INTERNATIONAL THOROUGHBRED BREEDERS INC, 10-K, 2000-10-13

INTERNATIONAL THOROUGHBRED BREEDERS INC
10-K, 2000-10-13
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, 2000

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: (856) 488-3838

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

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

COMMON STOCK, $2.00 PAR VALUE
SERIES A CONVERTIBLE PREFERRED STOCK, $100 PAR VALUE

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. [ ]

Based on the closing sale price on October 6, 2000 the aggregate market value
of the voting stock held by non-affiliates of the Registrant was $1,697,461.

The number of shares outstanding of the Registrant's Common Stock was 8,980,260
at October 6, 2000.

<PAGE>

INTERNATIONAL THOROUGHBRED BREEDERS, INC.

FORM 10-K

INDEX
-----
PART I PAGE
------ ----
Item 1 Business 1

Item 2 Properties 6

Item 3 Legal Proceedings 6

Item 4 Submission of Matters to a Vote of Security Holders 10

PART II
-------
Item 5 Market for Registrant's Common Equity and Related
Stockholder Matters 11

Item 6 Selected Financial Data 12

Item 7 Management's Discussion and Analysis of
Financial Conditions and Results of Operation 13

Item 7A Quantative and Qualitative Disclosures
About Market Risk 19

Item 8 Financial Statements and Supplemental Data 19

PART III
--------
Item 10 Directors and Executive Officers of
the Registrant 58

Item 11 Executive Compensation 61

Item 12 Security Ownership of Certain Beneficial
Owners and Management 65

Item 13 Certain Relationships and Related Transactions 66

PART IV
-------
Item 14 Exhibits, Financial Statement Schedules
and Reports on Form 8-K 70

<PAGE>

PART I

ITEM 1 - BUSINESS

GENERAL

International Thoroughbred Breeders, Inc. ("ITB"), a Delaware corporation,
is a holding company incorporated on October 31, 1980. Until January 28, 1999
when the Company completed the sale of Freehold Raceway, the sale of a ten-acre
parcel at Garden State Park and the lease of the Garden State Park facilities to
subsidiaries of Greenwood Racing, Inc., (the "Greenwood Transaction"), ITB was
primarily engaged through its operating subsidiaries, in (i) the ownership and
operation of standardbred and thoroughbred racetracks in New Jersey (the
"Racetrack Operations") and until May 22, 2000 when the Company completed the
sale of the non-operating former El Rancho Hotel and Casino(ii) the ownership of
a non-operating casino property in Las Vegas, Nevada (the "Casino Development
Operations"). ITB owns and operated until January 28, 1999 Garden State Park in
Cherry Hill, New Jersey (through its wholly-owned subsidiary Garden State Race
Track, Inc.) and also owned and operated 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.)
until it completed the sale of all the assets of Freehold Raceway and the lease
of the Garden State Park operations to Greenwood New Jersey, Inc. ("Greenwood"),
a wholly-owned subsidiary of Greenwood Racing, Inc. which is the operator of
Philadelphia Park., on January 28, 1999. The Greenwood Transaction was
subsequently amended to include Penn National Gaming, Inc. ("Penn National") as
a 50% joint venture between Greenwood and Penn National (the "Pennwood
Transaction"). See "Racing Operations" below. ITB also owned 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) until it
completed the sale of the property on May 22, 2000 to Turnberry/Las Vegas
Boulevard, LLC ("Turnberry"). See "Casino Development Operations," On January
25, 2000, the Company entered into agreements to sell the Garden State Park
property. See "Developments During the Last Fiscal Year" below. As used in this
Form 10-K, the term "Company" includes ITB and its wholly-owned subsidiaries.

In April 1998, the Company's Board of Directors (the "Board") authorized
the exploration of strategic opportunities for the Company, including a possible
merger or sale of all of the Company's assets and prior to June 30, 1998, the
Company decided to dispose of its racetracks. On January 28, 1999, the Company
completed the sale of all of the real property and related assets at Freehold
Raceway and the lease of the real property and related assets at Garden State
Park to Greenwood, subsequently amended to include the Pennwood Transaction
("Pennwood"). Accordingly, operating results of the Company's racetrack
subsidiaries have been segregated and reported as discontinued operations in the
accompanying financial statements for each of the two years ended June 30, 1999
and 1998.

During the year ended June 30, 2000, the Company incurred a loss before
discontinued operations of ($6,980,831) as compared to a loss before
discontinued operations of ($16,034,769) for the year ended June 30, 1999.
Revenue before discontinued operations for the year ended June 30, 2000
decreased $31,737 from $478,325 in Fiscal 1999 to $446,588 in Fiscal 2000 and
expenses before discontinued operations decreased $9,085,675 or 55%, from
$16,513,094 in Fiscal 1999 to $7,427,419 in Fiscal 2000. In Fiscal 1999, the
Company recognized a gain of $3,657,688 on the sale of Freehold Raceway, the
sale of a ten-acre parcel at the Garden State Park facility and the lease of the
Garden State Park facilities in addition to income from discontinued racetrack
operations of $4,486,384 for the year ended June 30, 1999. The Company incurred
a net loss of ($6,980,831) for the year ended June 30, 2000 as compared to a net
loss of ($7,890,697) for the comparable period in Fiscal 1999. See "Management's
Discussion and Analysis of Financial Conditions and Results of Operations."

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As of September 22, 2000, ITB employed six full-time corporate executive,
administrative and clerical personnel.

On January 28, 1999, the Company completed the sale of Freehold Raceway,
the sale of a ten-acre parcel at Garden State Park and the lease of the Garden
State Park facilities to subsidiaries of Greenwood Racing, Inc., which owns
Philadelphia Park racetrack, the Turf Clubs and Phonebet (the "Greenwood
Transaction"). The purchase price was $46 million ($1 million of which will be
held in escrow to cover certain indemnification and other obligations of the
Company), with an additional $10 million in contingent promissory notes (the
"Contingent Notes") which become effective upon, among other things, the New
Jersey Legislature's approval of off-track betting facilities or telephone
account pari-mutuel wagering on horse racing. Further adjustments could be made
to increase the purchase price if certain additional regulatory gaming changes
are approved by the New Jersey Legislature in the future. Greenwood Racing, Inc.
has guaranteed the performance by the purchaser of all obligations under the
Contingent Notes, and Pennwood Racing, Inc. ("Pennwood "), a joint venture
between Greenwood Racing, Inc. and Penn National Gaming, Inc. ("Penn National"),
which owns Penn National Race Course, Pocono Downs Racetrack, Charles Town Races
and at least ten off-track betting parlors in Pennsylvania, has also guaranteed
the Contingent Notes.

On January 21, 2000, after obtaining the written consent of the holders of
a majority of the outstanding shares of stock of the Company entitled to vote
thereon, the Company entered into a restructuring agreement (the "Restructure
Agreement") with its primary lender, Credit Suisse First Boston Mortgage Capital
LLC, ("Credit Suisse"). Prior to this agreement, the Company had been in a
maturity default with Credit Suisse for its loan due on June 1, 1999 (the "CSFB
Loan") in the principal amount of $30,500,000 plus unpaid interest since June 1,
1999. The Restructure Agreement returned the loan to a good standing position
and extended the maturity date of the CSFB Loan to June 30, 2000. See
"Developments During the Last Fiscal Year" below.

Pursuant to the Restructure Agreement, Garden State Race Track, Inc.
transferred title to the Garden State Race Track to GSRT, LLC ("GSRT"), a
Delaware limited liability company in which Garden State Race Track, Inc. is the
sole member, the result of which effects no change in real ownership.
Pursuant to the limited liability company agreement of GSRT entered into in
connection with the Restructure Agreement, Garden State Race Track, Inc. may
cause GSRT to enter into an arm's-length sale or joint venture of the Garden
State Property under certain enumerated circumstances and conditions, including
that the purchase price for such sale or joint venture be at least equal to
fifty-percent of the combined outstanding principal balance of the CSFB Loan and
the Trustee Note, which amount must be paid to Credit Suisse, and the contract
for such sale or joint venture be entered into on or prior to January 25, 2000
(the "GSRT Option").

On January 25, 2000, the Company and Garden State Race Track, Inc., the
owner of Garden State Park, entered into an agreement for the sale of all of the
Garden State Park property, excluding a ten-acre parcel of land previously
committed to GS Park Racing, L.P., to Turnberry/Cherry Hill, LLC. The terms of
the sale meet all the conditions required by Credit Suisse to be a valid GSRT
Option, according to a letter received from Credit Suisse. Under the Agreement
of Sale, as amended, the purchase price for the Garden State Park real property
is $30 million, plus assumption of certain monetary obligations of the Company
with respect to the property sold which aggregate approximately $500,000. At
closing, $20 million of the purchase price will be payable in cash (of which the
Company has already received deposits of $1,000,000), and the buyer will deliver
its promissory note in the face amount of $10 million. See "Developments During
the Last Fiscal Year" below and Management's Discussion and Analysis of
Financial Conditions and Results of Operations."

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<PAGE>

RACETRACK OPERATIONS

GARDEN STATE PARK

Garden State Park is owned and was operated until January 28, 1999 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 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") can be used 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.

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.

On May 22, 2000, the Company, through its wholly-owned subsidiary, Orion
Casino Corporation,

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closed on the sale (the "El Rancho Transaction") of the non-operating former El
Rancho Hotel and Casino (the "El Rancho Property") in Las Vegas, Nevada, to
Turnberry/Las Vegas Boulevard, LLC ("Turnberry"). The purchase price was $45
million and was paid by: (i) previous cash deposits totaling $2,000,000; and
(ii) the balance of the purchase price paid in cash at the closing. The Company
used a portion of the proceeds to purchase a promissory note of the buyer in the
amount of $23,000,000 which will be convertible at the Company's option into a
33 1/3% equity interest in the buyer. See "Developments During the Last Fiscal
Year" below and "Management's Discussion and Analysis of Financial Conditions
and Results of Operations."

DEVELOPMENTS DURING THE LAST FISCAL YEAR

Effective December 3, 1999, the Board of Directors accepted the
resignation of Christopher C.
Castens, the Company's Secretary and General Counsel. See "Termination and
Severance Agreements."

On January 21, 2000 after obtaining the written consent of the holders of a
majority of the outstanding shares of stock of the Company entitled to vote
thereon, the Company entered into a restructuring agreement (the "Restructure
Agreement") with its primary lender, Credit Suisse First Boston Mortgage Capital
LLC, ("Credit Suisse"). Prior to this agreement, the Company had been in a
maturity default with Credit Suisse for its loan due on June 1, 1999 (the "CSFB
Loan") in the principal amount of $30,500,000 plus unpaid interest since June 1,
1999.

The Restructure Agreement returned the loan to a good standing position and
extended the maturity date of the CSFB Loan to June 30, 2000. As part of the
Restructure Agreement, the Company agreed that as of January 21, 2000, the
restructured principal balance due on the CSFB Loan was $33,103,189, which
consisted of: (i) the principal amount of $30,500,000 remaining on the CSFB
Loan; (ii) accrued interest advanced by Credit Suisse from June 1, 1999 to
January 21, 2000 in the amount of $2,523,189; and (iii) an advance of a portion
of Credit Suisse's legal fees incurred in connection with the Restructure
Agreement in the amount of $80,000. Credit Suisse has agreed, pursuant to the
Restructure Agreement, to advance the monthly interest payments due by the
Company under the CSFB Loan until April 15, 2000. Such interest amounts shall,
to the extent not paid when due by the Company, become part of the outstanding
principal balance of the CSFB Loan on the date such interest becomes due.

In connection with the Restructure Agreement, the Chapter 11 Bankruptcy
Trustee (the "Trustee") for the estate of Robert E. Brennan, to whom the Company
and its subsidiaries Garden State Race Track, Inc. and Orion Casino Corporation
are indebted to in the remaining principal amount of $3,652,226, as evidenced by
a note dated January 28, 1999 (the "Trustee Note"), entered into an agreement
with the Company wherein: (i) the amounts due under the Trustee Note are due at
the earlier of (a) June 1, 2000 or (b) the date on which the latter of the
Garden State Park or El Rancho property is sold, provided that the sale of the
latter will satisfy the remaining balance on the CSFB Loan and the Trustee Note;
(ii) all interest due under the Trustee Note will be accrued and deferred until
the maturity date of the Note; and (iii) the Company shall reimburse the Trustee
for legal and accounting fees up to $20,000, which amount will be advanced by
the Trustee and added to the outstanding principal balance of the Trustee Note.

Pursuant to the Restructure Agreement, the Company paid at closing: (i)
legal fees in the amount of $146,000 which were incurred by Credit Suisse in
connection with the Restructure Agreement; (ii) real estate transfer taxes in
the amount of $56,275 on behalf of Garden State Race Track, Inc. in connection
with the transfer discussed below; and (iii) loan servicing fees in the amount
of $7,174. Credit Suisse released to the Company $167,476 of funds held in
various escrow accounts in connection with the CSFB Loan which will be used by
the Company for working capital purposes.

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On January 25, 2000, the Company entered into an Agreement of Sale pursuant
to which it has agreed to sell the real property known as Garden State Park to
Turnberry/Cherry Hill LLC. The terms of the sale meet all the conditions
required by Credit Suisse to be a valid GSRT Option, according to a letter
received from Credit Suisse. Under the Agreement of Sale, as amended, the
purchase price for the Garden State Park real property is $30 million, plus
assumption of certain monetary obligations of the Company with respect to the
property sold which aggregate approximately $500,000 (the "Assumed Liability").
The buyer also agreed to pay up to $200,000 per month of the Company's
out-of-pocket carrying costs of the Garden State Park property after April 15,
2000 (which includes interest on the Company's mortgage debt). At closing, $20
million of the purchase price will be payable in cash (of which the Company has
already received a deposits of $1,000,000), and the buyer will deliver its
promissory note in the face amount of $10 million (the "Note"). Under the Note,
once the buyer has received distributions from the buyer equal to the amount of
its invested capital contributions plus an agreed upon return thereon, the next
$10 million of the buyer's distributable cash would be paid under the Note to
the Company, and the Company thereafter would receive payments under the Note
equal to one-third of the distributable cash of the buyer, including (without
limitation) distributable cash generated by development, sale or leasing of the
Garden State Park property. The agreed upon rate of return to be paid to buyer's
owner on its invested capital contributions, before payments under the Note will
be made, will be 15% per year, except that the rate of return on capital
invested by buyer's owner to cover certain costs, in excess of $1,000,000, which
buyer may incur in respect of the Assumed Liability, environmental investigation
and remediation, and various other specified items (including the September
extension fee of $146,680 paid to the Company's primary lender, CSFB), may be as
high as 33 1/3% per annum. Closing is scheduled to occur prior to December 1,
2000. The parties continue to negotiate certain issues and there can be no
assurance that the transaction will be consummated. See "Management's Discussion
and Analysis of Financial Conditions and Results of Operations."

On February 24, 2000, the Company sold several pieces of artwork to Robert
E. Brennan Jr., son of the Company's former Chairman and Chief Executive
Officer. The $218,000 sales price of the artwork was in excess of the original
cost of $186,600. The Company recorded a $31,400 gain on the sale in Fiscal
2000. In addition, the Company purchased two large bronze sculptures located on
the Garden State Park property that were previously on loan to the Company from
Mr. Brennan Jr. The purchase price of the sculptures was $700,000. In connection
with the transaction, the Company signed a $482,000 promissory note with Mr.
Brennan Jr. which represented the purchase price of the sculptures less the
sales price of the artwork sold to Mr. Brennan Jr. The note is due on January
31, 2002 without interest if the principal is paid on or before January 31,
2002. Any amounts not paid prior to January 31, 2002 will accrue interest at 8%
On July 27, 2000 the Company received a notice from the Chapter 11 Trustee for
the bankruptcy estate of Robert E. Brennan asserting certain ownership rights in
a number of items on loan to the Company, including the sculptures mentioned
above.

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On May 22, 2000, the Company, through its wholly-owned subsidiary, Orion
Casino Corporation, closed on the sale (the "El Rancho Transaction") of the
non-operating former El Rancho Hotel and Casino (the "El Rancho Property") in
Las Vegas, Nevada, to Turnberry/Las Vegas Boulevard, LLC ("Turnberry"). The
purchase price was $45 million and was paid by: (i) previous cash deposits
totaling $2,000,000; and (ii) the balance of the purchase price paid in cash at
the closing. The proceeds of the El Rancho Transaction were principally used by
the Company to reduce the outstanding balance on the Company's loan from Credit
Suisse First Boston Mortgage Capital LLC ("Credit Suisse") to $14.7 million and
to purchase a promissory note, secured by the rights to 100% of the
distributable cash of the buyer in the event of default, of the buyer in the
amount of $23,000,000 which will be convertible at the Company's option into a
33 1/3% equity interest in the buyer. The interest rate will be adjusted from
time to time since the interest actually payable will be dependent upon, and
payable solely out of, the buyer's net cash flow available for distribution to
its equity owners ("Distributable Cash"). After the equity investors in the
buyer have received total distributions equal to their capital contributions
plus an agreed upon return on their invested capital, the next $23 million of
Distributable Cash will be paid to the Company. The Company will thereafter
receive payments under the note equal to 33 1/3% of all Distributable Cash until
the maturity date, which occurs on the 30th anniversary of the Company's
purchase of the note. The Company may convert the promissory note, at its
option, into a 33 1/3% equity interest in the buyer during a six month period
beginning at the 15th anniversary of the issuance of the note. If not then
converted, the note will convert into a 33 1/3% equity interest in the buyer at
the 30th anniversary of its issuance. See "Management's Discussion and Analysis
of Financial Conditions and Results of Operations."

ITEM 2 - PROPERTIES

In addition to Garden State Park described above, the Company owns a
condominium unit and an ownership interest in the Ocala Jockey Club located in
Reddick, Florida. This property was purchased at a time when the Company was in
the thoroughbred breeding business and is currently being held for the purpose
of generating rental income until such time that it is sold.

ITEM 3 - LEGAL PROCEEDINGS

DELAWARE SETTLEMENT

On January 28, 1999, the Company fully and finally consummated the
settlement and dismissal of the following actions: Quigley et al. v. DeSantis et
al., C.A. No. 15919, in the Court of Chancery of the State of Delaware; Rekulak
v. DeSantis et al., C.A. No. 15920, in the Court of Chancery of the State of
Delaware; Green v. DeSantis, et al., C.A. No. 97-CV-5657, in the New Jersey
District Court. These actions were settled in connection and accordance with the
Stipulation and Agreement of Compromise, Settlement and Release entered into on
July 2, 1998 to resolve the above action entitled Quigley et al. v. DeSantis et
al. (the "Delaware Settlement").

Pursuant to the terms of the Delaware Settlement, the Company purchased
from NPD, Inc. ("NPD") approximately 2.9 million shares of the Company's common
stock (the "NPD Shares") for $4.6 million in cash and assumed a $5.8 million
promissory note originally issued by NPD to acquire the NPD Shares, held by
Donald F. Conway, Chapter 11 Trustee for the Bankruptcy Estate of Robert E.
Brennan (the "Bankruptcy Trustee"). In addition, pursuant to the terms of the
Delaware Settlement and with the approval of the United States Bankruptcy Court
for the District of New Mexico in an action in which AutoLend Group, Inc. is the
debtor, NPD returned to AutoLend Group, Inc. the $2 million originally pledged
by AutoLend Group, Inc. to secure the aforementioned $5.8 million promissory
note (the "NPD Note"). The Company understands that the Company's former
director Nunzio P. DeSantis is Chairman, President and a principal stockholder
of AutoLend Group, Inc., and the Company's former chairman and director Anthony
Coelho is a director of AutoLend Group, Inc.

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The approval of certain transactions between ITB and the Bankruptcy Trustee
by the United States Bankruptcy Court for the District of New Jersey in the
action entitled In re Robert E. Brennan, C.A. No. 95-35502, was a condition
precedent to the consummation of the Delaware Settlement. This approval was duly
received and the Company consummated a separate settlement with the Bankruptcy
Trustee necessary to consummate the Delaware Settlement (the "Trustee
Settlement"). Pursuant to the Trustee Settlement, the Bankruptcy Trustee
received: (a) a pay down on the NPD Note from the original principal balance of
$5,808,032 to $3,558,032 (see Note11-B); (b) a promissory note from ITB in the
amount of $3,558,032 (the "ITB Note"), on substantially the same terms as the
NPD Note, except that the ITB Note becomes due and payable on the earlier to
occur of (i) January 15, 2001, or (ii) the closing of either the sale of the
Company's non-operating El Rancho hotel and casino property in Las Vegas, Nevada
(the "El Rancho Property"), or the sale of Garden State Park (the "Garden State
Property"); (c) a security interest in the NPD Shares; (d) the payment of the
costs and expenses incurred by the Bankruptcy Trustee in connection with the
Delaware Settlement and the Trustee Settlement; (e) subordinate interests in
both the El Rancho Property and the Garden State Property; and (f) an escrow of
the July 15, 1999 interest payment due on the ITB Note. As a result of the
Trustee Settlement, the Company secured (a) the power to consummate the Delaware
Settlement, (b) releases from the Bankruptcy Trustee in favor of all parties to
the Delaware Settlement, including the Company, and (c) the right to defer
certain interest payments due under the ITB Note until the maturity of such
note.

Upon consummation of the Delaware Settlement, Nunzio P. DeSantis, Anthony
Coelho, and Joseph Zappala immediately resigned from the Company's board of
directors and terminated any and all employment agreements or consulting
arrangements with the Company. Francis W. Murray and Robert J. Quigley remained
directors, and during the quarter ended March 31, 1999, John U. Mariucci and
James J. Murray were elected by the remaining directors to serve on the board of
directors until the next annual stockholders' meeting.

Also pursuant to the Delaware Settlement, Las Vegas Entertainment Network,
Inc. ("LVEN") was granted the exclusive right to sell the El Rancho Property
until November 20, 1998 and the co-extensive right, along with the Company, to
sell the El Rancho Property until April 19, 1999. Beginning January 19, 1999,
and ending upon the earlier of a sale of the El Rancho Property or April 19,
1999, LVEN was required to pay one-half of the carrying costs associated with
maintaining the El Rancho Property. LVEN also obtained the right, exercisable
from March 20, 1999 until April 19, 1999, to refinance the El Rancho Property
and thereby obtain the extended right to sell the El Rancho Property until the
earlier of (a) one year from April 19, 1999 or (b) the midpoint of the term of
the refinancing loan (the "Refinancing Option"). LVEN did not sell the El Rancho
Property nor did it exercise the Refinancing Option. If the Company sells or
refinances the El Rancho property after April 19, 1999 for an amount in excess
of $44,200,000, plus one half of the carrying costs from January 20, 1999 to
April 19, 1999, plus the customary transaction costs incurred by the Company in
such sale (the "Threshold Amount"), then LVEN shall receive from such cash
proceeds in excess of the Threshold Amount up to the amount of $12,000,000 of
cash sale proceeds over and above the Threshold Amount, out of which LVEN will
direct that the first $2,000,000 be paid over to NPD. NPD is owned by Nunzio
DeSantis, the Company's former Director and CEO and Tony Coelho, the Company's
former Director and Chairman of the Board. On May 22, 2000, the Company closed
on the sale of the El Rancho property for $45,000,000 in cash. Interest and
one-half of the carrying costs for the period between January 20, 1999 to April
19, 1999 were in excess of $800,000, therefore, no payments are due to LVEN as a
result of the transaction.

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plus accrued interest from ITB to LVEN, which note remains canceled, (c)
released any and all LVEN or Casino-Co Corporation interests in the NPD Shares,
and (d) cancelled any and all agreements of any kind or nature whatsoever
between LVEN and its affiliates and ITB or any of its subsidiaries.

The foregoing summary of the terms and transactions relating to the
Delaware Settlement and the Trustee Settlement is qualified by reference to the
actual documents filed with the respective courts in the actions discussed
above.

HARRIS V. DESANTIS, ET AL.

The first New Jersey Action, filed on February 24, 1998 in the New Jersey
District Court, captioned Myron Harris, derivatively on behalf of International
Thoroughbred Breeders, Inc. 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-Federal"), C.A. No. 98-CV-
517(JBS), is a derivative suit brought by a stockholder of the Company. The
Harris-Federal complaint alleges that various individual defendants acted in
contravention of ITB's by-laws and their fiduciary duties by (i) causing the
Company to undertake various actions, including the issuance of a significant
amount of the Company's common stock, in violation of the Supermajority By-law;
(ii) usurping certain corporate opportunities allegedly belonging to ITB; and
(iii) causing the Company to fail to file current, audited financial statements.

On May 4, 1998, all defendants filed a motion to dismiss or stay the
Harris-Federal action, pending resolution of the Quigley action. On May 4, 1998,
the plaintiff filed an amended complaint to, among other things, add Howard J.
Kaufman, a stockholder of the Company, as an additional plaintiff.

As described more fully below, pursuant to the New Jersey Settlement, the
Harris-Federal action is to be fully and finally dismissed with prejudice, and
the parties are to provide mutual releases of all claims related to the action.
See "New Jersey Settlement."

HARRIS V. DESANTIS, ET AL.

A second New Jersey Action, filed on July 15, 1998 in the New Jersey
Superior Court, captioned Myron Harris and Howard Kaufman v. Nunzio P. DeSantis,
Anthony Coelho, Kenneth W. Scholl, Michael Abraham, Joseph Zappala, Frank A.
Leo, Robert J. Quigley and Charles R. Dees, Jr. ("Harris-State" and,
collectively with the Harris-Federal action, the "New Jersey Actions"),
Cam-L-5534-98, was a purported class action suit brought by the same plaintiffs
as the Harris-Federal action. The complaint alleged that the Harris-State
defendants breached their fiduciary duties to the Company's stockholders by
failing to file timely audited financial statements for the fiscal year ended
June 30, 1997, resulting in the indefinite suspension of trading of the
Company's stock on AMEX.

NEW JERSEY SETTLEMENT

8
<PAGE>

Jersey Memorandum provided that
the Proposed New Jersey Settlement would be submitted for approval to the New
Jersey Superior Court, that a fee petition would be submitted by plaintiffs'
attorneys in the New Jersey Actions for approval by the New Jersey District
Court, and that the Harris-Federal action would be dismissed on the grounds that
the plaintiffs' claims are barred and released as a result of the settlement and
dismissal of the Quigley Action by the Delaware Court of Chancery on October 6,
1998. Pursuant to the Proposed New Jersey Settlement, the plaintiffs agreed not
to file objections to the Delaware Settlement.

On June 17, 1999, the New Jersey Superior Court acted unilaterally to
dismiss the complaint in the Harris-State action filed under docket number
Cam-L-5534-98. On July 30, 1999, the plaintiffs in the Harris-State action filed
in the New Jersey Superior Court a second complaint, identical to the original
action and naming as defendants the same parties as the original complaint in
the Harris-State action, under docket number Cam-L-5620-99 (the "Second
Harris-State Complaint"). Subsequent to the filing of the Second Harris-State
Complaint, the terms of the Proposed New Jersey Settlement were amended to
expressly include the claims asserted by plaintiffs in the Second Harris-State
Complaint. Beginning in October 1999, plaintiffs in the Harris-State Action
began serving process of the Second Harris-State Complaint on certain of the
defendants.

On December 3, 1999, plaintiffs in the Harris-Federal action filed with the
New Jersey District Court a motion for an order enforcing the Proposed New
Jersey Settlement. On December 3, 1999, the New Jersey District Court entered an
order dismissing the Harris-Federal action without costs and without prejudice
to the plaintiffs' right to reopen the action within 60 days if the Proposed New
Jersey Settlement is not consummated. In light of the entry of this order, on
December 7, 1999, the New Jersey District Court dismissed as moot plaintiffs'
motion for an order enforcing the Proposed New Jersey Settlement.
On January 6, 2000, plaintiffs in the Harris-Federal action moved to vacate the
New Jersey District Court's dismissal order and to pursue the original motion to
enforce the Proposed New Jersey Settlement. On February 16, 2000, the New Jersey
District Court granted the plaintiffs' motion to vacate the dismissal order and
reopen the Harris-Federal action. The plaintiffs filed a second motion to
enforce the terms of the Proposed New Jersey Settlement on April 25, 2000.

On May 24, 2000, the parties to the New Jersey Actions agreed to and
executed a Stipulation of Settlement (the "New Jersey Settlement"). The New
Jersey Settlement provides that, subject to the approval of the New Jersey
District Court, the Company will pay, on behalf and for the benefit of the
individual defendants in the New Jersey Actions, the aggregate sum of $175,000
for plaintiffs' counsel fees and expenses in the New Jersey Actions. Any
incentive award to plaintiffs Harris and Kaufman would be paid out of this
$175,000 sum. Pursuant to the New Jersey Settlement, the Board will restructure
its Audit Committee of the Company so as to facilitate the procurement and
timely filing of audited financial statements in the future. Further, the ITB
Board will establish a Relisting Committee for the purpose of attempting to
secure the relisting of the Company's common stock on a public market. On June
21, 2000, in light of the parties' agreement to the terms of the New Jersey
Settlement, the New Jersey District Court dismissed as moot the plaintiffs'
second motion to enforce the proposed settlement.

Pursuant to the New Jersey Settlement, on June 30, 2000, the New Jersey
Superior Court certified preliminarily, for the settlement purposes only, a
plaintiff class (the "Class") consisting of all holders of the Company's stock
between October 13, 1997 (the date AMEX suspended trading of the Company's
stock) and June 30, 2000, the date the New Jersey Superior Court entered an
order approving the form of the proposed Notice of Settlement to the Class. On
July 13, 2000, pursuant to the New Jersey Settlement, the Company mailed to all
record holders of ITB stock within the Class period a Notice of Settlement of
the Harris-State action and a Notice of Dismissal of the Harris-Federal action.

On August 21, 2000, the New Jersey Superior Court held a hearing to
consider the fairness of the

9
<PAGE>

New Jersey Settlement to the Class. At the
conclusion of the hearing, the New Jersey Superior Court entered an order (i)
certifying the Class pursuant to New Jersey Rule 4:32; (ii) approving the New
Jersey Settlement as fair, reasonable, adequate and in the best interests of the
Class; (iii) dismissing the Harris- State action with prejudice; and (iv)
releasing all Class claims against the defendants arising from and relating to
the facts alleged in the Second Harris-State Complaint.

On September 26, 2000, the New Jersey Federal Court held a hearing to
consider the proposed dismissal of the Harris-Federal action and the application
by plaintiffs' counsel for payment of attorneys' fees and expenses incurred in
connection with pursuing the New Jersey Actions. During the hearing, the New
Jersey Federal Court requested the submission of additional materials relating
to the New Jersey Settlement and the Delaware Settlement. Plaintiffs' counsel
submitted the requested materials to the New Jersey Federal Court on September
29, 2000. ITB is hopeful that the New Jersey Federal Court, after reviewing
these materials, will enter shortly an order dismissing the Harris-Federal
action with prejudice and awarding plaintiffs' counsel attorneys' fees and
reimbursement of the expenses to be paid by the Company in accordance with the
New Jersey Settlement. There is no assurance that the plaintiffs' fee petition
will be approved by the New Jersey District Court. No prediction can be made at
this time as to the outcome of the Harris-Federal Action.

OTHER LITIGATION

The Company is a defendant in a wrongful death action arising out of motor
vehicle/pedestrian accident at Freehold Raceway. The case is in the initial
stages of discovery. The Company believes that it may have adequate insurance
coverage for the claim, however, because of the uncertainties, the Company is
unable to determine at this time the potential liability, if any. Any claim for
punitive damages would not be covered by insurance.

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

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, 2000.

10
<PAGE>

PART II

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

MARKET INFORMATION

The Company's Common Stock has been listed for quotation on the Pink Sheets
since September 15, 1998. The following table indicates the high and low sale
prices for such stock on the Pink Sheets for the year ended June 30, 2000 based
upon information supplied by the Pink Sheets:

SALES PRICE
QUARTER ENDED HIGH LOW
------------- ---- ---
September 30, 1998
(Trading commenced
on the NQB Pink Sheets
on September 15, 1998) .25 .25

December 31, 1998 1.00 .10

March 31, 1999 .75 .25

June 30, 1999 .75 .20

September 30, 1999 .75 .20

December 31, 1999 .75 .35

March 31, 2000 .58 .25

June 30, 2000 .89 .29

HOLDERS

As of June 30, 2000, there were 30,447 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 Credit Suisse Credit
Facility.

11
<PAGE>

Item 6 - SELECTED FINANCIAL DATA

INTERNATIONAL THOROUGHBRED BREEDERS, INC.
AND SUBSIDIARIES
<TABLE>

Years Ended June 30,
-----------------------------------------------------------------------------
2000 1999 1998 1997 1996
------------ ------------- -------------- -------------- --------------
<CAPTION>

<S> <C> <C> <C> <C> <C>
(Loss) Before Discontinued Operations (2)(5)$ (6,980,831) $ (16,034,769) $ (25,468,850) $ (15,144,053) $ (2,779,987)

Income From Discontinued Operations (1) $ 0 $ 8,144,072 $ 7,207,633 $ 1,594,096 $ 1,710,276

(Loss) Before Extraordinary Item $ (6,980,831) $ (7,890,697) $ (18,261,217) $ (13,549,957) $ (1,069,712)

Net (Loss) (3) $ (6,980,831) $ (7,890,697) $ (18,261,217) $ (17,387,582) $ (1,069,711)

Per Common Share - Basic and Diluted:

(Loss) Before Discontinued Operations
and Extraordinary Item $ (0.78) $ (1.38) $ (1.82) $ (1.29) $ (0.26)

Gain on Sale of Net Assets of
Discontinued Operations $ 0.00 $ 0.32 $ -- $ -- $ --

Income From Discontinued Operations $ 0.00 $ 0.39 $ 0.51 $ 0.14 $ 0.16

(Loss) Before Extraordinary Item $ (0.78) $ (0.67) $ (1.31) $ (1.15) $ (0.10)

Net (Loss) $ (0.78) $ (0.67) $ (1.31) $ (1.49) $ (0.10)

Weighted Average Number of Shares 8,980,244 11,554,476 13,978,086 11,715,256 10,536,414
</TABLE>
<TABLE>

June 30,
----------------------------------------------------------------------------
2000 1999 1998 1997 1996
------------ ------------ -------------- -------------- --------------
<CAPTION>
<S> <C> <C> <C> <C> <C>
Working Capital (Deficiency) $(17,792,740) $ (33,069,102) $ (36,744,740) $ (41,300,996) $ (3,916,684)

Total Assets $ 58,166,739 $ 76,588,565 $ 120,252,901 $ 164,694,029 $ 144,880,933

Long-Term Debt $ 482,000 $ 0 $ 0 $ 13,131,003 $ 50,992,702

Stockholders' Equity (4) $ 33,870,852 $ 40,846,683 $ 59,913,361 $ 75,651,933 $ 79,318,105
</TABLE>

(1) Prior to June 30, 1998, the Company decided to sell its racing operations.
As a result, such operations have been classified as discontinued
operations for all periods presented.
(2) As a result of the above described decision, the (loss) from continuing
operations primarily consists of corporate expenses, charges and write-offs
for years subsequent to June 30, 1996.
(3) The 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.
(4) The Company did not pay cash dividends during any of the fiscal years shown
above.
(5) See Management's Discussion and Analysis of Financial Conditions and
Results of Operations and the consolidated financial statements and the
notes thereto for additional information for each of the three years in the
period ended June 30, 2000.

12
<PAGE>

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, 2000, was a deficit of
($17,792,740) which represents a decrease in the deficit of approximately
$15,276,362 from the June 30, 1999 working capital deficit of ($33,069,102). The
decrease in the deficit was primarily caused by: (i) the funds received from the
sale of the El Rancho property that were; (a) in excess of the carrying value of
the property; (b) were used to retire $17.9 million of the debt to the Company's
primary lender, Credit Suisse First Boston Mortgage Capital LLC, ("Credit
Suisse"); and (c) were used to purchase a $23,000,000 promissory note from the
buyer; ii) a $2,004,276 decrease in net assets of Discontinued Racetrack
Operations primarily the result of: (a) cash used by the Company to fund
corporate activities; and (b) non-refundable deposits of $1,000,000 on the sale
of the Garden State Park property classified as deferred income at June 30,
2000.

The net loss for the year ended June 30, 2000 was ($6,980,831). Cash flows
used by operating activities amounted to approximately $7,929,567 during the
year ended June 30, 2000.

Cash provided by investing activities was $22,267,942 during the year ended
June 30, 2000, primarily the result of cash proceeds of approximately
$22,300,000 from the sale of the El Rancho property. (See Note 4)

Cash used in financing activities was $16,134,840 during the year ended
June 30, 2000, consisting principally of principal payments of approximately
$17,800,000 primarily associated with reducing the CSFB debt. (See Notes 4 and
8)

On May 23, 1997, the Company obtained a credit facility from Credit Suisse.
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 this
facility were used to repay in full the Company's $30 million credit facility
with Foothill Capital Corporation ("Foothill") and were used to 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
LIBOR rate. Of the remaining facility borrowings, approximately $16.8 million
was placed in 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. On January 28, 1999, the credit facility was reduced to
$30.5 million in connection with the sale of certain assets of Freehold Raceway
and the sale of a ten-acre parcel of land at the Garden State Park facility. On
January 21, 2000 after obtaining the written consent of the holders of a
majority of the outstanding shares of stock of the Company entitled to vote
thereon, the Company entered into a restructuring agreement (the "Restructure
Agreement") with Credit Suisse. Prior to this agreement, the Company had been in
a maturity default with Credit Suisse for its loan due on June 1, 1999 (the
"CSFB Loan") in the principal amount of $30,500,000 plus unpaid interest since
June 1, 1999. The Restructure Agreement returned the loan to a good standing
position and extended the maturity date of the CSFB Loan to June 30, 2000. As
part of the Restructure Agreement, the Company agreed that as of January 21,
2000, the restructured principal balance due on the CSFB Loan was $33,103,189,
which consisted of: (i) the principal amount of $30,500,000 remaining on the
CSFB Loan; (ii) accrued interest advanced by Credit Suisse from June 1, 1999 to
January 21, 2000 in the amount of $2,523,189; and (iii) an advance of a portion
of Credit Suisse's legal fees incurred in connection with the Restructure
Agreement in the amount of $80,000. Credit Suisse agreed, pursuant to the
Restructure Agreement, to advance the monthly interest payments due by the
Company under the CSFB Loan until April 15, 2000. Such interest amounts shall,
to the extent not paid when due by the Company, become part of the outstanding
principal balance of the CSFB Loan on the date such interest becomes due. On May
22, 2000, the proceeds from the sale of the El Rancho property were principally
used by the Company to reduce the outstanding balance on the CSFB

13
<PAGE>

Loan to $14,668,022. The Company has entered into an Agreement of sale pursuant
to which it has agreed to sell the real property known as Garden State Park to
Turnberry/Cherry Hill LLC. CSFB has agreed to extend the maturity date of the
Company's mortgage indebtedness to November 30, 2000 in order to permit this
sale to the buyer, subject to payment of interest monthly in advance and payment
of monthly extension fees for September, October and November, 2000, in the
amount of $146,680 per month. The buyer has been paying the interest accruing to
CSFB since April 15, 2000 and has paid the extension fee for September in the
amount of $146,680. Extension fees paid by the buyer for October and November,
2000 will be credited towards the purchase price at closing. If the transaction
fails to close by November 30, 2000, or if the buyer (or its principal) fails to
pay either the monthly interest or extension fee due on October 1 or November 1,
CSFB may declare a default and proceed to sell the Garden State Park property.
At June 30, 2000, the interest rate on the Credit Suisse Credit Facility was
13.64%.(See Notes 8 and 10)

In connection with the Restructure Agreement, the Chapter 11 Bankruptcy
Trustee (the "Trustee") for the estate of Robert E. Brennan, to whom the Company
and its subsidiaries Garden State Race Track, Inc. and Orion Casino Corporation
are indebted to in the remaining principal amount of $3,363,032, as evidenced by
a note dated January 28, 1999 (the "Trustee Note"), entered into an agreement
with the Company wherein: (i) the amounts due under the Trustee Note are due at
the earlier of (a) June 1, 2000 or (b) the date on which the latter of the
Garden State Park or El Rancho property is sold, provided that the sale of the
latter will satisfy the remaining balance on the CSFB Loan and the Trustee Note;
(ii) all interest due under the Trustee Note will be accrued and deferred until
the maturity date of the Note; and (iii) the Company shall reimburse the Trustee
for legal and accounting fees up to $20,000, which amount will be advanced by
the Trustee and added to the outstanding principal balance of the Trustee Note.
Pursuant to the Restructure Agreement, the Trustee Note is subordinate to the
CSFB Loan, thereby principal and interest payments on the Trustee Note will be
made only if and when the CSFB Loan is paid in full.

Pursuant to the Restructure Agreement, Garden State Race Track, Inc.
transferred title to the Garden State Race Track to GSRT, LLC ("GSRT"), a
Delaware limited liability company in which Garden State Race Track, Inc. is the
sole member, the result of which effects no change in real ownership. Pursuant
to the limited liability company agreement of GSRT entered into in connection
with the Restructure Agreement, Garden State Race Track, Inc. may cause GSRT to
enter into an arm's-length sale or joint venture of the Garden State Property
under certain enumerated circumstances and conditions, including that the
purchase price for such sale or joint venture be at least equal to fifty-percent
of the combined outstanding principal balance of the CSFB Loan and the Trustee
Note, which amount must be paid to Credit Suisse, and the contract for such sale
or joint venture be entered into on or prior to January 25, 2000 (the "GSRT
Option").

14
<PAGE>

of the Garden State Park property. The agreed upon rate of return to be paid to
buyer's owner on its invested capital contributions, before payments under the
Note will be made, will be 15% per year, except that the rate of return on
capital invested by buyer's owner to cover certain costs, in excess of
$1,000,000, which buyer may incur in respect of the Assumed Liability,
environmental investigation and remediation, and various other specified items
(including the September extension fee of $146,680 paid to the Company's primary
lender, CSFB), may be as high as 33 1/3% per annum. Closing is scheduled to
occur prior to December 1, 2000. The parties continue to negotiate certain
issues and there can be no assurance that the transaction will be consummated.

On May 22, 2000, the Company, through its wholly-owned subsidiary, Orion
Casino Corporation, closed on the sale (the "El Rancho Transaction") of the
non-operating former El Rancho Hotel and Casino (the "El Rancho Property") in
Las Vegas, Nevada, to Turnberry/Las Vegas Boulevard, LLC ("Turnberry"). The
purchase price was $45 million and was paid by: (i) previous cash deposits
totaling $2,000,000; and (ii) the balance of the purchase price paid in cash at
the closing. The proceeds of the El Rancho Transaction were principally used by
the Company to reduce the outstanding balance on the Company's loan from Credit
Suisse First Boston Mortgage Capital LLC ("Credit Suisse") to $14.7 million and
to purchase a promissory note, secured by the rights to 100% of the
distributable cash of the buyer in the event of default, of the buyer in the
amount of $23,000,000 which will be convertible at the Company's option into a
33 1/3% equity interest in the buyer. The interest rate will be adjusted from
time to time since the interest actually payable will be dependent upon, and
payable solely out of, the buyer's net cash flow available for distribution to
its equity owners ("Distributable Cash"). After the equity investors in the
buyer have received total distributions equal to their capital contributions
plus an agreed upon return on their invested capital, the next $23 million of
Distributable Cash will be paid to the Company. The Company will thereafter
receive payments under the note equal to 33 1/3% of all Distributable Cash until
the maturity date, which occurs on the 30th anniversary of the Company's
purchase of the note. The Company may convert the promissory note, at its
option, into a 33 1/3% equity interest in the buyer during a six month period
beginning at the 15th anniversary of the issuance of the note. If not then
converted, the note will convert into a 33 1/3% equity interest in the buyer at
the 30th anniversary of its issuance. The Company has elected to defer the gain
on the sale until such time that collectability, under the $23,000,000 note
purchased from Turnberry after the closing, can be determined.

15
<PAGE>

additional regulatory gaming changes are approved by the New Jersey Legislature
in the future. The Greenwood Transaction was subsequently amended to include
Penn National Gaming, Inc.("Penn National"), which owns Penn National Race
Course, Pocono Downs Racetrack, Charles Town Races and at least ten off-track
betting parlors in Pennsylvania as a 50% joint venture between Greenwood and
Penn National ( "Pennwood"). Greenwood and Pennwood have guaranteed the
performance by the purchaser of all obligations under the Contingent Notes.

On September 18, 2000, the Company borrowed $150,000 from the Company's
acting Chief Executive Officer, Mr. Francis Murray, in order to finance its
current operations until November 30, 2000. The Company expects to repay the
note with a portion of the Garden State Park sale proceeds.

The Company currently estimates that the proceeds from the sale of the El
Rancho property, the $500,000 deposit made available March 2, 2000 toward the
sale of the Garden State Park property and a short term loan of $150,000 made
available on September 18, 2000 will be sufficient to finance its current
operations through November 30, 2000.

The Company's debt with CSFB is due on November 30, 2000. Unless the sale
of the Garden State Park property is consummated prior to that date or CSFB
further extends the due date of the Note, the Company will be in default in
connection with the CSFB loan agreement. Additionally, the cash proceeds from
the sale must be in an amount sufficient to satisfy the loan due on the trustee
note together with accrued interest. The total amount due on November 30, 2000
to satisfy the CSFB loan together with accrued interest and fees and the trustee
note together with accrued interest is approximately $18,600,000. The proceeds
from the sale of the Garden State Park property are expected to be sufficient to
meet this obligation.

The Company currently estimates that approximately $150,000 per month is
needed to cover operating expenses of International Thoroughbred Breeders.
Should the closing of the Garden State Park property be delayed beyond November
30, 2000, the Company will need to seek additional short term loans or
additional advances from the buyer to fund its operations.

The Company's Board is continuing to consider all of the Company's
strategic options to maximize stockholder value and alternatives for the
Company's future.

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Footnote 1 to the
consolidated financial statements, the Company's debt with its major lender is
due November 30, 2000 and the Company has sustained losses of approximately $45
million during the last three fiscal years, 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 Footnote 1 to the consolidated financial
statements. The consolidated financial statements do not include any adjustments
that might result from the outcome of these uncertainties.

RESULTS OF OPERATIONS FOR THE FISCAL YEARS ENDED JUNE 30, 2000 AND 1999

On January 28, 1999, the Company completed the sale of Freehold Raceway,
the sale of a ten-acre parcel at Garden State Park, and the lease of the Garden
State Park facilities. Accordingly, the operating results of the racetrack
subsidiaries have been segregated and reported as discontinued operations for
each of the two years ended June 30, 1999 and 1998.

Revenue for the year ended June 30, 2000 decreased $31,737 from $478,325 in
Fiscal 1999 to $446,588 in Fiscal 2000 primarily as a result of: (i) a decrease
in interest income primarily the result the decrease in cash during the fiscal
year; partially offset by (ii) an increase in rental income from the lease of
the Garden State property for the full year in Fiscal 2000 as compared to five
months in Fiscal 1999. Expenses from continuing operations decreased $9,085,675
or 55%, from $16,513,094 in Fiscal 1999 to

16
<PAGE>

$7,427,419 in Fiscal 2000. This decrease in expenses was primarily the result
of: (i) a decrease in general and administrative expenses of $2,023,353 or 43%
from $4,667,737 in Fiscal 1999 to $2,644,384 in Fiscal 2000; (ii) a decrease in
interest and financing expense of $4,059,620 primarily as a result of reduced
debt and a financing expense for warrants of $1,242,883 associated with the
Delaware Settlement in the third quarter of fiscal 1999; and (iii) bank fees
associated with the debt no longer being amortized in Fiscal 2000. These fees
were fully amortized in Fiscal 1999.

The decrease of $2,023,353 in general and administrative expenses was
principally attributable to: (i) a decrease in expenses primarily as a result of
the Delaware Settlement in Fiscal 1999 of; (a) approximately $1,064,000 in legal
expenses associated with the various director and stockholder lawsuits in the
prior fiscal year; (b) a decrease in officer and corporate administrative
salaries and benefits of approximately $532,000 primarily associated with the
termination of certain agreements upon consummation of the Delaware Settlement;
(c) a decrease in consulting and director fees of $246,000 associated with the
termination of certain agreements upon consummation of the Delaware Settlement;
(d) a decrease of approximately $311,000 in travel expenses and the
administrative costs of operating an office in New Mexico; (e) a decrease of
approximately $231,000 in printing, mailing and transfer agent expenses
associated with an information statement sent to stockholder in Fiscal 1999; and
(e) a decrease in costs of $60,000 in penalties assessed by the New Jersey
Racing Commission associated with the Casino-Co Stock issuance in Fiscal 1999;
(ii) a decrease in accounting fees of $334,000; and (iii) a decrease in
political contributions of $50,000 associated with New Jersey legislation
affecting racetrack operations; partially offset by (iv) an increase of
approximately $549,000 in corporate expenses associated with discontinuing the
racing operations which includes $150,000 to replace sprinkler system parts as
provided in the lease with Pennwood; (v) an increase in legal fees of
approximately $136,000 during the second and third quarters of Fiscal 2000 in
connection with various corporate activities; and (vi) an increase of
approximately $113,000 primarily associated with an increase in expense for
officers and directors insurance.

During the year ended June 30, 2000, the Company incurred a loss before
discontinued operations of ($6,980,831) as compared to a loss before
discontinued operations of ($16,034,769) for the year ended June 30, 1999. The
Company recognized a net gain of $3,657,688, following the write down of
approximately $14,000,000 to fair value of the remaining assets of Garden State
Park and the approximate gain of $17,600,000 on the sale of Freehold Raceway,
the sale of a ten-acre parcel at the Garden State Park facility and the lease of
the Garden State Park facilities in Fiscal 1999 in addition to income from
discontinued racetrack operations of $4,486,384 for the year ended June 30,
1999.

During the year ended June 30, 2000, the Company incurred a net loss of
($6,980,831) as compared to a net loss of ($7,890,697) for the comparable period
in Fiscal 1999. The decrease in net loss of $909,866 was the result of those
differences described above.

RESULTS OF OPERATIONS FOR THE FISCAL YEARS ENDED JUNE 30, 1999 AND 1998

On January 28, 1999, the Company completed the sale of Freehold Raceway,
the sale of a ten-acre parcel at Garden State Park, and the lease of the Garden
State Park facilities to subsidiaries of Greenwood Racing, Inc., which owns
Philadelphia Park racetrack, the Turf Clubs, and Phonebet (the "Greenwood
Transaction.") The Greenwood Transaction was subsequently amended to include
Penn National Gaming, Inc.("Penn National"), which owns Penn National Race
Course, Pocono Downs Racetrack, Charles Town Races and at least ten off-track
betting parlors in Pennsylvania as a 50% joint venture between Greenwood and
Penn National ( "Pennwood"). Accordingly, the operating results of the racetrack
subsidiaries have been segregated and reported as discontinued operations for
each of the periods presented. Also, on the same date, the Company consummated
the settlement under the Stipulation and Agreement of Compromise, Settlement and
Release entered into on July 2, 1998 to resolve the pending stockholder
derivative litigation in the Delaware Court of Chancery.

17
<PAGE>

For the year ended June 30, 1999, The Company's loss before discontinued
operations was ($16,034,769) as compared to a loss before discontinued
operations for the comparable period in prior fiscal year of ($25,468,850), a
decrease in the loss of $9,434,081. This decrease in the loss before
discontinued operations was primarily the result of: (i) a decrease in general
and administrative expenses of $7,082,988; (ii) the estimated loss in connection
with the adjustment to fair market value of the El Rancho Property of $3,429,252
recognized in fiscal 1998; partially offset by (iii) an increase in financing
expenses of $1,807,736 primarily associated with fees and warrants granted in
connection with the Delaware Settlement partially offset by a decrease of
$1,059,266 or 15% in interest expenses primarily associated with reducing the
debt during the third quarter.

General and administrative expenses of $4,532,984 for Fiscal 1999 decreased
$7,082,988 or 61% from the prior fiscal year amount of $11,615,972. This
decrease in general and administrative expenses was principally attributable to:
(i) a decrease in legal expenses of approximately $2,000,000 from $3,300,000 in
Fiscal 1998 to $1,318,000 in Fiscal 1999, primarily as the result of legal
expenses associated with the various director and stockholder lawsuits; (2) a
decrease in officer and corporate administrative salaries and benefits of
$554,216 previously associated with the termination of certain agreements with
directors and officers who resigned upon consummation of the Delaware
Settlement; (3) a decrease in non- employee option expenses of $786,000; and (4)
the accrual in Fiscal 1998 of an estimated charge of $3,748,000 the Company
would incur in connection with the purchase of the 2,904,016 shares from NPD and
the termination of certain agreements upon consummation of the Delaware
Settlement; the charge of $3,748,000 represents the difference between the
amount the Company will pay for the shares and their estimated fair value.

Income from discontinued racetrack operations was $4,486,384 for the year
ended June 30, 1999. As a result of operations being discontinued after seven
months in the fiscal 1999 year, this income is not comparable to the prior
year's results of operations. The Company recognized a net gain of $3,657,688,
following the write down of approximately $14,000,000 to fair value of the
remaining assets of Garden State Park and the approximate gain of $17,600,000 on
the sale of Freehold Raceway, the sale of a ten-acre parcel at the Garden State
Park facility and the lease of the Garden State Park facilities.

During the year ended June 30, 1999, the Company incurred a net loss of
($7,890,697) as compared to a net loss of ($18,261,217) for the comparable
period in Fiscal 1998. The decrease in net loss of $10,370,520 was the result of
those differences described above.

IMPACT OF YEAR 2000 ON THE COMPANY'S SYSTEMS

The year 2000 issue was the result of computer programs being written using
two digits rather than four to define the applicable year, which may have
resulted in systems failures and disruptions to operations at January 1, 2000.
Management determined where appropriate action was necessary and at a cost of
approximately $5,000 brought the Company's accounting and operational systems
into year 2000 compliance. The Company has not experienced any problems with its
computer systems or its vendors associated with a Year 2000 issue.

INFLATION

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

18
<PAGE>

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 on the
Company's operations of the sale and lease of the Company's racetracks, the
disposition of the El Rancho Property, the Delaware Settlement, the Company's
restructuring of the Credit Suisse Credit Facility and 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 to
differ from those expressed or implied by such forward-looking statements. Such
factors include, among others, the following: general economic and business
conditions; 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 the 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 7A - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company's primary debt obligation at June 30, 2000 was with its primary
lender CSFB. Interest under the Credit Suisse Credit Facility is payable monthly
in arrears at 7% over the London interbank offered rate ("LIBOR"). Therefore,
management believes that the Company has a material risk from its debt
obligations should there be a material increase in market interest rates.

ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA

Attached.

19
<PAGE>

6 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, 2000
and 1999 and the related consolidated statements of operations, stockholders'
equity and cash flows for each of the two years 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 audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
consolidated financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of
International Thoroughbred Breeders, Inc. and its subsidiaries as of June 30,
2000 and 1999 and the results of their operations and their cash flows for the
two years 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's debt to its major lender is due November 30,
2000 and the Company sustained losses of approximately $33 million during the
last three fiscal years, 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.

STOCKTON BATES, LLP

Philadelphia, Pennsylvania
October 10, 2000

20
<PAGE>

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 statements of operations,
stockholders' equity and cash flows of International Thoroughbred Breeders, Inc.
and subsidiaries for the year ended June 30,1998. 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 results of operations and cash
flows of International Thoroughbred Breeders, Inc. and its subsidiaries for the
year ended June 30, 1998 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 was in violation of several loan covenants
with its major lender, was party to various legal proceedings and their proposed
settlements and has sustained a loss of approximately $18.3 million for the year
ended June 30, 1998, 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
October 9, 1998

21
<PAGE>

INTERNATIONAL THOROUGHBRED BREEDERS, INC.
AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
AS OF JUNE 30, 2000 AND 1999

ASSETS

<TABLE>

June 30,
-----------------------------------
2000 1999
---------------- ----------------
<CAPTION>
CURRENT ASSETS:
<S> <C> <C>
Cash and Cash Equivalents $ 271,119 $ 1,358,200
Restricted Cash and Investments 1,656,743 0
Reserve Escrow Deposits 0 182,154
Accounts Receivable 427,654 234,774
Prepaid Expenses 362,321 349,182
Other Current Assets 516,721 53,771
Net Assets of Discontinued
Operations - Current 0 494,699
---------------- ----------------
TOTAL CURRENT ASSETS 3,234,558 2,672,780
---------------- ----------------

NET ASSETS OF DISCONTINUED
OPERATIONS - Long Term 30,000,000 30,000,000
---------------- ----------------

PROPERTY HELD FOR SALE 0 42,149,755
---------------- ----------------

LAND, BUILDINGS AND EQUIPMENT:
Land and Buildings 214,097 214,097
Equipment and Artwork 1,199,284 683,428
---------------- ----------------
1,413,381 897,525
LESS: Accumulated Depreciation
and Amortization 387,404 329,667
---------------- ----------------

TOTAL LAND, BUILDINGS AND
EQUIPMENT, NET 1,025,977 567,858
---------------- ----------------

OTHER ASSETS:
Notes Receivable 23,000,000 0
Deposits and Other Assets 906,204 1,198,172
---------------- ----------------
TOTAL OTHER ASSETS 23,906,204 1,198,172
---------------- ----------------

TOTAL ASSETS $ 58,166,739 $ 76,588,565
================ ================
</TABLE>

See Notes to Consolidated Financial Statements.

22
<PAGE>

INTERNATIONAL THOROUGHBRED BREEDERS, INC.
AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
AS OF JUNE 30, 2000 AND 1999

LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>

June 30,
-------------------------------
2000 1999
------------- ---------------
<CAPTION>
CURRENT LIABILITIES:
<S> <C> <C>
Accounts Payable $ 62,502 $ 267,941
Accrued Expenses 858,510 1,176,796
Current Maturities of Long-Term Debt 18,596,709 34,297,145
Net Liabilities of Discontinued
Operations - Current 1,509,577 0
------------- -------------
TOTAL CURRENT LIABILITIES 21,027,298 35,741,882
------------- -------------

DEFERRED INCOME 2,786,589 0
------------- -------------

LONG-TERM DEBT, Net of Current Portion 482,000 0
------------- -------------

COMMITMENTS AND CONTINGENCIES - -

STOCKHOLDERS' EQUITY:
Series A Preferred Stock,
$100.00 Par Value,
Authorized 500,000 Shares,
Issued and Outstanding,
362,484 and 362,482 Shares, Respectively 36,248,375 36,248,175
Common Stock, $2.00 Par Value,
Authorized 25,000,000
Shares,Issued, 11,884,270 and 11,884,249
Shares,and Outstanding, 8,980,254 and
8,980,233 Shares,Respectively 23,768,539 23,768,497
Capital in Excess of Par 26,144,540 26,144,782
(Deficit) (subsequent to June 30, 1993,
date of quasi-reorganization) (45,003,895) (38,023,064)
------------- -------------
TOTAL 41,157,559 48,138,390
LESS:
Treasury Stock, 2,904,016 Shares, at Cost (7,260,040) (7,260,040)
Deferred Compensation, Net (26,667) (31,667)
------------- -------------
TOTAL STOCKHOLDERS' EQUITY 33,870,852 40,846,683
------------- -------------

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 58,166,740 $ 76,588,565
============= =============
</TABLE>

See Notes to Consolidated Financial Statements.

23
<PAGE>

INTERNATIONAL THOROUGHBRED BREEDERS, INC.
AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED JUNE 30, 2000, 1999 AND 1998

<TABLE>

Years Ended June 30,
------------------------------------------
2000 1999 1998
------------------------------------------
<CAPTION>
REVENUE:
<S> <C> <C> <C>
Revenue $ 337,334 $ 134,753 $ 0
Interest Income 109,254 343,572 689,092
------------ ------------ ------------
TOTAL REVENUES 446,588 478,325 689,092
------------ ------------ ------------

EXPENSES:
General & Administrative Expenses 2,644,384 4,667,737 11,615,972
Interest and Financing Expenses 3,771,401 7,831,021 7,084,968
Amortization of Financing Costs 0 2,900,749 3,053,583
El Rancho Property Carrying Costs 1,011,634 1,113,587 974,167
Impairment Loss on El Rancho Property 0 0 3,429,252
------------ ------------ ------------
TOTAL EXPENSES 7,427,419 16,513,094 26,157,942
------------ ------------ ------------

(LOSS) BEFORE DISCONTINUED OPERATIONS (6,980,831) (16,034,769) (25,468,850)
------------ ------------ ------------

INCOME FROM DISCONTINUED OPERATIONS:
Net Gain on Sale of Net Assets of
Discontinued Operations 0 3,657,688 0
(less applicable state income
taxes of $1,335,500)
Income from operations of discontinued
racetrack operations (less
applicable state income taxes of
$119,348 and $135,100 for the years
ended June 30, 1999 and 1998) 0 4,486,384 7,207,633
------------ ------------ ------------
INCOME FROM DISCONTINUED OPERATIONS 0 8,144,072 7,207,633
------------ ------------ ------------

NET (LOSS) $ (6,980,831) $ (7,890,697) $(18,261,217)
============ ============ ============

BASIC AND DILUTED PER SHARE DATA:
(LOSS) BEFORE DISCONTINUED OPERATIONS $ (0.78) $ (1.38) $ (1.82)
NET GAIN ON SALE OF NET ASSETS
OF DISCONTINUED OPERATIONS 0.00 0.32 0.00
INCOME FROM DISCONTINUED OPERATIONS 0.00 0.39 0.52
------------- ------------- ------------
NET (LOSS) $ (0.78) $ (0.67) $ (1.31)
============= ============= ============

WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING 8,980,244 11,554,476 13,978,086
============= ============= ============

</TABLE>

See Notes to Consolidated Financial Statements.

24
<PAGE>

INTERNATIONAL THOROUGHBRED BREEDERS, INC.
AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED JUNE 30, 2000, 1999 AND 1998

<TABLE>

Preferred Common
--------------------- ------------------------
Number of Number of
Shares Amount Shares Amount
--------- ---------- ------------ ----------
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
BALANCE - JUNE 30, 1997 362,470 $ 36,246,975 13,978,060 $ 27,956,119

Compensation for Options Granted
to Non-Employees --- --- --- ---
Shares Issued for Fractional Exchanges
With Respect to the
One-for-twenty Reverse Stock Split effected
on March 13, 1992 10 1,000 39 78
Amortization of Deferred Compensation Costs --- --- --- ---
Gain on Sale of Land --- --- --- ---
Net (Loss) for the Year Ended June 30, 1998 --- --- --- ---
--------- ---------- ------------ ----------
BALANCE - JUNE 30, 1998 362,480 $ 36,247,975 13,978,099 $ 27,956,197

Shares Canceled in connection with
Delaware Settlement --- --- (2,093,868) (4,187,736)
Purchase of 2,904,016 Shares for Treasury
in connection with Delaware Settlement --- --- --- ---
Compensation for Options Granted to Non-Employees --- --- --- ---
Shares Issued for Fractional Exchanges With
Respect to the One-for-twenty Reverse Stock
Split effected on March 13, 1992 2 200 18 36
Financing Costs for Warrants Issued
in Connection with Debt Financing --- --- --- ---
Warrants Issued in Connection With
Debt Retirement (See Note 11-A) --- --- --- ---
Amortization of Deferred Compensation Costs --- --- --- ---
Net (Loss) for the Year Ended June 30, 1999 --- --- --- ---
--------- ---------- ------------ ----------
BALANCE - JUNE 30, 1999 362,482 $ 36,248,175 11,884,249 $ 23,768,497

Shares Issued for Fractional Exchanges
With Respect to the
One-for-twenty Reverse Stock Split
effected on March 13, 1992 2 200 21 42
Amortization of Deferred Compensation Costs --- --- --- ---
Net (Loss) for the Year Ended June 30, 2000 --- --- --- ---
--------- ---------- ------------ ----------
BALANCE - JUNE 30, 2000 362,484 $ 36,248,375 11,884,270 $ 23,768,539
========= ========== ============ ==========
</TABLE>

<TABLE>

Capital Treasury Deferred
in Excess Stock, Compen-
of Par (Deficit) At Cost sation Total
------------ ------------- ------------ ---------- ------------
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE - JUNE 30, 1997 $ 25,048,751 $ (13,558,246) $ 0 $ (41,667) $ 75,651,933

Compensation for Options Granted
to Non-Employees 830,550 --- --- --- 830,550
Shares Issued for Fractional Exchanges
With Respect to the
One-for-twenty Reverse Stock Split effected
on March 13, 1992 (1,077) --- --- --- ---
Amortization of Deferred Compensation Costs --- --- --- 5,000 5,000
Gain on Sale of Land --- 1,687,096 --- 1,687,095
Net (Loss) for the Year Ended June 30, 1998 --- (18,261,217) --- --- (18,261,217)
------------ ------------- ------------ ---------- ------------
BALANCE - JUNE 30, 1998 $ 25,878,224 $ (30,132,367) $ 0 $ (36,667) $ 59,913,362

Shares Canceled in connection with
Delaware Settlement (1,046,934) --- --- --- (5,234,670)
Purchase of 2,904,016 Shares for Treasury
in connection with Delaware Settlement --- --- (7,260,040) --- (7,260,040)
Compensation for Options Granted to Non-Employees 44,550 --- --- --- 44,550
Shares Issued for Fractional Exchanges With
Respect to the One-for-twenty Reverse Stock
Split effected on March 13, 1992 (236) --- --- --- ---
Financing Costs for Warrants Issued
in Connection with Debt Financing 26,296 --- --- --- 26,296
Warrants Issued in Connection With
Debt Retirement (See Note 11-A) 1,242,882 --- --- --- 1,242,882
Amortization of Deferred Compensation Costs --- --- --- 5,000 5,000
Net (Loss) for the Year Ended June 30, 1999 --- (7,890,697) --- --- (7,890,697)
------------ ------------- ------------ ---------- ------------
BALANCE - JUNE 30, 1999 $ 26,144,782 $ (38,023,064) $ (7,260,040) $ (31,667) $ 40,846,683

Shares Issued for Fractional Exchanges
With Respect to the
One-for-twenty Reverse Stock Split
effected on March 13, 1992 (242) --- --- --- ---
Amortization of Deferred Compensation Costs --- --- --- 5,000 5,000
Net (Loss) for the Year Ended June 30, 2000 --- (6,980,831) --- --- (6,980,831)
------------ ------------- ------------ ---------- ------------
BALANCE - JUNE 30, 2000 $ 26,144,540 $ (45,003,895) $ (7,260,040) $ (26,667) $ 33,870,852
============ ============= ============ ========== ============
</TABLE>

See Notes to Consolidated Financial Statements.

25
<PAGE>

INTERNATIONAL THOROUGHBRED BREEDERS, INC.
AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED JUNE 30, 2000, 1999 AND 1998

<TABLE>

Years Ended June 30,
---------------------------------------------
2000 1999 1998
---------------------------------------------
<CAPTION>
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C> <C>
(LOSS) BEFORE DISCONTINUED OPERATIONS ..................................... $(6,980,831) $(16,034,769) $(25,468,850)
----------- ------------ -----------
Adjustments to reconcile (loss) to net cash (used in) operating activities:
Depreciation and Amortization ................................ 62,737 2,958,067 3,125,272
Financing Cost from Warrants Granted ......................... 0 1,269,178 0
Compensation for Options Granted ............................. 0 44,550 830,550
(Gain) Loss on Disposal of Fixed Assets ...................... (31,400) 146,238 31,666
Estimated charge in connection with the repurchase
of the NPD shares .......................................... 0 0 3,748,000
Estimated loss in connection with the adjustment to
fair market value of the El Rancho Property ................ 0 0 3,429,251
Other ........................................................ 0 0 303,002
Changes in Operating Assets and Liabilities -
(Increase) in Restricted Cash & Investments ............... (1,656,740) 0 0
(Increase) in Accounts Receivable ......................... (192,880) (197,935) (31,455)
(Increase) Decrease in Other Assets ....................... 37,049 271,985 (282,609)
(Increase) Decrease in Prepaid Expenses ................... (13,139) (26,869) 239,628
(Decrease) in Accounts Payable and Accrued Expenses ....... (523,725) (538,387) (771,010)
----------- ------------ -----------
CASH (USED IN) OPERATING ACTIVITIES BEFORE
DISCONTINUED OPERATIONS ................................................ (9,298,929) (12,107,942) (14,846,555)

CASH PROVIDED BY DISCONTINUED OPERATING ACTIVITIES ........................ 1,369,362 10,155,578 9,192,657
----------- ------------ -----------
NET CASH (USED IN) OPERATING ACTIVITIES ................................... $(7,929,567) $ (1,952,364) $(5,653,898)
----------- ------------ -----------
</TABLE>
CONTINUED ON FOLLOWING PAGE

See Notes to Consolidated Financial Statements.

26
<PAGE>

INTERNATIONAL THOROUGHBRED BREEDERS, INC.
AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED JUNE 30, 2000, 1999 AND 1998

CONTINUED FROM PREVIOUS PAGE
<TABLE>

Years Ended June 30,
-----------------------------------------------
2000 1999 1998
-----------------------------------------------
<CAPTION>
CASH FLOWS FROM INVESTING ACTIVITIES:
<S> <C> <C> <C>
Proceeds from Sale of El Rancho .................................... $22,304,540 $ 0 $ 0
Proceeds from Sale of Freehold ..................................... 0 17,900,000 0
Proceeds from Sale of Land at Garden State Park .................... 0 2,000,000 0
Purchase of 2,904,016 Shares of Treasury Stock ..................... 0 (6,850,000) 0
Purchase and Development of El Rancho Property ..................... 0 0 (239,588)
Deposits on New Mexico Racetrack Options ........................... 0 0 (600,000)
Capital Expenditures ............................................... (2,456) (69,044) (284,271)
(Increase) Decrease in Other Investments ........................... 96,968 0 27,405
------------ ------------ ------------
CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES
BEFORE DISCONTINUED INVESTING ACTIVITIES ........................ 22,399,052 12,980,956 (1,096,454)
CASH (USED IN) DISCONTINUED INVESTING ACTIVITIES .................. (131,110) (146,648) 8,224,665
------------ ------------ ------------
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES ............... 22,267,942 12,834,308 7,128,211
------------ ------------ ------------

CASH FLOWS FROM FINANCING ACTIVITIES:
Escrow Deposits Utilized ........................................... 502,154 10,278,727 7,683,063
Deposit to Escrow Funds ............................................ (320,000) 0 0
Proceeds from Land Sale to Reserve Escrow Deposits ................. 0 0 1,370,120)
Deferred Financing Costs ........................................... 0 0 (22,445)
Decrease in Balances Due From Discontinued Subsidiaries ............ 3,473,637 (1,823,666) 8,376,135
Principal Payments on Short Term Notes ............................. (17,842,995) (5,016,770) (303,020)
------------ ------------ ------------
CASH PROVIDED BY FINANCING ACTIVITIES
BEFORE DISCONTINUED FINANCING ACTIVITIES ........................ (14,187,204) 3,438,291 14,363,613
CASH (USED IN) DISCONTINUED FINANCING ACTIVITIES .................. (1,947,636) (12,437,662) (16,242,127)
------------ ------------ ------------
NET CASH PROVIDED BY FINANCING ACTIVITIES ......................... (16,134,840) (8,999,371) (1,878,514)
------------ ------------ ------------

NET (DECREASE) IN CASH AND CASH EQUIVALENTS ............................ (1,796,465) 1,882,573 (404,200)
LESS CASH AND CASH EQUIVALENTS AT END OF THE YEAR
FROM DISCONTINUED OPERATIONS ............................... 709,384 (738,168) (3,166,900)
CASH AND CASH EQUIVALENTS AT BEGINNING OF THE YEAR
BEFORE DISCONTINUED OPERATIONS .................................. 1,358,200 213,795 3,784,895
------------ ------------ ------------

CASH AND CASH EQUIVALENTS AT END OF THE YEAR ...................... $ 271,119 $ 1,358,200 $ 213,795
============ ============ ============

Supplemental Disclosures of Cash Flow Information:
Cash paid during the period for:
Interest ............................................. $ 1,306,950 $ 6,498,191 $ 7,936,680
Income Taxes ......................................... $ 19,699 $ 1,490,000 $ 200,000
</TABLE>

Supplemental Schedule of Non-Cash Investing and Financing Activities:
During the year ended June 30, 1998, the Company recorded unrealized losses
of $19,174 on trading securities. For the year ended June 30, 1999, the
Company realized a loss of $12,908 on trading securities.
During the years ended June 30, 1999 and 1998, respectively, the Company
issued warrants to purchase 497,153 shares, and 300,000 shares of Common
Stock at fair values of $1,242,882 and $830,550, respectively, in
connection with financing agreements.
During the year ended June 30, 1998, the Company issued options to purchase
300,000 shares of Common Stock at a fair value of $786,000 to three of
the Company's directors.
During the year ended June 30, 1999, the Company canceled 2,093,868 shares
of Common Stock in connection with the Delaware Settlement.
During the year ended June 30, 1999, the purchase of 2,904,016 shares of
Common Stock was financed, in part, through a long term note in the
amount of $3,558,032.
During the year ended June 30, 1999, $22,000,000 of the Company's short
term debt was assumed by the the purchaser in in connection with the sale
of certain assets at Freehold Raceway and Garden State Park.
During the year ended June 30, 2000, a note payable to the Company in the
amount of $23,000,000 was issued by the purchaser in connection with the
sale of the El Rancho property.

See Notes to Consolidated Financial Statements.

27
<PAGE>

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

(1) BASIS OF PRESENTATION

On January 28, 1999, the Company completed the sale of Freehold Raceway and
a ten-acre parcel at the Garden State Park facility and the lease of the Garden
State Park facilities. Prior to June 30, 1998, the Company determined to sell
its racetracks and, accordingly, the operating results of the racetrack
subsidiaries have been segregated and reported as discontinued operations for
each of the periods presented.

The accompanying consolidated financial statements have been prepared
assuming International Thoroughbred Breeders, Inc. and subsidiaries
(collectively, the "Company") will continue as a going concern. The remaining
debt to the Company's primary lender was due June 30, 1999. On May 7, 1999, the
Company notified their primary lender, Credit Suisse First Boston Mortgage
Capital LLC ("Credit Suisse"), of its intent to extend the loan maturity date to
June 30, 2000. On January 21, 2000 after obtaining the written consent of the
holders of a majority of the outstanding shares of stock of the Company entitled
to vote thereon, the Company entered into a restructuring agreement with Credit
Suisse. Prior to this agreement, the Company had been in a maturity default with
Credit Suisse for its loan due on June 1, 1999 (the "CSFB Loan") in the
principal amount of $30,500,000 plus unpaid interest since June 1, 1999. The
restructuring agreement returned the loan to a good standing position and
extended the maturity date of the CSFB Loan to June 30, 2000.

On January 25, 2000, the Company entered into agreements with unrelated
third parties for the sale of the Garden State Park and El Rancho properties. On
May 22, 2000 the Company closed on the sale of the El Rancho property and
reduced the debt to Credit Suisse to $14,668,022. Unless the scheduled closing
of the Garden State Park property prior to December 1, 2000 is consummated, the
Company will be in default with respect to the Credit Suisse loan due on
November 30, 2000. The Company does not have any committed source of working
capital and there are no assurances that the Company would be successful in
obtaining working capital from other sources. There can be no assurances that
the sale of the Garden State Park property will be consummated or to the timing
thereof.

The Company has sustained losses of approximately $7 million, $7.9 million
and $18.3 million during fiscals 2000, 1999 and 1998, respectively and has been
in a negative working capital position at the end of each of the three years.
The Company believes its projected cash flows from its current operations will
be sufficient until November 30, 2000 and there can be no assurances beyond that
date.

The Company currently estimates that approximately $150,000 per month is
needed to cover operating expenses of International Thoroughbred Breeders.
Should the closing of the Garden state Park property be delayed beyond November
30, 2000, the Company will need to seek additional short term loans or
additional advances from the buyer to fund its operations

The Company's Board is continuing to consider all of the Company's
strategic options to maximize stockholder value and alternatives for the
Company's future.

The financial statements do not include any adjustments that might result
from the outcome of these uncertainties.

(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(A) Nature of Operations - The Company is currently in the process of
effecting a sale of its Garden State Park Property in Cherry Hill, New Jersey.
Prior to January 28, 1999, the Company

28
<PAGE>
INTERNATIONAL THOROUGHBRED BREEDERS, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

conducted live race meetings for Thoroughbred and Harness (Standardbred) horses
and participated in intrastate and interstate simulcast wagering as a host and
receiving track in Cherry Hill ("Garden State Park") and Freehold ("Freehold
Raceway"), New Jersey.

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

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

(D) Depreciation and Amortization - Depreciation of property and equipment
and amortization of building improvements were 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 has adopted the provisions of Statement of Financial Accounting
Standards No. 121 ("SFAS 121") "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to Be Disposed Of." SFAS 121 establishes
accounting standards for the impairment of long-lived assets, certain
identifiable intangibles and goodwill related to those assets to be held and
used for long-lived assets and certain identifiable intangibles to be disposed
of. The Company reviews the carrying values of its long- lived property 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, 1998 and
1999, the Company determined that an impairment had occurred. (See E below).

(E) Property Held for Sale - As of June 30, 1997, construction in progress
included the purchase price as well as construction costs in conjunction with
the development of the El Rancho Property. These amounts included real property
acquisition costs in the amount of approximately $43,500,000, capitalized
interest of $4,182,007, consulting and other development costs. As of July 1997,
development of the El Rancho Property was suspended. On January 28, 1999, the
Company fully and finally consummated the settlement agreement entered into on
July 2, 1998 ("the Delaware Settlement"). As part of the Delaware Settlement,
the Company provided for the sale of the El Rancho Property. As of June 30,
1998, the El Rancho Property was reclassified to "Property held for Sale" after
recording an impairment charge during the fourth quarter of Fiscal 1998 of
approximately $3,430,000 to adjust it to fair value, after taking into account
the estimated fair value of the reversion of Las Vegas Entertainment Network,
Inc.'s shares of the Company's common stock. In the absence of a public market
for the Company's Common Stock, management determined the estimated fair value
of the Common Stock to be the anticipated book value attributable to the Common
Stock after taking into account the estimated operating results until the
disposition of the racetrack operations assumed to have occurred on December 31,
1998, the disposal of the racetrack assets and the El Rancho Property, and other
transactions contemplated in the Delaware Settlement. (See Note 4)

(F) Net Assets of Discontinued Operations - At June 30, 1998, the Garden
State Property and Freehold Raceway were classified as "Net Assets of
Discontinued Operations." During the third quarter of Fiscal 1999, the Company
recognized a net gain of $3,657,688 from the sale of Freehold Raceway, the sale
of a ten-acre parcel at the Garden State Park facility and the lease of the
Garden State Park facilities after applying approximately $14,000,000 from the
transaction to reduce the fair value of the Garden State

29
<PAGE>
INTERNATIONAL THOROUGHBRED BREEDERS, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

property. At June 30, 2000, the remaining net assets and liabilities of Garden
State Park and Freehold Raceway were classified as "Net Liabilities of
Discontinued Operations."

(G) Recent Accounting Pronouncements - In June 1998, the Financial
Accounting Standards Board issued Statement of Financial Account Standards No.
133, "Accounting for Derivative Instruments" ("SFAS 133 as amended by SFAS
137"). SFAS 137 delays the effective date of implementation of SFAS 133 by one
year. SFAS 133 establishes accounting and reporting standards for derivative
instruments and for hedging activities. SFAS 133 requires that an entity
recognize all derivatives as either assets or liabilities and measure those
instruments at fair market value. Presently, the Company does not use derivative
instruments either in hedging activities or as investments. Accordingly, the
Company believes that the adoption of SFAS 133 will have no impact on its
financial position or results of operations.

The Company has no material comprehensive income items as defined in
Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive
Income".

(H) Deferred Financing Costs - Deferred financing costs at June 30, 1998
include those amounts associated with its May 23, 1997 financing agreement with
Credit Suisse First Boston Mortgage Capital LLC("Credit Suisse"). These costs of
$6,238,731 were expensed over the two-year life of the loan which had an
original due date of June 30, 1999.

(I) Revenue Recognition - The Company recognized the revenues associated
with horse racing at Garden State Park and Freehold Raceway as they were earned.
Both Garden State Park and Freehold Raceway operated as satellite wagering sites
for both thoroughbred and harness racing meets conducted at other racetracks.
The tracks received broadcasts of live racing from other racetracks under
various simulcasting agreements. The tracks also provided broadcasts of live
racing conducted at the Company's facilities to other racetracks under various
host simulcasting agreements. Under these contracts, the Company received or
paid pari-mutuel commissions of varying percentages of simulcast pari-mutuel
wagering. Costs and expenses associated with horse racing revenues were charged
against income in those periods in which the horse racing revenues were
recognized. Other costs and expenses, including advertising, were recognized as
they actually occur throughout the year.

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

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

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

30
<PAGE>
INTERNATIONAL THOROUGHBRED BREEDERS, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(M) 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.

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

Loss per common share is computed by dividing net loss by the weighted
average number of shares of common stock outstanding. Options and warrants to
purchase 3,104,000 shares of Common Stock at various prices per share, for the
each of the two years ended June 30, 2000 and 1999 and 3,271,847 shares of
Common Stock at various prices per share, for the year ended June 30, 1998, were
not included in the computation of diluted loss per share as their effect would
be anti-dilutive.

(3) DISCONTINUED OPERATIONS

The proceeds of the Greenwood Transaction were principally used by the
Company to pay off the first lien on the assets of Freehold Raceway, reduce the
outstanding balance on the Company's loan from Credit Suisse to $30.5 million
and to consummate the Delaware Settlement. In addition, Credit Suisse also
released to the Company approximately $4.475 million from its escrow reserves
for working capital purposes, to reduce debt and pay fees.

31
<PAGE>
INTERNATIONAL THOROUGHBRED BREEDERS, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The discontinued operations are summarized as follows:
--------------------------------------------------------------------------------
Years Ended June 30,
--------------------
DISCONTINUED RACETRACK OPERATIONS: 1999 * 1998
------ ----

REVENUE $ 37,992,012 $ 68,636,449
------------- -------------

EXPENSES:

Cost of Revenues:

Purses 12,591,222 22,370,695

Operating Expenses 16,612,009 31,794,410

Depreciation & Amortization 1,078,701 1,665,206

General & Administrative Expenses 2,619,944 4,607,984

Interest Expenses 484,404 855,421
------------- -------------

TOTAL EXPENSES 33,386,280 61,293,716
------------- -------------

INCOME FROM DISCONTINUED RACETRACK

OPERATIONS BEFORE TAXES 4,605,732 7,342,733

INCOME TAX EXPENSE 119,348 135,100
------------- -------------
4,486,384 7,207,633

NET GAIN ON SALE OF NET ASSETS OF
DISCONTINUED OPERATIONS
(NET OF $1,335,500 STATE
INCOME TAXES) 3,657,688 0
------------- -------------

INCOME FROM DISCONTINUED
RACETRACK OPERATIONS $ 8,144,072 $ 7,207,633
============= =============

--------------------------------------------------------------------------------
* July 1, 1998 to January 28, 1999

As of June 30, 1998, the Garden State Property was reclassified to "Net As
sets of Discontinued Operations." During the third quarter of Fiscal 1999, the
Company recognized a net gain of $3,657,688 from the sale of Freehold Raceway,
the sale of a ten-acre parcel at the Garden State Park facility and the lease of
the Garden State Park facilities after applying approximately $14,000,00 0 from
the transaction to reduce the fair value of the Garden State property.

32
<PAGE>
INTERNATIONAL THOROUGHBRED BREEDERS, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The net assets of the operations to be disposed of included in the
accompanying consolidated balance sheets as of June 30, 1999 and 1998 consist of
the following:
<TABLE>
June 30,
----------------------------
Classified As: 2000 1999
---- ----
<CAPTION>
<S> <C> <C>
Current Assets $ 546,034 $ 2,201,036
Current Liabilities (1,055,611) 1,706,337
Deferred Income (1,000,000) -0-
-------------- ------------
Net Assets of Discontinued Operations - Current -0- 494,699
Net Liabilities of Discontinued Operations - Current (1,509,577) -0-
Property Assets of Garden State Park 30,000,000 30,000,000
-------------- ------------
Net Assets of Discontinued Operations $ 28,490,423 $ 30,494,699
============== ============
</TABLE>

Cash flows from discontinued operations for the year ended June 30, 1999
and 1998 consist of the following:
<TABLE>
June 30,
Cash Flows From Discontinued Operating Activities: 1999 1998
--------------- ---------------
<CAPTION>
<S> <C> <C>
Income $ 8,144,072 $ 7,207,633
----------- -----------
Adjustments to reconcile income to net cash provided by
discontinued operating activities

Depreciation and Amortization 1,078,701 1,665,206

Net (Gain) Loss on Sale of Discontinued Operations (3,657,688) 1,007

Changes in Operating Assets and Liabilities of
Discontinued Operations:

Decrease in Restricted Cash and Investments 3,444,267 277,040
Decrease in Accounts Receivable 331,742 287,694
Decrease in Other Assets 21,142 140,165
Decrease in Prepaid Expenses 773,312 534,625
Increase (Decrease) in Accounts and Purses
Payable and Accrued Expenses 1,790,189 (940,299)
(Decrease) Increase in Deferred Revenue (1,770,159) 19,587
----------- -----------
Net Cash Provided by Discontinued Operating Activities 10,155,578 9,192,657
----------- -----------
Cash Flows From Discontinued Investing Activities:

Proceeds from Sale of Land -0- 8,449,904
Capital Expenditures (69,616) (212,227)
(Increase) in Other Investments (77,032) (13,012)
----------- -----------
Net Cash (Used In) Provided by Discontinued Investing Activities $ (146,648) $ 8,224,665
----------- -----------
</TABLE>

33
<PAGE>
INTERNATIONAL THOROUGHBRED BREEDERS, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
June 30,
--------
1999 1998
--------------- ---------------
<CAPTION>
Cash Flows from Discontinued Financing Activities:
<S> <C> <C>
Principal Payments on Sun Mortgage $ -0- $ (6,000,000)
Principal Payments on Short Term Notes (856,475) (733,719)
Increase (Decrease) in Balances Due To/From
Continuing Operations 1,823,666 (8,376,135)
Principal Payments on Long Term Notes (13,404,853) (1,132,272)
--------------- ---------------
Net Cash (Used In) Discontinued Financing Activities (12,437,662) (16,242,126)
--------------- ---------------

Net (Decrease) Increase in Cash and Cash Equivalents
From Discontinued Operations (2,428,732) 1,175,197

Cash and Cash Equivalents at Beginning of Year
From Discontinued Operations 3,166,900 1,991,705
--------------- --------------
Cash and Cash Equivalents at End of Year From
Discontinued Operations $ 738,168 $ 3,166,900
=============== ==============
</TABLE>

On January 25, 2000, the Company entered into an Agreement of sale pursuant
to which it has agreed to sell the real property known as Garden State Park to
Turnberry/Cherry Hill LLC. Under the Agreement of Sale, as amended, the purchase
price for the Garden State Park real property is $30 million, plus assumption of
certain monetary obligations of the Company with respect to the property sold
which aggregate approximately $500,000 (the "Assumed Liability"). The buyer also
agreed to pay up to $200,000 per month of the Company's out-of-pocket carrying
costs of the Garden State Park property after April 15, 2000 (including interest
on the Company's Mortgage debt). At closing, $20 million of the purchase price
will be payable in cash (of which the Company has already received deposits of
$1,000,000), and the buyer will deliver its promissory note in the face amount
of $10 million (the "Note"). Under the Note, once the buyer has received
distributions from the buyer equal to the amount of its invested capital
contributions plus an agreed upon return thereon, the next $10 million of the
buyer's distributable cash would be paid under the Note to the Company, and the
Company thereafter would receive payments under the Note equal to one-third of
the distributable cash of the buyer, including (without limitation)
distributable cash generated by development, sale or leasing of the Garden State
Park property. The agreed upon rate of return to be paid to buyer's owner on its
invested capital contributions, before payments under the Note will be made,
will be 15% per year, except that the rate of return on capital invested by
buyer's owner to cover certain costs, in excess of $1,000,000, which buyer may
incur in respect of the Assumed Liability, environmental investigation and
remediation, and various other specified items (including the September
extension fee of $146,680 paid to the Company's primary lender, CSFB), may be as
high as 33 1/3% per annum. Closing is scheduled to occur prior to December 1,
2000. The parties continue to negotiate certain issues and there can be no
assurance that the transaction will be consummated.

34
<PAGE>
INTERNATIONAL THOROUGHBRED BREEDERS, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(4) SALE OF THE El RANCHO PROPERTY

The proceeds of the El Rancho Transaction were principally used by the
Company to reduce the outstanding balance on the Company's loan from Credit
Suisse First Boston Mortgage Capital LLC ("Credit Suisse") to $14.7 million and
to purchase a promissory note, secured by the rights to 100% of the
distributable cash of the buyer in the event of default, of the buyer in the
amount of $23,000,000 which can be convertible at the Company's option into a 33
1/3% equity interest in the buyer.

The interest rate will be adjusted from time to time since the interest
actually payable will be dependent upon, and payable solely out of, the buyer's
net cash flow available for distribution to its equity owners ("Distributable
Cash"). After the equity investors in the buyer have received total
distributions equal to their capital contributions plus an agreed upon return on
their invested capital, the next $23 million of Distributable Cash will be paid
to the Company. The Company will thereafter receive payments under the note
equal to 33 1/3% of all Distributable Cash until the maturity date, which occurs
on the 30th anniversary of the Company's purchase of the note. The Company may
convert the promissory note, at its option, into a 33 1/3% equity interest in
the buyer during a six month period beginning at the 15th anniversary of the
issuance of the note. If not then converted, the note will convert into a 33
1/3% equity interest in the buyer at the 30th anniversary of its issuance.

The sales price of $45,000,000 exceeded the remaining basis and closing
costs in the property by $2,786,589. The Company has elected to defer the gain
on the sale until such time that collectability under the $23,000,000 note
purchased from Turnberry after the closing can be determined.

(5) ACQUISITIONS AND DISPOSITIONS

Fiscal 2000

Fiscal 1999

35
<PAGE>

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

Penn National Gaming, Inc. ("Penn National"), which owns Penn National Race
Course, Pocono Downs Racetrack, Charles Town Races and at least ten off-track
betting parlors in Pennsylvania. (See Note 3)

In connection with the January 28, 1999 transactions, the Company purchased
the undepreciated balance of equipment located at Garden State Park and a liquor
license owned by an unaffiliated third party, Service America Corporation, for
$500,000 ($100,000 of which will be paid by the lessee). This asset is recorded
in net assets of discontinued operations.

Pursuant to the terms of the Delaware Settlement, the Company purchased
from NPD, Inc. ("NPD") approximately 2.9 million shares of ITB common stock (the
"NPD Shares") for $4.6 million cash and the assumption by ITB of a $5.8 million
promissory note originally issued by NPD to acquire the NPD Shares, held by
Donald F. Conway, Chapter 11 Trustee for the Bankruptcy Estate of Robert E.
Brennan (the "Bankruptcy Trustee").

Fiscal 1998

On July 1, 1997, the Company made a non-refundable payment of $600,000 to
purchase an option to acquire the leasehold interests from D&C Gaming
Corporation ("D&C"), a company owned equally by the Company's former Director,
CEO and President, Nunzio P. DeSantis, and by the Chairman of Las Vegas
Entertainment Network, Inc. ("LVEN"), to acquire operating leases for two New
Mexico racetracks. Subsequently, the option agreement has been terminated by the
Company and D&C. In the Delaware litigation, the minority Board members have
challenged the authorization and enforceability of certain agreements, including
the option agreement. In connection with the Delaware Settlement, the $600,000
has been included in the calculation of the purchase price of the NPD shares.

On October 20, 1997, the Company sold a parcel of land contiguous to Garden
State Park for $9,000,000 exclusive of closing costs of approximately $545,190.
The carrying value of such property was $6,767,715. $6,000,000 of such sales
proceeds was used to repay an existing mortgage on the property. The resulting
gain was recorded as an adjustment to Stockholders' Equity in accordance with
accounting principles applicable to a quasi-reorganization.

(6) INVESTMENTS

Interest income for the fiscal years ended June 30, 2000, 1999, and 1998
was $109,254, $343,572, and $689,092, respectively. Realized losses resulting
from the sale of trading securities for fiscals 1999 were $12,908. There were no
realized gains or losses resulting from the sale of trading securities for
fiscals 2000 and 1998 .

36
<PAGE>

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

(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 principles applicable
to a quasi-reorganization which was completed on that date. 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:

Estimated Useful June 30,
--------
Lives in Years 2000 1999
-------------- ---- ----

Buildings and Improvements 15-40 $ 214,097 $ 214,097

Equipment and Artwork 5-15 1,199,284 683,428
--------- -------

Totals 1,413,381 897,525

Less Accumulated Depreciation
and Amortization 387,404 329,667
--------- -------
$1,025,977 $ 567,858
========== ==========

As of June 30, 1999 and 1998, Land, Buildings and Improvements, Equipment
relating to the racetrack operations and the El Rancho Property were classified
as "Property Held For Sale", "Net Assets of Discontinued Operations - Current",
and "Net Assets of Discontinued Operations - Long Term". As of June 30, 2000,
Land, Buildings and Improvements, Equipment relating to the racetrack operations
were classified as "Net Liabilities of Discontinued Operations - Current", and
"Net Assets of Discontinued Operations - Long Term".

(This space intentionally left blank)

37
<PAGE>

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

(8) NOTES AND MORTGAGES PAYABLE
Notes and Mortgages Payable are summarized below:

<TABLE>

June 30, 2000 June 30, 1999
------------- -------------
Interest %
Per Annum Current Long-Term Current Long-Term
----------------------------------------------------------------------------
<CAPTION>
International Thoroughbred
Breeders, Inc.:

<S> <C> <C> <C> <C>
Credit Suisse First Boston (A) LIBOR Rate plus 7% $ 14,668,022 $ -0- $ 30,500,000 $ -0-
(6/30/00 rate 13.64%)

REB Bankruptcy Trustee (B) Prime Rate (6/30/00 3,652,226 -0- 3,558,032 -0-
rate 9.50%)

Robert E. Brennan Jr. (C) -0- 482,000 -0- -0-

Other Various 276,461 -0- 239,113 -0-

Garden State Park:

Service America Corporation (D) 6% 320,000 -0- 400,000 -0-

Other (E) Various 179,375 -0- 344,954 -0-
-------------- ---------- ------------- ------
Totals $ 19,181,082 $ 482,000 $ 35,042,099 $ -0-

Net Assets of Discontinued
Operations - Long Term -0- -0- (744,954) -0-

Net Liabilities of Discontinued
Operations - Long Term (499,375) -0- -0-
-------------- ---------- ------------- ------
Totals $ 18,596,709 $ 482,000 $ 34,297,145 $ -0-
============== ========== ============= ======
</TABLE>

The effective LIBOR Rate and the Prime Rate at June 30, 2000 were 6.64% and
9.50%, respectively. There was no short term borrowings outstanding as of June
30, 2000.

A) On May 23, 1997, the Company entered into a two-year $55 million credit
facility with Credit Suisse First Boston Mortgage Capital LLC, ("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 existing credit
facility and to provide funds for working capital and other general corporate
purposes, including, but not limited to, preliminary development of the El
Rancho Property. Of the remaining facility borrowings, approximately $16.8
million was placed in escrow accounts, financing and closing fees of $4.3
million were incurred by the Company and $3.9 million was used by the Company
for general corporate purposes and repayment of certain other financial
obligations. Interest under the Credit Suisse Credit Facility is payable monthly
in arrears at 7% over the London interbank offered rate ("LIBOR").

38
<PAGE>

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

Company had been in a maturity default with Credit Suisse for its loan due on
June 1, 1999 (the "CSFB Loan") in the principal amount of $30,500,000 plus
unpaid interest since June 1, 1999. On November 17, 1999, the Company and Credit
Suisse signed a term sheet outlining the term and conditions of the Restructure
Agreement. At that time, accrued interest in the amount of $1,762,891 was added
to the principal balance of the note.

The Restructure Agreement returned the loan to a good standing position
and extended the maturity date of the CSFB Loan to June 30, 2000. As part of the
Restructure Agreement, the Company agreed that as of January 21, 2000, the
restructured principal balance due on the CSFB Loan was $33,103,189, which
consisted of: (i) the principal amount of $30,500,000 remaining on the CSFB
Loan; (ii) accrued interest advanced by Credit Suisse from June 1, 1999 to
January 21, 2000 in the amount of $2,523,189; and (iii) an advance of a portion
of Credit Suisse's legal fees incurred in connection with the Restructure
Agreement in the amount of $80,000. Credit Suisse agreed, pursuant to the
Restructure Agreement, to advance the monthly interest payments due by the
Company under the CSFB Loan until April 15, 2000. Such interest amounts shall,
to the extent not paid when due by the Company, become part of the outstanding
principal balance of the CSFB Loan on the date such interest becomes due.

On January 28, 1999, a portion of the proceeds from the Greenwood
Transaction and $2,500,000 held in escrow was used to reduce the principal
balance on the Credit Suisse Note to $30.5 million and to pay a 2% prepayment
fee of $500,000, recorded as financing expenses, to Credit Suisse. On May 22,
2000, the proceeds from the sale of the El Rancho property were principally used
by the Company to reduce the outstanding balance on the CSFB Loan to
$14,668,022. The Company has entered into an Agreement of sale pursuant to which
it has agreed to sell the real property known as Garden State Park to
Turnberry/Cherry Hill LLC. CSFB has agreed to extend the maturity date of the
Company's mortgage indebtedness to November 30, 2000 in order to permit this
sale to the buyer, subject to payment of interest monthly in advance and payment
of monthly extension fees for September, October and November, 2000, in the
amount of $146,680 per month. The buyer has been paying the interest accruing to
CSFB since April 15, 2000 and has paid the extension fee for September in the
amount of $146,680. Extension fees paid by the buyer for October and November,
2000 will be credited towards the purchase price at closing. If the transaction
fails to close by November 30, 2000, or if the buyer (or its principal) fails to
pay either the monthly interest or extension fee due on October 1 or November 1,
CSFB may declare a default and proceed to sell the Garden State Park property.

The Credit Suisse Credit Facility is evidenced by a convertible promissory
note (the "Credit Suisse 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 an aggregate principal amount of the CSFB Note or upon
acceleration of the CSFB 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 (valued at $1,269,579) 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 became exercisable January 28, 1999,
following the consummation of the Delaware Settlement and were recorded as
financing expenses in the amount of $1,242,883 during the third quarter of
Fiscal 1999.

39
<PAGE>

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

Credit Suisse also received 232,652 shares of the Company's Common Stock
upon the prior conversion of a $10.5 million promissory note issued by the
Company to LVEN in consideration for Credit Suisse's consent and advisory
services in connection with this transaction. The Company has granted Credit
Suisse certain registration rights with respect to the above described warrants
and 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 Suisse Credit Facility.

(B) On January 28, 1999, in connection with the Delaware Settlement, the
Company executed a note (the "Trustee Note") in the principal amount of
$3,558,032 to the Chapter 11 Bankruptcy Trustee for the estate of Robert E.
Brennan (the "Trustee") in order to purchase 2,904,016 shares of the Company's
Common Stock from NPD. Pursuant to the Trustee Settlement associated with the
Delaware Settlement, the Trustee received: (a) a pay down on the NPD Note from
the original principal balance of $5,808,032 to $3,558,032; (b) a promissory
note from ITB in the amount of $3,558,032 (the "ITB Note"), on substantially the
same terms as the NPD Note, except that the ITB Note becomes due and payable on
the earlier to occur of (i) January 15, 2001, or (ii) the closing of either the
sale of the Company's non-operating El Rancho hotel and casino property in Las
Vegas, Nevada (the "El Rancho Property"), or the sale of Garden State Park (the
"Garden State Property"); (c) a security interest in the NPD Shares; (d) the
payment of the costs and expenses incurred by the Bankruptcy Trustee in
connection with the Delaware Settlement and the Trustee Settlement; (e)
subordinate interests in both the El Rancho Property and the Garden State
Property; and (f) an escrow of the July 15, 1999 interest payment due on the ITB
Note. Proceeds from the sale of the El Rancho property (See Note 4) were used to
reduce the CSFB debt due to this note being subordinate to the CSFB debt. (See
below)

In connection with the January 21, 2000 Restructure Agreement with Credit
Suisse, the Trustee entered into an agreement with the Company wherein: (i) the
amounts due under the Trustee Note are due at the earlier of (a) June 1, 2000 or
(b) the date on which the latter of the Garden State Park or El Rancho property
is sold, provided that the sale of the latter will satisfy the remaining balance
on the CSFB Loan and the Trustee Note; (ii) all interest due under the Trustee
Note will be accrued and deferred until the maturity date of the Note; and (iii)
the Company shall reimburse the Trustee for legal and accounting fees up to
$20,000, which amount will be advanced by the Trustee and added to the
outstanding principal balance of the Trustee Note. Pursuant to the Restructure
Agreement, the Trustee Note is subordinate to the CSFB Loan, thereby principal
and interest payments on the Trustee Note will be made only if and when the CSFB
Loan is paid in full.

(C) On February 24, 2000, the Company sold several pieces of artwork to
Robert E. Brennan Jr., son of the Company's former Chairman and Chief Executive
Officer. The $218,000 sales price of the artwork was in excess of the original
cost of $186,600. The Company recorded a $31,400 gain on the sale in Fiscal
2000. In addition, the Company purchased two large bronze sculptures located on
the Garden State Park property that were previously on loan to the Company from
Mr. Brennan Jr. The purchase price of the sculptures was $700,000. In connection
with the transaction, the Company signed a $482,000 promissory note with Mr.
Brennan Jr. which represented the purchase price of the sculptures less the
sales price of the artwork sold to Mr. Brennan Jr. The note is due on January
31, 2002 without interest if the principal is paid on or before January 31,
2002. Any amounts not paid prior to January 31, 2002 will accrue interest at 8%
On July 27, 2000 the Company received a notice from the Chapter 11 Trustee for
the bankruptcy estate of Robert E. Brennan asserting certain ownership rights in
a number of items on loan to the Company, including the sculptures mentioned
above.

40
<PAGE>

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

(D) In connection with the January 28, 1999 lease transactions for the
Garden State Park facility, the Company purchased the undepreciated balance of
equipment located at Garden State Park and a liquor license owned by an
unaffiliated third party, Service America Corporation, for $500,000 ($100,000 of
which will be paid by the lessee when title is transferred to Pennwood, which
event has not occurred as of September 30, 2000) financed by a five (5) year
promissory note at a 6% interest rate. The Company paid $100,000 on June 1,
1999, a principal and interest payment of $99,200 on December 28, 1999 and is
scheduled to make principal payments of $80,000 plus interest on December 28th
for the next three years.

(E) In connection with the January 28, 1999 lease transactions for the
Garden State Park facility, a note associated with certain equipment at the
Garden State Park facility will be paid by Greenwood as part of the lease
agreement.

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

The Company's income tax expense for the year ending June 30, 1998 relates
to New Jersey income taxes for its Freehold Raceway operations and for the
fiscal year ended June 30, 1999 relates to New Jersey income taxes for its
Freehold Raceway operations and for the sale of the property.

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
$217,000,000 at June 30, 2000 expiring in the years June 30, 2002 through June
30, 2020. 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 $90,000,000 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.

41
<PAGE>

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

The Company has the following carryforwards to offset future taxable income at
June 30, 2000:

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

$45,750,000 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

97,730,000 6/30/2007
---------- through 6/30/2020
$217,000,000
============

(10) COMMITMENTS AND CONTINGENCIES

A state has asserted a tax claim for the period June 30, 1988 to June 30,
1991 (during which the Company maintained an accounting office in the state) for
a Foreign Corporate Franchise Tax in the approximate amount of $400,000 (which
amount was accrued in Fiscal 1998), not taking into consideration any interest
or penalties that may be assessed. At this time, the Company cannot predict the
final amount which may be due. It is likely that litigation will have to
commence in the courts to pursue a compromise of the amount due. It is unknown
at this time whether the Company will be successful in abating all or part of
the tax due.

Commencing in the third quarter of Fiscal 1999, the Company and certain of
its officers and directors and former officers and directors received subpoenas
from the Securities and Exchange Commission (the "SEC") relating to certain
transactions and reports. The Company has fully cooperated with the SEC's
investigation.

The Company is responsible for remediation costs associated with an
environmental site on the Freehold Raceway property. The Company has accrued
what it believes to be the total cost of remediation. At June 30, 1999 and 1998,
the Company had accrued $300,000 and $100,000, respectively, for remediation
costs.

In connection with the environmental evaluation on the Garden State Park
property by the prospective buyer, the Company has been made aware of certain
environmental issues that may have to be addressed with respect to the sale of
the property. At this time, the Company cannot make a determination as to any
costs that would be necessary to correct the situation or the extent of any
violations. In addition, the State of New Jersey has fined the Company $75,000
for alleged violations with respect to required environmental reports not being
filed with the state following the property's lease to Pennwood. The Company is
negotiating with Pennwood to recover the cost in accordance with the terms of
the lease.

42
<PAGE>

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

In connection with the January 28, 1999 lease transactions for the Garden
State Park facility, a note associated with certain equipment at the Garden
State Park facility is being paid by Greenwood as part of the lease agreement.
In the event that the Company or Pennwood terminates its lease agreement prior
to July 2001 when the note is fully paid, the Company will be responsible for
the monthly note payments of approximately $17,000. The Company may be required
to reimburse approximately $240,000 to Pennwood for all the payments made on the
note from the inception of the lease should the Company sell the property to a
third party. The Company is currently negotiating with Turnberry for these
reimbursement costs to be included as a cost of purchasing the property.

In connection with the January 28, 1999 lease transactions for the Garden
State Park facility, the Company purchased a liquor license owned by an
unaffiliated third party, Service America Corporation, for $500,000 ($100,000 of
which will be paid by the lessee when title is transferred to Pennwood, which
event has not occurred as of September 30, 2000) financed by a five (5) year
promissory note at a 6% interest rate. The Company paid $100,000 on June 1,
1999, $99,200 on December 28, 1999 and is scheduled to make principal payments
of $80,000 plus interest on December 28th for the next three years. In the event
Pennwood is awarded a license to own and operate an off-track betting facility
prior to January 28, 2002, the Company will be required to release the liquor
license to Pennwood in consideration of the $100,000 payment to be made by
Pennwood for the transfer of the title to the liquor license.

The Chapter 11 Bankruptcy Trustee (the "Trustee") for the estate of Robert
E. Brennan has asserted certain claims challenging the ownership of
approximately 2,300,000 shares of the Company's Common Stock (the "Shares") held
by certain individuals. In order to preserve the Company's net operating loss
carryforwards from being lost due to the shares being transferred, the Company
and the Trustee have entered into an agreement whereby the Trustee has agreed to
accept a letter of credit for $1,150,000, which will be secured by an amount of
$1,150,000 held in escrow, that will be used to purchase his interest in the
Shares in the event that he is awarded a judgement granting him an ownership
interest in the Shares.

The Company's debt with CSFB is due on November 30, 2000. Unless the sale
of the Garden State Park property is consummated prior to that date, the Company
will be in default in connection with the CSFB loan agreement. Additionally, the
cash proceeds from the sale must be in an amount sufficient to satisfy the loan
due on the trustee note together with accrued interest. The total amount due on
November 30, 2000 to satisfy the CSFB loan together with accrued interest and
fees and the trustee note together with accrued interest is approximately
$18,600,000. The proceeds from the sale of the Garden State Park property are
expected to be sufficient to meet this obligation.

LEGAL PROCEEDINGS

DELAWARE SETTLEMENT

43
<PAGE>

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

44
<PAGE>

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

Option"). LVEN did not sell the El Rancho Property nor did it exercise the
Refinancing Option. If the Company sells or refinances the El Rancho property
after April 19, 1999 for an amount in excess of $44,200,000, plus one half of
the carrying costs from January 20, 1999 to April 19, 1999, plus the customary
transaction costs incurred by the Company in such sale (the "Threshold Amount"),
then LVEN shall receive from such cash proceeds in excess of the Threshold
Amount up to the amount of $12,000,000 of cash sale proceeds over and above the
Threshold Amount, out of which LVEN will direct that the first $2,000,000 be
paid over to NPD. NPD is owned by Nunzio DeSantis, the Company's former Director
and CEO and Tony Coelho, the Company's former Director and Chairman of the
Board. On January 25, 2000, the Company signed a binding term sheet for the sale
of the El Rancho Property.

In exchange for the foregoing, LVEN (a) executed and delivered releases to
all parties to the Delaware Settlement, including the Company and Credit Suisse,
(b) returned to ITB for immediate cancellation the 2,093,868 shares of ITB
common stock (the "LVEN Shares") previously issued to Casino- Co Corporation, a
subsidiary of LVEN, in exchange for the cancellation of a certain $10.5 million
note plus accrued interest from ITB to LVEN, which note remains canceled, (c)
released any and all LVEN or Casino-Co Corporation interests in the NPD Shares,
and (d) cancelled any and all agreements of any kind or nature whatsoever
between LVEN and its affiliates and ITB or any of its subsidiaries.

HARRIS V. DESANTIS, ET AL.

45
<PAGE>

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

HARRIS V. DESANTIS, ET AL.

NEW JERSEY SETTLEMENT

Prior to filing pleadings in response to the Harris-State complaint, ITB
and the defendants in the New Jersey Actions entered into a memorandum of
understanding dated August 18, 1998 (the "New Jersey Memorandum") pursuant to
which, upon satisfaction of multiple conditions (including the parties' approval
of definitive settlement documents, notice of the settlement to ITB's past and
current stockholders, and the approval of the New Jersey Superior Court and the
New Jersey District Court), the New Jersey Actions were to be fully and finally
dismissed with prejudice, and ITB and all defendants were to receive a release
from all holders of ITB common and preferred stock of any claims arising out of
the facts and transactions set forth in the complaints in the New Jersey Actions
(the "Proposed New Jersey Settlement"). The New Jersey Memorandum provided that
the Proposed New Jersey Settlement would be submitted for approval to the New
Jersey Superior Court, that a fee petition would be submitted by plaintiffs'
attorneys in the New Jersey Actions for approval by the New Jersey District
Court, and that the Harris-Federal action would be dismissed on the grounds that
the plaintiffs' claims are barred and released as a result of the settlement and
dismissal of the Quigley Action by the Delaware Court of Chancery on October 6,
1998. Pursuant to the Proposed New Jersey Settlement, the plaintiffs agreed not
to file objections to the Delaware Settlement.

On December 3, 1999, plaintiffs in the Harris-Federal action filed with the
New Jersey District Court a motion for an order enforcing the Proposed New
Jersey Settlement. On December 3, 1999, the New Jersey District Court entered an
order dismissing the Harris-Federal action without costs and without prejudice
to the plaintiffs' right to reopen the action within 60 days if the Proposed New
Jersey Settlement is not consummated. In light of the entry of this order, on
December 7, 1999, the New Jersey District Court dismissed as moot plaintiffs'
motion for an order enforcing the Proposed New Jersey Settlement. On January 6,
2000, plaintiffs in the Harris-Federal action moved to vacate the New Jersey
District Court's dismissal order and to pursue the original motion to enforce
the Proposed New Jersey Settlement. On February 16, 2000, the New Jersey
District Court granted the plaintiffs' motion to vacate the dismissal

46
<PAGE>

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

order and reopen the Harris-Federal action. The plaintiffs filed a second motion
to enforce the terms of the Proposed New Jersey Settlement on April 25, 2000.

On August 21, 2000, the New Jersey Superior Court held a hearing to
consider the fairness of the New Jersey Settlement to the Class. At the
conclusion of the hearing, the New Jersey Superior Court entered an order (i)
certifying the Class pursuant to New Jersey Rule 4:32; (ii) approving the New
Jersey Settlement as fair, reasonable, adequate and in the best interests of the
Class; (iii) dismissing the Harris- State action with prejudice; and (iv)
releasing all Class claims against the defendants arising from and relating to
the facts alleged in the Second Harris-State Complaint.

47
<PAGE>

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

OTHER LITIGATION

The Company is a defendant in a wrongful death action arising out of a
motor vehicle/pedestrian accident at Freehold Raceway. The case is in the
initial stages of discovery. The Company believes that it has adequate insurance
coverage for the claim, however, because of the uncertainties, the Company is
unable to determine at this time the potential liability, if any. Any claim for
punitive damages would not be covered by insurance.

(11) FAIR VALUE OF FINANCIAL INSTRUMENTS

As of June 30, 2000, in assessing the fair value of financial instruments,
the Company has used a variety of methods and assumptions, which were based on
estimates of market conditions and loan risks existing at that time. For certain
instruments, including cash and cash equivalents, investments, non-trade
accounts receivable and loans, and short-term debt, it was estimated that the
carrying amount approximated fair value for the majority of these instruments
because of their short-term maturity. The carrying amounts of long term debt
approximate fair value since 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 of 1986, as amended (the "Code") covering
all its non-union full time employees who have completed one year of service.
The Company's basic contribution under the plan is 4% of each covered employee's
compensation for such calendar year. In addition, the Company contributes up to
an additional 50% of the first 4% of compensation contributed by any covered
employee to the plan (an employee's maximum contribution is $10,000 factored for
inflation annually). The Company's expense totaled $1,911(utilizing accumulated
forfeitures), $137,091 and $216,848 for the fiscal years ended June 30, 2000,
1999 and 1998, respectively.

(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

48
<PAGE>
INTERNATIONAL THOROUGHBRED BREEDERS, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

intended to qualify under section 422 of the Code, and non-qualified stock
options which do not qualify. No option may have a term longer than 10 years
(limited to five years in the case of an option granted to a 10% or greater
stockholder of the Company). Options under the 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, 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, 2000:

Stock Options
-------------
Exercise Weighted
Number Price Range Average
of Shares Per Share Price
--------- --------- -----
Outstanding at
June 30, 1997 1,600,000 $ 4.00 - $ 5.875 $ 4.59

Granted 300,000 $ 4.00 $ 4.00
---------
Outstanding at
June 30, 1998 1,900,000 $ 4.00 - $ 5.875 $ 4.50

Canceled (350,000) $ 4.00 - $ 5.00 $ 4.14
---------
Outstanding at
June 30, 1999 1,550,000 $ 4.00 - $ 5.875 $ 4.58

Granted 5,000 $ 1.00 $ 1.00

Canceled (200,000) $ 5.875 $ 5.875
---------
Outstanding at
June 30, 2000 1,355,000 $ 1.00 - $ 5.00 $ 4.37
=========

Exercise Weighted
Price Range Average
Option shares Per Share Price
------------- --------- -----
Exercisable at June 30:

1998 1,900,000 $4.00 - $5.875 $4.50
--------- -------------- -----
1999 1,550,000 $4.00 - $5.875 $4.58
--------- -------------- -----
2000 1,355,000 $1.00 - $5.00 $4.37
--------- -------------- -----
Options available for
future grant
under the Plan at
June 30: 1994 Plan
---------
1998 275,000

1999 275,000

2000 475,000

49
<PAGE>

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

The following table summarizes information about stock options outstanding at
June 30, 2000:

Ranges Total
------------------------ ------------
Range of exercise prices $1.00 - 4.625 $5.00 $1.00 - 5.00

Outstanding options:

Number outstanding at
June 30, 2000 980,000 375,000 1,355,000
------------------------ ------------
Weighted average remaining
contractual life (years) 5.85 5.50 6.75
------------------------ ------------
Weighted average exercise price $4.13 $5.00 $4.37
------------------------ ------------
Exercisable options:

Number outstanding at
June 30, 2000 980,000 375,000 1,355,000
------------------------ ------------
Weighted average exercise price $4.13 $5.00 $4.37
------------------------ ------------

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

June 30, 1997:

Below Market -- -- --

At Market -- -- --

Above Market 875,000 $4.51 $1.78
--------
875,000
--------
June 30, 1998:
-------- -------------- ----------------
Below Market 300,000 $4.00 $2.62

At Market -- -- --

Above Market -- -- --
--------
300,000
--------
June 30, 2000:
-------- -------------- ----------------
Below Market 5,000 $1.00 $1.00

At Market -- -- --

Above Market -- -- --
--------
5,000
--------

50
<PAGE>

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

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 Employees" ("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:

Years Ended June 30,
--------------------
2000 1999 1998
---- ---- ----
Net (Loss): As Reported

(Loss) Before Discontinued
Operations $ (6,980,831) $ (16,034,769) $ (25,468,850)

Income from Discontinued
Operations -0- 8,144,072 7,207,633
------------- -------------- --------------
Net (Loss) $ (6,980,831) $ (7,890,697) $ (18,261,217)
------------- -------------- --------------

Pro Forma Net (Loss)

(Loss) Before Discontinued
Operations $ (7,026,581) $ (16,034,769) $ (25,468,850)

Income from Discontinued
Operations -0- 8,144,072 7,207,633
------------- -------------- --------------
Net (Loss) $ (7,026,581) $ (7,890,697) $ (18,261,217)
------------- -------------- --------------

51
<PAGE>

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

Years Ended June 30,
--------------------
2000 1999 1998
---- ---- ----
Net (Loss) Per Share- Basic and Diluted:
As Reported

(Loss) Before Discontinued Operations $ (0.78) $ (1.38) $ (1.82)

Income from Discontinued Operations -0- 0.71 0.51
--------- -------- ---------
Net (Loss) $ (0.78) $ (0.67) $ (1.31)
--------- -------- ---------
Pro Forma Net (Loss) Per Share - Basic
and Diluted

(Loss) Before Discontinued Operations $ (0.78) $ (1.38) $ (1.82)

Income From Discontinued Operations -0- 0.71 0.51
--------- -------- ---------
Net (Loss) $ (0.78) $ (0.67) $ (1.31)
--------- -------- ---------

(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. During the fiscal year ended June 30, 1999, the Company
issued warrants to purchase 932,153 shares of Common Stock in connection with
its financing activities, including the Credit Suisse Credit Facility. All
warrants are exercisable at June 30, 2000.

The fair value of warrants issued during the years ended June 30, 1999 and
1998 was $1,269,179, and $0, respectively. The 1999 warrants were accounted for
as financing expenses.

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, 1999:

Warrants
--------
Exercise Weighted
Number Price Range Average
Of Shares Per Share Price
--------------------------------------
Outstanding at
June 30, 1997 and 1998 1,671,847 $4.00 - $5.25 $4.66

Granted During Fiscal 1999 497,153 $4.375 $4.375

Granted During Fiscal 1999 435,000 $2.50 $2.50
---------
Outstanding at
June 30, 1999 and 2000 2,604,000 $2.50 - $5.25 $4.25
=========

52
<PAGE>

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

(14) DIVIDENDS

The Company is required to pay to the holders of the Company's Series A
Convertible Preferred Stock ("Preferred Stock") a cash dividend from any net
racetrack earnings, as defined, of Garden State Park. No dividends were required
for fiscals 2000, 1999 and 1998. The Preferred Stock has liquidation rights of
$100 per share plus accrued dividends, if any.

(15) RELATED PARTY TRANSACTIONS

Mr. James J. Murray was elected by the Board of Directors to serve as a
Director of the Company on February 22, 1999. Mr. Murray is the brother of Mr.
Francis W. Murray who is a Director and also serves as acting Chief Executive
Officer of the Company.

Effective December 3, 1999, the Board of Directors accepted the resignation
of Christopher C. Castens, the Company's Secretary and General Counsel. During
the third quarter of Fiscal 2000, the Company paid $10,000 in consulting fees
for services Mr. Castens performed.

Mr. DeSantis, former director and Chief Executive Officer of the Company,
and Mr. Joseph Corazzi, President and Chairman of LVEN, each own one-half of the
stock of D&C Gaming, Inc.. 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. In the Delaware litigation, the minority Board members challenged the
authorization and enforceability of certain agreements, including this option
agreement. In connection with the Delaware Settlement, the $600,000 due to the
Company was offset by the price the Company paid to purchase the 2,904,016
shares of the Company's Common Stock held by NPD.

53
<PAGE>

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

Delaware Settlement, the profit participation note and the entertainment
management contract were terminated. 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 the Executive Committee 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 the Delaware litigation, the minority Board members challenged the
decision of the Executive Committee to reject the opportunity to purchase the
Fort Erie Racetrack. In connection with the Delaware Settlement, the litigation
was dropped.

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 had 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 a proxy to vote
any or all of the Conversion Shares until the occurrence of certain events and
agreed to grant Mr. DeSantis a proxy to vote any or all of the shares to be
issued to LVEN in the Casino-Co transaction. In the Delaware litigation, the
minority Board members challenged the authorization and enforceability of
certain agreements, including the Tri-Party Agreement. Upon consummation of the
Delaware Settlement, the Tri-Party Agreement was terminated and the Conversion
Shares were retired.

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 the Delaware litigation, the
minority Board members challenged the authorization and enforceability of
certain agreements, including the Bi-Lateral Agreement. The Bi-Lateral Agreement
and the $160 million profit participation note were terminated upon consummation
of the Delaware Settlement.

54
<PAGE>

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

Pursuant to the Delaware Settlement, Las Vegas Entertainment Network, Inc.
("LVEN") was granted the exclusive right to sell the El Rancho Property until
November 20, 1998 and the co-extensive right, along with the Company, to sell
the El Rancho Property until April 19, 1999. Beginning January 19, 1999, and
ending April 19, 1999, LVEN was required to pay one-half of the carrying costs
associated with maintaining the El Rancho Property. LVEN also obtained the
right, exercisable from March 20, 1999 until April 19, 1999, to refinance the El
Rancho Property and thereby obtain the extended right to sell the El Rancho
Property until the earlier of (a) one year from April 19, 1999 or (b) the
midpoint of the term of the refinancing loan (the "Refinancing Option"). If the
Company sells or refinances the El Rancho property after April 19, 1999 for an
amount in excess of $44,200,000, plus one half of the carrying costs from
January 20, 1999 to April 19, 1999, plus the customary transaction costs
incurred by the Company in such sale (the "Threshold Amount"), then LVEN shall
receive from such cash proceeds in excess of the Threshold Amount up to the
amount of $12,000,000 of cash sale proceeds over and above the Threshold Amount,
out of which LVEN will direct that the first $2,000,000 be paid over to NPD. NPD
is owned by Nunzio DeSantis, the Company's former Director and CEO and Tony
Coelho, the Company's former Director and Chairman of the Board. As of January
25, 2000 LVEN did not sell the El Rancho Property and did not exercise the
Refinancing Option. On May 22, 2000, the Company closed on the sale of the El
Rancho property for $45,000,000 in cash. Interest and one-half of the carrying
costs for the period between January 20, 1999 to April 19, 1999 were in excess
of $800,000, therefore, no payments are due to LVEN as a result of the
transaction.

Effective January 15, 1997, the Company entered into an employment
agreement with Nunzio P. DeSantis, the Company's Chief Executive Officer, for a
ten-year term at an initial annual base salary of $450,000 per year plus $5,000
in non-accountable expenses and $1,500 auto allowance, respectively, each month
in addition to a grant, subject to shareholder approval, of 5,000,000 options to
purchase up to 5,000,000 shares of the Company's Common Stock at an exercise
price of $4.00 per share and the use of a private charter jet for travel on
Company business. In the Delaware litigation, which was dismissed with prejudice
upon consummation of the Delaware Settlement, the minority Board members
challenged the authorization and enforceability of certain agreements, including
Mr. DeSantis' employment agreement. Upon consummation of the Delaware
Settlement, Mr. DeSantis' employment agreement was terminated and options
granted to him in the employment agreement were canceled.

During fiscal 1998, the Company paid $12,200, on behalf of 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
Corrazzi. Messrs. DeSantis and Corazzi used private jets operated by Southwest
Jet Group for certain personal matters for which the Company advanced
approximately $177,000 during fiscal 1998 and which LVEN had agreed to reimburse
the Company. The $177,000 owed to the Company was offset by certain conditions
agreed upon in the consummation of the Delaware Settlement.

55
<PAGE>

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

dismissed with prejudice upon consummation of the Delaware Settlement, the
minority Board members challenged the authorization and enforceability of
certain agreements, including Mr. Coelho's consulting agreement. Upon
consummation of the Delaware Settlement, Mr. Coelho's consulting agreement was
terminated and options granted to him in the consulting agreement were canceled.

Kenneth Scholl, a director of the Company until July 23, 1998, provides
consulting services to LVEN and certain of its subsidiaries through the Stanford
Company of which he is the president. 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. During Fiscal 2000, the Company paid
Mr. Scholl $120,000 for these services. Additionally, Mr. Scholl was paid
director fees of $10,000 for each of fiscal years 1999 and 1998. The Company has
continued to pay Mr. Scholl $10,000 per month for ongoing consulting services.
Mr. Scholl was elected president and director of Casino-Co in March 1996, he
resigned as a board member on March 14, 1997 and resigned as president on May
19, 1997. Mr. Scholl also held the position of Secretary and resigned the
position on March 1, 1998.

During fiscal 1999, the Company paid approximately $70,000 in consulting
fees and $21,777 of reimbursed expenses to Joseph Zappala, a former director of
the Company. During fiscal 1998, the Company paid approximately $110,000 in
consulting fees and $38,000 of reimbursed expenses to Mr. Zappala. During fiscal
1997, the Company paid approximately $15,000 in consulting fees, and $4,757 of
reimbursed expenses to Mr. Zappala. Upon consummation of the Delaware
Settlement, Mr. Zappala's consulting arrangement was terminated. Mr. Zappala
also provided consulting services to EMC during fiscal 1997 pursuant to which he
was paid $100,000.

During fiscals 1999 and 1998, the Company made payments for legal fees in
the amount of $696,500 and $759,755, respectively, on behalf of the following
current and former directors: Robert J. Quigley, Frank A. Leo, Francis W.
Murray, Charles R. Dees, Jr., John Mariucci, and James J. Murray. These amounts
were for legal fees in connection with the various lawsuits brought against the
Company.

During fiscals 1999 and 1998, the Company made payments for legal fees in
the amount of $50,000 and $45,586 on behalf of Robert Green. Those amounts were
for legal fees in connection with the Green v. DeSantis, et al. suit.

During fiscals 1999 and 1998, the Company paid $90,510 and $141,350,
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 in December 1997. Public
Strategies provided consulting services to the Company on a month-to-month basis
from January 1, 1998 to January 31, 1999.

During fiscal 1998, the Company made payment for legal fees in the amount
of $148,342 on behalf of The Family Investment Trust, a trust for the benefit of
Mr. Brennan's children and of which Mr. Brennan's brother is the trustee, in
connection with the then Delaware litigation.

56
<PAGE>

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

improvements and furniture purchased by the Company in the amount of $ 211,423
in exchange for assuming the lease and as an offset of the price the Company
paid NPD to purchase the 2,904,016 shares of the Company's Common Stock held by
NPD (of which Mr. DeSantis and Mr. Coelho were owners). In addition, the
computer equipment in the amount of $12,040 purchased by the Company for the
Albuquerque office was sold to AutoLend for $5,000.

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 Chairman of LVEN. LVEN also subleased
an office from the Company in Albuquerque. In exchange for its first year's
rent, LVEN provided certain furniture for the executive and reception areas of
the Company's Albuquerque office space. Upon consummation of the Delaware
Settlement, the Albuquerque lease was assumed by AutoLend.

57
<PAGE>

PART III

ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

BOARD OF DIRECTORS

The directors of the Company are:

Name Age Director Since Position
---- --- -------------- --------

John U. Mariucci 60 November 1996 to January 1997
February 22, 1999 Director
Francis W. Murray 59 November 1995
October 2000 Director
President
Chairman of the Board
James J. Murray 62 November 1996 to January 1997
February 22, 1999 Director
Robert J. Quigley 71 October 1980
February 1996 to October 1997
January 1999 to October 2000 Director
President
President
Chairman of the Board

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.

John U. Mariucci. Mr. Mariucci was elected by the Board of Directors on
February 22, 1999. Mr. Mariucci previously served as a director of the Company
from November 6, 1996 to January 15, 1997. Mr. Mariucci has spent 30 years with
the advertising firm of Doyle Dane Bernbach/DDB Needham Worldwide, including
seven years as a member of the board of DDB Needham Worldwide. In 1986 he was
appointed Executive Vice President, Executive Creative Director of DDB Needham
Worldwide, a position he held until his retirement in 1994. He is the recipient
of more than 100 awards for his advertising, including Cleos, Stephan F. Kelly
Effies and the One Show Awards. He has developed major advertising campaigns for
clients such as American Tourister Luggage, Michelin, Volkswagen, Hershey's,
Weight Watchers, Sony, Citicorp, Nabisco, GTE, Seagrams, IBM and the New York
State Lottery. Mr. Mariucci has been a member of the Audit Committee and the
Compensation and Stock Options Committee since March 15, 1999. Mr. Mariucci has
previously served on the Compensation and Stock Options Committee from December
20, 1996 to January 15, 1997.

Francis W. Murray. From time to time from November 1995 until June 1999,
Mr. Murray served as President of the Company's subsidiaries International
Thoroughbred Gaming Development Corporation ("ITG") and Orion Casino
Corporation. From November 1993 through June 1995, Mr. Murray served as a
General Partner of Healthcare Properties, a partnership operating nursing homes
in New Jersey and as a consultant to ITG. From December 1988 through November
1993, Mr. Murray was the co-owner and President of the New England Patriots and
co-founder of the St. Louis NFL Partnership, which attempted to obtain an
expansion NFL franchise for St. Louis. Mr. Murray has been a member of the
Executive Committee and the Compensation and Stock Options Committee since March
15, 1999. Mr.

58
<PAGE>

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.

James J. Murray. Mr. Murray was elected by the Board of Directors on
February 22, 1999. Mr. Murray previously served as a director of the Company
from November 6, 1996 to January 15, 1997. Mr. Murray is a member of the Ronald
McDonald House of Charities Local Operations Advisory Council and past President
of Jim Murray, Ltd., a sports promotion and marketing firm. In 1969, Murray
joined the Philadelphia Eagles' public relations staff and two years later he
became the NFL team's administrative assistant. In 1974, just five years after
joining the organization, he was named the Eagles' General Manager and spent
more than nine years in that post, during which the Eagles' appeared in Super
Bowl XV. He also served as Director of Marketing for the Company's Garden State
Park subsidiary from 1985- 1987. Mr. Murray has been a member of the Audit
Committee since March 15, 1999. Mr. Murray has previously served on the
Executive Committee and the Compensation and Stock Options Committee from
December 20, 1996 to January 15, 1997. Mr. Murray is the brother of Francis W.
Murray who is a Director and is also acting as the Chief Executive Officer of
the Company.

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.

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. Francis W. Murray and Quigley 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.
Mariucci and James J. Murray 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.
Francis W. Murray and Mariucci are the current members of the Compensation and
Stock Options Committee.

59
<PAGE>

The following is a summary of the composition of these committees during
Fiscal 2000:

COMPENSATION AND STOCK
EFFECTIVE DATE EXECUTIVE COMMITTEE AUDIT COMMITTEE OPTIONS COMMITTEE
-------------- ------------------- --------------- -----------------
March 15, 1999 Francis W. Murray John U. Mariucci Francis W. Murray
Robert J. Quigley James J. Murray John U. Mariucci

EXECUTIVE AND OTHER KEY OFFICERS

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

Name Age Position
---- --- --------
William H. Warner 55 Secretary/Treasurer

Christine E. Rice Newell 55 Assistant Treasurer and Controller

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

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. Mr. Warner was elected Secretary of
the Company on October 10, 2000,

Christine E. Rice Newell. Ms. Rice Newell is a certified public accountant
and has been employed by the Company since December 1986. Ms. Rice Newell has
served as Assistant Treasurer of the Company since November 1990. From December
1986 to November 1990 Ms. Rice Newell was the Company's Corporate Accounting
Manager.

60
<PAGE>

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, 2000, 1999 and 1998 to
(i) the Company's acting Chief Executive Officer, (ii) the Company's most highly
compensated executive officers (other than the Chief Executive Officer) who were
serving in such capacity at the end of Fiscal 2000 and (iii) a former executive
officer of the Company who was not serving in such capacity at the end of Fiscal
2000.

<TABLE>

SUMMARY COMPENSATION TABLE
Long-Term
Annual Compensation Compensation
------------------- ------------
Securities All
Name and Other Annual Underlying Other
Principal Position Year Salary Compensation Options Compensation
$ $ $
------------------ ---- ------ ------------ ------- ------------
<CAPTION>
<S> <C> <C> <C> <C> <C>
Nunzio P. DeSantis(1) 2000 -0- -0- -0- -0-
Former Chief Executive Officer 1999 268,269 10,500 -0- -0-
of the Company 1998 450,000 78,000 -0- -0-

Francis W. Murray 2000 122,308 17,737(2) -0- 10,997(3)
Acting Chief Executive Officer 1999 120,692 15,145 -0- 12,323
of the Company and effective 1998 129,333 16,000 -0- 87,292
October 10, 2000, President
and Chairman of the Board of
the Company

Robert J. Quigley 2000 71,346 12,000(4) -0- 6,593(5)
President and Chairman of the 1999 138,461 4,000 -0- 12,267
Board of the Company until 1998 220,000 -0- -0- 11,160
October 10, 2000

Christopher C. Castens(6) 2000 57,031 -0- -0- 57,211(7)
Secretary of the Company 1999 123,693 -0- -0- 9,260
1998 115,770 -0- -0- 8,060

William H. Warner 2000 126,000 -0- -0- 11,219(8)
Treasurer and 1999 123,693 -0- -0- 117,355
Chief Financial Officer 1998 125,693 -0- -0- 9,498
of the Company and effective
October 10, 2000, Secretary

Christine E. Rice Newell 2000 86,625 3,600(9) -0- 7,782(10)
Assistant Treasurer and 1999 77,308 3,600 -0- 6,112
Controller 1998 78,308 3,600 -0- 6,455
</TABLE>

(1) Mr. DeSantis became Chief Executive Officer of the Company on January 15,
1997 following the NPD Acquisition and upon consummation of the Delaware
Settlement on January 28, 1999, Mr. DeSantis' employment was terminated.

(2) Consisted of monthly automobile lease payments.

(3) Fiscal 2000 amounts consist of $3,659 of life insurance premiums paid by
the Company with respect to term life insurance payable to beneficiaries
designated by Mr. Murray and $7,338 contributed by the Company under the
Company's 401(k) plan.

(4) Fiscal 2000 consists of $1,000 per month automobile allowance.

61
<PAGE>

(5) Fiscal 2000 amounts consist of $2,313 of life insurance premiums paid by
the Company with respect to term life insurance payable to beneficiaries
designated by Mr. Quigley and $4,280 contributed by the Company under the
Company's 401(k) plan.

(6) Effective December 3, 1999, Mr. Castens resigned his position.

(7) Fiscal 2000 amounts include $1,324 of life insurance premiums paid by the
Company with respect to term life insurance payable to beneficiaries
designated by Mr. Castens, $764 contributed by the Company under the
Company's 401(k) plan and six months severance in the amount of $55,123.

(8) Fiscal 2000 amounts include $3,659 of life insurance premiums paid by the
Company with respect to term life insurance payable to beneficiaries
designated by Mr. Warner and $7,560 contributed by the Company under the
Company's 401(k) plan.

(9) Consists of $300 per month automobile allowance.

(10) Fiscal 2000 amounts include $2,585 of life insurance premiums paid by the
Company with respect to term life insurance payable to beneficiaries
designated by Ms. Rice Newell and $5,197 contributed by the Company under
the Company's 401(k) plan.

STOCK OPTIONS

OPTIONS GRANTED IN LAST FISCAL YEAR

OPTION GRANTS IN LAST FISCAL YEAR

Individual Grants
-----------------
Potential
% of Total Realizable Value
Number of Options At Assumed Annual
Securities Granted to Rates of Stock
Underlying Employees Exercise Price
Options In Fiscal Price Expiration Appreciation
Name Granted(#) Year ($/Sh) Date for Option Term
---- ---------- ---- ------ ---- ---------------
5%(1) 10%(1)
----- ------
Christine E.
Rice Newell 1,500 30% $1.00 1/1/2005 -0- -0-
--------------------------------------------------------------------------------
(1) Calculated based on the market price of the Company's Common Stock of $.41
per share on June 30, 2000 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.

62
<PAGE>

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

The following table indicates the outstanding stock options held at June 30,
2000 by each person named in the Summary Compensation Table. No options were
exercised during Fiscal 2000 by any of the named executive employees.

Number of Securities Underlying Value of Unexercised
Unexercised Options In-the-Money Options at
At Fiscal Year End Fiscal Year End (1)
Name Exercisable/Unexercisable Exercisable/Unexercisable
---- ------------------------- -------------------------
Francis W. Murray 300,000/-0- -0-/-0-

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

Christine E. Rice Newell 1,500/-0- -0-/-0-

(1) The Company's Common Stock has been trading on the NQB Pink Sheets since
August 1998 and the sales have averaged approximately $.68 per share. As a
result, the Company believes that the market price of the Common Stock is
below the exercise price of such options.

COMPENSATION OF DIRECTORS

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

TERMINATION AND SEVERANCE AGREEMENTS

Christopher C. Castens - Secretary and General Counsel. The Company and Mr.
Castens were parties to an employment agreement effective October 16, 1997
pursuant to which Mr. Castens served as the Company's Secretary and General
Counsel at an annual salary of $123,700. Effective December 3, 1999, the Board
of Directors accepted Mr. Castens' resignation and the Company paid $79,846 in
the second quarter of Fiscal 2000 associated with his employment contract. In
addition, the Company transferred to Mr. Castens the title to his Company car.

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 consisted of Mr.
Francis W. Murray and Mr. Marriucci. No officer or employee of the Company
participated in deliberations of the Compensation and Stock Options Committee.

During Fiscal 1999, the Company paid Mr. Anthony Coelho, the Company's
former Chairman, pursuant to an agreement effective January 15, 1997, $70,000 in
consulting fees and $10,607 in reimbursed expenses, $25,000 for Board meetings
he attended and $3,500 for an auto allowance. Mr. Coelho's consulting agreement
was 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 attended and a $500
monthly automobile allowance.

63
<PAGE>

In the Delaware Litigation, the minority Board members have challenged the
authorization and enforceability of certain agreements, including Mr. Coelho's
consulting agreement. Mr. Coelho's consulting agreement was terminated and his
options were canceled. See "Legal Proceedings."

During Fiscal 1999, the Company paid approximately $70,000 in consulting
fees and $21,777 in reimbursed expenses to Joseph Zappala, a director of the
Company. The Company paid Mr. Zappala approximately $10,000 per month in which
he provided consulting services. Upon consummation of the Delaware Settlement,
Mr. Zappala's consulting arrangement was terminated. See "Legal Proceedings."

Kenneth Scholl, a former director of the Company, provided consulting
services to LVEN and certain of its subsidiaries through the Stanford Company of
which he is the president. Until December 31, 1997, LVEN advanced Stanford
Company $10,000 per month and was reimbursed by the Company 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. During Fiscal 1999 the Company paid Mr. Scholl $120,000. Mr. Scholl
was elected president and director of Casino-Co in March 1996, he resigned as a
board member on March 14, 1997 and resigned as president on May 19, 1997. Mr.
Scholl also held the position of Secretary and resigned the position on March 1,
1998.

Commencing July 2, 1998 upon execution of the Delaware Stipulation, the
Company began compensating Mr. Frances W. Murray as an employee at a rate of
$120,000 per year retroactive to June 1997.

The Company subleased a portion of its office space in Albuquerque, New
Mexico to AutoLend for $600 per month, which sublease was terminable on 30 days'
notice. Under the terms of the Delaware Settlement, AutoLend assumed the
Company's lease for the Albuquerque office space. Upon such assumption of the
lease, AutoLend retained the leasehold improvements and furniture purchased by
the Company in the amount of $ 211,423 in exchange for assuming the lease and as
an offset of the price the Company paid NPD to purchase the 2,904,016 shares of
the Company's Common Stock held by NPD (of which Mr. DeSantis and Mr. Coelho
were owners). In addition, the computer equipment in the amount of $12,040
purchased by the Company for the Albuquerque office was sold to Autolend for
$5,000. Mr DeSantis is the Chairman, Chief Executive Officer and a principal
stockholder of AutoLend and Mr. Coelho was a director. See "Legal Proceedings."

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ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth, as of September 30, 2000, 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 named 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 September 30, 2000, the Company had
11,884,273 shares of Common Stock issued and 8,980,257 shares outstanding. In
addition to the Common Stock, the Company has 362,485 shares of Preferred Stock
issued and outstanding. The Preferred Stock is not convertible into Common Stock
and has no voting rights.

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

Credit Suisse First
Boston Mortgage
Capital LLC
Eleven Madison Avenue
New York, NY 10010 2,419,509(1) 20.5%

The Family Investment Trust
(Henry Brennan, Trustee)
340 North Avenue
Cranford, NJ 07016 1,090,731(2) 9.2%

Frank A. Leo 736,201(3) 6.2%

John U. Mariucci 60,500(4) *

Francis W. Murray 300,000(5) 2.5%

James J. Murray 25,000(5) *

Robert J. Quigley 105,830(6) *

William H. Warner 124 *

Christine E. Rice Newell 1,500(5) *

All Executive Officers
and Directors as a Group
(6 persons)(4)(5)(6) 492,954 4.2%

The above persons have sole voting and investment power, unless otherwise
indicated below.
* Less than 1%.

(1) 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.

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

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

(4) Consists of 25,000 shares of Common Stock issuable upon exercise of
options.

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

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

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ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

On February 24, 2000, the Company sold several pieces of artwork to Robert
E. Brennan Jr., son of the Company's former Chairman and Chief Executive
Officer. The $218,000 sales price of the artwork was in excess of the original
cost of $186,600. The Company recorded a $31,400 gain on the sale in Fiscal
2000. In addition, the Company purchased from Mr. Brennan Jr. two large bronze
sculptures located on the Garden State Park property that were previously on
loan to the Company. The purchase price of the sculptures was $700,000. In
connection with the transaction, the Company signed a $482,000 promissory note
with Mr. Brennan Jr. which represented the purchase price of the sculptures less
the sales price of the artwork sold to Mr. Brennan Jr.. The note is due on
January 31, 2002 without interest if the principal is paid on or before January
31, 2002. Any amounts not paid prior to January 31, 2002 will accrue interest at
8% On July 27, 2000 the Company received a notice from the Chapter 11 Trustee
for the bankruptcy estate of Robert E. Brennan asserting certain ownership
rights in a number of items on loan to the Company, including the sculptures
mentioned above.

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. Upon consummation
of the Delaware Settlement, the profit participation note and the entertainment
management contract were terminated. 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

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the Fort Erie Racetrack in Fort Erie, Canada on August 27, 1997. The Company was
offered, but the Executive Committee 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 the
Delaware litigation, the minority Board members challenged the decision of the
Executive Committee to reject the opportunity to purchase the Fort Erie
Racetrack. In connection with the Delaware Settlement, the litigation was
dropped.

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 a proxy to vote
any or all of the Conversion Shares until the occurrence of certain events and
agreed to grant Mr. DeSantis a proxy to vote any or all of the shares to be
issued to LVEN in the Casino-Co transaction. In the Delaware litigation, the
minority Board members challenged the authorization and enforceability of
certain agreements, including the Tri-Party Agreement. Upon consummation of the
Delaware Settlement, the Tri-Party Agreement was terminated and the Conversion
Shares were retired.

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During fiscals 1998, the Company paid $12,200 on behalf of 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 $177,000 during fiscals 1998 and which LVEN had agreed to
reimburse the Company. The $177,000 owed to the Company was offset by certain
conditions agreed upon in the consummation of the Delaware Settlement.

During fiscal 1999, the Company paid $70,000 in consulting fees, $25,000
for director fees, $3,500 for an auto allowance and $10,607 in expense
reimbursements to Anthony Coelho, the Company's former Chairman, pursuant to an
agreement effective January 15, 1997. During fiscal 1998, the Company paid
$120,000 in consulting fees, $22,500 for director fees, $6,000 for an auto
allowance and $44,500 in expense reimbursements to Mr. Coelho. During fiscal
1997, the Company paid $55,000 in consulting fees, $18,000 for director fees and
$2,750 for an auto allowance to Mr. Coelho. Mr. Coelho's consulting agreement
was 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 attended and a $500
monthly automobile allowance. In the Delaware litigation, which was dismissed
with prejudice upon consummation of the Delaware Settlement, the minority Board
members challenged the authorization and enforceability of certain agreements,
including Mr. Coelho's consulting agreement. Upon consummation of the Delaware
Settlement, Mr. Coelho's consulting agreement was terminated and options granted
to him in the consulting agreement were canceled.

During fiscals 1999 and 1998, the Company made payments for legal fees in
the amount of $50,000 and $45,586 on behalf of Robert Green. Those amounts were
for legal fees in connection with the Green

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v. DeSantis, et al. suit.

Commencing July 2, 1998 upon execution of the Delaware Stipulation, the
Company began compensating Mr. Murray as an employee at a rate of $120,000 per
year.

The Company subleased a portion of its office space in Albuquerque, New
Mexico to AutoLend Group, Inc. for $600 per month, which sublease was terminable
on 30 days' notice. Mr. DeSantis is the Chairman, Chief Executive Officer and a
principal stockholder of AutoLend and Mr. Coelho was a director. Under the terms
of the Delaware Settlement, AutoLend assumed the Company's lease for the
Albuquerque office space. Upon such assumption of the lease, AutoLend retained
the leasehold improvements and furniture purchased by the Company in the amount
of $ 211,423 in exchange for assuming the lease and as an offset of the price
the Company paid NPD to purchase the 2,904,016 shares of the Company's Common
Stock held by NPD (of which Mr. DeSantis and Mr. Coelho were owners). In
addition, the computer equipment in the amount of $12,040 purchased by the
Company for the Albuquerque office was sold to AutoLend for $5,000.

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 Chairman of LVEN. LVEN also subleases
an office from the Company in Albuquerque. In exchange for its first year's
rent, LVEN provided certain furniture for the executive and reception areas of
the Company's Albuquerque office space. Upon consummation of the Delaware
Settlement, the Albuquerque lease was assumed by AutoLend.

For additional information regarding related party transactions see
Footnote 15 in the Consolidated Financial Statements. See also "Item 11 -
Compensation Committee Interlocks and Insider Participation."

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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 (incorporated by reference
to Exhibit 3.3 to the Registrant's Annual Report on Form 10-K for the
Fiscal Year Ended June 30, 1997)

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
(incorporated by reference to Exhibit 4.3 to the Registrant's Annual Report
on Form 10-K for the Fiscal Year Ended June 30, 1997)

10.1 Stipulation and Agreement of Compromise, Settlement and Release dated July
2, 1998 (incorporated by reference to Exhibit 10.1 of the Registrant's
Current Report on Form 8-K dated July 2, 1998)

10.2 Asset Purchase Agreement dated as of July 2, 1998 by, between and among
Greenwood New Jersey, Inc., Garden State Race Track, Inc., Freehold Raceway
Association, Atlantic City Harness, Inc., Circa 1850 and International
Thoroughbred Breeders, Inc. together with exhibits thereto (incorporated by
reference to Exhibit 10.2 on Form 8-K dated July 2, 1998)

10.3 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)

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<PAGE>

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

10.4 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)

10.5 Proxy dated October 31, 1997 of LVEN and Casino-Co granted to Nunzio P.
DeSantis (incorporated by reference to Exhibit 10.3 to the Registrant's
Annual Report on Form 10- K for the Fiscal Year Ended June 30, 1997)

10.6 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)

10.7 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)

10.8 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 10.6 to the Registrant's Form 10-K
for the year ended June 30, 1996)

10.9 Tri-Party Agreement by and among the Registrant, CSFB and LVEN, dated as of
May 23, 1997 (incorporated by reference to Exhibit 10.7 to the Registrant's
Form 10-K for the year ended June 30, 1997)

10.10Bi-Lateral Agreement by and between the Registrant and LVEN, dated as of
May 23, 1997 (incorporated by reference to Exhibit 10.8 to the Registrant's
Form 10-K for the year ended June 30, 1997)

10.11* Employment Agreement by and between the Registrant and Nunzio DeSantis,
dated as of January 15, 1997 (incorporated by reference to Exhibit 10.9 to
the Registrant's Form 10-K for the year ended June 30, 1997)

10.12* Consulting Agreement by and between the Registrant and Anthony Coelho,
dated as of January 15, 1997 (incorporated by reference to Exhibit 10.10 to
the Registrant's Form 10- K for the year ended June 30, 1997)

10.13* Amended and Restated Employment Agreement by and between the Registrant
and Richard E. Orbann, dated as of October 16, 1997 (incorporated by
reference to Exhibit 10.11 to the Registrant's Form 10-K for the year ended
June 30, 1997)

10.14* Employment Agreement by and between the Registrant and Christopher C.
Castens, dated as of January 1, 1996 (incorporated by reference to Exhibit
10.2 to the Registrant's Form 10-K for the year ended June 30, 1996)

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

10.14.1* Amendment No. 2 to Employment Agreement, dated as of October 16, 1997

10.15First Amendment to Asset Purchase Agreement dated as of January 28, 1999
among the Company, Garden State Race Track, Inc., Freehold Racing
Association, Atlantic City Harness, Inc., Circa 1850, Inc., Greenwood New
Jersey, Inc. and Penn National Gaming, Inc. (without Exhibits).
(incorporated by reference to Exhibit 10.1 to the Registrant's Current
Report on Form 8K dated January 28, 1999)

10.16Lease Agreement between Garden State Race Track, Inc. and GS Park Racing,
L.P. (without Exhibits). (incorporated by reference to Exhibit 10.2 to the
Registrant's Current Report on Form 8K dated January 28, 1999)

10.17Approval Agreement dated January 28, 1999 between Credit Suisse First
Boston Mortgage Capital LLC, the Company, Garden State Race Track, Inc.,
Freehold Racing Association, International Thoroughbred Gaming Development
Corporation and Orion Casino Corporation (without Exhibits). (incorporated
by reference to Exhibit 10.3 to the Registrant's Current Report on Form 8K
dated January 28, 1999)

10.18Agreement dated January 6, 1999 between the Company and Donald F. Conway,
Chapter 11 Trustee for the Bankruptcy Estate of Robert E. Brennan (without
Exhibits). (incorporated by reference to Exhibit 10.4 to the Registrant's
Current Report on Form 8K dated January 28, 1999)

10.19$1,000,000 Deferred Purchase Price Promissory Note from GS Park Racing,
L.P. and FR Park Racing, L.P. (incorporated by reference to Exhibit 10.5 to
the Registrant's Current Report on Form 8K dated January 28, 1999)

10.20$5,000,000 Contingent Promissory Note from GS Park Racing, L.P. and FR
Park Racing, L.P. to the Company, as Agent for Garden State Race Track,
Inc., Freehold Racing Association, Atlantic City Harness, Inc. and Circa
1850, Inc. (incorporated by reference to Exhibit 10.6 to the Registrant's
Current Report on Form 8K dated January 28, 1999)

10.21$3,000,000 Contingent Promissory Note from GS Park Racing, L.P. and FR
Park Racing, L.P. to the Company, as Agent for Garden State Race Track,
Inc., Freehold Racing Association, Atlantic City Harness, Inc. and Circa
1850, Inc. (incorporated by reference to Exhibit 10.7 to the Registrant's
Current Report on Form 8K dated January 28, 1999)

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<PAGE>

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

10.22$2,000,000 Contingent Promissory Note from GS Park Racing, L.P. and FR
Park Racing, L.P. to the Company, as Agent for Garden State Race Track,
Inc., Freehold Racing Association, Atlantic City Harness, Inc. and Circa
1850, Inc. (incorporated by reference to Exhibit 10.8 to the Registrant's
Current Report on Form 8K dated January 28, 1999)

10.23Mortgage and Security Agreement, dated January 28, 1999, between FR Park
Racing, L.P. and the Company, as agent for Garden State Race Track, Inc.,
Freehold Racing Association, Atlantic City Harness, Inc. and Circa 1850,
Inc. (incorporated by reference to Exhibit 10.9 to the Registrant's Current
Report on Form 8K dated January 28, 1999)

10.24$3,558,032 Note from the Company to Donald F. Conway, Chapter 11 Trustee
for the Bankruptcy Estate of Robert E. Brennan. (incorporated by reference
to Exhibit 10.10 to the Registrant's Current Report on Form 8K dated
January 28, 1999)

10.25Security Agreement, dated January 28, 1999, between Garden State Race
Track, Inc. and Donald F. Conway, Chapter 11 Trustee for the Bankruptcy
Estate of Robert E. Brennan. (incorporated by reference to Exhibit 10.11 to
the Registrant's Current Report on Form 8K dated January 28, 1999)

10.26Security Agreement, dated January 28, 1999, between Orion Casino
Corporation and Donald F. Conway, Chapter 11 Trustee for the Bankruptcy
Estate of Robert E. Brennan. (incorporated by reference to Exhibit 10.12 to
the Registrant's Current Report on Form 8K dated January 28, 1999)

10.27Employment Termination Agreement, dated January 28, 1999, between the
Company and Richard Orbann. (incorporated by reference to Exhibit 10.13 to
the Registrant's Current Report on Form 8K dated January 28, 1999)

10.28Restructure Agreement dated January 21, 2000, between the Company and
Credit Suisse (incorporated by reference to Exhibit 10.1 to the
Registrant's Current Report on Form 8K dated January 21, 2000)

10.29Limited Liability Company Agreement of GSRT, LLC between the Company and
Credit Suisse (incorporated by reference to Exhibit 10.2 to the
Registrant's Current Report on Form 8K dated January 21, 2000)

10.30Letter approving Garden State joint venture transaction (incorporated by
reference to Exhibit 10.3 to the Registrant's Current Report on Form 8K
dated January 21, 2000)

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<PAGE>

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

10.31Letter regarding possible El Rancho transaction (incorporated by reference
to Exhibit 10.4 to the Registrant's Current Report on Form 8K dated January
21, 2000)

10.32Modification of Mortgage, Deed of Trust and Other Loan Documents
(incorporated by reference to Exhibit 10.5 to the Registrant's Current
Report on Form 8K dated January 21, 2000)

10.33Indemnification Agreement (incorporated by reference to Exhibit 10.6 to
the Registrant's Current Report on Form 8K dated January 21, 2000)

10.34Agreement of Sale Between Orion Casino Corporation (the "Seller") and
Turnberry/Las Vegas Boulevard, LLC (the "Buyer"). (incorporated by
reference to Exhibit 10.1 to the Registrant's Current Report on Form 8K
dated May 22, 2000)

10.35Note Purchase Agreement Between Orion Casino Corporation, as Purchaser,
and Turnberry/Las Vegas Boulevard, LLC, as Issuer, Dated as of March 1,
2000. (incorporated by reference to Exhibit 10.2 to the Registrant's
Current Report on Form 8K dated May 22, 2000)

10.36$23,000,000.00 Promissory Note dated May 18, 2000, from Turnberry/Las
Vegas Boulevard, LLC, (the "Maker") to Orion Casino Corporation, (the
"Payee"). (incorporated by reference to Exhibit 10.3 to the Registrant's
Current Report on Form 8K dated May 22, 2000)

10.37Security Agreement, dated as of May 18, 2000, by and among Turnberry/Las
Vegas Boulevard, LLC, (the "Joint Venture"), the members of the Joint
Venture parties to this Agreement (said members being collectively called
the "Pledgers"), and Orion Casino Corporation, a Nevada corporation (the
"Purchaser"). (incorporated by reference to Exhibit 10.4 to the
Registrant's Current Report on Form 8K dated May 22, 2000)

21 Subsidiaries

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

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<PAGE>

(B) Financial Statements Page

Reports of independent certified public accountants. 20
Consolidated Balance Sheets as of June 30, 2000 and 1999. 22
Consolidated Statements of Operations for the Years
Ended June 30, 2000, 1999 and 1998. 24
Consolidated Statements of Stockholders' Equity for the Years
Ended June 30, 2000, 1999 and 1998. 25
Consolidated Statements of Cash Flows for the Years Ended
June 30, 2000, 1999 and 1998. 26
Notes to Consolidated Financial Statements. 28

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<PAGE>

No reports were filed on Form 8-K during the last quarter of the fiscal
year covered by this report.

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

Holdfree Racing Association New Jersey

Garden State Race Track, Inc. New Jersey

GSRT, LLC 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

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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 October 13, 2000.

INTERNATIONAL THOROUGHBRED
BREEDERS, INC.

By:_______________________
Francis W. Murray, President and
Chairman of the Board

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:___________________ Secretary Treasurer (Principal 10/13/2000
William H. Warner Financial and
Accounting Officer)

By:___________________ Director 10/13/2000
John Mariucci

By:___________________ Director 10/13/2000
James Murray

By:___________________ Director 10/13/2000
Francis W. Murray

By:___________________ Director 10/13/2000
Robert J. Quigley

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