INTERNATIONAL THOROUGHBRED BREEDERS INC, 10-K, 1998-05-22

INTERNATIONAL THOROUGHBRED BREEDERS INC
10-K, 1998-05-22
RACING, INCLUDING TRACK OPERATION

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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-K

FOR ANNUAL AND TRANSITION REPORTS
PURSUANT TO SECTIONS 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934

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

For the fiscal year ended JUNE 30, 1997

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

For the transition period from to

Commission file number 0-9624
INTERNATIONAL THOROUGHBRED BREEDERS, INC.
(Exact name of registrant as specified in its charter)

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

ROUTE 70 AND HADDONFIELD ROAD
CHERRY HILL, NEW JERSEY 08034
(Address of principal executive offices) (Zip Code)

Registrant's telephone number, including area code: (609) 488-3838

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class Name of Each Exchange on Which Registered

COMMON STOCK, $2.00 PAR VALUE AMERICAN STOCK EXCHANGE

SERIES A CONVERTIBLE PREFERRED STOCK,
$100 PAR VALUE AMERICAN STOCK EXCHANGE

Securities registered pursuant to Section 12(g) of the Act: NONE

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 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 Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]

Based on the closing sale price on October 13, 1997 (the last day of
trading), the aggregate market value of the voting stock held by
nonaffiliates of the Registrant was $28,712,348.

The number of shares outstanding of the Registrant's Common Stock was
13,978,095 at May 15, 1998.

INTERNATIONAL THOROUGHBRED BREEDERS, INC.

FORM 10-K

This report contains "forward-looking statements." The Company desires
to take advantage of the "safe harbor" provisions of the Private
Securities Litigation Act of 1995 and is including this statement for
the express purpose of availing itself of such safe harbor with respect
to forward-looking statements. Forward-looking information is subject
to important risks and uncertainties that could significantly affect
anticipated results in the future and, accordingly, such results may
differ from those expressed in any forward-looking statements made by
the Company. These risks and uncertainties include, but are not limited
to: (i) the impact of off-track wagering and other forms of gaming on
the Company's operations; (ii) the Company's ability to obtain
additional financing necessary for any development of the El Rancho
Property; (iii) the results of certain litigation involving the Company
and certain of its directors and stockholders; (iv) the effect of the
New Jersey Division of Gaming Enforcement investigation on the Company's
licenses with the New Jersey Casino Control Commission and the New
Jersey Racing Commission; and (v) the Company's non-financial defaults
under the CSFB Credit Facility. The Company wishes to caution each
reader of this report to carefully consider the risks and uncertainties
with respect to each such forward-looking statement.

PART I

ITEM 1 - BUSINESS

GENERAL

International Thoroughbred Breeders, Inc. ("ITB"), a Delaware corporation,
is a holding company incorporated on October 31, 1980. Through its operating
subsidiaries, ITB is primarily engaged in (i) the ownership and operation of
standardbred and thoroughbred racetracks in New Jersey (the "Racetrack
Operations") and (ii) ownership of a casino property in Las Vegas, Nevada (the
"Casino Operations"). ITB owns and operates Garden State Park in Cherry Hill,
New Jersey (through its wholly-owned subsidiary Garden State Race Track, Inc.)
and Freehold Raceway and certain nearby properties in Freehold, New Jersey
(through its wholly-owned subsidiaries Freehold Racing
Association, Atlantic City
Harness, Inc. and Circa 1850, Inc.). ITB also owns the non-operating former El
Rancho Hotel and Casino (the "El Rancho Property") in Las Vegas, Nevada (through
its wholly-owned subsidiary Orion Casino Corporation). For the year ended June
30, 1997 ("Fiscal 1997"), Racetrack Operations accounted for substantially all
of ITB's total consolidated revenues. As used in this Form 10-K, the term
"Company" includes ITB and its wholly owned subsidiaries.

For Fiscal 1997, the Company's operating loss was $4,715,334 as compared
to an operating profit for the prior fiscal year of $377,929, a decrease of
$5,093,263. Revenue from operations increased at Freehold Raceway and declined
at Garden State Park during Fiscal 1997 for a net combined decrease of $282,095
from the prior fiscal year. Total operating expenses increased $4,439,182 or 6%
during the same period, consisting of an increase in general and administrative
expenses of $2,871,634 or 35%, and carrying costs for the El Rancho Property of
$1,773,627, offset by a decrease of less than 1% in direct operating expenses,
cost of revenues and depreciation and amortization. The increase in general and
administrative expenses is principally attributable to: (i) non-employee option
expense increases of $460,000; (ii) a net increase in officer and corporate
administrative salary and benefits of $233,000; (iii) severance amounts paid to
or accrued for terminated officers of $452,000; (iv) legal, accounting and
professional fees increases of $267,000; (v) an increase
of $220,000 in corporate
insurance expense; and (vi) an increase of $390,000 in travel and related
expenses in connection with corporate business opportunities, financing
activities and executive travel.

During Fiscal 1997, the Company incurred a net loss of $17,387,582 as
compared to a net loss of $1,069,712 for the prior fiscal year. The increase in
net loss of $16,317,870 primarily resulted from the effects of: (i) a write-off
of $2,585,000 in non-refundable deposits associated with the termination of an
option to purchase a parcel of land adjoining the El Rancho
Property in Las Vegas
made during the second quarter; (ii) a write-off of $3,837,625
of financing costs
associated with the early retirement of debt made during the fourth quarter;
(iii) a write-off during the fourth quarter of $2,543,968 of costs associated
with the termination of the Starship Orion Casino concept for the development of
the El Rancho Property; (iv) an increase of $1,360,037 in interest expense due
to higher indebtedness levels incurred by the Company; (v) an increase of
$1,063,800 in the amortization of financing costs which reflects the cost
associated with the Company's new indebtedness; and (vi) a negative change of
$5,093,263 in the operating loss as described above.

As of May 1, 1998, ITB employed twelve full-time and two part-time
corporate executive, administrative and clerical personnel. In addition, the
Company employs consultants primarily relating to its casino development
projects.

In connection with Racetrack Operations, the Company directly employs (i)
at Garden State Park, approximately 345 persons during thoroughbred racing meets
and 265 persons during harness racing meets and (ii) at Freehold Raceway,
approximately 250 persons during harness racing meets. Such personnel include
pari-mutuel machine tellers, security personnel, admissions, cleaning,
maintenance and parking personnel, most of whom are presently represented by
unions with which the Company has existing contracts. Non-union racing
department officials and starters are also employed during each meet. In
addition, the Company employs approximately 100 additional full-time persons in
connection with Racetrack Operations, who provide information, media, marketing,
executive, administrative and clerical services and support for the tracks.

The Company is involved in various lawsuits brought by certain minority
Board members and stockholders. See "Legal Proceedings." In such litigation,
the plaintiffs, minority Board members, have challenged the authorization and
enforceability of certain actions taken and agreements entered into by the
Company, including among other things, the Company's $55 million credit facility
and related agreements. In the event the plaintiffs prevail in such litigation,
such actions and agreements may be subject to modification, termination or
revision, the impact of which on the Company cannot be foreseen.
This litigation
is currently at a standstill as the parties are in
the final stages of settlement
negotiations. Although the parties believe that a settlement is imminent, there
can be no assurance that the settlement will be reached or as to the terms
thereof. If a settlement is reached, it will be subject to the approval of the
Delaware Court of Chancery after notice to all stockholders. In the event a
settlement cannot be reached, there can be no
assurance as to the outcome of such
litigation or as to the impact the litigation itself or any resolution thereof
may have on the Company's operations, financial position, results of operations
or cash flows.

As part of the proposed settlement, it is the Company's intention to
dispose of the casino property in Las Vegas, Nevada. However, there can be no
assurance that the settlement and subsequent sale of the casino property can be
completed or as to the terms thereof.

The Company is currently in default under certain non-financial covenants
of its $55 million credit facility. There can be no assurance that the lender
will continue to forebear with respect to the exercise of its rights under the
credit facility, including its right to accelerate the loan. The Company is in
discussions with such lender regarding the grant of waivers of such defaults in
connection with the proposed settlement of
the pending litigation, however, there
can be no assurance that such settlement will be entered into or that such
waivers will be granted. See "Management's Discussion and Analysis of Financial
Conditions and Results of Operations" and "Developments During the Last Fiscal
Year."

The Company is engaged in discussions with potential purchasers of the
Company's Racetrack Operations. However, there can be no assurance that the
Company will enter into an agreement with respect to any such sale or as to the
terms of such sale, if entered into. Any sale of all of the Company's Racetrack
Operations will be subject to stockholder approval.

RACETRACK OPERATIONS

GARDEN STATE PARK

Garden State Park is owned and operated by the Company's wholly-owned
subsidiary, Garden State Race Track, Inc. ("GSRT").
Garden State Park is located
on approximately 220 acres of land in
Cherry Hill, New Jersey. Cherry Hill forms
part of the Philadelphia metropolitan area and is approximately eight miles from
downtown Philadelphia.

The Company purchased the site of Garden State Park on March 15, 1983
following a fire which destroyed the original
racetrack facility. Following such
purchase, the Company undertook an extensive reconstruction of the racetrack
facility, as well as the construction of a separate pavilion (completed in
1986).
On April 1, 1985, Garden State Park reopened for horse racing.

The reconstructed grandstand and clubhouse is an approximately 500,000
square foot, seven level, steel frame, glass enclosed, fully heated and
air-conditioned facility (the "Clubhouse") with an adjacent multi-level glass
covered thoroughbred paddock area. The Clubhouse can accommodate up to 24,000
spectators, including seating for approximately 9,500 spectators, and contains
three sit-down restaurants as well as 17 food concession stands. The Company is
not currently using a portion of the Clubhouse due to a decrease in business
levels at Garden State Park over the last few years as a result of year-round
simulcasting and less live racing at Garden State Park. The backstretch area
includes 27 barns and stables capable of accommodating approximately 1,500
horses, a harness paddock, a training track, dormitories, cafeteria and
recreation buildings for backstretch personnel, an administration building, and
other service buildings. Reconstruction also included restoration of the main
dirt and turf tracks, installation of lighting for nighttime racing, paving of
parking facilities to accommodate approximately 4,000 automobiles, landscaping,
fencing and other amenities. The approximately 56,000 square foot, 1-1/2 story
pavilion (the "Pavilion") is used by the Company for closed circuit television
events (racing as well as other sporting and non-sporting events), wagering,
concerts, special events, concessions and other conveniences. The Pavilion has
seating capacity for approximately 1,500 spectators.

GSRT's operations are regulated by the New Jersey Racing Commission (the
"Racing Commission") and the New Jersey Casino Control Commission (the "CCC").
See "Government Regulation."

OPERATIONS

Racing Dates. Garden State Park's racing dates consist principally of
night racing. For Fiscal 1997, Garden State Park conducted (i) standardbred
harness racing (the "Harness Meet") from September 6, 1996 through December 14,
1996 for a total of 55 racing dates and (ii) thoroughbred flat racing (the
"Thoroughbred Meet") from January 1, 1997 through May 23, 1997 for a total of 62
racing dates. For the fiscal year ending June 30, 1998 ("Fiscal 1998"), the
Company conducted the Harness Meet from September 5, 1997 through December 12,
1997 for a total of 51 racing dates and is conducting the Thoroughbred Meet from
January 1, 1998 through May 23, 1998 for a total of 63 racing dates.

Simulcasting. Simulcasting is defined as the television transmission of
live horse racing from one racetrack (the "Sending Track") to another (the
"Receiving Track"). Typically, pari-mutuel wagering is conducted at the
Receiving Track with a percentage of the Receiving Track's commission on the
wagering being shared with the Sending Track. For New Jersey intra-state
simulcasts, a portion of the Receiving Track wagering must be used for purses at
the Sending and Receiving Tracks. In such situations when Garden State Park is
the Sending Track, a portion of the Receiving Track wagering is required to be
used for purses at Garden State Park during the current live race meeting. In
cases where Garden State Park is the Receiving Track, it is required to remit a
percentage of its pari-mutuel wagering to the Sending Track and is required to
pay a portion of the commission to purses if live racing is being conducted, or
at the next live race meeting if live racing is not in progress at the time of
simulcasting. Garden State Park conducts day and night
year around simulcasting.

Attendance and Wagering. The following table summarizes average daily
attendance and wagering at Garden State Park and races simulcast to other racing
facilities during the past three fiscal years:

<TABLE>
<S> <C> <C><C> <C><C> <C><C>
Approximate
Commission % of
Wagering* DAILY AVERAGES

THOROUGHBRED MEETS Fiscal Year EndedJune 30,
1997 1996 1995

Attendance 2,929 2,891 3,292

Live Wagering 13.4% $154,407 $164,381 $212,580

Simulcast Sending Signal:

New Jersey Tracks 3.3% $201,584 $261,560 $311,763
(Avg.)

Atlantic City 4.4% $24,272 $29,227 $43,503
Casinos

Out-of-State Tracks 1.5% $635,876 $840,328 $792,269

Combined Wagering $1,016,139 $1,295,497 $1,360,115

Number of Live Race Days 62 64 75
</TABLE>
<TABLE>
<S> <C> <C><C> <C><C> <C><C>
Approximate
Commission
% of
Wagering* DAILY AVERAGES

HARNESS MEETS Fiscal Year EndedJune 30,
1997 1996 1995

Attendance 2,206 2,434 2,767

Live Wagering 12.7% $154,242 $182,103 $207,747

Simulcast Sending Signal:

New Jersey Tracks 4.0% $342,124 $391,232 $456,522
(Avg.)

Atlantic City 4.6% $25,609 $36,553 $35,578
Casinos

Out-of-State Tracks 1.5% $888,891 $929,190 $658,699

Combined Wagering $1,410,867 $1,539,079 $1,358,546

Number of Live Race Days 55 53 55
</TABLE>

* Amounts equal the portion received by the track after payment of purses to
horsemen.

The following table summarizes average wagering experienced by Garden State
Park in connection with receiving simulcasts during the past three fiscal years:

AVERAGE DAILY SIMULCAST WAGERING (RECEIVING TRACK)

FISCAL YEAR ENDED JUNE 30,
1997 1996 1995
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
From Tracks *: # # # of
of ($) of ($) days ($)
days days

New Jersey
Tracks:

Atlantic City (T) 36 42,065 52 45,916 59 61,672

Freehold (H) 208 23,027 201 27,225 216 33,353

Meadowlands (T,H) 232 56,762 234 71,182 251 98,652

Monmouth (T) 72 54,951 74 66,255 73 81,164

Out-of-State (T,H) 364 244,099 360 244,024 364 236,650
Tracks

TOTAL ANNUAL $112,281,224 $117,267,914 $127,669,977
RECEIVING WAGERING
</TABLE>

(T) = Thoroughbred, (H) = Harness
* The commission percentage of wagering received by Garden State Park is
approximately 9.9% after the payment of purses to horsemen.

Other Operations. In November 1983, Garden State Park and an
unaffiliated third party, the Servomation Corporation (now Service America
Corporation ("Service America")), entered into an agreement
(the "Service America
Vendor Agreement") pursuant to which Service America was granted a fifteen year
exclusive right to operate all food and retail services at the
racetrack facility
commencing with the 1985 opening of the racetrack. Under the Service America
Vendor Agreement, Service America agreed to invest $7,000,000 in the concession
facilities at Garden State Park. Service America depreciates such investment on
a straight line basis over the term of the Service America
Vendor Agreement. Upon
termination of the Service America Vendor Agreement, Garden State Park is
obligated to pay Service America an amount equal to the undepreciated balance,
if any, and will acquire title to the improvements. As of May 1, 1998, the
undepreciated balance was approximately $932,000. The Service America Vendor
Agreement requires that Service America pay a monthly concession fee to Garden
State Park based on a percentage of adjusted gross sales of beverages, food and
other items. In addition, Service America is required to pay Garden State Park
a percentage of net profits, if any, with respect to the operations of Garden
State Park's Phoenix Restaurant. Garden State Park is responsible for any net
operating losses of the Phoenix Restaurant. For the twelve months ended
December 31, 1997, the Phoenix Restaurant incurred an operating loss of
$88,693.
Service America has obtained a license to permit the sale of alcoholic beverages
at the racetrack. Garden State Park has a right of first refusal (subject to
regulatory approval) to purchase the liquor license at the expiration or other
termination of the Service America Vendor Agreement.

Prior to 1995, the annual New Jersey State Fair was held at Garden State
Park. In 1995, the Company contracted with another fair operator to hold a
similar fair. In 1996, the Company entered into an agreement permitting the
annual New Jersey State Fair (under new ownership) to be held at Garden State
Park (the "State Fair Agreement") during July and/or August from 1996 until
1998.
The State Fair Agreement provides that the Company will receive a fixed fee and
a percentage of the receipts from admissions, concessions, and other amenities
received by the operator of the State Fair. The Company has the option, at its
sole discretion, to renew the agreement to conduct the state fair during the
calendar year 1999. The New Jersey State Fair was held at Garden State Park in
August 1996 for a period of ten days and in August 1997 for a period of eleven
days.

On January 1, 1994, the Company granted a license (the "TTI License") to
Ten Tables, Inc. ("TTI") pursuant to which TTI has the right to conduct a flea
market on the Garden State Park property. The flea market is conducted on a
section of property not normally used by the Company for racing operations. The
TTI License is for an initial term of five years,
with an extension provision for
an additional five years. The Company receives a fixed
fee for each day the flea
market is conducted (approximately 80 days per year) plus parking revenue. In
connection with the sale on October 20, 1997 of the 56 acre site where the flea
market had previously been held, the flea market has been relocated to another
site on the Garden State Park property and TTI has received permanent zoning
approval for such location. See "Developments During the Last Fiscal Year."

FREEHOLD RACEWAY

Freehold Raceway is owned by Freehold Racing Association ("FRA"), a
wholly-owned subsidiary of the Company, and is operated by FRA and Atlantic City
Harness, Inc. ("ACH"), also a wholly-owned subsidiary of the Company. Freehold
Raceway is located on a 51 acre site in western Monmouth County, New Jersey and
is the nation's oldest harness track. Daytime racing has been conducted at
Freehold Raceway since 1853; pari-mutuel wagering commenced in 1941.

Freehold Raceway was acquired by the Company in January 1995 for a
purchase price of $17,800,000, of which approximately
$12,500,000 was represented
by a promissory note (the "Freehold Note"). The Freehold
Note matures in January
2003 and bears interest at 80% of the prevailing
prime rate (not to exceed 6% per
annum). The Freehold Note is secured by a mortgage on the land and buildings at
Freehold Raceway and certain other collateral.

The grandstand is an approximately 150,000 square foot, five level,
steel frame, enclosed, fully heated and air conditioned facility constructed in
1986 (the "Grandstand"). The Grandstand can accommodate up to 10,000 spectators,
including seating for approximately 2,500 spectators, and has a sit-down
restaurant as well as seven food concession stands. Additional facilities
include receiving barns with an adjacent paddock area, parking lots to
accommodate approximately 2,500 vehicles and a
two story administration building.

The operations of ACH and FRA are regulated by the Racing Commission.
See "Government Regulation." The Company holds two racing permits for harness
racing at Freehold Raceway through ACH and FRA.

OPERATIONS

Racing Dates. Freehold Raceway's racing dates consist solely of daytime
harness racing dates. FRA conducted a Harness Meet (the "FRA Harness Meet") from
August 15, 1996 through December 31, 1996 for a total of 100 racing dates. ACH
conducted a Harness Meet (the "ACH Harness Meet") from January 1, 1997 through
May 26, 1997 for a total of 106 racing dates. For Fiscal 1998, the Company
conducted the FRA Harness Meet from August 14, 1997 through December 31, 1997,
with 99 racing dates and is conducting the ACH Harness Meet from January 1, 1998
through May 25, 1998, with 97 racing dates.

Simulcasting. Freehold Raceway hosts full-card simulcast betting on
thoroughbred and harness racing from numerous tracks in North America. For New
Jersey intra-state simulcasts, a portion of the Receiving Track wagering must be
used for purses at the Sending and Receiving Tracks. In such situations when
Freehold Raceway is the Sending Track, a portion of the Receiving Track wagering
is required to be used for purses at Freehold Raceway during the current live
race meeting. In cases where Freehold Raceway is the Receiving Track, it is
required to remit a percentage of its pari-mutuel wagering to the Sending Track
and is required to pay a portion of the commission to purses if live racing is
being conducted, or at the next live race meeting if live racing is not in
progress at the time of simulcasting. Freehold Raceway conducts day and night
year around simulcasting.

Attendance and Wagering. The following table summarizes average daily
attendance and wagering at Freehold Raceway and races simulcast to other racing
facilities during the past three fiscal years:

<TABLE>
<S> <C> <C><C> <C><C> <C><C>
Approximate
Commission
% of
Wagering* DAILY AVERAGES

ACH HARNESS MEETS Fiscal Year EndedJune 30,
1997 1996 1995

Attendance 2,099 2,085 2,298

Live Wagering 9.3% $214,126 $252,058 $290,449

Simulcast Sending
Signal:

New Jersey Tracks 3.7% $167,642 $181,929 $184,427
(Avg.)

Atlantic City 4.5% $22,467 $23,073 $25,203
Casinos

Out-of-State 1.5% $391,500 $389,771 $322,948
Tracks

Combined Wagering $795,735 $846,831 $823,026

Number of Live Race 106 102 107
Days
</TABLE>
<TABLE>
<S> <C> <C><C> <C><C> <C><C>
Approximate
Commission
% of
Wagering* DAILY AVERAGES

FRA HARNESS MEETS Fiscal Year EndedJune 30,
1997 1996 1995

Attendance 2,161 2,286 2,421

Live Wagering 9.3% $248,819 $283,361 $323,079

Simulcast Sending
Signal:

New Jersey Tracks
(Avg.) 3.6% $166,714 $170,226 $182,427

Atlantic City
Casinos 4.5% $23,547 $23,937 $25,304

Out-of-State
Tracks 1.5% $347,626 $392,704 $292,914

Combined Wagering $786,706 $870,228 $823,724

Number of Live Race 100 99 109
Days
</TABLE>

* Amounts equal the portion received by the track after payment of purses to
horsemen.

The following table summarizes average wagering experienced by Freehold
Raceway in connection with receiving simulcasts during the past three fiscal
years:

COMBINED HARNESS MEETS

AVERAGE DAILY SIMULCAST WAGERING (RECEIVING TRACK)

FISCAL YEAR ENDED JUNE 30,
1997 1996 1995

<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
From Tracks *: # of # of # of
days ($) days ($) days ($)

New Jersey
Tracks:

Atlantic City (T) 36 24,626 52 34,270 57 47,230

Garden State(T,H) 117 45,919 117 50,563 130 53,851
Park

Meadowlands (T,H) 232 88,848 234 100,776 249109,088

Out-of-State (T,H) 362 252,033 330 230,995 340159,694
Tracks

TOTAL ANNUAL
RECEIVING $118,107,660 $107,507,691 $91,151,147
WAGERING
</TABLE>

(T) = Thoroughbred, (H) = Harness
*The commission percentage of the wagering received by Freehold Raceway is
approximately 8.2% after the payment of purses to horsemen.

Other Operations. In December 1985, Freehold Raceway and an unaffiliated
third party, Sportservice, Inc. ("Sportservice"), entered into an agreement (the
"Sportservice Vendor Agreement") pursuant to which Sportservice was granted the
exclusive right to operate all food concessions at the racetrack facility. The
Sportservice Vendor Agreement requires that
Sportservice pay a monthly concession
fee to Freehold Raceway based on a percentage of adjusted gross receipts from
the food services. The Sportservice Vendor Agreement terminates in June 2002.
Sportservice holds a license to permit the sale of alcoholic beverages at
Freehold Raceway. Upon the termination of the Sportservice Vendor Agreement,
Sportservice has agreed to transfer such liquor license to Freehold Raceway at
no charge to Freehold Raceway.

COMPETITION

Freehold Raceway conducts all of its live harness racing during the
day. Garden State Park's live thoroughbred and
harness racing has been conducted
primarily at night, although day racing (in whole or part) may be conducted in
the future. The Company intends to conduct live harness racing at night at
Garden State Park on some dates when daytime live harness racing is being
conducted at Freehold Raceway.

On most days during the year, Garden State Park and Freehold Raceway each
conduct simulcasting in competition with live and simulcast racing being
conducted at the other's facility. In addition, at various times, each track
receives simulcasts of thoroughbred and harness
races from other tracks while the
same type of racing is being conducted live at the other track.

Garden State Park and Freehold Raceway face direct competition from
year-round, daytime, thoroughbred racing at Philadelphia Park in Bucks County,
Pennsylvania ("Philadelphia Park"), as well as from five off-track betting
parlors in the Philadelphia area operated by Philadelphia Park. Management
believes that telephone wagering to Philadelphia Park placed from locations in
Pennsylvania and areas outside Pennsylvania (including New Jersey) which allows
residents to place wagers from their homes and businesses, has had and will
continue to have a significant adverse impact on attendance and wagering at the
Company's racetracks. The Company expects that one additional off-track betting
parlor may be opened by Philadelphia Park in the Philadelphia area, which is
expected to directly compete with the Company's facilities.

The Company's racetrack facilities also face competition from (i)
Atlantic City Race Course (day thoroughbred
racing and summer simulcasting), (ii)
Delaware Park near Wilmington, Delaware (day thoroughbred racing and year-round
simulcasting), (iii) Monmouth Park (summer day
thoroughbred racing and year-round
simulcasting) and (iv) The Meadowlands (principally night thoroughbred and
harness racing and year-round simulcasting). With the exception of Monmouth
(with respect to Freehold Raceway), these tracks lie a greater distance from
either Garden State Park and Freehold than does
Philadelphia Park. Atlantic City
Race Course has reduced its 1998 meet to five days in May and has indicated that
it will discontinue live horse racing after this summer. Atlantic City Race
Course has also indicated that it has entered into an agreement to sell its
racetrack site to a developer, while retaining the right to develop an on-site
simulcasting facility in the future if New Jersey law permits. The Company's
racetracks also face competition from racetracks in New York, Delaware, Maryland
and Pennsylvania, most of which tracks have
larger purses which enable the tracks
to attract better quality horses and greater attendance. In 1997, the Maryland
lottery donated $5 million towards enhancing that state's total purse
distribution, and that amount is expected to double in 1998.

Garden State Park and Freehold Raceway simulcast some or all of their
racing to, and receive simulcasting of some or all of their racing from, all of
the above New Jersey racetracks. A New Jersey state law enacted in 1992 which
permits Garden State Park, Freehold Raceway, other New Jersey racetracks and the
Atlantic City Casinos to receive entire race cards from out-of-state tracks via
simulcasting may have had, and may have in the future, the effect of increasing
the competition the Company's racetracks face in New Jersey. In addition, off-
track wagering and full card simulcasting
are conducted in Pennsylvania, New York
and Maryland, full card simulcasting is conducted in Delaware, and telephone
wagering is available in Pennsylvania and New York. New Jersey law does not
permit off-track wagering or telephone wagering.

Since September 1995, Delaware racetracks have offered slot machines to
their patrons. This may have had, and may have in the future, the effect of
increasing the competition the Company's racetracks face from legalized gaming
in other Mid-Atlantic states. Competition from off-track betting, casino
gambling (in Atlantic City), various state lotteries and other forms of gambling
and entertainment, including professional and collegiate sporting events, may
also have had, and may have in the future, a
material adverse effect on racetrack
attendance, wagering and thus profitability at Garden State Park and Freehold
Raceway. From time to time, legislation has been introduced in New Jersey and
neighboring states which would further expand gambling opportunities. Approval
of such legislation could have the effect of increasing competition for the
Company in the future.

On January 16, 1998, the nineteen member Racing Industry Study Commission
appointed by the Governor of New Jersey issued its report on the horse racing
industry in New Jersey, including existing statutes and regulations, in-state
competition for gambling dollars and legislation in neighboring states. The
Commission concluded that the long-term health of the New Jersey racing industry
was dependent upon a purse structure which would be sufficient to support
breeders and owners, attract quality horses to
New Jersey racetracks, and protect
New Jersey green acres by keeping farms economically viable. Accordingly, the
Commission recommended, among other things, an infusion of $25 million to $50
million of state funds annually to augment racetrack purses and revenue and
regulatory reform of the racing industry to allow off-track betting and wagering
through telephones, the Internet and other locations. The Commission's
recommendations are under consideration by the Governor. There can be no
assurance that any or all of the Commission's recommendations will be adopted by
the Governor or the New Jersey legislature.
Certain of the recommendations would
also require an amendment to the New Jersey constitution, and there can be no
assurance that any amendment will be approved.

GOVERNMENT REGULATION

The Company's operations at Garden State Park and Freehold Raceway are
subject to regulation (i) under the Racing Act of 1940, as amended and
supplemented (the "Racing Act") and the rules and regulations of the Racing
Commission and (ii) by the CCC.

Under the Racing Act, all pari-mutuel employees and all others who are
connected with the training of horses or the conduct of races, must be licensed
by the Racing Commission. In addition, no person may hold or acquire, directly
or indirectly, beneficial ownership of more than 5% of the voting securities of
the Company without the approval of the Racing Commission. The issuance by the
Company of 2,093,868 shares of its Common Stock to Las Vegas Entertainment
Network, Inc. ("LVEN"), a Delaware corporation, required Racing Commission
approval as it exceeded the 5% threshold. See "Developments During the Last
Fiscal Year" for a description of that stock issuance. The Company did not seek
prior approval for the issuance of the shares to LVEN and, accordingly, is in
violation under the Racing Act. As a result, the Racing Commission could revoke
the Company's licenses, impose a fine or otherwise sanction the Company. The
Company does not believe that the amount of any such fine will have a material
adverse effect on its financial position.
In connection with pending litigation,
the minority directors have challenged the authorization and enforceability of
certain agreements and actions taken by the Company, including the issuance of
the above shares to LVEN. See "Legal Proceedings."

At least 85% of the persons employed by the Company at Garden State Park
and Freehold Raceway must be residents of New Jersey (excluding jockeys, drivers
or apprentices, exercise boys, owners, trainers, clockers and governing and
managing officials). The Racing Commission has the authority to require the
Company to discharge any employee who: (i) fails or refuses for any reason to
comply with the rules and regulations of the Racing Commission; (ii) in the
opinion of the Racing Commission is guilty of fraud, dishonesty or incompetency;
(iii) has been convicted of a crime involving moral turpitude; or (iv) fails or
refuses for any reason to comply with any of the provisions of the Racing Act.

Additional restrictions and/or requirements imposed by the Racing
Commission on the Company's racetrack operations
include, but are not limited to,
the setting of the admission price required to be charged by the Company, a
requirement that the Company (and all other racetracks operating in New Jersey)
must schedule at least one race per day limited to registered New Jersey-bred
foals and the methods the Company may use to distribute pari-mutuel pools and
"breaks" (the odd cents remaining after computing the amount due holders of
winning pari-mutuel tickets). The Racing Commission also regulates the manner
of keeping of certain of the Company's books and records.

The Racing Commission is also responsible for the allocation of racing
dates. There are no legislative limits or constraints on the number of racing
dates that Freehold Raceway may be allotted. In the case of Garden State Park,
however, by law the Racing Commission is to grant not less than 100 racing dates
for thoroughbred racing after January 31 and prior to July 1 in any year and not
less than 100 racing dates for harness racing after August 31 and prior to
January 1 of the following year, if and to the extent that application is made
therefor. For more information regarding racing dates at each of Garden State
Park and Freehold Raceway, see "- Garden State Park - Operations - Racing Dates"
and "-Freehold Raceway - Operations - Racing Dates" above.

Because the Company simulcasts to Atlantic City casinos, the Company's
simulcasting agreements are required to be filed with and approved by the CCC.
In addition, the Company is required to be approved and licensed by the CCC as
a non-gaming related casino service industry.
Certain of the Company's employees
and its directors and significant stockholders are also required to be approved
by the CCC. As of the date hereof, all of the Company's employees required to
be approved and all of the Company's directors and significant stockholders have
been approved by the CCC or have filed applications
seeking such approval. There
can be no assurance that all such parties will obtain approval or the effect on
the Company if such approvals are not obtained.

The New Jersey Division of Gaming Enforcement ("DGE") is currently
investigating in accordance with their statutory obligation to determine the
qualification of the Company and its directors and significant stockholders in
connection with Garden State Park's and Freehold Raceway's licenses with the CCC
and the Racing Commission. The Company has no information with respect to the
potential outcome of such investigation. In the event that the DGE concludes
that one or more of such individuals are not
qualified, the CCC and/or the Racing
Commission may require any such stockholder to divest his or her interests and
any such director may be asked to resign. Failure of such individuals to comply
with such requests (other than during the pendency of an appeal of such order)
could jeopardize the Company's racing licenses and ability to conduct business
with any casino licensees, including simulcasting to Atlantic City casinos. See
"Management's Discussion and Analysis of Financial Conditions and Results of
Operations."

CASINO DEVELOPMENT OPERATIONS

EL RANCHO PROPERTY

On January 24, 1996, the Company purchased the nonoperating El Rancho
Property from LVEN. The El Rancho Property
is an approximately 21 acre property
bounded (i) on the west by Las Vegas Boulevard South (Las Vegas strip with
approximately 735 feet of frontage), (ii) on the south by the Algiers Hotel and
Riviera Boulevard, (iii) on the east by an undeveloped lot and (iv) on the north
by a "Wet and Wild" attraction. The El Rancho Property, which has not operated
since July 1992, consists of a vacant hotel building with 1,008 rooms, an
approximately 90,000 square foot casino and ancillary area, a 52-lane bowling
alley, a swimming pool and a parking garage. The El Rancho Property was one of
the first large scale hotel casinos built in Las Vegas and previously operated
under an old west theme.

In February 1996, the Company announced its intention to develop the El
Rancho Property using the theme "Starship Orion." In June 1996, the Company
acquired an option from Sheraton Gaming Corporation to purchase an undeveloped
parcel of land adjacent to the El Rancho Property and made a series of non-
refundable deposits through Fiscal 1997 in the aggregate amount of $2,585,000 in
connection with such option. The purchase of the parcel would have expanded the
Company's acreage, provided space for future expansion and increased parking
availability. The Company was unable to complete the purchase of the parcel by
December 27, 1996 and forfeited such deposits. In February 1997, the Company
announced that it would develop the property under a more modest country and
western theme to be known as "CountryLand". These plans include the development
of a 34 story tower addition containing 380 hotel rooms, a showroom with seating
for approximately 1,800 spectators, a 450 seat bullring, a country western dance
hall, a swimming pool, shopping mall and new restaurants. See "Developments
During the Last Fiscal Year" and "Financing" below.

The Company believes that additional financing in the amount of $50
million will be sufficient to complete the development of the El Rancho Property
under the CountryLand theme. However, the Company has considered expanding the
CountryLand project to the extent that the development costs could increase by
an additional $25 million. See "Financing" below.

Financing. The aggregate purchase price of the El Rancho Property was
approximately $43.5 million, consisting of (i) approximately $12.5 million in
cash, (ii) approximately $6.5 million in the form of an unsecured mortgage note
(paid during the third quarter of Fiscal 1996), (iii) approximately $14 million
in the form of the assumption by the Company of a first mortgage note (which was
refinanced in connection with a credit facility
from Foothill Capital Corporation
and subsequently with the CSFB Credit Facility (defined below)) and (iv)
approximately $10.5 million in the form of a secured promissory note and accrued
interest thereon of approximately $1.1 million (which was subsequently exchanged
for 2,326,520 shares of the Company's Common Stock in connection with the CSFB
Credit Facility (as hereinafter defined), of which 2,093,868 shares were issued
to Casino-Co Corporation, a wholly-owned subsidiary of LVEN, and 232,652 shares
were issued to Credit Suisse First Boston Mortgage Capital, LLC ("CSFB")). For
a more detailed description of the CSFB Credit Facility, see the information set
forth under the caption "Developments During
the Last Fiscal Year." In addition,
in connection with the purchase of the El Rancho
Property, Casino-Co obtained the
right to receive contingent consideration of up to $160 million based on the
"adjusted cash flow" from the El Rancho Property (the "$160 Million Profit
Participation Note"). See "Developments During the Last Fiscal Year." In
connection with pending litigation, the minority Board members have challenged
the authorization and enforceability of certain agreements, including the CSFB
Credit Facility. See "Legal Proceedings."

On May 23, 1997, the Company and certain of its subsidiaries entered into
a two-year $55 million credit facility with CSFB secured by a pledge of certain
of the personal and real property of the Company, including the El Rancho
Property (the "CSFB Credit Facility"). The proceeds of the CSFB Credit Facility
were used by the Company to repay its existing $30 million credit facility with
Foothill Capital Corporation, to provide funds for working capital and other
general purposes, including, but not limited to, preliminary development of the
El Rancho Property. The Company is currently in default under certain non-
financial covenants of the CSFB Credit Facility. There can be no assurance that
CSFB will continue to forbear with respect to the exercise of its rights under
the CSFB Credit Facility, including its right to accelerate the loan. The
Company is in discussions with CSFB regarding the grant of waivers of such
defaults in connection with the proposed settlement of the pending litigation.
See "Management's Discussion and Analysis of Financial Conditions and Results of
Operations."

The Company is involved in various lawsuits brought by certain minority
Board members and stockholders. See "Legal Proceedings." The Company believes
that while such litigation is pending, it is unlikely that CSFB or another major
lending institution will provide additional funding to the Company. The
Company's inability to obtain such additional
funding by the end of calendar year
1998 could have a serious financial impact upon the Company and its results of
operations. See "Developments During the Last Fiscal Year" and "Management's
Discussion and Analysis of Financial Conditions and Results of Operations."

The litigation referenced above is at a standstill as the parties are in
the final stages of settlement negotiations. Although the parties believe that
a settlement is imminent, there can be no assurance that a settlement will be
reached or as to the terms thereof. In the
event a settlement cannot be reached,
there can be no assurance as to the outcome of such litigation or as to the
impact the litigation itself or any resolution thereof may have on the Company's
operations, financial position, results of operations or cash flows. In such
litigation, the plaintiffs, minority Board members, have challenged the
authorization and enforceability of certain actions taken and agreements entered
into by the Company, including the CSFB Credit Facility, the Tri-Party Agreement
and the Bi-Lateral Agreement. In the event the plaintiffs prevail in such
litigation, such actions and agreements may be subject to modification,
termination or revision, the impact of which on the Company cannot be
predicted.
See "Legal Proceedings" and "Management's Discussion and Analysis of Financial
Conditions and Results of Operations."

As part of the proposed settlement, it is the Company's intention to
dispose of the El Rancho Property. However, there can be no assurance that the
settlement and subsequent sale of the El Rancho Property can be completed or as
to the terms thereof. See "Legal Proceedings."

Construction in Progress. Construction and renovation of the El Rancho
Property is subject to a number of conditions including, but not limited to,
approval of the Company's plans by the local building commission and acquisition
of additional funding. As of May 1, 1998, the Company has expended approximately
$50,864,000 (including the initial acquisition cost of $43.5 million) in
acquisition and development costs related to the El Rancho Property. Such costs
include land and building acquisition costs, interest, legal, consulting and
other professional fees, and other carrying costs. The Company anticipates that
when and if construction is fully under way, it will take approximately eighteen
months to complete construction and commence operations on
the El Rancho Property
under the CountryLand theme. However, as stated above, it is unlikely that the
Company will be able to obtain additional financing in the reasonable future,
which financing is necessary for the Company to develop the El Rancho
Property.
Until any such financing is obtained, the Company's work at the El Rancho
Property consists principally of normal maintenance and emergency repairs.

Entertainment and Management. As part of the purchase of the El Rancho
Property, Las Vegas Casino Corporation ("LVCC"), a wholly-owned subsidiary of
LVEN, retained the exclusive right to manage all aspects of the CountryLand
entertainment activities pursuant to an entertainment
management agreement. This
will include: (i) responsibility for management and oversight of booking all
acts, performers, entertainers, movies, rides and other non-gaming attractions
of any kind or nature at the property site; (ii) arranging all advertising
activities; and (iii) managing all other entertainment venues. The term of the
Agreement is ten years commencing on the date which is six months prior to the
projected opening date of the El Rancho Property; LVCC has the option to renew
the Agreement for two consecutive five-year terms. The Agreement provides for
an annual fee to LVCC of $800,000, subject to annual increases. LVCC will also
receive (i) 25% of profits from entertainment activities, (ii) 10% of the cost
of all advertising and (iii) a booking fee equal to 10% of gross compensation
paid to talent.

Pursuant to the Bi-Lateral Agreement entered into by the Company and LVEN
in connection with the CSFB Credit Facility, the parties agreed to amend the
entertainment management agreement to provide for a lease by the Company to LVCC
of space within the El Rancho Property on or from which all food, beverage and
retail activities will be conducted (exclusive of
the mezzanine space, the rights
to which will be retained by the Company). No amendment has yet been completed
and the terms of such lease arrangement have not been finalized. In the
litigation referenced above, the minority Board members have challenged the
authorization and enforceability of the Bi-Lateral Agreement. See "Legal
Proceedings."

COMPETITION

Assuming that the Company develops and opens the El Rancho Property as
CountryLand, the El Rancho Property would compete with approximately 20 major
casinos and/or casino-hotels located on or near the
Las Vegas strip (the location
of the El Rancho Property), approximately nine major
casino-hotels located in the
downtown Las Vegas area and additional major casino facilities located elsewhere
in the Las Vegas area. In addition to such existing competition, the
construction of several new casino-hotels and/or the expansion of existing
facilities have been announced or are already in progress including, but not
limited to, Bally's Paris, Circus Circus' Project Paradise and the Venetian.
During 1996 and 1997, at least two new major casino-hotels, the Monte-Carlo
Resort and Hotel and New York, New York, were opened and several other casino-
hotels, notably the Luxor, Circus and the Rio Suite Hotel & Casino, completed
expansion projects. As a result, hotel and motel
capacity in Las Vegas increased
by approximately 23,000 rooms during this period.

The Company believes that the El Rancho Property's ability to compete,
if and when developed, would be based on the atmosphere and excitement offered
by CountryLand, the desirability of its location, the quality and relative value
of its hotel rooms and restaurants, the variety of entertainment and customer
services, the availability of convention facilities, the Company's marketing
strategy and special marketing and promotional programs. The Company believes
that the most significant competition for the El Rancho Property would come from
certain large casino-hotels located on or near the Las Vegas strip and which
offering amenities and marketing programs similar to those that will be offered
by the El Rancho Property. Such facilities include, but are not limited to,
Bally's, Flamingo Hilton, Frontier, Harrah's, Sahara, Circus, Stardust and
Tropicana. Many of these casino-hotels are larger than the El Rancho Property
and have greater name recognition and financial resources. There can be no
assurance that the El Rancho Property, if developed, would be able to compete
successfully against such casino-hotels.

To a lesser extent, the El Rancho Property would compete with casino-
hotel operations located in the Laughlin and Reno-Lake Tahoe areas of Nevada, in
Atlantic City, New Jersey and in other areas where casino gambling is currently
legal. While casino gambling is currently not legal in or in close proximity to
any major metropolitan areas such as New York City,
Chicago or Los Angeles, there
can be no assurance that such gambling will not be legalized in any such
locations in the near future. If casino gambling were to be legalized in such
major metropolitan areas, the business and
operations of the Company with respect
to the El Rancho Property could be adversely affected.

GOVERNMENT REGULATION

The ownership and operation of casino gaming facilities in Nevada are
subject to the provisions of the Nevada Gaming Control Act and the regulations
promulgated thereunder (the "Nevada Gaming Act") and to licensing and regulatory
control by the Nevada State Gaming Control Board, the Nevada Gaming Commission
and local licensing boards (collectively, the "Nevada Gaming Authorities").

Under the Nevada Gaming Act, the Company, its officers, directors and
certain key employees must register with the Nevada Gaming Commission, be found
suitable and be granted all requisite licenses in order to conduct a
nonrestricted gaming operation in Nevada. In the event the Company develops the
El Rancho Property, the Company intends to apply for the necessary governmental
licenses, permits and approvals for the El Rancho Property. However, there can
be no assurances that any licenses, permits or approvals that may presently be
required, or may be required in the future, will be received by the Company or
that once received, they will not be suspended or revoked. Nevada gaming
licenses are not transferable. In addition, persons or entities who hold or
acquire beneficial ownership of more than 5% of the voting securities of the
Company are subject to the Nevada Gaming Act.

Under the Nevada Gaming Act, the Company and its subsidiaries may engage
in gaming activities outside the State of Nevada without seeking the approval of
the Nevada Gaming Authorities, provided that such activities are lawful in the
jurisdiction where they are to be conducted and that certain information
regarding the foreign operation is provided to the Nevada Gaming Authority on a
periodic basis.

DEVELOPMENTS DURING THE LAST FISCAL YEAR

On August 19, 1996, the Company and its financial advisor, Standard
Capital Group Inc. ("Standard Capital"), terminated their contractual
relationship. In connection with such termination, the Company paid Standard
Capital an aggregate amount of $120,000, representing all outstanding fees and
expenses as of August 14, 1996. The Company also granted Standard Capital
warrants (the "SC Termination Warrants") to purchase 450,000 shares of the
Company's Common Stock, par value $2.00 per share (the "Common Stock"),
consisting of warrants to purchase 250,000 shares pursuant to contractual
obligations and warrants to purchase 200,000 shares as a termination payment.
The SC Termination Warrants are exercisable for five years at an exercise price
of $5.00 per share. Following the NPD Acquisition (as defined below), the
Company rehired Standard Capital to render certain financial advisory and
investment banking services to the Company with respect to obtaining financing
and identifying potential transactions aimed at enabling the Company to
capitalize on its existing growth opportunities and to increase stockholder
value. In connection with certain investment banking services provided in
December 1996 and January 1997 with respect to locating a potential financing
source for the Company, Standard Capital received a fee of $250,000. In
consideration of its services with respect to the CSFB Credit Facility, Standard
Capital received a fee (including expenses) in the amount of $2,252,403.

On September 26, 1996, the Company's then Board of Directors approved a
three-year consulting contract (the "Sterns Contract") pursuant to which Joel H.
Sterns was to serve as Chairman of the Board on a full-time basis at an annual
compensation of $384,000. The contract also provided that, unless otherwise
terminated before the end of any year, the Sterns Contract would renew for an
additional year and that upon the occurrence of a Termination Event (as defined
in the Sterns Contract), Mr. Sterns would be entitled to receive certain
severance amounts. Effective November 4, 1996, pursuant to a written consent of
the holders of a majority of the Company's Common Stock, the Board removed Mr.
Sterns as Chairman. Under the Sterns Contract, such removal was deemed to be a
"Termination Event." On December 20, 1996, the Board approved a settlement
agreement with Mr. Sterns pursuant to which Mr. Sterns has been paid $252,000 in
settlement of all amounts due, reimbursable expenses and termination payments to
which Mr. Sterns might otherwise be entitled.
See "Notes to Financial Statements
- - Commitments and Contingencies" and "Termination and Severance Agreements."

On November 4, 1996, stockholders representing approximately 56% of the
Company's issued and outstanding Common Stock, including Robert E. Brennan
("Brennan"), approved, by written consent in
accordance with the Delaware General
Corporation law, the removal of Joel H. Sterns (then Chairman of the Board of
Directors), Roger Bodman, Clifford Goldman, Steve Norton, Robert Peloquin and
Arthur Winkler as directors and elected four new directors (Frank A. Leo, John
U. Mariucci, James J. Murray and Frank Koenemund) to fill the newly created
vacancies on the Board of Directors (the "Board"). At a meeting of the Board
on November 5, 1996, Frank A. Leo was named Chairman of the Board.

On October 28, 1996, the Company announced that LVEN had forfeited
certain rights under a January 1996 purchase agreement between the Company and
LVEN with respect to the El Rancho Property as a
result of its failure to satisfy
certain contractual pre-conditions. Following such announcement, LVEN advised
the Company that it would contest the Company's position with respect to the
alleged forfeiture. On February 4, 1997, the Company announced that all
disagreements with LVEN regarding development of the El Rancho Property had been
resolved. See "El Rancho Property."

In connection with an option (acquired in June 1996 from Sheraton Gaming
Corporation) to purchase an undeveloped parcel of land adjacent to the El Rancho
Property, the Company made a series of non-refundable deposit payments through
Fiscal 1997 in the aggregate amount of $2,585,000. The purchase of such parcel
would have expanded the Company's frontage, provided space for future expansion
and increased parking availability. The terms of
the option required the Company
to complete the transaction by December 27, 1996 (the "Option Settlement
Date").
The Company was unable to complete the purchase by
the Option Settlement Date and
forfeited such deposits. See "El Rancho Property" and "Notes to Financial
Statements."

On December 5, 1996, NPD, Inc., a Delaware corporation owned by Messrs.
Nunzio P. DeSantis and Anthony Coelho ("NPD"), entered into an agreement (the
"NPD Acquisition Agreement") with Brennan to purchase the "NPD Acquisition") all
of the Company's Common Stock then owned by Brennan (2,904,016 shares or 24.9%
of the Company's issued and outstanding Common Stock). The NPD Acquisition was
subject to certain conditions including, but not limited to, the approval of the
U.S. bankruptcy court, the granting to Robert Green of an option to purchase
certain of the Brennan shares to be acquired by NPD and the establishment by Mr.
DeSantis of an unsecured $5 million revolving line of credit for the benefit of
the Company. The minority directors allege in the pending litigation that the
obligation to fund the $5 million revolving line of credit was a condition of
their approval of the NPD Acquisition. See "Legal Proceedings."

In 1995, Brennan resigned as a director, Chairman of the Board and Chief
Executive Officer of the Company as a result of actions taken by the DGE. The
DGE filed a complaint with the CCC seeking to prohibit the Company's racetrack
subsidiaries from simulcasting to Atlantic City casinos on the grounds that
Brennan had been found liable for securities laws violations in a civil action
in the Southern District of New York. The Racing Commission also advised the
Company that, on the same grounds, it was considering the issuance of a Notice
of Intention to suspend or revoke the permits held by Garden State Park and
Freehold Raceway. On November 6, 1996, the CCC accepted a proposed stipulation
of settlement (over Brennan's objections) which required Brennan to place his
shares of the Company's Common Stock in a liquidating trust. Such stipulation
also resolved all of the outstanding issues with the Racing Commission.

On January 8, 1997, the U.S. bankruptcy court approved the sale of
Brennan's shares to NPD. On January 15, 1997, NPD completed its acquisition of
Brennan's shares and, in accordance with an agreement, the directors of the
Company (the "Old Directors"), with the exception of Messrs. Leo, Quigley, Dees,
and Murray, resigned. At a meeting of the Board on January 15, 1997, Messrs.
DeSantis, Coelho, Michael C. Abraham, Kenneth Scholl and Joseph Zappala were
elected as directors (the "New Directors"), Mr. Coelho was named Chairman of the
Board and Mr. DeSantis was named the Company's
Chief Executive Officer. Pursuant
to the Securities Exchange Act of 1934 (the "Exchange Act") which requires ten
days notice to stockholders prior to a change of control of the Board, Mr.
Zappala's term did not commence until January 25, 1997, ten days after an
Information Statement describing the change of control was provided to
stockholders.

On January 15, 1997, the Board of Directors accepted the resignation of
Arthur Winkler as Executive Vice President of the Company and President of the
Company's racetrack subsidiaries. See "Termination and Severance Agreements."

On May 23, 1997, the Company and certain of its subsidiaries entered into
a two-year $55 million credit facility with CSFB, secured by a pledge of certain
of the personal and real property of the Company (the "CSFB Credit Facility").
Interest under the CSFB Credit Facility is payable monthly in arrears at 7% over
the London Interbank Offered Rate ("LIBOR"). The scheduled maturity date of the
CSFB Credit Facility is June 1, 1999, at which time all
outstanding principal and
interest are payable in full. The CSFB Credit Facility is evidenced by a
convertible promissory note (the "CSFB Note") and loan agreement (the "CSFB Loan
Agreement"). Pursuant to the terms of the CSFB Note, $10 million in aggregate
principal amount of the CSFB Note may, in certain circumstances, including upon
the maturity date of the CSFB Note, upon the prepayment of $10 million in
aggregate principal amount of the CSFB Note or upon acceleration of the CSFB
Note, at the option of CSFB, be converted by CSFB into shares of the Company's
Common Stock at a conversion price of $8.75 per share (subject to adjustment in
certain events). In addition, pursuant to the CSFB Loan Agreement, CSFB was
granted warrants to purchase up to 1,044,000 shares of Common Stock at an
exercise price of $4.375 per share (subject to adjustment upon the occurrence of
certain events). Warrants to purchase 546,847 shares of Common Stock are
immediately exercisable by CSFB and warrants to purchase 497,153 shares become
exercisable at any time prior to May 23, 2002, upon delivery to the Company by
CSFB of a firm commitment to provide additional funding in connection with the
El Rancho Property of at least $50 million. The Company has granted certain
registration rights to CSFB with respect to the warrants and the warrant
shares.
The proceeds of the CSFB Credit Facility were used by the Company to repay the
Company's existing $30 million credit facility with Foothill Capital Corporation
and to provide funds for working capital and other general corporate purposes,
including, but not limited to, preliminary development of the El Rancho
Property.
The Company is in violation of certain non-financial covenants of the CSFB Loan
Agreement and related loan documents. There can be no assurance that CSFB will
continue to forbear with respect to the exercise of its rights under the CSFB
Loan Agreement and related documents, including its right to accelerate the
loan.
The Company is in discussions with CSFB regarding the grant of waivers of such
defaults in connection with the proposed settlement of the pending litigation,
in which, among other things, the validity of the CSFB Loan Agreement is
challenged. See "Management's Discussion and Analysis of Financial Conditions
and Results of Operations." In connection with pending litigation, the minority
Board members have challenged the authorization and enforceability of certain
agreements, including the CSFB Credit Facility. See "Legal Proceedings."

Under the terms of an agreement among the Company, CSFB and LVEN in
connection with the CSFB Credit Facility (the "Tri-Party
Agreement"), and subject
to, among other things, an independent valuation of Casino-Co, receipt of a
fairness opinion from an independent investment banking firm and the approval of
the Board and the Company's stockholders, none of which have yet occurred, the
Company agreed to acquire Casino-Co (which holds as its principal asset the $160
Million Profit Participation Note) in exchange for shares of Common Stock (the
"Casino-Co Transaction"). The $160 Million Profit
Participation Note was granted
to Casino-Co in connection with the Company's purchase of the El Rancho
Property.
See "El Rancho Property -Co Transaction upon
consummation of the Transaction, in consideration for CSFB's consent and for
certain advisory services. LVEN has agreed to grant Mr. DeSantis an irrevocable
proxy to vote any or all of the shares to be issued to it in the Casino-Co
Transaction until the occurrence of certain events, including, among other
things, the repayment of the CSFB loan or the distribution of the shares to
LVEN's stockholders generally. The Company has granted CSFB and LVEN certain
registration rights with respect to the shares. In connection with pending
litigation, the minority Board members have challenged the authorization and
enforceability of certain agreements, including the Tri-Party Agreement. See
"Legal Proceedings."

The $160 Million Profit Participation Note provides that Casino-Co would
receive, as additional consideration for the sale of the El Rancho Property to
the Company, an interest in the "adjusted cash flow" of the El Rancho Property
in the amount of 50% for the first six years following the opening of the casino
and 25% thereafter until such time as Casino-Co has received $160 million, but
only after (a) the Company has recouped (i) the aggregate
amount of cash payments
applied to the purchase price, (ii) payments made under the $6.5 million note
and/or the $10.5 million note, (iii) $2 million and (iv) any amounts that the
Company invested in the El Rancho Property after the purchase, together with
interest at 8% per annum from the date of the investment; (b) Casino-Co has (i)
received payment of all principal and interest, if any, remaining outstanding
under the $6.5 million note and/or the $10.5 million note and (ii) recouped $4
million plus any amount invested in the El Rancho
Property after the purchase and
approved by the Company, together with interest
thereon at a rate of 8% per annum
from the date of investment; and (c) the Company has received an additional $2
million, together with interest thereon at the
rate of 8% per annum from the date
of the purchase. The term "adjusted cash flow" is defined as cash flow from the
El Rancho Property before taxes, less the payment of any debt requirements and
capital lease payments and less certain fees received or accrued for certain
initial rent or lease payments. In connection with
the CSFB Credit Facility, the
Company and LVEN entered into a Bi-Lateral Agreement
(the "Bi-Lateral Agreement")
which fixed the amount the Company could recoup prior to Casino-Co receiving
consideration under the $160 Million Profit Participation Note at $35 million.
In addition, the Bi-Lateral Agreement set the maximum debt service to be netted
against cash flow from operations of the El Rancho Property in computing
"adjusted cash flow" at $65 million, with a further limitation to $27 million in
the event that additional financing over $55 million is not required for the
development of the El Rancho Property. In connection with pending litigation,
the minority Board members have challenged the authorization and enforceability
of certain agreements, including the Bi-Lateral Agreement. See "Legal
Proceedings."

On June 19, 1997, the Company entered into an agreement with D&C Gaming
Corporation ("D&C"), a Delaware corporation owned by Mr. DeSantis and Mr. Joseph
Corazzi, the President and Chairman of LVEN, pursuant to which the Company paid
a non-refundable deposit of $600,000 for an option to acquire the operating
leases for two racetracks located in New Mexico. The option agreement has been
terminated and D&C has agreed to repay the $600,000 deposit to the Company. See
"Certain Relationships and Related Party Transactions." In connection with
pending litigation, the minority Board members have challenged the authorization
and enforceability of certain agreements, including the option agreement. See
"Legal Proceedings."

On July 10, 1997, the Company executed an agreement to lease office space
in Albuquerque, New Mexico for a five-year period, expiring on July 31, 2002.
The lease provides for a current monthly rent of $8,580, increasing to $9,935
when the space is fully occupied. See "Certain Relationships and Related
Transactions." In connection with pending
litigation, the minority Board members
have challenged the authorization and enforceability of certain agreements,
including the Albuquerque lease. See "Legal Proceedings."

Effective June 27, 1997, in accordance with the Tri-Party Agreement, the
Company exchanged an aggregate of 2,326,520 shares of Common Stock (based on a
value of $5.00 per share) for the cancellation by Casino-Co of a secured
promissory note (the "Casino-Co Note") in the principal amount of $10.5 million,
plus accrued interest of approximately $1.1 million, issued by ITB and its Orion
Casino Corporation subsidiary ("Orion") to Casino-Co in connection with the
acquisition of the El Rancho Property. Of such shares, 2,093,868 shares were
issued to Casino-Co (the "Conversion Shares") and 232,652 shares were issued to
CSFB in consideration for its consent and for certain advisory services in
connection with the transaction. Casino-Co has granted Mr. DeSantis an
irrevocable proxy to vote any or all of such Conversion Shares until the
occurrence of certain events, including the repayment of the CSFB loan or the
distribution of the Conversion Shares to LVEN's stockholders generally. See
"Certain Relationships and Related Party Transactions" and "Notes to Financial
Statements." In connection with pending litigation, the minority Board members
have challenged the authorization and enforceability of certain agreements,
including the Tri-Party Agreement and the issuance of the Conversion Shares.

On or about September 10, 1997, Messrs. Quigley and Leo, two directors
of the Company, and The Family Investment Trust (Robert Brennan's family trust)
filed a derivative claim in the Delaware Chancery Court
against Messrs. DeSantis,
Abraham, Coelho, Scholl, Zappala and Corazzi, LVEN and the Company, alleging,
inter alia, that certain purported "super-majority" voting provisions of the
Company's By-laws remain in full force and effect. In addition, on or about the
same date, James Rekulak, an individual stockholder, filed a virtually identical
derivative claim to that filed by Messrs. Quigley and Leo and The Family
Investment Trust. The Company filed a counterclaim in the Quigley law suit on
November 18, 1997 alleging that Messrs. Quigley and Leo, together with Messrs.
Francis Murray and Dees, breached their fiduciary duty to the Company by, among
other things, adopting and subsequently refusing to recognize the repeal of the
"super-majority" voting provisions. See "Legal Proceedings." The "super-
majority" voting provisions were adopted by the Board of Directors at its
December 20, 1996 Board meeting and required the approval of a super-majority
(75% or seven of nine members) of the Board in order to authorize the Company to
undertake certain actions, including, inter alia: effecting a merger or
acquisition or the purchase or sale of assets with proceeds of $1 million,
individually or in the aggregate; issuing capital stock, or options, warrants or
securities convertible into shares of capital stock; entering into employment,
consulting or similar agreements with officers, directors, consultants or key
employees; borrowing $3 million or more, individually or in the aggregate;
filling vacancies on the Board of Directors; determining management's list of
nominees for election to the Board of Directors by stockholders; and making
future changes to the By-laws.

The majority of the Company's Board believe that the By-laws were amended
at the March 14, 1997 Board meeting to remove the "super-majority" provisions
upon the occurrence of certain conditions relating
to the receipt of a commitment
letter from CSFB for a loan. The minority directors dispute that belief in the
pending litigation. See "Legal Proceedings." In the event the plaintiffs
ultimately prevail on this issue, certain transactions completed by the Company
with a simple majority approval by the Board may be subject to modification,
termination or revision. In addition, the continued existence of the "super-
majority" provisions would be a default under the CSFB Loan Agreement and could
result in acceleration of the CSFB loan. See "Management's Discussion and
Analysis of Financial Conditions and Results of Operations."

The litigation referenced above is at a standstill as the parties are in
the final stages of settlement negotiations. Although the parties believe that
a settlement is imminent, there can be no assurance that a settlement will be
reached or as to the terms thereof. In the event a
settlement cannot be reached,
there can be no assurance as to the outcome of such litigation or as to the
impact the litigation itself or any resolution thereof may have on the Company's
operations, financial position, results of operations and cash flows. In such
litigation, the minority Board members have challenged the authorization and
enforceability of certain actions taken and agreements entered into by the
Company, including the CSFB Credit Facility and related documents. In the event
the plaintiffs prevail in such litigation, such actions and agreements may be
subject to modification, termination or revision. See "Legal Proceedings" and
"Management's Discussion and Analysis of Financial Conditions and Results of
Operations."

On October 15, 1997, the Company terminated the employment of Mr. Quigley
as President of the Company and an officer of its racetrack subsidiaries. See
"Termination and Severance Agreements."

Effective October 20, 1997, the Company consummated the sale of a 56 acre
parking lot tract at Garden State Park to an unaffiliated
third party for a sales
price of $9 million. Of the proceeds, $6 million
was used to pay off an existing
mortgage loan on the property. See "Notes to Financial Statements."

ITEM 2 - PROPERTIES

In addition to Garden State Park, Freehold Raceway and the El Rancho
Property described above, the Company owns a condominium unit and an ownership
interest in the Ocala Jockey Club located in Reddick, Florida. The Company,
through its Circa 1850, Inc. subsidiary, owns seven properties, including six
single family homes and a condominium adjacent to Freehold Raceway. These
properties are held for the purpose of generating rental income.

ITEM 3 - LEGAL PROCEEDINGS

On or about September 10, 1997, three actions were filed in the Delaware
Court of Chancery in and for New Castle County (the "Delaware Chancery Court"),
each of which named the Company as a nominal defendant (collectively, the
"Delaware Actions"). Additionally, on or about
February 24, 1998, another action
was filed in the United States District Court for the
District of New Jersey (the
"New Jersey District Court") naming the Company as a nominal defendant. These
actions are summarized below:

MARIUCCI ET AL. V. DESANTIS, ET AL.

The first Delaware Action, captioned John Mariucci, Robert J. Quigley,
Charles R. Dees, Jr., James J. Murray, Francis W. Murray, Frank A. Leo and The
Family Investment Trust (Henry Brennan as Trustee) v.
Nunzio P. DeSantis, Michael
Abraham, Anthony Coelho, Kenneth W. Scholl and Joseph Zappala and International
Thoroughbred Breeders, Inc., C.A. No.15918NC ("Mariucci"), alleged, among other
things, that (i) NPD had breached the terms of the NPD Acquisition Agreement by
failing to fund a line of credit, (ii) as a result of such breach, the
resignations of the Old Directors were ineffective and (iii) the New Directors
were misusing the assets of the Company for their
personal benefit. The Mariucci
complaint sought an order (a) pursuant to Section 225 of the Delaware General
Corporation Law, determining that (1) the New Directors were not validly
appointed or elected to the Board and (2) Frank Koenemund, John Mariucci and
James Murray, notwithstanding their written resignations
upon the NPD Acquisition
and the acceptance of those resignations by the Company's Board, continued as
directors of the Company (the "Section 225 Claims")
and (b) preserving the status
quo pending a final adjudication of the Section 225 Claims. On September 18,
1997, the plaintiffs filed an amended complaint. On September 26, 1997, the New
Directors and the Company filed a motion to dismiss, or in the alternative, to
strike allegations of the amended complaint (the "Motion to Dismiss"). The
Delaware Chancery Court granted the Motion to Dismiss by opinion dated October
14, 1997. The time for appeal of the Delaware Chancery Court Order has expired
and no appeal has been taken by the plaintiffs.

QUIGLEY ET AL. V. DESANTIS, ET AL.

The second Delaware Action, captioned Robert J. Quigley, Frank A. Leo,
and The Family Investment Trust (Henry Brennan
as Trustee) v. Nunzio P. DeSantis,
Michael Abraham, Anthony Coelho, Kenneth W. Scholl, Joseph Zappala, Joseph A.
Corazzi and Las Vegas Entertainment Network, Inc. and International Thoroughbred
Breeders, Inc., C.A. No.15919NC ("Quigley"), is a derivative suit brought by two
of the Old Directors (Messrs. Quigley and Leo) and the Family Investment Trust
(collectively, the "Quigley Plaintiffs") which alleges, among other things, that
the New Directors have breached their fiduciary duties to the Company, usurped
corporate opportunities belonging to the Company and incorrectly stated minutes
of Board meetings to omit material discussions. The Quigley complaint alleges
that the New Directors entered into certain agreements on behalf of the Company
in violation of the "super-majority" voting provisions of the Company's By-laws
and their fiduciary duty to the Company, including but not limited to, the CSFB
Loan Agreement, the Tri-Party Agreement, the
Bi-Lateral Agreement, the D&C Gaming
option agreement, the DeSantis employment agreement and Coelho consulting
agreement. The Quigley complaint seeks (i) a declaratory judgment that (a)
certain actions taken by the New Directors are null and void and (b) the "super-
majority" By-law provisions remain in full force and effect, (ii) rescission of
certain actions taken by the Company's Board and (iii)
damages as a result of the
allegedly unauthorized and unlawful conduct of the
defendants. See "Developments
During the Last Fiscal Year." On November 7, 1997, the New Directors and the
Company filed answers to the Quigley complaint denying all of the material
allegations contained in the Quigley complaint.

On November 18, 1997, the Company filed an amended answer and
counterclaim (the "Counterclaim") against Messrs. Quigley, Leo, Francis Murray
and Dees (collectively, the "Counterclaim Defendants").
The Counterclaim alleges
that the Counterclaim Defendants have breached their fiduciary duty to the
Company by (i) adopting, and subsequently refusing to recognize the repeal of
certain "super-majority" By-law provisions in order to aid Brennan in retaining
control of the Company's business affairs and
jeopardizing the Company's licenses
and registrations, (ii) interfering in the Company's hiring of new independent
auditors thereby causing the Company to be delinquent in its required filings
with the Securities and Exchange Commission ("SEC") and causing the suspension
of trading in the Company's stock on the American Stock Exchange, (iii) using
corporate funds for their personal uses and (iv)
usurping corporate opportunities
properly belonging to the Company. The Counterclaim seeks injunctive relief
enjoining the Counterclaim Defendants from, among other things, interfering in
the Company's day-to-day business operations, the
establishment of a constructive
trust over certain assets of the Counterclaim Defendants, a declaratory judgment
that the "super-majority" voting provisions have been repealed and money
damages.
On December 4, 1997, the Quigley Plaintiffs filed a motion to conduct a separate
expedited trial on the "super-majority" By-law issues,
which motion was withdrawn
by the Quigley Plaintiffs at a February 10, 1998 scheduling conference. At the
February scheduling conference, the Delaware Chancery Court
scheduled this matter
for trial to have commenced on May 20, 1998. The Counterclaim Defendants
answered the Counterclaim on January 12, 1998 (the "Counterclaim Answer") and,
in the Counterclaim Answer, Mr. Murray asserted a wrongful discharge claim and
seeks monetary damages.

REKULAK V. DESANTIS, ET AL.

The third Delaware Action, captioned James Rekulak v. Nunzio P. DeSantis,
Michael Abraham, Anthony Coelho, Kenneth W. Scholl, Joseph Zappala, Las Vegas
Entertainment Network, Inc. and Joseph A. Corazzi and International Thoroughbred
Breeders, Inc., C.A. No.15920 ("Rekulak"), is a derivative suit which in essence
repeats the allegations contained in the Quigley complaint and seeks similar
relief. The Rekulak action was consolidated with the Quigley action pursuant to
a stipulation and order dated January 13, 1998.

The Trustee of Brennan's Bankruptcy Estate, as well as the SEC, have
participated to a limited extent in discovery in the litigation of the Quigley
and Rekulak actions. The Trustee's and the SEC's involvement is predicated upon
overseeing any possible interests of the Bankruptcy Estate and the SEC.

REKULAK V. DESANTIS, ET AL.

On or about October 8, 1997, James Rekulak filed a complaint in the
Delaware Chancery Court captioned Rekulak v. DeSantis, et al., Civil Action No.
15978, which purports to be a complaint under Section 225
of the Delaware General
Corporation Law and contains substantive allegations that
are virtually identical
to those in the complaint in the Mariucci action described above. On October 8,
1997, the plaintiff in this action sought to have his
complaint consolidated with
the complaint in the Mariucci action and represented to the Court that he was
willing to be bound by the Delaware Chancery Court's decision on defendants'
Motion to Dismiss the Mariucci action. As set forth above, the Mariucci action
was dismissed by the Delaware Chancery Court's opinion dated October 14, 1997,
and thereafter, this action was dismissed with prejudice by a stipulation and
order dated February 9, 1998.

HARRIS V. DESANTIS, ET AL.

The most recent action, filed on February 24, 1998 in the New Jersey
District Court, captioned Myron Harris, derivatively on behalf of International
Thoroughbred Breeders, Inc., a Delaware corporation v. Nunzio P. DeSantis,
Anthony Coelho, Kenneth W. Scholl, Michael Abraham,
Joseph Zappala, Frank A. Leo,
Robert J. Quigley, Charles R. Dees, Jr. and Francis W. Murray ("Harris"), C.A.
No. 98-CV-517 (JBS), is a derivative suit brought by a stockholder of the
Company. The factual allegations and claims
asserted in the Harris complaint are
virtually identical to the claims asserted in the Quigley complaint and in the
Counterclaim asserted by the Company in the Quigley action.

The Harris action has been assigned to The Honorable Jerome B. Simandle,
United States District Judge. On April 28, 1998, all defendants in the Harris
action filed a motion for reassignment, seeking that the Harris case be
reassigned to The Honorable Joseph H. Rodriguez, United States District Judge,
as Judge Rodriguez had already been assigned two related cases involving members
of the Board. See NPD v. Quigley, et al. and Green v. DeSantis, et al.,
discussed below. On May 4, 1998, all defendants filed a motion to dismiss or in
the alternative a motion to stay the Harris action, pending a resolution of the
Quigley action. The plaintiff's response will be due thirty days subsequent to
the filing of the motion. On May 4, 1998, the plaintiff filed an amended
complaint to, among other things, add another stockholder as an additional
plaintiff.

The litigation in the Quigley, Rekulak and NPD actions is at a standstill
while the parties are in settlement negotiations. Although the parties believe
that a settlement is imminent, there can be no assurance that a settlement will
be reached or as to the terms thereof. If a settlement is reached, it will be
subject to the approval of the Delaware Chancery Court after notice to all
stockholders. In the event a settlement cannot be reached, there can be no
assurance as to the outcome of such litigation and the impact the litigation
itself or any resolution thereof may have on the Company's operations, financial
position, results of operations or cash flows. As discussed above, the Quigley,
Rekulak and Green actions challenge the authorization and enforceability of
certain actions taken and agreements entered into by the Company, including the
CSFB Credit Facility and related documents. In the event the plaintiffs prevail
in such litigation, such actions and agreements may be subject to modification,
termination or revision, the impact of which on the Company cannot be
predicted.
See "Management's Discussion and Analysis of Financial Conditions and Results of
Operations."

In November 1997, two separate actions were filed in the New Jersey
District Court against various directors of the Company and other affiliated
parties. The Company is not a party to either of these actions, both of which
are summarized below:

NPD, INC. V. QUIGLEY, ET AL.

On November 18, 1997, NPD (the Company's largest stockholder and whose
stockholders are Messrs. DeSantis and Coelho), filed a complaint captioned NPD,
Inc. v. Robert J. Quigley, Francis W. Murray,
Frank A. Leo, Charles R. Dees, Jr.,
John Mariucci, Frank Koenemund and James J. Murray, C.A. 97-CV-5657 ("NPD"), in
the New Jersey District Court. The complaint alleges, among other things, that
Messrs. Quigley, Francis Murray, Leo and Dees, each of whom is currently a
director of the Company, and Messrs. Mariucci, Koenemund and James Murray, each
of whom is a former director of the Company, conspired with one another and
Brennan to defraud NPD by (i) approving and subsequently concealing from NPD the
existence of the "super-majority" voting provision of the Company's By-laws and
(ii) purporting to repeal such provision and subsequently filing suit in an
effort to restore such provision, all of which has had the effect of attempting
to deprive NPD of control of the Company and perpetuating the control of Brennan
and his associates. The NPD suit seeks compensatory and punitive damages. On
January 8, 1998, the defendants served a motion to dismiss NPD's complaint. NPD
has not yet responded to that motion. The Company is not a party to the NPD
suit.

GREEN V. DESANTIS ET AL.

Certain officers, directors and affiliates of the Company are parties to
an action filed on November 30, 1997 by Robert William Green ("Green"), a
stockholder of the Company and Chief Executive Officer of Philadelphia Park,
captioned Robert William Green v. Nunzio DeSantis, Joseph Corazzi, Anthony
Coelho, Las Vegas Entertainment Network, Inc. and NPD, Inc., C.A. 97-5359(JHR),
in the New Jersey District Court. The complaint alleges, among other things,
that the defendants have usurped certain corporate opportunities at the expense
of the Company, have diluted Green's interest
in the Company through the issuance
of shares of stock and have conspired to deprive him of certain rights under an
option granted to him by NPD (the "Green Option"). See "Developments During the
Last Fiscal Year." Subject to regulatory approval,
the Green Option grants Green
the right to purchase approximately 50% of the shares of the Company's Common
Stock which are held by NPD. The expiration date of the
Green Option was January
15, 1998 and Green did not exercise the option by such date. Green seeks (i)
compensatory and punitive damages, (ii) an order enjoining defendants from
transferring, encumbering or alienating the
Company's Common Stock subject to the
Green Option, (iii) an order declaring the issuance of certain shares of Common
Stock to be a nullity, and (iv) reformation of the Green Option to extend the
termination date. This action also raises claims substantially similar to those
made in the Quigley action. The defendants have not yet filed a response to the
complaint in the Green action. The Company is not a party to this action.

ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matters were submitted to a vote of security holders by the Company
during the quarter ended June 30, 1997. The last annual meeting of stockholders
was held on February 21, 1996.

PART II

ITEM 5 - MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS

MARKET INFORMATION

Until October 13, 1997, the Company's Common Stock had been traded on
the American Stock Exchange since April 4, 1985 under the symbol "ITB." On
October 13, 1997, the American Stock Exchange suspended trading in the Common
Stock because the Company had not filed its Annual Report on Form 10-K for
Fiscal 1997 within the SEC's prescribed time period. The Company expects
trading to resume once its financial information on file with the SEC is
current. The following table indicates the high and low sale prices for such
stock on the American Stock Exchange on a quarterly basis for the two years
ended June 30, 1997 and the two quarters ended December 31, 1997, based upon
information supplied by the American Stock Exchange:

<TABLE>
<S> <C> <C>
SALES PRICE
QUARTER ENDED HIGH LOW

September 30, 1995 $4.75 $3.38

December 31, 1995 5.25 3.25

March 31, 1996 5.69 3.31

June 30, 1996 4.75 3.50

September 30, 1996 4.13 3.50

December 31, 1996 3.88 2.63

March 31, 1997 5.13 2.81

June 30, 1997 5.06 4.00

September 30, 1997 4.56 3.50

December 31, 1997 3.88* 3.44*
(Trading was suspendedon October 13, 1997)
</TABLE>
* The last sale price on October 13, 1997 was $3.50.

HOLDERS

As of June 30, 1997, there were 31,711 recordholders of the Company's
Common Stock.

DIVIDENDS

The Company has not paid any dividends on its Common Stock since its
inception. Anticipated capital requirements of the Company make it unlikely
that any dividends will be declared in the foreseeable future. Furthermore,
25% of the "net racetrack earnings" from the Company's Garden State Park
racetrack facility are required to be paid by the Company in dividends on its
Series A Preferred Stock and, thus, would not be available for payment as
dividends on the Common Stock. Additionally, the Company's ability to pay
dividends in cash or property or by obligation is limited by the terms of the
CSFB Credit Facility.

Item 6 - SELECTED FINANCIAL DATA

INTERNATIONAL THOROUGHBRED BREEDERS, INC.
AND SUBSIDIARIES

<TABLE>
<S> <C><C> <C><C> <C><C>
Years Ended June 30,
1997 1996 1995 (1)

Revenue from Operations $ 68,347,904 $ 68,864,894 $ 55,744,950
Investment Income 117,972 255,063 3,437,788

Total Revenue $ 68,465,876 $ 69,119,957 $ 59,182,738

(Loss) Income from
Operations $ (4,715,334) $ 377,929 $ 3,070,851

Other Expenses (3) $ 8,772,579 $ 1,219,774 $ 556,799

(Loss) Income Before
Extraordinary Item $ (13,549,957) $ (1,069,712) $ 2,398,452

Net (Loss) Income (4) $ (17,387,582) $ (1,069,712) $ 2,398,452

Per Common Share:

(Loss) Income Before
Extraordinary Item $ (1.16) $ (0.10) $ 0.25

Net (Loss) Income $ (1.48) $ (0.10) $ 0.25

Weighted Average Number
of Shares 11,715,256 10,536,414 9,551,369

June 30, June 30, June 30,
1997 1996 1995

Working Capital
(Deficiency) $ (41,300,996) $ (3,916,684) $ 7,740,788

Total Assets $ 164,694,029 $ 144,880,933 $ 97,469,045

Long-Term Debt $ 13,131,003 $ 50,992,702 $ 15,599,097

Stockholders' Equity (5) $ 75,651,933 $ 79,318,105 $ 72,206,437

Years Ended June 30,
1994 1993 (2)

Revenue from Operations $ 37,334,236 $ 38,478,067
Investment Income 3,343,274 3,394,805

Total Revenue 40,677,510 $ 41,872,872

(Loss) Income from
Operation $ 2,500,596 $ (2,904,874)

Other Expenses (3) $ 0 $ 638,693

(Loss) Income Before
Extraordinary Item $ 2,500,595 $(31,142,797)

Net (Loss) Income (4) $ 2,500,595 $(29,410,166)

Per Common Share:
(Loss) Income Before
Extraordinary Item $ 0.26 $ (3.48)

Net (Loss) Income 0.26 $ (3.29)

Weighted Average Number
of Shares 9,547,900 8,950,025

June 30, June 30,
1994 1993

Working Capital
(Deficiency) $ 16,038,454 $ 13,713,621

Total Assets $ 74,433,411 $ 72,263,542

Long-Term Debt $ -0- $ 50,000

Stockholders' Equity (5) $ 69,807,985 $ 67,307,389
</TABLE>

(1) On January 1, 1995, the Company completed its purchase of Freehold
Raceway. The results of operations include the results of Freehold Raceway
from such date.

(2) Total Assets and Stockholders' Equity for June 30, 1993 and future
years reflect the effects of a quasi-reorganization of the Company's assets
during the fiscal year ended June 30, 1993. As a result, the operating data
for subsequent periods are not comparable.

(3) Other expenses during the fiscal year ended June 30, 1997 consist
of write-offs of deposits on land and Starship Orion costs, amortization
of financing costs and interest expense. Other expenses during the fiscal
years ended June 30, 1996, 1995, 1994 and 1993 consist primarily of interest
expense.

(4) Net Loss for the fiscal year ended June 30, 1997 is after an
extraordinary loss on early extinguishment of debt in the amount of
$3,837,625. The Net Loss for the fiscal year ended June 30, 1993 is after
an extraordinary gain on early extinguishment of debt in the
amount of $1,732,631.

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

ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS
AND RESULTS OF OPERATIONS

Liquidity and Capital Resources

The Company's working capital, as of June 30, 1997, was a deficit
of ($41,300,996) which represents an increase in the deficit of
approximately $37,385,000 from the June 30, 1996 working capital deficit
of ($3,916,684). On May 23, 1997, the Company obtained a credit
facility from CSFB. This two-year $55 million facility was secured by a
pledge of certain of the personal and real property of the Company and
its subsidiaries. Proceeds of the CSFB Credit Facility were used to
repay in full the Company's $30 million credit facility with Foothill
Capital Corporation ("Foothill") and will also provide funds for working
capital and other general corporate purposes, including, but not limited
to, preliminary development of the El Rancho Property. Interest under
the CSFB Credit Facility is payable monthly in arrears at 7% over the
LIBOR. Of the remaining facility borrowings, approximately $16.8
million was placed in various escrow accounts ( including $10 million in
an interest reserve account), financing and closing fees of $4.3 million
were paid and $3.9 million was used by the Company for general corporate
purposes and repayment of certain financial obligations. At June 30,
1997, the interest rate on the CSFB Credit Facility was 12.72%. The
Company is not in compliance with certain non-financial covenants of the
CSFB Credit Facility. As a result of not receiving waivers of these
violations, CSFB could accelerate the $55 million loan at anytime and
therefore, the loan has been classified as a current liability.
Additionally, all escrow amounts have been classified as current assets.

The CSFB Credit Facility is evidenced by a convertible promissory
note (the "CSFB Note") pursuant to which $10 million of the aggregate
principal amount of the CSFB Note can be converted in certain
circumstances, including on the maturity date of the CSFB Note, upon the
prepayment of at least $10 million in aggregate principal amount of the
CSFB Note or upon acceleration of the CSFB Note, at the option of CSFB,
into shares of the Company's Common Stock at a conversion price of $8.75
per share (subject to adjustment in certain events). In addition,
pursuant to the CSFB loan agreement, CSFB was granted warrants to
purchase 1,044,000 shares of common stock at an exercise price of $4.375
per share (subject to adjustment in certain events). Warrants to
purchase 546,847 shares of common stock are immediately exercisable and
warrants to purchase 497,153 shares of common stock become exercisable
at such time as CSFB delivers to the Company a commitment for additional
funding of no less than $50 million in connection with the development
of the El Rancho Property.

In connection with pending litigation, the minority Board members
have challenged the authorization and enforceability of certain
agreements entered into and actions taken by the Company, including the
Credit Facility and certain related agreements and related actions. See
"Legal Proceedings."

The net loss for Fiscal 1997 was ($17,387,582). Cash flows used
in operating activities amounted to approximately $4,400,000. The net
loss incurred by the Company includes approximately $9,000,000 of non-
cash write offs during the year and approximately $3,200,000 of other
non-cash expenses.

Cash used in investing activities was $5,491,190 during Fiscal
1997, consisting of El Rancho Property development costs of
approximately $2,016,000, option payments of $2,115,000 to purchase
additional land in Las Vegas, Nevada (which deposits were subsequently
forfeited) and capital expenditures at the Company's race tracks of
approximately $1,428,000.

Cash provided by financing activities during Fiscal 1997 was
$9,472,851. Cash was generated from debt financing of $70,966,581
primarily associated with: 1) the draw down of $9,138,690 from the
Foothill credit facility; 2) the $55,000,000 CSFB Credit Facility of
which certain proceeds were used to retire the approximately $30,000,000
due on the Foothill credit facility; and 3) the proceeds of $6,000,000
from the Sun Bank which were used to refinance the foreign notes of the
same amount. Costs associated with debt financing in the amount of
$4,927,000 were paid during Fiscal 1997.

Restricted cash and investments of $3,730,323 as of June 30, 1997
consisted of horsemen's deposits held by the racetracks for race
nominations, purse winnings, and funds held for uncashed mutuel ticket
sales due to the patrons or government authorities. As restricted cash,
these cash funds are not available for other Company operations.

Effective June 27, 1997, the Company issued 2,093,868 shares of
its Common Stock to Casino-Co, a wholly-owned subsidiary of LVEN, and
232,652 shares to CSFB, in exchange for cancellation of a $10.5 million
second mortgage note entered into in connection with the purchase of the
El Rancho Property and accrued interest of approximately $1.1 million.
At the time of conversion, the note was classified as a long term
liability. This transaction has been challenged in the pending
litigation. See "Legal Proceedings."

In June 1996, the Company entered into a purchase agreement with
Sheraton Gaming Corporation to purchase a fifteen acre tract directly
behind the El Rancho Property. The Company made payments of $470,000
during Fiscal 1996 and $2,115,000 during Fiscal 1997. The Company
could not arrange the necessary financing to finalize the purchase,
resulting in forfeiture of payments in December 1996 totaling
$2,585,000.

On January 15, 1997, the Company obtained a commitment for a
$5,000,000 revolving line of credit from the Company's Chief Executive
Officer. The line of credit has not been drawn upon and it is unlikely
that it will be utilized in the future. This is a subject of the
pending litigation. See "Legal Proceedings."

The Company's scheduled principal payment on debt service
(excluding acceleration of the CSFB Note) is expected to be
approximately $7,963,000 during Fiscal 1998. This amount includes
$6,000,000 which was retired with proceeds received in connection with
the sale on October 20, 1997 of an approximately 56 acre parking lot
tract contiguous to the Company's Garden State Racetrack.

Capital expenditures at the Company's racetrack subsidiaries were
$1,428,277 during Fiscal 1997 and are expected to be approximately
$625,000 in Fiscal 1998. Interest on the CSFB Credit Facility is
expected to be approximately $7,100,000 for Fiscal 1998. Expenses in
connection with the El Rancho Property for carrying costs, including
real estate taxes, utilities, security and maintenance were $1,774,000
in Fiscal 1997 and are expected to be approximately $1,100,000 in Fiscal
1998. Additionally, professional fees for consultants, legal and on-
going architectural work in connection with the El Rancho Property were
$1,015,000 in Fiscal 1997 and are expected to be approximately $500,000
in Fiscal 1998.

The Company currently estimates that the funds made available from
the $55,000,000 CSFB Credit Facility and placed in the interest reserve
and El Rancho project escrow accounts, together with the Company's cash
balances, will be sufficient to finance the Company's operations and the
expected expenditures and carrying costs of the El Rancho Property at
least through March 31, 1999. The Company believes that additional
financing in the amount of $50 million will be sufficient to complete
the development of the El Rancho Property under the "CountryLand" theme.
The Company has also considered expanding the CountryLand project to the
extent that
the development costs could increase by an additional $25 million. If
the Company is successful in obtaining the necessary funding, it
anticipates that once construction is fully under way at the El Rancho
Property, it would take approximately eighteen months to complete and
commence gaming operations. However, due to the pending litigation
discussed above under "Legal Proceedings", it is unlikely that any
additional funding will be obtained in order to develop the El Rancho
Property.

The Company is involved in various lawsuits brought by certain
minority Board members and believes that while such litigation is
pending, it is unlikely that CSFB or another major lending institution
will provide additional funding to the Company. The Company's inability
to obtain such additional funding by March 31, 1999 could have a serious
financial impact upon the Company and its results of operations. If the
Company is unsuccessful in obtaining such additional funding, whether
from CSFB or another lender, by the end of calendar year 1998, it may be
necessary to either (i) establish a joint venture relationship with
respect to the El Rancho Property and/or other Company property or (ii)
sell the El Rancho Property and/or other corporate assets in order to
satisfy the outstanding CSFB debt in the amount of $55 million, becoming
due on June 1, 1999, if no extension is granted and also to provide
funds for working capital purposes beyond such date.

The accompanying consolidated financial statements have been
prepared assuming the Company will continue as a going concern. As
discussed in Note 8 to the Consolidated Financial Statements, the
Company is in violation of several non-financial loan covenants with
CSFB. As a result of not obtaining waivers of these violations, its
$55,000,000 Credit Facility has been classified as a current liability
and payment could be demanded immediately. The Company is continuing
discussions with this lender as to the granting of waivers or other
remedies that could be reached in connection with the litigation
settlement negotiations described in the following paragraph. See
"Legal Proceedings."

The Company and certain of its directors and stockholders are
involved in various legal proceedings as more fully described above
under "Legal Proceedings". Several of these actions are at a standstill
as the parties are in the final stages of settlement negotiations.
Although the parties believe a settlement is imminent, there can be no
assurance that a settlement will be reached or as to the terms thereof.
In the event a settlement cannot be reached, it is not possible to
determine with any precision the probable outcome or the amount of
liability, if any, and the resultant effects on the Company's financial
position, results of operations or cash flows.

Additionally, the Company has sustained a net loss of
approximately $17.4 million and $1.1 million during the Fiscals 1997 and
1996, respectively. While the Company believes its projected cash flows
from operations will be sufficient to meet its operating needs through
March 1999, there can be no assurances beyond that date. These
projections do not reflect the impact of its default under the CSFB
Credit Facility or the effects of the above mentioned litigation.

While the Company is continuing to monitor and reduce its
operating expenses, including payroll, it is also considering the sale
of certain assets or operations, including the El Rancho Property as
part of the litigation settlement negotiations described above and all
or some of its racing operations.

Seasonality and Effect of Inclement Weather

Because horse racing is conducted outdoors, a number of variables
contribute to the seasonality of the business, most importantly the
weather. Weather conditions, particularly during the winter months,
sometimes cause cancellations of races or severely curtail attendance,
which reduces both live racing and simulcast wagering at on-site and
off-site facilities.

In addition, a disproportionate amount of the Company's revenue is
received during the period from September through May of each year
because Garden State Park and Freehold Raceway conduct only simulcast
receiving (not live racing) during the summer months. As a result, the
Company's revenue has been the greatest in the second and third quarters
of its fiscal year.

Inflation

To date, inflation has not had a material effect on the Company's
operations.

Impact of Year 2000 on the Company's Systems

Management is in the process of determining whether all of the
Company's accounting and operational systems are year 2000 compliant.
Although there can be no assurances, management does not expect the
costs associated with any required conversions of systems to ensure year
2000 compliance to be significant.

Results of Operations for the Fiscal Years Ended June 30, 1997 and 1996

For Fiscal 1997, the Company's operating loss was ($4,715,334) as
compared to an operating profit for the prior fiscal year of $377,929, a
decrease of $5,093,263. Revenue from operations increased at Freehold
Raceway and declined at Garden State Park for a net combined decrease of
$282,095 from Fiscal 1996. Total operating expenses increased
$4,439,182 or 6%. Direct operating expenses, cost of revenues and
depreciation and amortization decreased less than 1%. General and
administrative expenses of $11,089,428 for Fiscal 1997 increased
$2,871,634, or 35%, from the prior fiscal year amount of $8,217,794.
The increase in general and administrative expenses is principally
attributable to: 1) non-employee option expense increases of $460,000;
2) a net increase of officer and corporate administrative salaries and
benefits of $233,000; 3) severance amounts paid to, or accrued for,
terminated officers of $452,000; 4) legal, accounting and professional
fee increases of $267,000; 5) corporate insurance expense increases of
$220,000; and 6) an increase of $390,000 in travel and related expenses
in connection with corporate business opportunities, financing
activities and executive travel. Carrying costs of $1,773,627,
including real estate taxes, insurance and utilities were incurred for
the El Rancho Property during Fiscal 1997.

During Fiscal 1997, the Company incurred a net loss of
($17,387,582) in comparison to a net loss of ($1,069,712) for the prior
fiscal year. The increase in net loss of $16,317,870 primarily resulted
from the effects of: 1) a write-off of $2,585,000 in non-refundable
deposits associated with the termination of an option to purchase a
parcel of land adjoining the El Rancho Property in Las Vegas made during
the second quarter; 2) a write-off of $3,837,625 of financing costs
associated with the early retirement of debt made during the fourth
quarter; 3) a write-off during the fourth quarter of $2,543,968 of costs
associated with the termination of the Starship Orion concept for the
future development of the El Rancho Property; 4) an increase of
$1,360,037 in interest expense which reflects higher indebtedness levels
incurred by the Company; 5) an increase of the amortization of financing
costs of $1,063,800 which reflects the cost associated with the
Company's new indebtedness; and 6) a negative change of $5,093,263 in
the operating loss as described above.

During Fiscal 1997, the Company's two racetracks realized
operating income before taxes and interest of $2,594,504 as compared to
$3,043,458 for the prior fiscal year.

The New Jersey Division of Gaming Enforcement ("DGE") is currently
investigating the Company and its directors and significant stockholders
in connection with Garden State Park's and Freehold Raceway's licenses
with the Casino Control Commission ("CCC") and the Racing Commission.
The Company has no information with respect to the potential outcome of
such investigation. In the event that the DGE concludes that one or
more of such individuals are not qualified, the CCC and/or the Racing
Commission may require any such stockholder to divest his interest and
any such director may be asked to resign. Failure of such individuals
to comply with such requests could jeopardize the Company's racing
licenses and ability to conduct business with any casino licensees,
including simulcasting to Atlantic City casinos, which could have a
significant negative impact on the Company's future operations.

bullet Garden State Park

During Fiscal 1997, Garden State Park ran its Harness Meet from
September 6, 1996 through December 14, 1996 (55 dates) and its
Thoroughbred Meet from January 1, 1997 through May 23, 1997 (62 dates).
During these race meets, Garden State Park simulcasts its live racing to
other racetracks, other licensed venues and certain Atlantic City
casinos. Simulcasting into the racetrack from other racetracks
continues throughout the year.

During Fiscal 1997, Garden State Park's revenue decreased
$1,273,714 or 4% when compared to the prior fiscal year, reflecting net
decreases in simulcasting revenues generated during the period of
$950,000, in addition to lower wagering and attendance throughout the
year which contributed to reduced revenue from live racing. The cost
of revenues, primarily purse expenses and operating expenses, decreased
approximately $1,750,000 or 5% when compared to the prior fiscal year,
primarily as a result of the decreases in purses of $1,200,000
attributable to the reduced wagering. As a net result, Garden State Park
incurred an operating loss of $1,844,495 during Fiscal 1997 compared to
an operating loss during Fiscal 1996 of $2,318,582.

The Fiscal 1997 Harness Meet (55 days) resulted in operating
income of approximately $400,000, compared with the Fiscal 1996 Harness
Meet (53 days) operating income of approximately $852,000. Daily
on-track attendance and wagering at the track's Fiscal 1997 Harness Meet
averaged 2,206 and $154,242, respectively, as compared to 2,434 and
$182,103, respectively, during the Fiscal 1996 Harness Meet. The
decrease in operating income of $452,000 is principally attributed to
lower revenues on live racing and simulcast sending and receiving in
Fiscal 1997 resulting from (i) increased competition principally from
telephone wagering in Pennsylvania, (ii) several off-track-betting
parlors located in close proximity to Garden State Park and (iii)
racetracks in Delaware which offer slot machines.

The Fiscal 1997 Thoroughbred Meet (62 days) had an operating loss
of approximately ($1,920,000) compared to the Fiscal 1996 Thoroughbred
Meet (64 days) operating loss of approximately ($2,388,000). Daily
on-track attendance and wagering at Garden State Park's Fiscal 1997
Thoroughbred Meet averaged 2,929 and $154,407, respectively. During the
Fiscal 1996 Thoroughbred Meet, daily on-track attendance and wagering
averaged 2,891 and $164,381, respectively. Although the attendance at
the Fiscal 1997 Thoroughbred Meet was approximately the same as compared
to the Fiscal 1996 meet, the Company's revenue from simulcast receiving
increased and wagering on live racing decreased during such period.
Revenue from simulcast sending decreased $700,000 or 24% in Fiscal 1997,
which was partially offset by reductions in purses, outside services and
utility expenses.

During Fiscal 1997, the track had an operating loss of
approximately ($300,000) during the non-racing periods as compared to an
operating loss of approximately ($782,000) in the prior fiscal year's
non-racing periods. The decrease in the operating loss was primarily
attributable to an increase in outside event income of $350,000 during
Fiscal 1997.

Simulcasting during both Fiscal 1997 and 1996, both to and from
other New Jersey racetracks, as well as out-of-state racetracks and
casinos, accounted for approximately 82% of revenue while live racing
and other income accounted for approximately 18% of revenue at Garden
State Park during both Fiscal 1997 and 1996.

Freehold Raceway

During Fiscal 1997, Freehold Raceway ran its Freehold Racing
Association (FRA) Harness Meet from August 15, 1996 through December 31,
1996 for a total of 100 days. Freehold's Atlantic City Harness (ACH),
ran a Harness Meet from January 1, 1997 through May 26, 1997 for a total
of 106 days. During both race meets, Freehold Raceway simulcasts its
live racing to other racetracks, other licensed venues and certain
Atlantic City casinos. Simulcasting into the racetrack from other
racetracks continues throughout the fiscal year.

For Fiscal 1997, Freehold Raceway realized operating income of
$4,439,000, a reduction of $923,039 as compared to operating income of
$5,362,039 for the prior fiscal year. During Fiscal 1997, Freehold
Raceway's revenue increased $1,169,953 or 3.3% when compared to the
prior fiscal year, primarily, as a result of a 5 day increase in the
total number of race days in Fiscal 1997 as compared to Fiscal 1996, a
15 day increase in the number of simulcast receiving days, along with
higher simulcast receiving wagering. The cost of revenues, primarily
purse expenses, simulcasting commissions and operating expenses,
increased $1,525,000 or 5% when compared to Fiscal 1996, primarily as a
result of the increase in the number of race days and simulcast days.
General and administrative expenses increased $560,000 as compared to
the prior fiscal year amount primarily as a result of increased
telephone expenses associated with the increased simulcast receiving and
an increase in real estate taxes.

The Fiscal 1997 FRA Harness Meet (100 days) resulted in operating
income of approximately $1,800,000 as compared to the Fiscal 1996 FRA
Harness Meet (99 days) which resulted in operating income of
approximately $2,987,717. Daily on-track attendance and wagering at
the Fiscal 1997 FRA Harness Meet averaged 2,161 and $248,819,
respectively, as compared to 2,286 and $283,361, respectively for Fiscal
1996. The decrease in operating income and wagering is, in part,
attributable to increased competition from Monmouth Park, a racetrack 20
miles from Freehold. During the fall of Fiscal 1996, simulcasting at
Monmouth Park was restricted (5 days per week and closed between
Thanksgiving and Christmas), whereas in Fiscal 1997 Monmouth Park
received simulcasting most days.

The Fiscal 1997 ACH Harness Meet (106 days) resulted in operating
income of approximately $2,200,000 as compared to the Fiscal 1996
Harness Meet (102 days) which resulted in income of $2,165,892. The
increase in income was primarily the result of additional simulcast
receiving during live days. Daily on-track attendance and wagering at
the Fiscal 1997 ACH Harness Meet averaged 2,099 and $214,126,
respectively, as compared to 2,085 and $252,058, respectively, for
Fiscal 1996. Although attendance was relatively stable, wagering on
simulcast receiving increased in Fiscal 1997 to the detriment of live
on-track wagering.

During Fiscals 1997 and 1996, Freehold Raceway had operating
income of approximately $400,000 and $208,430, respectively, during the
non-racing periods. During Fiscal 1997, the track conducted
simulcasting each day during the summer months, whereas simulcasting was
restricted during the summer in Fiscal 1996.

Simulcasting during Fiscals 1997 and 1996, both to and from other
New Jersey racetracks as well as out-of-state racetracks and casinos,
accounted for approximately 70% and 66%, respectively, of revenue, while
live racing and other income accounted for approximately 30% and 34%,
respectively, of revenue at Freehold Raceway during Fiscals 1997 and
1996.

RESULTS OF OPERATIONS FOR THE FISCAL YEARS ENDED JUNE 30, 1996 AND 1995

For Fiscal 1996, the Company's operating income was $377,929, a
decrease of $2,692,922, as compared to operating income for the prior
fiscal year of $3,070,851. During Fiscal 1996, revenue from operations
increased $13,119,944, however, investment income decreased $3,182,725.
The increase in operating revenue was due to the inclusion of Freehold
Raceway in operations for a full year, whereas in Fiscal 1995 Freehold
Raceway's operations were included for the six month period from January
1, 1995 (the purchase date) through June 30, 1995. The decrease in
investment income was primarily the result of decreased investing
transactions as the Company ceased these activities in Fiscal 1996.
Total operating expenses increased $12,630,141 which is reflective of
the inclusion of Freehold Raceway for a full year during Fiscal 1996 as
stated above.

During Fiscal 1996, the Company incurred a net loss of
($1,069,712) compared to net income of $2,398,452 for the prior fiscal
year. The change in the amount of $3,468,164 resulted from the net
effect of : 1) an increase of $583,866 in interest expense associated
with the mortgages on Freehold Raceway and additional debt for the
comparable periods; 2) an increase of the amortization of financing
costs of $79,109 which reflects the cost associated with the Foothill
loan obtained in June 1996 ; 3) an increase of income tax expense of
$112,267 on the additional income at Freehold Raceway; and 4) the
negative change of $2,692,922 in the operating income as described
above.

During Fiscal 1996, the Company's two racetracks realized income
before taxes and interest of $3,043,457, as compared to $2,683,884 for
the prior fiscal year.

Garden State Park

During Fiscal 1996, Garden State Park ran its Harness Meet from
September 8, 1995 through December 9, 1995 (53 dates) and its
Thoroughbred Meet from January 12, 1996 through May 24, 1996 (64 dates).
During these race meetings, Garden State Park simulcasts its live racing
to other racetracks, other licensed venues and certain Atlantic City
casinos. Simulcasting into the racetrack from other racetracks
continues throughout the year.

During Fiscal 1996, Garden State Park's revenue decreased
$4,304,948 or 12% when compared to the prior fiscal year, reflecting a
significant decrease in revenues generated during the period at Garden
State Park primarily as a result of the effect of severe weather
conditions which forced the cancellation of ten scheduled live racing
days and the simulcasting during those days, as well as the effect of
adverse weather conditions during many of the completed live racing
programs. This severe weather, which also caused most other racetracks
in the northeastern United States to limit their live racing programs,
had an adverse impact on earnings during these periods. In addition,
Garden State Park experienced lower wagering and attendance throughout
the year which reduced revenue. The cost of revenues, primarily purse
expenses, simulcasting commissions and operating expenses, decreased
$1,938,065 or 6% when compared to the prior fiscal year as a result of
the canceled race days and limited simulcasting schedules. Principally
as a net result of decreased revenues and expenses during Fiscal 1996,
Garden State Park incurred an operating loss of ($2,318,582) compared to
operating income during Fiscal 1995 of $201,872.
The Fiscal 1996 Harness Meet (53 days) resulted in operating
income of approximately $852,000, compared with the Fiscal 1995 Harness
Meet's (55 days) operating income of approximately $855,000. Daily
on-track attendance and wagering at the track's Fiscal 1996 Harness
Meet, averaged 2,434 and $182,103, respectively, as compared to 2,767
and $207,747, respectively, during the 1995 Harness Meet. Attendance
and wagering declined on live and simulcast receiving, however,
simulcast sending revenue increased in Fiscal 1996. Additionally,
expenses decreased by approximately 2% during the Fiscal 1996 Harness
Meet due primarily to cuts in payroll related expenses.

The Fiscal 1996 Thoroughbred Meet (64 days) had an operating loss
of approximately ($2,388,000) compared to the Fiscal 1995 Thoroughbred
Meet (75 days) operating loss of approximately ($311,000). This increase
in operating loss primarily reflects the net effect of the decreased
revenues associated with a decrease in the number of race days, due to
less favorable weather condition, during the third quarter of Fiscal
1996 as compared to the comparable period in the prior fiscal year.
Additionally, losses during the fourth quarter of Fiscal 1996 increased
primarily as a result of decreases in income from live racing and
simulcast receiving and sending. In addition, increased competition
primarily from Pennsylvania phone betting and several off-track-betting
locations situated in close proximity to Garden State Park may have
contributed to the decline. Daily on-track attendance and wagering at
Garden State Park's Fiscal 1996 Thoroughbred Meet averaged 2,891 and
$164,381, respectively, compared to 3,292 and $212,580, respectively,
during Fiscal 1995.

During Fiscal 1996, the track had an operating loss of
approximately ($782,000) during the non-racing periods, as compared to a
loss of approximately ($342,000) in the prior fiscal year. The increase
in operating loss was primarily attributable to lower simulcasting
handles.

Simulcasting during Fiscals 1996 and 1995, both to and from other
New Jersey racetracks as well as out-of-state racetracks and casinos,
accounted for approximately 82% and 77%, respectively, of revenue. Live
racing and other income accounted for approximately 18% and 23% of
revenue at Garden State Park during Fiscals 1996 and 1995, respectively.

Freehold Raceway

During Fiscal 1996, Freehold Raceway ran its FRA Harness Meet from
August 17, 1995 through December 30, 1995 for a total of 99 days.
Freehold Raceway's ACH Harness Meet ran from January 1, 1996 through May
27, 1996 for a total of 102 days. During both race meetings, Freehold
Raceway simulcasts its live racing to other racetracks, other licensed
venues and certain Atlantic City casinos. Simulcasting into the
racetrack from other racetracks continues throughout the fiscal year.

For Fiscal 1996, Freehold Raceway realized operating income before
interest and income taxes of $5,362,039. Revenue for the period was
$36,242,799. The cost of revenues, primarily purse expenses and
simulcasting commissions, was $13,476,190. Operating and depreciation
expenses were $15,032,484 and $793,038, respectively. General and
administrative expenses were $1,579,048.

The Fiscal 1996 FRA Harness Meet resulted in operating income of
approximately $2,987,717. Daily on-track attendance and wagering at
the Fiscal 1995 FRA Harness Meet averaged 2,286 and $283,361,
respectively.

The Fiscal 1996 ACH Harness Meet resulted in operating income of
approximately $2,165,892 as compared to $3,449,403 in Fiscal 1995. The
decrease in income was primarily the net result of decreased revenues
and expenses associated with a decrease in the number of race days, due
to less favorable weather conditions, during the third quarter of Fiscal
1996 as compared to the comparable period in the prior fiscal year.
Daily on-track attendance and wagering at the Fiscal 1996 ACH Harness
Meet averaged 2,085 and $252,058, respectively, during Fiscal 1996 and
averaged 2,298 and $290,449, respectively, during Fiscal 1995.

During Fiscal 1996, Freehold Raceway had operating income of
approximately $208,430 during the non-racing periods.

Live racing accounted for approximately 34% of revenue at
Freehold Raceway during Fiscal 1996. Simulcasting, both to and from
other New Jersey racetracks as well as out-of-state racetracks and
casinos, accounted for approximately 66% of revenue at Freehold Raceway
during Fiscal 1996.

IMPORTANT FACTORS RELATING TO FORWARD LOOKING STATEMENTS

This Report contains certain forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended, and is
subject to the safe-harbor created by such sections. Such statements
concern the Company's operations, economic performance and financial
condition, including the impact of off-track wagering and other forms of
gaming on the Company's operations, the Company's defaults under the
CSFB Credit Facility, the Company's ability to obtain additional
financing necessary for any development of the El Rancho Property, the
results of certain litigation involving the Company and certain of its
directors and stockholders and the status of the DGE investigation and
the Company's licenses with the CCC and the Racing Commission. The
forward-looking statements in this Report involve known and unknown
risk, uncertainties and other factors that may cause the actual results,
performance, or achievements of the Company, or industry results, to be
materially different from any future results, performance or
achievements expressed or implied by such forward-looking statements.
Such factors include, among others, the following: general economic and
business conditions; changes in law regarding gaming activities in New
Jersey and neighboring states; competition; changes in business
strategy; the indebtedness of the Company; quality of management;
business abilities and judgment of the Company's personnel; the
availability, terms and deployment of capital; and various other factors
referenced in this Report. The forward-looking statements are made as
of the date of this Report, and the Company assumes no obligation to
update the forward-looking statements or to update the reasons why
actual results could differ from those projected in the forward-looking
statements.

ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA

Attached.

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

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

We have audited the accompanying consolidated balance sheet of
International Thoroughbred Breeders, Inc. and subsidiaries as of June
30, 1997, and the related consolidated statements of operations,
stockholders' equity and cash flows for the year then ended. These
consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on
these consolidated financial statements based on our audit.

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

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of
International Thoroughbred Breeders, Inc. and its subsidiaries as of
June 30, 1997, and the results of their operations and their cash flows
for the year then ended in conformity with generally accepted accounting
principles.

The accompanying financial statements have been prepared assuming that
the Company will continue as a going concern. As discussed in Note 1 to
the financial statements, the Company is in violation of several non-
financial loan covenants with its major lender which has resulted in an
additional $55 million of indebtedness being classified as a current
liability, is party to various legal proceedings and has sustained a
loss of approximately $17.4 million for the year ended June 30, 1997,
all of which raise substantial doubt about its ability to continue as a
going concern. Management's plans in regard to these matters are also
described in Note 1. The financial statements do not include any
adjustments that might result from the outcome of these uncertainties.

BDO SEIDMAN, LLP

Philadelphia, Pennsylvania
January 9, 1998

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

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

We have audited the accompanying consolidated balance sheets of
International Thoroughbred Breeders, Inc. and its subsidiaries as of
June 30, 1996, and the related consolidated statements of operations,
stockholders' equity, and cash flows for each of the two years in the
period ended June 30, 1996. These consolidated financial statements are
the responsibility of the Company's management. Our responsibility is to
express an opinion on these consolidated financial statements based on
our audits.

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

In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the consolidated
financial position of International Thoroughbred Breeders, Inc. and its
subsidiaries as of June 30, 1996, and the consolidated results of their
operations and their cash flows for each of the two years in the period
ended June 30, 1996, in conformity with generally accepted accounting
principles.

MOORE STEPHENS,
P.C.
Certified Public
Accountants

Cranford, New Jersey
August 23, 1996

INTERNATIONAL THOROUGHBRED BREEDERS, INC.
AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
AS OF JUNE 30, 1997 AND 1996

ASSETS
<TABLE>
<S><C> <C><C> <C><C>
June 30,
1997 1996

CURRENT ASSETS:

Cash and Cash Equivalents $ 3,784,895 $ 4,216,356
Restricted Cash and Investments 3,730,323 2,971,538
Reserve Escrow Deposits 16,773,824 0
Accounts Receivable 1,497,254 1,892,941
Prepaid Expenses 1,396,766 1,205,951
Other Current Assets 664,226 366,656
Land and Improvements
Held for Sale, Net 6,762,809 0

TOTAL CURRENT ASSETS 34,610,097 10,653,442

LAND, BUILDINGS AND EQUIPMENT:

Land and Buildings 69,255,937 69,093,719
Construction In Progress 50,624,333 48,736,200
Equipment 5,261,367 4,376,889

125,141,637 122,206,808

LESS: Accumulated Depreciation
and Amortization 4,278,754 2,858,439

TOTAL LAND, BUILDINGS AND
EQUIPMENT, NET 120,862,883 119,348,369

LAND AND IMPROVEMENTS
HELD FOR SALE, NET 0 6,719,327

OTHER ASSETS:

Deposits and Other Assets 272,337 340,507
Deferred Financing Costs, Net 5,907,432 4,667,415
Goodwill, Net 3,041,280 3,151,872
TOTAL OTHER ASSETS 9,221,049 8,159,794

TOTAL ASSETS $ 164,694,029 $ 144,880,933

See Notes to Consolidated Financial Statements.
</TABLE>

INTERNATIONAL THOROUGHBRED BREEDERS, INC.
AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
AS OF JUNE 30, 1997 AND 1996

LIABILITIES AND STOCKHOLDERS' EQUITY

<TABLE>
<S><C> <C><C> <C> <C>
June 30,
1997 1996

CURRENT LIABILITIES:

Accounts Payable $ 3,984,638 $ 4,837,191
Accrued Expenses 5,228,655 3,056,236
Purses Payable 1,984,050 1,963,150
Current Maturities of
Long-Term Debt 62,963,178 3,214,100
Deferred Revenue 1,750,572 1,499,449

TOTAL CURRENT LIABILITIES 75,911,093 14,570,126

LONG-TERM DEBT,
Net of Current Portion 13,131,003 50,992,702

COMMITMENTS AND CONTINGENCIES - -

STOCKHOLDERS' EQUITY:

Series A Preferred Stock,
$100.00 Par Value,
Authorized 500,000 Shares,
Issued and Outstanding,
362,470 and 362,462 Shares,
Respectively 36,246,975 36,246,175

Common Stock, $2.00 Par Value,
Authorized 25,000,000 Shares,
Issued and Outstanding,
13,978,060 and 11,651,487
Shares, Respectively 27,956,119 23,302,973
Capital in Excess of Par 25,048,752 16,111,652
Retained Earnings (Deficit)
(subsequent to June 30, 1993,
date of quasi-reorganization) (13,558,246) 3,829,336

TOTAL 75,693,600 79,490,136

LESS: Deferred Compensation, Net 41,667 172,031

TOTAL STOCKHOLDERS' EQUITY 75,651,933 79,318,105

TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 164,694,029 $144,880,933

See Notes to Consolidated Financial Statements.
</TABLE>

INTERNATIONAL THOROUGHBRED BREEDERS, INC.
AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE YEARS ENDED
JUNE 30, 1997, 1996 AND 1995

<TABLE>
<S><C> <C><C> <C> <C>
Year Ended June 30,
1997 1996

REVENUES:

Revenue from Operations $ 68,347,904 $ 68,864,894
Investment Income 117,972 255,063
TOTAL REVENUES 68,465,876 69,119,957

EXPENSES:

Cost of Revenues:

Purses 23,144,742 23,309,829
Operating Expenses 35,541,128 35,752,642
Depreciation & Amortization 1,632,285 1,461,763
General & Administrative Expenses 11,089,428 8,217,794
El Rancho Property Development
Carrying Costs 1,773,627 0

TOTAL EXPENSES 73,181,210 68,742,028

OPERATING (LOSS) INCOME (4,715,334) 377,929

OTHER EXPENSES:

Interest Expense 2,500,702 1,140,665
Amortization of Financing Costs 1,142,909 79,109
Write Off of Deposits on Land 2,585,000 0
Write Off of Starship Orion Costs 2,543,968 0
TOTAL OTHER EXPENSES 8,772,579 1,219,774

(LOSS) INCOME BEFORE
INCOME TAXES AND
AND EXTRAORDINARY ITEM (13,487,913) (841,845)
Income Tax Expense 62,044 227,867

(LOSS) INCOME BEFORE
EXTRAORDINARY ITEM (13,549,957) (1,069,712)

EXTRAORDINARY ITEM -
Loss on Early Extinguishment of Debt 3,837,625 0

NET (LOSS) INCOME $ (17,387,582) $(1,069,712)

PER SHARE DATA:
(LOSS) INCOME BEFORE
EXTRAORDINARY ITEM $ (1.16) $ (0.10)

EXTRAORDINARY ITEM (0.32) -

NET (LOSS) INCOME $ (1.48) $ (0.10)

WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING 11,715,256 10,536,414

Year Ended June 30,
1995

REVENUES:

Revenue from Operations $ 55,744,950
Investment Income 3,437,788
TOTAL REVENUES 59,182,738

EXPENSES:

Cost of Revenues:

Purses 17,342,134
Operating Expenses 29,892,282
Depreciation & Amortization 965,026
General & Administrative Expenses 7,912,445
El Rancho Property Development
Carrying Costs 0

TOTAL EXPENSES 56,111,887

OPERATING (LOSS) INCOME 3,070,851

OTHER EXPENSES:

Interest Expense 556,799
Amortization of Financing Costs 0
Write Off of Deposits on Land 0
Write Off of Starship Orion Costs 0

TOTAL OTHER EXPENSES 556,799

(LOSS) INCOME BEFORE
INCOME TAXES AND
AND EXTRAORDINARY ITEM 2,514,052
Income Tax Expense 115,600

(LOSS) INCOME BEFORE
EXTRAORDINARY ITEM 2,398,452

EXTRAORDINARY ITEM -
Loss on Early Extinguishment of Debt 0

NET (LOSS) INCOME $ 2,398,452

PER SHARE DATA:

(LOSS) INCOME BEFORE
EXTRAORDINARY ITEM $ 0.25

EXTRAORDINARY ITEM -

NET (LOSS) INCOME $ 0.25

WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING 9,551,369

The Company's purchase of Freehold Raceway in January, 1995 materially
affects the comparability of the twelve month periods
reflected in the above data.

See Notes to Consolidated Financial Statements.
</TABLE>

INTERNATIONAL THOROUGHBRED BREEDERS, INC.
AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY FOR THE YEARS
ENDED JUNE 30, 1997, 1996 AND 1995

<TABLE>
<S><C> <C><C> <C><C>
Preferred
Number of
Shares Amount

BALANCE - JUNE 30, 1994 362,443 $ 36,244,275

Shares Issued for Fractional
Exchanges With Respect to the
One-for-twenty Reverse Stock
Split effected on March 13, 1992 7 700

Net Income for the Year
Ended June 30, 1995 --- ---

BALANCE - JUNE 30, 1995 362,450 36,244,975

Common Shares Issued -
- Reg S Offering --- ---

Shares Issued in Connection
with Debt Financing --- ---

Deferred Compensation for Options
Granted to Employees --- ---

Financing Costs for Warrants in
Connection with Debt Financing --- ---

Shares Issued for Fractional
Exchanges With Respect to the
One-for-twenty Reverse Stock Split
effected on March 13, 1992 12 1,200

Amortization of Deferred
Compensation Costs --- ---

Net (Loss) for the Year
Ended June 30, 1996 --- ---

BALANCE - JUNE 30, 1996 362,462 36,246,175

Shares Issued in Connection
with Retirement of Debt
Compensation for Options
Granted to Non-Employees --- ---

Financing Costs for Warrants Issued
in Connection with Debt Financing --- ---

Shares Issued for Fractional
Exchanges With Respect to the
One-for-twenty Reverse Stock Split
effected on March 13, 1992 8 800

Amortization of Deferred
Compensation Costs --- ---

Cancellation of Options Granted
for Deferred Compensation --- ---

Net (Loss) for the Year
Ended June 30, 1997 --- ---

BALANCE - JUNE 30, 1997 362,470 $ 36,246,975

Common
Number of
Shares Amount

BALANCE - JUNE 30, 1994 9,551,255 $ 19,102,509

Shares Issued for Fractional
Exchanges With Respect to the
One-for-twenty Reverse Stock Split
effected on March 13, 1992 131 262

Net Income for the Year
Ended June 30, 1995 --- ---

BALANCE - JUNE 30, 1995 9,551,386 19,102,771

Common Shares Issued -
- Reg S Offering 1,900,000 3,800,000

Shares Issued in Connection
with Debt Financing 200,000 400,000

Deferred Compensation for Options
Granted to Employees --- ---

Financing Costs for Warrants in
Connection with Debt Financing --- ---

Shares Issued for Fractional
Exchanges With Respect to the
One-for-twenty Reverse Stock Split
effected on March 13, 1992 101 202

Amortization of Deferred
Compensation Costs --- ---

Net (Loss) for the Year
Ended June 30, 1996 --- ---

BALANCE - JUNE 30, 1996 11,651,487 23,302,973

Shares Issued in Connection
with Retirement of Debt 2,326,520 4,653,040

Compensation for Options
Granted to Non-Employees --- ---

Financing Costs for Warrants Issued
in Connection with Debt Financing --- ---

Shares Issued for Fractional
Exchanges With Respect to the
One-for-twenty Reverse Stock Split
effected on March 13, 1992 53 106

Amortization of Deferred
Compensation Costs --- ---

Cancellation of Options Granted
for Deferred Compensation --- ---

Net (Loss) for the Year
Ended June 30, 1997 --- ---

BALANCE - JUNE 30, 1997 13,978,060 $ 27,956,119

Capital Retained
in Excess Earnings
of Par (Deficit)

BALANCE - JUNE 30, 1994 $ 11,960,605 $ 2,500,596

Shares Issued for Fractional
Exchanges With Respect to the
One-for-twenty Reverse Stock Split
effected on March 13, 1992 (962) ---

Net Income for the Year
Ended June 30, 1995 --- 2,398,452

BALANCE - JUNE 30, 1995 11,959,643 4,899,048

Common Shares Issued -
- Reg S Offering 1,638,162 ---

Shares Issued in Connection
with Debt Financing 400,000 ---

Deferred Compensation for Options
Granted to Employees 175,000 ---

Financing Costs for Warrants in
Connection with Debt Financing 1,940,250 ---

Shares Issued for Fractional
Exchanges With Respect to the
One-for-twenty Reverse Stock Split
effected on March 13, 1992 (1,402) ---

Amortization of Deferred
Compensation Costs --- ---

Net (Loss) for the Year
Ended June 30, 1996 --- (1,069,712)

BALANCE - JUNE 30, 1996 16,111,652 3,829,336

Shares Issued in Connection
with Retirement of Debt 6,671,245

Compensation for Options
Granted to Non-Employees 493,050 ---

Financing Costs for Warrants Issued
in Connection with Debt Financing 1,893,451 ---

Shares Issued for Fractional
Exchanges With Respect to the
One-for-twenty Reverse Stock Split
effected on March 13, 1992 (906) ---

Amortization of Deferred
Compensation Costs --- ---

Cancellation of Options Granted
for Deferred Compensation (119,741) ---

Net (Loss) for the Year
Ended June 30, 1997 --- (17,387,582)

BALANCE - JUNE 30, 1997 $ 25,048,752 $ (13,558,246)

Deferred
Compensation Total

BALANCE - JUNE 30, 1994 $ 0 $ 69,807,985

Shares Issued for Fractional
Exchanges With Respect to the
One-for-twenty Reverse Stock Split
effected on March 13, 1992 --- ---

Net Income for the Year
Ended June 30, 1995 --- 2,398,452

BALANCE - JUNE 30, 1995 0 72,206,437

Common Shares Issued -
- Reg S Offering --- 5,438,162

Shares Issued in Connection
with Debt Financing --- 800,000

Deferred Compensation for Options
Granted to Employees (175,000) 0

Financing Costs for Warrants in
Connection with Debt Financing --- 1,940,250

Shares Issued for Fractional
Exchanges With Respect to the
One-for-twenty Reverse Stock Split
effected on March 13, 1992 --- ---

Amortization of Deferred
Compensation Costs 2,969 2,969

Net (Loss) for the Year
Ended June 30, 1996 --- (1,069,712)

BALANCE - JUNE 30, 1996 (172,031) 79,318,105

Shares Issued in Connection
with Retirement of Debt 11,324,285

Compensation for Options
Granted to Non-Employees --- 493,050

Financing Costs for Warrants Issued
in Connection with Debt Financing --- 1,893,451

Shares Issued for Fractional
Exchanges With Respect to the
One-for-twenty Reverse Stock Split
effected on March 13, 1992 --- ---

Amortization of Deferred
Compensation Costs 10,623 10,623

Cancellation of Options Granted
for Deferred Compensation 119,741 ---

Net (Loss) for the Year
Ended June 30, 1997 --- (17,387,582)

BALANCE - JUNE 30, 1997 $ (41,667) $ 75,651,933

See Notes to Consolidated Financial Statements.

</TABLE>

INTERNATIONAL THOROUGHBRED BREEDERS, INC.
AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS
ENDED JUNE 30, 1997, 1996 AND 1995

<TABLE>
<S><C><C> <C><C> <C><C>
Years Ended June 30,
1997 1996

CASH FLOWS FROM OPERATING
ACTIVITIES:

NET (LOSS) INCOME $(17,387,582) $ (1,069,712)

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

Depreciation and Amortization 2,775,194 1,543,841
Compensation for Options Granted 493,050 0
Write-Off of Deposits on Land 2,585,000 0
Write-Off of Starship Orion Costs 2,543,968 0
Extraordinary Item - Loss on Early
Extinguishment of Debt 3,837,625 0
Other (783) 16,652
Changes in Assets and Liabilities -
(Increase) in Restricted Cash
and Investments (758,785) (820,127)
Decrease in Accounts Receivable 395,687 262,851
(Increase) in Other Assets (297,570) (213,861)
(Increase) in Prepaid Expenses (190,815) (62,944)
Increase (Decrease) in
Accounts and Purses
Payable and Accrued Expenses 1,340,766 3,063,264
Increase (Decrease) in
Deferred Revenue 251,123 (51,002)

NET CASH (USED IN) PROVIDED
BY OPERATING ACTIVITIES (4,413,122) 2,668,962

CASH FLOWS FROM INVESTING
ACTIVITIES:

Purchase and Development of El Rancho
and costs incurred in connection
with Starship Orion Theme (2,016,133) (18,033,745)
Deposits on Purchase of Land (2,115,000) (470,000)
Purchase of Land at Freehold Raceway 0 (400,000)
Capital Expenditures at Racetracks (1,428,227) (1,594,384)
(Increase) Decrease in
Other Investments 68,170 57,024
NET CASH (USED IN) INVESTING
ACTIVITIES (5,491,190) (20,441,105)

CASH FLOWS FROM FINANCING
ACTIVITIES:

Sale of Common Stock 0 5,438,162
Proceeds from issuance of
Long Term Notes 827,891 6,000,000
Proceeds from Line of Credit -
Foothill 9,138,690 6,597,794
Proceeds from Foothill Financing 0 14,000,000
Proceeds from Credit Suisse Financing 55,000,000 0
Reserve Escrow Deposits in Connection
with Credit Suisse Financing (16,762,059) 0
Deferred Financing Costs (4,926,943) 0
Proceeds from Sun Bank
Refinancing of Foreign Notes 6,000,000 0
Principal Payments on Acquired Debt -
Freehold 0 0
Principal Payments on Foothill Notes (29,976,010) 0
Principal Payments on Foreign Notes (6,000,000) 0
Principal Payments on Sun Mortgage 0 (14,000,000)
Principal Payments on Short Term Notes (836,874) (6,500,000)
Principal Payments on Long Term Notes (2,991,844) (1,348,751)

NET CASH PROVIDED BY (USED IN)
FINANCING ACTIVITIES 9,472,851 10,187,205

NET (DECREASE) IN CASH AND
CASH EQUIVALENTS (431,461) (7,584,938)

CASH AND CASH EQUIVALENTS
AT BEGINNING OF YEAR 4,216,356 11,801,294

CASH AND CASH EQUIVALENTS
AT END OF YEAR $ 3,784,895 $ 4,216,356

Supplemental Disclosures of Cash Flow Information:

Cash paid during the period for:
Interest $ 4,849,949 $ 1,915,571
Income Taxes $ 0 $ 291,531

Years Ended June30,
1995

CASH FLOWS FROM OPERATING
ACTIVITIES:

NET (LOSS) INCOME $ 2,398,452

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

Depreciation and Amortization 965,026
Compensation for Options Granted 0
Write-Off of Deposits on Land 0
Write-Off of Starship Orion Costs 0
Extraordinary Item - Loss on Early
Extinguishment of Debt 0
Other (113,339)
Changes in Assets and Liabilities -
(Increase) in Restricted Cash
and Investments (21,339)
Decrease in Accounts Receivable 142,576
(Increase) in Other Assets (15,907)
(Increase) in Prepaid Expenses (138,661)
Increase (Decrease) in
Accounts and Purses
Payable and Accrued Expenses (1,488,291)
Increase (Decrease) in
Deferred Revenue 831,068

NET CASH (USED IN) PROVIDED
BY OPERATING ACTIVITIES 2,559,585

CASH FLOWS FROM INVESTING
ACTIVITIES:

Purchase and Development of El Rancho
and costs incurred in connection
with Starship Orion Theme 0
Deposits on Purchase of Land 0
Purchase of Land at Freehold Raceway 0
Capital Expenditures at Racetracks (1,090,904)
(Increase) Decrease in
Other Investments (94,931)

NET CASH (USED IN) INVESTING
ACTIVITIES (1,185,835)

CASH FLOWS FROM FINANCING
ACTIVITIES:

Sale of Common Stock 0
Proceeds from issuance of
Long Term Notes 0
Proceeds from Line of Credit -
Foothill 0
Proceeds from Foothill Financing 0
Proceeds from Credit Suisse Financing 0
Reserve Escrow Deposits in Connection
with Credit Suisse Financing 0
Deferred Financing Costs 0
Proceeds from Sun Bank
Refinancing of Foreign Notes 0
Principal Payments on Acquired Debt -
Freehold (5,169,098)
Principal Payments on Foothill Notes 0
Principal Payments on Foreign Notes 0
Principal Payments on Sun Mortgage 0
Principal Payments on Short Term Notes 0
Principal Payments on Long Term Notes (479,449)

NET CASH PROVIDED BY (USED IN)
FINANCING ACTIVITIES (5,648,547)

NET (DECREASE) IN CASH AND
CASH EQUIVALENTS (4,274,797)

CASH AND CASH EQUIVALENTS
AT BEGINNING OF YEAR 16,076,091

CASH AND CASH EQUIVALENTS
AT END OF YEAR $ 11,801,294

Supplemental Disclosures of Cash Flow Information:

Cash paid during the period for:
Interest $ 160,674
Income Taxes $ 0

Supplemental Schedule of Non-Cash Investing and Financing Activities:

During the years ended June 30, 1997 and 1996, the Company recorded
an unrealized loss of $40,000 and $160,000, respectively, on trading
securities.
During the years ended June 30, 1997 and 1996, respectively, the Company
issued warrants to purchase 746,847 shares and 925,000 shares of Common
Stock at a fair value of $1,893,451 and $1,930,250, respectively,
in connection with financing agreements.
During the year ended June 30, 1997, the Company exchanged debt totaling
$10.5 million plus accrued interest of approximately $1.1 million for
2,326,520 shares of Common Stock.
During the year ended June 30, 1996, Land and Improvements at a total
cost of $31,975,000 was financed through short and long term notes.

See Notes to Consolidated Financial Statements.
</TABLE>

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

(1) BASIS OF PRESENTATION

The accompanying consolidated financial statements have been prepared
assuming International Thoroughbred Breeders, Inc. and subsidiaries
(collectively the "Company") will continue as a going concern. As discussed
in Note 8, the Company is in violation of several non-financial loan covenants
with its major lender. As a result of not obtaining waivers of these
violations, its $55,000,000 credit facility has been classified as a current
liability and payment could be demanded immediately. The Company is
continuing discussions with this lender as to the granting of waivers or other
remedies that could be reached in connection with the litigation settlement
negotiations described below.

The Company and certain of its directors and stockholders are involved
in various legal proceedings as more fully described in Note 10. Several of
these actions are at a standstill as the parties are in the final stages of
settlement negotiations. Although the parties believe a settlement is
imminent, there can be no assurance that a settlement will be reached or as to
the terms thereof. In the event a settlement cannot be reached, it is not
possible to determine the probable outcome or the amount of liability, if any,
and the resultant effects on the Company's financial position, results of
operations or cash flows.

Additionally, the Company has sustained a net loss of approximately
$17.4 million and $1.1 million during fiscals 1997 and 1996, respectively.
While the Company believes its projected cash flows will be sufficient to meet
its operating needs through March 1999, there can be no assurances beyond that
date. These projections do not reflect the impact of its default under the
above mentioned credit facility or the effects of the above mentioned
litigation.

While the Company is continuing to monitor and reduce its operating
expenses, including payroll, it is also considering the sale of certain assets
or operations, including the possible sale of the El Rancho property as part
of the litigation settlement negotiations described above and the possible
sale of all or some of its racing operations.

(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(A) Nature of Operations -The Company conducts live race meetings for
Thoroughbred and Harness (Standardbred) horses and participates in intrastate
and interstate simulcast wagering as a host and receiving track in Cherry Hill
("Garden State") and Freehold ("Freehold"), New Jersey. The Company's
racetrack operations are dependent upon continued governmental acceptance of
racing as a form of legalized gambling. The Company competes for gaming
revenue, not only with other racetracks, but also with other forms of gaming
activities, such as, off-track betting parlors, telephone wagering, casino
gambling in Atlantic City, New Jersey, slot machines at other racetracks, and
various state lotteries, both from within the State of New Jersey and from
neighboring states (Pennsylvania and Delaware in particular). From time to
time, legislation has been introduced in New Jersey and neighboring states
which would further expand gambling opportunities and increase competition.
Severe inclement weather, which can affect the northeastern portion of the
United States in the winter months, can also adversely affect operations. The
Company is required to annually renew its racing permits with the New Jersey
Racing Commission in order to operate.

During fiscal 1996, the Company, through one of its subsidiaries,
purchased property in Las Vegas, Nevada, the former El Rancho Hotel and Casino
(the "El Rancho"), for the purpose of developing a casino gaming and hotel
entertainment complex. (See Note 3).

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

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

(D) Construction in Progress - Construction in progress includes the
purchase price as well as construction costs in conjunction with the
development of the El Rancho. These amounts include land and building
acquisition costs, interest, consulting and other development costs in
connection with the project. Such costs, aggregating approximately
$50,624,000 at June 30, 1997, include real property acquisition costs in the
amount of approximately $43,500,000, capitalized interest of $4,182,007
($3,430,416 in fiscal 1997) and other development costs.

(E) Goodwill, Depreciation and Amortization - Goodwill is the excess of
the cost of acquired net assets at Freehold over their fair value and is being
amortized over 30 years under the straight line method. Accumulated
amortization at June 30, 1997 and 1996 was $556,349 and $445,757,
respectively.

Management of the Company evaluates the recoverability of goodwill
quarterly or more frequently whenever events and circumstances warrant revised
estimates, and considers whether the goodwill should be completely or
partially written off or the amortization period accelerated.

Depreciation of property and equipment and amortization of building
improvements are computed by the straight-line method at rates adequate to
allocate their cost or adjusted fair value in accordance with accounting
principles applicable to a quasi-reorganization over the estimated remaining
useful lives of the respective assets.

The Company adopted the provisions of Statement of Financial Accounting
Standards No. 121 ("SFAS 121") "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to Be Disposed Of" during the year ended June
30, 1996. SFAS 121 establishes accounting standards for the impairment of
long-lived assets, certain identifiable intangibles and goodwill related to
those assets to be held and used and for long-lived assets and certain
identifiable intangibles to be disposed of. The Company reviews the carrying
values of its long-lived and identifiable intangible assets for possible
impairment whenever events or changes in circumstances indicate that the
carrying amount of the assets may not be recoverable based on undiscounted
estimated future operating cash flows. As of June 30, 1997, the Company has
determined that no impairment has occurred.

As more fully discussed in Notes 2D and 3, the Company has incurred
approximately $52.4 million in costs associated with the El Rancho project,
including approximately $1.8 million in El Rancho carrying costs. The Company
believes that additional costs of approximately $50 million will be sufficient
to complete the development of the El Rancho property under the "CountryLand"
theme. The Company has also considered expanding the CountryLand project into
a more elaborate one which could increase these additional costs by
approximately $25 million. Due to the pending litigation discussed in Note
10, it is unlikely any additional funding will be obtained

in order to develop the El Rancho property. Application of SFAS No. 121 could
prospectively result in a write-down of costs incurred on the project if there
is any significant decrease in the market value of the property, any
significant adverse change in business climate, or any accumulation of costs
significantly in excess of amounts expected to complete the project. As of
July 1997, development was suspended until additional funding can be obtained.
As a result, interest will not be capitalized as additional costs associated
with construction until such time as the Company obtains additional financing
and resumes construction.

(F) Recent Accounting Pronouncements - In March 1997, the Financial
Accounting Standards Board issued Statement of Financial Accounting Standards
No. 128, Earnings Per Share ("SFAS 128"). SFAS 128 provides a different
method of calculating earnings per share than is currently used in APB Opinion
15. SFAS 128 provides for the calculation of basic and diluted
earnings per share. Basic earnings
per share includes no dilution and is computed by dividing income available to
common stockholders by the weighted average number of common shares
outstanding for the period. Diluted earnings per share reflects the potential
dilution of securities that could share in the earnings of an entity, similar
to existing fully diluted earnings per share. The Company will adopt the
provisions for computing earnings per share set forth in SFAS 128 in December
1997 and believes that its adoption will not have a material effect on the
calculation of earnings per share.

Statement of Financial Accounting Standards No. 129, Disclosure of
Information about Capital Structure ("SFAS 129") effective for periods ending
after December 15, 1997, establishes standards for disclosing information
about an entity's capital structure. SFAS 129 requires disclosure of the
pertinent rights and privileges of various securities outstanding (stock
options, warrants, preferred stock, debt and participation rights) including
dividend and liquidation preferences, participant rights, call prices and
dates, conversion or exercise prices and redemption requirements. Adoption of
SFAS 129 will have no effect on the Company as it currently discloses the
information specified.

In June 1997, the Financial Accounting Standards Board issued two new
disclosure standards as described below. The Company's results of operations
and financial position will be unaffected by implementation of these new
standards.

Statement of Financial Accounting Standards No. 130, Reporting
Comprehensive Income ("SFAS 130"), establishes standards for reporting and
display of comprehensive income, its components and accumulated balances.
Comprehensive income is defined to include all changes in equity except those
resulting from investments by owners and distributions to owners. Among other
disclosures, SFAS 130 requires that all items that are required to be
recognized under current accounting standards as components of comprehensive
income be reported in a financial statement that is displayed with the same
prominence as other financial statements.

Statement of Financial Accounting Standards No. 131, Disclosure about
Segments of a Business Enterprise ("SFAS 131"), establishes standards for the
way that public enterprises report information about operating segments in
annual financial statements and requires reporting of selected information
about operating segments in interim financial statements issued to the public.
It also establishes standards for disclosures regarding products and services,
geographic areas and major customers. SFAS 131 defines operating segments as
components of an enterprise about which separate financial information is
available that is evaluated regularly by the chief operating decision maker in
deciding how to allocate resources and in assessing performance.

Both SFAS 130 and SFAS 131 are effective for financial statements for
periods beginning after December 15, 1997 and require comparative information
for earlier years to be restated. Due to the recent issuance of these
standards, management has been unable to fully evaluate the impact, if any,
they may have on future financial statement disclosures.

(G) Deferred Financing Costs - Deferred financing costs at June 30, 1997
include those amounts associated with its May 23, 1997 financing agreement
with Credit Suisse First Boston Mortgage Capital LLC("Credit Suisse"). (See
Note 8). These costs of $6,220,129, less amortization of $312,697, are being
expensed over the two year life of the loan. The Company has reflected, as an
extraordinary item, the write-off of the costs of prior and current
year's financing activities that had been deferred, as the related
indebtedness associated with these costs has been retired. (See Note 16).

(H) Revenue Recognition - The Company recognizes the revenues associated
with horse racing at Garden State Park and Freehold Raceway as they are
earned. Both Garden State and Freehold operate as satellite wagering sites
for both thoroughbred and harness racing meets conducted at other racetracks.
The tracks receive broadcasts of live racing from other racetracks under
various simulcasting agreements. The tracks also provide broadcasts of live
racing conducted at the Company's facilities to other race tracks under
various host simulcasting agreements. Under these contracts, the Company
receives or pays pari-mutuel commissions of varying percentages of simulcast
pari-mutuel wagering. Costs and expenses associated with horse racing
revenues are charged against income in those periods in which the horse racing
revenues are recognized. Other costs and expenses, including advertising, are
recognized as they actually occur throughout the year. Deferred revenue
primarily consists of prepaid purse amounts.

(I) Income Taxes - The Company has adopted the provisions of Statement
of Financial Accounting Standards No. 109, "Accounting for Income Taxes"
("SFAS 109"). SFAS 109 requires a company to recognize deferred tax
liabilities and assets for the expected future tax consequences of events that
have been recognized in a company's financial statements or tax returns.
Under this method, deferred tax liabilities and assets are determined based on
the difference between the financial statement carrying amounts and tax bases
of assets and liabilities using enacted tax rates in effect in the years in
which the differences are expected to reverse.

(J) Cash and Cash Equivalents - The Company considers all highly liquid
investments with an original maturity of three months or less to be cash
equivalents.

(K) Concentrations of Credit Risk - Financial instruments which
potentially subject the Company to concentrations of credit risk are cash and
cash equivalents. The Company places its cash investments with high credit
quality financial institutions and currently invests primarily in U.S.
government obligations that have maturities of less than three months. The
amount on deposit in any one institution that exceeds federally insured limits
is subject to credit risk. At June 30, 1997, the Company had approximately $8
million on deposit in financial institutions that was subject to such risk.
The Company does not require collateral for its financial instruments. In
addition, at June 30, 1997, the Company had approximately $16.8 million of
cash in reserve escrow accounts, which substantially exceeded federally
insured limits.

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

(M) Net Income (Loss) Per Common Share - Net income per share is
calculated by dividing net income by the weighted average number of shares of
common stock outstanding adjusted by the dilutive effect of common stock
equivalents, which consist of stock options (using the treasury stock method)
and warrants.

Loss per common share is computed by dividing net loss by the weighted
average number of shares of common stock outstanding. Common stock
equivalents are not included in the loss per share computation because they
are antidilutive.

(3) ACQUISITIONS AND DISPOSITIONS

Fiscal 1997

The Company executed an agreement to purchase 15 acres of unimproved
land in Las Vegas, Nevada in fiscal 1996. The Company made non-refundable
deposits aggregating $2,585,000 through fiscal 1997. The land is located
contiguous to the El Rancho property. The Company could not arrange the
necessary financing to finalize the purchase. As a result, these deposits
were forfeited during December 1996.

On July 1, 1997, the Company made a non-refundable payment of $600,000
to D&C Gaming Corporation. ("D&C"), a company owned equally by the Company's
Chief Executive Officer and President and by the President and Chairman of
Las Vegas Entertainment Network, Inc. ("LVEN"), for an option to acquire
operating leases for two New Mexico racetracks. The option agreement has been
terminated and D&C has agreed to repay the $600,000 deposit. (See Note 10).

Fiscal 1996

During January 1996, the Company purchased the El Rancho property from
LVEN for the development of a casino gaming and entertainment complex. The
purchase price was for approximately $43.5 million in cash and notes, plus
contingent consideration of up to $160 million, dependent on future "adjusted
cash flows" as contractually defined. Construction and renovation of the El
Rancho property is subject to a number of conditions including, but not
limited to, approval of the Company's plans by the local building commission
and obtaining of additional funding.

The purchase price of approximately $43.5 million consisted of
approximately $12.5 million paid in cash with the balance financed by: 1) a
$6.5 million unsecured seller note; 2) the assumption of a $14 million first
mortgage note; and 3) a $10.5 million second mortgage seller note which will
be payable only to the extent that certain contingent events occur. Effective
June 27, 1997, the Company issued 2,093,868 shares of its Common Stock to a
subsidiary of the seller and 232,652 shares to Credit Suisse, the Company's
prime lender, for its consent and for certain advisory services on the
transaction, in exchange for cancellation of the $10.5 million note and
accrued interest amounting to approximately $1.1 million. A proxy to vote the
2,093,868 shares has been granted to the Company's Chief Executive Officer and
President by LVEN and its subsidiary. The 2,326,520 shares were valued at $5
per share, the approximate fair market value at the date of the transaction.
No material gain or loss was realized.

Fiscal 1995

During fiscal 1995, Freehold Raceway completed the purchase for $975,000
of a 4.659 acre parcel of land, previously leased for parking space, from an
unrelated party. Part of the purchase price was financed by a three year
$575,000 note at an eight percent per annum rate. On May 23, 1997, this note
was paid in full in connection with the Company's debt refinancing. (See Note
8)

(4) INVESTMENTS

At June 30, 1997 and 1996, the Company had approximately $3,730,000 and
$2,972,000, respectively, which was classified as restricted cash and
investments. These funds are primarily cash received from horsemen for
nomination and entry fees to be applied to upcoming racing meets, purse
winnings held in trust for horsemen and amounts held for unclaimed
ticketholder winnings.

Interest income for the fiscal years ended June 30, 1997, 1996, and 1995
was $157,972, $415,063, and $633,304, respectively. Realized gains resulting
from the sale of trading securities for fiscals 1997, 1996 and 1995 were -0-,
$7,500 and $2,804,484, respectively.

(5) RESERVE ESCROW DEPOSITS

At June 30, 1997, $16,773,824 was held in various reserve cash escrow
deposit accounts that were established in connection with the Company's two-
year $55 million credit facility with Credit Suisse. The financing agreement
provided for reserve accounts to be held by LaSalle National Bank ("the
Depository"). The Company is currently in default with respect to the Credit
Suisse credit facility (See Note 8). As a result, Credit Suisse could apply
any remaining escrow amounts to any outstanding borrowings. Therefore, all
balances in the Reserve Escrow Deposits have been classified as current
assets. On the maturity date of the facility, any amounts remaining on
deposit shall, at Credit Suisse's option, be applied against outstanding
borrowings or returned to the Company.

Interest Reserve Account. $10,000,000 was placed in a Interest Reserve
Account to fund the monthly interest due on the $55,000,000 loan
(approximately $588,000 per month).

El Rancho Reserve Account.$3,759,615 of the loan proceeds were deposited
to reimburse the Company for expenditures in connection with the development
and carrying costs of the El Rancho property. Through December 31, 1997, the
Company has been reimbursed $1,465,000 from this account.

Working Capital Account. $760,000 of the loan proceeds was deposited for
working capital purposes. Subsequent to June 30, 1997, upon the sale of
certain Garden State property, the Company deposited an additional $1,370,120
in this account.

Tax and Insurance Account. $916,898 of the loan proceeds were deposited
into a Tax and Insurance Reserve Account. Each month the Company will make
deposits equal to one-twelfth, or approximately $300,000, of the amount
reasonably estimated by Credit Suisse to be sufficient to pay, all taxes,
general and special assessments, water and sewer rents and charges and other
similar charges levied against certain of the Company's properties.

Deferred Maintenance Account. $500,000 of the loan proceeds were
deposited to be used to reimburse the Company's racetracks for maintenance
expenditures.

Environmental Remediation Account.$1,000,000 of the loan proceeds were
deposited to be used to reimburse the Company for expenditures made in
connection with approved environmental remediation expenditures.

The Escrow Accounts at June 30, 1997 are summarized below:
<TABLE>
<S> <C><C>
Account

Interest Reserve $ 9,825,547

El Rancho Reserve 3,759,615

Working Capital 760,000

Tax and Insurance 928,662

Deferred Maintenance 500,000

Environmental Remediation 1,000,000

Total $ 16,773,824
</TABLE>

(6) LAND AND IMPROVEMENTS HELD FOR SALE - NET

During the second quarter of fiscal 1998, the Company sold a parcel of
land contiguous to Garden State Park for $9,000,000 exclusive of closing costs
of approximately $545,000. The carrying value of such property at June 30,
1997 was $6,762,809. $6,000,000 of such sales proceeds were used to repay an
existing mortgage on the property (See Note 8G). The resulting gain will be
recorded as an adjustment to Stockholders' Equity in accordance with
accounting principles applicable to a quasi-reorganization (See Note 9).

(7) LAND, BUILDINGS AND EQUIPMENT

Land, buildings and equipment acquired prior to June 30, 1993 are
carried at their adjusted fair value in accordance with accounting principals
applicable to a quasi-reorganization which was completed on that date. The
property assets acquired with the acquisition of Freehold Raceway in January
1995 were recorded at their fair values as required under the purchase method
of accounting. All other property assets are recorded at cost. Depreciation
is being computed over the estimated remaining useful lives using the
straight-line method.

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

<TABLE>
<S> <C><C> <C> <C> <C><C>
Estimated
Useful
Lives in June 30,
Years 1997 1996

Land --- $ 40,432,500 $ 40,432,500

Buildings and 15-40 28,823,437 28,661,219
Improvements

Construction in Progress(A) --- 50,624,333 48,736,200

Equipment 5-15 5,261,367 4,376,889

Totals 125,141,637 122,206,808

Less Accumulated 4,278,754 2,858,439
Depreciation
and Amortization

$ 120,862,883$ 119,348,369
</TABLE>

(A) Includes the costs associated with the purchase and construction of the El
Rancho property (See Note 17).

(8) NOTES AND MORTGAGES PAYABLE

Notes and Mortgages Payable are summarized below:
<TABLE>
<S> <C> <C><C> <C><C> <C><C> <C><C>
Interest % June 30, 1997 June 30, 1996
Per Annum Current Long-Term Current Long-Term

INTERNATIONAL THOROUGHBRED BREEDERS, INC.:

Credit Suisse
FirstBoston (A) LIBOR Rate
plus 7% $55,000,000 $ -0- $ -0- $ -0-
(6/30/97
rate
12.72%)

LVEN Mortgage (B) 8% -0- -0- -0- 10,500,000

Foothill Capital
Corp. (C) Prime plus -0- -0- -0- 14,000,000
2.75%

Foothill Capital
Corp. (C) Prime plus -0- -0- -0- 6,837,320
2.75%

Other Various 258,851 -0- 200,338 -0-

FREEHOLD RACEWAY:

Kenneth R.
Fisher (D) 80% of
Prime
(not to 625,000 10,625,000 625,000 11,250,000
exceed 6%)
(6/30/97
rate 6%)

Kenneth R.
Fisher (E) 80% of
Prime 225,000 1,815,800 225,000 2,022,049
(6/30/97
rate 6.6%)

Marine
Midland Bank Prime -0- -0- 1,445,000 -0-

Other 42,537 -0- 191,667 383,333

GARDEN STATE PARK:

Banque SCS
Alliance (F) 10% -0- -0- -0- 3,000,000

Banque 10% -0- -0- -0- 3,000,000
Financier de
la Cite(F)

Sun National Prime 6,000,000 -0- -0- -0-
Bank(G) (6/30/97
rate 8.5%)

Other Various 781,806 690,203 527,095 -0-

ORION CASINO CORP:

Other Various 29,984 -0- -0- -0-

Totals $62,963,178 $ 13,131,003 $ 3,214,100 $50,992,702
</TABLE>

The effective LIBOR Rate and the Prime Rate at June 30, 1997 were 5.72% and
8.50%, respectively.
The weighted average interest rate on short-term borrowings outstanding as of
June 30, 1996 was 9.29%.
There was no short term borrowings outstanding as of June 30, 1997.

(A) On May 23, 1997, the Company entered into a two-year $55 million credit
facility with Credit Suisse secured by a pledge of certain of the
personal and real
property of the Company and its subsidiaries (the "Credit Suisse Credit
Facility").
Proceeds of this facility were used to repay in
full the Company's $30 million credit
facility with Foothill Capital Corporation and will
also provide funds for working
capital and other general corporate purposes, including, but not limited to,
preliminary development of the El Rancho property.
Interest under the Credit Suisse
Credit Facility is payable monthly in arrears at 7%
over the London interbank offered
rate ("LIBOR"). The scheduled maturity date of the facility is June 1, 1999.
Of the
remaining facility borrowings, approximately $16.8 million was placed in escrow
accounts, financing and closing fees of $4.3
million were incurred and $3.9 million
was used by the Company for general corporate purposes and repayment of certain
financial obligations.

The Credit Suisse Credit Facility is evidenced by a convertible promissory note
(the "Credit Suisse Note") pursuant to which up to $10 million of the aggregate
principal amount can be converted in certain circumstances, including upon the
maturity date of the Credit Suisse Note upon the prepayment of $10 million in
aggregate principal amount of the Credit Suisse Note or upon acceleration of the
Credit Suisse Note, at the option of Credit Suisse, into shares of the Company's
Common Stock at a conversion price of $8.75 per share (subject to adjustment in
certain events). In addition, Credit Suisse was
granted warrants to purchase 1,044,000
shares at an exercise price of $4.375 per share
(subject to adjustment in certain
events). The warrants to purchase 546,847 shares
are immediately exercisable, have
been valued at approximately $1.6 million and have been
recorded as original issue
discount. The warrants to purchase 497,153 shares become exercisable at such
time as Credit Suisse delivers to the Company a firm commitment
for additional funding of no less than $50 million in connection
with the development of the El Rancho Property.

Credit Suisse also received 232,652 shares of Common Stock upon the conversion
of Common Stock into a $10.5 million promissory note issued by the Company to
LVEN in consideration for Credit Suisse's consent and for certain
advisory services in connection with this transaction (See Note 8-B).
Credit Suisse has the right to receive further shares upon the
consummation of a proposed related acquisition by the
Company of Casino-Co Corporation ("Casino-Co"), a
wholly-owned subsidiary of LVEN,
equal to 10% of the stock consideration paid by the Company for such
acquisition. The Company has granted Credit Suisse certain
registration rights with respect to the
warrants and the shares.

The Credit Suisse Credit Facility also provides for both affirmative and
negative covenants, including financial covenants such as tangible net worth, as
defined in the Credit Facility. The Company is not in compliance with
certain non-financial covenants. As a result of not obtaining waivers of these
violations, its $55 million Credit Facility has been classified as a current
liability and could be demanded immediately.

In connection with pending litigation, the minority Board members have
challenged the authorization and enforceability of certain agreements entered
into and actions taken by the Company, including the Credit
Facility and certain related
agreements and related actions. (See Note 10).

(B) On January 14, 1996, in connection with the Company's purchase of the El
Rancho property, the Company entered into a $10.5 million seller second
mortgage note at 8% interest, which was payable only to the
extent that certain contingent events
occur. Effective June 27, 1997, the Company issued
2,326,520 shares of its Common
Stock, including 2,093,868 shares to Casino-Co, in satisfaction of the
principal of and accrued interest on this obligation at an
agreed upon conversion price of $5 per share, which approximated
its fair market value.

Casino-Co and LVEN granted an irrevocable proxy to Nunzio P. DeSantis, the
Company's Chief Executive Officer, to vote all or any portion
of the 2,093,868 shares
of the Company's Common Stock until the occurrence of certain events,
including the repayment of the Company's obligations to Credit
Suisse or the distribution of the
shares to LVEN's stockholders. The Company also granted Casino-Co certain
registration rights with respect to the shares.
(C) On June 4, 1996, the Company and Foothill Capital Corporation closed on a
financing package for $30,000,000. The financing
arrangement was secured by, among
other things, a first mortgage on each of the El Rancho property and Garden
State Park and a second mortgage on Freehold Raceway, and included a $16,000,000
revolving credit line and a $14,000,000 Time Loan Mortgage
(which was used at settlement to pay off a
note that was due on December 20, 1996). The balances
outstanding at May 23, 1997
were repaid with certain of the proceeds of the Credit Suisse Credit Facility.

(D) On February 2, 1995, the Company entered into an agreement with the former
owner of Freehold Raceway whereby the $12.5 million balance of the purchase
price of the Freehold Raceway was financed by an eight year promissory
note at 80% of the prevailing prime rate, not to exceed 6%. Yearly
principal and interest payments during the first five (5) years commencing
January 1, 1996 is based upon a twenty (20)
year principal amortization schedule. During each of the next three (3) years,
commencing January 1, 2001, yearly principal and interest payments shall be
based upon a ten (10) year amortization schedule. On January 1, 2003, the
entire unpaid principal balance, together with any accrued interest becomes
due and payable. The note is secured by a mortgage on the land and
buildings at Freehold Raceway.

(E) On February 2, 1995, the seller of Freehold Raceway advanced to Freehold
Raceway $2,584,549 towards the retirement of $5.2 million of existing debt
on Freehold Raceway. The seller received from Freehold Raceway in fiscal
1995, a promissory note evidencing the indebtedness secured by mortgage on
the racetrack property and other collateral.
Equal monthly principal installments of $18,750 beginning on February 1,
1995 is paid to the seller together with accrued interest. Interest is
calculated at 80% of the prime rate at January 1 of each year. The note is
secured by a mortgage on the land and buildings at Freehold Raceway.

(F) In March 1996, the Company received financing of $6,000,000 from two
foreign banks (which was used in part to pay the $6.5 million mortgage note
due to LVEN in connection with the El Rancho acquisition) by issuing two
$3,000,000 mortgage notes.
The notes bore interest at 10% per annum, payable yearly with principal due
in March 1998. In connection with the payments on these notes, the Company
issued warrants to purchase 200,000 shares of the Company's Common Stock, at
an exercise price of $5.00 per share, to each foreign note holder.
These notes were retired with the $6,000,000 financing from
Sun National Bank (See Note 8G).

(G) In June 1997, the Company received financing of $6,000,000
from Sun National Bank (which was used to pay two $3,000,000 mortgage notes
(See Note 8-F)), by issuing a $6,000,000 mortgage note.
On October 20, 1997, the Company retired the $6,000,000 mortgage note with
proceeds from the sale of a portion of the Garden State property.
(See Note 6.) The note was originally due in December 1998. Interest due on
the note was paid by the purchaser of a portion of the Garden State property.

Annual maturities of the Company's consolidated long-term debt as of June 30,
1997 are as follows:

Year Ended June 30,

1998 $ 62,963,178
1999 1,113,522
2000 1,054,807
2001 1,054,807
2002 1,179,567
Thereafter 8,728,300
Total $ 76,094,181

(9) INCOME TAX EXPENSE

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

The Company's income tax expense for each of the years in the three year period
ending June 30, 1997 relates to New Jersey income taxes for its Freehold Raceway
operations.

At June 30, 1993, the Company effected a quasi-reorganization in conformity
with generally accepted accounting principles. The effect of the
quasi-reorganization was to decrease asset values for financial reporting,
but not for Federal income tax purposes. Accordingly, depreciation expense
for Federal income tax purposes continues
to be based on amounts that do not reflect the accounting quasi-reorganization.

The Company has net operating loss carryforwards aggregating approximately
$200,000,000 at June 30, 1997 expiring in the years June 30, 2002
through June 30, 2012. 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 $80,000,000 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, 1997:
<TABLE>
<S> <C>
NET OPERATING LOSS YEAR END
CARRYFORWARDS EXPIRATION DATES

$47,800,000 6/30/2002

26,400,000 6/30/2003

19,900,000 6/30/2004

15,600,000 6/30/2005

11,800,000 6/30/2006

78,500,000 6/30/2007
___________ through 6/30/2012

$200,000,000
</TABLE>

(10) COMMITMENTS AND CONTINGENCIES

As discussed in Notes 2 and 3 , during January 1996 the Company purchased
the El Rancho property from LVEN. The original agreement provided that,
following the development of the property, LVEN would receive as additional
consideration an interest in the "adjusted cash flow" in the amount of 50%
for the first six (6) years
following the opening of a casino and 25% thereafter until such time as LVEN has
received $160,000,000, but only after (a) the Company recouped: 1) the aggregate
amount of cash payments applied to the purchase price; 2) payments made under
the $6.5 million note and the $10.5 million note; 3) $2 million;
and 4) any amounts that the Company invested in the property after the
purchase, together with interest at
eight percent (8%) per annum from the date of the investment; (b) LVEN has (i)
received payment of all principal and interest, if any, remaining
outstanding under the $6.5 million note and/or the $10.5 million note
and (ii) recouped $4 million plus
any amount invested in the El Rancho property after the purchase and approved
by the Company, together with interest thereon at a rate of 8% per annum
from the date of investment; and (c) the Company has received an additional
$2 million, together with interest thereon at the rate of 8% per annum
from the date of the purchase. This
agreement was amended on May 23, 1997 by the Bi-Lateral Agreement
between the Company and LVEN to limit to $35 million the aggregate amount
for which the Company is entitled to recover above.

The term "adjusted cash flow", as defined, refers to cash flow from the
property before taxes, less the payment of any debt retirements and capital
lease payments and less certain fees received or accrued for certain inital
rent or lease payments. The Bi-Lateral Agreement, signed in connection with
the $55 million credit facility with Credit Suisse, limited the maximum debt
service to be netted against cash flow from operation of the El Rancho
property in computing "adjusted cash flow" to $65 million,
with a further limitation to $27 million in the event that additional
financing over the $55 million is not required for the development of the El
Rancho property.

On May 23, 1997, the original agreement with LVEN was also amended by a Tri-
Party Agreement among the Company, LVEN and Credit Suisse whereby the Company is
required to acquire Casino-Co, whose principal asset is the $160 million profit
participation note described in the preceding paragraphs. The acquisition
may be accomplished by the purchase of all the stock of Casino-Co or a
merger of the companies. The Company would be required to issue its stock,
the price of which will be subject to fairness opinions from independent
investment banking firms independently representing the Company and LVEN, to:
i) LVEN in an amount equal to 90% of the greater of the fairness opinions
obtained by the Company and LVEN; and to ii) Credit Suisse in an amount
equal to 10% of the greater of the fairness opinions obtained by the Company
and LVEN. If this acquisition is approved by the Company's
stockholders and Board of Directors, and completed, the Company's requirement
for the sharing of cash flow, described above, will be canceled.

In connection with the purchase of the El Rancho property, Las Vegas
Communications Corporation ("LVCC"), a wholly-owned subsidiary of LVEN,
retained the exclusive right to manage all aspects of the property's
entertainment activities.
The term of the agreement is for ten (10) years commencing on the date which
is six (6) months prior to the projected opening date of the property, and
LVCC shall have the option to renew the agreement for two (2) consecutive
five year terms. The agreement provides LVCC with an annual fee of $800,000
subject to annual increases and other additional amounts. Pursuant to the
Bi-Lateral Agreement entered into by the Company and LVEN in connection with
the Credit Suisse Credit Facility, the parties agreed to amend the
entertainment management agreement to provide for a lease
by the Company to LVCC of space within the El Rancho property on or from
which all food, beverage and retail activities will be conducted
(exclusive of the mezzanine space, the rights to which will be retained by
the Company). The terms of such lease arrangement have not been finalized.

In connection with pending litigation, the minority Board members have
challenged the authorization and enforceability of certain agreements entered
into and actions taken by the Company, including the Credit Facility and
certain related agreements and related actions.

On December 5, 1996, NPD, Inc. ("NPD"), a company owned by the Company's Chief
Executive Officer and its Chairman of the Board, entered into an agreement
with Robert E. Brennan, a former Chairman and director of the Company, to
purchase 2,904,016, or 24.9% of the Company's Common Stock, representing all
of the Company's Common Stock owned by Mr. Brennan ("NPD acquisition').
The NPD acquisition closed on January 15, 1997.

The contract of Joel H. Sterns, the Company's former Chairman of the Board of
Directors was terminated during November 1996, resulting in severance expense of
$252,000 which was recorded during fiscal 1997.

Retroactive to January 15, 1997, the Company entered into a ten-year employment
contract with Nunzio P. DeSantis, the Company's Chief Executive Officer.
The contract provides for annual compensation of $450,000, adjusted annually by
increases, if any, in certain Consumer Price Indexes. Mr. DeSantis will
also receive a performance bonus for each fiscal year during the term of the
agreement equal to the excess of the amount, if any, by which the pre-tax
income of the Company exceeds $2 million, limited
to an amount equal to his base salary. As part of his contract,
Mr. DeSantis was awarded options, subject to stockholder approval, to
purchase 5,000,000 shares of the Company's Common Stock at $4 per share.
Upon obtaining stockholder approval for the
awarding of the options, the Company may need to record as compensation an
expense calculated by multiplying the
number of shares covered by the option by the difference
between the intrinsic value of each share
and the exercise price at the measurement
date. An expense would only be recorded if the
exercise price is below the market
price at the measurement date. Options
to purchase 500,000 shares of Common Stock
would be exercisable immediately and options
to purchase an additional 500,000 shares
of Common Stock shall become exercisable on each succeeding anniversary of the
effective date of the agreement, provided,
however, that all options shall be fully
vested if Mr. DeSantis resigns for good
reason (as defined in the agreement), resigns
upon a change of control, or if he is discharged without cause. Mr. DeSantis is
entitled to additional fringe benefits including the use of a private jet in
connection with the performance of his duties.
During the year ended June 30, 1997,
the Company's cost associated with such aircraft
was approximately $217,000. Such
aircraft is operated by a Company owned by Mr. DeSantis' son and was partially
financed by Mr. DeSantis and by the President and Chairman of LVEN. This
contract is a subject of the pending litigation discussed below.

Effective January 15, 1997, the Company
entered into a consulting contract with
Anthony Coelho, the Company's Chairman of the Board, that provides for
$10,000 per month in consulting fees on
a month-to-month basis, $2,500 for each director's meeting
he attends and other fringe benefits. As part of this contract, Mr. Coelho was
awarded options, subject to stockholder
approval, to purchase an additional 1,000,000
shares of the Company's Common Stock
at $4 per share. Options to purchase 100,000
shares would become exercisable immediately
and options to purchase an additional
100,000 shares would become exercisable on each succeeding anniversary of the
effective date of the agreement. Upon
obtaining stockholder approval for the awarding
of these options, the Company will need to record an expense calculated by
using the fair value of the options at
that date. This contract is a subject of
the pending litigation discussed below.

On January 15, 1997, the Company obtained a commitment for a $5,000,000
revolving line of credit from Mr. DeSantis.
The line of credit has not been drawn
upon and it is unlikely that it will be utilized in the future. This is a
subject of the pending litigation discussed below.

On January 15, 1997, the Board of Directors accepted the resignation of Arthur
Winkler, a director and Executive Vice President of the Company and President
of the racetrack subsidiaries. As conditions
of the termination of his five year employment
contract with the Company, Mr. Winkler agreed
to receive $200,000. $70,000 of this
amount was unpaid as of June 30, 1997 and will be paid at the rate of $5,000 per
month. In addition, options for 125,000
shares, previously granted to him at an
exercise price of $5.875 per share, were canceled.
The Company expensed the severance amount during the 1997 fiscal year.

During October 1997, the Company terminated the employment of the Company's
President, Robert J. Quigley. The severance
package approximating $300,000, payable
through December 1998, will be expensed in the second quarter of the 1998
fiscal year.

The Company has entered into lease agreements for certain equipment and
maintenance contracts at Garden State Park
and Freehold Raceway. Two of the equipment
lease agreements are based upon the daily
average of the total amount wagered and
number of live racing days at the Company's racetracks. Minimum rental
payments for the next five years are based
on projected racing dates. During July 1997, the
Company executed an agreement to lease office space in Albuquerque, New Mexico
for a five year period, expiring on July 31, 2002.
The lease provides for a monthly rent of
approximately $10,000 when the space is fully occupied. In connection with this
lease, the Company has sub-leased a portion of the
premises to AutoLend Group Inc. ("AutoLend"), a company in which
Nunzio P. DeSantis is the Chairman, President and
principal stockholder and Anthony Coelho is a director, for $600 per month. The
sublease is terminable on 30 days written notice.
Equipment lease and rent expense
for the years ended June 30, 1997, 1996 and 1995 was $1,927,081, $2,201,346 and
$1,402,758, respectively.

The following summarizes commitments on non-cancelable contracts and leases as
of June 30, 1997

<TABLE>
<S> <C><C> <C><C> <C><C> <C><C> <C><C> <C><C> <C><C>
YEAR ENDED JUNE 30,

THERE-
1998 1999 2000 2001 2002 AFTER TOTAL

Employee $1,090,000$ 900,000$ 688,000$ 688,000$ 608,000$ 2,398,000$ 6,372,000
Contracts
(excluding
severance
agreements)

Consultant
Contract 60,000 -0- -0- -0- -0- -0- 60,000

Operating 2,299,000 2,226,000 1,516,000 557,000 255,00 10,000 6,863,000
Leases

El Rancho
Construction
Contracts
342,000 -0- -0- -0- -0- -0- 342,000

Total $3,791,000$3,126,000$2,204,000$1,245,000$863,000$2,408,000 $13,637,000

</TABLE>

Garden State has granted the exclusive right to operate all food and retail
services and to sell or rent all food products and merchandise sold or rented
at the racetrack facility to Service America
Corporation. The term of the agreement is for
the 15 year period terminating during
March 2000. Service America agreed to invest
$7,000,000 in the concession premises at the racetrack facility. As of June
30, 1997, the Company is contingently liable for
approximately $1,300,000, the undepreciated
value of the equipment Service America installed at the track, if this
agreement were to be terminated. At the end of
the agreement or upon termination, Garden State would
take title to such equipment.

The New Jersey Division of Gaming Enforcement
("DGE") is currently investigating
in accordance with its statutory
obligation to determine the qualifications of the
Company and its directors and significant stockholders in connection with
Garden State Park's and Freehold Raceway's
licenses with the Casino Control Commission
("CCC") and the Racing Commission. The Company
has no information with respect to the potential
outcome of such investigation. In the event that the DGE concludes that one
or more of such individuals are not qualified,
the CCC and/or the Racing Commission may
require any such stockholder to divest his
interests and any such director may be
asked to resign. Failure of such individuals to comply with such requests could
jeopardize the Company's racing licenses and ability to conduct
business with any casino licensees, including simulcasting
to Atlantic City casinos.

LEGAL PROCEEDINGS

On or about September 10, 1997, three actions were filed in Delaware Court of
Chancery in and for New Castle County (the "Chancery Court"), each of which
named the Company as a nominal defendant
(collectively, the "Delaware Actions"). Additionally,
on or about February 24, 1998, another action
was filed in the United States District
Court for the District of New Jersey, (the "New Jersey
District Court") naming the
Company as a nominal defendant. These actions are summarized below:

Mariucci et. al. v. DeSantis et. al.

The first Delaware Action, captioned John Mariucci, Robert J. Quigley, Charles
R. Dees, Jr., James J. Murray, Francis W. Murray, Frank A. Leo, and The Family
Investment Trust (Henry Brennan as Trustee)
v. Nunzio P. DeSantis, Michael Abraham,
Anthony Coelho, Kenneth W. Scholl and
Joseph Zappala and International Thoroughbred
Breeders, Inc., C.A. No. 15918NC ("Mariucci"), alleged, among other things,
that (i) NPD had breached the terms of the NPD
Acquisition Agreement by failing to fund
a line of credit, (ii) as a result of such breach,
the resignations of Messrs. Mariucci,
James Murray and Keonemund ("the Old Directors")
were ineffective and (iii) Messrs.
DeSantis, Coelho, Abraham, Scholl and Zappala (" the New Directors") were
misusing the assets of the Company for their
personal benefit. The Mariucci complaint
sought an order (a) pursuant to Section 225
of the Delaware General Corporation Law, determining
that (1) the New Directors were never validly appointed or elected to the
Board and (2) Frank Koenemund, John Mariucci
and James Murray, notwithstanding their
resignations upon the NPD Acquisition, and the acceptance of those
resignations by the Company's Board, continued as
directors of the Company (the "Section 225
Claims") and (b) preserving the status quo
pending a final adjudication of the Section 225
Claims. On September 18, 1997, the plaintiffs filed an amended complaint. On
September 26, 1997, the New Directors and the
Company filed a motion to dismiss, or in the
alternative, to strike allegations of the amended complaint (the "Motion to
Dismiss"). The Chancery Court granted the Motion
to Dismiss by opinion dated October 14, 1997.
The time for appeal of the Chancery Court order has
expired and no appeal has been taken by the plaintiffs.

Quigley et. al. v. DeSantis et. al.

The second Delaware Action, captioned Robert J. Quigley, Frank A. Leo , and The
Family Investment Trust (Henry Brennan as Trustee)
v. Nunzio P. DeSantis, Michael Abraham, Anthony Coelho,
Kenneth W. Scholl, Joseph Zappala, Joseph A. Corazzi
and Las Vegas Entertainment Network, Inc. and International
Thoroughbred Breeders, Inc., C.A.
No. 15919NC ("Quigley"), is a derivative suit
brought by two of the Old Directors
(Messrs. Quigley and Leo) and the Family
Investment Trust (collectively, the "Quigley
Plaintiffs") which alleges, among other things,
that the New Directors have breached
their fiduciary duties to the Company, usurped corporate opportunities
belonging to the Company and incorrectly stated
minutes of Board meetings to omit material
discussions. The Quigley complaint alleges that the New Directors entered into
certain agreements on behalf of the Company in violation of the "super-majority"
voting provisions of the Company's By-laws
and their fiduciary duty to the Company,
including but not limited to, the CSFB Loan Agreement, the Tri-Party
Agreement, the Bi-Lateral Agreement, the D&C Gaming
option agreement, the DeSantis employment
agreement and Coelho consulting agreement. The Quigley complaint seeks (i) a
declaratory judgment that (a) certain actions taken by the New Directors are
null and void and (b) the "super-majority" provisions
of the Company's By-laws remain in full
force and effect, (ii) recision of certain actions taken by the Company's
Board and (iii) damages as a result of the allegedly
unauthorized and allegedly unlawful conduct
of the defendants. On November 7, 1997, the New Directors and the Company
filed answers to the Quigley complaint denying all of the material allegations
contained in the Quigley complaint.

On November 18, 1997, the Company filed an amended answer and counterclaim (the
"Counterclaim") against Messrs.
Quigley, Leo, Francis Murray and Dees (collectively,
the "Counterclaim Defendants"). The Counterclaim alleges that the Counterclaim
Defendants have breached their fiduciary duty to
the Company by (i) adopting, and
subsequently refusing to recognize the repeal of certain "super-majority" By-law
provisions in order to aid Brennan in retaining
control of the Company's business
affairs and jeopardizing the Company's licenses and registrations, (ii)
interfering in
the Company's hiring of new independent auditors thereby causing the Company
to be
delinquent in its required filings with the
Securities and Exchange Commission ("SEC")
and causing the suspension of trading in
the Company's stock on the American Stock
Exchange, (iii) using corporate funds for their personal uses and (iv) usurping
corporate opportunities properly belonging
to the Company. The Counterclaim seeks
injunctive relief enjoining the Counterclaim
Defendants from, among other things,
interfering in the Company's day-to-day business operations, the establishment
of a
constructive trust over certain assets
of the Counterclaim Defendants, a declaratory
judgement that the "super-majority" voting
provisions have been repealed and money
damages. On December 4, 1997, the Quigley Plaintiffs filed a motion to
conduct a
separate expedited trial on the "super-majority" By-law issues, which motion was
withdrawn by the Quigley Plaintiffs at a February 10, 1998 scheduling
conference. At
the February scheduling conference, the Chancery Court scheduled this matter
for trial
to have commenced on May 20, 1998. The
Counterclaim Defendants answered the
Counterclaim on January 12, 1998 (the
"Counterclaim Answer") and, in the Counterclaim
Answer, Mr. Murray asserted a wrongful discharge and seeks monetary damages.

Rekulak et. al. v. DeSantis et. al.

The third Delaware Action, captioned James Rekulak v. Nunzio P. DeSantis,
Michael Abraham, Anthony Coelho, Kenneth W. Scholl, Joseph Zappala, Las Vegas
Entertainment Network, Inc. and Joseph A. Corazzi and International Thoroughbred
Breeders, Inc., C.A. No. 15920 ("Rekulak"),
is a derivative suit which in essence
repeats the allegations contained in the Quigley complaint and seeks similar
relief.
The Rekulak action was consolidated with the
Quigley action pursuant to a stipulation
and order dated January 13, 1998.

The trustee of Brennan's Bankruptcy Estate, as well as the SEC, have
participated to a limited extent in discovery in
the litigation of the Quigley and
Rekulak actions. The Trustee's and the SEC's involvement is predicated upon
overseeing any possible interests of the Bankruptcy Estate and the SEC.

Rekulak v. DeSantis, et al.

On or about October 8, 1997, James Rekulak filed a complaint in the Chancery
Court captioned Rekulak v. DeSantis, et al., Civil Action No. 15978, which
purports to
be a complaint under Section 225 of the
Delaware General Corporation Law and contains
substantive allegations that are virtually identical to those in the complaint
in the
Mariucci action described above. On
October 8, 1997, the plaintiff in this action
sought to have his complaint consolidated
with the complaint in the Mariucci action
and represented to the Chancery Court
that he was willing to be bound by the Court's
decision on defendants' Motion to Dismiss
the Mariucci action. As set forth above,
the Mariucci action was dismissed by the Chancery Court's opinion dated
October 14,
1997, and thereafter, this action was dismissed with prejudice by a
stipulation and
order dated February 9, 1998.

Harris v. DeSantis, et al.

The most recent action, filed on February 24, 1998 in the New Jersey District
Court, captioned Myron Harris, derivatively
on behalf of International Thoroughbred
Breeders, Inc., a Delaware corporation v.
Nunzio P. DeSantis, Anthony Coelho, Kenneth
W. Scholl, Michael Abraham, Joseph Zappala,
Frank A. Leo, Robert J. Quigley, Charles
R. Dees, Jr. and Francis W. Murray ("Harris"), C.A. No. 98-CV-517 (JBS), is a
derivative suit brought by a stockholder of the Company. The factual
allegations and
claims asserted in the Harris complaint are
virtually identical to the claims asserted
in the Quigley complaint and in the Counterclaim asserted by the Company in the
Quigley action.

The Harris action has been assigned to The Honorable Jerome B. Simandle, United
States District Judge. On April 28, 1998, all defendants in the Harris action
filed a
Motion for Reassignment, seeking that the
Harris case be reassigned to The Honorable
Joseph H. Rodriguez, United States District Judge, as Judge Rodriguez had
already been
assigned two related cases involving members of the Board. See NPD v.
Quigley, et al.
and Green v. DeSantis, et al., discussed below. On May 4, 1998, all
defendants filed
a motion to dismiss or in the alternative a
motion to stay the Harris action, pending
a resolution of the Quigley action. The plaintiff's response will be due
thirty days
subsequent to the filing of the motion. On May 4, 1998, the plaintiff filed an
amended complaint to, among other things,
add another stockholder as an additional
plaintiff.

The litigation in the Quigley, Rekulak and
NPD actions is at a standstill as the
parties are in the final stages of settlement
negotiations. Although the parties
believe that a settlement is imminent, there can
be no assurance that a settlement
will be reached or as to the terms thereof. In the event a settlement cannot be
reached, there can be no assurance as to the outcome of such litigation and
the impact
the litigation itself or any resolution
thereof may have on the Company's financial
position, results of operations or cash flows. As discussed above, the Quigley,
Rekulak and Green actions challenge the
authorization and enforceability of certain
actions taken and agreements entered into by
the Company, including the Credit Suisse
Credit Facility and related documents. In the event plaintiffs prevail in such
litigation, such actions and agreements may be subject to modification,
termination or
revision, the impact of which on the Company cannot be predicted.

In November 1997, two separate actions were filed in the New Jersey District
Court against various directors of the Company and
other affiliated parties. The
Company is not a party to either of these actions, both of which are
summarized below:

NPD, Inc. v. Quigley, et. al.

On November 18, 1997, NPD (the Company's largest stockholder and whose
stockholders are Messrs. DeSantis and Coelho), filed a complaint captioned
NPD, Inc.
v. Robert J. Quigley, Francis W. Murray,
Frank A. Leo, Charles R. Dees, Jr., John
Mariucci, Frank Koenemund and
James J. Murray, C.A. 97-CV-5657 ("NPD"), in the New
Jersey District Court. The complaint alleges, among other things, that Messrs.
Quigley, F. Murray, Leo and Dees, each
of whom is currently a director of the Company,
and Messrs. Mariucci, Koenemund and James Murray, each of whom is a former
director of
the Company, conspired with one another
and Robert E. Brennan ("Brennan") to defraud
NPD by (i) approving and subsequently
concealing from NPD the existence of the "super-
majority" voting provision of the Company's By-laws and (ii) purporting to
repeal such
provision and subsequently filing suit in an effort to restore such provision,
all of
which has had the effect of attempting to deprive NPD of control of the
Company and
perpetuating the control of Brennan and his associates. The NPD suit seeks
compensatory and punitive damages. On January 8, 1998, the defendants served
a motion
to dismiss NPD's complaint. NPD has not yet responded to that motion. The
Company is
not a party to the NPD suit.

Green v. DeSantis, et. al.

Certain officers, directors and affiliates of the Company are parties to an
action filed on November 30, 1997 by Robert William Green ("Green"), a
stockholder of
the Company and Chief Executive Officer of
Philadelphia Park, captioned Robert William
Green v. Nunzio DeSantis, Joseph Corazzi,
Anthony Coelho, Las Vegas Entertainment
Network, Inc. and NPD, Inc., C.A. 97-5359(JHR), in the New Jersey District
Court. The
complaint alleges, among other things, that the defendants have usurped certain
corporate opportunities at the expense of
the Company, have diluted Green's interest
in the Company though the issuance of
shares of stock and have conspired to deprive
him of certain rights under an option granted to him by NPD (the "Green
Option").
Subject to regulatory approval, the
Green Option grants Green the right to purchase
approximately 50% of the shares of the Company's Common Stock which are held
by NPD.
The Green Option terminated by its terms on January 15, 1998 and Green did not
exercise the option by such date.
Green seeks (i) compensatory and punitive damages,
(ii) an order enjoining defendants from transferring, encumbering or
alienating the
Company's Common Stock subject to the Green Option, (iii) an order declaring
the
issuance of certain shares of Common Stock to be a nullity, and (iv)
reformation of
the Green Option to extend the termination date. This action also raises claims
substantially similar to those made in the Quigley action. The defendants
have not
yet filed a response to the complaint.
The Company is not a party to this action.

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

(11) FAIR VALUE OF FINANCIAL INSTRUMENTS

As of June 30, 1997, in assessing the fair value of financial instruments, the
Company has used a variety of methods and
assumptions, which were based on estimates
of market conditions and loan risks
existing at that time. For certain instruments,
including cash and cash equivalents, restricted cash and investments, non-trade
accounts receivable and loans, and
short-term debt, it was estimated that the carrying
amount approximated fair value for the majority of these instruments because
of their
short-term maturity. Quoted market prices for the same instrument were used for
trading securities. Estimated discounted value of future cash flows, has been
used to
determine fair value for long term debt. The carrying amounts of long term debt
approximate fair value since the
Company's interest rates approximate current interest
rates.

(12) RETIREMENT PLANS

The Company maintains a Retirement Plan under the provisions of section 401(k)
of the Internal Revenue Code covering all its non-union full time employees
who have
completed one year of service. The Company's basic contribution under the plan
is 4%
of each covered employee's compensation for such calendar year. In addition, the
Company contributes up to an additional 50% of the first 4% of compensation
contributed by any covered employee to the plan (an employee's maximum
contribution is
$9,500 factored for inflation annually).
The Company's expense totaled $238,201,
$229,187 and $194,949 for the fiscal years ending June 30, 1997, 1996 and 1995,
respectively.

For collectively bargained, multi-employer
pension plans, contributions are made
in accordance with negotiated labor contracts and generally are based on the
number of
hours worked. With the passage of the Multi-Employer Pension Plan Amendments
Act of
1980 (the "Act"), the Company may, under certain circumstances become subject to
liabilities in excess of contributions made under collective bargaining
agreements.
Generally, these liabilities are contingent upon the termination, withdrawal, or
partial withdrawal from the plans. Total contributions charged to expense
under all
collectively bargained multi-employer pension plans were $1,106,906,
$1,070,549 and
$840,397, in fiscal 1997, 1996 and 1995, respectively.

The Company has approximately 72% of its labor force covered by collective
bargaining agreements at June 30, 1997; 53% of its labor force is covered by
collective bargaining agreements that will expire during fiscal 1998.

(13) STOCK OPTIONS AND WARRANTS

(A) EMPLOYEE AND NON-EMPLOYEE OPTIONS

In December 1994, the Company's Board of Directors and stockholders adopted and
approved the 1994 Employees' Stock Option
Plan ("Plan"). The Plan permits the grant
of options to purchase up to 475,000 shares of common stock, at a price per
share no
less than 100% of the fair market value of the Common Stock on the date the
option is
granted. The price would be no less than 110% of fair market value in the
case of an
incentive stock option granted to any individual who owns more than 10% of the
Company's outstanding Common Stock. The Plan provides for the granting of both
incentive stock options intended to qualify
under section 422 of the Internal Revenue
Code of 1986, and non-qualified stock
options which do not qualify. No option may
have a term longer than 10 years (limited to five years in the case of an option
granted to a 10% or greater stockholder of the Company). Options under the
Plan are
non-transferable except in the event of
death and are only exercisable by the holder
while employed by the Company. Unless the Plan is terminated earlier by the
Board of
Directors, the Plan will terminate in June 2004.

In addition, the Company has also granted non-qualified stock options for the
purchase of Common Stock to employees and directors of the Company that are
not part
of the above mentioned plan. These options have been granted with terms of
five and
ten years. These options have been granted
at prices per share that have been below,
equal to or above the fair market value on the grant date.

The following table contains information on stock options for options granted
from the Plan and options granted outside
the Plan for the three year period ended
June 30, 1997:

<TABLE>
<S> <C> <C><C> <C>
Stock Options

Number Exercise Weighted
Of Shares Price Range Average
Per Share Price

Outstanding at June 30,
1995 and 1994 1,475,000 $5.875 - $14.10
$24.00

Granted 1,200,000 $4.00 - $4.875 $ 4.14

Canceled (1,400,000) $4.00 - $24.00 $14.22

Outstanding at June 30, 1996
1,275,000 $4.00 - $5.875 $ 4.59

Granted 875,000 $4.00 - $5.00 $ 4.51

Canceled (550,000) $4.00 - $5.875 $ 4.43

Outstanding at
June 30, 1997 1,600,000 $4.00 - $5.875 $ 4.59
</TABLE>

<TABLE>
<S> <C> <C><C> <C><C>
Exercise Weighted
Price Range Average
Option shares Per Share Price

Exercisable at June 30:

1995 1,475,000 $5.875 - $24.00 $14.10

1996 875,000 $4.00 - $5.875 $4.86

1997 1,600,000 $4.00 - $5.875 $4.59

Options available for futuregrant under the Plan at June30:

1994 Plan

1995 -0-

1996 150,000

1997 275,000

The following table summarizes information about stock options
outstanding at June 30, 1997:

</TABLE>
<TABLE>
<S> <C> <C> <C><C>
Ranges Total

Range of exercise prices $4.00 - 4.625 $5.00 - 5.875 $4.00 - 5.875

Outstanding options:

Number outstanding at June 30, 1997 975,000 625,000 1,600,000

Weighted average remaining
contractuallife (years)
8.80 6.25 7.83

Weighted average exercise price $4.14 $ 5.28 $4.59

Exercisable options:

Number outstanding at June 30, 1997 975,000 625,000 1,600,000

Weighted average exercise price $4.14 $5.28 $4.59
</TABLE>

<TABLE>
<S> <C><C> <C><C> <C><C>
Weighted Average Fair Value of Options Granted

Weighted Weighted
Number of Average Average
During Fiscal Year Ended: Shares Exercise Price Fair Value

June 30, 1995:

Below Market

At Market

Above Market 1,475,000 $14.10 $3.63

June 30, 1996:

Below Market 400,000 $4.00 $4.25

At Market 250,000 $4.65 $4.65

Above Market 550,000 $4.00 $3.75

1,200,000

June 30, 1997:

Below Market

At Market

Above Market 875,000 $4.51 $3.59
</TABLE>

Options to purchase an aggregate of 6,000,000 shares of Common Stock have been
granted, subject to stockholder approval, to the Company's Chief Executive
Officer and
Chairman of the Board and are not reflected in the above tables. (See Note
10). On
August 21, 1997, the Company granted non-qualified stock options to purchase an
aggregate of 300,000 shares of common stock to certain directors.

During 1995, the Financial Accounting Standards Board adopted Statement of
Financial Accounting Standards No. 123 ("SFAS 123"), "Accounting for Stock-Based
Compensation", which has recognition provisions that establish a fair value
based method
of accounting for stock-based employee compensation plans and established fair
value as
the measurement basis for transactions in which
an entity acquires goods or services
from non-employees in exchange for equity
instruments. SFAS 123 also has certain
disclosure provisions. Adoption of the recognition provisions of SFAS 123
with regard
to these transactions with non-employees was required for all such
transactions entered
into after December 15, 1995, and the Company adopted these provisions as
required. The
recognition provision with regard to the fair
value based method of accounting for
stock-based employee compensation plans
is optional. Accounting Principles Board
Opinion No. 25 "Accounting for Stock Issued
to Employers" ("APB 25") uses what is
referred to as an intrinsic value based
method of accounting. The Company has decided
to continue to apply APB 25 for its stock-based employee compensation
arrangements.
Accordingly, no compensation cost has been recognized. The Company estimates
the fair
value of each option and warrant granted
on the date of grant using the Black-Scholes
option-pricing model with the following
assumptions: a weighted average risk-free
interest rate of 6.3%, a weighted average
expected life of 5 years based on Company
expectations, and a weighted average expected
volatility of 56.29%. Had compensation
cost for the Company's employee stock option
plan been determined based on the fair
value at the grant date for awards under the Plan consistent with the method
of SFAS
123, the Company's net loss and net loss per share would have been increased
to the pro
forma amounts indicated below:

<TABLE>
<S> <C> <C>
Year Ended June 30,

1997 1996
_________________________________

Net loss :
As reported ($17,387,582) ($1,069,712)

Pro forma (17,614,382) (1,142,729)

Net loss per
share: ($1.48) ($.10)
As reported

Pro forma ($1.50) ($.11)
</TABLE>

(B) WARRANTS

During the fiscal year ended June 30, 1996, the Company issued warrants to
purchase 925,000 shares of Common Stock in connection with its financing
activities and
the purchase of the El Rancho property. During the fiscal year ended June 30,
1997, the
Company issued warrants to purchase 746,847 shares of Common Stock in
connection with
its financing activities, including the Credit Suisse Credit Facility.

The fair value of warrants issued during the
years ended June 30, 1997, and 1996,
was $1,893,451 and $1,930,250, respectively,
and has been accounted for as deferred
financing costs and costs associated with the acquisition of the El Rancho
property.
The deferred financing costs are being amortized over the terms of the related
indebtedness. The fair value of the warrants
issued in connection with the acquisiton
of the El Rancho property has been capitalized
and will be amortized when the facility
becomes operational.

Certain deferred financing costs recorded by the Company in connection with the
Foothill and other financing agreements were expensed during the fiscal year
ended June
30, 1997. Total expense recorded by the Company during the fiscal year ended
June 30,
1997 associated with these warrants amounted to $1,287,258.

Warrants have been granted to acquire Common Stock at various prices - above,
below, and at fair market value at the date
of grant. The following table contains
information on warrants for the three year period ended June 30, 1997:
<TABLE>
<S> <C> <C> <C> <C>

Warrants

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

Outstanding at June 30,
1995 and 1994 -0-

Granted 925,000 $4.00 - $5.25 $4.76

Outstanding at June 30, 1996 925,000 $4.00 - $5.25 $4.76

Granted 746,847 $4.375- $5.00 $4.54

Outstanding at June 30, 1997 1,671,847 $4.00 - $5.25 $4.66
</TABLE>

(14) DIVIDENDS

The Company is required to pay to the holders
of the Company's Series A Preferred
Stock a cash dividend from any net racetrack
earnings, as defined, of Garden State
Park. No dividends were required for fiscal
years 1997, 1996 and 1995. The Preferred
Stock has liquidation rights of $100 per share plus accrued dividends, if any.

(15) RELATED PARTY TRANSACTIONS

In connection with the NPD acquisition, NPD borrowed the sum of $2,900,000 from
Casino-Co., from whom the Company purchased the El Rancho property and with
whom the
Company has various contractual obligations with respect to the purchase of
the El
Rancho property including, but not limited
to, a profit participation note and an
entertainment management contract. The Casino-Co
loan, together with accrued interest,
was repaid in July 1997. Mr. DeSantis holds options to acquire 1,500,000
shares of
LVEN's common stock at an exercise price of $1.00 per share. Mr. DeSantis was
also paid
a commitment fee by LVEN of $110,000 in connection
with a standby financing commitment
he made to LVEN

on October 31, 1996 as replacement financing for the El Rancho property.
This standby
financing commitment was never drawn upon
and was terminated in January 1997. Mr.
DeSantis is a 25% owner in Electric Media
Company, Inc., ("EMC"), a Delaware corporation
and subsidiary of LVEN, for which investment Mr. DeSantis paid $375,000.

Mr. DeSantis owned 80% of Nordic Gaming
Corporation, an Ontario corporation which
purchased the Fort Erie Racetrack in Fort Erie, Canada on August 27, 1997.
The Company
was offered, but rejected, the opportunity
to make this investment because of the
demands on cash flow. Nordic Gaming borrowed $182,000 from LVEN for a deposit
on the
purchase, which was repaid to LVEN at the closing. LVEN has also provided
Nordic Gaming
with a $1.3 million secured line of credit to fund operating losses at the
Fort Erie
Racetrack. On May 15, 1998, Mr. DeSantis sold his Nordic Gaming shares to
Erie Gaming
Organization, Inc., an Ontario corporation which holds the other 20% interest
in Nordic
Gaming. In consideration for his shares, Mr. DeSantis received $10.00 and
each of
Nordic Gaming, Mr. DeSantis and Erie Gaming exchanged mutual general
releases. In
connection with the pending litigation, the minority Board members have
challenged the
decision to reject the opportunity to purchase the Fort Erie Racetrack. (See
Note 10).

Pursuant to the Tri-Party Agreement executed
in connection with the Credit Suisse
Credit Facility, the Company issued an aggregate
of 2,326,520 shares of Common Stock
(based on a value of $5.00 per share) in exchange for cancellation of the
Casino-Co Note
plus accrued interest. Of such shares, 2,093,868 shares were issued to
Casino-Co (the
"Conversion Shares") and 232,652 shares were
issued to Credit Suisse in consideration
for its consent and for certain advisory
services on the transaction. In accordance
with the Tri-Party Agreement, the Company has
also agreed, subject to, among other
things, an independent valuation, receipt of
a fairness opinion from an independent
investment banking firm and Board and stockholder
approval, to complete the Casino-Co
Transaction. LVEN and Casino-Co granted Mr. DeSantis an irrevocable proxy to
vote any
or all of the Conversion Shares until the occurrence of certain events and
have agreed
to grant Mr. DeSantis a similar proxy to vote any or all of the shares to be
issued to
LVEN in the Casino-Co Transaction. In connection
with the pending litigation, the
minority Board members have challenged the
authorization and enforceability of certain
agreements, including the Tri-Party Agreement. (See Note 10).

In connection with the Credit Suisse Credit
Facility, the Company and LVEN entered
into the Bi-Lateral Agreement which set the amount the Company could recoup
prior to
Casino-Co receiving consideration under the $160 Million Profit Participation
Note at
$35 million. In addition, the Bi-Lateral Agreement fixed the maximum debt
service to be
netted against cash flow from operations of the El Rancho property in computing
"adjusted cash flow" under the $160 Million Profit Participation Note at $65
million.
In connection with the pending litigation, the
minority Board members have challenged
the authorization and enforceability of certain
agreements, including the Bi-Lateral
Agreement. (See Note 10).

During fiscal 1997, the Company paid approximately
$217,000 to Southwest Jet Group
in connection with the use of a private jet by certain officers and directors
of the
Company, including Mr. DeSantis, for Company business. Southwest Jet Group is
a Nevada
corporation, owned by Mr. DeSantis' son, which operates private jets,
including one
which was partially financed by Messrs. DeSantis and Corazzi. Messrs.
DeSantis and
Corazzi used private jets operated by Southwest
Jet Group for certain personal matters
for which the Company advanced approximately $160,000, and which LVEN has
agreed to
reimburse to the Company.

Retroactive to January 15, 1997, the Company
entered into an employment agreement
with Nunzio P. DeSantis, the Company' Chief Executive Officer, for a ten-year
term at an
initial annual base salary of $450,000. (See Note 10).

During fiscal 1997, the Company paid $55,000 in consulting fees and $2,750
for an
auto allowance to Anthony Coelho, the Company's
Chairman, pursuant to an agreement
effective January 15, 1997. Mr. Coelho's consulting agreement is month to
month, under
which he is to be paid $10,000 per month for ongoing consulting services,
$2,500 for
each board meeting he attends and a $500 monthly automobile allowance. (See
Note 10).

Mr. DeSantis and Mr. Joseph Corazzi, President
and Chairman of LVEN, are the sole
stockholders of D&C. On July 1, 1997, the Company made a payment for an
option to
acquire certain leasehold interests relating to two New Mexico racetracks from
D&C for a
non-refundable deposit of $600,000 which was to be credited towards the
purchase price.
The option agreement has been terminated and D&C
has agreed to repay the $600,000
deposit. In the pending litigation, the minority directors have challenged the
authorization and enforceability of certain agreements, including the option
agreement.
(See Note 10).

Kenneth Scholl, a director of the Company, provides consulting services to LVEN
and certain of its subsidiaries through the Stanford Company of which he is the
president. Until December 31, 1997, LVEN paid Stanford Company $10,000 per
month for
consulting services, including Mr. Scholl's services as project manager for
the El
Rancho Property. Effective January 1, 1998, the Company began paying Mr.
Scholl $10,000
per month for ongoing consulting services as project manager for the El Rancho
Property.
Mr. Scholl is currently the Secretary of Casino-Co and was President and a
director of
Casino-Co from March 1996 to May 19, 1997.

During fiscal 1997, the Company paid approximately
$15,000 in consulting fees and
reimbursed expenses to Joseph Zappala, a director of the Company. Subsequent
to June
30, 1997, the Company has paid approximately
$10,000 per month to Mr. Zappala for
ongoing consulting services. Mr. Zappala
also provided consulting services to EMC
during fiscal 1997 pursuant to which he was paid $100,000.

During fiscal 1997 and 1996, the Company paid
$128,000 and $68,000 respectively,
to Public Strategies, L.L.C., a company owned by Roger A. Bodman, a former
director of
the Company, in consideration for ongoing
consulting services pursuant to an agreement
which expired December, 1997. Public Strategies is
continuing to provide consulting
services to the Company on a month-to-month as needed basis.

During fiscal 1997 and 1996, the Company paid
approximately $75,300 and $160,000,
respectively, for the legal services of Sterns and Weinroth, a law firm
partially owned
by Joel H. Sterns, the Company's former chairman.

During fiscal 1997 and 1996, the Company
paid $35,685 and $35,000, respectively,
in consulting fees to Goldman, Beale Associates,
a company partially owned by Clifford
Goldman, a former director of the Company.

During fiscal 1997, the Company agreed to
pay and paid approximately $102,000 to
Robert E. Brennan (the Company's former
Chairman and a significant stockholder until
January 15, 1997) for reimbursement of Mr. Brennan's legal fees in connection
with the
investigation by New Jersey regulatory authorities which oversee the casino
and horse
racing industries in the state.

During fiscal 1997, the Company paid LVEN $150,000 under a letter agreement
executed in connection with the purchase of the El Rancho property, which
provides for a
$25,000 per month fee with respect to maintenance and supervision of the
property prior
to and during development. The Company terminated the letter agreement on
December 17,
1997.

During fiscal 1997 and 1996, the Company paid
approximately $118,800 and $37,800,
respectively, to Francis W. Murray, a director of
the Company, for legal fees and
reimbursed expenses and for consulting fees prior to his becoming an employee.

In August 1997, the Company subleased a portion of its office space in
Albuquerque, New Mexico to AutoLend Group, Inc. for $600 per month, which
sublease is
terminable on 30 days' notice. Mr. DeSantis
is the Chairman, Chief Executive Officer
and a principal stockholder of AutoLend and Mr. Coelho is a director. The
Company also
reimbursed AutoLend for $150,000 it paid to
Communications Associates for investment
advisory services in connection with locating a
potential financing source for the
Company. Communications Associates is a
consulting firm owned by Mr. Corazzi, the
President and Chairman of LVEN. Mr.
Corazzi has been using an office at the Company's
Albuquerque office, although no sublease has been executed for such office.

The Company has contracted, through
Commerce National Insurance Services, formally
known as Keystone National Companies,
Inc. ("KNC"), to purchase general liability
insurance, excess liability insurance, athletic participants coverage, workers
compensation, automobile damage and garagekeepers liability insurance for
Garden State
Park, Freehold Raceway and the El Rancho property as well as corporate
insurance. The
premium amounts associated with this insurance coverage are considered normal
in the
industry. George E. Norcross III, a director of the Company from November
1995 until
April 1996, was the owner of KNC. The Company paid insurance premiums in the
approximate amount of $1,290,000 and $1,140,000 during fiscal 1997 and 1996,
respectively, for the above referenced insurance coverages.

During fiscal 1996, the Company paid
an aggregate $400,000 for a fee in connection
with the purchase of the El Rancho
property to KNC. The Company also issued ten-year
warrants exercisable to purchase 275,000 shares of its Common Stock at an
exercise price
of $4.00 per share to George E. Norcross III or his designee in connection
with the
purchase of the El Rancho property.

During fiscal 1995 and the first quarter of fiscal 1996, the Company
purchased and
sold securities and conducted investment
and financial consulting activities, both
directly and through its wholly-owned Olde English Management, Inc., ("OEM")
subsidiary.
The Company's then Chairman of the Board and Chief Executive Officer, Robert
E. Brennan,
directed such activities. In fiscal 1995, the Company paid $1,250,000 and
accrued an
additional $350,000 to Power Forward, Inc. ("PFI"), a corporation wholly-owned
by Mr.
Brennan, in reimbursement for $1,611,198 of
expenses during the year which Mr. Brennan
advised were paid by PFI in support of the Company's and OEM's efforts to
produce the
investment and financial consulting revenues.

In fiscal 1996, the Company and OEM paid to PFI an aggregate $725,000, which
includes accrued expenses of $350,000 from fiscal 1995, reimbursement for
$365,500 of
expenses during fiscal 1996 and $9,500 due to PFI from the prior year.

For additional information regarding related party transactions see Footnotes 3
and 10 in the Consolidated Financial Statements.

(16) LOSS FROM RETIREMENT OF DEBT

During the fourth quarter of fiscal1997, the Company recorded an extraordinary
loss of $3,837,625 for the early retirement
of debt. The extraordinary losses consist
primarily of write-offs of deferred finance costs associated with the retired
indebtedness.

(17) STARSHIP ORION COSTS

During the fourth quarter of fiscal 1997, the Company determined that the El
Rancho property will be developed under the
name "CountryLand" using a country western
theme. Previously, the property was going
to be developed under a "Starship Orion"
concept. All costs associated with the
Starship Orion concept, amounting to $2,543,968,
were expensed. Starship Orion costs,
amounting to approximately $2,200,000, were
incurred prior to the 1997 fiscal year and classified as a portion of
construction in
progress on the June 30, 1996 balance sheet.

ITEM 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

On August 6, 1997, the Company informed the accounting firm of Moore
Stephens, P.C. ("Moore Stephens") that the Company would not retain it to
audit the Company's financial statements for Fiscal 1997. Moore Stephens had
been the Company's principal accountants since the fiscal year ended June 30,
1981. The report of Moore Stephens on the consolidated financial statements
of the Company for the two most recent fiscal years did not contain an adverse
opinion or a disclaimer of opinion, and was not qualified or modified as to
uncertainty, audit scope or accounting principles. The Company has had no
disagreements with its former principal accountants on any matter of
accounting principles or practices, financial statement disclosure or auditing
scope or procedure which disagreements, if not resolved to the satisfaction of
the former principal accountants, would have caused it to make reference to
the subject matter of the disagreements in connection with its report relating
to the audits for Fiscals 1995 and 1996 or during the period from July 1, 1996
to August 6, 1997.

The Company's decision not to continue to retain Moore Stephens was not
based on the expectation that any disagreement would arise in connection with
the audit of its financial statements for Fiscal 1997. The decision not to
retain Moore Stephens was made by the Executive Committee of the Company's
Board pursuant to the authority granted to the Executive Committee, upon the
recommendation of the Audit Committee, in connection with the change in
management of the Company and the belief that a larger, nationwide firm will
be more able to service the Company in the future. Moore Stephens has
expressed a disagreement as to the grounds for its termination, although the
Company considers the characterizations of its former auditor with respect to
its termination unfounded. Moore Stephens had not commenced its review of the
fourth quarter in connection with an audit for Fiscal 1997 prior to its
termination and, as a result, was not consulted by the Board or any committee
thereof concerning matters in connection with the year-end audit. The Company
has provided its new auditor all information concerning any matters in
connection with its audit.

On October 14, 1997, the Company engaged the accounting firm of BDO
Seidman, LLP as its principal accountants for Fiscal 1997.

PART III

ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

BOARD OF DIRECTORS

The directors of the Company are:

Name Age Director SincePosition

Anthony Coelho 55 January 1997 Chairman of the
Board and Director

Nunzio P. DeSantis 47 January 1997 Chief Executive
Officer, President
and Director
Michael 48 January 1997
C.
Abraham
Director Michael 48 January 1997

Charles R. Dees, Jr. 58 April 1988 Director

Frank A. Leo 54 November 1996 Director

Francis W. Murray 56 May 1996 Director

Robert J. Quigley 69 October 1980 Director

Kenneth S. Scholl 60 January 1997 Director

Joseph Zappala 64 January 1997 Director

Set forth below is certain biographical information with respect to each
director set forth above, including his principal occupation and employment
during the past five years.

Anthony Coelho. Mr. Coelho served as a consultant to Tele-
Communications, Inc. From October 1995 to September 1997, he served as
Chairman and Chief Executive Officer of ETC w/tci, Inc., an education and
training technology company. Mr. Coelho served as Chairman and Chief
Executive Officer of Coelho Associates, L.L.C., an investment advisory firm,
from July 1995 to July 1997. From 1989 to June 1995, Mr. Coelho was a
Managing Director of the New York investment banking firm Wertheim Schroder &
Company, and from 1990 to 1995 he also served as President and Chief Executive
Officer of Wertheim Schroder Investment Services. Mr. Coelho served as a
Director of Circus Circus Enterprises, Inc. until February 1997. He is a
director of NPD, Inc., AutoLend Group, Inc. ("AutoLend"), ICF Kaiser
International, Inc., Cyberonics, Inc., Service Corporation International and
TEI, Inc. In addition, Mr. Coelho is a member of Fleishman-Hillard, Inc.'s
international advisory board. Since his appointment by President Clinton in
1994, Mr. Coelho has also served as Chairman of the President's Committee on
Employment of People with Disabilities. Mr. Coelho is a former U.S.
Representative from California and Majority Whip of the U.S. House of
Representatives. Mr. Coelho is a member of the Executive Committee and the
Compensation and Stock Options Committee and has served on such committees
since February 12, 1997.

Nunzio P. DeSantis. Mr. DeSantis is the Chairman of the Board and
Chief Executive Officer of NPD. Mr. DeSantis also is Chairman of the Board
and Chief Executive Officer of AutoLend, positions he has held since September
1996. On November 1, 1996, an involuntary petition in bankruptcy was filed
against AutoLend which was dismissed effective April 7, 1997. On September
22, 1997, AutoLend filed a petition in bankruptcy under Chapter 11 of the U.S.
Bankruptcy Code (Reorganization). Prior to September 1995 and for more than
five years, Mr. DeSantis was Chairman of the Board and Chief Executive Officer
of Diagnostek, Inc., a New York Stock Exchange pharmacy benefit management
company which was sold to Value Health, Inc. in July 1995. Mr. DeSantis has
been a member of the Executive Committee since February 12, 1997.

Michael C. Abraham. Mr. Abraham is currently a developer of real estate
projects in the southwest, including housing, shopping malls and time share
developments. Mr. Abraham was the former developer and owner of Midnight
Rodeo California, one of the nation's largest nightclub and entertainment
centers. He has also developed and currently owns oil and gas leases
throughout Texas and Colorado. Mr. Abraham is the founder and President of
Enchanted Farm, New Mexico's largest privately-owned quarter horse breeding
facility. Mr. Abraham is a former director of the New Mexico Horse Breeders
Association. Mr. Abraham has been a member of the Audit Committee since
February 12, 1997.

Dr. Charles R. Dees, Jr. Dr. Dees is currently Vice President of
Institutional Advancement at Fairleigh Dickinson University. Prior to
Fairleigh Dickinson University, Dr. Dees served as Vice Chancellor for
University Affairs at Seton Hall University in South Orange, New Jersey. Dr.
Dees has been a member of the Audit Committee since January 19, 1998 and has
previously served as a member of the Executive Committee from July 9, 1996 to
February 12, 1997 and as a member of the Compensation and Stock Options
Committee from July 9, 1996 to December 20, 1996.

Frank A. Leo. Mr. Leo is currently retired. Mr. Leo served as the
Chairman of the Board and acting Chief Executive Officer of the Company from
November 1996 until January 15, 1997. From January 1976 until August 1995
when he retired, Mr. Leo was the founder and a partner in Melior Graphics,
Inc. (subsequently MGI Industries, Inc.), a promotional direct mail service
company. Mr. Leo has been a member of the Executive Committee since January
19, 1998 and also served on such Committee from December 20, 1996 to February
12, 1997. Mr. Leo has previously served as a member of the Audit Committee
from February 12, 1997 to January 19, 1998.

Francis W. Murray. From time to time from November 1995 until May 1997,
Mr. Murray served as President of the Company's subsidiaries International
Thoroughbred Gaming Development Corporation ("ITG") and Orion Casino
Corporation. From November 1993 through June 1995, Mr. Murray served as a
General Partner of Healthcare Properties, a partnership operating nursing
homes in New Jersey and as a consultant to ITG. From December 1992 through
November 1993, Mr. Murray was the President of the St. Louis NFL Partnership,
which attempted unsuccessfully to obtain an expansion NFL franchise for St.
Louis. Mr. Murray has been a member of the Executive Committee and the
Compensation and Stock Options Committee since January 19, 1998. Mr. Murray
has previously served on the Executive Committee from February 21, 1996 to
July 9, 1996 and from December 20, 1996 to February 12, 1997.

Robert J. Quigley. From February 1996 until October 15, 1997, Mr.
Quigley served as President of the Company. Mr. Quigley also served as
President of the Company from 1988 until July 1992. Between November 1995 and
May 1996, Mr. Quigley served as Chairman of the Board and acting Chief
Executive Officer of the Company. From July 1992 until November 1995, Mr.
Quigley was President and Chief Operating Officer of Retama Park Association,
Inc., a racetrack facility in San Antonio, Texas. Mr. Quigley has previously
served as a member of the Executive Committee from July 9, 1996 to December
20, 1996.

Kenneth S. Scholl. Since 1984, Mr. Scholl has been the President of
Stanford Company, a hotel, restaurant and gaming management and consulting
company, through which he has provided consulting and other services to
various companies. From November 1992 until February 1993, Mr. Scholl was an
independent contractor with Minami Development, Inc. in connection with the
closing of the Dunes Hotel Casino in Las Vegas, Nevada. From July 1990 until
June 1992, Mr. Scholl was the President and a management consultant for the
Peabody Hotel Group, Memphis, Tennessee. Mr. Scholl previously held a Nevada
State Gaming License and is a licensed Nevada real estate broker. Mr. Scholl
is the property manager at the El Rancho Property. Mr. Scholl has been a
member of the Compensation and Stock Options Committee since January 19, 1998.
Mr. Scholl has previously served as a member of the Executive Committee from
February 12, 1997 to January 19, 1998.

Joseph Zappala. Mr. Zappala has served as Chairman of the Board of
CarePlus, LLC since its inception in 1996. For the past 30 years, he has been
the Chairman and President of Joseph Zappala Investments, an investment and
land development company located in Boca Raton, Florida. Mr. Zappala is a
part owner and director of Associated Industrial Supply Company headquartered
in Columbia, South Carolina and serves as a director of Miami Subs Corp. From
February 1989 until February 1992, Mr. Zappala served as U.S. Ambassador to
Spain. Mr. Zappala owns an interest in and is an officer of Tucson Greyhound
Park and holds an Arizona Gaming License. Mr. Zappala has been a member of
the Executive Committee since January 19, 1998 and a member of the Audit
Committee and the Compensation and Stock Options Committee since February 12,
1997.

COMMITTEES OF THE BOARD

Executive Committee. The Executive Committee is authorized to exercise
all of the authority of the Board in the management of the Company's business
affairs between Board meetings except as otherwise provided by the Company's
By-laws or applicable corporate law. Messrs. Coelho, DeSantis, Leo, Murray
and Zappala are the current members of the Executive Committee.

Audit Committee. The Audit Committee provides general financial
oversight. The committee periodically meets and confers with the Company's
independent auditors concerning the Company's accounting systems and the
maintenance of its books and records, reviews the scope of the audit of the
Company's financial statements, and the results thereof, and performs other
services. Messrs. Zappala, Abraham and Dees are the current members of the
Audit Committee.

Compensation and Stock Options Committee. The Compensation and Stock
Options Committee establishes director and executive compensation levels and
is responsible for the administration of the employee stock option plan.
Messrs. Coelho, Murray, Scholl and Zappala are the current members of the
Compensation and Stock Options Committee.

The following is a summary of the composition of these committees during
Fiscal 1997:

<TABLE>
<S> <C> <C> <C>
COMPENSATION AND
EFFECTIVE DATE EXECUTIVE AUDIT COMMITTEE STOCK OPTIONS
COMMITTEE COMMITTEE

July 1, 1996 Francis W. Murray Roger A. Bodman(1) Charles R. Dees,Jr.
Robert J. Quigley Charles R. Dees, Jr.

July 9, 1996 Charles R. Dees,Jr. Roger A. Bodman Charles R. Dees,Jr.
Clifford Goldman(1) Clifford Goldman(1) Robert Peloquin(1) Robert Peloquin(1)
Robert J. Quigley
Joel H. Sterns(1)
Arthur Winkler(2)

December 20, 1996Charles R. Dees,Jr.Frank Koenemund(3) Charles R. Dees,Jr.
Frank A. Leo James Murray(3) John Mariucci(3)
Francis W. Murray

February 12, 1997Anthony Coelho Michael Abraham Anthony Coelho
Nunzio P. DeSantis Frank A. Leo Joseph Zappala
Keneth S. Scholl Joseph Zappala

January 19, 1998Anthony Coelho Michael Abraham Anthony Coelho
Nunzio P.DeSantis Charles R. Dees,Jr. Francis W. Murray
Frank A. Leo Joseph Zappala Kenneth S.Scholl
Francis W. Murray Joseph Zappala
Joseph Zappala
</TABLE>

(1) Removed on November 4, 1996
(2) Resigned on February 1, 1997
(3) Resigned on January 15, 1997

EXECUTIVE AND OTHER KEY OFFICERS

The executive and other key officers of the Company, in addition to
Messrs. Coelho and DeSantis, are:

Name Age Position

William H. Warner 53 Treasurer

Richard E. Orbann 45 Vice President - Racing
Operations

Edward Ryan 56 General Manager - Freehold
Raceway General Manager - Freehold
Christopher C. Castens 46 Secretary and General Counsel

Set forth below is certain biographical information with respect to each
such executive and other key officer:

William H. Warner. Mr. Warner is a certified public accountant and has
been employed by the Company since September 1983. Mr. Warner has served as
Treasurer of the Company since December 1983. Prior to joining the Company,
Mr. Warner was employed in public accounting for 11 years.

Richard E. Orbann. Mr. Orbann has been the Vice President - Racing
Operations at the Company since October 1997. In such capacity, he oversees
all racing matters at the Company. From 1992 until October 1997, Mr. Orbann
served as General Manager of Garden State Park and continues in this role in
addition to his other duties with the Company. Prior to 1992, Mr. Orbann
served as Assistant General Manager at Garden State Park.

Edward Ryan. Mr. Ryan has served as Vice President and General Manager
of Freehold Raceway since 1990. Mr. Ryan has been an employee of Freehold
Raceway since 1965. From 1988 to 1989, he served as Assistant General Manager
and from 1977 to 1987, he served as General Superintendent of Freehold
Raceway.

Christopher C. Castens. Mr. Castens has been General Counsel to the
Company since December 1986. Prior to joining the Company, Mr. Castens served
as in-house counsel and assistant to the Executive Vice President of Harness
Tracks of America.

ITEM 11 - EXECUTIVE COMPENSATION

The following table sets forth information concerning the compensation
paid or accrued by the Company during the years ended June 30, 1997, 1996 and
1995 to (i) all individuals serving as the Company's Chief Executive Officer
(or acting in similar capacity) during Fiscal 1997, (ii) the Company's four
most highly compensated executive officers (other than the Chief Executive
Officer) who were serving in such capacity at the end of Fiscal 1997 and (iii)
one executive officer of the Company who resigned prior to the end of Fiscal
1997.

SUMMARY COMPENSATION TABLE

<TABLE>
<S> <C> <C> <C> <C> <C>
Long-Term
AnnualCompensation Compensation
Securities
Underlying
Options
Name and Other All
Principal Annual Other
Position Year Salary Compensation Compensation

Nunzio P.
DeSantis (1) 1997 $204,231 $39,000(2) 5,000,000(3) $-0-
Chief ExecutiveOfficer of the
Company

Frank A. Leo (4)
Former Acting 1997 40,000 -0- 200,000 -0-
Chief ExecutiveOfficer of the
Company

Joel H. Sterns 1997 110,533 -0- -0- 162,000
(5) 1996 65,654 -0- 200,000 -0-
Former Chairmanand Chief
Executive
Officer of the
Company

Robert J. 1997 210,000 -0- -0- 10,971(7)
Quigley (6) 1996 71,923 -0- 100,000 1,969
Former Presidentand
Acting ChiefExecutive
Officer of the
Company

Arthur Winkler 1997 119,231 -0- -0- 154,868(9)
(8) 1996 166,539 -0- 50,000 11,767
Former Executive
Vice President 1995 163,007 -0- 275,000 12,121

William H. 1997 120,000 -0- -0- 9,360(10)
Warner 1996 111,300 -0- -0- 8,411
Chief Financial
Officer 1995 96,827 -0- 75,000 7,956
of the Company

Richard E. 1997 124,723 -0- -0- 9,494(12)
Orbann (11) 1996 118,500 -0- -0- 8,454
Vice 1995 96,827 -0- -0- 7,936
President -
Racing
Operations

Edward Ryan 1997 123,508 -0- 50,000 12,278((13)
General 1996 112,654 -0- -0- 10,520
Manager - 1995 52,494 -0- -0- 4,153
Freehold Raceway

</TABLE>

(1) Mr. DeSantis became Chief Executive Officer of the Company on January 15,
1997 following
the NPD Acquisition.

(2) Consists of $5,000 per month nonaccountable expense allowance and $1,500
per month
automobile allowance pursuant to an employment agreement effective January
15, 1997. See
"Employment Agreements" below.

(3) Subject to stockholder approval at the Company's next annual meeting, Mr.
DeSantis was
granted options to purchase 5,000,000 shares at an exercise price of $4.00
per share. If
approved by stockholders, options to purchase 1,000,000 shares will vest
immediately and
options to purchase 500,000 shares will vest on January 15, 1999 and on
each anniversary
thereof until January 15, 2007. See "Legal Proceedings."

(4) Mr. Leo served as Chairman and as acting Chief Executive Officer from
November 4, 1996
until January 15, 1997. Mr. Leo remains a director of the Company.

(5) Fiscal 1997 amounts consist of $110,553 paid as consulting fees and
$162,000 paid as
severance payments. Mr. Sterns was terminated as Chairman on November 4,
1997. Mr.
Sterns also served as acting Chief Executive Officer from June 1996 until
November 4,
1996. For a description of the terms of Mr. Sterns termination
settlement, see
"Developments During the Last Fiscal Year."

(6) Mr. Quigley served as acting Chief Executive Officer until May 14, 1996
and as President
until October 15, 1997. Mr. Quigley remains a director of the Company.
For a description
of the terms of Mr. Quigley's termination agreement, see "Developments
During the Last
Fiscal Year."

(7) Fiscal 1997 amounts include $1,233 of life insurance premiums paid by the
Company with
respect to term life insurance payable to beneficiaries designated by Mr.
Quigley and
$9,738 contributed by the Company under the Company's 401(k) plan.

(8) Mr. Winkler resigned as a director of the Company, President of the
Company's subsidiaries
and Executive Vice President of the Company on February 1, 1997.
Upon his resignation,
Mr. Winkler forfeited options to purchase up to 125,000 shares of Common
Stock. Mr.
Winkler retains options to purchase up to 200,000 shares of Common Stock.

(9) Fiscal 1997 amounts include $130,000 paid as severance payments, accrued
vacation of
$15,385, $1,800 of life insurance premiums paid by the Company with
respect to term life
insurance payable to beneficiaries designated by Mr. Winkler and $7,683
contributed by the
Company under the Company's 401(k) plan.

(10) Fiscal 1997 amounts include $2,160 of life insurance premiums paid
by the Company with
respect to term life insurance payable to beneficiaries designated
by Mr. Warner and
$7,200 contributed by the Company under the Company's 401(k) plan.

(11) Mr. Orbann became Vice President-Racing Operations on October 16,
1997. From 1992 to
October 16, 1997, Mr. Orbann served as
General Manager-Garden State Park.

(12) Fiscal 1997 amounts include $2,160 of life insurance premiums paid
by the Company with
respect to term life insurance payable to beneficiaries designated
by Mr. Orbann and
$7,334 contributed by the Company under the Company's 401(k) plan.

(13) Fiscal 1997 amounts include $4,960 of life insurance premiums paid
by the Company with
respect to term life insurance payable to beneficiaries designated
by Mr. Ryan and $7,318
contributed by the Company under the Company's 401(k) plan.

STOCK OPTIONS

The following table indicates options granted during the fiscal year
ended June 30, 1997 to each person named in the Summary Compensation Table:

OPTION GRANTS IN LAST FISCAL YEAR

<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Individual Grants

% of
Total
Options Potential Realizable
Number of Granted Value At Assumed
Securities to Annual Rates of
Underlying Employees Stock Price
In Fiscal Appreciation for
Year Exercise Option
Options Price Expiration Term
Name Granted(#) ($/Sh) Date

5%(1) 10%(1)

Nunzio P. 5,000,000(2)86% $4.00 1/15/2007 $16,650,000$38,350,000
DeSantis

Frank A. Leo 200,000 3% $4.00 12/20/2006 $ 668,000$ 1,534,000

Joel H. Sterns -- -- -- -- -- --

Robert J. -- -- -- -- -- --
Quigley

Arthur Winkler -- -- -- -- -- --

William H. -- -- -- -- -- --
Warner

Richard E. -- -- -- -- -- --
Orbann

Edward Ryan 50,000 1% $5.00 1/15/2002 $ 37,500$ 113,000
</TABLE>

(1) Calculated based on the market price of the Company's Common Stock
of $4.50 per share on June 30,
1997 minus the aggregate exercise price of such options. The
options will have greater, lesser
or no value to the extent that the market price of the Company's
Common Stock appreciates or
declines from the grant date to the exercise date.
(2) These options were granted subject to stockholder approval at the
Company's next annual meeting
of stockholders. See "Legal Proceedings."
The following table indicates the outstanding stock options held
at June 30, 1997 by each person named in the Summary Compensation Table. No
options were exercised during Fiscal 1997 by any of the named executive
employees.

AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR END OPTION VALUES

Number of Securities
Underlying Unexercised
Options Value of Unexercised
At Fiscal Year End In-the-Money
Options at
Name Exercisable/Unexercisabl Fiscal Year End (1)
e Exercisable/Unexercisable

Nunzio P. DeSantis -0-/5,000,000(2) -0-/$2,500,000

Frank A. Leo
200,000/-0- $100,000/-0-

Joel H. Sterns 200,000/-0- 100,000/-0-

Robert J. Quigley 100,000/-0- 12,500/-0-

Arthur Winkler 200,000/-0- 100,000/-0-

William H. Warner 75,000/-0- -0-/-0-

Richard E. Orbann 75,000/-0- -0-/-0-

Edward Ryan 50,000/-0- -0-/-0-

____________________

(1) Based on the market price of the Company's Common Stock of $4.50 per
share on June 30, 1997 minus the aggregate exercise price of such
options.

(2) Such options were granted to Mr. DeSantis subject to stockholder approval
at next annual meeting of stockholders. See "Legal Proceedings."

COMPENSATION OF DIRECTORS

Prior to June 17, 1997, the Company's policy on compensation paid to
members of its Board was as follows: (i) inside directors (i.e., executive
officers or employees) received no compensation; (ii) outside directors
received $1,000 per month, plus $1,000 for each Board of Directors meeting and
$500 for each committee meeting in which they participated; and (iii) all
directors (regardless of whether they were inside or outside directors)
received options to acquire 100,000 shares of Common Stock which were
immediately exercisable.

Commencing on June 17, 1997, the above policy was replaced with a new
policy pursuant to which the only compensation paid to outside directors was
$1,000 for each regular or special meeting of the Board in which each outside
director participated either in person or by telephone, if participation by
telephone is approved by the Chairman. Under the terms of his consulting
agreement with the Company, Mr. Coelho receives $2,500 per Board meeting in
which he participates.

EMPLOYMENT AGREEMENTS

Nunzio DeSantis - Chief Executive Officer and President. Retroactive
to January 15, 1997 (the "Effective Date"), Mr. DeSantis and the Company
entered into a ten-year employment agreement pursuant to which Mr. DeSantis
serves as the Company's Chief Executive Officer at an initial annual base
salary of $450,000. Beginning January 1, 1998, the agreement provides for
annual increases equal to any increase in the consumer price index for the
Albuquerque, New Mexico area for the preceding calendar year. Mr. DeSantis is
also entitled to receive a performance bonus each year equal to the amount, if
any, by which the net income of the Company (before deduction of federal and
state income taxes) exceeds $2 million. The maximum amount of such
performance bonus for any fiscal year is limited to the amount of Mr.
DeSantis' base salary for such year. Subject to stockholder approval at the
Company's next annual meeting, Mr. DeSantis was granted options to purchase
up to 5,000,000 shares of the Company's Common Stock at an exercise price of
$4.00 per share. If approved by the Company's stockholders, options
exercisable for 1,000,000 shares of Common Stock will be exercisable
immediately and the remaining options become exercisable in eight equal annual
installments commencing on January 15, 1999. If Mr. DeSantis is discharged
without cause or resigns for good reason, all options vest immediately and Mr.
DeSantis is entitled to receive an amount equal to his then base salary for
the remaining term of the agreement or eighteen months, whichever is greater.
Upon a change of control (as defined in the agreement) and Mr. DeSantis'
resignation in connection therewith, all options vest immediately and Mr.
DeSantis is entitled to receive an amount equal to his then base salary for
the remaining term of the agreement or three years, whichever is lesser. In
the event of the death of Mr. DeSantis, his estate will receive a lump sum
payment of $1 million. Mr. DeSantis also receives a monthly automobile
expense allowance and a non-accountable expense account in an aggregate amount
of $6,500. In connection with the performance of his duties during the term
of his contract, the Company has made available to him, at its expense, the
use of a private airplane. For a period of two years following the
termination of the agreement or while he is receiving severance payments from
the Company, Mr. DeSantis is bound by the terms of a non-competition clause.
See "Summary Compensation." In connection with pending litigation, the
minority Board members have challenged the authorization and enforceability
of certain agreements, including Mr. Desantis' employment agreement. See
Legal Proceedings."

William H. Warner - Treasurer. The Company and Mr. Warner are parties
to an employment agreement pursuant to which Mr. Warner serves as the
Company's treasurer at an annual salary of $120,000 per annum. Unless renewed
by the Company, this agreement expires on December 31, 1998. In addition to
other customary and usual terms, Mr. Warner's agreement provides that the
Company may terminate his contract without cause by paying him an amount equal
to the greater of six months salary or his salary for the remaining contract
term.

Richard E. Orbann - Vice President-Track Operations. The Company and
Mr. Orbann entered into an amended and restated employment agreement pursuant
to which Mr. Orbann is employed as the Vice President - Track Operations at an
annual base salary of $160,000. Unless earlier terminated, the term of the
agreement extends until December 31, 2001 and is automatically renewable by
the Company for additional two-year terms, unless terminated by either party
on six months notice before the end of the then current term. In the event
that the agreement is not renewed at the end of the initial or any renewal
term, Mr. Orbann would be entitled to a lump sum payment equal to his base
salary for six months and certain other benefits. The agreement also provides
that the Company may terminate his agreement without cause by paying him an
amount equal to the greater of six months salary or his salary for the
remaining contract term. In addition, in the event of a change of control (as
defined in the agreement), Mr. Orbann would be entitled to a lump sum payment
equal to his base salary for the balance of the term of the agreement.

Edward Ryan - General Manager-Freehold Raceway. The Company and Mr.
Ryan are parties to an employment contract pursuant to which Mr. Ryan serves
as the general manager of Freehold Raceway at an annual salary of $120,000.
Unless renewed by the Company, this agreement expires on December 31, 1998.
In addition to other customary and usual terms, Mr. Ryan's agreement provides
that the Company may terminate his contract without cause by paying him an
amount equal to the greater of six months salary or his salary for the
remaining contract term.

TERMINATION AND SEVERANCE AGREEMENTS

Robert J. Quigley - Former President. Mr. Quigley's employment
contract with the Company terminated upon his termination as President of the
Company on October 15, 1997. Under the terms of such employment contract, the
Company is obligated to pay Mr. Quigley an amount equal to the greater of six
months salary or his salary for the remaining contract term. Pursuant to such
agreement, the Company expects to pay an aggregate amount of $300,000,
including benefits.

Joel H. Sterns - Former Chairman and Chief Executive Officer. On
January 15, 1997, the Company entered into a settlement agreement with Mr.
Sterns with respect to the termination of his employment agreement. Under the
terms of the settlement agreement, the Company has paid Mr. Sterns an
aggregate of $252,000 in full and final settlement of all salary, reimbursable
expenses and termination payments to which he might otherwise be entitled.
Mr. Sterns retained his ten-year options to purchase up to 200,000 shares of
Common Stock at an exercise price of $4.00 per share.

Arthur Winkler - Former Executive Vice President. On January 31,
1997, the Company entered into a termination settlement agreement with Mr.
Winkler with respect to the termination of his employment agreement. The
Company agreed to pay Mr. Winkler $200,000 over a twenty month period. Of
such amount, $100,000 was paid on February 1, 1997 and $5,000 will be paid
monthly until September 1, 1998. In addition, Mr. Winkler forfeited options
to purchase up to 125,000 shares of Common Stock at an exercise price of $5.87
per share, but retained options to purchase up to 200,000 shares of Common
Stock at an exercise price of $4.00 per share.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

The compensation of the Company's executive officers is determined by
the Company's Compensation and Stock Options Committee, which consists of
Messrs. Coelho, Murray, Scholl and Zappala. No officer or employee of the
Company participated in deliberations of the Compensation and Stock Options
Committee.

During Fiscal 1997, the Company paid $55,000 in consulting fees and
$2,750 for an auto allowance to Anthony Coelho, the Company's Chairman,
pursuant to an agreement effective January 15, 1997. Mr. Coelho's consulting
agreement is month to month, under which he is to be paid $10,000 per month
for ongoing consulting services, $2,500 for each Board meeting he attends and
a $500 monthly automobile allowance. In connection with pending litigation,
the minority Board members have challenged the authorization and
enforceability of certain agreements, including Mr. Coelho's consulting
agreement. See "Legal Proceedings."

During Fiscal 1997, the Company paid approximately $15,000 in
consulting fees and reimbursed expenses to Joseph Zappala, a director of the
Company. Currently, the Company pays Mr. Zappala approximately $10,000 per
month in which he provides consulting services. Mr. Zappala also provided
consulting services to Electric Media Company, Inc., a subsidiary of LVEN,
during Fiscal 1997 pursuant to which he was paid $100,000.

Kenneth Scholl, a director of the Company, provides consulting
services to LVEN and certain of its subsidiaries through the Stanford Company
of which he is the president. Until December 31, 1997, LVEN paid Stanford
Company $10,000 per month for consulting services, including Mr. Scholl's
services as project manager for the El Rancho Property. Effective January 1,
1998, the Company began paying Mr. Scholl $10,000 per month for ongoing
consulting services as project manager for the El Rancho Property. Mr. Scholl
is currently the Secretary of Casino-Co and was President and a director of
Casino-Co from March 1996 to May 19, 1997.

During Fiscals 1997 and 1996, the Company paid approximately $118,800
and $37,800, respectively, to Francis W. Murray, a director of the Company,
for legal and reimbursed expenses and for consulting fees prior to his
becoming an employee.

The Company subleased a portion of its office space in Albuquerque,
New Mexico to AutoLend for $600 per month, which sublease is terminable on 30
days' notice. See "Developments During the Last Fiscal Year." Mr DeSantis is
the Chairman, Chief Executive Officer and a principal stockholder of AutoLend
and Mr. Coelho is a director. The Company also reimbursed AutoLend for
$150,000 it paid to Communications Associates for investment advisory services
in connection with locating a potential financing source for the Company.
Communications Associates is a consulting firm owned by Mr. Corazzi.

ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth, as of May 15, 1998, the number of
shares of the Company's Common Stock owned beneficially by (i) each beneficial
owner of more than 5% of such Common Stock, (ii) each executive officer and
director of the Company and (iii) all executive officers and directors of the
Company as a group (calculated in accordance with Rule 13d-3 under the
Exchange Act). In the case of persons other than executive officers and
directors of the Company, such information is based solely on a review of
Schedules 13D and 13G filed with the SEC. Except as otherwise noted below,
each person or entity has sole voting and dispositive power with respect to
the shares of Common Stock listed below. As of May 15, 1998, the Company had
13,978,095 shares of Common Stock issued and outstanding. In addition to the
Common Stock, the Company has 362,470 shares of Series A Preferred Stock
issued and outstanding. Series A Preferred Stock is not convertible into
Common Stock and has no voting rights.

NAME AND ADDRESS OF AMOUNT AND NATURE PERCENTOF
5% BENEFICIAL OWNER OF
BENEFICIAL CLASS
OWNERSHIP(1)

Nunzio P. DeSantis 4,997,884(2) 35.8%

Anthony Coelho 2,904,016(3) 20.8%

Casino-Co. Corporation 2,093,868(4) 15.0%
1801 Century Park East
Los Angeles, CA 90067

NPD, Inc. 2,904,016 20.8%
600 Central Ave. SW
Albuquerque, NM 87102

The Family Investment 1,090,731(5) 7.8%
Trust
(Henry Brennan, Trustee)
340 North Avenue
Cranford, NJ 07016
2,419,509(6) 14.9%
Credit Suisse First
Boston Mortgage Capital
LLC
Eleven Madison Avenue
New York, NY 10010

Michael C. Abraham 105,000(7) *
Charles R. Dees, Jr. 100,000(8) *
Frank A. Leo 732,201(9) 5.2%
Francis W. Murray 300,000(8) 2.1%
Robert J. Quigley 105,830(7) *
Kenneth S. Scholl 101,000(7) *
Joseph Zappala 100,000(8) *

All Executive Officers 6,741,915 44.5%
and Directors as a Group
(12
persons)(1)(2)(3)(7)(8)(
9)(10)

The above persons have sole voting and investment power, unless otherwise
indicated below.

* Less than 1%.

(1) With respect to each stockholder, includes any shares issuable upon
exercise of any
options held by such stockholder that are or will become exercisable
within sixty days
of May 15, 1998.

(2) Includes 2,904,016 shares owned of record by NPD, as to which Mr.
DeSantis may be deemed
to be the beneficial owner and 2,093,868 shares owned of record by
Casino-Co as to which
Mr. DeSantis holds a proxy to vote all or a portion of the shares until
the occurrence
of certain events. Does not include 5,000,000 shares of Common Stock
issuable upon
exercise of options granted subject to stockholder approval at the next
annual meeting,
of which options issuable with respect to 1,000,000 shares
would be immediately
exercisable. See "Developments During the Last Fiscal Year"
and "Legal Proceedings."

(3) Consists of 2,904,016 shares owned of record by NPD, as to which Mr.
Coelho may be
deemed to be the beneficial owner. Does not include 1,000,000 shares of
Common Stock
issuable upon exercise of options granted subject to stockholder
approval at the next
annual meeting, of which options issuable with respect to 200,000 shares
would be
immediately exercisable. See "Legal Proceedings."

(4) Such shares are subject to a proxy granted to Mr. DeSantis to vote all
or a portion of
the shares until the occurrence of certain events. See "Developments
During the Last
Fiscal Year" and "Legal Proceedings."

(5) Henry Brennan is the brother of Robert E. Brennan, whose
adult sons are the beneficiaries of the trust.

(6) Includes 1,044,000 shares of Common Stock issuable upon exercise of
warrants and
1,142,857 shares of Common Stock issuable upon conversion of the CSFB
Note. See
"Developments During the Last Fiscal Year" and "Legal Proceedings."

(7) Includes 100,000 shares of Common Stock issuable upon exercise of
options.

(8) Consists of shares of Common Stock issuable upon exercise of options.

(9) Includes 200,000 shares of Common Stock issuable upon exercise of options.

ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

In connection with the NPD Acquisition, NPD borrowed the sum of
$2,900,000 from Casino-Co. Casino-Co is a wholly-owned subsidiary of LVEN,
from whom the Company purchased the El Rancho Property and with whom the
Company has various contractual obligations with respect to the purchase of
the El Rancho Property including, but not limited to, a profit participation
note and an entertainment management contract. See "Casino Development
Operations-El Rancho Property" and "Developments During the Last Fiscal Year."
The Casino-Co loan, together with accrued interest, was repaid in July 1997.
Mr. DeSantis holds options to acquire 1,500,000 shares of LVEN's common stock
at an exercise price of $1.00 per share. Mr. DeSantis was also paid a
commitment fee by LVEN of $110,000 in connection with a standby financing
commitment he made to LVEN on October 31, 1996 as replacement financing for
the El Rancho Property. This standby financing commitment was never drawn
upon and was terminated in January 1997. Mr. DeSantis is a 25% owner in
Electric Media Company, Inc. ("EMC"), a Delaware corporation and subsidiary of
LVEN, for which investment Mr. DeSantis paid $375,000.

On January 15, 1997, Mr. DeSantis provided the Company with an unsecured
$5 million revolving line of credit. The line of credit has not been drawn
upon and it is unlikely that it will be utilized in the future. This is a
subject of the pending litigation. See "Legal Proceedings."

Mr. DeSantis and Mr. Joseph Corazzi, President and Chairman of LVEN,
each own one-half of the stock of D&C Gaming Corporation ("D&C"), a Delaware
corporation. On July 1, 1997, the Company paid for an option to acquire
certain leasehold interests relating to two New Mexico racetracks for a non-
refundable deposit of $600,000 which was to be credited towards the purchase
price. The option agreement has been terminated and D&C has agreed to repay
the $600,000 deposit to ITB. In connection with pending litigation, the
minority Board members have challenged the authorization and enforceability of
certain agreements, including the option agreement. See "Legal Proceedings."

Pursuant to the Tri-Party Agreement executed in connection with the CSFB
Credit Facility, the Company issued an aggregate of 2,326,520 shares of Common
Stock (based on a value of $5.00 per share) in exchange for cancellation of
the Casino-Co Note plus accrued interest. Of such shares, 2,093,868 shares
were issued to Casino-Co (the "Conversion Shares") and 232,652 shares were
issued to CSFB in consideration for its consent and for certain advisory
services in connection with the transaction. In accordance with the Tri-Party
Agreement, the Company has also agreed, subject to, among other things, an
independent valuation, receipt of a fairness opinion from an independent
investment banking firm and Board and stockholder approval, to complete the
Casino-Co Transaction. LVEN and Casino-Co granted Mr. DeSantis an irrevocable
proxy to vote any or all of the Conversion Shares until the occurrence of
certain events and have agreed to grant Mr. DeSantis a similar proxy to vote
any or all of the shares to be issued to LVEN in the Casino-Co Transaction.
See "Developments During the Last Fiscal Year." In connection with pending
litigation, the minority Board members have challenged the authorization and
enforceability of certain agreements, including the Tri-Party Agreement. See
"Legal Proceedings."

The Company paid LVEN an aggregate of $150,000 to date under a letter
agreement executed in connection with the purchase of the El Rancho Property,
which provides for a $25,000 per month fee with respect to maintenance and
supervision of the property prior to and during development. The Company
terminated the letter agreement on December 17, 1997.

In connection with the CSFB Credit Facility, the Company and LVEN
entered into the Bi-Lateral Agreement which set the amount the Company could
recoup prior to Casino-Co receiving consideration under the $160 Million
Profit Participation Note at $35 million. In addition, the Bi-Lateral
Agreement fixed the maximum debt service to be netted against cash flow from
operations of the El Rancho Property in computing "adjusted cash flow" under
of the $160 Million Profit Participation Note at $65 million. See
"Developments During the Last Fiscal Year." In connection with pending
litigation, the minority Board members have challenged the authorization and
enforceability of certain agreements, including the Bi-Lateral Agreement. See
"Legal Proceedings."

Mr. DeSantis owns 80% of Nordic Gaming Corporation, an Ontario
corporation which purchased the Fort Erie Racetrack in Fort Erie, Canada on
August 27, 1997. The Company was offered, but rejected, the opportunity to
make this investment because of the demands on cash flow. Nordic Gaming
borrowed $182,000 from LVEN for a deposit on the purchase, which was repaid to
LVEN at the closing. LVEN has also provided Nordic Gaming with a $1.3 million
secured line of credit to fund operating losses at the Fort Erie Racetrack.
On May 15, 1998, Mr. DeSantis sold his Nordic Gaming shares to Erie Gaming
Organization, Inc., an Ontario corporation which holds the other 20% interest
in Nordic Gaming. In consideration for his shares, Mr. DeSantis received $10
and each of Nordic Gaming, Mr. DeSantis and Erie Gaming exchanged mutual
general releases. In connection with the pending litigation, the minority
Board members have challenged the decision to reject the opportunity to
purchase the Fort Erie Racetrack. See "Legal Proceedings."

Retroactive to January 15, 1997, the Company entered into an employment
agreement with Mr. DeSantis for a ten-year term at an initial annual base
salary of $450,000. See "Employment Agreements." In connection with pending
litigation, the minority Board members have challenged the authorization and
enforceability of certain agreements, including Mr. DeSantis' employment
agreement. See "Legal Proceedings."

During Fiscal 1997, the Company paid approximately $217,000 to Southwest
Jet Group in connection with the use of a private jet by certain officers and
directors of the Company, including Mr. DeSantis, for Company business.
Southwest Jet Group is a Nevada corporation, owned by Mr. DeSantis' son, which
operates private jets, including one which was partially financed by Messrs.
DeSantis and Corazzi. Messrs. DeSantis and Corazzi used private jets operated
by Southwest Jet Group for certain personal matters for which the Company
advanced approximately $160,000, and which LVEN has agreed to reimburse to the
Company.

Mr. Corazzi has been using an office at the Company's Albuquerque
office, although no sublease has been executed for such office.

During Fiscal 1997, the Company paid $10,000 per month to Public
Strategies, L.L.C., a company owned by Roger A. Bodman, a former director of
the Company, in consideration for consulting services, pursuant to an
agreement which expired December 31, 1997. Public Strategies is continuing to
provide consulting services to the Company on a month-to-month basis, as
needed.

During Fiscal 1997, the Company paid approximately $75,300 for the legal
services of Sterns and Weinroth, a law firm partially owned by Joel H. Sterns,
the Company's former Chairman.

During Fiscal 1997, the Company paid $35,685 in consulting fees to
Goldman, Beale Associates, a company partially owned by Clifford Goldman, a
former director of the Company.

During Fiscal 1997, the Company agreed to pay and paid approximately
$102,000 to Robert E. Brennan (the Company's former Chairman and a significant
stockholder until January 15, 1997) for reimbursement of Mr. Brennan's legal
fees in connection with the investigation by New Jersey regulatory authorities
which oversee the casino and horse racing industries in the state.

See also "Item 11 - Compensation Committee Interlocks and Insider
Participation."
PART IV

ITEM 14 - EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(A) Exhibits

Exhibit

Number Description of Exhibit

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

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

3.3 Amended and Restated By-Laws of the Registrant

4.1 Warrant No. 1 dated May 23, 1997 to purchase 546,847 shares of the
Registrant's Common Stock (incorporated by reference to Exhibit 10.2
to the Registrant's Current Report on Form 8-K dated May 23, 1997)

4.2 Warrant No. 2 dated May 23, 1997 to purchase 497,153 shares of the
Registrant's Common Stock (incorporated by reference to Exhibit 10.3
to the Registrant's Current Report on Form 8-K dated May 23, 1997)

4.3 Convertible Promissory Note dated May 23, 1997 from the Registrant
to CSFB

10.1 Loan Agreement dated May 23, 1997 by and among CSFB and the Company
and certain of its subsidiaries (incorporated by reference to
Exhibit 10.1 to the Registrant's Current Report on Form 8-K dated
May 23, 1997)

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

10.3 Proxy dated October 31, 1997 of LVEN and Casino-Co granted to Nunzio
P. DeSantis

10.4 Registration Rights Agreement dated July 1, 1997 between the
Registrant and Casino-Co (incorporated by reference to Exhibit 10.2
to the Registrant's Current Report on Form 8-K dated July 1, 1997)

10.5 Letter Agreement dated as of January 22, 1996 among LVEN, the
Registrant and Orion Casino Corporation (incorporated by reference
to Exhibit 10.1 to the Registrant's Current Report on Form 8-K dated
January 24, 1996)

10.6 Stock Purchase Agreement made as of January 1, 1995 for the
acquisition by the Registrant of all the outstanding capital stock
of Freehold Raceway (incorporated by reference to Exhibit 10.1 to
the Registrant's Form 10-K for the year ended June 30, 1996)
Exhibit

Number Description of Exhibit

10.7 Tri-Party Agreement by and among the Company, CSFB and LVEN, dated
as of May 23, 1997

10.8 Bi-Lateral Agreement by and between the Company and LVEN, dated as
of May 23, 1997

10.9* Employment Agreement by and between the Company and Nunzio DeSantis,
dated as of January 15, 1997

10.10* Consulting Agreement by and between the Company and Anthony Coelho,
dated as of January 15, 1997

10.11* Amended and Restated Employment Agreement by and between the Company
and Richard E. Orbann, dated as of October 16, 1997

10.12* Severance Agreement by and between the Company and Joel H. Sterns,
dated as of January 15, 1997

16 Letter re: Change in Certifying Accountant (incorporated by
reference to Exhibit 16 to the Registrant's Current Report on Form
8-K dated August 6, 1997)

21 Subsidiaries

27 Financial Data Schedule
___________________
* Constitutes a management contract or compensation plan.

(B) Financial Statements Page

Reports of independent certified public accountants. 39
Consolidated Balance Sheets as of June 30, 1997 and 1996. 41
Consolidated Statements of Operations for the Years 43
Ended June 30, 1997, 1996 and 1995.
Consolidated Statements of Stockholders' Equity for the Years 44
Ended June 30, 1997, 1996 and 1995.
Consolidated Statements of Cash Flows for the Years Ended 45
June 30, 1997, 1996 and 1995.
Notes to Consolidated Financial Statements. 46

During the quarter ended June 30, 1997, the Company filed one Current Report
on Form 8-K, dated May 23, 1997, reporting an Item 5 disclosure regarding the
execution by the Company of the CSFB Credit Facility.
INTERNATIONAL THOROUGHBRED BREEDERS, INC.
AND SUBSIDIARIES

EXHIBIT 21

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

Name State of Incorporation

Atlantic City Harness, Inc. New Jersey

Circa 1850, Inc. New Jersey

Freehold Racing Association New Jersey

Garden State Race Track, Inc. New Jersey

International Thoroughbred Breeders Management, Inc. New Jersey

International Thoroughbred Gaming Development Corporation New Jersey

Olde English Management Co., Inc. New Jersey

Orion Casino Corporation Nevada

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be signed on
its behalf by the undersigned, thereunto duly authorized, on May 22, 1998.

INTERNATIONAL THOROUGHBRED BREEDERS,
INC.

By:/s/ Nunzio P. DeSantis

Nunzio P. DeSantis, Chief
Executive Officer
and President

Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf
of the Registrant and in the capacities and on the dates indicated.

Name Title Date

By:/s/ Anthony Coelho Chairman of the Board
May 22, 1998
Anthony Coelho

By:/s/ Nunzio P. DeSantis Chief Executive Officer,
May 22, 1998 President and Director
Nunzio P. DeSantis (Principal Executive Officer)

By:/s/ William H. Warner Treasurer (Principal
May 22, 1998 Financial and
William H. Warner Accounting Officer)

By:/s/ Michael C. Abraham Director
May 22, 1998
Michael C. Abraham

By:/s/ Charles R. Dees, Jr. Director
May 22, 1998
Charles R. Dees, Jr.

By:/s/ Frank A. Leo Director
May 22, 1998
Frank A. Leo

By:/s/ Francis W. Murray Director
May 22, 1998
Francis W. Murray

By:/s/ Robert J. Quigley Director
May 22, 1998
Robert J. Quigley

By:/s/ Kenneth S. Scholl Director
May 22, 1998
Kenneth S. Scholl

By:/s/ Joseph Zappala Director
May 22, 1998
Joseph Zappala

EXHIBT 3.3
AMENDED AND RESTATED BY-LAWS

INTERNATIONAL THOROUGHBRED BREEDERS, INC.

ARTICLE I

OFFICES

SECTION 1. Principal Office. The principal office of
International Thoroughbred Breeders, Inc. (hereinafter called the Corporation)
in the State of Delaware shall be at No. 100 West Tenth Street, City of
Wilmington, County of New Castle. The name of the resident agent in charge
thereof is The Corporation Trust Company.

SECTION 2. Other Offices. The Corporation may also have an
office or offices at such other place or places either within or without the
State of Delaware as the Board of Directors (hereinafter called the Board) may
from time to time determine or the business of the Corporation requires.

ARTICLE II

MEETINGS OF STOCKHOLDERS

SECTION 1. Annual Meetings. The annual meeting of the
stockholders for the election of directors and for the transaction of such
other business as may properly come before the meeting shall be held at such
date, time and place as may be designated in the notice thereof.

SECTION 2. Special Meetings. A special meeting of the
stockholders for any purpose or purposes, unless otherwise prescribed by
statute, may be called by the Board or the President to be held at such date,
time and place as may be designated in the notice thereof.

SECTION 3. Notice of Meetings. Every stockholder shall furnish
the secretary with an address at which notices of meetings and other corporate
notices may be served on or mailed to him. Except as otherwise expressly
required by law, notice of each meeting of the stockholders shall be given, at
least 15 days in the case of an annual meeting and at least 10 days in the
case of a special meeting before the day on which the meeting is to be held,
to each stockholder of record entitled to vote at such meeting by mailing such
notice in postage paid envelope addressed to him at his last post office
address appearing no the stock records of the Corporation. Every such notice
shall state briefly the purposes thereof. Except as otherwise expressly
required by law, notice of any adjourned meeting of the stockholders need not
be given. Notice of any meeting of stockholders shall not be required to be
given to any stockholder who shall attend such meeting in person or by proxy,
or who shall, in person or by attorney thereunto authorized, waive such notice
in writing or by telegraph, cable or other form of recorded communication,
either before or after such meeting.

SECTION 4. List of Stockholders. It shall be the duty of the
Secretary or other officer of the Corporation who shall have charge of the
Secretary or other officer of the Corporation who shall have charge of its
stock ledger to prepare and make, at least 10 days before every meeting of the
stockholders, a complete list of the stockholders entitled to vote thereat,
arranged in alphabetical order, and showing the address of each stockholder
and the number of shares registered in the name of each stockholder. Such list
shall be open to the examination of any stockholder, for any purpose germane
to the meeting, during ordinary business hours, for a period of at least 10
days prior to the meeting, either at a place within the city where the meeting
is to be held, which place shall be specified in the notice of the meeting,
or, if not so specified, at the place where the meeting is to be held. Such
list shall also be produced and kept at the time and place of the meeting
during the whole time thereof, and may be inspected by any stockholder who is
present.

SECTION 5. Quorum. At each meeting of the stockholders, except
as otherwise expressly required by law, stockholders holding one-third of the
shares of stock of the Corporation issued and outstanding, and entitled to be
voted thereat, shall be present in person or by proxy to constitute a quorum
for the transaction of business. In the absence of a quorum at any such
meeting or any adjournment or adjournments thereof, a majority in voting
interest of those present in person or by proxy and entitled to vote thereat,
or in the absence therefrom of all the stockholders, any officer entitled to
preside at, or to act as secretary of, such meeting may adjourn such meeting
from time to time until stockholders holding the amount of stock requisite for
a quorum shall be present or represented. At any such adjourned meeting at
which a quorum may be present any business may be transacted which might have
been transacted at the meeting as originally called.

SECTION 6. Organization. At each meeting of the stockholders,
one of the following shall act as chairman of the meeting and preside thereat,
in the following order of precedence:

(a) the Chairman of the Board;

(b) the President;

(c) any other officer of the Corporation designated by the
board to act as chairman of such meeting and to
preside thereat if the chairman or the President shall
be absent from such meeting; or

(d) a stockholder of record of the Corporation who shall
be chosen chairman of such meeting by a majority in
voting interest of the stockholders present in person
or by proxy and entitled to vote thereat.

The Secretary, or, if he shall be presiding over the meeting in accordance
with the provisions of this Section, or, if he shall be absent from such
meeting, the person (who shall be an Assistant Secretary, if an Assistant
Secretary shall be present thereat) whom the chairman of such meeting shall
appoint, shall act as secretary of such meeting and keep the minutes thereof.

SECTION 7. Order of Business. The order of business at
each meeting of the stockholders shall be determined by the chairman of such
meeting, but such order of business may be changed by a majority in voting
interest of those present in person or by proxy at such meeting and entitled
to vote thereat. in the discretion of the chairman of the meeting, matters
may be taken up which are not stated in the notice of meeting sent to the
stockholders.

SECTION 8. Voting. Each stockholder shall, at each meeting of
the stockholders, be entitled to one vote in person or by proxy for each share
of stock of the Corporation held by him and registered in his name on the
books of the Corporation:

(a) on the date fixed pursuant to the provisions of
Section 5 of Article VII of these By-Laws as the
record date for the determination of stockholders who
shall be entitled to receive notice of and to vote at
such meeting, or

(b) if no record date shall have been so fixed, then at
the close of business on the day next preceding the
day on which notice of the meeting shall be given.

Shares of its own stock belonging to the Corporation or to another
corporation, if a majority of the shares entitled to vote in the election of
directors of such other corporation is held by the Corporation, shall not be
entitled to vote. Any vote on stock of the Corporation may be given at any
meeting of the stockholders by the stockholders entitled thereto in person or
by proxy appointed by an instrument in writing delivered to the Secretary of
an Assistant Secretary of the Corporation or the secretary of the meeting.
The attendance at any meeting of a stockholder who may theretofore have given
a proxy shall not have the effect of revoking the same unless he shall in
writing so notify the secretary of the meeting prior to the voting of the
proxy. At all meetings of the stockholders all matters, except as otherwise
providing in these By-Laws or by law, shall be decided by the vote of a
majority in voting interest of the stockholders present in person or by proxy
and entitled to vote thereat, a quorum being present. Except in the case of
votes for the election of directors, the vote at any meeting of the
stockholders on any question need not be by ballot, unless so directed by the
chairman of the meeting. On a vote by ballot each ballot shall be signed by
the stockholder voting, or by his proxy, if there shall be such proxy, and
shall state the number of shares voted.

ARTICLE III

BOARD OF DIRECTORS

SECTION 1. General Powers. The business and affairs of the
Corporation shall be managed by the Board.

SECTION 2. Number and Time of Holding Office. The number of
directors shall be fixed from time to time by vote of a majority of the whole
Board. Each of the directors of the Corporation shall hold office until the
annual meeting next after his election and until his successor shall be
elected and shall qualify or until his earlier death, resignation or removal
in the manner hereinafter provided.

SECTION 3. Election of Directors. At each meeting of the
stockholders for the election of directors at which a quorum is present, the
persons receiving the greatest number of votes, up to the number of directors
to be elected, shall be the directors.

SECTION 4. Organization and Order of Business. At each meeting
of the Board, one of the following shall act as chairman of the meeting and
preside thereat, in the following order of precedence:

(a) the Chairman of the Board;

(b) the president;

The Secretary or, in the case of his absence, any person (who shall be an
Assistant Secretary if any of them shall be present at such meeting) whom the
chairman shall appoint, shall act as a secretary of such meeting and keep the
minutes thereof.

SECTION 5. Resignations. Any director may resign at any time by
giving written notice of his resignation to the Chairman of the Board or the
President or the Secretary of the Corporation. Any such resignation shall
take effect at the time specified therein, or, if the time when i shall become
effective shall not be specified therein, then it shall take effect when
accepted by action of the Board. Except as aforesaid, the acceptance of such
resignation shall no be necessary to make it effective.

SECTION 6. Removal of Directors. A director or directors of the
Corporation may be removed, either with or without cause, at any time by vote
of a majority of the Corporation's common stock then outstanding and in
accordance with Section 141 of the Delaware Corporation Law.

SECTION 7. Vacancies. In case of any vacancy in the Board or in
the case of any newly created directorship, a director to fill the vacancy or
the newly created directorship for the unexpired portion of the term being
filled may be elected by the affirmative vote of not less than 75% of the
directors then in office.

SECTION 8. Place of Meeting. The Board may hold its meetings at
such place or places within or without the State of Delaware as the Board may
from time to time by resolution determine or as shall be designated in the
respective notices or waivers of notice thereof.

SECTION 9. Meetings.

(A) First Meeting. As soon as practicable after each annual
election of directors, the Board shall meet for the purpose of organization
and the transaction of other business at the time and place theretofore fixed
by the Board for the next regular meeting of the Board and no notice thereof
need be given; provided, however, that the Board may determine that such
meeting may be held at a different place and time but notice thereof shall be
given in the manner hereinafter provided for special meetings of the Board.

(B) Regular Meetings. Regular meetings of the Board shall be
held at such times as the Board shall from time to time determine. Notices of
regular meetings need not be given.

(C) Special Meetings. Special meetings of the Board shall be
held whenever called by the Chairman of the Board or by the President or by a
majority of the directors at the time in office. The Secretary shall give
notice to each director of each such special meeting, including the time and
place and purposes of such meeting. Notice of each such meeting shall be
mailed to each director, addressed to him at his residence or usual place of
business, at least two days before the day on which such meeting is to be
held, and shall be sent to him by telegraph, cable, wireless or other form of
recorded communication or be delivered personally or by telephone not later
than the day before the day on which such meeting is to be held.

Notice of any special meeting shall not be required to be given to
any director who shall attend such meeting in person or by proxy, or who shall
waive such notice in writing or by telegraph, cable or other form of recorded
communication, either before, during or after such meeting. Any and all
business may be transacted at a special meeting which may be transacted at a
regular meeting of the Board unless notice of the meeting specifically states
that action will be taken only upon the matters listed in the notice.

SECTION 10. Quorum and Manner of Acting. A majority of the then
authorized number of directors shall be present in person at any meeting of
the Board in order to constitute a quorum for the transaction of business at
such meeting, and the vote of a majority of those directors present at any
such meeting at which a quorum is present shall be necessary for the passage
of any resolution or act of the Board. In the absence of a quorum for any
such meeting, a majority of the directors present thereat may adjourn such
meeting from time to time until a quorum shall be present thereat. Notice of
any adjourned meeting need not be given.

SECTION 11. Compensation. Each director, in consideration of his
serving as such, shall be entitled to receive from the Corporation such amount
per annum or such fees for attendance at meetings of the Board or of any
committee, or both, as the Board shall from time to time determine. The Board
may likewise provide that the Corporation shall reimburse each director or
member of a committee for any expenses incurred by him on account of his
attendance at any such meeting. Nothing contained in this Section shall be
construed to preclude any director from serving the Corporation in any other
capacity and receiving compensation therefor.

ARTICLE IV

OFFICERS

SECTION 1. Number. The officers of the Corporation shall be a
Chairman of the Board, a President, such number of Vice Presidents (including
any Executive and/or Senior Vice Presidents) as the Board may determine from
time to time, a Treasurer and a Secretary. Such officers shall annually be
elected by the vote of a majority of the whole Board at its first meeting
after the annual meeting of the stockholders and shall hold office until the
first meeting of the Board after the next annual meeting of the stockholders
and until their successors are elected.

The Board may appoint such other officers as it deems necessary
who shall have such authority and shall perform such duties as the Board may
prescribe.

If additional officers are elected or appointed during the year,
they shall hold office until the next annual meeting of the Board at which
officers are regularly elected or appointed and until their successors are
elected or appointed.

A vacancy in any office may be filled for the unexpired portion of
the term in the same manner as provided for election or appointment to such
office.

All officers and agents elected or appointed by the Board shall be
subject to removal at any time by the Board with or without cause.

Any officer may resign at any time by giving written notice to the
Chairman of the Board or to the President or the Secretary of the Corporation,
and such resignation shall take effect at the time specified therein or if the
time when it shall become effective shall not be specified therein, then it
shall take effect when accepted by action of the Board. Except as aforesaid,
the acceptance of such resignation shall not be necessary to make it
effective.

SECTION 2. The Chairman of the Board. The Chairman shall preside
as chairman at all meetings of the Board and of the stockholders at which he
is present.

SECTION 3. The President. The President shall preside as
chairman at all meetings of the Board and of the stockholders at which he is
present and the Chairman of the Board is not present, and shall be the chief
executive officer of the Corporation and shall have general charge of the
business and affairs of the Corporation and shall have the direction of all
officers, agents and employees of the Board of Directors.

SECTION 4. Vice Presidents. Each Vice President shall have such
powers and duties as shall be prescribed by the President or the Board.

SECTION 5. Treasurer. The Treasurer shall have charge and
custody of and be responsible for all funds and securities of the Corporation.
He shall formulate the investment and financial policies of the Corporation
for submission to the President or the Board and shall be the principal
officer in charge of the accounts of the Corporation, shall maintain adequate
accounting records, and shall be responsible for the preparation of financial
statements and reports on the operation of the business.

SECTION 6. Secretary. The Secretary shall keep the records of
all meetings of the stockholders and of the Board. He shall affix the seal of
the Corporation to all deeds, contracts, bonds or other instruments requiring
the corporate seal when the same shall have been signed on behalf of the
Corporation by a duly authorized officer. The Secretary shall be the
custodian of all contracts, deeds, documents and all other indicia of title to
properties owned by the Corporation and of its other corporate records (except
accounting records).

ARTICLE V

CONTRACTS, CHECKS, DRAFTS, BANK ACCOUNTS, ETC.

SECTION 1. Execution of Documents. The Board shall designate the
officers and agents of the Corporation who shall have power to execute and
deliver deeds, contracts, mortgages, bonds, debentures, checks, drafts and
other orders for the payment of money and other documents for and in the name
of the Corporation.

SECTION 2. Deposits. All funds of the Corporation not otherwise
employed shall be deposited from time to time to the credit of the Corporation
or otherwise as the Board of Directors or the President or any other officer
of the Corporation to whom power in that respect shall have been delegated by
the Board shall select.

SECTION 3. Proxies In Respect of Stock or Other Securities of
Other Corporation. Unless otherwise provided by resolution adopted by the
Board, the Chairman of the Board or the President of any Vice President may
from time to time appoint an attorney or attorneys or agent or agents of the
Corporation to exercise in the name and on behalf of the Corporation the
powers and rights which the Corporation may have as the holder of stock or
other securities in any other corporation to vote or consent in respect of
such stock or other securities; the Chairman of the Board or the President or
Vice President may instruct the person or persons so appointed as to the
manner of exercising such powers and rights; and the Chairman of the Board or
the President or any Vice President may execute or cause to be executed in the
name and on behalf of the corporation and under its corporate seal, or
otherwise, all such written proxies, powers of attorney or other instruments
as he may deem necessary or proper in order that the Corporation may exercise
its said powers and rights.

ARTICLE VI

BOOKS AND RECORDS

The books and records of the Corporation may be kept at such
places within or without the State of Delaware as the Board may from time to
time determine.

ARTICLE VII

SHARES AND THEIR TRANSFER

SECTION 1. Certificates for Stock. Every owner of stock of the
Corporation shall be entitled to have a certificate certifying the number of
shares owned by him in the Corporation and designating the class of stock to
which such shares belong, which shall otherwise be in such form as the Board
shall prescribe. Each such certificate shall be signed by, or in the name of
the Corporation by the Chairman of the Board or the President or a Vice
President and the Treasurer or an Assistant Treasurer or the Secretary or an
Assistant Secretary of the Corporation. In case any officer or officers who
shall have signed any such certificate or certificates shall cease to be such
officer or officers of the Corporation, whether because of death, resignation
or otherwise, before such certificate or certificates shall have been
delivered by the Corporation, such certificate or certificates may
nevertheless be adopted by the corporation and be issued and delivered as
though the person or persons who signed such certificate had not ceased to be
such officer or officers of the Corporation.

SECTION 2. Record A record shall be kept of the name of the
person, firm or corporation owning the stock represented by each certificate
for stock of the corporation issued, the number of shares represented by each
such certificate, and the date thereof, and, in the case of cancellation, the
date of cancellation. The person in whose name shares of stock stand on the
books of the Corporation shall be deemed the owner therefor for all purposes
as regards the Corporation.

SECTION 3. Transfer of Stock. Transfers of shares of the stock
of the Corporation shall be made only on the books of the Corporation by the
registered holder thereof, or by his attorney thereunto authorized by power of
attorney duly executed and filed with the Secretary of the Corporation, and on
the surrender of the certificate or certificates for such shares properly
endorsed.

SECTION 4. Lost, Stolen, Destroyed or Mutilated Certificates.
The holder of any stock of the Corporation shall immediately notify the
Corporation of any loss, theft or mutilation of the certificate therefor. The
Corporation may issue a new certificate for stock in the place of any
certificate theretofore issued by it and alleged to have been lost, stolen,
destroyed or mutilated, and the Board may, in its discretion, require the
owner of the lost, stolen, mutilated or destroyed certificate or his legal
representatives to give the Corporation a bond in such sum, limited or
unlimited, in such form and with such surety or sureties as the Board shall in
its discretion determine, to indemnify the Corporation against any claim that
may be made against it on account of the alleged loss, theft, mutilation or
destruction of any such certificate or the issuance of any such new
certificate.

SECTION 5. Fixing Date for Determination of Stockholders of
Record. In order that the Corporation may determine the stockholders entitled
to notice of or to vote at any meeting of stockholders or any adjournment
thereof, or to express consent to corporate action in writing without a
meeting, or entitled to receive payment of any divided or other distribution
or allotment of any rights, or entitled to exercise any rights in respect of
any other change, the conversion or exchange of stock or for the purposes of
any other lawful action, the Board may fix a record date, which shall not be
more than 60 or less than 10 days before the date of such meeting, nor more
than 60 days prior to any other action.

ARTICLE VIII

SEAL

The Board shall provide a corporate seal, which shall be in the
form of a circle and shall bear the full name of the Corporation and the words
and figures "Corporate Seal 1980 Delaware."

ARTICLE IX

FISCAL YEAR

The fiscal year of the Corporation shall end on such date in each
year as shall be determined by the Board of Directors.

ARTICLE X

AMENDMENTS

The By-Laws of the Corporation shall be subject to alteration or
repeal by the affirmative vote of a majority of the whole Board given at any
meeting of the Board provided for in these Articles, subject to the right of
the holders of a majority of the outstanding stock of the Corporation entitled
to vote in respect thereof, given at an annual meeting or at any special
meeting, to alter or repeal any By-Law made by the Board.

EXHIBIT 4.3
CONVERTIBLE PROMISSORY NOTE

US $55,000,000.00 May 23, 1997
New York, New York

FOR VALUE RECEIVED, INTERNATIONAL THOROUGHBRED BREEDERS, INC., a
Delaware corporation, having an address at Route 70 and Haddonfield Road,
Cherry Hill, New Jersey 08034-0649, ORION CASINO CORPORATION, a Nevada
corporation, having an address at 2755 Las Vegas Boulevard South, Las Vegas,
Nevada 89109, INTERNATIONAL THOROUGHBRED GAMING DEVELOPMENT CORPORATION, a New
Jersey corporation, having an address c/o International Thoroughbred Breeders,
Inc., Route 70 and Haddonfield Road, Cherry Hill, New Jersey 08034-0649,
GARDEN STATE RACE TRACK, INC., a New Jersey corporation, having an address c/o
International Thoroughbred Breeders, Inc., Route 70 and Haddonfield Road,
Cherry Hill, New Jersey 08034-0649 and FREEHOLD RACING ASSOCIATION, a New
Jersey corporation, having an address at Route 9 and Route 33, Freehold, New
Jersey 07726 (each a "MAKER" and collectively, "MAKERS"), jointly and
severally promised to pay to the order of CREDIT SUISSE FIRST BOSTON MORTGAGE
CAPITAL LLC, a Delaware limited liability company, having an address at Eleven
Madison Avenue, New York, New York 10010 (together with its successors and
assigns, "HOLDER"), the principal sum of FIFTY FIVE MILLION AND 00/100 DOLLARS
(US $55,000,000.00), in lawful money of the United States of America, advanced
by Holder pursuant to the terms of that certain Loan Agreement dated as of May
23, 1997 by and between Makers and Holder (as from time to time amended in
accordance with the terms thereof and in effect, the "LOAN AGREEMENT";
capitalized terms used herein and not otherwise defined shall have the
respective meanings ascribed to them in the Loan Agreement), on the dates and
in the manner provided in the Loan Agreement, together with all other amounts
payable to Holder hereunder, under the Loan Agreement and under the other Loan
Documents, including without limitation, the Exit Fee.

Each Maker further agrees to pay to Holder interest in like money
on the unpaid principal amount hereof from time to time outstanding from the
date hereof until paid in full at the rates and at the times set forth in the
Loan Agreement. Principal and interest shall be payable on the dates and in
the manner provided in the Loan Agreement with all unpaid amounts of principal
and interest due on the Maturity Date.

Each maker further acknowledges and agrees that up to TEN MILLION
AND OO/100 DOLLARS (US $10,000,000.00) of the principal amount hereof is
convertible into shares of the common stock, par value $2.00 per share, of
International Thoroughbred Breeders, Inc., at the option of Holder, pursuant
to the provisions of Section 2.10 of the Loan Agreement. If, and to the
extent, Holder makes such election to convert a portion of the principal
amount hereof into such common stock, the then principal balance hereof shall
be reduced by such amount.

This Convertible Promissory Note (i) is the Note referred to in
the Loan Agreement and is entitled to the benefits thereof, and (ii) is
secured as provided in the Loan Agreement and is subject to optional and
mandatory prepayment in whole or in part as provided therein.

After the occurrence of any one or more of the Events of Default
specified in the Loan Agreement, all amounts then remaining unpaid on this
Convertible Promissory Note may be declared to be immediately due and payable,
all as provided in the Loan Agreement and the other Loan Documents.

Except as provided in the Loan Agreement and the other Loan
Documents, each Maker hereby waives presentment, demand, protest or notice of
any kind in connection with this Convertible Promissory Note.

The obligations of each Maker hereunder shall be joint and
several.

[BALANCE OF PAGE INTENTIONALLY LEFT BLANK]

THIS CONVERTIBLE PROMISSORY NOTE SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING
EFFECT TO NEW YORK'S CONFLICTS OF LAW PRINCIPLES.

IN WITNESS WHEREOF, each Maker has executed this Convertible
Promissory Note or has caused the same to be executed by its duly authorized
representative as of the date first set forth above.

INTERNATIONAL THOROUGHBRED BREEDERS, INC.,
a Delaware corporation

By:/s/ Nunzio DeSantis

Name: Nunzio DeSantis
Title: Chief Executive Officer

ORION CASINO CORPORATION,
a Nevada corporation

By:/s/ Nunzio DeSantis

Name: Nunzio DeSantis
Title: Chief Executive Officer

INTERNATIONAL THOROUGHBRED GAMING
DEVELOPMENT CORPORATION,
a New Jersey corporation

By:/s/ Nunzio DeSantis

Name: Nunzio DeSantis
Title: Chief Executive Officer

GARDEN STATE RACE TRACK, INC.,
a New Jersey corporation

By:/s/ Nunzio DeSantis

Name: Nunzio DeSantis
Title: Chief Executive Officer

FREEHOLD RACING ASSOCIATION,
a New Jersey corporation

By:/s/Nunzio DeSantis

Name: Nunzio Desantis
Title: Chief Executive Officer

EXHIBIT 10.3
PROXY

KNOW ALL MEN BY THESE PRESENTS, that each of the undersigned
hereby appoints Nunzio P. DeSantis ("Mr. DeSantis"), with full power of
substitution and resubstitution, as the lawful proxy for the undersigned, to
vote all or any portion of the 2,093,868 shares (the "Conversion Shares") of
Common Stock of International Thoroughbred Breeders, Inc., a Delaware
corporation ("ITB"), which either of the undersigned is now and/or hereafter
may be entitled to vote, for and in the name, place and stead of the
undersigned, at any annual, special or other meeting of the holders of shares
of voting stock of ITB and at any adjournment thereof, or pursuant to any
consent in lieu of a meeting, at which meeting or in connection with such
consent action shall be taken, and hereby grants to Mr. DeSantis all the
powers the undersigned should possess if personally present thereat or as if
executing such a consent. The following proxy is coupled with an interest
and, therefore, is not terminable by the undersigned until the earlier of (i)
the date on which the loan and all of the other obligations of ITB and certain
of its direct and indirect subsidiaries owing to Credit Suisse First Boston
Mortgage Capital LLC, a Delaware limited liability company ("CSFB"), under the
Loan Agreement dated May 23, 1997 among CSFB, ITB and certain of its direct
and indirect subsidiaries, and the related loan documents, have been repaid in
full, (ii) the date on which the Conversion Shares are distributed to the
shareholders of Las Vegas Entertainment Network, Inc. generally, (iii) the
date on which the undersigned sell the Conversion Shares to or the undersigned
(if then a holder of Conversion Shares) is acquired by, or merged with or
into, a person or entity that is not affiliated with the undersigned or Mr.
Joseph A. Corazzi and (iv) the date on which Mr. DeSantis dies or becomes
mentally incompetent, in any of which event, the undersigned may revoke this
Proxy by filing with the Secretary of ITB a written notice of said revocation
subscribed by the undersigned. The undersigned hereby waives any formal or
documentary defect which might cause the Proxy granted hereunder to be invalid
and unenforceable. The undersigned hereby agree to execute such other
instruments as Mr. DeSantis shall reasonably request to confirm the validity
and enforceability of the Proxy granted hereunder.

IN WITNESS WHEREOF, the undersigned have executed and delivered
this Proxy on this 31st day of October, 1997.

LAS VEGAS ENTERTAINMENT NETWORK, INC.,
a Delaware corporation

By:/s/ Joseph A. Corazzi

Joseph A. Corazzi, President

CASINO-CO CORPORATION,
a Nevada corporation

By: /s/ Joseph A. Corazzi

Joseph A. Corazzi, President

EXHIBIT 10.7
TRI-PARTY AGREEMENT

THIS TRI-PARTY AGREEMENT (this "Agreement"), dated as of May 23, 1997,
by and among International Thoroughbred Breeders, Inc. a Delaware corporation
("ITB"), Las Vegas Entertainment Network, Inc., a Delaware corporation
("LVEN"), and Credit Suisse First Boston Mortgage Capital LLC, a Delaware
limited liability company ("CSFB"), is made with reference to the following:

(a) that certain Loan Agreement, dated as of even date herewith, by and
among ITB, certain of ITB's subsidiaries (together with ITB, the "Borrowers"),
and CSFB (the "Loan Agreement"),

(b) that certain Subordination Agreement, dated as of even date
herewith, by and among LVEN, LVEN's wholly owned subsidiary, Casino-Co
Corporation ("Casino-Co"), LVEN's wholly owned subsidiary, Las Vegas
Communications Corporation, ITB, Orion Casino Corporation ("Orion"), and CSFB
(the "Subordination Agreement"),

(c) that certain Letter Agreement, dated as of January 22, 1996, by and
among LVEN, Countryland Properties, Inc., a Nevada corporation and a direct,
wholly-owned subsidiary of LVEN ("Countryland"), Casino-Co, ITB, and Orion
(the "Letter Agreement"), and

(d) that certain promissory note issued by ITB and Orion to the order
of LVEN's wholly owned subsidiary, Countryland Properties, Inc.
("Countryland") in the original principal amount of $10,500,000 (the "B
Note"), which B Note is secured by a lien on certain real property of Orion
known as the El Rancho Hotel and Casino (the "El Rancho Property").

In order to induce ITB and CSFB to enter into the Loan Agreement and to
induce LVEN, ITB, Orion, and CSFB to enter into the Subordination Agreement,
LVEN (on its own behalf and on behalf of Casino-Co), ITB, and CSFB each have
agreed to set forth their agreement regarding (i) a transaction whereby the B
Note is converted into shares of common stock of ITB par value $2.00 per share
("ITB Stock"), and (ii) a transaction whereby ITB would acquire Casino-Co.
The parties' agreement is as follows:

1. LVEN represents and warrants to ITB and CSFB that Countryland
previously has assigned all of its right, title, and interest in and to the B
Note to Casino-Co.

2. LVEN represents and warrants to ITB and CSFB that the outstanding
principal balance of the B Note currently is $10,500,000 and that there is
approximately $1,100,000 of accrued and unpaid interest in respect thereof.

3. LVEN represents and warrants to ITB and CSFB that there currently
exists an unsecured, intercompany payable (the "Intercompany Payable") owing
from Casino-Co to LVEN in respect of the B Note in the approximate amount of
$11,600,000. In addition, the parties acknowledge that an additional
intercompany amount of $2,910,000, together with interest thereon, is owed by
Casino-Co to LVEN on account of funds loaned by Casino-Co to NPD, Inc.
("NPD"), which amount, including the interest thereon, (i) does not constitute
a part of the Intercompany Payable and (ii) that prior to the consummation of
the Permitted Acquisition (as herein defined), (y) such amount (including
interest) will either be paid in full by NPD to Casino-Co, with the proceeds
to be distributed as a dividend to LVEN, or (z) the rights to receive such
repayment will be transferred and assigned to LVEN or another affiliate of
LVEN.

4. Subject to receiving approval of their respective boards of
directors, each of ITB and LVEN agrees that, as soon as practicable following
the date of the execution and delivery of this Agreement, the B Note (and any
and all interest, penalties, or other amounts accrued and unpaid thereon)
shall be converted into shares of ITB Stock (the "Permitted Debt Conversion").
The Permitted Debt Conversion shall be effected in whole and not in part. In
order to effect the Permitted Debt Conversion, ITB will be required to issue
(A) 2,093,868 shares (the "Conversion Shares") of ITB Stock to Casino-Co in
exchange for the receipt of the B Note marked cancelled, and (B) 232,652
shares (the "Lender Conversion Shares") of ITB Stock to CSFB in consideration
of CSFB's consent to the Permitted Debt Conversion. LVEN and CSFB agree that
ITB shall not be obligated to pay any other consideration to LVEN, Casino-Co
or CSFB in connection with the Permitted Debt Conversion and none of LVEN,
Casino-Co or CSFB shall have the right to demand or receive any such other
consideration, and ITB agrees with CSFB that it will not pay any additional
consideration in connection with the Permitted Debt Conversion. LVEN agrees
to seek approval of the Permitted Debt Conversion from its board of directors
at its next scheduled board of directors meeting following the date hereof and
agrees promptly to notify ITB and CSFB of its receipt (or disapproval, as
applicable) of such approval. ITB agrees to seek approval of the Permitted
Debt Conversion from its board of directors at its next scheduled board of
directors meeting following the date hereof and agrees promptly to notify ITB
and CSFB of its receipt (or disapproval, as applicable) of such approval.
Upon delivery of notices from LVEN and ITB indicating approval of their
respective boards of directors of the Permitted Debt Conversion, ITB and LVEN
agree that the Permitted Debt Conversion transaction shall be consummated
within a period of not more than 10 days. Within 30 days of this Agreement,
LVEN and ITB agree to enter into a registration rights agreement respecting
the Conversion Shares and the Acquisition Shares (as herein defined) and
providing for 2 demand rights, unlimited piggyback rights, and other customary
provisions.

5. When the Permitted Debt Conversion is consummated, the parties
agree that the deed of trust lien in favor of Casino-Co with respect to the El
Rancho Property shall be released.

6. When the Permitted Debt Conversion is consummated, LVEN agrees
simultaneously to cause Casino-Co to distribute the Conversion Shares to LVEN
as repayment in full of the Intercompany Payable and any and all interest
accrued and unpaid thereon.

7. At the time of the consummation of the Permitted Debt Conversion,
and as a condition precedent to its effectiveness, LVEN agrees to execute and
deliver an irrevocable proxy respecting the Conversion Shares in favor of Mr.
Nunzio P. DeSantis ("Mr. DeSantis"), which proxy shall be irrevocable until
the earlier of (w) the date on which the loan (the "CSFB Loan") and all of the
other obligations of the Borrowers owing to CSFB under the Loan Agreement (and
the related loan documents) have been repaid in full, (x) the date on which
LVEN distributes the Conversion Shares to its shareholders generally, (y) the
date on which LVEN sells the Conversion Shares to or LVEN is acquired by, or
merged with or into, a person or entity that is not affiliated with LVEN or
Mr. Joseph A. Corazzi ("Mr. Corazzi"), and (z) the date on which Mr. DeSantis
dies or becomes mentally incompetent.

8. LVEN represents and warrants to ITB and CSFB that Casino-Co has no
assets or liabilities other than those set forth on Schedule A attached
hereto.

9. Irrespective of whether the Permitted Debt Conversion is
consummated, but subject to receiving approval of their respective boards of
directors, each of ITB and LVEN agrees that, as soon as practicable following
the date of the execution and delivery of this letter agreement, ITB shall
acquire Casino-Co (the "Permitted Acquisition"). The Permitted Acquisition
may be accomplished by means of purchase of all of the stock of Casino-Co (the
"Casino-Co Stock"), or a merger of Casino-Co with and into ITB (or a
subsidiary of ITB).

10. As a condition precedent to the consummation of the Permitted
Acquisition, ITB, at its sole cost and expense, shall have received an opinion
from a nationally recognized investment banking firm reasonably satisfactory
to CSFB (it being expressly understood that such investment banking firm may,
but need not, be an affiliate of CSFB) respecting the fair market value of
Casino-Co (the "ITB Fairness Opinion Value") and opining that the proposed
consideration (as set forth in paragraph 15 below) is fair to the shareholders
of ITB from a financial point of view (the "ITB Fairness Opinion").

11. As a condition precedent to the consummation of the Permitted
Acquisition, LVEN, at its sole cost and expense, shall have received one or
more opinions from one or more investment banking firms satisfactory to LVEN
respecting the fair market value of Casino-Co (the highest value established
by such opinions, the "LVEN Fairness Opinion Value") and opining that the
proposed consideration (as set forth in paragraph 15 below) is fair to the
shareholders of LVEN from a financial point of view (the "LVEN Fairness
Opinion").

12. As a condition precedent to the consummation of the Permitted
Acquisition, CSFB shall have been given reasonable access to the books and
records of Casino-Co in order to determine that Casino-Co has no assets or
liabilities other than those set forth on Schedule A attached hereto and the
same shall remain true up to the date of the consummation of the Permitted
Acquisition.

13. As a condition precedent to the consummation of the Permitted
Acquisition, ITB also shall have been given reasonable access to the books and
records of Casino-Co in order to determine that Casino-Co has no assets or
liabilities other than those set forth on Schedule A attached hereto and the
same shall remain true up to the date of the consummation of the Permitted
Acquisition.

14. LVEN agrees to cause Casino-Co to provide representatives of CSFB
and ITB, upon prior written request, with access during normal business hours,
to the books and records of Casino-Co for the purpose of conducting the audits
contemplated by paragraphs 12 and 13 above.

15. In order to effect the Permitted Acquisition, ITB will be required
to issue shares of ITB Stock (i) to LVEN in an amount equal to the result of
(A) 90% times the greater of the ITB Fairness Opinion Value or the LVEN
Fairness Opinion Value, divided by (B) the average bid price for ITB Stock
during the 20 trading days prior to the closing date (the "Acquisition
Shares") in exchange for 100% of the shares of Casino-Co Stock (or the
consummation of a merger or asset purchase transaction), and (ii) to CSFB in
an amount equal to the result of (A) 10% times the greater of the ITB Fairness
Opinion Value or the LVEN Fairness Opinion Value, divided by (B) the average
bid price for ITB Stock during the 20 trading days prior to the closing date
(the "Lender Consideration Shares") in consideration for Lender's consent to
the Permitted Acquisition. LVEN and CSFB agree that ITB shall not be
obligated to pay any other consideration to LVEN, Casino-Co, or CSFB in
connection with the Permitted Acquisition and none of LVEN, Casino-Co, or CSFB
shall have the right to demand or receive any such other consideration, and
ITB agrees with CSFB that it will not pay any additional consideration in
connection with the Permitted Acquisition. LVEN agrees to seek approval of
the Permitted Acquisition from its board of directors at its next scheduled
board of directors meeting following the date hereof and agrees promptly to
notify ITB and CSFB of its receipt (or disapproval, as applicable) of such
approval. ITB agrees to seek approval of the Permitted Acquisition from its
board of directors at its next scheduled board of directors meeting following
the date hereof and agrees promptly to notify ITB and CSFB of its receipt (or
disapproval, as applicable) of such approval. Subject to reasonable
extensions for acts of force majeure, delays occasioned by commercial
complexities that could not reasonably have been foreseen, or delays caused
by compliance with legal or regulatory requirements, and subject to the prior
receipt of the approvals therefor from their respective boards of directors,
ITB and LVEN agree to close the Permitted Acquisition within 90 days of the
date hereof.

16. When the Permitted Acquisition is consummated, ITB agrees that it
shall promptly thereafter cause Casino-Co to release all liens, if any, in
favor of Casino-Co with respect to the El Rancho Property.

17. If the Permitted Conversion is not consummated, but the Permitted
Acquisition is consummated, LVEN agrees that the delivery to it by ITB of the
Acquisition Shares also shall effect repayment in full of the Intercompany
Payable and any and all interest accrued and unpaid thereon.

18. At the time of the consummating of the Permitted Acquisition, and
as a condition precedent to its effectiveness, LVEN agrees to execute and
deliver an irrevocable proxy respecting the Acquisition Shares in favor of Mr.
DeSantis, which proxy shall be irrevocable until the earlier of (w) the date
on which the CSFB Loan and all of the other obligations of the Borrowers owing
to CSFB under the Loan Agreement (and the related loan documents) have been
repaid in full, (x) the date on which LVEN distributes the Acquisition Shares
to its shareholders generally, (y) the date on which LVEN sells the
Acquisition Shares to, or LVEN is acquired by, or merged with or into, a
person or entity that is not affiliated with LVEN or Mr. Corazzi, and (z) the
date on which Mr. DeSantis dies or becomes mentally incompetent.

19. Anything contained in the Loan Agreement (the related loan
documents) or the Subordination Agreement to the contrary notwithstanding,
CSFB agrees that ITB and LVEN can consummate the Permitted Conversion and/or
the Permitted Acquisition so long as they are consummated on the terms and
conditions set forth herein and further agrees that LVEN shall constitute a
"Permitted Holder" under the Loan Agreement; provided, however, anything
contained in this Agreement (including the last sentence of paragraph 15
hereof), the Loan Agreement, or the other loan documents to the contrary
notwithstanding, the failure to consummate both the Permitted Conversion and
the Permitted Acquisition on the terms hereunder within 90 days following the
date hereof, for whatever reason, shall constitute an "Event of Default" under
the Loan Agreement.

20. Anything contained in this Agreement to the contrary
notwithstanding, LVEN and ITB agree amongst themselves that LVEN and ITB shall
not be obligated to complete the Permitted Acquisition if LVEN has repaid the
CSFB Loan (on behalf of ITB and in accordance with the provisions of the Loan
Agreement) in accordance with a separate Bi-Lateral Agreement, of even date
herewith, between LVEN and ITB. The foregoing is merely to reflect an
agreement between LVEN and ITB and is not intended to create any rights in
favor of, or obligations on the part of, CSFB.

21. The parties hereto agree to execute and deliver such other
documents and to take such actions (including actions in connection with any
required regulatory approvals and actions to consummate the Acquisition on a
tax free basis) as reasonably may be required to carry out the purposes and
intent of this letter agreement.

22. If any legal action or proceeding is brought by any party hereto
to enforce or construe a provision of this Agreement, the unsuccessful party
in such action or proceeding, irrespective of whether such action or
proceeding is settled or prosecuted to final judgment, shall pay all of the
reasonable attorneys fees and costs incurred by the prevailing party.

23. No amendment, modification, supplement, termination, consent, or
waiver of or to any provision of this Agreement nor any consent to any
departure therefrom shall in any event be effective unless the same shall be
in writing and signed by or on behalf of each of the parties hereto.

24. This Agreement is intended by the parties as a final expression of
their agreement and is intended as a complete and integrated statement of the
terms and conditions of their agreement.

25. This Agreement may be executed in any number of counterparts, each
of which shall be deemed to be an original, admissible into evidence, and all
of which together shall be deemed to be a single instrument. Delivery of an
executed counterpart of this Agreement by telefacsimile shall be as effective
as delivery of a manually executed counterpart. Any party delivering an
executed counterpart of this Agreement by telefacsimile also shall deliver a
manually executed counterpart of this Agreement, but the failure to deliver a
manually executed counterpart shall not affect the validity, enforceability,
and binding effect of the Agreement.

IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the date first written above.

CREDIT SUISSE FIRST BOSTON
MORTGAGE CAPITAL LLC

By: /s/Lance J. Graber

Title: Vice President

LAS VEGAS ENTERTAINMENT
NETWORK, INC.

By: /s/JOSEPH A. CORAZZI

Title: President

INTERNATIONAL THOROUGHBRED
BREEDERS, INC.

By: /s/Nunzio DeSantis

Title: Chief Executive Officer

EXHIBIT 10.8

BI-LATERAL AGREEMENT

THIS BI-LATERAL AGREEMENT (this "Agreement"), dated as of May 23, 1997,
by and between International Thoroughbred Breeders, Inc. a Delaware
corporation ("ITB"), and Las Vegas Entertainment Network, Inc., a Delaware
corporation ("LVEN") with reference to the following:

(a) that certain Loan Agreement, dated as of even date herewith, by and
among ITB, certain of ITB's subsidiaries (together with ITB, the "Borrowers"),
and Credit Suisse First Boston Mortgage Capital LLC ("CSFB") (the "Loan
Agreement"),

(b) that certain Tri-Party Agreement, dated as of even date herewith, by
and among LVEN, ITB, and CSFB (the "Tri-Party Agreement"), and

In order to induce ITB and LVEN to enter into the Tri-Party Agreement,
ITB and LVEN each have agreed to set forth their further agreement as follows:

1. In the event that the Permitted Acquisition (as that term is
defined in the Tri-Party Agreement) is not consummated for any reason the
respective rights and obligations of LVEN, Casino-Co Corporation ("Casino-
Co"), ITB, and Orion Casino Corporation ("Orion") with respect to the profit
participation payable to Casino-Co pursuant to Section 2(c) of that certain
Letter Agreement dated as of January 22, 1996, by and among such parties (the
"Letter Agreement") are hereby confirmed and/or clarified, and restated as
follows:

For purposes of computing the Adjusted Cash Flow (as that term is
defined in the Letter Agreement) amounts of which Casino-Co initially will
receive a fifty percent (50%) interest, and thereafter will receive a twenty-
five percent (25%) interest, subject to the other terms and conditions of the
Letter Agreement, (i) the term Adjusted Cash Flow shall mean and refer to
adjusted cash flow from the operation of the Property (as that term is defined
in the Letter Agreement), before any provision for federal or state income
taxes, depreciation and/or amortization, and (ii) without the consent of
Casino-Co, the amount of debt service to be netted against cash flow from
operations of the Property in computing Adjusted Cash Flow shall be limited to
a maximum of $65 Million. At the time of the closing of the $55 Million loan
by CSFB under the Loan Agreement (the "CSFB Loan") the amount of debt service
to be netted against cash flow from operations in computing Adjusted Cash Flow
shall be $27 Million. The parties agree that, as of the date hereof, the
amount which Orion is entitled to recoup pursuant to clause (i) of the third
sentence of Section 2(c) of the Letter Agreement is $35 Million.

2. ITB agrees that the CSFB Loan has been arranged by Casino-Co as
the "Alternative Financing" contemplated by, pursuant to, and in satisfaction
of, the provisions of Section 2(b)(z) of the Letter Agreement; provided,
however, that LVEN (for itself and on behalf of Casino-Co) acknowledges and
agrees that no fee or commission is payable to anyone in connection therewith.

3. If, within 90 days of the date hereof, ITB has not received the
proceeds of a construction loan of $50 Million, or more, respecting the El
Rancho Property, or has not otherwise arranged alternative financing for the
opening of the hotel and casino at the El Rancho Property, and if and only if
the Permitted Conversion and Permitted Acquisition have not occurred, then
LVEN shall have the right, for a period of 180 days, to make a $30 Million
loan to Orion the proceeds of which would be used to repay a portion of the
CSFB Loan. If it were to make such a $30 Million loan to Orion, the loan
would mature on the date that the CSFB Loan is scheduled to mature and would
bear interest at the rate applicable to the CSFB Loan. ITB agrees with LVEN
(for their own benefit and not for the benefit of CSFB) that, in such
circumstances, ITB would be obligated to prepay the balance of the
indebtedness owed to CSFB with respect to the CSFB Loan (including principal,
interest, premium, exit fees, fees, costs, and expenses). Any financing
arranged by ITB for the prepayment of the CSFB Loan would be entitled to
obtain a first lien on ITB's subsidiary's Garden State Race Track and a second
lien (junior to the lien of Mr. Ken Fischer) on ITB's subsidiary's Freehold
Race Track and a second lien (junior to the $30 Million loan made by LVEN)
with respect to the El Rancho Property. If LVEN makes the $30 Million loan to
Orion and ITB prepays the balance of the CSFB Loan, the $30 Million loan by
LVEN to Orion would be secured by a first priority lien on the El Rancho
Property, and LVEN would thereafter have the right to oversee the development
of the El Rancho Property (without any change in ownership or economics).

4. If LVEN is unsatisfied with the fair market value of Casino-Co as
established by the greater of the ITB Value or the LVEN Value, LVEN shall have
the right, within 180 days of the date hereof, to make a loan to ITB in an
amount sufficient to repay in full the CSFB Loan and the proceeds of which
would be used to repay the CSFB Loan in full. If it were to make such a loan
to ITB, the loan would mature on the date that the CSFB Loan is scheduled to
mature and would bear interest at the rate applicable to the CSFB Loan. ITB
agrees with LVEN (for their own benefit and not for the benefit of CSFB) that,
in such circumstances, ITB would be obligated to use such loan proceeds to
prepay all of the indebtedness owed to CSFB with respect to the CSFB Loan
(including principal, interest, premium, exit fees, fees, costs, and
expenses). Any such loan made by LVEN to ITB would be entitled to obtain a
first lien on ITB's subsidiary's Garden State Race Track, a second lien
(junior to the lien of Mr. Ken Fischer) on ITB's subsidiary's Freehold Race
Track, and a first lien (assuming the Conversion has occurred) with respect to
the El Rancho Property.

5. As a result of changes in the development plans for the El Rancho
Property, and as a material inducement to LVEN to enter into this Agreement
and the Subordination Agreement, LVEN and ITB have agreed to cause their
subsidiaries to amend and restate the Entertainment Management Agreement (as
defined in the Letter Agreement) to reflect the scope and nature of such
changes, it being the intention of such parties to effect, upon commercially
reasonable terms and conditions, the leasing by Orion to LVCC of space within
the El Rancho Property of space on or from which all food, beverage and retail
activities will be conducted (exclusive of certain mezzanine space), the
rights to which will be retained by Orion. LVEN and ITB hereby agree to cause
their subsidiaries to embody such modifications in definitive documentation at
the earliest practicable time.

6. If any legal action or proceeding is br a provision of this
Agreement, the unsuccessful party in such action or proceeding, irrespective
of whether such action or proceeding is settled or prosecuted to final
judgment, shall pay all of the reasonable attorneys fees and costs incurred by
the prevailing party.

7. No amendment, modification, supplement, termination, consent, or
waiver of or to any provision of this Agreement nor any consent to any
departure therefrom shall in any event be effective unless the same shall be
in writing and signed by or on behalf of each of the parties hereto.

8. This Agreement is intended by the parties as a final expression of
their agreement and is intended as a complete and integrated statement of the
terms and conditions of their agreement.

9. This Agreement may be executed in any number of counterparts, each
of which shall be deemed to be an original, admissible into evidence, and all
of which together shall be deemed to be a single instrument. Delivery of an
executed counterpart of this Agreement by telefacsimile shall be as effective
as delivery of a manually executed counterpart. Any party delivering an
executed counterpart of this Agreement by telefacsimile also shall deliver a
manually executed counterpart of this Agreement, but the failure to deliver a
manually executed counterpart shall not affect the validity, enforceability,
and binding effect of this Agreement.

IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the date first written above.

LAS VEGAS ENTERTAINMENT
NETWORK, INC.

By: /s/JOSEPH A. CORAZZI

Title: Chairman/CEO

INTERNATIONAL THOROUGHBRED
BREEDERS, INC.

By: /s/Nunzio DeSantis

Title: CEO

EXHIBIT 10.9

EMPLOYMENT AGREEMENT

THIS EMPLOYMENT AGREEMENT (the "Agreement") made as of the 15th day of
January, 1997, by and between International Thoroughbred Breeders, Inc., a
Delaware corporation (the "Company") and Nunzio P. DeSantis ("Executive").

BACKGROUND

A. The Company believes that it would benefit from the application of
Executive's particular and unique skill, experience and background to the
management and operation of the Company, and wishes to employ Executive on
the terms and conditions hereinafter set forth; and

B. The parties desire to set forth the terms and conditions of the
employment relationship between the Company and Executive.

NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants in this Agreement, the Company and Executive, intending to be
legally bound, hereby agree as follows:

1. Employment and Duties. The Company hereby employs Executive
as Chief Executive Officer of the Company on the terms and conditions provided
in this Agreement and Executive agrees to accept such employment subject to
the terms and conditions of this Agreement. Executive shall perform the
duties and responsibilities reasonably determined from time to time by the
Board of Directors of the Company (the "Board") consistent with the types of
duties and responsibilities typically performed by a person serving as Chief
Executive Officer of businesses similar to the Company. Executive agrees to
devote his best efforts and substantially all his time, attention, energy, and
skill to performing the duties of Chief Executive Officer. The Board shall
also elect Executive as a director of the Company and Executive shall continue
to serve as a director so long as he is duly elected by the stockholders of
the Company and employed by the Company. Executive shall be based at the
Company's executive offices in Albuquerque, New Mexico.

2. Term. The term of this Agreement shall be for ten (10)
years (the "Initial Term"), commencing as of the date hereof (the "Effective
Date"), and expiring on the tenth anniversary of the Effective Date, unless
extended by mutual agreement of the parties or earlier terminated in
accordance with the terms of this Agreement. This Agreement shall continue in
full force and effect from year-to year after the expiration of the Initial
Term, unless either party shall give the other party before the commencement
of any such year at least ninety (90) days' prior written notice of such
party's intention to terminate this Agreement.

3. Compensation. As compensation for performing the services
required by this Agreement for the Company and during the term of this
Agreement, Executive shall be compensated as follows:

(a) Base Salary. Company shall pay to
Executive a base salary of Four Hundred Fifty Thousand Dollars ($450,000) for
each calendar year during the term of this Agreement, payable in substantially
equal installments pursuant to the Company's customary payroll procedures in
effect for its executive personnel at the time of payment, and subject to
withholding for applicable federal, state, and local taxes and all other
items, if any, required to be withheld. For each calendar year during the
term of this Agreement, effective with the year beginning January 1, 1998,
Executive's base salary shall be an amount equal to the base salary for the
preceding year, increased (but not decreased) by the increase, if any, in the
Consumer Price Index (CPI-U) for the Albuquerque, New Mexico area during the
preceding calendar year. Executive's annual base salary may be reviewed from
time to time during the term of this Agreement by the Board to determine
whether, in its sole discretion, such base salary should be increased or
decreased, but in no event will the annual base salary be less than Four
Hundred Fifty Thousand Dollars ($450,000).

(b) Performance Bonus.

(i) In addition to annual base salary, the Company shall
pay Executive, within 90 days of the end of each of the Company's fiscal years
during the term of this Agreement, a Performance Bonus with respect to such
fiscal year equal to the excess of the amount, if any, by which the net income
of the Company before deduction of federal and state income taxes for such
fiscal year exceeds Two Million Dollars ($2,000,000); provided, however, that
the amount of the Performance Bonus for any fiscal year shall not exceed the
amount of Executive's base salary for such year.

(ii) Except where Executive has been discharged without
Cause or has terminated this Agreement for Good Reason, or this Agreement has
expired without extension pursuant to Paragraph 2, the Performance Bonus shall
be deemed vested at the end of each fiscal year, provided Executive is
employed by the Company on such date, and shall be payable regardless of
whether Executive is employed on the date scheduled for payment. If Executive
has been discharged without Cause or has terminated this Agreement for Good
Reason, or this Agreement has expired without extension pursuant to Paragraph
2, Executive will be entitled to receive the Performance Bonus to which he
would otherwise have been entitled for the fiscal year in which such
discharge, termination or expiration occurred, pro rated for the number of
days elapsed before such discharge, termination or expiration; provided,
however, that if such termination, discharge or expiration occurs after July
31 of any such year Executive shall be entitled to such Performance Bonus
without proration.

4. Options. As of the Effective Date, the Company shall issue
to Executive options (the "Options") to purchase up to five million
(5,000,000) shares of the Company's Common Stock, $___ par value ("Common
Shares") under the Company's 1997 Stock Option Plan (the "Plan") at an
exercise price of Four Dollars ($4.00) per Common Share. Options covering
Five Hundred Thousand (500,000) Common Shares shall be exercisable
immediately, and Options covering an additional Five Hundred Thousand
(500,000) Common Shares shall become exercisable (i.e. vest) on each
succeeding anniversary of the Effective Date; provided, however, that all
Options shall be fully vested if Executive resigns for Good Reason, resigns
upon a Change of Control, or if Executive is discharged without Cause. The
Options shall be represented by the form of option agreement typically used by
the Company pursuant to the Plan with such changes as shall be required to
conform to this Agreement. The Options granted pursuant to this Paragraph 4
shall be in lieu of any options which might otherwise have been granted to
Executive during the Initial Term of this Agreement.

5. Employee Benefits.

(a) During the term of this Agreement, Executive shall have the
right to participate in any retirement plans (qualified and nonqualified),
401-K plan, pension, profit sharing, stock bonus, insurance, health, medical,
disability or other benefit plan or program (other than any stock option plan
except as described in Paragraph 4 hereof) that has been or is hereafter
adopted by the Company (or in which the Company participates), according to
the terms of such plan or program, on terms similar to the most senior
executives of the Company. Company agrees that Executive shall be eligible to
participate in all insurance programs on the Effective Date without regard to
any waiting period.

(b) Company shall purchase and during the term of this Agreement
pay the premium for a Nine Million Dollar ($9,000,000) split dollar life
insurance policy on Executive's life, subject to the execution of a collateral
assignment split dollar insurance agreement and Executive's insurability at
normal premium rates. Subject to the interest of the Company, Executive shall
be entitled to name the beneficiary of the death benefit of such policy. Upon
termination of Executive's employment for any reason, Executive may purchase
the split dollar life insurance policy on his life by giving Company notice of
his desire to purchase such insurance within 30 days of the termination of
Executive's employment and paying Company within 5 days of being informed of
the amount due, the greater of: (i) the amount of all premiums for such policy
theretofore paid by Company; or (ii) the cash surrender value of such policy.

6. Vacation. Executive shall be entitled to not less than six (6)
weeks of paid vacation in each year during the term of this Agreement,
beginning on the Effective Date of this Agreement. Any vacation days that are
not taken in a given twelve (12) month period shall accrue and carry over from
year to year.

7. Expenses. Company will provide Executive with a monthly
automobile expense allowance of Fifteen Hundred Dollars ($1,500) throughout
the term of this Agreement. In addition, Executive shall be entitled to a
non-accountable expense account of Five Thousand Dollars ($5,000) per month,
and the Company shall make available to Executive, at the Company's expense,
the use of a private jet in connection with the performance of his duties
hereunder, throughout the term of this Agreement.

8. Indemnification. The Company shall (and is hereby obligated to)
indemnify Executive in each and every situation where the Company is
obligated or permitted to make such indemnification pursuant to the relevant
portions of the Company's Articles of Incorporation and By-Laws. The Company
agrees that it will not reduce the indemnification currently available to
Executive hereunder.

9. Relocation. Company and Executive agree that Executive is not
required to relocate to the Philadelphia area. If Executive decides to
relocate to the Philadelphia area, Company shall pay all expenses incurred in
connection with the transportation of Executive's household goods (including
packing and unpacking) and all closing costs incurred in connection with the
purchase of Executive's new residence (including, attorney's fees, title
insurance charges, pest and radon inspection charges, recording and transfer
fees, mortgage application fees and points). Prior to Executive's relocation
to the Philadelphia area, Company shall provide[ an apartment] for Executive
or pay for Executive's lodging expenses in the Philadelphia area and one
round-trip airplane ticket between Philadelphia and Albuquerque each week.

10. Termination of Employment. Notwithstanding any other provision of
this Agreement, Executive's employment may be terminated as set forth below:

(a) Disability or Incapacity. In the event of Executive's
physical or mental inability to perform his essential duties hereunder, with
or without reasonable accommodation, for a period of 26 consecutive weeks or
for a cumulative period of 52 weeks during the term of this Agreement.

(b) Death. In the event of Executive's death.

(c) Resignation for Good Reason. Executive may resign for "good
reason," defined below, upon 30 days' written notice by Executive to the
Company. The Company may waive Executive's obligation to work during this 30-
day notice period and terminate his employment immediately, but if the Company
takes this action Executive shall nevertheless be entitled to receive the
payments provided for in Paragraph 11(a) of this Agreement. For purposes of
this Agreement, "good reason" shall mean: (i) a substantial change in
Executive's duties and responsibilities, which change would materially reduce
Executive's stature, importance and dignity within the Company; (ii) the
appointment of an executive officer superior in rank to Executive; (iii) the
failure of the Board to nominate Executive for re-election as a director, or
the failure of the stockholders to re-elect Executive; and/or (iv) the failure
of the Company to pay any amount due to Executive hereunder which failure
shall persist for ten (10) days after written notice of such failure shall
have been given to the Company.

(d) Resignation Without Good Reason. Notwithstanding any other
provision of this Agreement, Executive may resign for any or no reason, upon
90 days' written notice by Executive to the Company. The Company may waive
Executive's obligation to work during this 90-day notice period and terminate
his employment immediately, but if the Company takes this action in the
absence of agreement by Executive, Executive shall receive the base salary
which would otherwise be due through the end of the notice period.

(e) Resignation Upon A Change of Control. Notwithstanding any
other provision of this Agreement, Executive may resign upon a Change of
Control (as defined below), at any time within 12 months of such Change of
Control, upon 30 days' written notice by Executive to the Company. The
Company may waive Executive's obligation to work during this 30-day notice
period and terminate his employment immediately, but if the Company takes this
action Executive shall nevertheless be entitled to receive the payments
provided for in Paragraph 11(b) of this Agreement.

(f) Discharge for Cause. The Company may discharge Executive at
any time for "Cause," which shall include but not be limited to: Executive's
chronic neglect, refusal or failure to perform his employment duties and
responsibilities, other than for reasons of sickness, accident or other
similar causes beyond Executive's control; or Executive's commission of any
dishonest act or intentional wrongdoing committed against the Company, its
agents or employees or otherwise in connection with his employment by the
Company or a conviction of a felony, whether or not in connection with
employment. Executive's discharge for Cause shall be effective upon delivery
to Executive of written notice specifying the matter or matters which the
Board deems to constitute Cause.

(g) Discharge Without Cause. Notwithstanding any other
provision of this Agreement, Executive's employment may be terminated by the
Company at any time without Cause.

(h) General.

(i) Termination of Executive's employment pursuant to this
Paragraph 10 shall release the Company of all of its liabilities and
obligations under this Agreement, except as expressly provided under Paragraph
11 below. The preceding sentence shall not be deemed a release of Executive's
right to contest any matter whatsoever arising under this Agreement in any
appropriate judicial or other forum, subject to the provisions of Paragraph 18
hereof.

(ii) Termination of Executive's employment pursuant to this
Paragraph 10 shall not release Executive from his obligations and restrictions
under Paragraphs 12 through 14 of this Agreement.

(i) Definitions of Certain Terms. For purposes of this
Agreement, the following definitions shall apply:

(i) "Beneficial Owner," "Beneficially Owns," and
"Beneficial Ownership" shall have the meanings ascribed to such terms for
purposes of Section 13(d) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act") and the rules thereunder, except that, for purposes of
this Paragraph 10, "Beneficial Ownership" (and the related terms) shall
include Voting Securities that a Person has the right to acquire pursuant to
any agreement, or upon exercise of conversion rights, warrants, options or
otherwise, regardless of whether any such right is exercisable within 60 days
of the date as of which Beneficial Ownership is to be determined.

(ii) "Change of Control" means and shall be deemed to have
occurred if

(A) any Person, other than the Company or a Related
Party, acquires directly or indirectly the Beneficial Ownership of any Voting
Security of the Company and immediately after such acquisition such Person
has, directly or indirectly, the Beneficial Ownership of Voting Securities
representing 25% or more of the total voting power of all the then-outstanding
Voting Securities, or

(B) those individuals who as of January 15, 1997
constitute the Board or who thereafter are elected to the Board and whose
election, or nomination for election, to the Board was approved by a vote of
at least two-thirds (2/3) of the directors then still in office who either
were directors as of January 15, 1997 or whose election or nomination for
election was previously so approved, cease for any reason to constitute a
majority of the members of the Board; or

(C) the shareholders of the Company approve a merger,
consolidation, recapitalization or reorganization of the Company, a reverse
stock split of outstanding Voting Securities, or an acquisition of securities
or assets by the Company (a "Transaction"), or consummation of such a
Transaction if shareholder approval is not obtained, other than a Transaction
which would result in the holders of Voting Securities having at least 80% of
the total voting power represented by the Voting Securities outstanding
immediately prior thereto continuing to hold Voting Securities or voting
securities of the surviving entity having at least 60% of the total voting
power represented by the Voting Securities or the voting securities of such
surviving entity outstanding immediately after such Transaction and in or as a
result of which the voting rights of each Voting Security relative to the
voting rights of all other Voting Securities are not altered; provided,
however, a Change of Control shall not be deemed to have occurred if the Board
shall have determined in good faith, by action taken prior to the approval of
the Transaction by shareholders or consummation of the Transaction if
shareholder approval is not obtained, that such Transaction shall not
constitute a Change of Control for purposes of this Agreement and options then
outstanding under the Plan, which determination, if made with respect to a
Transaction, shall not be deemed to constitute a determination with respect to
any subsequent Transaction; or

(D) the shareholders of the Company approve a plan
of complete liquidation of the Company or an agreement for the sale or
disposition by the Company of all or substantially all of the Company's assets
other than any such transaction which would result in Related Parties owning
or acquiring more than 50% of the assets owned by the Company immediately
prior to the transaction.

(iii) "Person" shall have the meaning ascribed for purposes
of Section 13(d) of the Exchange Act and the rules thereunder.

(iv) "Related Party" means (A) a majority-owned subsidiary
of the Company; or (B) a trustee or other fiduciary holding securities under
an employee benefit plan of the Company or any majority-owned subsidiary of
the Company; or (C) a corporation owned directly or indirectly by the
shareholders of the Company in substantially the same proportion as their
ownership of Voting Securities; or (D) if, prior to any acquisition of a
Voting Security which would result in any Person Beneficially Owning more than
10% of any outstanding class of Voting Security and which would be required to
be reported on a Schedule 13D or an amendment thereto, the Board approved the
initial transaction giving rise to an increase in Beneficial ownership in
excess of 10% and any subsequent transaction giving rise to any further
increase in Beneficial Ownership; provided, however, that such Person has not,
prior to obtaining Board approval of any such transaction, publicly announced
an intention to take actions which, if consummated or successful (at a time
such Person has not been deemed a "Related Party"), would constitute a Change
of Control.

(v) "Voting Securities" means any securities of the
Company which carry the right to vote generally in the election of directors.

11. Payments Upon Termination.

(a) Discharge Without Cause or Resignation for Good Reason. If
Executive is discharged without Cause or resigns for Good Reason or this
Agreement expires at the end of the Initial Term or any renewal term without
extension pursuant to Paragraph 2:

(i) Executive shall continue to receive his base salary,
paid in monthly installments, for the greater of the remaining term of this
Agreement or eighteen months. In addition, during the period in which
Executive receives post-termination salary, the Company will pay the premiums
in connection with Executive's continued participation in the Company's group
health plans pursuant to COBRA, subject to such plans' terms, conditions and
restrictions. Executive shall also receive that portion of his Performance
Bonus as provided in Paragraph 3(b).

(ii) The Company's obligation for base salary under
subparagraph (i) above shall be offset by 50% of any compensation from
employment earned by Executive through self-employment or with another
employer during this period, and its obligation to continue payments on behalf
of Executive for medical insurance shall cease upon Executive's acceptance of
other employment pursuant to which comparable coverage is provided to
Executive. Moreover, the Company's obligations under subparagraph (i) above
shall cease in the event that Executive breaches any of the covenants or
restrictions set forth in Paragraphs 12 through 14 below.

(iii) Except as set forth above in this Paragraph 11,
Executive shall not be eligible for any payments or other benefits upon
termination of his employment without Cause or resignation for Good Reason.

(b) Resignation Upon a Change of Control.

(i) If Executive resigns upon a Change of Control,
Executive shall be entitled to the payments set forth in Paragraph 11(a) upon
the terms and subject to the limitations set forth in such Paragraph, except
that he shall only be entitled to receive post-termination compensation for a
period of three years; if less than the remaining Initial Term of this
Agreement.

(ii) If, within 12 months following a Change of Control,
Executive's employment is terminated by Executive for Good Reason or if
Executive's employment is terminated without Cause, then, in lieu of any other
severance payments under Paragraph 11(a) or 11(b)(i) of this Agreement,
Company shall pay to Executive on the date of such termination, a lump sum
amount equal to 2.99 times his "base amount" within the meaning of Section
280G(b)(3) of the Internal Revenue Code of 1986, as amended (the "Code").

(i) On death, Executive's estate's sole entitlement will
be to (A) a lump sum payment of One Million Dollars ($1,000,000), plus (B) any
amounts payable on account of Executive's death under any insurance or benefit
plans or policies maintained by the Company. Throughout the term of this
Agreement, Company shall maintain in effect a "keyman" life insurance policy
on the life of Executive in an amount equal to or greater than One Million
Dollars ($1,000,000) in order to assure an adequate funding source for the
benefit described in clause (A) hereof.

(ii) On termination for disability or incapacity,
Executive's sole entitlement will be to (A) a continuation of his base salary
for a period of three (3) years, plus (B) any amounts payable on account of
Executive's disability or incapacity under any insurance or benefit plans or
policies maintained by the Company.

(d) Discharge for Cause or Resignation Without Good Reason. If
Executive is discharged for Cause or Executive resigns without Good Reason,
Executive's sole entitlement will be the receipt of base salary for any days
worked through the date of termination.

12. Company Property. All advertising, sales and other materials or
articles or information, including without limitation data processing reports,
customer sales or sourcing analyses, invoices, price lists or information,
samples, or any other materials or data of any kind furnished to Executive by
the Company or developed by Executive on behalf of the Company or at the
Company's direction or for the Company's use or otherwise in connection with
Executive's employment with the Company, are and shall remain the sole and
confidential property of the Company; if the Company requests the return of
such materials at any time during or at or after the termination of
Executive's employment, Executive shall immediately deliver the same to the
Company.

13. Prohibited Public Statements. Executive shall not, either during
or at any time after the termination of his employment, make any public
statement (including a private statement reasonably likely to be repeated
publicly) reflecting adversely on the Company and its business prospects,
except for such statements which during Executive's employment he may be
required to make in the ordinary course of his service as Chief Executive
Officer.

14. Non-competition, Noninterference and Non-solicitation.

(a) During the term of this Agreement and for a period equal to
the greater of (x) two (2) years following termination of employment for any
reason whatsoever, whether by Executive or by the Company and whether during
the term of this Agreement or subsequent to the termination or (y) the period
during which Executive is entitled to receive any payment under Paragraph 11
of this Agreement, Executive shall not directly or indirectly:

(i) solicit, induce or encourage any customer, employee,
consultant, independent contractor or vendor of the Company to cease to do
business with or to be employed by the Company; or

(ii) engage in (as a principal, partner, director, officer,
agent, employee, consultant, owner, independent contractor or otherwise) or be
financially interested in any business which is in actual competition with the
Company.

(b) During his employment with the Company and at all times
thereafter, Executive shall not use for his personal benefit, or disclose,
communicate or divulge to, or use for the direct or indirect benefit of any
person, firm, association or company other than the Company, any material
referred to in Paragraph 12 above or any information regarding the business
methods, policies, procedures, strategies or techniques, research or
development projects or results, trade secrets, or other knowledge or
processes of or developed by the Company or any names and addresses of
employees, customers or vendors or any data on or relating to past, present or
prospective customers or any other confidential information relating to or
dealing with the business operations, strategies or activities of the Company,
made known to Executive or learned or acquired by Executive while in the
employ of the Company.

(c) Any and all writings, inventions, improvements, processes,
procedures and/or techniques which Executive may make, conceive, discover or
develop, either solely or jointly with any other person or persons, during his
employment with the Company, whether during working hours or at any other time
and whether at the request or upon the suggestion of the Company or otherwise,
which relate to or are useful in connection with any business now or hereafter
carried on or contemplated by the Company, including developments or
expansions of its present fields of operations, shall be the sole and
exclusive property of the Company. Executive shall make full disclosure to
the Company of all such writings, inventions, improvements, processes,
procedures and techniques, and shall do everything necessary or desirable to
vest the absolute title thereto in the Company. Executive shall write and
prepare all specifications and procedures regarding such inventions,
improvements, processes, procedures and techniques and otherwise aid and
assist the Company so that the Company can prepare and present applications
for copyright or Letters Patent therefor and can secure such copyright or
Letters Patent wherever possible, as well as reissues, renewals, and
extensions thereof, and can obtain the record title to such copyright or
patents so that the Company shall be the sole and absolute owner thereof in
all countries in which it may desire to have copyright or patent protection.
Executive shall not be entitled to any additional or special compensation or
reimbursement regarding any and all such writings, inventions, improvements,
processes, procedures and techniques.

(e) Executive agrees that if any portion of the foregoing
covenants, or the application thereof, is construed to be invalid or
unenforceable, the remainder of such covenant or covenants or the application
thereof shall not be affected and the remaining covenant or covenants will
then be given full force and effect without regard to the invalid or
unenforceable portions. If any covenant is held to be unenforceable because
of the area covered, the duration thereof or the scope thereof, Executive
agrees that the court making such determination shall have the power to reduce
the area and/or the duration and/or limit the scope thereof, and the covenant
shall then be enforceable in its reduced form as is adjudged to be reasonable
by the court. If Executive violates any of the restrictions contained in the
foregoing Paragraph 14, the restrictive period shall not run in favor of
Executive from the time of the commencement of any such violation until such
time as such violation shall be cured by Employee to the satisfaction of the
Company.

(f) The provision of Paragraphs 12 through 14 shall survive the
termination of Executive's employment as well as the expiration of this
Agreement at the end of its Initial Term or any renewal term or at any time
prior thereto.

(g) For purposes of Paragraphs 12 through 14 of this Agreement,
the term "Company" shall include not only International Thoroughbred Breeders,
Inc., but also any of its subsidiaries or successors.

15. Purchase or Other Acquisition of Company. In the event of the
proposed acquisition of the Company, or of all or any material portion of its
assets (regardless of the form of the proposed acquisition), or the proposed
acquisition by any Person (other than a Related Person) of 80% or more of the
Voting Securities of the Company whether from the Company or its
shareholders, or in the event the Company obtains financing, whether in the
form of debt, equity or a combination of debt and equity (other than short-
term working capital borrowing) (each of which events is hereinafter referred
to as a "Transaction") Executive shall, subject to the direction of the Board
of Directors, be primarily responsible for representing the interests of the
Company in conducting negotiations for the Transaction. If any such
Transaction results in the acquisition of the Company or all or any material
portion of its assets, or in the acquisition of 80% or more of the Voting
Securities of the Company by any Person (other than a Related Person) or in
the Company's securing financing, as aforesaid, the Company shall pay
Executive, or cause Executive to be paid by the acquiring Person, a fee for
his services in connection with the Transaction in an amount equal to 3% of
the total consideration payable to or obtained by the Company and/or its
shareholders by virtue of the Transaction, which Transaction fee shall be paid
to Executive in a lump sum upon consummation of the Transaction.

16. Specific Performance. Executive acknowledges that the
obligations undertaken by him pursuant to this Agreement are unique and that
the Company will likely have no adequate remedy at law if Executive shall fail
to perform any of his obligations hereunder. Executive therefore confirms
that the Company's right to specific performance of the terms of this
Agreement is essential to protect the rights and interests of the Company.
Accordingly, in addition to any other remedies that the Company may have at
law or in equity, the Company shall have the right to have all obligations,
covenants, agreements and other provisions of this Agreement specifically
performed by Executive and the Company shall have the right to obtain
preliminary injunctive relief to secure specific performance and to prevent a
breach or contemplated breach of this Agreement by Executive.

17. Taxes.

(a) All payments to be made to Executive under this Agreement
will be subject to required withholding of federal, state and local income and
employment taxes and any other items required to be withheld therefrom.

(b) Notwithstanding any other provision of this Agreement, if
any of the payments provided for in this Agreement, together with any other
payments which Executive has the right to receive from the Company or any
corporation which is a member of an "affiliated group" (as defined in Section
1504(a) of the Code without regard to Section 1504(b) of the Code) of which
the Company is a member, would constitute a "parachute payment" (as defined in
Section 280G(b)(2) of the Code), payments pursuant to this Agreement shall be
reduced to the largest amount as will result in no portion of such payments
being subject to the excise tax imposed by Section 4999 of the Code and the
determination of which such payments are to be reduced shall be made by the
Company in its sole discretion.

18. Arbitration of Disputes. Any controversy or claim arising out of
or relating to this Agreement or the breach thereof or otherwise arising out
of Executive's employment or the termination of that employment shall, to the
fullest extent permitted by law, be settled by arbitration in any forum agreed
upon by the parties or, in the absence of such an agreement, under the
auspices of the American Arbitration Association ("AAA") in Philadelphia,
Pennsylvania in accordance with the Employment Dispute Resolution Rules of the
AAA, including, but not limited to, the rules and procedures applicable to the
selection of arbitrators. The arbitration panel shall consist of persons
experienced in business affairs. The award rendered by the arbitrator shall
include a statement of the findings of fact and the conclusions of law which
serve as the basis for the award. Judgment upon the award rendered by the
arbitrator may be entered in any court having jurisdiction thereof.
Notwithstanding the foregoing, this provision shall not preclude the Company
from pursuing a court action for the purpose of enforcing Paragraph 14 hereof,
including obtaining a temporary restraining order or a preliminary or
permanent injunction in circumstances in which such relief is appropriate or
damages. In the event that the arbitration relates principally to Executive's
termination for Cause, the arbitrators shall award counsel fees and costs to
Executive if he prevails.

19. Miscellaneous.

(a) Integration; Amendment. This Agreement constitutes the
entire agreement between the parties hereto with respect to the matters set
forth herein and supersedes and renders of no force and effect all prior
understandings and agreements between the parties with respect to the matters
set forth herein. No amendments or additions to this Agreement shall be
binding unless in writing and signed by both parties.

(b) Assignment. This Agreement is personal in nature and
neither of the parties shall, without the consent of the other, assign or
transfer this Agreement or any rights or obligations hereunder. This
Agreement and all of the provisions herein shall be binding upon and inure to
the benefit of, the parties hereto and their successors (including successors
by merger, consolidation or similar transactions), permitted assigns, personal
representatives, heirs, executors and administrators.

(c) Severability. If any part of this Agreement is contrary to,
prohibited by, or deemed invalid under applicable law or regulations, such
provision shall be inapplicable and deemed omitted to the extent so contrary,
prohibited, or invalid, but the remainder of this Agreement shall not be
invalid and shall be given full force and effect so far as possible.

(d) Waivers. The failure or delay of any party at any time to
require performance by the other party of any provision of this Agreement,
even if known, shall not affect the right of such party to require performance
of that provision or to exercise any right, power, or remedy hereunder, and
any waiver by any party of any breach of any provision of this Agreement
shall not be construed as a waiver of any continuing or succeeding breach of
such provision, a waiver of the provision itself, or a waiver of any right,
power, or remedy under this Agreement. No notice to or demand on any party in
any case shall, of itself, entitle such party to any other or further notice
or demand in similar or other circumstances.

(e) Power and Authority.

(i) The Company represents and warrants to Executive that it
has the requisite power to enter into this Agreement and perform the terms
hereof; and that the execution, delivery and performance of this Agreement by
it has been duly authorized by all appropriate action; and this Agreement
represents the valid and legally binding obligation of the Company and is
enforceable against it in accordance with its terms.

(ii) Executive represents and warrants to the Company that
he has full power to enter into this Agreement and perform his duties
hereunder; that the execution and delivery of this Agreement and the
performance of his duties hereunder shall not result in a breach of, or
constitute a default under, any agreement or understanding, oral or written,
to which he is a party or by which he may be bound; and this Agreement
represents the valid and legally binding obligation of Executive and is
enforceable against him in accordance with its terms.

(f) Burden and Benefit; Survival. This Agreement shall be
binding upon and inure to the benefit of the parties hereto and their
respective heirs, executors, personal and legal representatives, successors
and, subject to Paragraph 19(b) above, assigns. In addition to, and not in
limitation of anything contained in this Agreement, it is expressly understood
and agreed that the Company's obligation to pay termination compensation set
forth herein and the provisions of Paragraphs 12 through 14, 16 and 17 shall
survive any termination of this Agreement.

(g) Governing Law; Headings. This Agreement and its
construction, performance, and enforceability shall be governed by, and
construed in accordance with, the laws of the State of Delaware. Headings and
titles herein are included solely for convenience and shall not affect, or be
used in connection with, the interpretation of this Agreement.

(h) Notices. All notices called for under this Agreement shall
be in writing and shall be deemed given upon receipt if delivered personally
or by facsimile transmission and followed promptly by mail, or mailed by
registered or certified mail (return receipt requested), postage prepaid, to
the parties at the following addresses (or at such other address for a party
as shall be specified by like notice; provided that notices of a change of
address shall be effective only upon receipt thereof):

If to Executive:

Nunzio P. DeSantis
2805 Ashworth Circle
Las Vegas, Nevada 89107

with a copy to:

E. Gerald Riesenbach, Esquire
Cozen and O'Connor
3rd Floor, The Atrium
1900 Market Street
Philadelphia, PA 19103

If to the Company:

International Thoroughbred
Breeders, Inc.
600 Central Avenue, S.W.
3rd Floor
Albuquerque, NM 87102
Attention: Chairman of the Board

or to any other address or addressee as any party entitled to receive notice
under this Agreement shall designate, from time to time, to the other in the
manner provided in this Paragraph 19(h) for the service of notices. Any
notice delivered to the party hereto to whom it is addressed shall be deemed
to have been given and received on the day it was received; provided, however,
that if such day is not a business day then the notice shall be deemed to have
been given and received on the business day next following such day.

(i) Counterparts. This Agreement may be executed in one or more
counterparts and by facsimile, each of which counterparts and/or facsimiles
shall be deemed to be an original, and all such counterparts and facsimiles
shall constitute one and the same instrument.

(j) Expenses. The Company agrees to pay all legal fees and
expenses which Executive incurs in connection with the negotiation of this
Agreement.

(k) Inconsistent Documents. If any provision of this Agreement
would conflict with any policy, procedure, manual, program, practice or other
Company document (collectively "Plan") which would otherwise apply to
Executive (including, without limitation, the provisions of any compensation,
bonus, option or severance Plan) then the provisions of this Agreement shall
apply and shall supersede any such Plan.

IN WITNESS WHEREOF, the parties have duly executed this Agreement as of
the date first above written.

ATTEST: INTERNATIONAL THOROUGHBRED
BREEDERS, INC.

_________________________ By:

WITNESS:

(SEAL)
Nunzio P. DeSantis

EXHIBIT 10.10

CONSULTANT AGREEMENT

AGREEMENT made as of the 15th day of January, 1997, by and between
International Thoroughbred Breeders, Inc. (the "Company") and Anthony Coelho
("Coelho").

BACKGROUND

Coelho has for many years worked in the gaming and hospitality
industries in a variety of executive and managerial capacities and has
extensive experience in acquiring, developing and operating casinos. The
Company intends to acquire and/or develop one or more casinos or other lodging
facilities and, in connection therewith, desires to avail itself of Coelho's
skill and expertise. Accordingly, the Company has requested that Coelho
provide certain consulting and related services to the Company and Coelho is
willing to provide such services to the Company on the terms and subject to
the conditions hereinafter set forth.

NOW, THEREFORE, in consideration of the mutual covenants herein
contained, and intending to be legally bound hereby, the parties agree as
follows:
1. TERM. For the period commencing as of January 15, 1997 and
continuing thereafter from month-to-month until the termination of this
Agreement as provided in Paragraph 6 hereof, Coelho shall provide consulting
and related services to the Company as more fully described in Paragraph 3.
2. CONSULTING FEES. For the services to be rendered to the
Company by Coelho:
a. The Company shall pay Coelho a fee of Ten Thousand
Dollars ($10,000) per month during the term of this Agreement.
b. The Company shall pay Coelho a fee of Twenty Five
Hundred Dollars ($2,500) for each meeting of the Board of Directors of the
Company which Coelho either attends in person or participates in by telephone.
c. The Company shall provide Coelho with a monthly
automobile expense allowance of Five Hundred Dollars ($500) and shall make
available to Coelho at the Company's expense the use of a private jet in
connection with the performance of his duties hereunder, if and when such
private jet is available.
Anything herein to the contrary notwithstanding, the
payment to Coelho of the amounts provided for in this Paragraph 2 shall not
commence until the month in which the Company obtains financing in the amount
of Fifty Million Dollars ($50,000,000) or more, whether in the form of debt,
equity or a combination thereof.
3. DUTIES. The terms upon which Coelho shall provide
consulting services to the Company are as follows:
a. Coelho shall serve the Company as Chairman of the
Board of Directors and as a consultant to senior management. In such
capacities, Coelho shall devote himself to strategic planning and initiatives
with respect to the Company's goal of owning and operating one or more casinos
or other lodging facilities or otherwise participating in the gaming and
hospitality industries. Coelho shall make himself reasonably available to the
Company for a maximum of seven (7) days per month and for a maximum of eight
(8) hours per any such day during the term of the Agreement.
b. Coelho's services hereunder shall be provided at such
locations, on such dates and at such times as are mutually agreed upon by
Coelho and the Chief Executive Office of the Company, taking into
consideration that Coelho may have commitments and time constraints resulting
from Coelho's other activities and endeavors which will impact on his
schedule.
c. During the term of this Agreement, the Company shall
provide Coelho with suitable office space and secretarial support.
4. INDEPENDENT CONTRACTOR. Coelho shall provide services to
the Company hereunder as an independent contractor, and not as an employee.
As such, Coelho shall not be entitled to participate in any benefit policy,
program or plan maintained by the Company for the benefit of Company's
employees.
5. STOCK OPTIONS. As of the date hereof, the Company shall
issue to Coelho options to purchase up to one million (1,000,000) shares of
the Company's Common Stock under the Company's 1997 Stock Option Plan at a
price of Four Dollars ($4.00) per share. Options covering two hundred
thousand (200,000) shares shall be exercisable immediately, and options
covering an additional one hundred thousand (100,000) shares shall become
exercisable on each succeeding anniversary of the date hereof. The options
shall be represented by the form of option agreement typically used by the
Company pursuant to the 1997 Stock Option Plan with such changes as shall be
required to conform to the terms of this Agreement. The options granted
pursuant to this Agreement shall be in lieu of any options which might
otherwise be granted to Coelho in consideration of his performance of services
for the Company.
6. TERMINATION OF AGREEMENT. This Agreement shall terminate
upon the earliest to occur of
(a) Coelho's death;
(b) a determination by the Board of Directors that Coelho
is not able physically or mentally substantially to perform his material
duties hereunder;
(c) the failure of the Board of Directors to nominate
Coelho for re-election as Chairman of the Board of Directors;
(d) the failure of the stockholders of the Company to re-
elect Coelho as a director;
(e) Coelho's resignation as Chairman of the Board; or
(f) the termination of Coelho's service to the Company by
decision of a majority of the Board of Directors.
Upon termination of this Agreement, the Company shall have no further
obligation to Coelho hereunder; provided, however, that the consulting fee
payable to Coelho pursuant to Paragraph 2. a. of this Agreement shall be
prorated for the month in which this Agreement terminates.
7. COMPANY PROPERTY. All advertising, sales and other
materials or articles or information, including without limitation data
processing reports, customer sales or sourcing analyses, invoices, price lists
or information, samples, or any other materials or data of any kind furnished
to Coelho by the Company or developed by Coelho on behalf of the Company or at
the Company's direction or for the Company's use or otherwise in connection
with Coelho's service with the Company, are and shall remain the sole and
confidential property of the Company; if the Company requests the return of
such materials at any time during or at or after the termination of Coelho's
service, Coelho shall immediately deliver the same to the Company.
8. NON-COMPETITION, NONINTERFERENCE AND NON-SOLICITATION.
(a) During the term of this Agreement and for a period
equal to one year following termination of service for any reason whatsoever,
Coelho shall not directly or indirectly:
(i) solicit, induce or encourage any customer,
employee, consultant, independent contractor or vendor of the Company to cease
to do business with or to be employed by the Company; or
(ii) engage in (as a principal, partner, director,
officer, agent, employee, consultant, owner, independent contractor or
otherwise) or be financially interested in any business which is in actual
competition with the Company.
(b) During his service with the Company and at all times
thereafter, Coelho shall not use for his personal benefit, or disclose,
communicate or divulge to, or use for the direct or indirect benefit of any
person, firm, association or company other than the Company, any material
referred to in Paragraph 7 above or any information regarding the business
methods, policies, procedures, strategies or techniques, research or
development projects or results, trade secrets, or other knowledge or
processes of or developed by the Company or any names and addresses of
employees, customers or vendors or any data on or relating to past, present or
prospective customers or any other confidential information relating to or
dealing with the business operations, strategies or activities of the Company,
made known to Coelho or learned or acquired by Coelho while in the service of
the Company.
(c) Any and all writings, inventions, improvements,
processes, procedures and/or techniques which Coelho may make, conceive,
discover or develop, either solely or jointly with any other person or
persons, during his service with the Company, whether during working hours or
at any other time and whether at the request or upon the suggestion of the
Company or otherwise, which relate to or are useful in connection with any
business now or hereafter carried on or contemplated by the Company, including
developments or expansions of its present fields of operations, shall be the
sole and exclusive property of the Company. Coelho shall make full disclosure
to the Company of all such writings, inventions, improvements, processes,
procedures and techniques, and shall do everything necessary or desirable to
vest the absolute title thereto in the Company. Coelho shall write and
prepare all specifications and procedures regarding such inventions,
improvements, processes, procedures and techniques and otherwise aid and
assist the Company so that the Company can prepare and present applications
for copyright or Letters Patent therefor and can secure such copyright or
Letters Patent wherever possible, as well as reissues, renewals, and
extensions thereof, and can obtain the record title to such copyright or
patents so that the Company shall be the sole and absolute owner thereof in
all countries in which it may desire to have copyright or patent protection.
Coelho shall not be entitled to any additional or special compensation or
reimbursement regarding any and all such writings, inventions, improvements,
processes, procedures and techniques.
(e) Coelho agrees that if any portion of the foregoing
covenants, or the application thereof, is construed to be invalid or
unenforceable, the remainder of such covenant or covenants or the application
thereof shall not be affected and the remaining covenant or covenants will
then be given full force and effect without regard to the invalid or
unenforceable portions. If any covenant is held to be unenforceable because
of the area covered, the duration thereof or the scope thereof, Coelho agrees
that the court making such determination shall have the power to reduce the
area and/or the duration and/or limit the scope thereof, and the covenant
shall then be enforceable in its reduced form as is adjudged to be reasonable
by the court. If Coelho violates any of the restrictions contained in the
foregoing Paragraph 8, the restrictive period shall not run in favor of Coelho
from the time of the commencement of any such violation until such time as
such violation shall be cured by Coelho to the satisfaction of the Company.
(f) The provision of Paragraphs 7 and 8 shall survive the
termination of Coelho's service with the Company.
(g) For purposes of Paragraphs 7 and 8 of this Agreement,
the term "Company" shall include not only International Thoroughbred Breeders,
Inc., but also any of its subsidiaries or successors.
9. WAIVER. No provision of this Agreement may be modified,
waived, or discharged unless such waiver, modification, or discharge is agreed
to in writing and signed by Coelho and the Company. No waiver by either party
hereto at any time or any breach by the other party hereto of, or compliance
with, any condition or provision of this Agreement to be performed by such
other party shall be deemed a waiver of similar or dissimilar provisions or
conditions at the same or at any prior or subsequent time.
10. BINDING AGREEMENT; ASSIGNMENT. This Agreement shall be
binding upon and inure to the benefit of the parties hereto and their heirs,
personal representatives, successors or assigns. Notwithstanding the
foregoing, this Agreement shall not be assignable by Coelho.
11. APPLICABLE LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware.
12. HEADINGS. The headings of the Paragraphs of this Agreement
are for convenience only and shall not control or effect the meaning or
construction or limit the scope or intent of any of the provisions of this
Agreement.
13. EXECUTION IN COUNTERPARTS. This Agreement may be executed
in one or more counterparts and shall be effective upon such execution. Any
original executed counterpart shall be deemed an executed original. Executed
counterparts which have been communicated by facsimile transmission shall be
as fully effective as an original executed counterpart.
IN WITNESS WHEREOF, the parties have executed this Agreement as of
the date first above written.

________________________(SEAL)
Anthony Coelho

Witness: ______________________________

INTERNATIONAL THOROUGHBRED BREEDERS,
INC.

By:___________________________
Name: Nunzio DeSantis

Attest:_______________________
Name: Joseph Zappala

EXHIBIT 10.11

AMENDED AND RESTATED EMPLOYMENT AGREEMENT

THIS AGREEMENT, made as of October 16, 1997, by and between
INTERNATIONAL THOROUGHBRED BREEDERS, INC., a Delaware corporation (hereinafter
called "Company"), and RICHARD E. ORBANN, an individual (hereinafter called
"Employee").

W I T N E S S E T H:

WHEREAS, Employee and Company are parties to an Employment
Agreement dated as of January 1, 1996, as amended by Amendment No. 1 dated as
of May 14, 1996 (collectively, the "Original Agreement"); and

WHEREAS, Company desires to extend the term of Employee's
employment pursuant to the Original Agreement and Company and Employee desire
to make certain other changes to the terms and conditions of his employment.

NOW, THEREFORE, in consideration of the facts, mutual promises and
covenants contained herein and intending to be legally bound hereby, Company
and Employee agree to amend and restate the Original Agreement by entering
into this Amended and Restated Employment Agreement (this "Agreement") upon
the following terms and conditions:

1. Definitions. As used herein, the following terms shall have
the meanings set forth below unless the contexts otherwise requires.

(a) "Base Compensation" shall mean the annual rate of
compensation set forth in Section 5(a) hereof, as such amount may be adjusted
from time to time.

(b) "Board" shall mean the Board of Directors of Company.

(i) Employee is convicted of a felony involving
fraud or dishonesty or any other crime for which a term of imprisonment in
excess of one (1) year could be imposed or has entered a plea of nolo
contendere (or similar plea) to a charge of any such offense;

(ii) Employee uses alcohol or any unlawful controlled
substance to an extent that it interferes on a continuing and material basis
with the performance of Employee's duties under this Agreement;

(iii) any act of fraud, intentional or willful
misappropriation or personal dishonesty relating to or involving Company in
any material way;

(iv) Employee intentionally or willfully engages in
grossly negligent or willful misconduct;

(v) Employee fails to obey any reasonable Board
directive, which failure continues for five (5) days;

(vi) Employee's material breach of any of the terms
of this Agreement, which material breach is not cured within ninety (90) days
after receipt of written notice from Company to Employee; or

(vii) Judgment is consented to by or rendered against
Employee on which any regulatory licensor of Company or any of its
Subsidiaries bases a threatened license revocation, after the expiration of
any appeal right, in any, undertaken by Employee.

(d) "Change of Control" shall mean and shall be deemed to
have occurred if:

(i) those individuals elected to the Board who were
either designated by Nunzio P. DeSantis (the "DeSantis Designees") or were
nominated for election by the DeSantis Designees, cease for any reason to
constitute a majority of the members of the Board; or

(ii) the shareholders of Company approve a merger,
consolidation, recapitalization or reorganization of Company, a reverse stock
split of outstanding Voting Securities, or an acquisition of securities or
assets by Company (a "Transaction"), or consummation of such a Transaction if
shareholder approval is not obtained, other than a Transaction which would
result in the holders of Voting Securities having at least 80% of the total
voting power represented by the Voting Securities outstanding immediately
prior thereto continuing to hold Voting Securities or voting securities of the
surviving entity having at least 60% of the total voting power represented by
the Voting Securities or the voting securities of such surviving entity
outstanding immediately after such Transaction and in or as a result of which
the voting rights of each Voting Security relative to the voting rights of all
other Voting Securities are not altered; or

(iii) the shareholders of Company approve a plan of
complete liquidation of Company or an agreement for the sale or disposition by
Company of all or substantially all of Company's assets other than any such
transaction which would result in Related Parties owning or acquiring more
than 50% of the assets owned by Company immediately prior to the transaction.

(e) "Disability" shall mean Employee's inability, for a
period of three consecutive months, or a cumulative period of ninety (90)
business days out of a consecutive period of six (6) months, to perform the
essential duties of Employee's position, with or without any reasonable
accommodation required by law, due to a mental or physical impairment which
substantially limits one or more major life activities.

(f) "Related Party" shall mean (i) a majority-owned
subsidiary of the Company, (ii) a trustee or other fiduciary holding
securities under an employee benefit plan of the Company or any majority-owned
subsidiary of the Company, or (iii) a corporation owned directly or indirectly
by the shareholders of the Company in substantially the same proportion as
their ownership of Voting Securities.

(g) "Subsidiary" shall mean any corporation in which
Company owns directly or indirectly 50% or more of the Voting Securities; or
any other venture in which it owns 50% or more of the equity.

(h) "Term of Employment" shall mean the period specified
in Section 4 hereof as such period may be extended pursuant to such Section
and as the same may be terminated in accordance with this Agreement.

(i) "Voting Security" shall mean capital stock of any
class or classes having general voting power under ordinary circumstances, in
the absence of contingencies, to elect the directors of a corporation.

2. Employment. Company hereby employs Employee and Employee
hereby accepts employment by Company for the period and upon the terms and
conditions contained in this Agreement.

3. Office and Duties.

(a) Employee shall serve Company generally as Vice
President of Racing Operations and shall have such authority and such
responsibilities as Company reasonably may determine from time to time.
Employee shall perform any other duties reasonably required by Company and, if
requested by Company, shall serve as an officer or director of Company or any
of its Subsidiaries without additional compensation; provided, however, that
Employee shall not be required to become a director or officer of Company
unless Company maintains directors and officers' liability insurance during
Employee's term as director or officer in an amount and type of coverage
consistent with its past practice.

(b) Throughout the Term of Employment, Employee shall
devote his entire working time, energy, skill and best efforts to the
performance of his duties hereunder in a manner which will faithfully and
diligently further the business and interests of Company.

4. Term of Employment.

(a) Initial Term. Employee shall be employed by Company
for an initial Term of Employment from the date of this Agreement through and
including December 31, 2001, unless sooner terminated as hereinafter provided.

(b) Renewal. Unless either party elects to terminate this
Agreement at the end of the initial or any renewal term by giving the other
party notice of such election at least six (6) months before the expiration of
the then current term, this Agreement shall be deemed to have been renewed for
an additional term of two (2) years commencing on the day after the expiration
of the then current term.

(c) Failure to Renew. In the event that Company chooses
not to renew this Agreement at the end of the initial or any renewal Term of
Employment, Company shall (i) pay to Employee six (6) months of Employee's
Base Compensation (plus unused vacation and sick leave), in one lump sum or in
equal weekly installments over six (6) months at Employee's option, (ii)
transfer to Employee title to the automobile used by Employee, at no cost to
Employee, free and clear of any liens, claims or encumbrances, (iii) assign
and transfer to Employee all rights to any life insurance policies insuring
the life of Employee and all rights under any employee benefit plans
(including Company's 401(k) Plan) in which Employee is vested at the effective
date of such termination and (iv) continue to pay Employee's health insurance
until the earlier of six (6) months from the expiration of this Agreement or
the date Employee obtains a new job which offers health insurance.
Thereafter, Company shall have no further obligations to Employee.

5. Compensation and Benefits.

(a) (i) For all of the service rendered by Employee to
Company, Employee shall receive Base Compensation at the gross annual rate
(without regard to authorized or legally required deductions and withholdings)
of One Hundred and Sixty Thousand Dollars ($160,000), payable in reasonable
periodic installments in accordance with Company's regular payroll practices
in effect from time to time.

(ii) Base Compensation of Employee shall be increased
at the commencement of any renewal term by ten percent (10%) of the then
existing Base Compensation.

(b) In addition to Employee's Base Compensation, Company
from time to time may pay Employee such bonuses or other additional
compensation as Company may determine, but there is no agreement regarding any
such additional payments, the existence and amounts of which shall be within
Company's sole discretion.

(c) Throughout the Term of Employment and as long as they
are kept in force by Company, Employee shall be entitled to participate in and
receive the benefits of any profit sharing or retirement plans and any health,
life, accident or disability insurance plans or programs made available to
other senior management of Company or Garden State Race Track, Inc.; provided
such benefits are no less than current levels.

6. Fringe Benefits

In consideration of Employee's covenants under this
Agreement, Employee shall be entitled to the benefits set forth below in this
Section 6 during the Term of Employment or as otherwise stated in this
Section:

(a) On August 1, 1999, and on every third anniversary
thereof during the Term of Employment under this Agreement, Company will
either lease or purchase for Employee a new automobile of Employee's choice
(which new automobile shall not exceed Fifty-Five Thousand Dollars ($55,000),
exclusive of tax, tags and title) for Employee's use. Company will pay all
insurance, operating, maintenance and repair costs in connection with any
automobile leased or purchased by Company for the benefit of Employee.

(b) Company will pay to Employee Five Hundred Dollars
($500) per month for reimbursement of expenses incurred by Employee in
connection with performance of Employee's duties hereunder, without receipt of
documentation therefor. In the event that Employee's reasonable and necessary
expenses incurred in performance of Employee's duties hereunder exceed $500 in
any month, Company will reimburse Employee for said expenses upon receipt of
documentation therefor in accordance with Company's regular reimbursement
procedures and practices in effect from time to time.

(c) Unless it is necessary for him to relocate out of the
Philadelphia/New Jersey region, Employee will be entitled to remain in his
current office and the facilities of Company shall be generally available to
Employee in the performance of Employee's duties, it being understood that all
equipment, supplies, secretarial staff and other office personnel required in
the performance of Employee's duties shall be supplied by Company.

(d) In the event it is necessary for Employee to relocate
out of the Philadelphia/New Jersey region in order to fulfill his obligations
to Company under this Agreement, Company shall pay all reasonable moving
expenses of Employee, net of any taxes attributable to Employee.

7. Disability. If Employee suffers a Disability, Company may
terminate this Agreement at any time thereafter by giving Employee ten (10)
days written notice of termination. In the event that Company terminates this
Agreement under this Section 7, Company shall be obligated to pay to Employee,
in one lump sum or weekly at Employee's option, six (6) months Base
Compensation (plus unused vacation and sick leave). In addition, Company
shall assign and transfer to Employee all rights to any life insurance
policies insuring the life of Employee and all rights under any employee
benefit plans (including Company's 401(k) Plan) in which Employee is vested at
the effective date of such termination. Thereafter, Company shall have no
further obligations to Employee.

8. Death. If Employee dies during the Term of Employment, this
Agreement shall automatically terminate. Thereafter, Company shall have no
further obligations to Employee's estate.

9. Resignation upon Change of Control. Notwithstanding any
other provision of this Agreement, Employee may resign upon Change of Control,
at any time within twelve (12) months of such Change of Control, upon thirty
(30) days' written notice by Employee to Company. In such an event, Company
shall pay to Employee, in one lump sum or weekly at Employee's option,
Employee's Base Compensation at the current rate for the remainder of the then
existing Term of Employment (plus unused vacation and sick leave). In
addition, Company shall transfer title to the automobile used by Employee,
without cost to Employee, free and clear of any liens, claims or encumbrances
and shall assign and transfer to Employee all rights to any life insurance
policies insuring the life of Employee and all rights under any employee
benefit plans (including Company's 401(k) Plan) in which Employee is vested at
the effective date of such termination. Thereafter, Company shall have no
further obligations to Employee. Company may waive Employee's obligation to
work during this 30-day notice period and terminate Employee's employment and
this Agreement immediately; provided, however, that such termination does not
relieve Company of its obligations to Employee as set forth in this Section 9.

10. Resignation Without Good Reason. Notwithstanding any other
provision of this Agreement, Employee may resign for any or no reason, upon
ninety (90) days' written notice by Employee to Company. Company may waive
Employee's obligation to work during this 90-day notice period and terminate
Employee's employment and this Agreement immediately, but if Company takes
this action in the absence of agreement by Employee, Employee shall receive
the Base Compensation which would otherwise be due through the end of the
notice period. After June 30, 1998, if Employee resigns under this Section
10, Company shall be obligated to pay to Employee, in one lump sum or weekly
at Employee's option, six (6) months Base Compensation (plus unused vacation
and sick leave). In addition, Company shall assign and transfer to Employee
all rights to any life insurance policies insuring the life of Employee and
all rights under any employee benefit plans (including Company's 401(k) Plan)
in which Employee is vested at the effective date of such termination.
Thereafter, Company shall have no further obligations to Employee.

11. Termination of Business. If Company shall discontinue the
business operation in which Employee is employed, Company may terminate this
Agreement by giving Employee ten (10) days written notice of termination. In
the event that Company terminates this Agreement under this Section 11,
Company shall be obligated to pay to Employee, in one lump sum payment or
weekly at Employee's option, Employee's Base Compensation at its then current
rate for the remainder of the then existing Term of Employment. In addition,
Company shall transfer title to the automobile used by Employee, without cost
to Employee, free and clear of any liens, claims or encumbrances and shall
assign and transfer to Employee all rights to any life insurance policies
insuring the life of Employee and all rights under any employee benefit plans
(including Company's 401(k) Plan) in which Employee is vested at the effective
date of such termination. Thereafter, Company shall have no further
obligations to Employee.

12. Termination for Cause. Company may terminate this Agreement
for Cause, in which event Company shall have no further obligations or
liabilities hereunder after the date of such termination.

13. Termination for No Cause. Company may terminate this
Agreement for no Cause, which termination shall be effective sixty (60) days
after notice of the same. Upon such termination, Company shall pay Employee,
in one lump sum or weekly at Employee's option, an amount equal to the greater
of six (6) months Base Compensation or Employee's Base Compensation at the
then current rate for the remainder of the then existing Term of Employment
(plus unused vacation time and sick leave). In addition, Company shall assign
and transfer to Employee all rights to any life insurance policies insuring
the life of Employee and all rights under any Employee benefit plans
(including Company's 401(k) Plan. Company shall also transfer title to the
automobile used by Employee, without cost to Employee, free and clear of any
liens, claims or encumbrances. Thereafter, Company shall have no further
obligations to Employee. Company may waive Employee's obligation to work
during this 60-day notice period and terminate Employee's employment and this
Agreement immediately; provided, however, that such termination does not
release Company of its obligation to Employee as set forth in this Section 13.

14. Company Property. All advertising, sales, manufacturers'
and other materials or articles or information, including without limitation
data processing reports, customer sales analyses, invoices, price lists or
information, samples, or any other materials or data of any kind furnished to
Employee by Company or developed by Employee on behalf of Company or at
Company's direction or for Company's use or otherwise in connection with
Employee's employment hereunder, are and shall remain the sole and
confidential property of Company; if Company requests the return of such
materials at any time during or at or after the termination of Employee's
employment, Employee shall immediately deliver the same to Company.

15. Prior Agreements. Employee represents to Company (a) that
there are no restriction, agreements or understandings whatsoever to which
Employee is a party which would prevent or make unlawful his execution of this
Agreement or his employment hereunder, (b) that his execution of this
Agreement and his employment hereunder shall not constitute a breach of any
contract, agreement or understanding, oral or written, to which he is a party
or by which he is bound and (c) that he is free and able to execute this
Agreement and to enter into employment by Company.

16. Miscellaneous.

(a) Indulgences, Etc. Neither the failure nor any delay
on the party of either party to exercise any right, remedy, power or privilege
under this Agreement shall operate as a waiver thereof, nor shall any single
or partial exercise of any right, remedy, power or privilege preclude any
other or further exercise of the same or of any other right, remedy, power or
privilege, nor shall any waiver of any right, remedy, power or privilege with
respect to any occurrences be construed as a waiver of such right, remedy,
power or privilege with respect to any other occurrence. No waiver shall be
effective unless it is in writing and is signed by the party asserted to have
granted such waiver.

(b) Controlling Law. This Agreement shall be governed by
and construed in accordance with the laws of the State of New Jersey.

(c) Notices. All notices, requests, demands and other
communications required or permitted under this Agreement shall be in writing
and shall be deemed to have been duly given, made and received only when
delivered (personally, by courier service such as Federal Express, or by other
messenger) or when deposited in the United States mails, registered or
certified mail, postage prepaid, return receipt requested, addressed as set
forth below:

(i) If to Employee:

Richard E. Orbann
652 Adams Avenue
Langhorne, PA 19047

with copy, given in the manner prescribed above,
to:

Daniel Barrison, Esquire
Sherman, Silverstein, Kohl,
Rose & Podolsky
4300 Haddonfield Road, Suite 311
Pennsauken, NJ 08109

(ii) If to Company:
International Thoroughbred Breeders, Inc.
Route 70 and Haddonfield Road
Cherry Hill, New Jersey 08034
Attention: Chief Executive Officer

with a copy, given in the manner prescribed
above, to:

E. Gerald Riesenbach, Esquire
Cozen and O'Connor
1900 Market Street
Philadelphia, Pennsylvania 19103

Any party may alter the address to which communications or copies
are to be sent by giving notice of such change of address in conformity with
the provisions of this paragraph for the giving of notice.

(d) Binding Nature of Agreement. This Agreement shall be
binding upon and inure to the benefit of Company and its successors and
assigns and shall be binding upon Employee, his heirs and legal
representatives.

(e) Execution in Counterparts. This Agreement may be
executed in any number of counterparts, each of which shall be deemed to be an
original as against any party whose signature appears thereon, and all of
which shall together constitute one and the same instrument. This Agreement
shall become binding when one or more counterparts hereof, individually taken
together, shall bear the signatures of all of the parties reflected hereon as
the signatories.

(f) Provisions Separable. The provisions of this
Agreement are independent of and separable from each other, and no provision
shall be affected or rendered invalid or unenforceable by virtue of the fact
that for any reason any other or others of them may be invalid or
unenforceable in whole or in part.

(g) Entire Agreement. This Agreement contains the entire
understanding among the parties hereto with respect to the subject matter
hereof, and supersedes all prior and contemporaneous agreements and
understandings, inducements or conditions, express or implied, oral or
written, except as herein contained. This Agreement may not be modified or
amended other than by an agreement in writing.

(h) Paragraph Headings. The paragraph headings in this
Agreement are for convenience only; they form no part of this Agreement and
shall not affect its interpretation.

IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed and delivered as of the date first above written.

INTERNATIONAL THOROUGHBRED BREEDERS,
INC.

By:

Nunzio P. DeSantis, Chief
Executive Officer

RICHARD E. ORBANN

EXHIBIT 10.12
SETTLEMENT AGREEMENT

THIS AGREEMENT is made as of this 15th day of January, 1997, by and
between International Thoroughbred Breeders, Inc., a Delaware corporation with
offices located at Garden State Park, Route 70 and Haddonfield Road, Cherry
Hill, New Jersey 08034 ("ITB"), and Joel H. Sterns, an individual residing at
RD #1, Box 307, River Road, Titusville, New Jersey 08560 ("Sterns").

W I T N E S S E T H:

WHEREAS, ITB and Sterns entered into a certain written agreement, dated
as of May 14, 1996 (the "May Agreement") whereby ITB engaged Sterns to serve
ITB and its subsidiaries as ITB's Chairman of the Board of Directors and to
provide non-legal, executive type services of the type normally provided by a
senior executive, and Sterns accepted such engagement upon the terms and
conditions and for the consideration set forth in the May Agreement; and

WHEREAS, ITB terminated the May Agreement with Sterns on our about
November 2, 1996; and

WHEREAS, the May Agreement provides, inter alia, that upon termination,
Sterns shall be entitled to certain payments and that ITB shall have certain
continuing obligations to Sterns relating to certain stock options, corporate
agent indemnification and the maintenance of Officers' and Directors'
Liability Insurance; and

WHEREAS, the parties have compromised and settled their respective
rights and obligations arising out of and related to the May Agreement and the
termination thereof, and wish to memorialize the terms and conditions of their
settlement in this agreement;

NOW, THEREFORE, in consideration of the mutual covenants herein
contained, the sufficiency whereof is hereby acknowledged, and intending to be
legally bound hereby, the parties hereto agree as follows:

1. Termination Payment: In full and final settlement of all salary,
reimbursable expenses and termination payments to which Sterns is
or may be entitled by virtue of the May Agreement and/or the
termination thereof, ITB shall pay Sterns the sum of $252,000.00
(the "Termination Payment"), payable as follows:

(a) $60,000.00 upon the earlier of the date of execution of this
agreement or January 15, 1997; and
(b) $15,000.00 per month, commencing on January 15, 1997 and
continuing on the fifteenth day of each successive month
thereafter through and including December 15, 1997, for a
total of $180,000.00; provided, however, that if the
fifteenth day of any such month shall fall on a Saturday,
Sunday or legal holiday, then the payment for such month
shall be made on the first day immediately thereafter that
is not a Saturday, Sunday or legal holiday; and
(c) $12,000.00 on June 15, 1997.

2. Outstanding Invoices: The Termination Payment provided for in
Paragraph 1 hereof is inclusive of the amounts billed to ITB under
Sterns & Weinroth, P.C. Invoices No. 10000-0001-016, dated
November 15, 1996, and 50276-00002-027, dated November 15, 1996,
and 50276-0002-029 dated December 31, 1996 as well as any amount
sunder the May Agreement or otherwise that were unbilled as of the
date of this agreement.

3. Default: (a) If ITB should fail to pay the full amount of any
installment of the Termination Payment on its due date or within
ten (10) days thereafter, Sterns shall provide written notice of
non-payment and potential default to ITB. If ITB should fail to
pay the subject installment in full within ten (10) days of the
date of such notice (or, if the tenth day after the date of such
notice shall be a Saturday, Sunday or legal holiday, then on the
first day immediately thereafter that is not a Saturday, Sunday or
legal holiday), ITB shall be in default of its obligations under
this agreement.

(b)In the event of its default under this agreement, ITB hereby
agrees that Sterns may institute suit against ITB to recover the
sum of $400,000.00 less any payments made on account of the
Termination Payment prior to default, and, in the event that such
suit is instituted, ITB hereby waives any and all defenses, except
payment, with respect thereto. ITB acknowledges that the
aforesaid sum is not in the nature of a penalty, but, rather, has
been specifically fixed in recognition of the fact that but for
the settlement memorialized in this agreement, Sterns had a claim
(albeit disputed by ITB) that he was entitled to a total of
$540,172.62 from ITB on account of its termination of the May
Agreement.

(c) In the event that prior to payment of the full amount of the
Termination Payment to Sterns, a trustee or receiver for ITB or
its assets is appointed by any court of competent jurisdiction, or
a proceeding is initiated by or against ITB under any provisions
of the Bankruptcy Code or any insolvency law, or ITB makes an
assignment for the benefit or creditors, then, in any of such
events, ITB agrees that Sterns shall be entitled to file a claim
in the amount of $540,172.62, less any payments previously made by
ITB on account of the Termination Payment. ITB shall not contest
the merits or the amount of such claim.

4. Stock Options: ITB represents and warrants to Sterns that the
stock options referred to in Paragraph 3.4 of the May Agreement
were validly issued, are in full force and effect and are legally
enforceable according to their terms and conditions.
Simultaneously with the execution and delivery of this agreement,
ITB shall execute and deliver to Sterns the "customary agreement"
referred to in Paragraph 3.4 of the May Agreement, as well as a
copy of all plans governing such stock options.

5. Release: Subject to their respective rights and obligations under
this agreement, the parties hereto, on behalf of themselves and
their respective parents, subsidiaries, affiliates, predecessors,
successors, assigns, officers, directors, agents, servants,
employees, heirs and personal or legal representatives, as the
case may be, hereby remise, release and discharge each other, and
their respective parents, subsidiaries, affiliates, predecessors,
successors, assigns, officers, directors, agents, servants,
employees, heirs and personal or legal representatives, as the
case may be, of and from all claims, actions, causes of actions
liability, costs, losses, expenses, damages and demands
whatsoever, in law or in equity, whether known or unknown, arising
out of or related to the May Agreement and/or the termination
thereof: provided however, that notwithstanding anything herein to
the contrary; (a) ITB shall not be released from its obligations
under Paragraphs 1.6 and 1.8 of the May Agreement pertaining,
respectively, to the maintenance of Officers' and Directors'
Liability Insurance and corporate agent indemnification; and (b)
Sterns' release shall not apply to or affect any of his rights,
title or interests in and to the stock options that were granted
to him by ITB pursuant to Paragraph 3.4 of the May Agreement.

6. Attorney's Fees: In the event that Sterns institutes any claim,
action or proceeding in order to enforce any of the provisions of
this agreement or to collect any sums due hereunder, and any
order, decree, award or judgment is entered in Sterns' favor,
then, in addition to any relief, judgment, award, costs, damages
or recovery incurred in connection with such claim, action or
proceeding and ITB shall be liable to Sterns for the payment
thereof.

7. Miscellaneous:
(a) Notice: All notices, demands, request or other communications
required or permitted under this agreement shall be in writing and
shall be deemed to have been received only if delivered
personally, by Federal Express or other overnight delivery service
(with confirmation of receipt) or by registered or certified mail,
return receipt requested, in a postage prepaid envelope, and
addressed to the recipient party at the address noted above or to
such other address for which notice of change of address has been
provided in accordance herewith.

(b) Severability. The provisions of this agreement are severable.
Any determination by any court or tribunal of competent
jurisdiction that any provision of this agreement is invalid, void
or unenforceable shall have no effect upon any other provisions(s)
hereof.

(c) No Reliance. With respect to the matters set forth herein,
each party hereto acknowledges that is has investigated the facts
and circumstances related thereto to its satisfaction and is not
relying upon any expectation or duty of disclosure by the other
party, except as expressly recited herein.

(d) Governing Law. This agreement shall be governed by and
construed and enforced in accordance with the laws of the State of
New Jersey without regard to its conflicts of laws principles.

(e) Binding Effect. This agreement is binding upon and shall
inure to the benefit of the parties hereto and their respective
parents, subsidiaries, affiliates, predecessors, successors,
assigns, officers, directors, agents, servants, employees, heirs
and personal or legal representatives as the case may be.

(f) Entire Agreement. This agreement and Exhibit "A" appended
hereto and incorporated herein sets forth the final, complete and
integrated understanding and agreement between the parties with
respect to the subject matter hereof. Any prior oral or written
understandings, representations or agreements with respect to the
subject matter hereof are merged herein and superceded hereby,
except as otherwise provided herein.

(g) Modification or Waiver. No modification, amendment or waiver
of this agreement, or of any provision hereof, or of any rights or
obligations established hereby, shall be valid, effective or
enforceable unless set forth in writing and signed by both parties
hereto.

(h) Due Authorization. ITB represents and warrants to Sterns that
its execution, delivery and performance of this agreement has been
duly authorized by all necessary corporation actions, and is valid
and binding upon ITB.

(i) Headings. Paragraph headings contained in this agreement are
for convenience of reference only, and shall not affect the
validity, construction or enforcement hereof.

IN WITNESS WHEREOF, the parties hereto have each duly executed this
agreement as of this date first written above.

ATTEST: INTERNATIONAL THOROUGHBRED
BREEDERS, INC.

s/sChristopher C. Castens By:/s/Robert J. Quigley

WITNESS:

/s/Joel H. Sterns

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