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**SECURITIES AND EXCHANGE COMMISSION****WASHINGTON, D.C. 20549**

 

**FORM 10-K**

 

| **x**                                          | **ANNUAL REPORT PURSUANT TO SECTION 13 OR  15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**     |
|------------------------------------------------|---------------------------------------------------------------------------------------------------------|
|                                           |                                                                                                    |
| **For the Year Ended  December 31, 2008** |
|                                           |                                                                                                    |
| **o**                                          | **TRANSITION REPORT PURSUANT TO SECTION 13 OR  15(d) OF THE SECURITIES EXCHANGE ACT OF 1934** |

 

**For the transition periodfrom                                    to                                           .**

 

**Commission File No.:  0-25244**

 

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**TRANS WORLD CORPORATION**

(Exact name of registrant asspecified in its charter)

 

| **Nevada**                                                       | ** ** | **13-3738518**                        |
|------------------------------------------------------------------|------------|---------------------------------------|
| (State or other  jurisdiction of  incorporation or organization) | ** ** | (I.R.S. Employer  Identification No.) |
| ** **                                                       | ** ** | ** **                            |
| **545 Fifth Avenue, Suite 940  New York, New York**    | ** ** | **10017**                             |
| (Address of principal  executive offices)                        | ** ** | (Zip Code)                            |

 

Registrant’s telephonenumber, including area code:  **(212) 983-3355**

 

Securities registeredpursuant to Section 12(b) of the Act: **None**Securities registered pursuant to Section 12(g) of theAct:

 

**CommonStock, $.001 par value**

 

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Indicate by check markif the Registrant is a well-known seasoned issuer, as defined in Rule 405of the Securities Act.  YES   o      NO   x

 

Indicate by check markif the Registrant is not required to file reports pursuant to Section 13or 15(d) of the Act.  YES   o      NO   x

 

Indicate by check markwhether the Registrant (1) has filed all reports required to be filed by Section 13or 15(d) of the Securities Exchange Act of 1934 during the preceding 12months (or for such shorter period that the Registrant was required to filesuch reports), and (2) has been subject to such filing requirements forthe past 90 days.  YES   x      NO   o

 

Indicate by check markif disclosure of delinquent filers pursuant to Item 405 of Regulation S-X isnot contained herein, and will not be contained, to the best of Registrant’sknowledge, in definitive proxy or information statements incorporated byreference in Part III of this Form 10-K or any amendment to this Form 10-K.      o

 

Indicate by check markwhether the Registrant is a large accelerated filer, an accelerated filer, anon-accelerated filer, or a smaller reporting company.  See the definitions of “large acceleratedfiler,” “accelerated filer” and “smaller reporting company” in Rule12b-2 of theExchange Act.(Check one):    Large acceleratedfiler    o       Accelerated filer    o   Non-accelerated filer    o     Smaller reporting company    x

 

Indicate by check markwhether the Registrant is a shell company (as defined in Rule 12b-2 of theAct.  YES   o      NO   x

 

The aggregate market value of Common Stock of the Registrant as of June 30,2008, based upon the average bid and asked price of $3.44 as reported on theOTC Bulletin Board on that date, was $30,432,387.00.  As of March 9, 2009, there were8,871,640 shares of Common Stock of the Registrant deemed outstanding as ofsaid date.

 

 

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**TRANS WORLD CORPORATIONFORM 1O-K**

** **

**TABLE OF CONTENTS**

 
| ** **   | ** ** | ** **                                                   | **Page** |
|--------------|------------|--------------------------------------------------------------|----------|
| PART I. |       |                                                         |     |
|         | Item  1.   | Business                                                     | 1        |
|         |       |                                                         |     |
|         |       | General Development of Business                              | 1        |
|         |       |                                                         |     |
|         |       | Corporate Information                                        | 1        |
|         |       |                                                         |     |
|         |       | Description  of Business                                     | 1        |
|         |       |                                                         |     |
|         |       | Market Overview and Competition                              | 2        |
|         |       |                                                         |     |
|         |       | Costs and Effects of Environmental Compliance                | 2        |
|         |       |                                                         |     |
|         |       | Internet Access                                              | 2        |
|         |       |                                                         |     |
|         |       | Our  Facilities                                              | 2        |
|         |       |                                                         |     |
|         |       | Future Operations                                            | 3        |
|         |       |                                                         |     |
|         |       | Long Range Objective                                         | 3        |
|         |       |                                                         |     |
|         |       | Marketing                                                    | 4        |
|         |       |                                                         |     |
|         |       | Regulations  and Licensing                                   | 4        |
|         |       |                                                         |     |
|         |       | Application of Future or Additional Regulatory  Requirements | 4        |
|         |       |                                                         |     |
|         |       | Taxation                                                     | 4        |
|         |       |                                                         |     |
|         |       | Our Employees                                                | 5        |
|         |       |                                                         |     |
|         | Item  1A.  | Risk  Factors                                                | 5        |
|         |       |                                                         |     |
|         | Item 1B.   | Unresolved Staff  Comments                                   | 9        |
|         |       |                                                         |     |
|         | Item  2.   | Properties                                                   | 9        |
|         |       |                                                         |     |
|         |       | Our Corporate Offices                                        | 9        |
|         |       |                                                         |     |
|         |       | Czech Republic                                               | 9        |
|         |       |                                                         |     |
|         | Item 3.    | Legal Proceedings                                            | 10       |
|         |       |                                                         |     |
|         | Item 4.    | Submission of  Matters to a Vote of Security Holders         | 10       |

 

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| PART II. |     |                                                                                                                |   |
|---------------|----------|---------------------------------------------------------------------------------------------------------------------|--------|
|          | Item 5.  | Market for  Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases  of Equity Securities | 10     |
|          |     |                                                                                                                |   |
|          |     | $3.5  million Capital Raise                                                                                         | 10     |
|          |     |                                                                                                                |   |
|          |     | Market Prices                                                                                                       | 11     |
|          |     |                                                                                                                |   |
|          |     | Dividends                                                                                                           | 11     |
|          |     |                                                                                                                |   |
|          | Item 6.  | Selected Financial  Data                                                                                            | 11     |
|          |     |                                                                                                                |   |
|          | Item 7.  | Management’s  Discussion and Analysis of Financial Condition and Results of Operations                         | 12     |
|          |     |                                                                                                                |   |
|          |     | Forward-Looking  Statements                                                                                         | 12     |
|          |     |                                                                                                                |   |
|          |     | Performance Measures and Indicators                                                                                 | 13     |
|          |     |                                                                                                                |   |
|          |     | Exchange Rates                                                                                                      | 13     |
|          |     |                                                                                                                |   |
|          |     | Critical  Accounting Policies                                                                                       | 13     |
|          |     |                                                                                                                |   |
|          |     | Results of Operations                                                                                               | 14     |
|          |     |                                                                                                                |   |
|          |     | Our Business Units:                                                                                                 | 15     |
|          |     |                                                                                                                |   |
|          |     | Ceska, Czech Republic                                                                                               | 15     |
|          |     |                                                                                                                |   |
|          |     | Rozvadov,  Czech Republic                                                                                           | 15     |
|          |     |                                                                                                                |   |
|          |     | Route 59, Czech Republic                                                                                            | 15     |
|          |     |                                                                                                                |   |
|          |     | Route 55, Czech Republic                                                                                            | 15     |
|          |     |                                                                                                                |   |
|          |     | Grand  Casino Lav, Croatia                                                                                          | 15     |
|          |     |                                                                                                                |   |
|          |     | Liquidity and Capital Resources                                                                                     | 16     |
|          |     |                                                                                                                |   |
|          |     | Our Plan of Operations                                                                                              | 16     |
|          |     |                                                                                                                |   |
|          | Item 7A. | Quantitative  and Qualitative Disclosures About Market Risk                                                         | 16     |
|          |     |                                                                                                                |   |
|          | Item 8.  | Financial Statements                                                                                                | 18     |
|          |     |                                                                                                                |   |
|          | Item 9.  | Changes In and  Disagreements with Accountants on Accounting and Financial Disclosure                               | 39     |
|          |     |                                                                                                                |   |
|          | Item 9A. | Controls and  Procedures                                                                                            | 39     |
|          |     |                                                                                                                |   |
|          | Item 9B. | Other Information                                                                                                   | 40     |

 

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| PART III. |     |                                                                                             |   |
|----------------|----------|--------------------------------------------------------------------------------------------------|--------|
|           | Item 10. | Directors,  Executive Officers and Corporate Governance                                          | 40     |
|           |     |                                                                                             |   |
|           |     | Information  about our Board and its Committees:                                                 | 41     |
|           |     |                                                                                             |   |
|           |     | Audit Committee                                                                                  | 41     |
|           |     |                                                                                             |   |
|           |     | Compensation  Committee                                                                          | 41     |
|           |     |                                                                                             |   |
|           |     | Nominating Committee                                                                             | 42     |
|           |     |                                                                                             |   |
|           |     | Section 16(a) Beneficial Ownership Reporting  Compliance                               | 42     |
|           |     |                                                                                             |   |
|           |     | Code of Ethics                                                                                   | 42     |
|           |     |                                                                                             |   |
|           | Item 11. | Executive  Compensation                                                                          | 43     |
|           |     |                                                                                             |   |
|           |     | Compensation Discussion and Analysis                                                             | 43     |
|           |     |                                                                                             |   |
|           |     | Stock Options                                                                                    | 44     |
|           |     |                                                                                             |   |
|           |     | Restricted  Stock Awards                                                                         | 44     |
|           |     |                                                                                             |   |
|           |     | Deferred  Compensation Plan                                                                      | 46     |
|           |     |                                                                                             |   |
|           |     | Compensation Committee Interlocks and Insider  Participation                                     | 46     |
|           |     |                                                                                             |   |
|           |     | Summary  Compensation Table                                                                      | 46     |
|           |     |                                                                                             |   |
|           |     | Equity  Compensation Plans                                                                       | 47     |
|           |     |                                                                                             |   |
|           |     | Outstanding Equity Awards at Fiscal Year-End                                                     | 48     |
|           |     |                                                                                             |   |
|           |     | Options Exercised and Stock Vested                                                               | 48     |
|           |     |                                                                                             |   |
|           |     | Nonqualified Deferred Compensation                                                               | 49     |
|           |     |                                                                                             |   |
|           |     | Employment and Change of Control Agreements                                                      | 49     |
|           |     |                                                                                             |   |
|           |     | Potential Payments upon Termination of Employment or a  Change in Control                        | 49     |
|           |     |                                                                                             |   |
|           |     | Directors’  Compensation                                                                    | 50     |
|           |     |                                                                                             |   |
|           |     | Employment/Severance Agreements                                                                  | 51     |
|           |     |                                                                                             |   |
|           | Item 12. | Security  Ownership of Certain Beneficial Owners and Management and Related Stockholder  Matters | 52     |
|           |     |                                                                                             |   |
|           | Item 13. | Certain  Relationships and Related Transactions, and Director Independence                       | 54     |
|           |     |                                                                                             |   |
|           | Item 14. | Principal  Accounting Fees and Services                                                          | 54     |

 

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| PART IV.                              |     |                                        |   |
|--------------------------------------------|----------|---------------------------------------------|--------|
|                                       | Item 15. | Exhibits and  Financial Statement Schedules | 55     |
|                                       |     |                                        |   |
| EXHIBITS INDEX                             | 56       |
|                                       |     |
| SIGNATURES AND CERTIFICATIONS              | 59       |
|                                       |     |
| INDEX TO CONSOLIDATED FINANCIAL STATEMENTS | 18       |

 

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**Item 1.  Business.**

 

**General Development of Business**

 

Trans World Corporation (hereinafter referred to as “we”, “us”, “ourCompany”, or “TWC”) was organized as a Nevada corporation in October 1993for the acquisition, development and management of gaming establishments, tothe extent permitted by applicable local laws, featuring live and mechanizedgaming, including video gaming devices such as video poker machines, primarilyin Louisiana.  In 1998, we amended ouroperating strategy by shifting our focus to the casino market in Europe.  Today, we operate five full-service casinos;four of which are owned and one of which is managed under contract.  The four fully-owned casinos are in the CzechRepublic, located in Ceska Kubice (“Ceska”), Rozvadov (“Rozvadov”), Hate (“Route59”), and Dolni Dvoriste (“Route 55”). The property operating under amanagement contract,  the Grand CasinoLav and InMotion Nightclub (collectively referred to as the “Grand Casino Lav”),is located in Podstrana, Croatia, in the Le Meridien Lav hotel resort near thecity of Split.

 

The Czech casinos, which conduct business under our brand name, *American Chance Casinos* (“ACC”), are situated at borderlocations and draw the majority of their customers from Germany andAustria.  Each of the casinos has adistinctive theme, portraying recognizable eras of American history: PacificSouth Seas, Chicago in the Roaring 1920’s during Prohibition, New Orleans inthe 1920’s, and Miami Beach in the 1950’s. ACC’s operating strategy centers on differentiating its products andservice offerings from the very formal German and Austrian casinos, and as aresult, management has endeavored to create gaming environments with casual andexciting atmospheres, emphasizing entertainment.  Further, as part of the ACC operatingformula, our management strives to uphold the integrity and professionalism ofour operations as a means to dispel any concerns that customers and governmentsmight have about gambling.

 

In addition to the above operations, on January 14, 2009, we heldour soft-opening of Hotel Savannah, a 77-room, four-star deluxe hotel, which isphysically connected to our Route 59 casino. A full-service spa and wellness center, which is attached to thehotel, is under final construction and is expected to open around mid-March 2009.  The hotel features banquet halls for meetingsand special events as well as a full-service restaurant and bar.

 

We have no operating presence in the United States.

 

**Corporate Information**

 

Ourcorporate offices are located at 545 Fifth Avenue, Suite 940, New York,New York 10017, our telephone number is (212) 983-3355, our website is www.transwc.comand the ACC website is www.acc.cz.  Neither websites are a part of this Form 10-K.

 

**Descriptionof Business**

 

TWC is engaged in the acquisition, development and management of nichecasino operations in Europe, which feature gaming tables and mechanized gamingdevices, such as video slot machines, as well as the acquisition, developmentand eventual management of small to mid-size hotels, which may include casinofacilities.  Our planned expansion intothe hotel industry is founded on management’s belief that hotels in the smallto mid-size boutique class are complementary to our casino brand, thatopportunities in one of these two industries often lead to, or are tied to,opportunities in the other industry, and that a more diversified portfolio ofassets will give us greater stability and make TWC more attractive to potentialinvestors.  Further, several of our topmanagement executives have extensive experience in the hotel industry.

 

 

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**Market Overview and Competition**

 

Casinos in Germany and Austria have formal atmospheres and an air ofexclusivity, while our casinos offer relaxed but exciting ambiance, which, formany of our patrons, have become a desirable alternative.  Further, we have established ACC as areputable casino company in the Czech Republic through our high customerservice standards, professionalism, and strict adherence to all local gamingregulations.

 

As of December 31, 2008, four casinos operate in directcompetition with our Ceska casino, while one competitor casino operates acrossthe street from our Rozvadov casino. Each of our Route 59 and Route 55 casinos currently has two directcompetitors.  Some of these competitorsare larger and have financial and other resources that are greater than ours.

 

The Grand Casino Lav, which opened on December 22, 2006, targetsthe immediate region surrounding Split, a resort destination and a UnitedNations Educational, Scientific and Cultural Organization (“UNESCO”)-recognizedcity, as well as neighboring countries. The casino conducts its gaming activities using the Euro (“EUR”)currency, and its food and beverage operations in Kunas (“HRK”), the Croatiancurrency.  The Grand Casino Lav has twocompetitors.

 

The gaming industry inEastern Europe faces competition from a variety of sources for discretionaryconsumer spending including spectator sports and other entertainment and gamingoptions. Competitive gaming activities include traditional casinos, videolottery terminals, state-sponsored lotteries and other forms of legalizedgaming. Additionally, web-based interactive gaming and wagering is growingrapidly and affecting competition in our industry. We anticipate competition inthis area will become more intense as new web-based ventures enter theindustry.

 

**Costs and Effects of Environmental Compliance**

** **

We incurred no material costs or effects of environmental compliancefor the year ended December 31, 2008.

 

**Internet Access**

** **

**We are a reporting company under the rules of theSecurities and Exchange Commission (“SEC”). Copies of our Annual Reports on Form 10-K,Quarterly Reports on Form 10-Q, Current Reports on Form 8-K andamendments to those reports filed or furnished pursuant to Section 13(a) or15(d) of the Securities and Exchange Act of 1934 are available free ofcharge on or through our website (www.transwc.com) as soon as reasonablypracticable after we electronically file the material with, or furnish it to,the Securities and Exchange Commission. In addition, the public may read andcopy any materials we file with the SEC at the SEC’s Public Reference Room at100 F Street, NE, Washington, D.C. 20549. The public may obtain information onthe operation of the Public Reference Room by calling the SEC at1-800-SEC-0330. In addition, the SEC maintains an Internet site(http://www.sec.gov) that contains reports, proxy and information statements,and other information regarding issuers that file electronically with the SEC.**

** **

**Our Facilities**

** **

**Ourcasinos each offer a restaurant and a full bar, and in the larger units, loungeareas and multiple bars.**

** **

OurCeska casino, which has a 1920’s Chicago Prohibition Period theme, currentlyhas 15 gaming tables, including seven card tables and eight roulette tables.  Through 2008, Ceska added, in aggregate, 8new video slot 

 

 

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machines, bringing the totalto the current 72, as of March 9, 2009. The address of our Ceska casino is Ceska Kubice 64, Ceska Kubice 345 32,Czech Republic.

 

OurRozvadov casino, which has a South Pacific theme, currently operates 8 gamingtables, including four card tables and four roulette tables, and 24 video slotmachines, as of March 9, 2009.  OurRozvadov casino is located at Rozvadov 26, Rozvadov 348 07, Czech Republic.

 

OurRoute 59 casino, whose address is Route 59, 199 American Way, Hate-Chvalovice,Znojmo 669 02, as of March 9, 2009, includes 22 gaming tables, which consist of 12card tables, nine roulette tables, and a Slingshot multi-win roulette table,and 102 video slot machines.  The unit was expanded and renovated overthe course of 2006 and 2007, the scope of which included: (i) refurbishment of theexisting space, including reception reconfiguration; (ii) expansion of thebuilding, including an extension of the gaming floor area; (iii) constructionof a large, centrally located stage; (iv) introduction of a second bar; (v) introductionof a New Orleans theme throughout the casino; (vi) expansion of theparking area to accommodate up to 220 cars; (vii) reconstruction of itsgaming floor roof; and (viii) a revolving door entrance.   Further, beginning in 2009, a reception areain the corridor between the casino and Hotel Savannah has been opened to permiteasier access between the two operations.

 

Our largest casino, Route55, features a Miami Beach “Streamline Moderne” style, reminiscent of MiamiBeach in the early 1950’s.  The two-storycasino offers 24 tables, including 13 card tables, 10 roulette tables, aSlingshot multi-win roulette table, and 120 video slot machines.  On the mezzanine level, the casino offers afull-service, Italian restaurant, an open buffet area, a VIP lounge, and a VIPgaming room equipped with four gaming tables, which are included in the 24table count.  This casino is at Route 55,Grenzubergang Wullowitz, Dolni Dvoriste 382 72, Czech Republic.

 

Our Grand Casino Lav unitcurrently has 18 gaming tables, including six roulette tables, eleven cardtables, two of which are in the VIP dedicated area, a multi-roulette table, and60 video slot machines, a panoramic mezzanine bar with a view overlooking thegaming floor, and a full-service nightclub. The address of the Le Meridien Lav Hotel is Grljevacka 2A, Podstrana21312, Croatia.

 

As a complement to ourgaming operations, we recently opened Hotel Savannah, a 77-room, Europeanfour-star deluxe hotel, the first for the Company.  The full-service spa and wellness center,complete with a large indoor pool, that is attached to the hotel is scheduledto open in mid-March 2009, and will be operated by a sub-contractor.  The hotel and wellness center are connectedto our Route 59 casino with the joint facility’s main restaurant linking thetwo buildings.  The hotel held itssoft-opening on January 14, 2009 and anticipates that its grand openingwill occur in mid-April 2009.  Thecombined operation of hotel and wellness center is expected to contributeincremental cash and ultimately enhance the Company’s overall results.

 

**FutureOperations**

 

In furtherance of ourdiversification goals, we are seeking to enhance our casino units withcomplementary operations, as was done for Route 59 with the addition of HotelSavannah and a full-service spa and wellness center.

 

**Long Range Objectives**

 

Ouroperations are predominantly in the gaming industry.  Consequently, our senior corporatemanagement, several of whom have extensive experience in the hotel industry,are exploring ways to expand the Company’s operations through the acquisitionand/or development of new, complementary non-gaming business units, whilecontinuing to grow the Company’s existing operations.  We will also seek to manage business units thatcomplement our existing operations, while acquisitions will be based onevaluations of the potential returns of projects that arise and theavailability of financing.

 

 

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# **Table of Contents**

 

# **Marketing**

# ** **

Inthe year ended December 31, 2008, we increased and tailored our marketingand promotional programs in an ongoing effort to secure and enhance ourcompetitive position in the markets that we serve.  The casinos’ event calendars were broadenedto attract new players, while focusing on higher player-incentive games toretain existing players.  In addition, wecontinued our sponsorships of several regional, athletic teams and were abenefactor in a number of community and social projects during the year, as away to further promote our image and positive contribution to the communitiesin which we operate.  We also continuedour popular, cultural-themed and holiday-related parties, which feature liveentertainment, raffles and complimentary grand buffets.  Further, we aggressively targeted key citiesin our media campaigns, most notably Vienna, Linz and Regensburg and the areassurrounding these cities.

 

Inaddition to our marketing programs in Croatia, we received the partial benefitof a larger marketing presence via the Le Meridien international hotel brandrecognition and their marketing activities.

 

# **Regulations and Licensing**

# ** **

In1998, the Czech Republic House of Deputies passed an amendment to the gaminglaw, which restricted foreign ownership of casino licenses.  In response, we restructured our Czechsubsidiaries and legal entities to comply with the amendment and weresubsequently granted 10-year gaming licenses or permits, which have since beenrenewed by the government of the Czech Republic for another 10-year term,expiring in 2018.  The permits areamended each time we add a new operating branch or unit.  The no-cost permits are renewable byapplication and must be granted as long as the corporate casino operator meetsthe following conditions: (i) maintain the required basic capital, whichincludes our gaming bonds of 26 million Czech Koruna (“CZK”) for our gamingsubsidiaries; (ii) be designated as a public or private stock company(using the Czech abbreviation “a.s.”); (iii) have executive board membersof said Czech stock company without criminal records; and (iv) have nooverdue taxes.

 

**Application of Future orAdditional Regulatory Requirements**

 

Inthe future, we may seek the necessary licenses, approvals and findings ofsuitability in other jurisdictions, where the Company plans to conductbusiness.  However, there can be noassurance that such licenses, approvals or findings of suitability will beobtained or will not be revoked, suspended or conditioned, or that we will beable to obtain the necessary approvals for our future activities.

 

**Taxation**

 

*Value Added Taxes*

 

In conformity with theEuropean Union (“EU”) taxation legislation, when the Czech Republic joined theEU in 2004, its value added tax (“VAT”) increased from 5% to 22%, beginning in January 2004,and currently is between 9% and 19% for all intra-EU generated purchases. Allnon-EU generated purchases were impacted by identical VAT increases, beginningin May 2004.  Unlike in otherindustries, VATs are not recoverable for gaming operations.

 

*GamingTaxes*

 

The majority of ourrevenues are derived from gaming operations in the Czech Republic, which aresubject to gaming taxes and, therefore, we have no corporate income taxliabilities under Czech law.  For theyear ended December 31, 2008, our gaming taxes averaged approximately14.6% of gross gaming revenues, which is comprised of live (table) games andslot games revenues.  For live gamesrevenue, the applicable taxes and fees are: (i) a 10% administration tax; (ii) a1% state supervision fee; and (iii) a charity contribution (tax) accordingto the formula below, net of the aforementioned taxes and fees.  For slot games revenue, the applicableassessment is the charity 

 

 

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tax (described below) for publicly beneficial,cultural, sporting and welfare purposes, net of local (municipality)administration and slot state-licensing fees.

 

Gaming taxes payable aredue to the Czech Ministry of Finance annually, typically in April, whilecharity contributions payable, although having no stated due dates, are paid asagreed with the charities by May of the subsequent year.  The Company may allocate this charitycontribution to local schools, sports clubs, subsidized or volunteeredorganizations, or municipalities in which each of the Company’s casinosoperate.  The distribution is subject tothe prior approval of the Czech Ministry of Finance.

 

For the year ended December 31,2008, slot revenues of one of our three slot subsidiary companies, ACC slot,s.r.o., were subject to the 10% charity tax rate, while slot revenues ofHollywood Spin s.r.o. were subject to the 8% rate, and slot revenues of LMJSlot, s.r.o. were subject to the 6% rate. Charity tax rates apply according to the following table:

** **
| ** **             | ** ** | **Net of Applicable Gaming  Taxes and Fees, in CZK** | ** ** |
|------------------------|------------|------------------------------------------------------|------------|
| ** **             | ** ** | **Up to  50 million**                                | ** ** | **Up to  100 million** | ** ** | **Up to  500 million** | ** ** | **Above  500 million** | ** ** |
| Charity  tax rates (1) |       | 6%                                                   |       | 8% |   | 10% |   | 15% |   |

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(1)                      The applicable charity tax rate is determinedseparately on annual live game and slot game revenues, net of applicable gamingtaxes and fees as generated by each of our Czech legal entities.

 

*CorporateIncome Taxes*

 

Our Czech subsidiaries’ gaming revenues are subject to applicablegaming taxes, however our Czech holding companies’ revenues, net of exemptedrevenues such as inter-group dividends, are subject to Czech corporate incometax, which was 21% for year 2008. Additionally, our non-gaming revenues are also subject to the Czechcorporate income tax.

 

In 2008, we incurred Czech corporate income taxes ofapproximately $31,000 on non-gaming revenues, versus $84,000 in 2007, of which$60,000 was deferred.  There can be no assurances that tax rates,fees, or other payments applicable to our gaming operations will not beincreased in the future.  (See also Note2 and 11 of the “Notes to the Consolidated Financial Statements”)

 

**OurEmployees**

 

Asof December 31, 2008, we had a total of 550 full-time employees, including100 in our casino in Ceska Kubice, 51 in our casino in Rozvadov, 143 at Route59, 163 in at Route 55, 17 in our shared services office located above theCeska casino, and five in the Company’s headquarters in New York.  Under the Grand Casino Lav managementcontract, we supervised 71 employees of Grand Hotel Lav, d.o.o..  None of our employees are represented by aunion nor are we a party to any labor contract. We believe that our employee relations are excellent.

 

**Item 1A.  Risk Factors.**

 

Our business operationsinvolve certain risks, some of which are unique to our organization, whileothers are common to the industry that we operate in.  Below are important factors to consider:

 

 

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***General EconomicTrends are Unfavorable***

 

There is apossibility that the recent significant economic downturn being experienced in Europemay, in the future, have, a negative impact on our financial performance. Therecent, severe economic downturn and adverse conditions in local, regional,national and global markets could likely negatively impact our operations inthe near future. During periods of economic contraction like that currentlybeing experienced, certain costs remain fixed or even increase, while revenuesdecline. The gaming services we provide are similar to other leisure activitiesin that they represent discretionary expenditures likely to decline duringeconomic downturns. In some cases, even the perception of an impending economicdownturn or the continuation of a recessionary climate can be enough todiscourage consumers from spending on leisure activities. We cannot predict atthis time what the effect will be of the current global recession on ourbusiness, financial condition, or results of operations.

 

***We Face SignificantCompetition***

 

We operate in ahighly competitive industry with a large number of participants, some of whichhave financial and other resources that are greater than ours. The gamingindustry faces competition from a variety of sources for discretionary consumerspending including spectator sports and other entertainment and gaming options.Competitive gaming activities include traditional casinos, video lotteryterminals, state-sponsored lotteries and other forms of legalized gaming in theCzech Republic and in other jurisdictions.

 

Legalized gamingis currently permitted in various forms in the Czech Republic, Austria andGermany. Moreover, established gaming jurisdictions could award additionalgaming licenses or permit the expansion of existing gaming operations. Ifadditional gaming opportunities become available near our operations, suchgaming opportunities could have a material, adverse impact on our business,financial condition, and results of operations.

 

Additionally,web-based interactive gaming and wagering is growing rapidly and may beaffecting competition in our industry. Web-based businesses may offer consumersa wide variety of events to wager on, including other games, racetracks andsporting events. Unlike most on-line and web-based gaming companies, ouroperations require ongoing capital expenditures for both their continued operationsand expansion. We could also face significantly greater costs in operating ourbusiness compared to these Internet gaming companies. We cannot offer the samenumber of gaming options as on-line and Internet-based gaming companies. Manyon-line and web-based gaming companies are based off-shore and avoid regulationunder applicable Czech laws. These companies may divert wagering dollars fromlive wagering venues, such as our casinos. The continued growth and success ofthese on-line ventures could have a material, adverse impact on our business,financial condition, and results of operations.

 

***Fluctuations incurrency exchange rates could adversely affect our business.***

 

Our facilities in theCzech Republic represent a significant portion of our business, and the revenuegenerated is generally denominated in Euros and the expenses incurred by thesefacilities are generally denominated in Czech Korunas.  A decrease in the value of either of thesecurrencies in relation to the value of the US dollar would decrease the revenueand operating profit from our operations when translated into US dollars, whichwould adversely affect our consolidated results of operations.  We do not currently hedge our exposure tofluctuations of these foreign currencies, and there is no guarantee that wewill be able to successfully hedge any future foreign currency exposure.

 

***Need to Diversify***

 

Atthis time, our operations are primarily located in the Czech Republic.  Therefore, any future adverse legislation ofthe Czech Republic may have a negative impact on our operations and financialresults.  We are 

 

 

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currently seeking to developor acquire additional interests in gaming operations and hotels in Europe.  However, there can be no assurance that wewill be able to develop or acquire such new operations in the future.

 

***Taxation of GamingOperations***

 

Gamingoperators are typically subject to significant taxes, which may increase at anytime. Any material increase in these taxes or fees would adversely affect ourresults of operations. The Czech Republic currently has a number of lawsrelated to various taxes imposed by governmental authorities. Applicable taxesinclude VAT, gaming tax, charity contribution tax, and payroll (social)taxes.  Tax declarations, together withother legal compliance areas (for example, customs and currency controlmatters) are subject to review and investigation by a number of different Czechauthorities, which are authorized by law to impose fines, penalties andinterest charges, may create tax risks. We believe that we have adequatelyprovided for our Czech tax liabilities. (See also Note 10 of the “Notes to theConsolidated Financial Statements”).

 

***Dependence upon Key Personnel***

 

Ourability to successfully implement our strategy of expansion, manage theexisting casinos, and maintain a competitive position will continue to depend,in large part, on the ability of Mr. Rami S. Ramadan, the Company’sPresident, Chief Executive Officer (“CEO”), and Chief Financial Officer (“CFO”).  The Company is also dependent upon other keyemployees, casino managers, and consultants, whom we retain from time to time.

 

***Need for AdditionalFinancing***

 

Althoughwe have achieved positive net income for the sixth consecutive year, pursuantto our growth strategies, we require additional debt and/or equity financingfor the acquisition and development of new businesses or business units.  In this regard, our ability to obtainadditional financing has been improved significantly as a result of thefollowing: (i) our recapitalization in 2003, which effectively reduced ourthen existing debt burden by approximately 80%; (ii) our ability to obtainthe GE Capital Bank a.s. loan for the construction of Route 55 in 2004; (iii) thesecuring of the Commerzbank Aktiengesellschaft, pobocka Praha (“Commerzbank”)revolving credit facility in 2007; and by (iv) the privateplacements of shares of our common stock, i.e., the $4.75 million capital raisein December 2005 and the $3.5 million capital raise in August 2007(collectively referred to as the “Two Capital Raises”).  Despite these improvements, there can be noassurance that such financing will continue to be available on terms favorableto us or at all.

 

***International Activities***

 

Ouroperations are completely outside of the United States. Operatinginternationally involves additional risks relating to such things as currencyexchange rates, different legal or regulatory environments, political andeconomic risks relating to the stability or predictability of foreigngovernments, differences in the manner in which different cultures do business,difficulties in staffing and managing foreign operations, differences infinancial reporting, operating difficulties, different types of criminalthreats and other factors. The occurrence of any of these risks, if severeenough, could have a material adverse effect on our financial condition orresults of operations.

 

***Climate Impact***

 

Asthe majority of our clientele travel from German and Austrian border regions,we are highly dependent on the volume and frequency of these players’visitations, which impact our operating revenues.  Wintry and icy climate conditions on theroads to our casinos can serve to drastically reduce the number ofvisitations.  On the other hand, warm andfavorable outdoor weather can also divert players to alternative activities,such as family outings 

 

 

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and picnics.  The frequency and strength of any of theseaforementioned climate conditions could have a material adverse effect on ourresults of operations.

 

***Licensing and Regulation***

 

Ouroperations are subject to regulation by each federal and local jurisdiction inwhich we operate. Each of our officers may be subject to strict scrutiny andapproval from the gaming commission or other regulatory body of eachjurisdiction in which we conduct gaming operations.

 

In 1998, the Czech Republic’sHouse of Deputies passed an amendment to the gaming law, which restrictedforeign ownership of casino licenses. In response, the Company restructured itssubsidiaries and Czech legal entities to comply with the amendment and wassubsequently granted 10-year gaming licenses, which, in October 2008, wererenewed by the government of the Czech Republic for another 10-year term,expiring in December 2018.  Therecan be no assurance that the authorities in the Czech Republic will not amendthe gaming law as it pertains to foreign ownership of casino licenses.  In the event the gaming laws are amended inthe future, it may have a material adverse effect on the Company’s futureprofitability and operations.

 

***Liability Insurance***

 

Wecurrently maintain, and intend to continue to maintain, general liabilityinsurance in each of those locations in which we operate. There can be noassurance that liability claims will not exceed the coverage limits of suchpolicies or that such insurance will continue to be available on commerciallyreasonable terms or at all. There can be no assurance that such insurance willbe adequate to cover unanticipated liabilities.

 

***No Dividends***

 

Wehave not paid any dividends to date on our common stock, and do not expect todeclare or pay any dividends in the foreseeable future. We intend to retainfuture earnings, if any are generated, for investment in our current operationsand for future project developments.

 

***Dilutive Effect of Options andWarrants***

 

As of February 28,2009, there were 429,065 options outstanding to purchase shares of our commonstock, which, if all were exercised, would represent 4.6% of the 9,363,205shares of common stock that would be outstanding.  The issuance of such securities would have adilutive effect on any earnings per share that we may generate when theearnings per share are evaluated on a fully diluted basis.  All of our outstanding warrants have expiredon March 31, 2008, with the exception of 5,754 shares of our common stockthat were issued in January 2008, pursuant to an exercise of warrants.

 

***Possible Adverse Effect ofIssuance of Preferred Stock***

 

OurArticles of Incorporation authorize the issuance of four (4) millionshares of “blank check” preferred stock, with designations, rights andpreferences to be determined from time to time by our Board of Directors.Accordingly, our Board of Directors is empowered, without further stockholderapproval, to issue preferred stock with dividend, liquidation, conversion,voting or other rights that could adversely affect the voting power or otherrights of the holders of the common stock. In the event of issuance, thepreferred stock could be used, under certain circumstances, as a method ofdiscouraging, delaying or preventing a change in control of the Company.  Our Board of Directors has no current plansto issue any shares of preferred stock. However, there can be no assurance thatpreferred stock will not be issued at some time in the future.

 

 

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**Item 1B. Unresolved StaffComments.**

 

None.

 

**Item 2.Properties.**

 

A recap of our properties as of February 28, 2009 is presentedbelow in square meters (“Sq.M”) and in square feet (“Sq.Ft”):

 
| ** **                       | ** ** | ** ** | ** ** | ** ** | ** ** | **Area Total** | ** ** | **Building** | ** ** |
|----------------------------------|------------|------------|------------|------------|------------|----------------|------------|--------------|------------|
| ** **                       | ** ** | **Leased** | ** ** | **Owned**  | ** ** | **Sq.M**       | ** ** | **Sq.Ft**    | ** ** | **Sq.M** | ** ** | **Sq.Ft** | ** ** |
|                             |       |       |       |       |       |           |       |         |       |   |   |   |   |
| **New York**                     |       |       |       |       |       |           |       |         |       |   |   |   |   |
| Corporate  Offices               |       | X          |       |       |       | 151            |       | 1626         |       | 151 |   | 1626 |   |
|                             |       |       |       |       |       |           |       |         |       |   |   |   |   |
| **Ceska Kubice**                 |       |       |       |       |       |           |       |         |       |   |   |   |   |
| Casino                           |       | X          |       |       |       | 3,055          |       | 32,884       |       | 1,767 |   | 19,020 |   |
| Staff  Housing                   |       | X          |       |       |       | 3,680          |       | 39,611       |       | 1,660 |   | 17,868 |   |
|                             |       |       |       |       |       |           |       |         |       |   |   |   |   |
| **Folmava**                      |       |       |       |       |       |           |       |         |       |   |   |   |   |
| Vacant  Land                     |       |       |       | X          |       | 15,000         |       | 161,459      |       |   |   |   |   |
|                             |       |       |       |       |       |           |       |         |       |   |   |   |   |
| **Rozvadov**                     |       |       |       |       |       |           |       |         |       |   |   |   |   |
| Casino                           |       |       |       | X          |       | 3,158          |       | 33,992       |       | 425 |   | 4,575 |   |
| Staff  Housing                   |       |       |       | X          |       | 965            |       | 10,387       |       | 165 |   | 1,776 |   |
|                             |       |       |       |       |       |           |       |         |       |   |   |   |   |
| **Hate**                         |       |       |       |       |       |           |       |         |       |   |   |   |   |
| Casino  (Route 55)               |       |       |       | X          |       | 8,036          |       | 86,499       |       | 1,588 |   | 17,093 |   |
| Hotel                            |       |       |       | X          |       | 9,060          |       | 97,521       |       | 3,060 |   | 32,938 |   |
| Staff  Housing                   |       | X          |       |       |       | 1,594          |       | 17,158       |       | 1,594 |   | 17,158 |   |
| Vacant  Land                     |       |       |       | X          |       | 39,934         |       | 429,846      |       |   |   |   |   |
|                             |       |       |       |       |       |           |       |         |       |   |   |   |   |
| **Dolni Dvoriste**               |       |       |       |       |       |           |       |         |       |   |   |   |   |
| Casino  (Route 55)               |       |       |       | X          |       | 18,502         |       | 199,154      |       | 1,882 |   | 20,258 |   |
| Staff  Housing                   |       | X          |       |       |       | 1,066          |       | 11,474       |       | 1,066 |   | 11,474 |   |
| Vacant  Land                     |       |       |       | X          |       | 27,251         |       | 293,327      |       |   |   |   |   |
|                             |       |       |       |       |       |           |       |         |       |   |   |   |   |
| **Split (GCL)**                  |       |       |       |       |       |           |       |         |       |   |   |   |   |
| Casino &  Nightclub (1) |       | X          |       |       |       | 2,800          |       | 30,139       |       | 2,800 |   | 30,139 |   |

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(1)                      under managementcontract

 

**Our Corporate Offices**

 

Our corporate offices are located at 545 Fifth Avenue, Suite 940,New York, New York, occupying 1,626 square feet of office space pursuant to therenewal of our five-year lease expiring in March 2010.

 

**Czech Republic**

 

Welease the casino facility in Ceska Kubice. The casino building lease expires in 2010, with option to renew onnegotiable terms. ** **We also own a parcel of raw land inFolmava, Czech Republic in the same region as the existing Ceska casino.

 

In Rozvadov, we own thecasino building and an adjacent facility for staff accommodations.

 

 

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InHate, we own the casino building and a parcel of land upon a portion of whichthe casino building sits.  We have sinceconstructed the Hotel Savannah, which opened on January 14, 2009, as wellas a spa and wellness center, due to open in April 2009, both on a portionof that remaining land.

 

In April 2002, we acquired a parcel of land inDolni Dvoriste, Czech Republic.  On thisparcel, we constructed our fourth and largest casino, Route 55, which wascompleted and opened in December 2004. The casino’s construction was financed in part by a CZK 60 million loanwith GE Capital Bank a.s. which was subsequently paid off by funds drawnagainst the Commerzbankrevolving credit facility that we secured in July 2007(see “Item 7. Management’s Discussion and Analysis of Financial Condition andResults of Operations — Liquidity and Capital Resources”).

 

Wealso lease on an annual basis accommodations for staff in Ceska Kubice, Hate(Route 59) and in Dolni Dvoriste (Route 55).

 

**Item 3.****Legal Proceedings.**

 

We are often subject tovarious contingencies, the resolutions of which, our management believes willnot have a material adverse effect on our consolidated financial position orresults of operations.  We are notcurrently involved in any material legal proceeding nor were we involved in anymaterial litigation during the year ended December 31, 2008.

 

**Item 4.****Submission of Matters to aVote of Security Holders.**

 

Nomatters were submitted to a vote of security holders during the fourth quarterof the fiscal year covered by this Report.

 

## **PART II**

## ** **

**Item 5.****Market for Common Equity and Related Stockholder Matters and IssuerPurchases of Equity Securities.**

 

Our $0.001 par value, common stock (“Common Stock”) is quoted on theOTC Bulletin Board under the symbol “TWOC.OB.”

 

## **$3.5 million Capital Raise**

## ** **

In August 2007, wecompleted the private placement of 1,000,000 shares of our Common Stock withseveral “accredited investors,” as defined in Rule 501(a) ofRegulation D promulgated under the Securities Act of 1933, for an aggregatepurchase price of $3.5 million or $3.50 per share (the “$3.5 million CapitalRaise”), the then quoted market price of our Common Stock.  Associated costs of the $3.5 million CapitalRaise, which included finder’s fees, and legal and accounting fees, totaledapproximately $224,000 and have been reflected as a reduction of additionalpaid-in capital.  The gross proceeds fromthe transaction were used primarily for the initial phase construction of theHotel Savannah adjacent our Route 59 Casino.

 

 

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**Market Prices**

 

As of March 9, 2009, our stock price was$2.40.  The following table sets forththe high and low prices of the Company’s Common Stock for fiscal years 2007 and2008 as quoted on OTC Bulletin Board. All such quotations reflect inter-dealerprices, without retail mark up, mark down or commission, and may not representactual transactions.

 
| **Common Stock** | ** ** | **High**   | ** ** | **Low**    | ** ** |
|------------------|------------|------------|------------|------------|------------|
| **2007**         | ** ** | ** ** | ** ** | ** ** | ** ** |
| First  Quarter   |       | $          | 4.60       |       | $          | 2.32 |   |
| Second  Quarter  |       | $          | 4.80       |       | $          | 3.40 |   |
| Third  Quarter   |       | $          | 4.65       |       | $          | 3.55 |   |
| Fourth  Quarter  |       | $          | 5.20       |       | $          | 3.60 |   |
| **2008**         | ** ** | ** ** | ** ** | ** ** | ** ** |
| First  Quarter   |       | $          | 4.50       |       | $          | 2.60 |   |
| Second  Quarter  |       | $          | 3.90       |       | $          | 3.02 |   |
| Third  Quarter   |       | $          | 3.75       |       | $          | 2.60 |   |
| Fourth  Quarter  |       | $          | 3.75       |       | $          | 1.80 |   |

 

As of March 9, 2009, there were 8,871,640 outstanding shares ofCommon Stock held of record by approximately 232 holders and outstandingoptions to purchase an aggregate of 429,065 shares of Common Stock, of which301,565 options were immediately exercisable. All outstanding warrants expired on March 31, 2008.

 

**Dividends**

 

We have not paidany dividends to date on our Common Stock, and do not expect to declare or payany dividends in the foreseeable future. We intend to retain future earnings, if any are generated, forinvestment in our current operations and for future project developments.

 

**Item6. Selected Financial Data.**

 

The selected financial data below should be read in conjunction with “Part II,Item 7. Management’s Discussion and Analysis of Financial Condition and Resultsof Operations,” as well as “Part II, Item 8. Financial Statements andSupplemental Data” of this Form 10-K.

 

 

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| * *                                  | ** ** | **For the Year Ended December 31,** | ** ** |
|-------------------------------------------|------------|-------------------------------------|------------|
| ** **                                | ** ** | ** **                          | ** ** | ** ** | ** ** | **2008 vs. 2007** | ** ** |
| **(in thousands, except per share data)** | ** ** | **2008**                            | ** ** | **2007 (1)** | ** ** | **Variance $** | ** ** | **Variance %** | ** ** |
| **Results of Operation:**                 | ** ** | ** **                          | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| Total  Revenue                            |       | $                                   | 36,424     |   | $ | 30,491 |   | $ | 5,933 |   | 19.5% |   |
| Gross  Operating Income                   |       | $                                   | 16,750     |   | $ | 13,823 |   | $ | 2,927 |   | 21.2% |   |
| EBITDA  from Operations (2)               |       | $                                   | 8,109      |   | $ | 6,477 |   | $ | 1,632 |   | 25.2% |   |
| Net  Income                               |       | $                                   | 3,704      |   | $ | 2,714 |   | $ | 990 |   | 36.5% |   |
| Earnings  per Share:                      |       |                                |       |   |   |   |   |   |   |
| Basic                                     |       | $                                   | 0.42       |   | $ | 0.33 |   | $ | 0.09 |   | 27.3% |   |
| Diluted                                   |       | $                                   | 0.42       |   | $ | 0.33 |   | $ | 0.09 |   | 27.3% |   |
|                                      |       |                                |       |   |   |   |   |   |   |
| **Balance Sheet:**                        | ** ** | ** **                          | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| Total  Current Assets                     |       | $                                   | 5,155      |   | $ | 9,968 |   | $ | (4,813 | ) | -48.3% |   |
| Total  Assets                             |       | $                                   | 50,657     |   | $ | 43,088 |   | $ | 7,569 |   | 17.6% |   |
| Total  Current Liabilities                |       | $                                   | 8,635      |   | $ | 5,953 |   | $ | 2,682 |   | 45.1% |   |
| Long-term  Liabilities                    |       | $                                   | 9,708      |   | $ | 7,116 |   | $ | 2,592 |   | 36.4% |   |
| Total  Stockholders’ Equity          |       | $                                   | 32,314     |   | $ | 30,019 |   | $ | 2,295 |   | 7.6% |   |

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(1)                      In August 2007,we raised an aggregate of $3.5 million in a private placement of our CommonStock with several “accredited investors,” as defined in Rule 501(a) ofRegulation D promulgated under the Securities Act of 1933.  The net proceeds from the transaction wereused primarily to finance the initial phase of construction of the HotelSavannah and the spa and wellness center adjacent our Route 59 Casino.

 

(2)                      EBITDA fromoperations represents earnings before interest, taxes and depreciation andamortization for the Czech entities. This is non-GAAP financial data.

 

**Item7. Management’s Discussion and Analysis ofFinancial Condition and Results of Operations.**

 

**Forward-Looking Statements**

 

Information set forth in this discussion and analysis contains various “forward-lookingstatements” within the meaning of Section 27A of the Securities Act of1933 and Section 21E of the Securities Exchange Act of 1934. The PrivateSecurities Litigation Reform Act of 1995 (the “Act”) provides certain “safeharbor” provisions for forward-looking statements.  All forward-looking statements made in thisAnnual Report on Form 10-K are made pursuant to the Act. The reader iscautioned that such forward-looking statements are based on informationavailable at the time and/or management’s good faith belief with respect tofuture events, and are subject to risks and uncertainties that could cause actualperformance or results to differ materially from those expressed in thestatements.  Forward-looking statementsspeak only as of the date the statement was made.  We assume no obligation to updateforward-looking information to reflect actual results, changes in assumptionsor changes in other factors affecting forward-looking information.  Forward-looking statements are typicallyidentified by the use of terms such as “anticipate,” “believe,” “could,” “estimate,”“expect,” “intend,” “may,” “might,” “plan,” “predict,” “project,” “should,” “will,”and similar words, although some forward-looking statements are expresseddifferently. Although we believe that the expectations reflected in suchforward-looking statements are reasonable, we can give no assurance that suchexpectations will prove to be correct. Important factors that could cause actual results to differ materiallyfrom expectations include those factors described in Item 1A, “Risk Factors” ofthis Annual Report on Form 10-K.

 

*You should read thisdiscussion with the financial statements and other financial informationincluded in this report.  Our significantaccounting policies are described in Note 1 to the Consolidated FinancialStatements included in Item 8 of this Annual Report on Form 10-K.*

 

 

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**Performance Measures andIndicators**

 

In discussing the consolidated results of operations,we may use or refer to performance measures and indicators that are common tothe gaming industry, such as: (i) total drop, the dollar value of gamingchips purchased in a given period; (ii) drop per head (“DpH”), the perguest average dollar value of gaming chips purchased; (iii) our net win,the difference between gaming wagers and the amount paid out to patrons; (iv) ourwin percentage (“WP”), the ratio of net win over total drop; and (v) earningsbefore interest, depreciation and amortization (“EBITDA”).  These measures are “non-GAAP financialmeasures.”

 

**Exchange Rates**

 

Due to the fact that ouroperations are located overseas, the results of the Company are subject to theimpact of fluctuations in foreign exchange rates.  In May 2004, the Czech Republic joinedthe European Union (“EU”), but still has not adopted the Euro (“EUR”)currency.  Thus, our Czech operationsconduct business in EURs and CZKs, the country’s local currency.  We do not hedge our currency holdings.

 

The impact of exchange ratefluctuations can be measured through a comparison of the rates of exchange forthese two currencies to the USD, which are depicted on a quarterly averagebasis of daily rates, showing the strengthening trend of the CZK currencyversus the USD and EUR currencies in 2007 and the subsequent weakening in 2008as noted in the following table.

 
| **Period**                     | ** ** | **USD** | ** ** | **CZK  2008** | ** ** | **CZK  2007** | ** ** | **EUR  2008** | ** ** | **EUR  2007** | ** ** |
|--------------------------------|------------|---------|------------|---------------|------------|---------------|------------|---------------|------------|---------------|------------|
|                           |       |    |       |          |       |          |       |          |       |          |       |
| January through  March    |       | $       | 1.00       |          | 17.1193    |          | 21.4284    |          | 0.6683     |          | 0.7634     |   |
| April through  June       |       | $       | 1.00       |          | 15.9280    |          | 20.9937    |          | 0.6399     |          | 0.7419     |   |
| July through  September   |       | $       | 1.00       |          | 16.0614    |          | 20.3716    |          | 0.6650     |          | 0.7280     |   |
| October through  December |       | $       | 1.00       |          | 19.2837    |          | 18.5515    |          | 0.7599     |          | 0.6907     |   |

 

The balance sheet totals ofour foreign subsidiaries at December 31, 2008 were converted to USDs usingthe prevailing interbank exchange rates, as found at www.oanda.com, which aredepicted in the following table.

 
| **As Of**               | ** ** | **USD** | ** ** | **CZK** | ** ** | **EUR** | ** ** | ** ** | ** ** | ** ** | ** ** |
|-------------------------|------------|---------|------------|---------|------------|---------|------------|------------|------------|------------|------------|
| December 31,  2008 |       | $       | 1.00       |    | 18.8606    |    | 0.7095     |       |       |       |       |   |
|                         |            |         |            |         |            |         |            |            |            |            |            |  |

 

**Critical Accounting Policies**

 

Ourmanagement has identified the following as critical accounting policies that affect our consolidated financialstatements.

 

*Goodwill*

 

Goodwill represents theexcess of the cost of our Czech subsidiaries over the fair value of their netassets at the date of acquisition, which consists of only the Ceska andRozvadov casinos.  Under Statement ofFinancial Accounting Standards (“SFAS”) No. 142, goodwill is no longersubject to amortization over its estimated useful life; rather, goodwill issubject to at least an annual assessment for impairment, applying a fair-valuebased test.  The impairment assessment requiresus to compare the fair value of our Czech Republic “reporting unit,” comprisedof our Ceska, Rozvadov casinos and the site of Route 59, to its originalcarrying value (the net equity of the Company) to determine whether there is anindication that an impairment exists. The fair value of the Czech Republic reporting unit is determinedthrough a combination of appraisals of the Company’s real property and amultiple of EBITDA, which was based upon our experience and data fromindependent, third parties.  As requiredby SFAS No. 

 

 

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142, we performed the periodic fair-value basedtesting of the carrying value of goodwill related to our Czech Republicreporting unit at September 30, 2008, and determined that goodwill was notimpaired and therefore that no reporting of impairment losses waswarranted.   There were no indicators ofimpairment present during the fourth quarter of 2008, therefore we determinedthat there was no impairment of goodwill at December 31, 2008.

 

**Results of Operations**

 

Thefollowing discussion and analysis relates to our consolidated financialcondition and results of operations for the years ended December 31, 2008and 2007.

 

**Year Ended December 31,2008 Compared to Year Ended December 31, 2007**

 

(in thousands)

 
| ** **                                   | ** ** | **Year Ended  December 31, 2007** | ** ** | **Change** | ** ** | **Year Ended  December 31, 2008** | ** ** |
|----------------------------------------------|------------|---------------------------------------------|------------|------------|------------|---------------------------------------------|------------|
| ** **                                   | ** ** | ** **                                  | ** ** | ** ** | ** ** | ** **                                  | ** ** |
| Net  income                                  |       | $                                           | 2,714      |       |       |                                        |       |   |
| Revenues                                     |       |                                        |       | $          | 5,933      |                                        |       |   |
| Cost  of revenues                            |       |                                        |       | (3,006     | )          |                                        |       |
| Depreciation  and amortization               |       |                                        |       | (236       | )          |                                        |       |
| Selling,  general and administrative         |       |                                        |       | (1,345     | )          |                                        |       |
| Interest  expense, net                       |       |                                        |       | (403       | )          |                                        |       |
| Foreign  currency transaction gain and other |       |                                        |       | (6         | )          |                                        |       |
| Foreign  income taxes                        |       |                                        |       | 53         |       |                                        |       |
| Net  income                                  |       |                                        |       | $          | 990        |                                        | $          | 3,704 |   |
|                                              |            |                                             |            |            |            |                                             |            |  |  |  |

 

For the year endedDecember 31, 2008, we achieved a 19.3%, or approximately $5.9 million,improvement on revenues of $36.4 million versus $30.5 million for the yearended December 31, 2007. This improvement was largely the result of majorrevenue increases, notably in slots, at three of our casinos, Route 55, Ceskaand Route 59, which, in turn, were based on the strength of higher attendanceand superior win percentages.

 

Our Company’s costof revenues increased by $3.0 million or 18.0%, over the prior year, mainlyfrom incremental costs associated with business volume increases at Route 55and Route 59.  Other factors that alsocontributed to the increase in cost of revenues included greater amenityexpenses related to the Company’s aggressive promotional and player-benefitprograms and higher volume-driven labor costs. In 2008, our slot lease expenses were approximately $1,777 versus $1,873in 2007.

 

Depreciation andamortization expense increased by $236,000, or 19.8%, in year 2008 versus theprior year, primarily due to the added capital asset value at Route 55.

 

Our selling,general and administrative expenses increased by approximately $1.3 million, or14.2%, in year 2008 in comparison to those of 2007, in large part, as a resultof the following:  (i) 91% increasein utilities cost during the year, as oil prices escalated; (ii) higherforeign exchange-related expenses; (iii) higher legal and consultingexpenses; and (iv) stock compensation expense of approximately $149,000,for the fair value of stock options awarded to key management employees.

 

Net interestexpense increased by $403,000, or 111.9%, in 2008 versus the prior year duemainly to interest on the full balance drawn against the Commerzbank revolvingcredit facility and to the escalated interest rate, per the terms of theReplacement Notes (See “Note 4 — Long Term Debt” of the Notes to theConsolidated Financial Statements).

 

We were subject toforeign income taxes on non-gaming revenues, totaling approximately $31,000 in2008, a difference of 63.1% from the $84,000 incurred in 2007, which included$60,000 of deferred taxes.

 

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Accordingly, weachieved a net income improvement of $990,000, or 36.5%, to approximately $3.7million for the year ended December 31, 2008, versus a net income ofapproximately $2.7 million for the year ended December 31, 2007.

 

Operationally, wegenerated a gross operating income of approximately $16.8 million in 2008 from$13.8 million in 2007, a 21.2% improvement, largely on the revenue growth atRoute 55 and Route 59.  Our EBITDA fromOperations in 2008 was $8.1 million compared with $6.5 million in 2007, a 25.2%increase, which was produced by the Czech operating units only.  (See table in “Item 6. Selected FinancialData” above)

 

**Our Business Units:**

 

***Ceska, Czech Republic***

 

Forthe year 2008, Ceska posted a 13.7% revenue improvement over 2007, due to a 33.0%slot revenue improvement, compensating for a 1.8% dip in live gamerevenue.  The lower live game revenueresulted from a poorer WP, which fell 1.7 percentage points (“ppts”) from thatachieved in 2007.  Operating expenseswere up by 22.4% versus the same period in 2007 due to increased complimentaryfood and beverage (“F&B”) offered to guests, higher slot lease expenses andhigher volume-driven labor costs. Overhead expenses were also up by 17.0%, largely from a higherproportion of shared expenses, such as legal and consulting fees, versusrevenues.

 

***Rozvadov, Czech Republic***

 

For2008 versus 2007, Rozvadov saw a 2.8 ppts improvement in its WP as well as a7.1% increase in its in dropper head (“DpH”), the per guest average money value of gaming chips purchased.  Although attendance dropped 12.4% from 2007,total revenue edged over last year by 0.3%. Operatingexpenses increased 15.2% from 2007, notably in slot lease expenses, whileoverhead expenses saw a 2.1% rise in the current year, from higher mediaadvertising.

 

***Route 59******,Czech Republic***

 

Route 59 continued itsrevenue recovery, which began in 2007, after the capital investment made in2006 for building expansion and renovation and the subsequent relaunch of thecasino.  The rejuvenated casino has beenpositively received. Live game attendance climbed 9.4% over 2007, as a resultof an improved product.  In 2008, theunit posted a 3.4 ppts increase in its WP versus 2007, thereby helping to posta 9.3% total revenue improvement.  Slotrevenues added 35.1% of that incremental revenue gain.  Operating costs were 3.5% higher than lastyear, notably in gifts and giveaways, while overhead expenses were 10.7%higher, principally in utility costs, which dramatically increased over thecourse of the year.

 

***Route 55, Czech Republic***

 

In 2008, Route 55continued to post strong revenue growth, as live game and slot revenuesincreased 25.2% and 41.5% versus 2007, respectively.  As a result, total revenue increased by 33.3%over 2007.  Operating and overheadexpenses were 33.0% and 25.3% higher than last year, mainly in volume-drivencosts as well as in higher utilities.

 

***Grand Casino Lav, Croatia***

** **

The performance results in 2008 of the Grand Casino Lav were betterthan expected, as management fees of $208,000 earned in 2008 nearly doubledthat of 2007’s $111,000.  However, thelack of owners’ investment into the casino’s marketing and promotional budgetlimited the ability of the unit to achieve its full potential.  In 2008, the casino continued to focus itsefforts to establish itself in its market and against its competitors.

 

Despite theefforts of local management to improve operations and control costs, the lackof owner funding devoted to marketing initiatives forced the Grand Casino Lavto rely on its own self-generated resources, and, as a result, the casino sawlimited growth in revenues for the reported year. Thus, its management feesincome

 

 

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contribution to the year2008 operational results was not material. Thus, all discussions of operational performance and results herein arelimited to the Company’s fully-owned and operated units in the Czech Republic.

 

**Liquidity and Capital Resources**

 

At December 31,2008, we had a working capital deficit of approximately $3.5 million versus aworking capital surplus of approximately $4.0 million at December 31,2007, largely as a result of our investment into the construction of HotelSavannah, a 77-room, European four-star deluxe hotel, and an adjoining spa andwellness center.  Hotel Savannah held itssoft-opening on January 14, 2009, and expects to hold its grand opening inmid-April 2009.

 

In February 2009, weexercised our option to extend the Commerzbank credit facility term for anadditional 12 months, to July 23, 2010, with all provisions, including therate of interest, remaining constant, with the exception of an additionalpledge as a result of concerns over a deteriorating worldwide economy and itspossible impact on our original security. Thus, as a further assurance to Commerzbank, we pledged, as additionalcollateral, our Route 59 casino’s original building and the corresponding,underlying land, excluding the building extension.  As of December 31, 2008, we had drawnour fully available balance of CZK 150 million, or approximately $8.0 million,of which a portion was used to pay off the Company’s existing long-termdebt.  The Company is in full compliancewith the credit facility’s financial covenants up to and including the yearended December 31, 2008.  (See also “Note4 — Long Term Debt” of the Consolidated Financial Statements).

 

Weare also obligated under various contractual commitments over the next threeyears.  The following is a summary of ourfive-year commitments as of December 31, 2008:

 
| **(in thousands)******Contractual Obligations** | ** ** | **Total** | ** ** | **Less than  1 Year** | ** ** | **1-3 Years** | ** ** | **3-5 Years** | ** ** | **More than  5 Years** | ** ** |
|-------------------------------------------------|------------|-----------|------------|-----------------------|------------|---------------|------------|---------------|------------|------------------------|------------|
| Long-term,  unsecured debt, U.S.                |       | $         | 1,550      |                  | $          | —        |       | $             | 1,550      |                   | $          | — |   | $ | — |   |
| Long-term,  secured debt, foreign               |       | 8,128     |       | 175                   |       | 7,953         |       |          |       |                   |       |
| Operating  and capital leases                   |       | 502       |       | 388                   |       | 114           |       |          |       |                   |       |
| Employment  agreements                          |       | 450       |       | 450                   |       |          |       |          |       |                   |       |
| Total  contractual obligations                  |       | $         | 10,630     |                  | $          | 1,013         |       | $             | 9,617      |                   | $          | — |   | $ | — |   |

 

Ourmanagement believes that TWC’s cash resources at December 31, 2008 andanticipated cash to be provided by 2009 operations will be sufficient to fundour activities for the year ending December 31, 2009.

 

**Our Plan of Operations**

 

We will continue to develop marketing and operational strategiesdesigned to increase attendance and revenues at our existing locations in theCzech Republic while striving to minimize costs, through cost-sharing allianceswith non-competing businesses, where advantageous.  We will also employ this formula in the Grand CasinoLav, our casino in Split, Croatia in an effort to build a solid customer basefrom the local and regional markets.  Furthermore, we will placeadditional focus on developing marketing strategies that will specificallytarget the significant summer tourist market in that region.  With respect to our newest operation, HotelSavannah, we anticipate utilizing the synergy of both gaming and hospitalityresources to lower operating costs and improve profitability.

 

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

 

**Foreign Currency Exchange Rate Risk**

 

 

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The information inthis section should be read in conjunction with information related to changesin the exchange rates of foreign currency in “Part I , Item 1A. RiskFactors.”  Changes in foreign exchangerates could materially adversely affect our consolidated results of operationsor financial condition.

 

Due to the fact that theCompany’s operations are all located overseas, the results of the Company aresubject to the impact of fluctuations in foreign exchanges rates.  Pursuant to the January 2002 adoption ofthe EUR as the sole trading currency by all European Union member nations thathad previously tied their local currencies to it, our operations conductedbusiness in EURs and CZKs for the Czech units and EURs and Croatian Kunas forthe Croatian unit, the local currencies in which payroll and most payable itemsare paid.  As our primary reportingsubsidiary, ACC, is a Czech entity, all revenues and expenses, regardless ofsources of origin (eg. Croatia), are recognized in the Czech currency and translatedto USD for reporting purposes.

 

 

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** **

**Item 8. Financial Statements.**

 

The following items are included in this Report:

 

Consolidated FinancialStatements

 
| Report  of Independent Registered Public Accounting Firm                                                  |   | 19    |   |
|-----------------------------------------------------------------------------------------------------------|--------|-------|--------|
| Consolidated  Balance Sheets, December 31, 2008 and 2007                                             |   | 20    |   |
| Consolidated  Statements of Income and Comprehensive Income, Years Ended December 31,  2008 and 2007 |   | 21    |   |
| Consolidated  Statements of Stockholders’ Equity, Years Ended December 31, 2008 and  2007       |   | 22    |   |
| Consolidated Statements of Cash Flows,  Years Ended December 31, 2008 and 2007                       |   | 23    |   |
| Notes to  Consolidated Financial Statements                                                               |   | 24-38 |   |

 

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

To the Board of Directors and StockholdersTrans World Corporation

 

Wehave audited the accompanying consolidated balance sheets of Trans WorldCorporation and Subsidiaries (collectively, the “Company”) as of December 31,2008 and 2007, and the related consolidated statements of income andcomprehensive income, stockholders’ equity and cash flows for each of the yearsthen ended.  These consolidated financialstatements are the responsibility of the Company’s management.  Our responsibility is to express an opinionon these consolidated financial statements based on our audits.

 

Weconducted our audits in accordance with the standards of the Public CompanyAccounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtainreasonable assurance about whether the financial statements are free ofmaterial misstatement.  The Company isnot required to have, nor were we engaged to perform, an audit of its internalcontrol over financial reporting. Our audits included consideration of internalcontrol over financial reporting as a basis for designing audit procedures thatare appropriate in the circumstances, but not for the purpose of expressing anopinion on the effectiveness of the Company’s internal control over financialreporting. Accordingly, we express no such opinion.  An audit also includes examining, on a testbasis, evidence supporting the amounts and disclosures in the financialstatements, assessing the accounting principles used and significant estimatesmade by management, as well as evaluating the overall financial statementpresentation. We believe that our audits provide a reasonable basis for ouropinion.

 

Inour opinion, the consolidated financial statements referred to above presentfairly, in all material respects, the financial position of Trans WorldCorporation and Subsidiaries as of December 31, 2008 and 2007, and theresults of their operations and their cash flows for each of the years thenended, in conformity with accounting principles generally accepted in theUnited States of America.

 

/s/  Rothstein, Kass & Company, P.C.

 

Roseland, New JerseyMarch 10, 2009

 

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###### **TRANSWORLD CORPORATION AND SUBSIDIARIES**

CONSOLIDATEDBALANCE SHEETS

December 31, 2008 and2007(in thousands, except forshare data)

 
| ** **                                                                                                                          | ** ** | **December 31, 2008** | ** ** | **December 31, 2007** | ** ** |
|-------------------------------------------------------------------------------------------------------------------------------------|------------|----------------------------|------------|----------------------------|------------|
| **ASSETS**                                                                                                                          |       |                       |       |                       |       |
| **CURRENT ASSETS:**                                                                                                                 |       |                       |       |                       |       |
| Cash                                                                                                                                |       | $                          | 3,676      |                       | $          | 8,315 |   |
| Prepaid  expenses                                                                                                                   |       | 886                        |       | 437                        |       |
| Notes  receivable, current portion                                                                                                  |       | 225                        |       | 969                        |       |
| Other  current assets                                                                                                               |       | 368                        |       | 247                        |       |
|                                                                                                                                |       |                       |       |                       |       |
| **Total current assets**                                                                                                            |       | 5,155                      |       | 9,968                      |       |
|                                                                                                                                |       |                       |       |                       |       |
| **PROPERTY AND EQUIPMENT****,**less  accumulated depreciation of****$7,580 and  $6,663, respectively                                |       | 35,839                     |       | 23,747                     |       |
|                                                                                                                                |       |                       |       |                       |       |
| **OTHER ASSETS:**                                                                                                                   |       |                       |       |                       |       |
| Goodwill                                                                                                                            |       | 6,430                      |       | 6,696                      |       |
| Notes  receivable, less current portion                                                                                             |       | 1,160                      |       | 551                        |       |
| Deposits  and other assets                                                                                                          |       | 2,073                      |       | 2,126                      |       |
|                                                                                                                                |       |                       |       |                       |       |
| **Total other assets**                                                                                                              |       | 9,663                      |       | 9,373                      |       |
|                                                                                                                                |       |                       |       |                       |       |
|                                                                                                                                |       | $                          | 50,657     |                       | $          | 43,088 |   |
|                                                                                                                                |       |                       |       |                       |       |
| **LIABILITIES AND STOCKHOLDERS’  EQUITY**                                                                                      |       |                       |       |                       |       |
|                                                                                                                                |       |                       |       |                       |       |
| **CURRENT LIABILITIES:**                                                                                                            |       |                       |       |                       |       |
| Long-term  debt, current maturities                                                                                                 |       | $                          | 175        |                       | $          | — |   |
| Capital  lease, current portion                                                                                                     |       | 282                        |       | 314                        |       |
| Accounts  payable                                                                                                                   |       | 4,043                      |       | 885                        |       |
| Interest  payable                                                                                                                   |       | 78                         |       | 78                         |       |
| Czech  tax accrual                                                                                                                  |       | 2,596                      |       | 3,381                      |       |
| Accrued  expenses and other current liabilities                                                                                     |       | 1,461                      |       | 1,295                      |       |
|                                                                                                                                |       |                       |       |                       |       |
| **Total current liabilities**                                                                                                       |       | 8,635                      |       | 5,953                      |       |
|                                                                                                                                |       |                       |       |                       |       |
| **LONG-TERM LIABILITIES:**                                                                                                          |       |                       |       |                       |       |
| Long-term  debt, less current maturities                                                                                            |       | 9,503                      |       | 6,661                      |       |
| Capital  lease, less current portion                                                                                                |       | 64                         |       | 314                        |       |
| Other  long-term liabilities                                                                                                        |       | 141                        |       | 141                        |       |
|                                                                                                                                |       |                       |       |                       |       |
| **Total long-term liabilities**                                                                                                     |       | 9,708                      |       | 7,116                      |       |
|                                                                                                                                |       |                       |       |                       |       |
| **COMMITMENTS AND CONTINGENCIES**                                                                                                   |       |                       |       |                       |       |
|                                                                                                                                |       |                       |       |                       |       |
| **STOCKHOLDERS’ EQUITY:**                                                                                                      |       |                       |       |                       |       |
|                                                                                                                                |       |                       |       |                       |       |
| Preferred  stock, $.001 par value, 4,000,000 shares authorized, none issued                                                         |       |                       |       |                       |       |
| Common  stock, $.001 par value, 20,000,000 shares authorized, 8,859,140 and 8,840,870  shares, issued and outstanding, respectively |       | 9                          |       | 9                          |       |
| Additional  paid-in capital                                                                                                         |       | 51,358                     |       | 51,147                     |       |
| Accumulated  other comprehensive income                                                                                             |       | 8,333                      |       | 9,953                      |       |
| Accumulated  deficit                                                                                                                |       | (27,386                    | )          | (31,090                    | )          |
|                                                                                                                                |       |                       |       |                       |       |
| **Total stockholders’ equity**                                                                                                 |       | 32,314                     |       | 30,019                     |       |
|                                                                                                                                |       |                       |       |                       |       |
|                                                                                                                                |       | $                          | 50,657     |                       | $          | 43,088 |   |

 

*See accompanying notes to consolidated financial statements*

 

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**TRANS WORLDCORPORATION AND SUBSIDIARIES**

CONSOLIDATEDSTATEMENTS OF INCOME

ANDCOMPREHENSIVE INCOMEYears Ended December 31, 2008 and 2007(in thousands, except for share data)

 
| ** **                                                                                         | ** ** | **Years Ended December 31,** | ** ** |
|----------------------------------------------------------------------------------------------------|------------|-----------------------------------|------------|
| ** **                                                                                         | ** ** | **2008**                          | ** ** | **2007** | ** ** |
|                                                                                               |       |                              |       |   |   |
| **REVENUES**                                                                                       |       | $                                 | 36,424     |   | $ | 30,491 |   |
|                                                                                               |       |                              |       |   |   |
| **OPERATING EXPENSES:**                                                                            |       |                              |       |   |   |
|                                                                                               |       |                              |       |   |   |
| Cost  of revenues                                                                                  |       | 19,674                            |       | 16,668 |   |
| Depreciation  and amortization                                                                     |       | 1,428                             |       | 1,192 |   |
| Selling,  general and administrative                                                               |       | 10,822                            |       | 9,477 |   |
|                                                                                               |       | 31,924                            |       | 27,337 |   |
|                                                                                               |       |                              |       |   |   |
| **INCOME FROM OPERATIONS**                                                                         |       | 4,500                             |       | 3,154 |   |
|                                                                                               |       |                              |       |   |   |
| **OTHER INCOME (EXPENSES):**                                                                       |       |                              |       |   |   |
|                                                                                               |       |                              |       |   |   |
| Interest  income                                                                                   |       | 54                                |       | 41 |   |
| Interest  expense                                                                                  |       | (817                              | )          | (401 | ) |
| Foreign  exchange gain (loss)                                                                      |       | (2                                | )          | 4 |   |
|                                                                                               |       | (765                              | )          | (356 | ) |
|                                                                                               |       |                              |       |   |   |
| **INCOME BEFORE INCOME TAXES**                                                                     |       | 3,735                             |       | 2,798 |   |
|                                                                                               |       |                              |       |   |   |
| Foreign  income taxes                                                                              |       | (31                               | )          | (84 | ) |
|                                                                                               |       |                              |       |   |   |
| **NET INCOME**                                                                                     |       | 3,704                             |       | 2,714 |   |
|                                                                                               |       |                              |       |   |   |
| **Other comprehensive income (loss)****,** foreign  currency translation adjustments, net of taxes |       | (1,620                            | )          | 3,623 |   |
|                                                                                               |       |                              |       |   |   |
| **TOTAL COMPREHENSIVE INCOME**                                                                     |       | $                                 | 2,084      |   | $ | 6,337 |   |
|                                                                                               |       |                              |       |   |   |
| **WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:**                                                    |       |                              |       |   |   |
| Basic                                                                                              |       | 8,851,480                         |       | 8,209,678 |   |
| Diluted                                                                                            |       | 8,873,353                         |       | 8,321,503 |   |
|                                                                                               |       |                              |       |   |   |
| **EARNINGS PER COMMON SHARE:**                                                                     |       |                              |       |   |   |
| Basic                                                                                              |       | $                                 | 0.42       |   | $ | 0.33 |   |
| Diluted                                                                                            |       | $                                 | 0.42       |   | $ | 0.33 |   |

 

*See accompanying notes to consolidated financial statements*

 

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**TRANS WORLDCORPORATION AND SUBSIDIARIES**

CONSOLIDATEDSTATEMENTS OF STOCKHOLDERS’ EQUITY

YearsEnded December 31, 2008 and 2007(in thousands, except for share data)

** **
| ** **                                               | ** ** | ** **       | ** ** | ** **  | ** ** | ** **        | ** ** | **Accumulated** | ** ** | ** **             | ** ** | ** ** | ** ** |
|----------------------------------------------------------|------------|------------------|------------|-------------|------------|-------------------|------------|-----------------|------------|------------------------|------------|------------|------------|
| ** **                                               | ** ** | ** **       | ** ** | ** **  | ** ** | **Additional**    | ** ** | **Other**       | ** ** | ** **             | ** ** | **Total**  | ** ** |
| ** **                                               | ** ** | **Common Stock** | ** ** | **Paid-in** | ** ** | **Comprehensive** | ** ** | **Accumulated** | ** ** | **Stockholders’** | ** ** |
| ** **                                               | ** ** | **Shares**       | ** ** | **Amount**  | ** ** | **Capital**       | ** ** | **Income**      | ** ** | **Deficit**            | ** ** | **Equity** | ** ** |
| **Balances,**January 1, 2007                        |       | 7,840,870        |       | $           | 8          |              | $          | 47,720          |       | $                      | 6,330      |       | $          | (33,804 | ) | $ | 20,254 |   |
| ** **                                               | ** ** | ** **       | ** ** | ** **  | ** ** | ** **        | ** ** | ** **      | ** ** | ** **             | ** ** | ** ** | ** ** |
| **Private  placement, net of costs**                     |       | 1,000,000        |       | 1           |       | 3,283             |       |            |       |                   |       | 3,284      |       |
| ** **                                               | ** ** | ** **       | ** ** | ** **  | ** ** | ** **        | ** ** | ** **      | ** ** | ** **             | ** ** | ** ** | ** ** |
| **Issuance of  stock options**                           |       |             |       |        |       | 144               |       |            |       |                   |       | 144        |       |
| ** **                                               | ** ** | ** **       | ** ** | ** **  | ** ** | ** **        | ** ** | ** **      | ** ** | ** **             | ** ** | ** ** | ** ** |
| **Foreign  currency translation adjustment, net of tax** |       |             |       |        |       |              |       | 3,623           |       |                   |       | 3,623      |       |
| ** **                                               | ** ** | ** **       | ** ** | ** **  | ** ** | ** **        | ** ** | ** **      | ** ** | ** **             | ** ** | ** ** | ** ** |
| **Net income**                                           |       |             |       |        |       |              |       |            |       | 2,714                  |       | 2,714      |       |
| **Balances,**December 31, 2007                      |       | 8,840,870        |       | $           | 9          |              | $          | 51,147          |       | $                      | 9,953      |       | $          | (31,090 | ) | $ | 30,019 |   |
|                                                     |       |             |       |        |       |              |       |            |       |                   |       |       |       |
| **Residual  costs, Private placement**                   |       |             |       |        |       | (8                | )          |            |       |                   |       | (8         | )          |
| ** **                                               | ** ** | ** **       | ** ** | ** **  | ** ** | ** **        | ** ** | ** **      | ** ** | ** **             | ** ** | ** ** | ** ** |
| **Warrants  exercise**                                   |       | 5,754            |       |        |       | 6                 |       |            |       |                   |       | 6          |       |
| ** **                                               |       |             |       |        |       |              |       |            |       |                   |       |       |       |
| **Stock  options expense**                               |       |             |       |        |       | 149               |       |            |       |                   |       | 149        |       |
| ** **                                               |       |             |       |        |       |              |       |            |       |                   |       |       |       |
| **Stock  issuance as compensation**                      |       | 12,500           |       |        |       | 36                |       |            |       |                   |       | 36         |       |
| ** **                                               |       |             |       |        |       |              |       |            |       |                   |       |       |       |
| **Deferred  bonuses to be paid in stock**                |       |             |       |        |       | 18                |       |            |       |                   |       | 18         |       |
| ** **                                               |       |             |       |        |       |              |       |            |       |                   |       |       |       |
| **Deferred  board fees to be paid in stock**             |       |             |       |        |       | 10                |       |            |       |                   |       | 10         |       |
| ** **                                               |       |             |       |        |       |              |       |            |       |                   |       |       |       |
| **Foreign  currency translation adjustment, net of tax** |       |             |       |        |       |              |       | (1,620          | )          |                   |       | (1,620     | )          |
| ** **                                               |       |             |       |        |       |              |       |            |       |                   |       |       |       |
| **Retirement  of fractional shares**                     |       | 16               |       |        |       |              |       |            |       |                   |       |       |       |
| ** **                                               | ** ** | ** **       | ** ** | ** **  | ** ** | ** **        | ** ** | ** **      | ** ** | ** **             | ** ** | ** ** | ** ** |
| **Net income**                                           |       |             |       |        |       |              |       |            |       | 3,704                  |       | 3,704      |       |
| **Balances,**December 31, 2008                      |       | 8,859,140        |       | $           | 9          |              | $          | 51,358          |       | $                      | 8,333      |       | $          | (27,386 | ) | $ | 32,314 |   |

 

*See accompanying notes to consolidated financial statements*

 

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**TRANS WORLDCORPORATION AND SUBSIDIARIES**

CONSOLIDATEDSTATEMENTS OF CASH FLOWSYears Ended December 31, 2008 and 2007(in thousands, except for share data)

 
| ** **                                                                         | ** ** | **2008** | ** ** | **2007** | ** ** |
|------------------------------------------------------------------------------------|------------|----------|------------|----------|------------|
|                                                                               |       |     |       |     |       |
| **CASH FLOWS FROM OPERATING ACTIVITIES:**                                          |       |     |       |     |       |
| Net  income                                                                        |       | $        | 3,704      |     | $          | 2,714 |   |
| Adjustments  to reconcile net income to net cash provided by operating activities: |       |     |       |     |       |
| Depreciation  and amortization                                                     |       | 1,428    |       | 1,192    |       |
| Stock-based  compensation expense                                                  |       | 149      |       | 144      |       |
| Stock  issued for services                                                         |       | 36       |       |     |       |
| Deferred  compensation to be paid as stock                                         |       | 28       |       |     |       |
| Loss  from sale of assets                                                          |       | (113     | )          |     |       |
| Changes  in operating assets and liabilities:                                      |       |     |       |     |       |
| Prepaid  expenses and other current assets                                         |       | (14      | )          | (286     | )          |
| Deposits  and other assets                                                         |       | (632     | )          | 1,183    |       |
| Accounts  receivable                                                               |       |     |       | (633     | )          |
| Accounts  payable                                                                  |       | 501      |       | (1,144   | )          |
| Interest  payable                                                                  |       |     |       | 5        |       |
| Czech  tax accrual                                                                 |       | (718     | )          | (402     | )          |
| Accrued  expenses and other current liabilities                                    |       | 227      |       | (270     | )          |
| **NET CASH PROVIDED BY OPERATING ACTIVITIES**                                      |       | 4,596    |       | 2,503    |       |
|                                                                               |       |     |       |     |       |
| **CASH FLOWS FROM INVESTING ACTIVITIES:**                                          |       |     |       |     |       |
| Renovation  and purchases of property and equipment                                |       | (436     | )          | (3,547   | )          |
| Repayment  on notes receivable                                                     |       | 177      |       |     |       |
| Investment  into Hotel Savannah construction                                       |       | (12,427  | )          |     |       |
| Proceeds  from sale of assets                                                      |       | 187      |       |     |       |
| **NET CASH USED IN INVESTING ACTIVITIES**                                          |       | (12,499  | )          | (3,547   | )          |
|                                                                               |       |     |       |     |       |
| **CASH FLOWS FROM FINANCING ACTIVITIES:**                                          |       |     |       |     |       |
| Proceeds  from credit line                                                         |       | 17,543   |       | 5,111    |       |
| Proceeds  from private placement                                                   |       |     |       | 3,500    |       |
| Payments  of long-term debt                                                        |       | (14,034  | )          | (2,172   | )          |
| Payments  of financing costs                                                       |       |     |       | (303     | )          |
| Payments  of issuance costs                                                        |       | (8       | )          | (216     | )          |
| Proceeds  from warrants exercise                                                   |       | 6        |       |     |       |
| **NET CASH PROVIDED BY FINANCING ACTIVITIES**                                      |       | 3,507    |       | 5,920    |       |
|                                                                               |       |     |       |     |       |
| **EFFECT OF EXCHANGE RATE CHANGES ON CASH**                                        |       | (243     | )          | 173      |       |
|                                                                               |       |     |       |     |       |
| **NET INCREASE (DECREASE) IN CASH**                                                |       | (4,639   | )          | 5,049    |       |
|                                                                               |       |     |       |     |       |
| **CASH:**                                                                          |       |     |       |     |       |
| Beginning  of year                                                                 |       | 8,315    |       | 3,266    |       |
|                                                                               |       |     |       |     |       |
| End  of year                                                                       |       | $        | 3,676      |     | $          | 8,315 |   |
|                                                                               |       |     |       |     |       |
| **SUPPLEMENTAL DISCLOSURES OF CASH FLOW  INFORMATION:**                            |       |     |       |     |       |
| Cash  paid during the year for interest                                            |       | $        | 814        |     | $          | 390 |   |
|                                                                               |       |     |       |     |       |
| **SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING  ACTIVITIES:**                       |       |     |       |     |       |
| Property  and equipment acquired via accounts payable                              |       | $        | 3,008      |     | $          | — |   |

 

*See accompanying notes to consolidated financial statements*

 

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**TRANS WORLD CORPORATION AND SUBSIDIARIES**

NOTES TO CONSOLIDATEDFINANCIAL STATEMENTS

(in thousands, except for share data)

 

**NOTE 1** - **Nature****of Business and Liquidity**

 

***Nature of Business***

 

TransWorld Corporation and Subsidiaries (collectively, “TWC” or the “Company”), aNevada corporation, is primarily engaged in the gaming business in the CzechRepublic.

 

TheCompany owns and operates four casinos in the Czech Republic (“CZ”), andmanages, under contract, one casino and nightclub in Croatia.  Two of the Czech casinos are located in thewestern part of the CZ, close to the border of Germany.  The larger of the two, located in CeskaKubice (“Ceska”), currently has 15 gaming tables and 72 slot machines. Thesmaller, Rozvadov (“Rozvadov”), located in the town of Rozvadov, currently has8 gaming tables and 24 slot machines. The other two Czech casinos are located in the southern part of the CZ,close to the Austrian border.  The largerof these two, “Route 55,” located in Dolni Dvoriste, now has 24 gaming tablesand 120 slot machines.  The other casino,“Route 59,” which recently underwent major building expansion and renovationwork, is located in Hate, near Znojmo, and currently has 22 gaming tables and102 slot machines.

 

The Company also managedunder contract the Grand Casino Lav and Nightclub (collectively known as the “GrandCasino Lav”), located in the Le Meridien Lav Hotel resort in Podstrana,Croatia, near the city of Split.  Themanagement agreement with Grand Hotel Lav d.o.o., the property owner, providesfor a 10-year term, with renewal periods of five (5) years option to TWC,subject to certain performance conditions.  In addition to marketing to the existing hotel guests, American ChanceCasinos (“ACC”) will target the local market of Split, the second largest cityin Croatia. Grand Casino Lav currently has 18 tables and 60 slot machines.

 

Despite the efforts of local management to improveoperations and control costs, the lack of owner funding devoted to marketinginitiatives forced the Grand Casino Lav to rely on its own self-generatedresources, and, as a result, the casino saw limited growth in revenues for thereported year. Thus, its management fees income contribution to the year 2008operational results was not material. Thus, all discussions of operational performance and results herein arelimited to the Company’s fully-owned and operated units in the Czech Republic.

 

***Liquidity***

 

At December 31,2008, the Company had a working capital deficit of $3,480 versus a workingcapital surplus of $4,015 at December 31, 2007, largely as a result of TWC’sinvestment into the construction of Hotel Savannah, a 77-room, Europeanfour-star deluxe hotel, and an adjoining spa and wellness center, which isexpected to open in mid-March 2009. Hotel Savannah held its soft-opening on January 14, 2009, andexpects to hold its grand opening in mid-April 2009.

 

In February 2009,TWC exercised its option to extend the terms of the Commerzbank credit facilityfor an additional 12 months, to July 23, 2010, with all provisions,including the rate of interest, remaining constant, with the exception of anadditional pledge as a result of concerns over a deteriorating worldwideeconomy and its possible impact on the Company’s original security.  Thus, as a further assurance to Commerzbank,TWC pledged, as additional collateral, its Route 59 casino’s 

 

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original building andcorresponding, underlying land, excluding the building extension.  As of December 31, 2008, TWC had drawnits fully available balance of CZK 150,000, or approximately $7,953, of which aportion was used to pay off the Company’s existing long term debt.  The Company is in full compliance with thecredit facility’s financial covenants up to and including the year ended December 31,2008.  (See also “Note 4 — Long Term Debt”below).

 

The Company’s managementbelieves that its cash resources at December 31, 2008 and anticipated cashto be provided by 2009 operations are sufficient to fund its activities for theyear ending December 31, 2009.

 

**NOTE 2** - **Summary of Significant Accounting Policies**

 

***Principles of Consolidation and Basis ofPresentation*****-**** **Theaccompanying consolidated financial statements are presented in conformity withaccounting principles generally accepted in the United States of America, andpursuant to the accounting and disclosure rules and regulations of theSecurities and Exchange Commission (the “SEC”) and Regulation S-X.  All significant intercompany balances andtransactions have been eliminated in consolidation.

 

***Property and Equipment***** **- Property and equipment is stated at cost lessaccumulated depreciation and amortization. TWC capitalizes the cost of improvements that extend the life of theasset and expenses maintenance and repair costs as incurred.  The Company provides for depreciation andamortization using the straight-line method over the following estimated usefullives:

 
| **Asset**                                | ** ** | **Estimated Useful Life** | ** ** |
|------------------------------------------|------------|---------------------------|------------|
|                                     |       |                      |       |
| Building  and improvements               |       | 5-50 years                |       |
| Gaming  equipment                        |       | 4-12 years                |       |
| Furniture,  fixtures and other equipment |       | 4-12 years                |       |

 

***Preopening Costs***** **- Preopening costs are expensed as incurredpursuant to AICPA Statement of Position (“SOP”) 98-5, “Reporting on the Costsof Start-up Activities.”

 

***Goodwill ***- Goodwillrepresents the excess of the cost of the Company’s Czech subsidiaries over thefair value of their net assets at the date of acquisition, which consists ofonly the Ceska and Rozvadov casinos. Under Statement of Financial Accounting Standards (“SFAS”) No. 142,goodwill is no longer subject to amortization over its estimated useful life;rather, goodwill is subject to at least an annual assessment for impairment,applying a fair-value based test.  Theimpairment assessment requires the Company to compare the fair value of itsCzech Republic “reporting unit,” which is comprised of its Ceska, and Rozvadovcasinos and the site of Route 59, and the Company’s reporting unit as definedunder SFAS No. 142, to its carrying value (the net equity of the Company)to determine whether there is an indication that an impairment exists.  The fair value of the Czech Republicreporting unit is determined through a combination of recent appraisals of theCompany’s real property and a multiple of earnings before interest, taxes,depreciation and amortization (“EBITDA”), which was based on the Company’sexperience and data from independent, third parties.  As required by SFAS No. 142, the Companyperformed the periodic fair-value based testing of the carrying value ofgoodwill related to its Czech Republic reporting unit, at September 30,2008, and determined that goodwill was not impaired.  There were no indicators of impairmentpresent during the fourth quarter of 2008, therefore TWC determined that therewas no impairment of goodwill at December 31, 2008.

 

***ComprehensiveIncome ***- The Company complies with SFAS No. 130,“Reporting Comprehensive Income.”  SFAS No. 130establishes rules for reporting and display of comprehensive income (loss)and 

 

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its components.  SFAS No. 130 requires the Company’schange in the foreign currency translation adjustments to be included in othercomprehensive income (loss).

 

***ForeignCurrency Translation* **- TheCompany complies with SFAS No. 52, “Foreign Currency Translation,” whichstates that for foreign subsidiaries whose functional currency is the localforeign currency, balance sheet accounts and cash flows are translated atexchange rates in effect at the end of the year and resulting translation adjustmentsare included in “accumulated other comprehensive income.”  Statement of income accounts are translatedby applying monthly averages of daily exchange rates on the respective monthlylocal statement of operations accounts for the year.

 

The impact offoreign currency translation on goodwill is presented below:

 

 

 
| ** **                                                                                            | ** ** | **Applicable**                | ** ** | ** **   | ** ** | ** ** | ** ** |
|-------------------------------------------------------------------------------------------------------|------------|-------------------------------|------------|--------------|------------|------------|------------|
| ** **                                                                                            | ** ** | **Foreign Exchange**          | ** ** | ** **   | ** ** | ** ** | ** ** |
| **As of December 31, 2008 (in thousands, except FX)**                                            | ** ** | **Rate (“FX”) (2)** | ** ** | **Goodwill** | ** ** | **Method** | ** ** |
|                                                                                                  |       |                          |       |         |       |       |       |   |   |
| Residual  balance, as of January 1, 2003 (in USD) (1)                                            |       |                          |       | USD          |       | $          | 3,579      |   | (A) |   |
|                                                                                                  |       |                          |       |         |       |       |       |   |   |
| USD  residual balance (A), translated at June 30, 1998 (date of acquisition),  at FX rate of:    |       | 33.8830                       |       | CZK          |       | 121,267    |       |   |   |
|                                                                                                  |       |                          |       |         |       |       |       |   |   |
| 2003  CZK balance, translated to USD, at December 31, 2008 at FX of:                             |       | 18.8606                       |       | USD          |       | 6,430      |       | (B) |   |
|                                                                                                  |       |                          |       |         |       |       |       |   |   |
| **Net increase (step-up) to Goodwill (adjustment  made to Translation Adjustment in consolidation):** |       |                          |       |         |       | $          | 2,851      |   | (B-A) |   |
|                                                                                                  |       |                          |       |         |       |       |       |   |   |
| **Increase to Goodwill is booked as follows:**                                                        | ** ** | ** **                    | ** ** | ** **   | ** ** | ** ** | ** ** | ** ** | ** ** |
| Step-up  for the year ended December 31, 2003 at avg. FX of                                      |       | 28.2170                       |       | USD          |       | $          | 1,080      |   |   |   |
| Step-up  for the year ended December 31, 2004 at avg. FX of                                      |       | 25.7251                       |       | USD          |       | 765        |       |   |   |
| (Step-down)  for the year ended December 31, 2005 at avg. FX of                                  |       | 23.9905                       |       | USD          |       | (482       | )          |   |   |
| Step-up  for the year ended December 31, 2006 at avg. FX of                                      |       | 22.6253                       |       | USD          |       | 873        |       |   |   |
| Step-up  for the year ended December 31, 2007 at avg. FX of                                      |       | 20.3285                       |       | USD          |       | 881        |       |   |   |
| (Step-down)  for the year ended December 31, 2008 at avg. FX of                                  |       | 17.1012                       |       | USD          |       | (266       | )          |   |   |
|                                                                                                  |       |                          |       |         |       | $          | 2,851      |   |   |   |

----

(1)                          Goodwill wasamortized over 15 years until the Company started to comply with SFAS No. 142,since January 1, 2002. This balance represents the remaining, unamortizedgoodwill, after an impairment charge taken prior to January 1, 2003.

(2)                          FX (interbank)rates taken from Oanda.com.

 

***Earnings Per Common Share***** **- The Company complies with SFAS No. 128, “Earningsper Share,” which states that basic earnings per common share are computed bydividing net income by the weighted average number of common shares outstandingduring the period.  Diluted earnings percommon share incorporate the dilutive effect of common stock equivalents on anaverage basis during the period.  TheCompany’s common stock equivalents currently include only stock options.  The Company includes the equivalent of only in-the-money,exercisable options, net of respective exercise costs into the computation ofdiluted shares.  Unexercised stockoptions to purchase shares of Common Stock as of December 31, 2008 wereapproximately 429,065 and unexercised warrants and options as of December 31,2007 were 430,517.

 

***Income Taxes***** ****-**** **The Company complies with SFAS No. 109, “Accounting for IncomeTaxes,” which requires an asset and liability approach to financial accountingand reporting for income taxes.  Deferredincome tax assets and liabilities are computed for differences between thefinancial statement and the tax bases of assets and liabilities that willresult in future taxable or deductible amounts, based on enacted tax laws andrates applicable to the periods in which the differences are expected to affecttaxable income.  Valuation allowances areestablished, when necessary, to reduce deferred income tax assets to the amountexpected to be realized.  In July 2006, the FinancialAccounting Standards Board issued Interpretation No. 48, “Accounting forUncertainty in Income Taxes” (FIN 48). FIN 48 creates a single accounting and disclosure model for uncertaintax positions, provides guidance on the minimum threshold that a taxuncertainty is required to meet 

 

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before it can berecognized in the financial statements and applies to all tax positions takenby a company, both those deemed to be routine as well as those for which theremay be a high degree of uncertainty.

 

FIN 48 establishes atwo-step approach for evaluating tax positions. The first step, recognition, occurs when a company concludes (basedsolely on the technical aspects of the tax matter) that a tax position is morelikely than not to be sustained on examination by a taxing authority.  The second step, measurement, is onlyconsidered after step one has been satisfied and measures any tax benefit atthe largest amount that is deemed more likely than not to be realized uponultimate settlement of the uncertainty. Tax positions that fail to qualify for initial recognition arerecognized in the first subsequent interim period that they meet the morelikely than not standard, when they are resolved through negotiation orlitigation with the taxing authority or upon the expiration of the statute oflimitations.  Derecognition of a taxposition previously recognized would occur when a company subsequentlyconcludes that a tax position no longer meets the more likely than notthreshold of being sustained.  FIN 48also significantly expands the financial statement disclosure requirementsrelating to uncertain tax positions. FIN 48 is effective for fiscal yearsbeginning after December 15, 2006.  **The adoption of theprovisions of FIN 48 did not have a material impact on the Company’s financialposition, results of operations and cash flows. During the year ended December 31, 2008, the Company recognized noadjustments for uncertain tax provisions.**

 

***Revenue Recognition*****-**** **The Companycomplies with the SEC’s Staff Accounting Bulletin (“SAB”) No. 101, “RevenueRecognition in Financial Statements, as amended by SAB 104.”  Casino revenue is defined as the net win fromgaming activities, which is the difference between gaming wagers and the amountpaid out to patrons.  Revenues generatedfrom ancillary services, including sales of food, beverage, cigarettes, andcasino logo merchandise are recognized at the time the related services areperformed and represented, in the aggregate, less than three percent of totalrevenues for the years ended December 31, 2008 and 2007.

 

***Promotional Allowances***** ****-**** **Promotionalallowances primarily consist of food and beverages furnished gratuitously tocustomers.  For the years ended December 31,2008 and 2007, revenues do not include the retail amount of food and beverageof $3,561 and $3,234, respectively, provided gratuitously to customers.  The cost of these items of $1,522 and $1,264,respectively, is included in cost of revenues.

 

***External Advertising*********-****** The Company complies with the accounting andreporting requirements of the AICPA Statement of Position (SOP) 93-7, “Reportingon Advertising Costs.”  Externaladvertising expenses are charged to operations as incurred and were $1,234 and$1,055 for the years ended December 31, 2008 and 2007, respectively.

 

***Fair Value of Financial Instruments***** ****-**** **The fair valuesof the Company’s assets and liabilities that qualify as financial instrumentsunder SFAS No. 107, “Disclosures about Fair Value of FinancialInstruments,” approximate their carrying amounts presented in the accompanyingconsolidated balance sheets at December 31, 2008 and 2007.

 

***Use of Estimates***** ****-**** **The preparationof consolidated financial statements in conformity with accounting principlesgenerally accepted in the United States of America requires the Company’smanagement to make estimates and assumptions that affect the reported amountsof assets and liabilities and disclosure of contingent assets and liabilitiesat the date of the consolidated financial statements, as well as the reportedamounts of revenues and expenses during the reporting period.  Actual results could differ from thoseestimates.

 

***Long-Lived Assets***** ****-**** **The Companyadheres to SFAS No. 144, “Accounting for the Impairment on Disposal ofLong-Lived Assets” and periodically reviews the carrying value of itslong-lived assets in 

 

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relationto historical results, as well as management’s best estimate of future trends,events and overall business climate.  Ifsuch reviews indicate that the carrying value of such assets may not berecoverable, the Company would then estimate the future cash flows(undiscounted and without interest charges). If such future cash flows are insufficient to recover the carryingamount of the assets, then impairment is triggered and the carrying value ofany impaired assets would then be reduced to fair value.

 

***Stock-based Compensation*****-** TheCompany complies with SFAS No. 123R, “Share-Based Payment,” issued inDecember 2004.  SFAS No. 123Ris a revision of SFAS No. 123, “Accounting for Stock-Based Compensation,”and supersedes APB Opinion No. 25 (“APB No. 25”). Among other items,SFAS No. 123R eliminates the use of APB No. 25 and the intrinsicvalue method of accounting, and requires companies to recognize the cost ofemployee services received in exchange for awards of equity instruments, basedon the fair value of those awards as of the vested date in the financialstatements. The effective date of SFAS No. 123R for the Company was thefirst quarter of 2006. SFAS No. 123R permits companies to adopt itsrequirements using either a “modified prospective” method, or a “modifiedretrospective” method. Under the “modified prospective” method, compensationcost is recognized in the financial statements beginning with the effectivedate, based on the requirements of SFAS No. 123R for all share-basedpayments vested after that date, and based on the requirements of SFAS No. 123for all unvested awards granted prior to the effective date of SFAS No. 123R.Under the “modified retrospective” method, the requirements are the same asunder the “modified prospective” method, but also permit entities to restatefinancial statements of previous periods, either for all prior periodspresented or to the beginning of the fiscal year in which the statement isadopted, based on previous pro forma disclosures made in accordance with SFAS No. 123.Accordingly, the Company has adopted the modified prospective method ofrecognition, and began applying the valuation and other criteria to stockoptions granted beginning January 1, 2006. The Company is recognizing the expense for the unvested portion ofpreviously issued grants based on the valuation and attribution methods usedpreviously to calculate the pro forma disclosures.  The Company did not recognize the expense foremployee stock options prior to January 1, 2006.

 

The Company currentlyutilizes the Black-Scholes option pricing model to measure the fair value ofstock options granted to certain key employees. While SFAS No. 123Rpermits entities to continue to use such a model, it also permits the use of a “lattice”model. The Company expects to continue using the Black-Scholes option pricingmodel in connection with its adoption of SFAS No. 123R to measure the fairvalue of stock options granted.

 

In 2008 and 2007, the Company expensedapproximately $149 and $144, respectively for granted options to certain keymanagement employees, which was recognized in its selling, general andadministrative expenses in the consolidated statements of income.

 

***Recently Adopted Accounti******ngPronouncements*****-******In September 2006, the FinancialAccounting Standards Board (“FASB”) issued SFAS No. 157, “Fair ValueMeasurements” (“SFAS 157”). This Standard defines fair value, establishes aframework for measuring fair value, and expands disclosures about fair valuemeasurements. It applies to other accounting pronouncements where the FASBrequires or permits fair value measurements but does not require any new fairvalue measurements. In February 2008, FASB issued FASB Staff Position (“FSP”)No. 157-2, Effective Date of FASB Statement No. 157, which delayedthe effective date of SFAS 157 for certain non-financial assets andnon-financial liabilities to fiscal years beginning after November 15,2008, and interim periods within those fiscal years. The Company adopted SFAS157 for financial assets and liabilities on January 1, 2008. It did nothave any impact on the Company’s results of operations or financial positionand did not result in any additional disclosures. The Company is in the processof evaluating the effect, if any, the adoption of FSP No. 157-2 will haveon its consolidated results of operations or financial position.  The Company does not expect the adoption ofFSP No. 157-2 to have a material effect on its consolidated financialstatements.  On October 10, 2008,the FASB issued FSP FAS No. 157-3, “Fair Value Measurements” (FSP FAS157-3), which clarifies the application of SFAS No. 157 in an inactivemarket and provides an example to demonstrate how the fair value of a financialasset is determined when the market for that financial asset is inactive. FSP

 

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FAS 157-3 was effectiveupon issuance, including prior periods for which financial statements had notbeen issued.  The adoption of thisstandard as of December 31, 2008 did not have a material impact on theCompany’s results of operations, cash flows or financial positions.

 

In February 2007,the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assetsand Financial Liabilities-Including an amendment of FASB Statement No. 155”(“SFAS 159”). This statement permits entities to choose to measure selectedassets and liabilities at fair value. The Company adopted SFAS 159 on January 1,2008 resulting in no material impact to the Company’s consolidated financialstatements.

 

***New Accounti******ng Pronouncements*****-** In December 2007, the FASB issuedSFAS No. 141 (revised 2007), “Business Combinations” (“SFAS 141R”).  SFAS 141R establishes principles andrequirements for how the acquirer in a business combination recognizes andmeasures in its financial statements the fair value of identifiable assetsacquired, the liabilities assumed and any noncontrolling interest in theacquiree at the acquisition date.  SFAS141R determines what information to disclose to enable users of the financialstatements to evaluate the nature and financial effects of the businesscombination.  SFAS 141R is effective forfiscal years beginning after December 15, 2008. The Company is currentlyevaluating the impact of adopting SFAS 141R on its consolidated resultsof operations and financial condition and plans to adopt it as required in thefirst quarter of fiscal 2009.

 

In December 2007,the FASB issued SFAS No. 160, “Noncontrolling Interests in ConsolidatedFinancial Statements” (“SFAS 160”), an amendment of Accounting ResearchBulletin No. 51, “Consolidated Financial Statements” (“ARB 51”).  SFAS 160 establishes accounting and reportingstandards for the noncontrolling interest in a subsidiary and for thedeconsolidation of a subsidiary. Minority interests will be recharacterized asnoncontrolling interests and will be reported as a component of equity separatefrom the parent’s equity, and purchases or sales of equity interests that donot result in a change in control will be accounted for as equity transactions.In addition, net income attributable to the noncontrolling interest will beincluded in consolidated net income on the face of the income statement andupon a loss of control, the interest sold, as well as any interest retained,will be recorded at fair value with any gain or loss recognized in earnings.This pronouncement is effective for fiscal years beginning after December 15,2008. TWC is currently evaluating the impact of adopting SFAS 160 on itsconsolidated results of operations and financial condition and plans to adoptit as required in the first quarter of fiscal 2009.

 

In March 2008, the FASB issued SFAS No. 161,“Disclosures about Derivative Instruments and Hedging Activities — an amendmentto FASB Statement No. 133.” SFAS No. 161 is intended to improvefinancial standards for derivative instruments and hedging activities byrequiring enhanced disclosures to enable investors to better understand theireffects on an entity’s financial position, financial performance, and cashflows. Entities are required to provide enhanced disclosures about: (a) howand why an entity uses derivative instruments; (b) how derivativeinstruments and related hedged items are accounted for under Statement 133 andits related interpretations; and (c) how derivative instruments andrelated hedged items affect an entity’s financial position, financialperformance, and cash flows. It is effective for financial statements issuedfor fiscal years beginning after November 15, 2008, with early adoptionencouraged. The adoption of this statement, which is expected to occur in thefirst quarter of 2009, is not expected to have a material effect on the Company’sconsolidated financial statements.

 

In May 2008, the FASB issued SFASNo. 162, “The Hierarchy of Generally Accepted Accounting Principles.” SFAS No.162 identifies the sources of accounting principles and the framework forselecting the principles to be used in the preparation of financial statementsof nongovernmental entities that are presented in conformity with generallyaccepted accounting principles in the United States. It is effective 60 daysfollowing the SEC’s approval of the Public Company Accounting Oversight Boardamendments to AU Section 411, “The Meaning of Present Fairly in Conformity WithGenerally Accepted Accounting Principles.” The adoption of this statement isnot expected to have a material effect on the Company’s consolidated financialstatements.

 

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In May 2008, theFASB issued SFAS No. 163, “Accounting for Financial Guarantee InsuranceContracts — An interpretation of FASB Statement No. 60.” SFAS No. 163requires that an insurance enterprise recognize a claim liability prior to anevent of default when there is evidence that credit deterioration has occurredin an insured financial obligation. It also clarifies how Statement No. 60applies to financial guarantee insurance contracts, including the recognitionand measurement to be used to account for premium revenue and claimliabilities, and requires expanded disclosures about financial guaranteeinsurance contracts. It is effective for financial statements issued for fiscalyears beginning after December 15, 2008, except for some disclosures aboutthe insurance enterprise’s risk-management activities. SFAS No. 163requires that disclosures about the risk-management activities of the insuranceenterprise be effective for the first period beginning after issuance. Exceptfor those disclosures, earlier application is not permitted. The adoption ofthis statement is not expected to have a material effect on the Company’sconsolidated financial statements.

 

**NOTE 3** - **Property and Equipment**

 

At December 31, 2008 and 2007, property and equipment consisted ofthe following:

 
| ** **                                      | ** ** | **2008** | ** ** | **2007** | ** ** |
|-------------------------------------------------|------------|----------|------------|----------|------------|
| Land                                            |       | $        | 3,283      |     | $          | 3,842 |   |
| Building  and improvements                      |       | 31,486   |       | 17,752   |       |
| Furniture,  fixtures and other equipment        |       | 8,650    |       | 8,816    |       |
|                                            |       | 43,419   |       | 30,410   |       |
| Less  accumulated depreciation and amortization |       | (7,580   | )          | (6,663   | )          |
|                                            |       | $        | 35,839     |     | $          | 23,747 |   |

 

In 2008, the Company capitalized allconstruction-related costs associated with its Hotel Savannah.

 

Depreciation and amortization expense for the yearsended December 31, 2008 and 2007 were approximately $1,428 and $1,192,respectively.  In 2008, the Companyreceived $187 for the sale of 22 non-performing slot machines, and incurred anaccounting loss of $113 for those same assets.

 

**NOTE 4** - **Long-Term Debt**

 

AtDecember 31, 2008 and 2007, long-term debt consisted of the following:

 
| ** **                     | ** ** | **2008** | ** ** | **2007** | ** ** |
|--------------------------------|------------|----------|------------|----------|------------|
| Replacement  Notes (a)         |       | $        | 1,550      |     | $          | 1,550 |   |
| Revolving  credit facility (b) |       | 7,953    |       | 5,111    |       |
|                           |       | $        | 9,503      |     | $          | 6,661 |   |

 

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(a)           The unsecured ReplacementNotes, issued in June 2003, have seven-year terms and have tiered, simpleinterest rates: 6% for the first three years, 9.3% for the fourth year and 10%for the fifth through the seventh year. For the first three years of the term, one half of the accrued annualinterest was payable, beginning on July 26, 2004, with the accruedinterest balance payable at maturity. For the last four years of the term, all annual interest accrued will bepayable in full on June 26 of each of these last four years.  The Notes mature on June 26, 2010.

 

(b)          On July 23, 2007, theCompany established a 24-month, secured, revolving credit facility (CZK150,000, or approximately $7,953), that will be used for operations and generalcorporate purposes, including business development.  The credit facility, which is secured by theCompany’s Route 55 casino building and related land, has been made availablethrough Commerzbank Aktiengesellschaft, pobocka Praha, requires quarterlytesting and compliance with certain financial covenants, following the Company’sU.S. regulatory filings.  The credit

 

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facility also includes an option, exercisable by the Company two monthsprior to full-term maturity, to extend the term for an additional 12 months,with all other provisions, including the rate of interest, remainingconstant.  The interest, in conjunctionwith each requested drawdown terms of either 1-month, 3-months, or 6-months, iscalculated using the corresponding PRIBOR, plus 400 basis points, based on a360-day calendar year.  As of December 31,2008, the Company had drawn the limit of CZK 150,000, or approximately $7,953,which was partially used to pay off a previous loan with GE Capital Banka.s..  The weighted average of theinterest rates on the drawn amounts is approximately 8.15%.  On February 9, 2009, the Companyexercised its renewal option to extend the Commerzbank credit facility to July 23,2010, pledging, as additional collateral, the Route 59 casino’s originalbuilding and its underlying land, excluding the building extension.  All other contract terms remained the same.

 

Principalpayments due on long-term debt are as follows:

 
| **Year ending December 31,** |
|-----------------------------------|
| 2009                              |   | $ | — |   |
| 2010                              |   | 9,503 |   |
|                              |   | $ | 9,503 |   |

 

**NOTE 5**- **Accrued Expenses and Other Current Liabilities**

 

AtDecember 31, 2008 and 2007, accrued expenses and other current liabilitiesconsisted of the following:

 
| ** **                         | ** ** | **2008** | ** ** | **2007** | ** ** |
|------------------------------------|------------|----------|------------|----------|------------|
| Accrued  payroll and related costs |       | $        | 975        |     | $          | 928 |   |
| Operational accruals               |       | 486      |       | 367      |       |
|                               |       | $        | 1,461      |     | $          | 1,295 |   |

 

**NOTE 6 -****Commitments and Contingencies**

 

***Lease Obligations*********-** The Company is obligated under severaloperating leases expiring through 2010.  Futureaggregate minimum annual rental payments under all of these leases for thelesser of three years or until their expiration dates are as follows:

 
| **Year ending December 31,** |
|-----------------------------------|
| 2009                              |   | $ | 100 |   |
| 2010                              |   | $ | 50 |   |

 

Rentexpense under these operating leases was approximately $100 and $97 for theyears ended December 31, 2008 and 2007, respectively.

 

TheCompany is also obligated under certain five-year, slot equipment operatingleases, expiring in 2011 and 2012, which include a monthly fixed rental fee perslot machine, and an option for replacement to different/newer machines duringthe term of the lease.  In 2008, theCompany’s slot lease expenses were approximately $1,777 versus $1,873 in 2007,as a result of a reduction in the number of leased slot machines in 2008.

 

***Employment Agreements*******-** The Company’s July 1,2005 employment agreement with its Chief Executive Officer (“CEO”), Mr. RamiS. Ramadan, absent the intervention of either party, renewed automatically atthe end of 2008 for another year ending December 31, 2009.  The agreement provides

 

 

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forannual compensation, plus participation in the Company’s benefits programs andequity incentive plans.  As of December 31,2008, $450 of annual compensation, payable in 2009, remains under saidemployment agreement, excluding any bonus awards that may be granted in 2009.

 

Pursuant to the renewal of the employment agreementwith Mr. Ramadan in July 2005, he received a grant of seven-yearoptions to purchase an aggregate total of 175,000 shares of the Company’sCommon Stock in allotments of 35,000 shares per annum over a four-year vestingperiod.  These options are exercisable atprices, depending on point in time, ranging from $2.80 per share on July 1,2005 to $4.11 per share on January 1, 2012.  Also pursuant to this July 2005employment agreement, upon reaching designated earnings per share targets, Mr. Ramadanwill be granted 75,000 restricted shares of the Company’s Common Stock thatwill vest in 25,000 allotments.  None ofthe restricted shares have been vested to date.

 

On February 4, 2007, Mr. Ramadan was grantedseven-year options to purchase 50,000 shares of Common Stock, of which optionsto purchase 12,500 shares vested immediately, 12,500 vested on February 4,2008, and the balance will vest on February 4, 2009.  The exercise price of these options was setat $3.75 per share, which represent a price greater than the closing price onthe date of grant.

 

Further, on October 23, 2007, pursuant to theCompany’s 2004 Equity Incentive Plan, Mr. Ramadan was granted seven-yearoptions to purchase 125,000 shares of Common Stock, with options to purchase25,000 shares to be vested immediately, and the balance to be vested in fourequal parts, over a four-year vesting period, on the anniversary of the date ofgrant.  The exercise price of theseoptions is set at $4.85 per share, the closing stock price on October 23,2007, and will escalate at 4.2% per annum.

 

On March 5, 2008, the Company’s CompensationCommittee recommended, and the Board of Directors approved, an increase to Mr. Ramadan’sannual salary from $400 to $450, effective April 1, 2008.

 

***401 (k) and Profit Sharing Plan*****-**The Company maintains a contributory 401(k) plan and a profit sharingplan.  These plans are for the benefit ofall eligible corporate employees, who may have up to 15% of their salarywithheld, not to exceed the maximum federally allowed amount.  The Company makes a voluntaryemployer-matching contribution of 60 cents for each employee dollarcontributed, which totaled $40 in 2008 and $37 in 2007.

 

***Taxing Jurisdiction*** **-** The Czech Republic currentlyhas a number of laws related to various taxes imposed by governmentalauthorities.  Applicable taxes includegaming tax, VAT, charity tax, and payroll (social) taxes.  Tax declarations, together with other legalcompliance areas (for example, customs and currency control matters) aresubject to review and investigation by a number of authorities, which areenabled by law to impose fines, penalties and interest charges, create taxrisks in the Czech Republic.  Managementbelieves that it has adequately provided for its Czech tax liabilities.

 

**NOTE 7 -****Risks and Uncertainties**

 

***Regulationand Licensing*****-**The Company’s operations are subject toregulation by each jurisdiction in which it operates or plans to operate.  Each of the Company’s officers may be subjectto strict scrutiny and approval from a gaming commission or another regulatorybody of each jurisdiction in which the Company may conduct gaming operations.

 

 

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In1998, the Czech Republic’s House of Deputies passed an amendment to the gaminglaw, which restricted foreign ownership of casino licenses. In response, theCompany restructured its subsidiaries and Czech legal entities to comply withthe amendment and was subsequently granted 10-year gaming licenses, which, in October 2008,were renewed by the government of the Czech Republic for another 10-year term,expiring in December 2018.  Therecan be no assurance that the authorities in the Czech Republic will not amendthe gaming law as it pertains to foreign ownership of casino licenses.  In the event the gaming laws are amended inthe future, it may have a material adverse effect on the Company’s futureprofitability and operations. Further, there has been increased competition inthe areas where the Company operates because local municipalities no longerhave control over the issuance of casino licenses, thereby effectivelyeliminating the municipal exclusivity that the Company had until December 1998.

 

***Foreign Activities*******-** The Company’s operations are entirely outside ofthe United States.  Operatinginternationally involves additional risks relating to such things as currencyexchange rates, different legal and regulatory environments, political andeconomic risks relating to the stability or predictability of foreigngovernments, differences in the manner in which different cultures conductbusiness, difficulties in staffing and managing foreign operations, differencesin financial reporting, operating difficulties, different types of criminalthreats, and other factors.  Theoccurrence of any of these risks, if severe enough, could have a materialadverse effect on the consolidated financial position, results of operationsand cash flows of the Company.

 

***Cash*********-** Cash consists of cash inbanks and on hand.  The Company maintainsits bank accounts at several financial institutions, which, at times, mayexceed Federal Deposit Insurance Corporation (“FDIC”) insured limits.  In addition, the FDIC does not insure theCompany’s foreign cash, which totaled approximately $3,288 and $4,557 at December 31,2008 and 2007, respectively.  The Companyhas not incurred any losses in such accounts and believes it is not exposed toany significant credit risk on cash.

 

**NOTE 8 -****Stockholders’ Equity**

 

In January 2008, theCompany issued 5,754 shares of our Common Stock, pursuant to warrants exercisedwith a strike price of $1.00, to U.S. Bancorp. The transaction was reflected as an addition to paid-in capital.  Further, in July 2008, TWC issued 12,500shares of our Common Stock, as compensation pursuant to a consulting agreement,to Alliance Advisors, LLC. The partial cost of issuance was reflected as anapproximate $36 reduction to additional paid-in capital.  Additionally, $8 of residual costs of the$3,500 Capital Raise was also reflected as a reduction of paid-in capital.  For the years ended December 31, 2008and 2007, the Company recognized stock-based compensation expenses of $149 and$144, respectively, for the vesting of granted stock options.  Further, the Company also recognized 16additional outstanding shares of its Common Stock for the retirement offractional shares, in connection with TWC’s 1-for-100 reverse stock splitcompleted in April 2004.

 

In August 2007, theCompany completed the private placement of 1,000,000 shares of its Common Stockwith several “accredited investors,” as defined in Rule 501(a) ofRegulation D promulgated under the Securities Act of 1933, for an aggregatepurchase price of $3,500 or $3.50 per share, the then listed closing price ofthe Company’s Common Stock.  Associatedcosts of the $3,500 Capital Raise, which included finder’s fees, and legal andaccounting fees, totaled approximately $216 and have been reflected as areduction of additional paid-in capital. The gross proceeds from the transaction were used primarily to financethe initial of the phase construction of the Hotel Savannah and the spa andwellness center adjacent to our Route 59 Casino.

 

 

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**NOTE 9 -****Other Assets and Other Long-Term Liabilities**

 

***Notes Receivables*** – Inconnection with the TWC’s management of the Grand Casino Lav and Nightclub, theCompany extended three EUR loans to Grand Hotel Lav, d.o.o., the owner of theGrand Casino Lav and Nightclub, as follows: (i) a three-year, 4.0% interest per annum loan of €568, orapproximately $801 using 2008 year-end exchange rates, for the purchase ofgaming equipment; (ii) a two-year, non-interest bearing loan of €229, orapproximately $322 using 2008 year-end exchange rates, for preopening costsrelated to the casino and nightclub; and (iii) a one-year (renewable),non-interest bearing loan of €170, or approximately $240 using 2008 year-endexchange rates, for working capital.  TWChas granted the owners of Grand Hotel Lav, d.o.o., a waiver to defer repaymentsuntil after the completion of the casino business’s high season, in the summermonths.  In 2008, TWC has received anaggregate of €105, or approximately $160, in principal and interestpayments.  Management believes the loansare fully collectible.

 

***Restricted Deposits*** -  Restricted depositsaggregated CZK 26,000 and CZK 24,000, relating to Czech license bondrequirements, for year 2008 and 2007, respectively.  Using respective year-end exchange rates,these deposits have been translated to $1,379 and $1,436 at December 31,2008 and 2007, respectively.

 

***Other Long-term Liabilities*** - At December 31, 2008and 2007, other long-term liabilities consisted of accrued interest on theReplacement Notes, payable in June 2010.

 

**NOTE 10 -****Income Taxes**

 

Inthe Czech Republic, gaming income is not subject to corporate income tax.  In lieu of income taxes, gaming income issubject to other taxes in the Czech Republic, including gaming and charitytaxes, which are primarily based on percentages of gaming revenues.  Foreign net operating loss carry-forwards(disclosed below) were derived from non-gaming activities and can only beapplied against non-gaming activities. However, for the years ended December 31, 2008 and 2007, theCompany did incurred approximately $31 and $84 of foreign income taxes,respectively for non-gaming revenues earned.

 

AtDecember 31, 2008, the Company had U.S. and foreign net operating losscarry forwards (“NOL’s”) of approximately $31,421 and $3,814, respectively,available to offset certain future income taxes payable.  However, based on limited analysis, a sizablewarrant exercise in February 2001 or earlier events may have triggeredsignificant limitations of preexisting U.S. NOL’s, pursuant to Internal RevenueCode Section 382, to the extent that substantially all of the Company’sexisting U.S. NOL’s prior to February 2001, aggregating approximately$13,497, may be significantly limited. The U.S. NOL’s generated subsequent to February 2001, aggregatingapproximately $17,924, resulted in an estimated $8,066 deferred tax asset at December 31,2008 and the foreign NOL resulted in an estimated $915 deferred tax asset at December 31,2008.  A full valuation allowance hasbeen established for these deferred tax assets since its realization isconsidered unlikely.  U.S. NOL’s cannotbe used to offset Czech net income nor can Czech NOL’s be used to offset U.S.net income.

 

 

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TheU.S. NOL’s expire between 2014 and 2018. The foreign NOL’s expire between 2008 and 2012.  During the year ended December 31, 2008,there was an immaterial amount of foreign NOL’s which expired.  The following table presents the U.S. andforeign components of pretax income before income taxes for the years ended December 31,2008 and 2007:

 
| ** ** | ** ** | **2008** | ** ** | **2007** | ** ** |
|------------|------------|----------|------------|----------|------------|
| U.S.       |       | $        | (2,211     | )        | $          | (2,165 | ) |
| Foreign    |       | 5,946    |       | 4,963    |       |
|       |       | $        | 3,735      |     | $          | 2,798 |   |

 

TheCompany’s effective income tax rate differs from the U.S. federal statutoryincome tax rate primarily because gaming income, the Company’s primary revenuesource, is not subject to income tax. Further, the Company’s effective income tax rate differs from the U.S.statutory income tax rate as a result of the Company maintaining a fullvaluation allowance on its NOL’s..

 

**NOTE 12 -****Stock Options and Warrants**

 

***Stock Options Plans***

 

The activity in the Company’s stock option plans is as follows:

 
| ** **                                   | ** ** | **Number of  Options** | ** ** | **Range of  Exercise Price** | ** ** | **Weighted Average  Exercise Price** | ** ** |
|----------------------------------------------|------------|------------------------|------------|------------------------------|------------|--------------------------------------|------------|
| Balance  outstanding, January 1, 2007   |       | 249,735                |       | $                            | 2.00-83.00 |                                 | $          | 3.07 |   |
|                                         |       |                   |       |                         |       |                                 |       |
| Granted  in 2007                             |       | 175,000                |       | 3.75-4.85                    |       | 4.54                                 |       |
| Expired  in 2007                             |       | (5,600                 | )          | 2.50-24.00                   |       | 3.88                                 |       |
|                                         |       |                   |       |                         |       |                                 |       |
| Balance  outstanding, December 31, 2007 |       | 419,135                |       | $                            | 2.00-83.00 |                                 | $          | 2.41 |   |
|                                         |       |                   |       |                         |       |                                 |       |
| Granted  in 2008                             |       | 10,000                 |       | 4.10                         |       | 4.10                                 |       |
| Expired  in 2008                             |       | (70                    | )          | 24.00-46.00                  |       | 32.29                                |       |
|                                         |       |                   |       |                         |       |                                 |
| Balance  outstanding, December 31, 2008 |       | 429,065                |       | $                            | 2.00-83.00 |                                 | $          | 3.75 |   |
|                                         |       |                   |       |                         |       |                                 |       |
| Exercisable,  December 31, 2008         |       | 286,565                |       | $                            | 2.00-83.00 |                                 | $          | 3.56 |   |

 

 

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In each instance, the option exercise price per share was equal to orabove the market value of the underlying stock on the date of grant.  Options generally expire between five and tenyears after the date of grant or earlier upon termination, as defined in theplans.

 

Thefair value of each option grant is estimated on the date of grant using theBlack-Scholes option pricing model with the below assumptions related torisk-free interest rates, expected dividend yield, expected lives and expectedstock price volatility.

 
| ** **                     | ** ** | **Option Pricing Assumptions** | ** ** |
|--------------------------------|------------|--------------------------------|------------|
| **Grant Year**                 | ** ** | **2008**                       | ** ** | **2007** | ** ** |
| ** **                     | ** ** | ** **                     | ** ** | ** ** | ** ** |
|  Stock Price Volatility   |       | 47%                            |       | 41%-51% |   |
|  Risk-Free Interest Rates |       | 3.31%                          |       | 4.37% to 4.75% |   |
|  Expected Life (in years) |       | 6.9 to 7.0                     |       | 6.9 |   |

 

Additionalinformation about the Company’s outstanding stock options at December 31,2008 is as follows:

 
| ** **          | ** ** | **Options Outstanding** | ** ** |
|---------------------|------------|-------------------------|------------|
| ** **          | ** ** | ** **              | ** ** | **Weighted** | ** ** | ** ** | ** ** |
| ** **          | ** ** | ** **              | ** ** | **Average** | ** ** | ** ** | ** ** |
| ** **          | ** ** | ** **              | ** ** | **Remaining** | ** ** | **Weighted** | ** ** |
| ** **          | ** ** | ** **              | ** ** | **Contractual** | ** ** | **Average** | ** ** |
| **Range of**        | ** ** | **Number of**           | ** ** | **Life** | ** ** | **Exercise** | ** ** |
| **Exercise Prices** | ** ** | **Shares**              | ** ** | **(in Years)** | ** ** | **Price** | ** ** |
|                |       |                    |       |   |   |   |   |
| $0.01  to $2.50     |       | 60,150                  |       | 4.59 |   | $ | 2.50 |   |
| $2.51  to $3.50     |       | 178,425                 |       | 3.53 |   | $ | 3.15 |   |
| $3.51  to $4.50     |       | 60,525                  |       | 5.25 |   | $ | 3.81 |   |
| $4.51  to $5.00     |       | 126,575                 |       | 5.78 |   | $ | 4.85 |   |
| $5.01  to $10.00    |       | 1,925                   |       | 4.34 |   | $ | 6.44 |   |
| $10.01  to $25.00   |       | 925                     |       | 2.96 |   | $ | 16.62 |   |
| $25.01  to $50.00   |       | 380                     |       | 1.00 |   | $ | 36.39 |   |
| $50.01  to $75.00   |       | 100                     |       | 0.94 |   | $ | 51.00 |   |
| $83.00              |       | 60                      |       | 0.75 |   | $ | 83.00 |   |
|                |       |                    |       |   |   |   |   |
|                |       | 429,065                 |       | 4.59 |   | $ | 3.75 |   |

 

***Warrants***

 

Exceptfor the 5,754 warrants exercised on January 25, 2008, all outstanding andexercisable warrants expired on March 31, 2008. (See also “Note 8 —Stockholders’ Equity” above)

 

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**NOTE 13 -****Compensation Plans**

 

***2004 Equity Incentive Plan***

 

InMay 2004, TWC’s Board of Directors (the “Board”) unanimously adopted the2004 Equity Incentive Plan (“2004 Equity Plan”), which was subsequentlyapproved by the shareholders of the Company at its Annual Meeting held in June 2004.

 

The2004 Equity Plan provides that certain awards made under the plan may beeligible for designation as “qualified performance-based compensation” whichmay be exempt from the $1,000 deduction limit imposed on publicly-heldcorporations by Section 162(m) of the Internal Revenue Code.  The type of awards which may be granted,under the 2004 Equity Plan, by the Compensation Committee of the Board, in itsdiscretion from time to time, include stock options, stock appreciation rights,restricted stock and restricted stock units, other stock-based awards andperformance awards.

 

InJune 2005, the shareholders of the Company, at its Annual Meeting,approved amendments providing the Committee with the discretion to grant to anyparticipant annually up to 250,000 shares of Common Stock and to determinewhether to include a one-year vesting requirement for any future grants awardedunder the 2004 Equity Plan to any of the Company’s employees.

 

Further,the shareholders of the Company at its Annual Meetings, held in April 2006and May 2007, approved amendments to the 2004 Equity Plan to increase theauthorized shares that may be issued under its provisions to a total of 627,270shares, of which 127,270 remained available for issuance as of December 31,2008.  Additionally, the amendmentsprovide that option awards will be available for grants to the executiveofficers and non-employee directors as well as other key employees, except thatnon-employee directors are eligible to receive only awards of non-qualifiedstock options.

 

The2004 Equity Plan also contains the following provisions:  (i) no stock option repricings (withoutthe approval of the Company’s shareholders); (ii) limitations on sharesother than for stock options; (iii) no discounts on stock options: (iv) minimumone year vesting periods for all awards (including stock options); (v) minimumthree year vesting periods for restricted stock and other stock-based awards; (vi) no“evergreen” provisions; and (vii) in no event shall there be grantedduring the term of the 2004 Equity Plan, restricted stock or restricted stockunits, which are not subject to be achievement of a performance target ortargets covering more than an aggregate of 75,000 shares.

 

InNovember 2008, per the recommendation of the Compensation Committee of theBoard, the 2004 Equity Plan was amended and restated in order to conform to Section 409Aof the Internal Revenue Code.

 

***Deferred Compensation Plan***

 

On May 17, 2006, theCompensation Committee of the Board unanimously approved and adopted TWC’sDeferred Compensation Plan (the “Deferred Plan”), which provides certain keyemployees and non-employee directors the opportunity to defer receipt ofspecified portions of their compensation and to have such deferred amountstreated as if invested in the Common Stock of the Company.

 

The Company adopted theDeferred Plan with the intention that it shall at all times be characterized asa “top hat” plan of deferred compensation maintained for a select group ofmanagement, as described under ERISA Sections 201(2), 301(a)(3) and 401(a)(1). The Deferred Plan shall at all 

 

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times satisfy Section 409Aof the Code.  Pursuant to a participant’selection, the unfunded Deferred Plan obligations are payable in the form ofCommon Stock and cash upon the earlier of:  (i) a designated, in-service distribution date which must be aminimum of three (3) years from the year of the first deferral; (ii) separationfrom service; (iii) disability; (iv) change in control; or (v) death.  A participant’s election form must specifywhether the payments will be made by lump sum or by installments, and thenumber of annual installments (with a minimum of two (2) and a maximum offive (5) installments) as may be directed by the participant in his or herelection form.

 

InNovember 2008, per the recommendation of the Compensation Committee of theBoard, the Deferred Plan was amended in order to conform to Section 409Aof the Internal Revenue Code.

 

***2008 Profit Sharing Plan***

 

The 2008 Profit SharingPlan, which supersedes the 2007 Profit Sharing Plan, was approved by theCompensation Committee of the Board on November 18, 2008.  At the same meeting, per itsrecommendation, the Board approved a revision to the 2008 Profit Sharing Planto conform to Section 409A of the Internal Revenue Code.

 

The 2008 Profit SharingPlan permits designated key management employees (“KME”) to share in theprofits of the Company.  The profitsharing pool was calculated based on a graduated scale of the attainment ofconsolidated year-end net income before taxes versus the annual budget and themaximum sum to be distributed from that pool will be determined annually as apercentage of the aggregate of the annual salaries of the KMEs.  Each KME is required, pursuant to the 2008Profit Sharing Plan, to defer 20% of his or her annual profit sharing award, ifattained, into the Deferred Plan.

 

**NOTE 14 -****Commitments andContingencies**

 

The Company may be, fromtime to time, a party to various legal proceedings and administrative actions,all arising from the ordinary course of business. Although it is impossible topredict the outcome of any legal proceeding, the Company believes any liabilitythat may finally be determined with respect to such legal proceedings shouldnot have a material effect on the Company’s consolidated financial position,results of operations or cash flows.

 

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**Item 9. Changes In andDisagreements with Accountants on Accounting and Financial Disclosure.**

 

None.

 

**Item 9A. Controls and Procedures.**

 

Included in this AnnualReport on Form 10-K are certifications of our CEO/CFO, which are requiredin accordance with Rule 13a-14 of the Securities and Exchange Act of 1934as amended (the “Exchange Act”). This section includes information concerningthe controls and controls evaluation referred to in the certifications.

 

**Evaluation of DisclosureControls and Procedures.**

 

We maintain a system of disclosure controls and procedures, as definedin Rule 13a-15(e) of the Exchange Act, which is designed to providereasonable assurance that information, which is required to be disclosed in ourreports filed pursuant to the Exchange Act, is accumulated and communicated tomanagement in a timely manner. At the end of the period covered by this report,we carried out an evaluation, under the supervision and with the participationof our management, including our CEO/CFO, of the effectiveness of the designand operation of our disclosure controls and procedures pursuant to ExchangeAct Rule 13a-15(b). Based upon that evaluation, our CEO/CFO concludedthat, as of the date of such evaluation, our disclosure controls and procedureswere effective in timely alerting him to information related to us that isrequired to be included in our reports filed under the Exchange Act.

 

**Changes in Internal Controlover Financial Reporting*.***

 

During the fourth quarter of 2008, there were no significant changes inour internal control over financial reporting or in other factors that havematerially affected, or are reasonably likely to materially affect, ourinternal control over financial reporting.

 

**Management’s Report onInternal Control over Financial Reporting.**

 

Our management is responsible for establishing and maintaining adequateinternal control over financial reporting. Internal control over financialreporting, as defined in Exchange Act Rule 13a-15(f), is a processdesigned by, or under the supervision of, our principal executive and principalfinancial officer, Mr. Ramadan, and effected by our Board of Directors,management and other personnel, to provide reasonable assurance regarding thereliability of financial reporting and the preparation of financial statementsfor external purposes in accordance with generally accepted accountingprinciples and includes those policies and procedures that:

 

·                                   Pertain to the maintenance of records that inreasonable detail accurately and fairly reflect the transactions anddispositions of our assets;

 

·                                   Provide reasonable assurance that transactionsare recorded as necessary to permit preparation of financial statements inaccordance with generally accepted accounting principles, and that our receiptsand expenditures are being made only in accordance with authorizations of ourmanagement and directors; and

 

·                                   Provide reasonable assurance regardingprevention or timely detection of unauthorized acquisition, use or dispositionof our assets that could have a material effect on the financial statements.

 

Because of its inherent limitations, internal control over financialreporting may not prevent or detect misstatements. Projections of anyevaluation of effectiveness to future periods are subject to the risk thatcontrols may become inadequate because of changes in conditions, or that thedegree of compliance with the policies or procedures may deteriorate. Allinternal control systems, no matter how well designed, have inherentlimitations. Therefore, even those systems determined to be effective canprovide only reasonable assurance with respect to financial statementpreparation and presentation. The scope of management’s assessment of theeffectiveness of internal control over financial reporting includes all of ourCompany’s consolidated subsidiaries.

 

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Our management assessed the effectiveness of our internal control overfinancial reporting as of December 31, 2008. In making this assessment,our management considered the criteria set forth by the Committee of SponsoringOrganizations of the Treadway Commission in “Internal Control-IntegratedFramework.” Based on this assessment, management believes that, as of December 31,2008, our internal control over financial reporting was effective.

 

This annual report does not include an attestation report by ourregistered public accounting firm regarding internal control over financialreporting.  Management’s report was notsubject to attestation by our registered public accounting firm pursuant totemporary rules of the Securities and Exchange Commission that permit usto provide only a management assessment in this annual report.

 

**Item 9B. Other Information.**

 

None.

 

**PART III**

 

**Item 10. Directors, Executive Officers and CorporateGovernance.**

** **

The following table provides information as of March 9, 2009 withrespect to each of our directors and Mr. Rami S. Ramadan, our CEO orprincipal Executive Officer (the “named executive officer”):

 

 
| **Name**                           | ** ** | **Age** | ** ** | **Position in the Company**      | ** ** | **Director Since** |
|------------------------------------|------------|---------|------------|----------------------------------|------------|--------------------|
| Rami S. Ramadan                    |       | 59      |       | CEO, CFO, President and Director |       | 1999               |
| Julio E. Heurtematte, Jr. (1) |       | 73      |       | Director                         |       | 1998               |
| Malcolm M.B. Sterrett (1)          |       | 66      |       | Director, Chairman               |       | 1998               |
| Geoffrey B. Baker (1),(2)          |       | 59      |       | Director                         |       | 1999               |
| Timothy G. Ewing (1)               |       | 48      |       | Director                         |       | 2004               |

----

| (1) | Member of each of theAudit, Nominating and  Compensation Committees.                                                                                                                                         |
|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (2) | Mr. Baker, who was appointed to a fill a  vacancy on the Board of Directors on December 22, 1998, resigned from  his position on May 13, 1999 and rejoined the Board on August 4,  1999. |

*** ***

***RamiS. Ramadan***has served as CEO and CFO since July 12,1999 and President since August 2000. His most recent prior position wasExecutive Vice President of Finance for the Ian Schrager Hotels from November 1997to July 1999. Prior to that, Mr. Ramadan held senior financialpositions with Hyatt Hotels from January 1994 to November 1997, EuroDisney from October 1990 to December 1993 and Le Meridien Hotels fromSeptember 1975 to September 1990.

 

***JulioE. Heurtematte, Jr.*** Mr. Heurtematte is aprivate investor.  Since 1989 he has also been a consultant,specializing in international projects, trade and investments.  From 1963to 1989, Mr. Heurtematte served with the Inter-American Development Bankin several capacities, the last as Deputy Manager for Project Analysis.

 

***MalcolmM. B. Sterrett***. Mr. Sterrett is a private investor.From 1989 to 1993, he was a partner at the law firm of Pepper Hamilton &Scheetz, in Washington, D.C. From 1988 to 1989, he served as General Counsel tothe U.S. Department of Health and Human Services and from 1982 to 1988 he was aCommissioner on the U.S. Interstate Commerce Commission. Before that, he wasVice President and General Counsel to the United States Railway Association andserved as Staff Director and Counsel to the U.S. Senate Committee on Commerce,Science 

 

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and Transportation.  From 1998 to2006, Mr. Sterrett had served as a member of the board of directors aswell as on certain board committees of Telos Corporation (OTC: TLSKP.PK) in Ashburn, Virginia.

 

***GeoffreyB. Baker. *** Mr. Baker is a private investor and since 1983 hasbeen a partner in a private investment firm and a member of various corporateand civic boards. A graduate of Stanford University and Georgetown UniversityLaw Center, Mr. Baker previously served as Legislative Director to U.S.Senator Lowell P. Weicker, Jr., and as Professional Staff Member on theU.S. Senate Committee on Commerce, Science and Transportation.

 

***TimothyG. Ewing. *** Mr. Ewing, a Chartered Financial Analyst,is the managing partner of Ewing & Partners and the manager of ValuePartners, Ltd., a private investment partnership formed in 1989, and of theEndurance Partnerships, private investment partnerships formed in 2001.  Mr. Ewinghas been a member of the board of directors of Cherokee, Inc.(NASDAQ:  CHKE) in Van Nuys, California since 1997.  He currentlyserves on the board of directors of Global Aircraft Solutions (OTCBB: GACF) in Tucson, AZ and Towne Bancorp, Inc, (OTCBB: TWNE) in Phoenix, AZ, bothsince 2008.  In addition, he is immediate past chairman and an advisoryboard member of the Dallas Museum of Nature & Science, serves on theboard of directors of The Dallas Opera, the board of trustees of the BaylorHealthcare System Foundation, and the advisory board of the University of Texasat Dallas’ Holocaust Studies Program.

 

**Information about our Board andits Committees:**

 

Our Board of Directors, which is chaired by Mr. Sterrettin a non-executive role, manages the business and affairs of the Company.  The Board holds biweekly conference calls andmeets in person on an as-needed basis. The Board has established several committees, described below, whichalso meet on an as-required basis during the year.  The Board met in person three times andconducted business by written consent once during the Company’s fiscal yearended December 31, 2008.  Nodirector attended fewer than 75% of the total number of meetings of the Boardor meetings of committees of the Board during the year ended December 31,2008.

 

The Board of Directors has established thefollowing committees:

 

***Audit Committee***

 

Our Audit Committee reviews and approves internalaccounting controls, internal audit operations and activities, the Company’sannual report and audited financial statements, the selection of the Company’sindependent auditors, the activities and recommendations of the Company’sindependent auditors, material changes in the Company’s accounting procedures,the Company’s policies regarding conflicts of interest and such other mattersas may be delegated by the Board. The Audit Committee, composed of Mr. Baker,the Committee’s Chairman, Messrs. Heurtematte, Sterrett and Ewing, allnon-employee, “independent”directors, with Mr. Heurtematte serving as the “audit committee financialexpert”, met three times in person and conferred by conference calls twice in2008.

 

***Compensation Committee***

 

Our Compensation Committee sets thecompensation for executive officers of the Company and sets the terms of grantsof awards under the 2004 Equity Plan and any other equity-based compensationplans adopted by the Company. The Compensation Committee, composed of Mr. Heurtematte,the Committee’s Chairman, Messrs. Baker, Sterrett and Ewing, met threetimes in person, conferred by phone twice, and conducted business by writtenconsent once in 2008.

 

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*** ***

***Nominating Committee***

 

Our Nominating Committee has theresponsibilities set forth in its Charter, including recommending Boardnominees, determining the qualifications for such nominees and assisting theBoard of Directors in interpreting and applying the Company’s CorporateGovernance Guidelines.  The NominatingCommittee is composed of Mr. Ewing, its Chairman, Messrs. Baker,Heurtematte and Sterrett, and met once during 2008.

 

**Section 16(a) BeneficialOwnership Reporting Compliance**

 

Section 16(a) of the Exchange Act requires our officers anddirectors, and persons who own more than 10% of our Common Stock to filereports of ownership and changes in ownership with the Securities andExchange Commission (“SEC”) and the Financial Industry Regulatory Authority, Inc.(formerly, the National Association of Securities Dealers, Inc.) (“FINRA”)by certain dates.  Officers, directors and 10% stockholders arerequired by regulation to furnish the Company with copies of all Section 16(a) formsthey file.

 

Prior to June 2003, Value Partners helda controlling 57.5% of our issued and outstanding Common Stock.  Further, as part of its participation in the2003 recapitalization, Value Partners received an additional 3,270,104shares.  After the issuance of 2,809,188and 1,000,000 shares of Common Stock as part of the $4.75 million and the $3.5million Capital Raises, respectively, Value Partners’ beneficial ownership wasreduced from 70.9% to 37.6% of our issued and outstanding Common Stock.  Mr. Ewing, one of our directors, can beconsidered to be a controlling person of Value Partners.

 

As part of their participation in the TwoCapital Raises, Special Situations Private Equity Fund LLP and SpecialSituations Cayman Fund, LP (collectively referred to as “Special SituationsFunds”), and Wynnefield Small Cap Value Offshore Fund, Ltd, Wynnefield PartnersSmall Cap Value LP and Wynnefield Partners Small Cap Value LP1 (collectivelyreferred to as “Wynnefield Funds”), currently hold 23.5% and 16.7%,respectively, of our issued and outstanding Common Stock.  (See also “Item 12. Security Ownership ofCertain Beneficial Owners and Management and Related Stockholder Matters”).

 

We know of no other person or entity who owns 10% or more of theCompany’s Common Stock.

 

Based solely on review of the copies of such forms either filed by uson behalf of our directors and named executive officer, or furnished to us, webelieve that all applicable Section 16(a) filing requirements weresatisfied by our directors and named executive officer during 2008.

 

***Code of Ethics***

 

Our Board of Directors adopted a Code ofEthics which covers all company executives of TWC and our subsidiaries.  The Code of Ethics requires that seniormanagement avoid conflicts of interest; maintain the confidentiality ofinformation relating to the Company; engage in transactions in the Common Stockonly in compliance with applicable laws and regulations and the requirementsset forth in the Code of Ethics; and comply with other requirements which areintended to ensure that such officers conduct business in an honest and ethicalmanner and otherwise act with integrity and in the best interest of TWC.  In February 2007, all of our key managementemployees and officers reaffirmed, in writing, their commitment to our Code ofEthics. It is our Company’s intention to revisit and reaffirm our Code ofEthics in year 2010.

 

A copy of our Company’s Code of Ethics willbe furnished to any person upon written request.  Requests should be sent to:  Jill A. Yarussi, Corporate Secretary, TransWorld Corporation, 545 Fifth Avenue, Suite 940, New York, New York 10017.

 

 

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**Item 11. Executive Compensation**

 

**Compensation Discussion andAnalysis**

 

**Overview ofCompensation Philosophy and Program.**  Ourcompensation philosophy is to provide compensation to our executive officersthat is competitive in the marketplace in order to attract and retain qualifiedand experienced officers.  Thecompensation of our named executive officer, including the various componentsof such compensation, is determined by our Compensation Committee.  The Committee consists solely of non-employeedirectors who meet all applicable requirements to be independent ofmanagement.  In addition, the Committeemay uses, from time to time, independent outside consulting firms that provideinformation regarding the compensation paid by our peer group, as describedbelow.

 

When setting the compensation of our named executive officer, theCommittee generally targets compensation which is comparable with our peergroup with respect to each of the components of compensation.  The compensation we provide to our namedexecutive officer primarily consists of the following:

 

·              annual base salary,

·              annual cash bonus,

·              stock options,

·              profit sharing plans,

·              to a lesser extent, restrictedstock awards, and

·              other forms of compensation asapproved by the Committee.

 

**Independent Compensation Committee.** The Compensation Committee, composed entirely of independent directors,administers our executive compensation program. The members of the Committee, Messrs. Geoffrey B. Baker, Timothy G.Ewing, Julio E. Heurtematte, Jr., and Malcolm M.B. Sterrett, meet all ofthe independence requirements under applicable laws and regulations, includingthe listing requirements of the NASDAQ stock market. None of the members is acurrent or former officer or employee of our Company or any of our subsidiariesor has any separate business relationship with the Company (other than as ashareholder). The role of the Committee is to: (i) oversee ourcompensation and benefit plans and policies; (ii) administer our stockbenefit plans (including reviewing and approving equity grants to executiveofficers); and (iii) review and approve annually all compensationdecisions relating to the named executive officer, Mr. Rami S. Ramadan,who serves as President, Chief Executive Officer and Chief Financial Officer ofthe Company, as set forth in the Summary Compensation Table.

 

**Role of the Named Executive Officer andManagement. **The named executive officer providesrecommendations to our Committee on matters of compensation philosophy, plandesign and the general guidelines for other executive officers’ compensation.  These recommendations are then considered bythe Committee. The chief executive officer generally attends Committee meetingsbut is not present for executive sessions or for any discussion of his owncompensation.

 

**TaxDeductibility of Pay.** Section 162(m) of theInternal Revenue Code of 1986, as amended (the “Code”), places a limit of $1.0million on the amount of compensation that the Company may deduct in any oneyear with respect to our Chief Executive Officer and certain other highlycompensated officers. There is an exception to the $1.0 million limitation forperformance-based compensation meeting certain requirements. Stock options areperformance-based compensation meeting those requirements and, as such, arefully deductible. Service-based only restricted stock awards are not consideredperformance-based compensation under Section 162(m) of the Code.

 

To date, Section 162(m) has not affected the ability of theCompany to deduct the expense of the executive compensation paid. To maintainflexibility in compensating executive officers in a manner designed to promotevarying corporate goals, our Committee has not adopted a policy requiring allcompensation to be deductible.

 

 

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**Salaries. **With the exception of the Chief Executive Officer, thesalaries of our key management employees are reviewed on an annual basis, aswell as at the time of a promotion or other change in responsibilities.  Increases in salary are based on anevaluation of the individual’s performance and current level of pay.  Merit increases normally take effect in January ofeach year.

 

For 2008, pursuant to his July 1, 2005, 2.5-year employmentagreement, which was automatically renewed for a one-year term ending December 31,2009.  The base annual salary for ournamed executive officer was increased to $450,000 from $400,000, effective April 1,2008.  Base salary is considered inconjunction with the short-term annual bonus component of our executivecompensation program.

 

**Bonuses. **In addition to the 2008 Profit SharingPlan (see above), a discretionary cash bonus for the named executive officer isdetermined by the Compensation Committee, on an annual basis, whereapplicable.  The amount of the bonus isbased on the Company’s overall performance as well as an evaluation of theindividual’s performance.  In 2008, theCompensation Committee granted a discretionary cash bonus of $135,000 to thenamed executive officer.

 

***Stock Options***

 

In determining the size of stock option grants toexecutive officers, our Committee considers the Company’s financial performanceagainst the strategic plan as attributed to executive officers.  In this regard, our Committee granted stockoptions to Mr. Ramadan, the Chief Executive Officer, on July 1, 2005,as part of his employment contract renewal. Mr. Ramadan was granted seven-year options, to be vested over afour-year vesting period, to purchase an aggregate total of 175,000 shares, ofwhich 35,000 remained unvested as of December 31, 2008, of the Company’sCommon Stock at the exercise prices ranging from $2.80 at July 1, 2005,incrementally increasing every six months, to a maximum of $4.11 on January 1,2012.  The unvested balance of 35,000options will vest, if Mr. Ramadanis employed by TWC at the time of vesting, on July 1, 2009.

 

On February 4, 2007, Mr. Ramadan was grantedseven-year options to purchase 50,000 shares of Common Stock, of which options topurchase 12,500 shares vested immediately, and the balance will vest in threeequal parts, over a three-year vesting period, on the anniversary of the dateof grant.  The exercise price of theseoptions is set at $3.75 per share, the closing market price of the shares onthe date of grant.  As of December 31,2008, options to purchase 25,000 shares have vested.

 

Further, on October 23, 2007, pursuant to theCompany’s 2004 Equity Incentive Plan, as amended, Mr. Ramadan was grantedseven-year options to purchase 125,000 shares of Common Stock, with options topurchase 25,000 shares to be vested immediately, and the balance to be vestedin four equal parts, over a four-year vesting period, on the anniversary of thedate of grant.  The exercise price ofthese options is set at $4.85 per share, the closing stock price on October 23,2007, and will escalate at 4.2% per annum. As of December 31, 2008, options to purchase 50,000 shares havevested.

 

***RestrictedStock Awards***

 

Under our 2004 Equity Plan, our Committee is authorized to grant shareawards, which are a right to receive a distribution of shares of Common Stock.Shares of common stock granted pursuant to a share award are in the form ofrestricted stock which vests upon such terms and conditions as established bythe Committee.  Our Committee determineswhich officers and key employees will be granted share awards, the number ofshares subject to each share award, whether the share award is contingent uponachievement of certain performance goals and the performance goals, if any,required to be met in connection with a share award.  Non-employee directors are not eligible toreceive share awards.  Under the amended2004 Equity Plan, our Committee has the discretion to grant an award or awardsto any one individual participant during any one calendar year up to 250,000shares of Common Stock and to determine whether to include a one-year vestingrequirement for any future grants awarded under the 

 

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2004 Equity Planto any of our employees.  However, in noevent shall there be granted during the term of the 2004 Equity Plan,restricted stock or restricted stock units, which are not subject to beachievement of a performance target or targets covering more than an aggregateof 75,000 shares.

 

Pursuant to his renewed employment agreement and the 2004 Equity Plan,in July 2005, Mr. Ramadan was granted 75,000 shares of restrictedCommon Stock that vest cumulatively, beginning with the quarter ended September 30,2005, as follows:

 
| **Number** | ** ** | **Cumulative  Vested** | ** ** | **When Vested**                                                                                                                                                                                                                     |
|------------|------------|------------------------|------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 25,000     |       | 25,000                 |       | When the trailing twelve months (“TTM”) earnings  per share from TWC’s continuing operations for any two (2) consecutive  fiscal quarters (“TTMEPS”) is equal to or exceeds $0.45 for the first time. |
| 25,000     |       | 50,000                 |       | When TTMEPS is equal to or exceeds $0.60 for any  two (2) consecutive fiscal quarters ended for the first time.                                                                                                                |
| 25,000     |       | 75,000                 |       | When  TTMEPS is equal to or exceeds $0.75 for any two (2) consecutive fiscal  quarters ended for the first time.                                                                                                               |

 

All unvested options and unvested restricted stock granted hereundershall, automatically and without any further action on the part of Mr. Ramadanor any members of the Compensation Committee, terminate upon the effective dateof the termination or expiration of his employment agreement, except that allunvested options and unvested restricted stock granted thereunder shall,automatically and without any further action on the part of any person, vest toMr. Ramadan upon the closing date of a change of control of the Company.All such vested options and restricted stock must be surrendered or otherwiseconverted into cash or securities of the acquiror or exercised as required orpermitted by the terms and conditions of the change of control documents.  Any extension of the terms of his employmentagreement beyond December 31, 2008 shall not result in the extension ofany option or stock grant vesting or exercise periods set forth above.  As of December 31, 2008, there were noshares of restricted stock vested.

 

**Stock Ownership Guidelines.** Wehave not established any formal policies or guidelines addressing expectedlevels of stock ownership by the named executive officer or for other executiveofficers.  However, this matter remainsunder consideration.

 

**Additional Components of ExecutiveCompensation. **As part of the renewal of the namedexecutive officer’s employment agreement in July 2005, the named executiveofficer and the Company amended the change in control provisions therein. Thepurpose of these provisions is to retain, for the benefit of the Company, thetalents of this highly skilled officer whose services are integral to thedevelopment and implementation of the Company’s business.  This agreement, as discussed below, providesfor severance benefits in the event of the termination of the executive’semployment under certain circumstances, or in the event of the occurrence ofcertain events.  The included severancepayments are intended to align the named executive officer’s and thestockholders’ interests by enabling the named executive officer to considercorporate transactions that are in the best interests of the stockholders andother constituents of our Company without undue concern over whether thetransactions may jeopardize the named executive officer’s own employment orimpose a financial hardship on him. The grounds under which severance paymentsare triggered in the employment and change in control provisions of Mr. Ramadan’semployment agreement are similar to, or the same as, those included in manyemployment agreements for senior executive officers of comparable gamingcompanies.

 

 

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***Deferred Compensation Plan***

 

On May 17, 2006, the Compensation Committee of the Boardunanimously approved and adopted TWC’s Deferred Compensation Plan (the “DeferredPlan”), which provides certain key employees and non-employee directors theopportunity to elect to defer receipt of specified portions of theircompensation and to have such deferred amounts treated as if invested in theCommon Stock of the Company.

 

We adopted the Deferred Plan with the intention that it shall at alltimes be characterized as a “top hat” plan of deferred compensation maintainedfor a select group of management, as described under ERISA Sections 201(2),301(a)(3) and 401(a)(1) and the Deferred Plan shall at all timessatisfy Section 409A of the Code. The unfunded Deferred Plan obligations are payable only in the form ofCommon Stock upon the earlier of:   (i) adesignated, in-service distribution date which must be a minimum of three (3) yearsfrom the year of the first deferral; (ii) separation of employment; (iii) disability;(iv) change in control; or (v) death. A participant’s election form must specify whether the payments will bemade by lump sum or by installments, and the number of annual installments(with a minimum of two (2) and a maximum of five (5) installments) asmay be directed by the participant in his or her election form.

 

**Compensation Committee Interlocks and InsiderParticipation**

 

No member of the Compensation Committee has served as an officer oremployee of the Company at any time. None of the Company’s executive officers serve as a member of thecompensation committee of any other for-profit company that has an executiveofficer serving as a member of our Company’s Board of Directors.  None of our Company’s executive officersserve as a member of the board of directors of any other company that has anexecutive officer serving as a member of that company’s compensation committee.

 

**Summary Compensation Table**

 

The following table sets forth a summary of certain informationconcerning the compensation awarded or paid by our Company or our subsidiariesfor services rendered in all capacities during the fiscal years ended December 31,2008 and 2007 to the Company’s executives, who with the exception of Mr. Ramadan,are not “executive officers”:

 
| **Name and Principal  Position**                          | ** ** | **Year** | ** ** | **Salary(1)** | ** ** | **Bonus(2)** | ** ** | **Stock Awards** | ** ** | **Option  Awards(3)** | ** ** | **Non- Equity Incentive Plan Compensation(4)** | ** ** | **Change in  Pension Value  and Nonqualified  Deferred  Compensation  Earnings(5)** | ** ** | **All  Other  Compensation(6)** | ** ** | **Total** |
|-----------------------------------------------------------|------------|----------|------------|---------------|------------|--------------|------------|------------------|------------|-----------------------|------------|------------------------------------------------|------------|-------------------------------------------------------------------------------------|------------|---------------------------------|------------|-----------|
| Rami S. Ramadan,*Chief  Executive Officer*                |       | 2008     |       | $             | 437,500    |         | $          | 135,000          |       | $                     | —     |                                           | $          | 98,000                                                                              |       | $                               | 40,100     |      | $ | — |   | $ | 20,000 |   | $ | 730,600 |
|                                                      | 2007       |     | $          | 400,000       |       | $            | 100,000    |             | $          | —                |       | $                                              | 89,000     |                                                                                | $          | —                          |       | $         | — |   | $ | 25,000 |   | $ | 614,000 |
| Sarah E. Wagner,*Director  of Project Development*        |       | 2008     |       | $             | 158,700    |         | $          | 32,900           |       | $                     | —     |                                           | $          | 3,000                                                                               |       | $                               | 14,700     |      | $ | — |   | $ | 9,300 |   | $ | 218,600 |
|                                                      | 2007       |     | $          | 146,850       |       | $            | 30,928     |             | $          | —                |       | $                                              | 3,000      |                                                                                | $          | —                          |       | $         | — |   | $ | 9,300 |   | $ | 190,078 |
| Thomas Mähder,*Managing  Director of Operations (7)* |       | 2008     |       | $             | 228,571    |         | $          | —           |       | $                     | —     |                                           | $          | 5,400                                                                               |       | $                               | —     |      | $ | — |   | $ | 15,000 |   | $ | 248,971 |
|                                                           |            |          |            |               |            |              |            |                  |            |                       |            |                                                |            |                                                                                     |            |                                 |            |           |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

 

 

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(1)                Mr. Ramadan’s annualsalary was increased from $400,000 to $450,000, effective April 1, 2008.

(2)                Represents awards based on eitherpersonal performance evaluation or at the discretion of the Company’sCompensation Committee.

(3)                Reflects the amount expensedin accordance with Statement of Financial Accounting Standards No. 123(R) duringfiscal 2008 with respect to vesting of stock options.  For a discussion of the assumptions used toestablish the valuation of the stock options, reference is made to Note 2 ofthe Notes to the Consolidated Financial Statements.  Additional information is also included inthe table entitled “Grants of Plan-Based Awards for the Year Ended December 31,2008.”

(4)                20% of each employee’s ProfitSharing Plan portion earned was allocated to the Deferred Compensation Plan andwill be paid out in Common Stock.

(5)                There were no above-market orpreferential earnings on nonqualified deferred compensation for the namedexecutive officer.

(6)                Consists of the cost of aleased automobile for business use to Mr. Ramadan and Mr. Mähder; and for Mr.Ramadan and Ms. Wagner an employer-matching contribution toward their 401(k) plan.

(7)                Mr. Mähder was hired on January 2,2008.

 

**Equity Compensation Plans**

 

The following table sets forth certain information for all equitycompensation plans and individual compensation arrangements (whether withemployees or non-employees, such as directors) in effect as of December 31,2008.

 
| **Plan category**                                               | ** ** | **Number of securities to  be issued upon exercise  of outstanding options  and rights** | ** ** | **Weighted-average  exercise price of  outstanding options and  rights** | ** ** | **Number of securities  remaining available for  future issuance under  equity compensation  plans (excluding  securities reflected in the  first column)** | ** **  |
|-----------------------------------------------------------------|------------|------------------------------------------------------------------------------------------|------------|--------------------------------------------------------------------------|------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------|-------------|
| Equity compensation  plans  approved by security holders (1)    |       | 429,065                                                                                  |       | $                                                                        | 3.75       |                                                                                                                                                        | 127,270     | ** ** |
| Equity compensation  plans not approved by security holders (2) |       | —                                                                                   |       | —                                                                   |       | —                                                                                                                                                      |        |
| **Total**                                                       | ** ** | **429,065**                                                                              | ** ** | **$**                                                                    | **3.75**   | ** **                                                                                                                                                  | **127,270** | ** ** |

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(1)          Represents allthe outstanding options, issued under the 2004 Equity Plan and previous equitycompensation plans.

(2)          Does not includeaccruals made under the Company’s Deferred Compensation Plan for directors andqualified employees who may only receive such amounts in shares of the Company’sCommon Stock upon elected deferment terms.

 

The following table sets forth information concerning grants of awardspursuant to plans made to the named executives during the year ended December 31,2008:

 

**Grants of Plan-Based Awards for the Year Ended December 31,2008**

 
| **GRANTS OF PLAN-BASED AWARDS** | ** ** |
|---------------------------------|------------|
| ** **                      | ** ** | **Grant** | ** ** | **Estimated Future Payouts  Under Non-Equity Incentive (1)  Plan Awards** | ** ** | **Estimated Future Payouts  Under Incentive  Plan Awards** | ** ** | **All Other  Stock Awards:  Number of  Shares of** | ** ** | **All Other  Option Awards:  Number of  Securities  Underlying** | ** ** | **Exercise or  Base Price  of Option** | ** ** | **Grant Date  Fair Value  of Stock  and Option** | ** ** |
| **Name**                        | ** ** | **Date** | ** ** | **Threshold** | ** ** | **Target** | ** ** | **Maximum** | ** ** | **Threshold** | ** ** | **Target** | ** ** | **Maximum** | ** ** | **Stock/Units** | ** ** | **Options** | ** ** | **Awards** | ** ** | **Awards** | ** ** |
| ** **                      | ** ** | ** ** | ** ** | **$000** | ** ** | **$000** | ** ** | **$000** | ** ** | **#** | ** ** | **#** | ** ** | **#** | ** ** | **#** | ** ** | **#** | ** ** | **($/Sh)** | ** ** | **($/Sh)** | ** ** |
|                            |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Rami  S. Ramadan                |       | 2008 |   | $ | 43 |   | $ | 87 |   | $ | 217 |   | N/A |   |   |   |   |   | — |   | — |   | $ | — |   | $ | — |   |
|                            |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Sarah  E. Wagner                |       | 2008 |   | $ | 16 |   | $ | 31 |   | $ | 79 |   | N/A |   |   |   |   |   | — |   | — |   | $ | — |   | $ | — |   |
|                            |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Thomas  Mähder             |       | 2008 |   | $ | 23 |   | $ | 45 |   | $ | 113 |   |   |   |   |   |   |   | — |   | — |   | $ | — |   | $ | — |   |

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(1)          Pursuant to thenamed executive officer and the other listed executives’ participation in the2008 Profit Sharing Plan.

 

 

 

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A summary description of ourCompany’s equity compensation plans are found at “Note 13 — Compensation Plans”of the Notes to the Consolidated Financial Statements.

 

 

**Outstanding Equity Awards at Fiscal Year-End**

 

Thefollowing table sets forth information concerning outstanding equity awardsheld by the named executives as of December 31, 2008:

 
| ** **          | ** ** | **Option Awards**                                       | ** ** | **Stock Awards**           | ** ** | **Equity Incentive  Plan Awards** | ** ** |
|---------------------|------------|---------------------------------------------------------|------------|----------------------------|------------|----------------------------------------|------------|
| **Name**            | ** ** | **Number of Securities Underlying Unexercised Options** | ** ** | **Option  Exercise Price** | ** ** | **Option Expiration Date**             | ** ** | **Number of Shares or Units of  Stock That Have Not Vested** | ** ** | **Market Value of Shares or Units  of Stock That Have Not Vested** | ** ** | **Number of Unearned Shares That  Have Not Vested** | ** ** | **Market Value of Shares or Units  of Stock That Have Not Vested** | ** ** |
| ** **          | ** ** | **Exercisable**                                         | ** ** | **Unexercisable**          | ** ** | ** **                             | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| Rami  S. Ramadan    |       | 50,000                                                  | (1)        | 75,000                     |       | $                                      | 5.05       |   | 10/23/14 |   | 75,000 | (2) | $ | — | (3) | — |   | $ | — |   |
|                |       | 25,000                                                  | (4)        | 25,000                     |       | $                                      | 3.75       |   | 02/04/14 |   |   |   |   |   |   |   |   |   |
|                |       | 140,000                                                 | (5)        | 35,000                     |       | $                                      | 3.34       |   | 06/30/12 |   |   |   |   |   |   |   |   |   |
|                |       | 1,500                                                   | (6)        |                       |       | $                                      | 3.30       |   | 07/12/14 |   |   |   |   |   |   |   |   |   |
|                |       | 1,500                                                   | (6)        |                       |       | $                                      | 6.00       |   | 07/12/13 |   |   |   |   |   |   |   |   |   |
|                |       | 1,500                                                   | (6)        |                       |       | $                                      | 5.00       |   | 07/12/12 |   |   |   |   |   |   |   |   |   |
| Sarah  E. Wagner    |       | 10,000                                                  |       |                       |       | $                                      | 2.50       |   | 08/02/13 |   |   |   |   |   |   |   |   |   |
|                |       | 300                                                     |       |                       |       | $                                      | 3.00       |   | 01/01/14 |   |   |   |   |   |   |   |   |   |
| Thomas  Mähder |       | 2,500                                                   | (7)        | 7,500                      |       | $                                      | 4.10       |   | 01/04/15 |   |   |   |   |   |   |   |   |   |
|                     |            |                                                         |            |                            |            |                                        |            |  |  |  |  |  |  |  |  |  |  |  |  |  |

 

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(1)                      On October 23, 2007, pursuant to the Company’s 2004 Equity IncentivePlan, as amended, Mr. Ramadan was granted seven-year options to purchase125,000 shares of Common Stock, with options to purchase 25,000 shares vestedimmediately, and the balance to be vested in equal parts, over a four-yearvesting period, on the anniversary of the date of grant.  The exercise price of these options was setat $4.85 per share, the closing stock price on October 23, 2007, andescalates at 4.2% per annum.

(2)                      The restrictedshares vest according to an earnings formula as stipulated in Mr. Ramadan’semployment agreement. (See “Compensation Discussion and Analysis - RestrictedStock Awards” above).

(3)                      Based upon thefair market value represented by the reported closing price on theover-the-counter bulletin board of $2.75 per share for the Company’s CommonStock as of December 31, 2008.

(4)                      On February 4,2007, Mr. Ramadan was granted seven-year options to purchase 50,000 sharesof Common Stock, with options to purchase 12,500 shares vested immediately, andthe balance to be vested in equal parts, over a three-year vesting period, onthe anniversary of the date of grant. The exercise price of these options was set at $3.75 per share.

(5)                      On July 1,2005, Mr. Ramadan was granted seven-year options to purchase 175,000shares of Common Stock, with options to purchase 25,000 shares to be vestedimmediately, and the balance to be vested in equal parts, over a four-yearvesting period, on the anniversary of the date of grant.  The exercise price of these optionsincrementally increases every six months, starting at $2.80 on July 1,2005 to a maximum of $4.11 on January 1, 2012.

(6)                      Options topurchase an aggregate of 4,500 shares of Common Stock granted under theprevious employment agreement have already vested. (See “CompensationDiscussion and Analysis - Stock Options” above).

(7)                      On January 4,2008, Mr. Mähder was granted seven-year options to purchase 10,000 sharesof Common Stock, with options to purchase 2,500 shares vested immediately, andthe balance to be vested in equal parts, over a three-year vesting period, onthe anniversary of the date of grant. The exercise price of these options was set at $4.10 per share.

 

**Option Exercises and Stock Vested**

 

No stock options were exercised and no shares of restricted stockvested for the named executive officer or for the other executives in 2008.

 

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**Nonqualified Deferred Compensation**

 

Neither the named executive officer nor theother executives earned any nonqualified deferred compensation in 2008.

 

**Employment and Change of ControlAgreements**

 

We extended an employment agreement with Mr. Ramadanin 2008, pursuant to which the Company agreed to employ Mr. Ramadan asPresident, Chief Executive Officer and Chief Financial Officer for another yearending on December 31, 2009.  Foradditional information, see “Compensation Discussion and Analysis -Employment/Severance Agreements” below.

 

Our Company, as part of an employment agreementrenewal, amended the change of control agreement with Mr. Ramadan.  See “Compensation Discussion and Analysis —Additional Components of Executive Compensation” above.

 

**Potential Payments upon Termination of Employmentor a Change in Control**

 

The following table describes the potentialpayments to the named executive officer, upon an assumed termination ofemployment or a change in control as of December 31, 2008:

 

 
| **Payments and Benefits**                               | ** ** | **Voluntary Termination** | ** ** | **Termination for Cause** | ** ** | **Involuntary Termination Without  Cause or Termination by the Executive for Good Reason With a Change in Control** | ** ** | **Material Breach of Agreement by  Company** | ** ** | **Death or Disability** | ** ** |
|---------------------------------------------------------|------------|---------------------------|------------|---------------------------|------------|---------------------------------------------------------------------------------------------------------------------|------------|----------------------------------------------|------------|-------------------------|------------|
|                                                    |       |                      |       |                      |       |                                                                                                                |       |                                         |       |                    |       |
| Accrued  vacation pay (a)                               |       | $                         | —     |                      | $          | —                                                                                                              |       | $                                            | —     |                    | $          | — |   | $ | — |   |
|                                                    |       |                      |       |                      |       |                                                                                                                |       |                                         |       |                    |       |
| Accrued  sick pay (b)                                   |       | 10,000                    |       | 10,000                    |       | 10,000                                                                                                              |       | 10,000                                       |       | 10,000                  |       |
|                                                    |       |                      |       |                      |       |                                                                                                                |       |                                         |       |                    |       |
| Severance  payments and benefits: (c)                   |       |                      |       |                      |       |                                                                                                                |       |                                         |       |                    |       |
|                                                    |       |                      |       |                      |       |                                                                                                                |       |                                         |       |                    |       |
| Cash  severance (d)                                     |       |                      |       |                      |       | 450,000                                                                                                             |       | 450,000                                      |       |                    |       |
|                                                    |       |                      |       |                      |       |                                                                                                                |       |                                         |       |                    |       |
| Medical  and dental benefits (e)                        |       |                      |       |                      |       | 20,000                                                                                                              |       | 20,000                                       |       |                    |       |
|                                                    |       |                      |       |                      |       |                                                                                                                |       |                                         |       |                    |       |
| Equity awards:                                          |       |                      |       |                      |       |                                                                                                                |       |                                         |       |                    |       |
|                                                    |       |                      |       |                      |       |                                                                                                                |       |                                         |       |                    |       |
| Vested  stock options and restricted stock awards (f)   |       |                      |       |                      |       |                                                                                                                |       |                                         |       |                    |       |
|                                                    |       |                      |       |                      |       |                                                                                                                |       |                                         |       |                    |       |
| Unvested  stock options and restricted stock awards (g) |       |                      |       |                      |       | 206,000                                                                                                             |       |                                         |       |                    |       |
|                                                    |       |                      |       |                      |       |                                                                                                                |       |                                         |       |                    |       |
| Total  payments and benefits                            |       | $                         | 10,000     |                      | $          | 10,000                                                                                                              |       | $                                            | 686,000    |                    | $          | 480,000 |   | $ | 10,000 |   |

 

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(a)          There was no accrued andunused vacation time due to Mr. Ramadan as of December 31, 2008.

(b)         Represents atotal of six unused sick days.

(c)          These severancepayments and benefits are payable if Mr. Ramadan’s employment isterminated either (i) by the Company for any reason other than cause,disability or death or (ii) by Mr. Ramadan after a change in controlof the Company and

 

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                        if the Companytakes certain adverse actions (a “good reason” termination) or if the Companymaterially breaches the employment agreement and does not cure such breachwithin 30 days after the date of termination.

(d)         Represents Mr. Ramadan’sannual base salary, to be paid in twelve (12) equal payments, commencing on Mr. Ramadan’spay date closest to the date of termination plus six (6) months and oneach monthly Company pay date thereafter.

(e)          Represents theestimated present value cost of providing continued medical and dental coverageto Mr. Ramadan for an assumed period ending at the earlier of (i) thedate he is entitled to receive substantially similar benefits from a subsequentemployer, or (ii) 12 months from the employment termination date.  The estimated costs assume the currentinsurance premiums and other costs for 12 months from December 31, 2008.

(f)            All vested stockoptions and restricted stock awards are exercisable as set forth in Mr. Ramadan’semployment agreement or the plans under which they were granted, except upon achange in control, in which case, they must be surrendered, or otherwiseconverted into cash or securities of the acquirer, or exercised as required, orpermitted by the terms and conditions of the change in control documents.  The vested stock options were “under water,” basedon the December 31, 2008 reported closing price of the Company’s CommonStock of $2.75 per share.

(g)         All unvestedstock options and unvested restricted stocks will terminate upon thetermination or expiration of the employment agreement except upon a change ofcontrol in which case they will vest on the closing date of change of control.The unvested stock options would be “under water,” based on the December 31,2008 reported closing price of the Company’s Common Stock of $2.75 per share,while the restricted stock would be worth approximately $206,000.

 

**Directors’Compensation**

 

Effective beginning the quarter ended September 30, 2003, ournon-employee directors’ compensation includes a cash retainer fee of $6,250 perquarter, per member.  In addition, thenon-executive chairman of our Board receives an additional $1,250 per quarter,while each chairman of our three Committees receives $625 per quarter.  To recognize the burden and importance of theAudit Committee, effective June 30, 2006, each member of this Committeehas been compensated an additional $1,250 per quarter.  In connection with this change, the automaticgrant of a non-qualified option to purchase 25 shares of Common Stock on thedate following each fiscal quarter in which the director serves waseliminated.  All members of the Board arereimbursed for out-of-pocket expenses in connection with attending Boardmeetings.  Full-time employee directorsof our Company do not receive any fees for board or committee meetings.

 

The following table sets forth information concerning compensation paidor accrued by our Company to each member of the Board of Directors during theyear ended December 31, 2008.  As anemployee-director, Mr. Ramadan received no compensation for his board andcommittee memberships.   His compensationis fully reported in the Summary Compensation Table above.

 
| **Name**                        | ** ** | **Fees Earned or Paid in Cash(1)** | ** ** | **Stock Awards** | ** ** | **Option Awards(2)** | ** ** | **Non-Equity Incentive Plan  Compensation** | ** ** | **Change in Pension Value and  Nonqualified Deferred Compensation Earnings** | ** ** | **All Other Compensation** | ** ** | **Total** | ** ** |
|---------------------------------|------------|------------------------------------|------------|------------------|------------|----------------------|------------|---------------------------------------------|------------|------------------------------------------------------------------------------|------------|----------------------------|------------|-----------|------------|
| Geoffrey  B. Baker              |       | $                                  | 32,500     |             | $          | —               |       | $                                           | —     |                                                                         | $          | —                     |       | $         | —     |   | $ | — |   | $ | 32,500 |   |
| Timothy  G. Ewing               |       | $                                  | 32,500     |             | $          | —               |       | $                                           | —     |                                                                         | $          | —                     |       | $         | —     |   | $ | — |   | $ | 32,500 |   |
| Julio  E. Heurtematte, Jr. |       | $                                  | 32,500     |             | $          | —               |       | $                                           | —     |                                                                         | $          | —                     |       | $         | —     |   | $ | — |   | $ | 32,500 |   |
| Malcolm  M.B. Sterrett          |       | $                                  | 35,000     |             | $          | —               |       | $                                           | —     |                                                                         | $          | —                     |       | $         | —     |   | $ | — |   | $ | 35,000 |   |

 

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(1)          Includespayment of directors’ retainer fees for service on the board of theCompany.  Also includes the payment offees for service as chairman of a board sub-committee.  Pursuant to the Company’s adoption of theDeferred Compensation Plan in June 2006, each director elected to defer aportion of his quarterly retainer, which, for the year ended December 31,2008, was $2,500 each for Mr. Baker, Mr. Ewing, Mr. Heurtematteand Mr. Sterrett, respectively. Furthermore, Mr. Sterrett receives an additional $2,500 asremuneration for being the Chairman of the Board of Directors.

 

(2)          Reflects theamount, if any, expensed in accordance with Statement of Financial AccountingStandards No. 123(R) during fiscal 2008 with respect to the grants ofstock options.  Until its termination in June 30,2006, each non-employee director was granted, on a quarterly basis,non-qualified options to purchase 25 shares of Common Stock, which were fullyvested on the dates of grant, and at the closing market price of the date ofgrant.  For a discussion of theassumptions used to establish the valuation of the stock options, reference ismade to Note 12 of the “Notes to the Consolidated Financial Statements” of theCompany included in the Company’s 2008 Annual Report to Stockholders.

 

**Employment/Severance Agreements**

 

On December 31,2008, our Company extended Mr. Ramadan’s July 1, 2005, two and a halfyear employment agreement, pursuant to which we agreed to employ him asPresident, Chief Executive Officer and Chief Financial Officer for a renewableterm of one year, ending December 31, 2009, with a current base annualsalary of $400,000, which was increased to $450,000 effective April 1,2008.  Mr. Ramadan willcontinue to be eligible to participate in the 2004 Equity Plan and any presentor future employee benefit plans, including the 2008 Profit Sharing Plan andthe Deferred Compensation Plan. He will also be reimbursed for reasonabletravel and out-of-pocket expenses necessarily incurred in the performance ofhis duties. Asprovided by Mr. Ramadan’s extended agreement and shown in the “StockOptions” and “Restricted Stock Awards” sections above, he received:  (i) a grant of seven-year options topurchase an aggregate total of 175,000 shares of the Company’s Common Stock inallotments of 35,000 shares per annum over a four-year vesting period withincreasing exercise prices every six months from $2.80 per share at July 1,2005 to $4.11 per share at January 1, 2012; and (ii) upon reachingdesignated earnings per share targets, up to 75,000 shares of restricted CommonStock in 25,000 share allotments.  On February 4,2007, Mr. Ramadan was granted seven-year options to purchase 50,000 sharesof Common Stock, with options to purchase 12,500 shares to be vestedimmediately, and the balance to be vested in equal parts, over a three-yearvesting period, on the anniversary of the date of grant.  The exercise price of these options was setat $3.75 per share.  25,000 options havevested as of December 31, 2008.  On October 23, 2007, pursuant to theCompany’s 2004 Equity Incentive Plan, as amended, Mr. Ramadan was grantedseven-year options to purchase 125,000 shares of Common Stock, with options topurchase 25,000 shares to be vested immediately, and the balance to be vestedin equal parts, over a four-year vesting period, on the anniversary of the dateof grant.  The exercise price of theseoptions was set at $4.85 per share, the closing stock price on October 23,2007, and escalates at 4.2% per annum.

 

In the event the employment agreement is terminated without cause, orif he terminates his employment agreement after a change in control for goodreason, as defined in the agreement, Mr. Ramadan will receive one year’ssalary.  The agreement is also subject tonumerous termination provisions in the event of death, disability, discharge forcause, and material breach thereof.  Inaddition, if our Company terminates the agreement without cause, materiallybreaches the employment agreement and does not cure such breach, or if Mr. Ramadanterminates the employment agreement after a change in control for good reason,we will continue to provide Mr. Ramadan with his medical insurancebenefits then in effect until the date of the earlier of the commencement ofhis full time employment with another employer, or the first anniversary dateof the termination date of the employment agreement.  Further, the employment agreement providesthat unless either the Company or Mr. Ramadan notified the other ofits/his intent not to extend the term on or prior to September 30, 2008 oron or prior to each September 30th thereafter, then the term shall beautomatically extended for a period of one year to the next December 31st.  Accordingly,the term of Mr. Ramadan’s employment agreement was, as of October 1,2008,  automatically extended to December 31,2009.

 

 

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**Item 12.  Security Ownership of Certain BeneficialOwners and Management and Related Stockholder Matters.**

 

The following table sets forth information regarding the beneficialownership of our Common Stock as of February 28, 2009 (the “CalculationDate”), unless otherwise noted, (a) by each shareholder who is known bythe Company to own beneficially more than 5.0% of the outstanding Common Stock,(b) by each director, (c) by each executive officer named in theSummary Compensation Table above and by all executive officers and directors asa group. Unless otherwise noted, each of the shareholders listed in the table orincluded within a group listed in the table possesses sole voting andinvestment power with respect to the shares indicated, subject to communityproperty laws where applicable. The business address for each director andofficer of our Company is 545 Fifth Avenue, Suite 940, New York, New York10017.

 
| **Name of Beneficial Owner**                                         | ** ** | **Number of Shares of  Common Stock Beneficially Owned (1)** | ** ** | **Percentage of Ownership (1)** | ** ** |
|----------------------------------------------------------------------|------------|-------------------------------------------------------------------|------------|---------------------------------|------------|
| Value  Partners, Ltd. (2)                                            |       | 3,326,679                                                         |       | 37.5                            | %          |
| Special  Situations Funds (3)                                        |       | 2,081,008                                                         |       | 23.5                            |       |
| Wynnefield  Funds (4)                                                |       | 1,483,548                                                         |       | 16.7                            |       |
| SC  Fundamental Funds (5)                                            |       | 468,735                                                           |       | 5.3                             |       |
| Rami  S. Ramadan (6)                                                 |       | 433,000                                                           |       | 4.7                             |       |
| Julio  E. Heurtematte, Jr. (7)                                  |       | 24,724                                                            |       | *                               |       |
| Malcolm  M.B. Sterrett (8)                                           |       | 24,724                                                            |       | *                               |       |
| Geoffrey  B. Baker (9)                                               |       | 24,704                                                            |       | *                               |       |
| Timothy  G. Ewing (10)                                               |       | 3,326,679                                                         |       | 37.5                            |       |
| All  directors and the executive officer as a group (5 persons) (11) |       | 3,833,831                                                         |       | 43.0                            | %          |

 

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*      Less than 1% of the issued and outstandingshares of the Company’s Common Stock.

 

(1)          The percentage of outstandingshares is based on 8,871,640 shares outstanding as of February 28, 2009and, for certain individuals and entities, on reports filed with the SEC or oninformation provided directly to our Company by such individuals or entities. Aperson is deemed to be the beneficial owner of securities that can be acquiredby such person within 60 days from February 28, 2009 upon the exercise ofoptions. Each beneficial owner’s percentage ownership is determined by assumingthat options that are held by such person (but not those held by any other person)are exercisable within 60 days from February 28, 2009 have been exercised.Included are shares of Common Stock issuable upon the exercise of options topurchase the Company’s Common Stock.

 

(2)          Value Partners, Ltd. is aTexas limited partnership, managed by Ewing & Partners, whose businessaddress is 4514 Cole Avenue, Suite 808, Dallas, Texas 75205.

 

(3)          AWM Investment Company, Inc.(“AWM”), whose address is 527 Madison Avenue, Suite 2600, New York, NewYork 10022, is the general partner of and investment adviser to the SpecialSituations Cayman Fund, L.P. (“SSCF”) and the investment adviser to the SpecialSituations Private Equity Fund, L.P. (“SSPEF”).  Austin W. Marxe and DavidM. Greenhouse are the principal owners of AWM.  Through their control ofAWM, Messrs. Marxe and Greenhouse share voting and investment control overthe portfolio securities of SSCF and SSPEF (collectively referred to as “SpecialSituations Funds”).  SSPEF beneficiallyowns 1,192,908 shares of Common Stock, of which 1,114,500 were acquired as aresult of their participation in the Company’s Two Capital Raises, while SSCFbeneficially owns 888,100 shares of Common Stock, of which 886,100 wereacquired in the same raises.

 

(4)          Wynnefield Small Cap ValueOffshore Fund, Ltd., Wynnefield Partners Small Cap Value LP, WynnefieldPartners Small Cap Value LP I, and Channel Partnership II (collectivelyreferred to as “Wynnefield Funds”), all managed by Wynnefield Capital, Inc.,a private investment firm, whose address is 450 Seventh Avenue, Suite 509,New York, New York 10123, directly beneficially owns 1,483,548 shares of theCompany’s Common Stock, of which 1,335,353 were acquired as a result of itsparticipation in TWC’s Two Capital Raises. Currently, Wynnefield Small Cap Value Offshore Fund, Ltd. beneficiallyowns 364,248 shares of Common Stock; Wynnefield Partners Small Cap Value LPbeneficially owns 461,500 shares of Common Stock; Wynnefield Partners Small CapValue LP I beneficially owns 650,500 shares of Common Stock; and Channel PartnershipII LP beneficially owns 7,300 shares of Common Stock.

 

 

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(5)          SC Fundamental Value Funds LP(“SCFVF”) and SC Fundamental Value BVI, Ltd (“SCFVBVI”), collectively referredto as SC Fundamental Value Funds, whose address is 747 Third Avenue, 27th Floor, New York, New York 10017, wereparticipants in the $4.75 million Capital Raise.  SCFVF is managed by SC Fundamental LLC, asgeneral partner, and beneficially owns 211,890 shares of Common Stock, whileSCFVBVI is managed by SC BVI Partners, as investment advisor, and beneficiallyowns 256,845 shares of Common Stock.

 

(6)          Consists of 3,500 shares ofCommon Stock, 354,500 shares subject to incentive options, granted to Mr. Ramadan,of which 147,000 have vested, and 75,000 shares of restricted stock, none ofwhich have vested. (See “Item 10. Executive Compensation.” above)

 

(7)          Includes 24,029 shares ofCommon Stock; 20 shares of Common Stock subject to non-qualified optionsgranted under the 1999 Plan at the end of each calendar quarter ended March 31,1999 through June 30, 2000; and 25 shares of Common Stock subject tonon-qualified options granted under the 1999 Plan at the end of each calendarquarter ended September 30, 2000 through June 30, 2006, all of whichwere fully vested on the dates of grant.  Effective the quarter ended September 30, 2006, as part of Mr. Heurtematte’sparticipation in the Company’s Deferred Compensation Plan, quarterly optiongrants were terminated for members of the Board of Directors in lieu of anominal increase in the annual retainer, of which a minimum of 25% is allocatedto the Deferred Compensation Plan.

 

(8)          Includes 24,029 shares ofCommon Stock; 20 shares of Common Stock, subject to non-qualified options,granted under the 1999 Plan at the end of each calendar quarter ended since March 31,1999 through June 30, 2000; and 25 shares of Common Stock subject tonon-qualified options granted under the 1999 Plan at the end of each calendarquarter ended September 30, 2000 through June 30, 2006, all of whichwere fully vested on the dates of grant. Effective the quarter ended September 30, 2006, as part of Mr. Sterrett’sparticipation in the Company’s Deferred Compensation Plan, quarterly optiongrants were terminated for members of the Board of Directors in lieu of anominal increase in the annual retainer, of which a minimum of 25% is allocatedto the Deferred Compensation Plan.

 

(9)          Includes 24,029 shares ofCommon Stock; 20 shares of Common Stock, subject to non-qualified options,granted under the 1999 Director Plan for the calendar quarter ended March 31,1999; 20 shares of Common Stock subject to non-qualified options granted underthe 1999 Director Plan at the end of each quarter ended since September 30,1999 through June 30, 2000; and 25 shares of Common Stock subject tonon-qualified options granted under the 1999 Director Plan at the end of eachcalendar quarter ended September 30, 2000 through June 30, 2006, allof which were fully vested on the dates of grant.  Effective the quarter ended September 30,2006, as part of Mr. Baker’s participation in the Company’s DeferredCompensation Plan, quarterly option grants were terminated for members of theBoard of Directors in lieu of a nominal increase in the annual retainer, ofwhich a minimum of 25% is allocated to the Deferred Compensation Plan.

 

(10)    Mr. Timothy G. Ewing isthe managing partner of Ewing & Partners, which manages ValuePartners, Ltd.  His beneficial ownershipincludes 3,326,679 shares of Common Stock, held by Value Partners, Ltd. (Seealso Note (2) above).  Effective thequarter ended September 30, 2006, as part of Mr. Ewing’sparticipation in the Company’s Deferred Compensation Plan, quarterly optiongrants were terminated for members of the Board of Directors in lieu of anominal increase in the annual retainer, of which a minimum of 25% is allocatedto the Deferred Compensation Plan.

 

(11)    See Notes (3), (4), (5), (6) and(7) above.

 

 

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**Item 13.  Certain Relationships and RelatedTransactions, and Director Independence.**

 

None.

 

**Item 14.  Principal Accounting Fees and Services.**

 

Rothstein, Kass &Co., P.C., our principal independent accountants, provided audit and non-auditservices to the Company in 2008 and 2007, which are described below.  We have been advised by Rothstein, Kass &Co., P.C. that neither that firm nor any of its associates has any relationshipwith our Company or its subsidiaries other than the usual relationship thatexists between independent accountants and clients.

 

All audit,audit-related and tax services were pre-approved by our Audit Committee, whichconcluded that the provision of such services by Rothstein, Kass &Co., P.C. was compatible with the maintenance of that firm’s independence inthe conduct of its auditing functions. Our Audit Committee’s Charter provides for pre-approval of specificallydescribed audit, audit-related and tax services by the Committee on an annualbasis.  Individual engagements that areanticipated to exceed pre-established thresholds will be considered on a caseby case basis.

 

Thefollowing table shows the fees that were billed to the Company by Rothstein,Kass & Co., P.C. for professional services rendered for the fiscalyears ended December 31, 2008 and December 31, 2007.

 

| **Fee Category**    | ** ** | **2008** | ** ** | **2007** | ** ** |
|---------------------|------------|----------|------------|----------|------------|
| Audit  Fees         |       | $        | 170,000    |     | $          | 161,000 |   |
| Audit-related  Fees |       | 8,000    |       |     |       |
| Tax  Fees           |       | 30,000   |       | 32,000   |       |
| All  Other Fees     |       |     |       |     |       |
| Total  Fees         |       | $        | 208,000    |     | $          | 193,000 |   |

 

**Audit Fees.**  This category includes fees for the audit ofthe Corporation’s annual financial statements, review of financial statementsincluded in the Corporation’s quarterly reports on Form 10-Q and servicesthat are normally provided by Rothstein, Kass & Co., P.C. inconnection with statutory and regulatory filings or engagements.

 

**Audit-Related Fees. **Thiscategory includes fees for assurance and related services that are reasonablyrelated to the performance of the audit or review of the Corporation’sfinancial statements and are not included above under “Audit Fees.”

 

**Tax Fees.**  This category includes fees for taxcompliance, tax advice, and tax planning. These services include tax return preparation, expatriate tax servicesand international VAT tax planning.

 

**All Other Fees. **This category includesall other fees not included in the above three categories.

 

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**PART IV**

 

**Item 15.  Exhibits,Financial Statement Schedules.**

** **

**(a)**         **Exhibits**

 

Referenceis made to the Exhibit Index hereinafter contained.

 

Acopy of any exhibits listed or referred to herein will be furnished at areasonable cost to any person who was a shareholder of our Company as of February 28,2009, upon written request from any such person. Requests should be sent to:Jill A. Yarussi, Corporate Secretary, Trans World Corporation, 545 Fifth Avenue,Suite 940, New York, New York 10017.

 

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**TRANS WORLD CORPORATION**

**EXHIBIT INDEX TO ANNUAL REPORT ONFORM 10-K**

**FOR THE YEAR ENDED DECEMBER 31, 2008**

 
| **Item No** | ** ** | **Item**                                                                                                                                                                                                                                               | ** ** | **Method of Filing**                                                                                                                                        |
|-------------|------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------|
|        |       |                                                                                                                                                                                                                                                   |       |                                                                                                                                                        |
| 3.1(a)      |       | Articles of Incorporation                                                                                                                                                                                                                              |       | Incorporated by reference to Exhibit 3.1  contained in the registration statement on Form SB-2 (File  No. 33-85446-A).                       |
|        |       |                                                                                                                                                                                                                                                   |       |                                                                                                                                                        |
| 3.1(b)      |       | Certificate of Amendment to Articles of  Incorporation                                                                                                                                                                                                 |       | Incorporated by reference to Exhibit 3.1  contained in the Form 10-KSB for the fiscal year ended December 31,  2000 (File No. 0-25244). |
|        |       |                                                                                                                                                                                                                                                   |       |                                                                                                                                                        |
| 3.1 (c)     |       | Certificate of Amendment to Articles of  Incorporation                                                                                                                                                                                                 |       | Incorporated by reference to Exhibit 3.1  contained in the Form 10-KSB for the fiscal year ended December 31,  2004 (File No. 0-25244). |
|        |       |                                                                                                                                                                                                                                                   |       |                                                                                                                                                        |
| 3.2         |       | Bylaws                                                                                                                                                                                                                                                 |       | Incorporated by reference to Exhibit 3.2  contained in the registration statement on Form SB-2 (File  No. 33-85446-A).                       |
|        |       |                                                                                                                                                                                                                                                   |       |
| 4.1         |       | Specimen Common Stock Certificate                                                                                                                                                                                                                      |       | Incorporated by reference to Exhibit 4.1  contained in the registration statement on Form SB-2 (File  No. 33-85446-A).                       |
|        |       |                                                                                                                                                                                                                                                   |       |                                                                                                                                                        |
| 4.2         |       | Indenture dated March 31, 1998, as  supplemented on October 29, 1998. October 15, 1999 and  September 10, 2001, among the registrant, TWC International U.S.  Corporation, TWC Finance Corp. and U.S. Trust Company of Texas, N.A. |       | Incorporated by reference to  Exhibit 4(1) contained in the Form 8-K filed on April 14,  1998 (File No.0-25244).                        |
|        |       |                                                                                                                                                                                                                                                   |       |                                                                                                                                                        |
| 4.3         |       | Indenture dated March 31, 1998, as  supplemented on October 29, 1998, October 15, 1999 and  September 10, 2001, between TWC International U.S. Corporation and U.S.  Trust Company of Texas, N.A.                                  |       | Incorporated by reference to  Exhibit 4(III) contained in the Form 8-K filed on  April 14, 1998 (File No. 0-25244).                |
|        |       |                                                                                                                                                                                                                                                   |       |                                                                                                                                                        |
| 4.4         |       | Series A Warrant to Purchase Common Stock  dated March 31, 1998                                                                                                                                                                              |       | Incorporated by reference to  Exhibit 4(VI) contained in the Form 8-K filed on  April 14, 1998 (File No. 0-25244).                 |
|        |       |                                                                                                                                                                                                                                                   |       |                                                                                                                                                        |
| 4.5         |       | Series B Warrant to Purchase Common Stock  dated March 31, 1998                                                                                                                                                                              |       | Incorporated by reference to  Exhibit 4(VII) contained in the Form 8-K filed on  April 14, 1998 (File No. 0-25244)                 |
|        |       |                                                                                                                                                                                                                                                   |       |                                                                                                                                                        |
| 4.6         |       | Series C Warrant to Purchase Common Stock  dated March 31, 1998                                                                                                                                                                              |       | Incorporated by reference to  Exhibit 4(II) contained in the Form 8-K filed on April 14,  1998 (File No. 0-25244).                 |
|        |       |                                                                                                                                                                                                                                                   |       |                                                                                                                                                        |

 

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| 4.7    |   | Series G Warrant to Purchase Common Stock  dated March 31, 1999                                                                                                                                      |   | Incorporated by reference to Exhibit 10.49  contained in the Form 10-KSB filed on May 30, 2000 (File  No. 0-25244).                                                     |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                           |   |                                                                                                                                                                                        |
| 4.8    |   | Agreement  to Amend Warrants dated March 31, 1998 among the Company and the named  Holders                                                                                                                |   | Incorporated by reference to Exhibit 4(VIII) contained  in the Form 8-K filed on April 14, 1998 (File No. 0-25244).                                                |
|   |   |                                                                                                                                                                                                           |   |                                                                                                                                                                                        |
| 10.1   |   | 1993 Incentive Stock Option Plan                                                                                                                                                                               |   | Incorporated by reference to Exhibit 10.13  contained in the registration statement on Form SB-2 (File  No. 33-85446-A).                                                     |
|   |   |                                                                                                                                                                                                           |   |                                                                                                                                                                                        |
| 10.2   |   | Loan Agreement dated June 11, 1997 between  the Company and Value Partners                                                                                                                                |   | Incorporated by reference to Exhibit 10.36  contained in the Form 8-K filed on June 17, 1997 (File  No. 0-25244).                                                       |
|   |   |                                                                                                                                                                                                           |   |                                                                                                                                                                                        |
| 10.3   |   | Loan Agreement dated October 27, 1997,  between Value Partners, and the Company                                                                                                                           |   | Incorporated by reference to Exhibit 10.39  contained in the Form 10-QSB for the quarter ended September 30,  1997, filed on November 12, 1997 (File No. 0-25244). |
|   |   |                                                                                                                                                                                                           |   |                                                                                                                                                                                        |
| 10.4   |   | Employment Agreement between the Company and Rami  S. Ramadan dated July 12, 1999                                                                                                                         |   | Incorporated by reference to Exhibit 10.1  contained in the Form 8-K filed on July 13, 1999 (File  No. 0-25244).                                                        |
|   |   |                                                                                                                                                                                                           |   |                                                                                                                                                                                        |
| 10.5   |   | Amendment to Employment Agreement between the  Company and Rami S. Ramadan dated July 1, 2002                                                                                                             |   | Incorporated by reference to Exhibit 10.5  contained in the Registration Statement on Form S-4 (File  No. 333-101028).                                                       |
|   |   |                                                                                                                                                                                                           |   |                                                                                                                                                                                        |
| 10.6   |   | 1998 Incentive Stock Option Plan                                                                                                                                                                               |   | Incorporated by reference to Exhibit 10.46  contained in the Form 10-KSB filed on May 26, 2000 (File  No. 0-25244).                                                     |
|   |   |                                                                                                                                                                                                           |   |                                                                                                                                                                                        |
| 10.7   |   | 1999 Non-Employee Director Stock Option Plan                                                                                                                                                                   |   | Incorporated by reference to Exhibit 10.47  contained in the Form 10-KSB filed on May 26, 2000 (File  No. 0-25244).                                                     |
|   |   |                                                                                                                                                                                                           |   |                                                                                                                                                                                        |
| 10.8   |   | Form 12% Secured Senior Note due  March 2005                                                                                                                                                         |   | Incorporated by reference to Exhibit 10.48  contained in the Form 10-KSB filed on May 26, 2000 (File  No. 0-25244).                                                     |
|   |   |                                                                                                                                                                                                           |   |                                                                                                                                                                                        |
| 10.9   |   | English Restatement of the Spanish Agreement of  Sale of Casino de Zaragoza                                                                                                                                    |   | Incorporated by reference to Exhibit 99.2  contained in the Form 8-K filed on January 9, 2002 (File  No. 0-22544).                                                      |
|   |   |                                                                                                                                                                                                           |   |                                                                                                                                                                                        |
| 10.10  |   | Form of  Fourth Supplemental Trust Indenture by and among Trans World Corporation, TWG  International U.S. Corp., TWG Finance Corp. and the Bank of New York Trust  Company of Florida, N.A. (as Trustee) |   | Incorporated by reference to Exhibit 10.10  contained in the Registration Statement on Form S-4 (File  No. 333-101028).                                                      |
|   |   |                                                                                                                                                                                                           |   |                                                                                                                                                                                        |
| 10.11  |   | Waiver  and Forbearance of Covenant Violations (Interest) — Primary Indenture                                                                                                                             |   | Incorporated  by reference to Exhibit 10.11 contained in the Registration Statement on  Form S-4 (File No. 333-101028).                                                      |
|   |   |                                                                                                                                                                                                           |   |                                                                                                                                                                                        |

 

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| 10.12  |   | Waiver  and Forbearance of Covenant Violations (Interest) — Finance Indenture                                                                           |   | Incorporated by reference to Exhibit 10.12  contained in the Registration Statement on Form S-4 (File  No. 333-101028).                                                                                                                                                                                                                                                      |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                         |   |                                                                                                                                                                                                                                                                                                                                                                                        |
| 10.13  |   | Indemnification Agreement by and between Value  Partners, Ltd., Trans World Corporation and TWG International U.S.  Corporation dated February 12, 2003 |   | Incorporated by reference to Exhibit 10.13  contained in the Registration Statement on Form S-4 (File  No. 333-101028).                                                                                                                                                                                                                                                      |
|   |   |                                                                                                                                                         |   |                                                                                                                                                                                                                                                                                                                                                                                        |
| 10.14  |   | Agreement  and Plan of Recapitalization dated June 25, 2003 between the Company and  the named Holders                                                  |   | Incorporated by reference to Exhibit 4.9  contained in the Registration Statement on Form S-4 (File  No. 333-101028).                                                                                                                                                                                                                                                        |
|   |   |                                                                                                                                                         |   |                                                                                                                                                                                                                                                                                                                                                                                        |
| 10.15  |   | Form of  8% Rate Promissory Note due 2006                                                                                                               |   | Incorporated by reference to Exhibit 4.10  contained in the Registration Statement on Form S-4 (File  No. 333-101028).                                                                                                                                                                                                                                                       |
|   |   |                                                                                                                                                         |   |                                                                                                                                                                                                                                                                                                                                                                                        |
| 10.16  |   | Form of  Variable Rate Promissory Note due 2010                                                                                                         |   | Incorporated by reference to Exhibit 4.11  contained in the Registration Statement on Form S-4 (File  No. 333-101028).                                                                                                                                                                                                                                                       |
|   |   |                                                                                                                                                         |   |                                                                                                                                                                                                                                                                                                                                                                                        |
| 10.17  |   | 2004 Equity Incentive Plan, as amended                                                                                                                       |   | Incorporated by reference to Appendix E contained  in the Proxy Statement for the 2004 Annual Meeting and from the discussion  contained at page 12-14 of the proxy statement for the 2005 Annual Meeting, at page 14-15 of the  proxy statement for the 2006 Annual Meeting, and at page 14-15 of the  proxy statement for the 2007 Annual Meeting (File No. 0-25244). |
|   |   |                                                                                                                                                         |   |                                                                                                                                                                                                                                                                                                                                                                                        |
| 10.18  |   | Renewal and Amendment of Employment Agreement  between the Company and Rami S. Ramadan, Effective as of July 1, 2005                                    |   | Incorporated by reference to Exhibit 10.18  contained in the Form 10-KSB filed on March 17, 2006 (File  No. 0-25244).                                                                                                                                                                                                                                                   |
|   |   |                                                                                                                                                         |   |                                                                                                                                                                                                                                                                                                                                                                                        |
| 14.0   |   | Code of Ethics                                                                                                                                               |   | Incorporated by reference to Exhibit 14.0  contained in the 2008 Proxy Statement filed on May 14, 2008 (File  No. 0-25244).                                                                                                                                                                                                                                                  |
|   |   |                                                                                                                                                         |   |                                                                                                                                                                                                                                                                                                                                                                                        |
| 21.0   |   | Subsidiaries                                                                                                                                                 |   | Filed herewith.                                                                                                                                                                                                                                                                                                                                                                             |
|   |   |                                                                                                                                                         |   |                                                                                                                                                                                                                                                                                                                                                                                        |
| 23.0   |   | Consent of Rothstein, Kass & Company,  P.C., Independent Registered Public Accounting Firm                                                          |   | Filed herewith - See page 19 of this report.                                                                                                                                                                                                                                                                                                                                                |
|   |   |                                                                                                                                                         |   |                                                                                                                                                                                                                                                                                                                                                                                        |
| 31.0   |   | Section 302 Certification of Chief Executive  Officer and Chief Financial Officer                                                                       |   | Filed herewith.                                                                                                                                                                                                                                                                                                                                                                             |
|   |   |                                                                                                                                                         |   |                                                                                                                                                                                                                                                                                                                                                                                        |
| 32.0   |   | Section 906 Certification of Chief Executive  Officer and Chief Financial Officer                                                                       |   | Filed herewith                                                                                                                                                                                                                                                                                                                                                                              |

 

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**SIGNATURES**

 

Pursuantto the requirements of Section 13 or 15(d) of the Securities ExchangeAct of 1934, the Registrant has duly caused this Report to be signed on itsbehalf by the undersigned, thereunto duly authorized.

 
| ** **                         | ** ** | **TRANS WORLD CORPORATION**                                     |
|------------------------------------|------------|-----------------------------------------------------------------|
|                               |       | (Registrant)                                                    |
|                               |       |                                                            |
| Dated:  *March 12, 2009* |       |                                                            |
|                               | By:        | /s/ Rami S. Ramadan                                             |
|                               |       | Rami S. Ramadan                                                 |
|                               |       | President, Chief Executive Officer and Chief  Financial Officer |
|                               |       | (Principal Executive and Financial Officer)                     |

 

Pursuantto the requirements of the Securities Exchange Act of 1934, this Report hasbeen signed by the following persons on behalf of the Registrant on *March 12, 2009* in the capacities indicated.

 
| ** ** | **Signature and Title**                                                                                                                   |
|------------|-------------------------------------------------------------------------------------------------------------------------------------------|
|       |                                                                                                                                      |
|       | /s/ Rami S. Ramadan                                                                                                                       |
|       | Director, President, Chief Executive Officer and  Chief Financial officer (Principal Executive Officer and Principal Accounting  Officer) |
|       |                                                                                                                                      |
|       | /s/ Geoffrey B. Baker                                                                                                                     |
|       | Director                                                                                                                                  |
|       |                                                                                                                                      |
|       | /s/ Timothy G. Ewing                                                                                                                      |
|       | Director                                                                                                                                  |
|       |                                                                                                                                      |
|       | /s/ Julio E. Heurtematte, Jr.                                                                                                        |
|       | Director                                                                                                                                  |
|       |                                                                                                                                      |
|       | /s/ Malcolm M.B. Sterrett                                                                                                                 |
|       | Director and Chairman of the Board                                                                                                        |

 

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