Company will pay a finder's fee of 5% of the purchase price of the
Series B Preferred Stock (in addition to fees payable to MBC Global as described
below). Accordingly, if all 500,000 shares of the Series B Preferred Stock
offered are purchased in the private offering, generating $7.5 million of gross
proceeds, a finder's fee of $375,000 would be payable. The Company plans to use
the net proceeds of the sale of Series B Preferred Stock for parent company
operating expenses and for working capital of the parent company and its
subsidiaries, including our ITG Vegas subsidiary.
Also on July 13, 2005, the Company entered into an Advisory Agreement dated
as of June 30, 2005, and an amendment thereto dated as of July 12, 2005, with
MBC Global, LLC, pursuant to which the Company retained the services of MBC
Global as financial advisor on a non-exclusive basis. The Advisory Agreement has
a minimum term of two (2) years, and requires the Company to pay a consulting
fee of $10,000 per month to MBC Global, a merger and acquisition fee of 2% of
the purchase price upon closing of a merger or acquisition transaction with a
target introduced by MBC Global, and an advisory fee upon closing of a financing
transaction with a source introduced by MBC Global equal to 7% of the gross
proceeds in the case of an equity transaction, 3% of the gross proceeds in the
case of any mezzanine debt, and 1% of the gross proceeds in the case of any
senior debt. MBC Global agreed to reduce its compensation in connection with the
sale of our Series B Preferred Stock to 5% of the gross proceeds of such sales
to investors introduced by MBC Global.
As additional compensation to MBC Global, the Company agreed to issue three
(3) stock purchase warrants to MBC Global, one for the purchase of up to 150,000
shares of the Company's common stock at $2.50 per share, a second warrant for
the purchase of up to 100,000 shares of the Company's common stock at $3.50 per
share, and a third warrant for the purchase of up to an additional 150,000
shares of the Company's common stock at $4.50 per share. The actual number of
common shares purchasable under each of these warrants will be determined by the
number of shares of Series B Preferred Stock, described above, subscribed for in
the Company's private offering by July 22, 2005 (or by such later date to which
the Company may extend its private offering of Series B Preferred Stock). All
three stock purchase warrants will have a term of four (4) years. In connection
with the Advisory Agreement and such warrants, the Company entered into a
Registration Rights Agreement with MBC Global pursuant
7
FORM 10-Q/A
AMENDMENT NO. 1
QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTER ENDED SEPTEMBER 30, 2005
to which the Company has agreed to file a Registration Statement under the
Securities Act of 1933, as amended, covering the resale of shares of common
stock purchasable under such MBC Global warrants, and to use its best efforts to
cause such Registration Statement to be declared effective.
(5) NOTES RECEIVABLE
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
8
FORM 10-Q/A
AMENDMENT NO. 1
QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTER ENDED SEPTEMBER 30, 2005
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, 2004.
In addition, if before July 31, 2005, there is 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. The July 31, 2005
deadline by which a sale of the El Rancho Property would have to occur in order
to trigger a possible prepayment to the Company will be extended to January 31,
2006 if a portion, but less than all, of the El Rancho Property or if the
Owner's direct or indirect ownership interest is sold before July 31, 2005. 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.
9
FORM 10-Q/A
AMENDMENT NO. 1
QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTER ENDED SEPTEMBER 30, 2005
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.
ITEM 2. 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.
10
FORM 10-Q/A
AMENDMENT NO. 1
QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTER ENDED SEPTEMBER 30, 2005
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.
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 Three Months Ended September 30, 2005 and
2004
Consolidated
Revenue for the three months ended September 30, 2005, (fiscal 2006)
increased $1,012,745 from $6,378,322 in Fiscal 2005 to $7,391,067 in Fiscal 2006
primarily as a result of increase in revenues generated by the Palm Beach
Princess operations during the comparable periods. Operating expenses increased
$2,915,886 from $7,308,649 in the three month period in Fiscal 2005 to
$10,224,535 in Fiscal 2006 primarily the result of : 1) recording start up costs
for the Big Easy of $2,332,773 compared to last year when no start up costs were
recorded; and carrying costs on the Royal Star of $350,569; 2) expenses of
$241,504 incurred as a result of our entry into the equine business; 3) an
increase in depreciation and amortization of $258,319 as a result of
depreciation being recorded on the Palm Beach Princess as a result of capital
leasing arrangements effective in July, 2004 and amortization of finance fees as
a result of the PDS transactions; 4) an increase in the Palm Beach Princess
operating expenses, before depreciation and interest expense of $37,369 due to
an increase in revenues and the increased number of cruises as compared to last
year, offset by a decrease in other development costs of $250,795 as compared to
last year when the Company had more funds to actively search, both domestically
and
11
FORM 10-Q/A
AMENDMENT NO. 1
QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTER ENDED SEPTEMBER 30, 2005
internationally for additional gaming opportunities, and a decrease in the
impairment on a Note Receivable of $200,000 which reflects the impairment
recognized in Fiscal 2005.
The operating (loss) for the quarter ended September 30, 2005 was
($2,833,468) as compared to an operating (loss) of ($930,327) for the
comparative quarter, an increase in loss of ($1,903,141) for the reasons stated
above.
Other net expenses increased by $297,282 due to the additional interest and
financing expense of $305,279 paid to PDS on the additional borrowings we
received from PDS during the last fiscal year and the 1) expensing of the
Beneficial Conversion Feature in the amount of $60,400 in connection with the
sale of 197,300 shares of Series B Convertible Preferred Stock; 2) expensing the
400,000 options granted at various prices to our financial advisor in the amount
of $86,590 which contract was effective on July 1, 2005; 3) the expensing
$44,250 due to the 236,760 warrants issued to the purchaser of our Series B
Preferred Stock as of September 30, 2005. We began the quarter with note and
capital lease borrowings from PDS in the approximate amount of $29,314,000,
compared to the first quarter of last fiscal year when the outstanding
borrowings from PDS were $27 million. The net (loss) before extraordinary item
for the quarter ended September 30, 2005 was a (loss) of ($4,226,783) as
compared to a (loss) of ($1,977,360) during the comparative quarter.
The Net (loss) for the quarter ended September 30, 2005 was ($4,226,783) or
a (loss) of ($.40) per diluted share as compared to income of $1,582,640, or
($15) per diluted share for the quarter ended September 30, 2004. During the
first quarter of the 2005 Fiscal year the Company recorded extraordinary income,
net of tax, of $3,560,00 as compared to this year when no extraordinary income
was recorded.
For the quarter ended September 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 $51,849 as
compared to a (loss) of ($331,207) for the quarter ended September 30, 2004. The
increase in Adjusted EBITDA of $383,056 was primarily due to EBITDA levels for
the Palm Beach Princess increasing from approximately $970,000 in Fiscal 2005 to
approximately $1.6 million in Fiscal 2006. In the quarter ended September 30,
2004, adjusted EBITDA levels were negatively affected by the hurricanes
experienced during that quarter.
Reconciliation of Non-GAAP Measures to GAAP
Adjusted EBITDA or earnings before interest, taxes, depreciation and
amortization and unusual items is not a measure of performance or liquidity
calculated in accordance with generally accepted accounting principles. EBITDA
information is presented as a supplemental disclosure because management
believes that it is a widely used measure of such performance in the gaming
industry. In addition, management uses Adjusted EBITDA as the primary measure of
the operating performance of its operations, including the evaluation of
management personnel. Adjusted EBITDA should not be construed as an alternative
to operating income, as an indicator of the Company's operating performance, or
as an alternative to cash flows from operating activities, as a measure of
liquidity, or as any other measure of performance determined in accordance with
generally accepted accounting principles. The Company has significant uses of
cash flows, including capital expenditures, interest payments, taxes, lease and
debt principal repayments, which are not reflected in Adjusted EBITDA. It should
also be noted that other gaming companies that report EBITDA information may
calculate EBITDA in a different manner than the Company. A reconciliation of the
Company's Adjusted EBITDA and unusual items to net income (GAAP), is shown
below.
12
FORM 10-Q/A
AMENDMENT NO. 1
QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTER ENDED SEPTEMBER 30, 2005
Reconciliation of Adjusted EBITDA to Net Income (GAAP)
Three Months Ended Septmeber 30,
------------------------------
2005 2004
--------------- -------------
Total Adjusted EBITDA $ 51,849 $ (331,207)
Depreciation & Amortization (657,198) (398,879)
Interest & Financing Expenses (1,368,217) (1,167,591)
Interest and Other Income 86,556 78,317
Income Tax (Expense) Benefit (7,000) 42,000
Net Income (Loss) before Unusual Items (1,894,010) (1,777,360)
Extraordinary Item - 3,560,000
Start Up Costs for Big Easy (2,332,773) -
Impairment Loss - (200,000)
--------------- -------------
Net Income (Loss) $ (4,226,783) $ 1,582,640
=============== =============
13
FORM 10-Q/A
AMENDMENT NO. 1
QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTER ENDED SEPTEMBER 30, 2005
ITEM 6. EXHIBITS
Exhibit
Description of Exhibit
31.1 CEO Certification pursuant to rule 13a-14(a) and 15d-14(a) of the
Securities Exchange Act of 1934
31.2 CFO Certification pursuant to rule 13a-14(a) and 15d-14(a) of the
Securities Exchange Act of 1934
32 CEO & CFO Certification pursuant to 18 U.S.C. Section 1350, As Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
14
FORM 10-Q/A
AMENDMENT NO. 1
QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTER ENDED SEPTEMBER 30, 2005
INTERNATIONAL THOROUGHBRED BREEDERS, INC.
AND SUBSIDIARIES
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
April 3, 2006 /s/Francis W. Murray
---------------------------------------------------------
Francis W. Murray, President, Chief Executive Officer and
Chief Financial Officer
15
FORM 10-Q/A
AMENDMENT NO. 1
QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTER ENDED SEPTEMBER 30, 2005
Exhibit 31.1
CEO CERTIFICATION PURSUANT TO RULE 13A-14 AND 15D-14 OF
THE SECURITIES AND EXCHANGE ACT OF 1934
I, Francis W. Murray, certify that:
1. I have reviewed this quarterly report on Form 10-Q/A of International
Thoroughbred Breeders;
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant
and we have:
a) designed such disclosure controls and procedures to ensure
that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the
period in which this quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to
the filing date of this quarterly report (the "Evaluation
Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures
based on our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the
audit committee of registrant's board of directors (or persons
performing the equivalent functions);
a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the
registrant's ability to record, process, summarize and
report financial data and have identified for the
registrant's auditors any material weaknesses in internal
controls; and
b) any fraud, whether or not material, that involves management
or other employees who have a significant role in the
registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated in
this quarterly report whether or not there were significant changes in
internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent
evaluation, including any corrective actions with regard to
significant deficiencies and material weaknesses.
Date: April 3, 2006
/s/Francis W. Murray
-------------------------------------------------------
Chairman/Chief Executive Officer/Chief Financial Officer
16
FORM 10-Q/A
AMENDMENT NO. 1
QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTER ENDED SEPTEMBER 30, 2005
Exhibit 31.2
CFO CERTIFICATION PURSUANT TO RULE 13A-14 AND 15D-14 OF
THE SECURITIES AND EXCHANGE ACT OF 1934
I, Francis W. Murray, certify that:
1. I have reviewed this quarterly report on Form 10-Q/A of International
Thoroughbred Breeders;
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant
and we have:
a) designed such disclosure controls and procedures to ensure
that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the
period in which this quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to
the filing date of this quarterly report (the "Evaluation
Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures
based on our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the
audit committee of registrant's board of directors (or persons
performing the equivalent functions);
a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the
registrant's ability to record, process, summarize and report
financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management
or other employees who have a significant role in the
registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated in
this quarterly report whether or not there were significant changes in
internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent
evaluation, including any corrective actions with regard to
significant deficiencies and material weaknesses.
Date: April 3, 2006
/s/Francis W. Murray
--------------------------------------------------------
Chairman/Chief Executive Officer/Chief Financial Officer
17
FORM 10-Q/A
AMENDMENT NO. 1
QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTER ENDED SEPTEMBER 30, 2005
Exhibit 32
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906 OF
THE SARBANES-OXLEY ACT OF 2002
In connection with the filing of the Quarterly Report on Form 10-Q/A of
International Thoroughbred Breeders, Inc. (the "Company") for the three months
ended September 30, 2005 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
April 3, 2006
18