**SECURITIES AND EXCHANGE COMMISSION**

**WASHINGTON, D.C. 20549**

 

**FORM 10-KSB**

 

| **ý** | ** ** | **ANNUAL REPORT PURSUANT TO  SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934** |
|------------|------------|-------------------------------------------------------------------------------------------|

 

**For the Year Ended December 31, 2005**

 

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

 

**For the transition period from                          to                          .**

 

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

 

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**TRANS WORLD CORPORATION**

(Exact name of registrant as specified in itscharter)

 

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

 

Registrant’s telephone number, including areacode:  **(212)983-3355**

 

Securities registered pursuant to Section12(b) of the Act: **None**Securities registered pursuant to Section 12(g) of the Act:

 

**Common Stock, $.001 par value**

 

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Indicateby check mark if the registrant is a well-known seasoned issuer, as defined inRule 405 of the Securities Act. Yes  o   Noý

 

Indicate by check mark whether theRegistrant (1) has filed all reports required to be filed by Section 13 or15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (orfor such shorter period that the Registrant was required to file such reports),and (2) has been subject to such filing requirements for the past 90 days. YES   ý     NO   o

 

Indicate by check mark if disclosure ofdelinquent filers pursuant to Item 405 of Regulation S-B is not containedherein, and will not be contained, to the best of Registrant’s knowledge, indefinitive proxy or information statements incorporated by reference inPart III of this Form 10-KSB or any amendment to this Form 10-KSB. o

 

Indicateby check mark whether the registrant is a large accelerated filer, anaccelerated filer, or a non-accelerated filer. See definition of “acceleratedfiler and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Checkone):
| Large  accelerated filer o  | Accelerated  filer o | Non-accelerated  filer ý |
|----------------------------------|----------------------|-------------------------------|

 

Indicateby check mark whether the registrant is a shell company (as defined in Rule12b-2 of the Act). Yes o   Noý

 

The issuer’s revenues for the year ended December 31, 2005 wereapproximately $23,249,000.

 

The aggregate market value of Common Stock of the Registrant as of March16, 2006, based upon the average bid and asked price of $2.50 as reported on theOTC Bulletin Board on that date, was $19,602,143. There were 7,840,869 sharesof Common Stock of the Registrant deemed outstanding as of said date.

 

Transitional Small Business Disclosure Format (check one:   YES   o     NO   ý)

 

 

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**TRANS WORLD CORPORATIONFORM 1O-KSB**

** **

**TABLE OF CONTENTS**

 
| PART I. |     |                                                        |   |
|---------|----------|-------------------------------------------------------------|--------|
|    | Item 1.  | Description of Business                                     |   |
|    |     | General Development of Business                             |   |
|    |     | Corporate  Information                                      |   |
|    |     | OTC  Bulletin Board                                         |   |
|    |     | Description  of Business                                    |   |
|    |     | Market Overview and Competition                             |   |
|    |     | The  Company’s Facilities                              |   |
|    |     | Future  Operations                                          |   |
|    |     | Long  Range Objective                                       |   |
|    |     | Marketing                                                   |   |
|    |     | Regulations  and Licensing                                  |   |
|    |     | Application of Future or Additional Regulatory Requirements |   |
|    |     | Gaming  Taxes                                               |   |
|    |     | Competition                                                 |   |
|    |     | Employees                                                   |   |
|    | Item 2.  | Description of Property                                     |   |
|    |     | Corporate  Offices                                          |   |
|    |     | Czech  Republic                                             |   |
|    | Item  3. | Legal  Proceedings                                          |   |
|    | Item 4.  | Submission of Matters to a Vote of Security Holders         |   |

 

i

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**TABLE OF CONTENTS**

 
| PART II. |    |                                                                                  |   |
|----------|---------|---------------------------------------------------------------------------------------|--------|
|     | Item 5. | Market for Common Equity and Related Stockholder Matters                              |   |
|     |    | $4.75  million Capital Raise                                                          |   |
|     |    | Reverse  Stock Split                                                                  |   |
|     | Item 6. | Management’s Discussion and Analysis or Plan of Operations                       |   |
|     |    | Forward-Looking  Statements                                                           |   |
|     |    | Exchange  Rates                                                                       |   |
|     |    | Critical Accounting Policies                                                          |   |
|     |    | Results  of Operations                                                                |   |
|     |    | Business  Units                                                                       |   |
|     |    | Route  59, Czech Republic                                                             |   |
|     |    | Ceska,  Czech Republic                                                                |   |
|     |    | Rozvadov,  Czech Republic                                                             |   |
|     |    | Hollywood Spin, Czech Republic                                                        |   |
|     |    | Route  55, Czech Republic                                                             |   |
|     |    | Liquidity and Capital Resources                                                       |   |
|     |    | Plan of Operations and Important Factors to Consider                                  |   |
|     |    | Positive Stockholders’ Equity; Positive Operating Income                         |   |
|     |    | Need  to Diversify                                                                    |   |
|     |    | Taxation of Gaming Operations                                                         |   |
|     |    | Dependence upon Key Personnel                                                         |   |
|     |    | Need for Additional Financing                                                         |   |
|     |    | International  Activities                                                             |   |
|     |    | Licensing  and Regulation                                                             |   |
|     |    | Liability  Insurance                                                                  |   |
|     |    | No  Dividends                                                                         |   |
|     |    | Possible Adverse Effect of Issuance of Preferred Stock                                |   |
|     |    | Dilutive Effect of Warrants and Options                                               |   |
|     | Item 7. | Financial Statements                                                                  |   |
|     | Item 8. | Changes In and Disagreements with  Accountants on Accounting and Financial Disclosure |   |

 

ii

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**TABLE OF CONTENTS**

 
| PART  III.                                 |     |                                                                                                                 |   |
|--------------------------------------------|----------|----------------------------------------------------------------------------------------------------------------------|--------|
|                                       | Item 9.  | Directors and Executive Officers, Promoters  and Control Persons: Compliance with Section 16(A) of the Exchange Act. |   |
|                                       |     | Information about the Board and its  Committees                                                                      |   |
|                                       |     | Audit Committee                                                                                                      |   |
|                                       |     | Compensation Committee                                                                                               |   |
|                                       |     | Nominating Committee                                                                                                 |   |
|                                       |     | Section 16 (A) Beneficial Ownership Reporting  Compliance                                                            |   |
|                                       | Item 10. | Executive Compensation                                                                                               |   |
|                                       |     | Summary of Cash and Certain Other  Compensation                                                                      |   |
|                                       |     | Option Grants and Exercises                                                                                          |   |
|                                       |     | Directors’ Compensation                                                                                         |   |
|                                       |     | Employment/Severance Agreements                                                                                      |   |
|                                       |     | Code of Ethics                                                                                                       |   |
|                                       | Item 11. | Security Ownership of Certain Beneficial  Owners and Management                                                      |   |
|                                       | Item 12. | Certain Relationships and Related  Transactions                                                                      |   |
|                                       | Item l3. | Exhibits and Reports on Form 8-K                                                                                     |   |
|                                       |     | (a)Exhibits                                                                                                          |   |
|                                       |     | (b)Reports on Form 8-K                                                                                               |   |
| EXHIBITS INDEX                             |     |
| SIGNATURES AND CERTIFICATIONS              |     |
| INDEX TO CONSOLIDATED FINANCIAL STATEMENTS |     |

 

iii

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**Item 1. Descriptionof Business.**

 

**General Development of Business**

 

Trans World Corporation (hereinafter referredto as the “Company” or “TWC”) was organized as a Nevada corporation in October1993 for the acquisition, development and management of gaming establishmentsto the extent permitted by applicable local laws, featuring live and mechanizedgaming, including video gaming devices such as video poker machines. In 1998,the Company amended its operating strategy by shifting its focus to the casinomarket in Europe. Today, TWC owns and operates four full-service casinos in theCzech Republic, which are located in Ceska Kubice (“Ceska”), Rozvadov (“Rozvadov”),Hate (“Route 59”), and, since December 19, 2004, Dolni Dvoriste (“Route 55”). Thecasinos, which operate under the brand name American Chance Casinos (“ACC”) andshowcase themes portraying recognizable eras of American history, are situatedat border locations and draw the majority of their clients from Germany andAustria. Each of the casinos has a distinctive theme: Pacific South Seas,Chicago in the Roaring 20’s, Southern Antebellum and Miami Beach in the 1950’s.ACC’s operating strategy centers on differentiating its products from the veryformal German and Austrian casinos. Management has endeavored to create gamingenvironments with casual and exciting atmospheres with an emphasis onentertainment. Further, as part of the ACC operating formula, management strivesto uphold the integrity and professionalism of its American-owned operations asa means to dispel any concerns that German and Austrian clients might haveabout gambling in the Czech Republic.

 

TWC, which is headquartered in New York City,has no operating presence in the United States.

 

**CorporateInformation**

 

The Company’s corporate offices are locatedat 545 Fifth Avenue, Suite 940, New York, New York 10017, its telephone numberis (212) 983-3355, and its website is www.transwc.com, which is not a part of this Form 10-KSB.

 

**OTCBulletin Board**

 

The Company’s Common Stock is quoted on theOTC Bulletin Board under the symbol TWOC.OB.

 

**Descriptionof Business**

 

The Company is engaged in the acquisition,development and management of niche casino operations in Europe, which featuregaming tables and mechanized gaming devices, such as slot and video pokermachines, as well as the acquisition, development and management of small tomidsize hotels, which may include casino facilities. In anticipation of its logicalexpansion into the hotel industry in order to complement its casino operations,the shareholders voted to amend the Company’s Articles of Incorporation bychanging its name from “Trans World Gaming Corp.” to “Trans World Corporation”in July 2000. The Company’s name change was based on the importance ofaccurately conveying its desired identity as more than just an owner/operatorof gaming operations. TWC’s planned expansion into the hotel industry isfounded on management’s belief that hotels in the small to midsize boutiqueclass are complementary to the Company’s casino brand, that opportunities inone of these two industries often lead to, or are tied to, opportunities in theother industry, and that a more diversified portfolio of assets will give theCompany greater stability and make it more attractive to potential investors. Further,several of the Company’s top management have extensive experience in the hotelindustry.

 

 

1

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**Market Overview and Competition**

 

The Company acquired two of its casinos inthe Czech Republic in March 1998, where they were the only casinos in the localmarket area. Prior to December 1998, local municipalities were empowered togrant casino licenses in their regions. However, after that time, amendments tothe Czech gaming legislation removed that right from the local governments andeffectively eliminated exclusivity. Since this licensing change, four casinoshave opened in Folmava, Czech Republic, which operate in direct competitionwith the Company’s Ceska casino due to their proximity. Route 59 currently hasonly two competitors: one remaining from four that were in existence two yearsago and a new competitor, which is similarly located in the former duty freezone between the Czech and Austrian border posts. The Company’s newest casino,Route 55, which opened on December 19, 2004, has one immediate competitor. Inearly 2000, in response to increased competition from casinos located in theCzech Republic, the German government issued 12 new gaming licenses in theBavarian region of Germany. Two of the Bavarian casinos that went intooperation in spring of 2000 as a result of the additional licenses haveoperated in direct competition with TWC’s casinos in Ceska and Rozvadov. Further,in June 2003, a new competitor casino opened across the street from theRozvadov casino.

 

Casinos in Germany and Austria have formalatmospheres and an air of exclusivity. ACC’s casinos offer relaxed but excitingand informal atmospheres, which have become a desirable alternative. Further,ACC has established itself as a reputable casino company in the Czech Republicthrough its high customer service standards, professional service, and strictadherence to all local gaming regulations.

 

In conformity to the European Union (“EU”)taxation legislation, when the Czech Republic joined the EU in 2004, its valueadded tax (“VAT”) increased from 5% to 19%, effective January 2004, for all intra-EUgenerated purchases. All non-EU generated purchases were impacted by identicalVAT increases, beginning in May 2004. Unlike in other industries, VATs are notrecoverable for gaming operations.

 

**The Company’s Facilities**

** **

The Ceska casino, which has a 1920’s Chicago theme, currently has 16gaming tables, including seven card tables, eight roulette tables, and oneelectro-mechanical, eight-position roulette machine. It also has 48 slotmachines, and parking for approximately 60 cars.

 

The Rozvadov casino, which has a South Pacific theme, currently operates10 gaming tables, including five card tables and five roulette tables, 30 slotmachines; and parking for 40 cars.

 

Route 59 features a Southern Antebellum theme and includes 22 gamingtables, which consist of 12 card tables, eight roulette tables, and twoelectro-mechanical roulette machines, 60 slot machines; and parking forapproximately 120 cars.

 

OnDecember 19, 2004, TWC opened Route 55, its largest casino to date. The casinofeatures a Miami Beach “Streamline Moderne” style, reminiscent of Miami Beachin the early 50’s. The two-story casino offers 21 tables (eight AmericanRoulette, seven Blackjack, four Poker and two electronic multi-roulettes) and 94slot machines on the main gaming floor, and, on the mezzanine level, a fullItalian, Pompeii-themed restaurant with seating for 70 guests; an open buffetarea; a VIP lounge; and a VIP gaming room.

 

2

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**FutureOperations**

 

TheCompany’s management is now focused on securing additional financing to acquireand develop new business units. Additionally, the Company is involved inseveral development projects, including the potential development of hotels inHate and in Folmava, Czech Republic, and the potential acquisition of existinghotels in Europe. There can be no assurances that management’s plans will berealized.

 

**Long RangeObjectives**

 

The Company’s existing operations are located exclusively in the CzechRepublic and in the gaming industry. Consequently, the Company’s seniorcorporate management, several of whom have extensive experience in the hotelindustry, are exploring ways to expand the Company through the acquisition and/ordevelopment of new non-gaming business units, while continuing to grow theCompany’s existing Czech Republic operations. Acquisitions will be based onevaluations of the potential returns of projects that arise and theavailability of financing to purchase additional assets.

 

# **Marketing**

# ** **

In the year ended December 31, 2005, the Company further increased itsmarketing and promotional programs in an effort to secure and enhance itscompetitive position in the respective markets that it serves. The casino eventcalendars were broadened to attract new players, while focusing on higherplayer-incentive games to retain existing players. In addition, the Company continuedits sponsorships of several athletic teams and community projects during theyear, as a way to further promote its image and positive contribution to thecommunities in which the Company operates. The Company also continued its popular,ethnic-themed and holiday-related parties, which feature live entertainment,raffles and complimentary grand buffets. Further, the Company aggressivelytargeted key cities in its media campaigns, most notably Vienna, Linz and Regensburgand the areas surrounding these cities. (See Item 6. “Management’s Discussionand Analysis or Plan of Operations – Results of Operations – Business Units.”)

 

# **Regulationsand Licensing**

# ** **

In 1998, the Czech Republic House of Deputies passed an amendment tothe gaming law, which restricted foreign ownership of casino licenses. Inresponse, the Company restructured its subsidiaries and Czech legal entities tocomply with the amendment and was subsequently granted a 10-year gaming license.There can be no assurance that the authorities in the Czech Republic will notamend the gaming law as it pertains to foreign ownership of casino licenses. Inthe event the gaming laws are amended in the future, it may have a materialadverse effect on the Company’s future profitability and operations. Further,there has been increased competition in the areas where the Company operatesbecause local municipalities no longer have control over the issuance of casinolicenses, thereby effectively eliminating exclusivity.

 

**Application of Future or Additional Regulatory Requirements**

 

In the future, TWC may seek the necessary licenses, approvals andfindings of suitability in other jurisdictions, where the Company plans to conductbusiness. However, there can be no assurance that such licenses, approvals orfindings of suitability will be obtained or will not be revoked, suspended orconditioned or that the Company will be able to obtain the necessary approvalsfor its future activities.

 

3

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**GamingTaxes**

 

Gaming tax rates in the Czech Republic averagedapproximately 14.7% of total gaming revenues for the year ended December 31, 2005and currently consist of gaming taxes of 11% of total gaming revenue, charitytaxes of 10% of total gaming revenue net of gaming taxes, and 6% of slotrevenue of 50.0 million Czech Korunas (“CZK”) (approximately $2.0 million) orless or 8% if above this threshold (both net of slot licensing fees). There canbe no assurances that tax rates, fees, or other payments applicable to theCompany’s gaming operations will not be increased in the future.

 

**Employees**

 

As of December 31, 2005, the Company had a total of 514 employees,including 121 in its casino in Ceska, 70 in its casino in Rozvadov, 164 in Route59, 142 in Route 55, 12 in its shared services office in the Czech Republic,and five in the Company’s headquarters in New York. The Company believes thatits employee relations are excellent.

 

**Item 2. Description of Property.**

 

**CorporateOffices**

 

The Company’s corporate offices are locatedat 545 Fifth Avenue, Suite 940, New York, New York, occupying 1,626 square feetof office space pursuant to the renewal of its five-year lease at the base rentalrate of $5,014 per month, expiring in March 2010.

 

**CzechRepublic**

 

The Company leases the casino facility in Ceska Kubice. The casinobuilding lease expires in 2010. The Company also owns a parcel of land in Folmava,Czech Republic in the same region as the existing Ceska casino.

 

The Company leases accommodations for staff in Ceska Kubice, Hate (Route59) and in Dolni Dvoriste (Route 55).

 

In Rozvadov, the Company owns the casinobuilding and an adjacent facility for staff accommodations.

 

In March 2002, the Company exercised its right to buyout (purchase) theRoute 59 building lease. The building lease buyout, of €1.6 million, or approximately$1.9 million using 2005 year-end exchange rate, was financed by a loan from alocal bank in the Czech Republic. Thebank note, which is payable in monthly installments through December 2006,bears interest at 6.2% per annum and is collateralized by the Route 59 buildingand the Company’s Rozvadov casino and an employee housing building.

 

In April 2002, TWC acquired a parcel of land inDolni Dvoriste, Czech Republic. On this parcel, the Company constructed its fourthand largest casino, Route 55, which was completed in December 2005. The casino’sconstruction was financed in part through a 60 million CZK (or approximately$2.4 million using 2005 year-end exchange rate), 5.95% interest per annum,58-month term loan with GE Capital Bank a.s.. The loan is collaterized bythe land, building, furniture, fixtures and equipment in Dolni Dvoriste and theland in Folmava.

 

4

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**Item 3.**   **LegalProceedings.**

 

The Company is not currently involved in any other material legalproceeding nor was it involved in any other material litigation during the yearended December 31, 2005, or through the date of this filing.

 

**Item 4.**   **Submission of Matters to a Vote of Security Holders.**

 

No matter was submitted to a vote of security holders during the fourthquarter of the fiscal year covered by this Report.

 

## **PARTII**

## ** **

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

 

The Company’s Common Stock is quoted on theOTC Bulletin Board under the symbol TWOC.OB (formerly TWCP.OB).

 

## **$4.75 million Capital Raise**

## ** **

InDecember 2005, the Company sold $4.75 million of the Company’s Common Stock, ina private placement (the “$4.75 million Capital Raise”) to selected “accreditedinvestors,” as defined in Rule 501(a) of Regulation D promulgated under theSecurities Act of 1933, as amended (the “Securities Act”). The market price atthe time of closing the $4.75 million Capital Raise was $1.70 per share. Thereby,the Company issued an aggregate of 2,794,188 shares of Common Stock on twoseparate dates: 1,911,835 on December 22, 2005and 882,353 onDecember 27, 2005. In conjunction with the transaction, the firm that assistedin the arrangement of the private placement requested to have a portion of itsfinder’s fee paid in shares of the Company’s Common Stock. Thus, on December30, 2005, the Company issued an additional 15,000 shares at market price of$1.70. The Company incurredapproximately $257,000 in associated expenses that were capitalized intoadditional paid-in capital. The private equity raise is intended for use forthe following purposes:

 

•                  Renovation and expansion of Route 59;

•                  Capital enhancements in Route 55;

•                  Purchase and upgrade of gaming equipment; and

•                  Additional working capital for the Company.

 

**Reverse Stock Split**

 

On March 5, 2004, TWC’s Board of Directors(the “Board”) approved a one (1)-for-one hundred (100) reverse stock split ofits Common Stock, with all fractional shares being rounded up to the next wholeshare. The reverse stock split was effective on April 5, 2004. Stockholders’equity was restated to give retroactive recognition to the stock split for allperiods presented by reclassifying from common stock to additional paid-incapital for the par value of the diminished shares arising from the reversesplit. In addition, all references herein and in the consolidated financialstatements to the number of shares and per share amount were restated.

 

5

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As of March 16, 2006, the Company’s stock pricewas $2.50. The following table sets forth the high and low prices of theCompany’s Common Stock for fiscal years 2004 and 2005 as quoted on OTC BulletinBoard.

 
| **Common Stock** | ** ** | **High** | ** ** | **Low** | ** ** |
|------------------|------------|----------|------------|---------|------------|
| **2004**         |       |     |       |    |       |
| First  Quarter   |       | $        | 5.00       |    | $          | 2.00 |   |
| Second  Quarter  |       | $        | 5.00       |    | $          | 2.50 |   |
| Third  Quarter   |       | $        | 5.00       |    | $          | 2.70 |   |
| Fourth  Quarter  |       | $        | 3.90       |    | $          | 2.75 |   |
| **2005**         |       |     |       |    |       |
| First  Quarter   |       | $        | 3.05       |    | $          | 2.50 |   |
| Second  Quarter  |       | $        | 3.50       |    | $          | 2.50 |   |
| Third  Quarter   |       | $        | 2.70       |    | $          | 2.35 |   |
| Fourth  Quarter  |       | $        | 2.00       |    | $          | 1.60 |   |

 

As of March 16, 2006, there were (a) 7,840,869outstanding shares of Common Stock held of record by approximately 114 holders;(b) outstanding options to purchase an aggregate of 185,360 shares of CommonStock; (c) outstanding $1.00 Series C Warrants to purchase an aggregate of 10,131shares of Common Stock issued in connection with the March 1998 PrivatePlacement, with 6,074 of this series having been exercised; (d) outstanding $1.00Series G warrants to purchase an aggregate 1,251 shares of Common Stock.

 

**Item 6.   Management’s Discussion andAnalysis or Plan of Operations.**

 

**Forward-LookingStatements**

 

This Form 10-KSB contains certainforward-looking statements. For this purpose, any statements contained in thisForm 10-KSB that are not statements of historical fact may be deemed to beforward-looking statements. Without limiting the foregoing, words such as “may,”“will,” “expects,” “believes,” “anticipates,” “estimates,” or “intends” orcomparable terminology are intended to identify certain forward-lookingstatements in this and other sections of the Form 10-KSB. These statements bytheir nature involve substantial risks and uncertainties, and actual resultsmay differ materially depending on a variety of factors, including those setforth in the section below entitled “Important Factors to Consider.”

 

**ExchangeRates**

 

Due to the fact that the Company’s operationsare located overseas, the results of the Company are subject to the impact offluctuations in foreign exchange rates. In May 2004, the Czech Republic joined theEuropean Union (“EU”), but has not yet adopted the Euro (“EUR”) currency. Thus,the Company’s operations conducted business in EURs and Czech Korunas (“CZK”), thecountry’s local currency.

 

In a reversalof the 2004 trend, the U.S. Dollar (“USD”) strengthened against the EUR and CZKcurrencies in 2005. Consequently, this strengthening of the USD had a negativeimpact on the Company’s earnings.

 

6

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The impact of exchange rate fluctuations canbe measured through a comparison of the rates of exchange for these twocurrencies to the USD, which are depicted on a quarterly basis, showing thetrend, in the following table. 

 
| **Period**                | ** ** | **USD** | ** ** | **CZK  2005** | ** ** | **CZK  2004** | ** ** | **EUR  2005** | ** ** | **EUR  2004** | ** ** |
|---------------------------|------------|---------|------------|---------------|------------|---------------|------------|---------------|------------|---------------|------------|
|                      |       |    |       |          |       |          |       |          |       |          |       |
| January  through March    |       | $       | 1.00       |          | 22.9139    |          | 26.3223    |          | 0.7623     |          | 0.8009     |   |
| April  through June       |       | $       | 1.00       |          | 23.9565    |          | 26.6319    |          | 0.7941     |          | 0.8299     |   |
| July through  September   |       | $       | 1.00       |          | 24.3836    |          | 25.8847    |          | 0.8197     |          | 0.8181     |   |
| October  through December |       | $       | 1.00       |          | 24.6842    |          | 24.0779    |          | 0.8410     |          | 0.7719     |   |

 

The balance sheet totals of the Company’sforeign subsidiaries at December 31, 2005 were converted to USDs using theprevailing exchange rates at December 31, 2005, which are depicted in thefollowing table. 

 
| **As Of**          | ** ** | **USD** | ** ** | **CZK** | ** ** | **EUR** | ** ** |
|--------------------|------------|---------|------------|---------|------------|---------|------------|
| December 31,  2005 |       | $       | 1.00       |    | 24.5390    |    | 0.8444     |   |
|                    |            |         |            |         |            |         |            |  |

 

**Critical Accounting Policies**

 

Management has identified the following as critical accountingpolicies that affect the Company’s consolidated financial statements.

 

*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. Under Statement ofFinancial Accounting Standards (“SFAS”) No. 142, goodwill is no longer subjectto amortization over its estimated useful life; rather, goodwill is subject toat least an annual assessment for impairment, applying a fair-value based test.The impairment assessment requires the Company to compare the fair value of itsCzech Republic reporting unit, the Company’s only reporting unit as definedunder SFAS No. 142, to its carrying value (the net equity of the Company) todetermine whether there is an indication that an impairment exists. The fairvalue of the Czech Republic reporting unit is determined through a combinationof recent appraisals of the Company’s real property and a multiple of earningsbefore interest, taxes, depreciation and amortization (“EBITDA”), which was basedon the Company’s experience and data from independent, third parties. Duringthe second quarter of 2004 and 2005, as required by SFAS No. 142, the Companyperformed the fair-value based testing of the carrying value of goodwillrelated to its Czech Republic reporting unit, and determined that no recordingof impairment losses was warranted.

 

7

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**Results ofOperations**

 

The following discussion and analysis relates to the consolidatedfinancial condition and results of operations of the Company for the yearsended December 31, 2005 and 2004.

 

**Year Ended December 31, 2005 Compared to YearEnded December 31, 2004**

 

($000s in thousands)

 
| ** **                           | ** ** | **Year Ended**        | ** ** | ** ** | ** ** | **Year Ended**        | ** ** |
|--------------------------------------|------------|-----------------------|------------|------------|------------|-----------------------|------------|
| ** **                           | ** ** | **December 31, 2004** | ** ** | **Change** | ** ** | **December 31, 2005** | ** ** |
|                                 |       |                  |       |       |       |                  |       |
| Net income                           |       | $                     | 1,247      |       |       |                  |       |   |
| Revenues                             |       |                  |       | 4,311      |       |                  |       |
| Cost of  revenues                    |       |                  |       | (3,495     | )          |                  |       |
| Depreciation  and amortization       |       |                  |       | (243       | )          |                  |       |
| Selling,  general and administrative |       |                  |       | (1,862     | )          |                  |       |
| 2004  preopening expenses            |       |                  |       | 197        |       |                  |       |
| Interest  expense, net               |       |                  |       | (41        | )          |                  |       |
| Other                                |       |                  |       | (35        | )          |                  |       |
| Net income                           |       |                  |       | (1,168     | )          | $                     | 79         |   |
|                                      |            |                       |            |            |            |                       |            |  |  |

 

In the year ended December 31, 2005, the Company posted a 22.8%, or $4.3million, improvement on revenues of $23.2 million versus $18.9 million in theyear ended December 31, 2004. The improvement was largely the result of theaddition of the Company’s newest operating unit, Route 55. The growth inrevenue was attributable to a 19.3% attendance improvement, which in turn contributedto 12.9% growth in total drop. Slot revenues in 2005 increased 61.9% over thesame period in 2004, with Route 55 contributing approximately 73% of theincrease. Attendance also improved as a consequence of the Company’s efforts toenhance player benefits and customer service programs, along with a greater andmore substantive offering of promotional events.

 

The Company’s cost of revenues increased by $3.5 million over the prioryear as a result of several factors, the principal contribution of which was theincremental costs of operating Route 55. Other factors that also contributed tothe increase in cost of revenues included: (i) higher revenue-based expenses;(ii) greater amenity expenses related to the refinement of player benefitprograms; (iii) higher labor costs related to quality and service enhancements infood and beverage operations; (iv) foreign exchange-related transactional losses,compared with a 2004 overall gain; and (v) higher utilities expenses from acolder winter.

 

Depreciation and amortization expense increased by $243,000 in year 2005versus the prior year, due primarily to the addition of Route 55.

 

Selling, general and administrative expenses increased by approximately$1.9 million in year 2005 in comparison to those of 2004, in large part, as aresult of the incremental costs of adding Route 55 and its associated launchingand initial marketing costs as well as to higher promotional expenditures to increaseand retain market share in the Company’s other units.

 

Interest expense increased by $41,000 in 2005 versus the prior year duemainly to the Route 55 construction loan.

 

Other income decreased $35,000 in 2005 due to the elimination ofinterest earned from the Company’s foreign bank deposits and from a gain on thesale of outdated slot machines of $27,000 in 2004.

 

Consequently, the Company posted a positive net income of approximately$79,000 for the year ended December 31, 2005, versus an approximate net incomeof $1.2 million for the year ended December 31, 2004.

 

8

----

 

**BusinessUnits:**

 

***Ceska, Czech Republic***

 

2005 was a year of notable growth for Ceska. Attendance surged 13% overthe year ended December 31, 2004 as the ongoing Regensburg, Germany marketingcampaign paid off. The increase in attendance boosted total drop by 5.4% whilegiving up 6.7% of drop per head (“DpH”), the per guest average dollarvalue of gaming chips purchased, versus 2004. Total revenue increased by34.2%, due, in part, to a win percentage gain of 3.6 percentage points (“ppts”) and slotrevenue improvement of 89%, compared to last year. Operating expenses in 2005,as a percentage of revenue, were 7.8 ppts lower than 2004, due to the largelywin-driven revenue. The casino’s overhead expenses were notable for higher foreignexchange-related expenses, which totaled approximately $46,000 in 2005,compared with a credit of $22,000 in 2004. Nevertheless, the large improvementin revenues more than compensated for these expenses and resulted in an EBITDAimprovement of nearly double that of 2004.

 

***Rozvadov, Czech Republic***

 

Rozvadovsaw a 16% increase in 2005 in attendance from the same period in 2004, due to arobust slate of promotional activities that had not been previously introducedat this venue due to space limitations. Total drop increased by 5.2% as aresult of better attendance, while DpH dipped 9.3% below 2004. Total revenue,which improved over last year by 4.5% did not fully benefit from the bettertotal drop, as the win percentage fell 3.7 ppts below the prior year, due tosome large wins by the casino’s players. Operating and overhead expenses in2005 were higher than 2004, notably due exchange-related expenses, which were$25,000 versus a credit of $14,000 in 2004, and higher utilities expenses,which increased by 163% due to the abnormally cold winter experienced in theregion in 2005.

 

***Route 59, Czech Republic***

 

Inthe year ended December 31, 2005, Route 59 experienced a decline in businessvolume as a result of greater competition and the fewer visits by the casino’shigh-stake players. The casino completed its fifth full-year of operation sinceopening in December 1999. The 8.2% improvement in DpH was not sufficient tooffset the 18.6% decline in attendance. Further exacerbating the decline intotal drop was the 1.6 ppts in TWC’s win percentage, as a result of severallarge wins by the casino’s regular players. Thus, total revenue in 2005 was offby 17.8%, or approximately $2.0 million, from the same period a year ago. Expenseswere within recognized standards, with the exception of foreignexchange-related charges, which increased by approximately $89,000.

 

***Route 55, Czech Republic***

 

In2005, Route 55 completed its first full year of operation. The Companyofficially launched the casino on January 29, 2005 with a hosted,invitation-only gala event that was attended by a wide range of guests,including high-profile celebrities, sports legends, local politicians from bothsides of the border, news reporters from television stations in Linz anddistinguished guests of both TWC and ACC. During 2005, the Company focused onpromotional events, a varied mix of live games and superior guest services inorder to develop a strong client base. Revenues achieved in 2005 were modestdue to delays in marketing programs. Recruiting, training and staffing of theunit posed a challenge as the local labor pool was inadequate and untrained. However,performance indicators were positive in trend, and average daily attendance hasimproved by approximately 30% during the period of January 1, 2005 throughDecember 31, 2005.

 

***             Hollywood Spin Slot Room andBar, Czech Republic***

 

Fromthe outset of operations in September 2003, attendance at the Freeport DesignerOutlet Mall, where Hollywood Spin was located, was insufficient to sustain theoperation. In December 2005 and pursuant to the terms of the lease, the Companyclosed Hollywood Spin. The Company alleges that the landlord failed to honorits contractual obligation under the lease relative to efforts to bringattendance to the mall. Accordingly, the Company is considering its legaloptions regarding this issue.

 

9

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**Liquidity and Capital Resources**

 

TheCompany had a positive working capital of $161,000 at December 31, 2005 versusa deficit of approximately $4.7 million at December 31, 2004, primarily as aresult of equity investments (i.e. cash infusion) from the sale of its Common Stock(see Part II - Item 5.  Market for Common Equity and RelatedStockholder Matters) in December2005 and from partial proceeds of a construction term loan from GE Capital Banka.s. in the amount of 60 million CZKs (or approximately $2.4 million using yearend exchange rates), of which only 10 million CZKs (or approximately $408,000using year end exchange rates) was drawn as of December 31, 2004.

 

For the year ended December 31, 2005, the Company had net cash providedby operating activities of approximately $1.5 million. This was primarily aresult of net income of approximately $79,000, an increase in cash of $1,055,000from higher Czech tax accrual,  anincrease of operational accounts payable of $570,000, an increase in cash of $66,000attributable to change in deposits and other assets, and $737,000 ofdepreciation and amortization, which were partially offset by $746,000 fromchanges in accrued expenses and other current liabilities, a decrease in cashof $112,000 as a result of increases in prepaid expenses and other currentassets and $111,000 of non-cash activity. For the year ended December 31, 2005,net cash used in investing activities was approximately $2.5 million and wasused primarily for the construction of the Company’s newest casino, Route 55,and minor additions to, and replacements of, casino equipment. Net cashprovided by financing activities of approximately $5.0 million included gross proceedsfrom the $4.75 million Capital Raise, approximately $2.1 million from theproceeds of the Route 55 construction loan, which were partially offset byapproximately $1.7 million in repayments of the Interest Notes and otherlong-term debts related to the Route 59 building lease purchase and the Route55 construction loan, plus $197,000 for the payoff of an unsecured, promissorynote.

 

The Company is also obligated under various contractual commitmentsover the next five years. The following is a summary of the five-yearcommitments of the Company as of December 31, 2005:

 
| **(in thousands)**             | ** ** | ** ** | ** ** | **Less than** | ** ** | ** **    | ** ** | ** **    | ** ** | **After**   | ** ** |
|--------------------------------|------------|------------|------------|---------------|------------|---------------|------------|---------------|------------|-------------|------------|
| **Contractual Obligations**    | ** ** | **Total**  | ** ** | **1 Year**    | ** ** | **1-3 Years** | ** ** | **4-5 Years** | ** ** | **5 Years** | ** ** |
|                           |       |       |       |          |       |          |       |          |       |        |       |
| Long-term,  unsecured debt, US |       | $          | 2,005      |          | $          | 455           |       | $             | 1,550      |        |       |   |   |   |
| Long-term  debt, foreign       |       | 2,542      |       | 925           |       | 1,532         |       | 85            |       |        |       |
| Operating  leases              |       | 477        |       | 114           |       | 223           |       | 140           |       |        |       |
| Employment  agreements         |       | 1,100      |       | 550           |       | 550           |       |          |       |        |       |
|                           |       |       |       |          |       |          |       |          |       |        |       |
| Total  contractual obligations |       | $          | 6,124      |          | $          | 2,044         |       | $             | 3,855      |        | $          | 225 |   | $ | — |   |
|                                |            |            |            |               |            |               |            |               |            |             |            |  |  |  |  |  |

 

The Company’smanagement believes that its cash resources at December 31, 2005 and anticipatedcash to be provided by 2006 operations will be sufficient to fund itsactivities for the year ending December 31, 2006.

 

**Plan of Operations and Important Factors to Consider:**

 

TWC management will continue to develop marketing and operationalstrategies designed to increase attendance and revenues at its existinglocations in the Czech Republic.

 

InJanuary 2006, the Company finalized the design of a renovation and expansionplan for its Route 59 casino. Construction work is expected to be completed byJuly 2006. The casino will continue to operate through the renovation/expansionperiod, which will be done during off-peak hours and closed periods. Further,the Company is

 

10

----

 

preparingto undertake certain capital enhancements in Route 55 and has initiated theprocess to purchase new gaming equipment for the Company’s casinos in the CzechRepublic.

 

***Positive Stockholders’ Equity; PositiveOperating Income***

 

On December 31, 2005, the Company had a positive stockholders’ equityof approximately $15.3 million. For the year ended December 31, 2005, theCompany achieved a net income of approximately $79,000, on total revenue ofapproximately $23.4 million. The year was exceptional due to the launching,marketing and first-year operation of its newest and largest casino, Route 55,which increased the Company’s total expenditures. The ability of the Company tosustain profitability from its continuing operations will depend upon thesuccessful management of gaming establishments in the Czech Republic, theirexpansions, the addition of business units, and the expansion of operations toinclude other sources of revenue. There can be no assurance that the Companywill achieve profitability as a result of these operations or otherwise.

 

***Need to Diversify***

 

At this time, the Company has operations exclusively in the CzechRepublic. The Company is currently seeking to develop or acquire interests ingaming operations and hotels in Europe. However, there can be no assurance thatthe Company will be able to develop or acquire such new operations in thefuture.

 

***Taxation of Gaming Operations***

 

Gaming operators are typically subject to significant taxes, which aresubject to increase at any time. Any material increase in these taxes or feeswould adversely affect the results of operations of the Company. The CzechRepublic currently has a number of laws related to various taxes imposed bygovernmental authorities. Applicable taxes include VAT, gaming tax, charitytax, 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 areauthorized by law to impose extremely severe fines, penalties and interestcharges, may create tax risks. Management believes that it has adequatelyprovided for tax liabilities.

 

***Dependence upon Key Personnel***

 

The Company’s ability to successfully implement its strategy ofexpansion, manage the Czech casinos, and maintain a competitive position willcontinue to depend, in large part, on the ability of Mr. Rami S. Ramadan, theCompany’s President, Chief Executive Officer (“CEO”), and Chief FinancialOfficer (“CFO”). The Company is also dependent upon other key employees, casinomanagers and consultants whom the Company retains from time to time.

 

***Need for Additional Financing***

 

Although the Company has achieved positive income for the thirdconsecutive year, the Company, pursuant to its growth strategies, requiresadditional debt and/or equity financing for the acquisition and development ofother businesses. In this regard, the Company’s ability to obtain additionalfinancing has been improved as a result of its recapitalization in 2003, whicheffectively reduced its then existing debt burden by approximately 80%, and bythe $4.75 million Capital Raise in December 2005. Despite these improvements,there can be no assurance that such financing will be available on termsfavorable to the Company or at all.

 

11

----

 

***International Activities***

 

The Company’s operations are completely outside of the United States.Operating internationally involves additional risks relating to such things ascurrency exchange rates, different legal or regulatory environments, politicaland economic 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 the financial condition orresults of operations of the Company.

 

***Licensing andRegulation***

 

The Company’s operations are subject to regulation by each localjurisdiction in which it operates or plans to operate, as well as federal lawsand the laws of any foreign country. Each of the Company’s officers may besubject to strict scrutiny and approval from the gaming commission or otherregulatory body of each jurisdiction in which the Company may conduct gamingoperations.

 

***Liability Insurance***

 

The Company currently maintains, and intends to continue to maintain,general liability insurance in each of those locations in which it operates.There can be no assurance that liability claims will not exceed the coveragelimits of such policies or that such insurance will continue to be available oncommercially reasonable terms or at all. There can be no assurance that suchinsurance will be adequate to cover unanticipated liabilities.

 

***No Dividends***

 

The Company has not paid any dividends to date on its Common Stock, anddoes not expect to declare or pay any dividends in the foreseeable future. TheCompany intends to retain future earnings, if any are generated, for investmentin its current operations and for future project developments.

 

***Possible Adverse Effect of Issuance ofPreferred Stock***

 

The Company’s Articles of Incorporation authorize the issuance of4,000,000 shares of “blank check” Preferred Stock, with designations, rightsand preferences determined from time to time by its Board of Directors.Accordingly, the Company’s Board of Directors is empowered, without furtherstockholder approval, to issue Preferred Stock with dividend, liquidation,conversion, voting or other rights that could adversely affect the voting poweror other rights 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. TheCompany has no current plans to issue any shares of Preferred Stock. However,there can be no assurance that Preferred Stock will not be issued at some timein the future.

 

***Dilutive Effect of Warrants and Options***

 

As of March 16, 2006, warrants exercisable for a total of 11,382 sharesof Common Stock and options for 185,360 shares of Common Stock are outstanding,which, if all were exercised, would represent 2.4% of the 8,037,611 shares ofCommon Stock that would be outstanding. The issuance of such securities wouldhave a dilutive effect on any earnings per share that the Company may generatewhen the earnings per share are evaluated on a diluted basis.

 

12

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**Item 7.**   **Financial Statements.**

 

The following items are included in this Report:

 

Consolidated Financial Statements

 
| Report of Independent Registered Public Accounting Firm            |   |
|--------------------------------------------------------------------|--------|
| Consolidated  Balance Sheets                                       |   |
| Consolidated  Statements of Income and Comprehensive Income (Loss) |   |
| Consolidated  Statements of Stockholders’ Equity              |   |
| Consolidated  Statements of Cash Flows                             |   |
| Notes to Consolidated Financial Statements                         |   |

 

13

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REPORTOF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

 

Board of Directors and StockholdersTrans World Corporation and Subsidiaries

 

 

We have audited the accompanying consolidatedbalance sheets of Trans World Corporation and Subsidiaries (collectively, “theCompany”) as of December 31, 2005 and 2004, and the related consolidatedstatements of income and comprehensive income (loss), stockholders’ equity andcash flows for each of the years then ended. These consolidated financialstatements are the responsibility of the Company’s management. Ourresponsibility is to express an opinion on these consolidated financialstatements based on our audits.

 

We conducted our audits inaccordance with the standards of the Public Company Accounting Oversight Board(United States). Those standards require that we plan and perform the audits toobtain reasonable assurance about whether the financial statements are free ofmaterial misstatement. The Company is not required to have, nor were we engagedto perform, an audit of its internal control over financial reporting. Ouraudits included consideration of internal control over financial reporting as abasis for designing audit procedures that are appropriate in the circumstances,but not for the purpose of expressing an opinion on the effectiveness of theCompany’s internal control over financial reporting. Accordingly, we express nosuch opinion. An audit also includes examining, on a test basis, evidencesupporting the amounts and disclosures in the financial statements, assessingthe accounting principles used and significant estimates made by management, aswell as evaluating the overall financial statement presentation. We believethat our audits provide a reasonable basis for our opinion.

 

In our opinion, theconsolidated financial statements referred to above present fairly, in allmaterial respects, the financial position of Trans World Corporation andSubsidiaries as of December 31, 2005 and 2004, and the results of theiroperations and their cash flows for each of the years then ended, in conformitywith accounting principles generally accepted in the United States of America.

 

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

 

 

Roseland, New JerseyFebruary 14, 2006

 

14

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###### **TRANS WORLD CORPORATION AND SUBSIDIARIES**

CONSOLIDATED BALANCE SHEETSDecember 31, 2005 and 2004(dollars in thousands, except for share data)

 
| ** **                                                                                                                                         | ** ** | **December 31, 2005** | ** ** | **December 31, 2004** | ** ** |
|----------------------------------------------------------------------------------------------------------------------------------------------------|------------|-----------------------|------------|-----------------------|------------|
| **ASSETS**                                                                                                                                         |       |
| **CURRENT  ASSETS:**                                                                                                                               |       |                  |       |                  |       |
|                                                                                                                                               |       |                  |       |                  |       |
| Cash                                                                                                                                               |       | $                     | 6,595      |                  | $          | 2,686 |   |
| Prepaid expenses                                                                                                                                   |       | 315                   |       | 492                   |       |
| Other current assets                                                                                                                               |       | 269                   |       | 154                   |       |
|                                                                                                                                               |       |                  |       |                  |       |
| **Total current assets**                                                                                                                           |       | 7,179                 |       | 3,332                 |       |
|                                                                                                                                               |       |                  |       |                  |       |
| **PROPERTY  AND EQUIPMENT, net**                                                                                                                   |       |                  |       |                  |       |
|                                                                                                                                               |       | 12,647                |       | 13,917                |       |
|                                                                                                                                               |       |                  |       |                  |       |
| **OTHER  ASSETS:**                                                                                                                                 |       |                  |       |                  |       |
|                                                                                                                                               |       |                  |       |                  |       |
| Goodwill                                                                                                                                           |       | 4,942                 |       | 5,424                 |       |
| Deposits and other assets                                                                                                                          |       | 1,257                 |       | 1,370                 |       |
|                                                                                                                                               |       |                  |       |                  |       |
| **Total other assets**                                                                                                                             |       | 6,199                 |       | 6,794                 |       |
|                                                                                                                                               |       |                  |       |                  |       |
|                                                                                                                                               |       | $                     | 26,025     |                  | $          | 24,043 |   |
|                                                                                                                                               |       |                  |       |                  |       |
| **LIABILITIES AND STOCKHOLDERS’ EQUITY**                                                                                                      |       |
|                                                                                                                                               |       |                  |       |                  |       |
| **CURRENT  LIABILITIES:**                                                                                                                          |       |                  |       |                  |       |
|                                                                                                                                               |       |                  |       |                  |       |
| Long-term debt, current maturities                                                                                                                 |       | $                     | 1,380      |                  | $          | 1,415 |   |
| Accounts payable                                                                                                                                   |       | 1,762                 |       | 3,315                 |       |
| Interest payable                                                                                                                                   |       | 51                    |       | 51                    |       |
| Czech tax accrual                                                                                                                                  |       | 2,724                 |       | 1,858                 |       |
| Accrued expenses and other current liabilities                                                                                                     |       | 1,101                 |       | 1,398                 |       |
|                                                                                                                                               |       |                  |       |                  |       |
| **Total current liabilities**                                                                                                                      |       | 7,018                 |       | 8,037                 |       |
|                                                                                                                                               |       |                  |       |                  |       |
| **LONG-TERM  LIABILITIES:**                                                                                                                        |       |                  |       |                  |       |
|                                                                                                                                               |       |                  |       |                  |       |
| Long-term debt, less current maturities                                                                                                            |       | 3,167                 |       | 2,919                 |       |
| Other                                                                                                                                              |       | 460                   |       | 1,026                 |       |
|                                                                                                                                               |       |                  |       |                  |       |
| **Total long-term liabilities**                                                                                                                    |       | 3,627                 |       | 3,945                 |       |
|                                                                                                                                               |       |                  |       |                  |       |
| **COMMITMENTS  AND CONTINGENCIES**                                                                                                                 |       |                  |       |                  |       |
|                                                                                                                                               |       |                  |       |                  |       |
| **STOCKHOLDERS’  EQUITY:**                                                                                                                    |       |                  |       |                  |       |
|                                                                                                                                               |       |                  |       |                  |       |
| Preferred stock, $.001 par value, 4,000,000  shares authorized, none issued                                                                        |       |                  |       |                  |       |
| Common stock, $.001 par value, 9,500,000  shares authorized, 7,840,869 and 5,031,681 shares issued and outstanding in  2005 and 2004, respectively |       | 8                     |       | 5                     |       |
| Additional paid-in capital                                                                                                                         |       | 47,743                |       | 43,228                |       |
| Accumulated other comprehensive income                                                                                                             |       | 3,460                 |       | 4,738                 |       |
| Accumulated deficit                                                                                                                                |       | (35,831               | )          | (35,910               | )          |
|                                                                                                                                               |       |                  |       |                  |       |
| **Total stockholders’ equity**                                                                                                                |       | 15,380                |       | 12,061                |       |
|                                                                                                                                               |       |                  |       |                  |       |
|                                                                                                                                               |       | $                     | 26,025     |                  | $          | 24,043 |   |

 

*Seeaccompanying notes to consolidated financial statements*

 

15

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**TRANS WORLD CORPORATION AND SUBSIDIARIES**

CONSOLIDATED STATEMENTS OF INCOMEAND COMPREHENSIVE INCOME (LOSS)Years Ended December 31, 2005 and 2004(dollars in thousands, except for share data)

 
| ** **                                                                      | ** ** | **2005**  | ** ** | **2004**  | ** ** |
|---------------------------------------------------------------------------------|------------|-----------|------------|-----------|------------|
|                                                                            |       |      |       |      |       |
| **REVENUES**                                                                    |       | $         | 23,249     |      | $          | 18,938 |   |
|                                                                            |       |      |       |      |       |
| **COSTS AND EXPENSES:**                                                         |       |      |       |      |       |
| Cost of revenues                                                                |       | 14,007    |       | 10,512    |       |
| Depreciation and amortization                                                   |       | 737       |       | 494       |       |
| Selling, general and administrative                                             |       | 8,073     |       | 6,211     |       |
| Preopening costs                                                                |       |      |       | 197       |       |
|                                                                            |       | 22,817    |       | 17,414    |       |
|                                                                            |       |      |       |      |       |
| **INCOME FROM OPERATIONS**                                                      |       | 432       |       | 1,524     |       |
|                                                                            |       |      |       |      |       |
| **OTHER INCOME (EXPENSE):**                                                     |       |      |       |      |       |
| Interest expense, net                                                           |       | (350      | )          | (309      | )          |
| Foreign exchange loss                                                           |       | (5        | )          | (5        | )          |
| Other                                                                           |       | 2         |       | 37        |       |
|                                                                            |       | (353      | )          | (277      | )          |
|                                                                            |       |      |       |      |       |
| **NET INCOME**                                                                  |       | 79        |       | 1,247     |       |
|                                                                            |       |      |       |      |       |
| **Other comprehensive income (loss),**foreign  currency translation adjustments |       | (1,278    | )          | 2,033     |       |
|                                                                            |       |      |       |      |       |
| **COMPREHENSIVE INCOME (LOSS)**                                                 |       | $         | (1,199     | )         | $          | 3,280 |   |
|                                                                            |       |      |       |      |       |
| **WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:**                                 |       |      |       |      |       |
| Basic                                                                           |       | 5,096,229 |       | 5,031,606 |       |
| Diluted                                                                         |       | 5,099,872 |       | 5,039,194 |       |
|                                                                            |       |      |       |      |       |
| **EARNINGS PER COMMON SHARE:**                                                  |       |      |       |      |       |
| Basic                                                                           |       | $         | 0.02       |      | $          | 0.25 |   |
| Diluted                                                                         |       | $         | 0.02       |      | $          | 0.25 |   |

 

*See accompanyingnotes to consolidated financial statements*

 

16

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**TRANS WORLD CORPORATION AND SUBSIDIARIES**

CONSOLIDATEDSTATEMENTS OF STOCKHOLDERS’ EQUITYYears Ended December 31, 2005 and 2004(dollars in thousands, except for share data)

 
| ** **                                  | ** ** | **Common Stock** | ** ** | **Additional  Paid-in** | ** ** | **Accumulated  Other  Comprehensive** | ** ** | **Accumulated** | ** ** | **Total  Stockholders’** | ** ** |
|---------------------------------------------|------------|------------------|------------|-------------------------|------------|---------------------------------------|------------|-----------------|------------|-------------------------------|------------|
| ** **                                  | ** ** | **Shares**       | ** ** | **Amount**              | ** ** | **Capital**                           | ** ** | **Income**      | ** ** | **Deficit**                   | ** ** | **Equity** | ** ** |
| **Balances,**January 1,  2004          |       | 5,031,452        |       | $                       | 5          |                                  | $          | 43,227          |       | $                             | 2,705      |   | $ | (37,157 | ) | $ | 8,780 |   |
|                                        |       |             |       |                    |       |                                  |       |            |       |                          |       |   |   |
| **Exercise of options**                     |       | 200              |       |                    |       |                                  |       |            |       |                          |       |   |   |
|                                        |       |             |       |                    |       |                                  |       |            |       |                          |       |   |   |
| **Foreign currency translation adjustment** |       |             |       |                    |       |                                  |       | 2,033           |       |                          |       | 2,033 |   |
|                                        |       |             |       |                    |       |                                  |       |            |       |                          |       |   |   |
| **Other**                                   |       | 29               |       |                    |       | 1                                     |       |            |       |                          |       | 1 |   |
|                                        |       |             |       |                    |       |                                  |       |            |       |                          |       |   |   |
| **Net income**                              |       |             |       |                    |       |                                  |       |            |       | 1,247                         |       | 1,247 |   |
| **Balances,**December  31, 2004             |       | 5,031,681        |       | 5                       |       | 43,228                                |       | 4,738           |       | (35,910                       | )          | 12,061 |   |
|                                        |       |             |       |                    |       |                                  |       |            |       |                          |       |   |   |
| **Private placement, net of costs**         |       | 2,809,188        |       | 3                       |       | 4,515                                 |       |            |       |                          |       | 4,518 |   |
|                                        |       |             |       |                    |       |                                  |       |            |       |                          |       |   |   |
| **Foreign currency translation adjustment** |       |             |       |                    |       |                                  |       | (1,278          | )          |                          |       | (1,278 | ) |
|                                        |       |             |       |                    |       |                                  |       |            |       |                          |       |   |   |
| **Net income**                              |       |             |       |                    |       |                                  |       |            |       | 79                            |       | 79 |   |
| **Balances,**December 31, 2005              |       | 7,840,869        |       | $                       | 8          |                                  | $          | 47,743          |       | $                             | 3,460      |   | $ | (35,831 | ) | $ | 15,380 |   |

 

*Seeaccompanying notes to consolidated financial statements*

 

17

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**TRANS WORLD CORPORATION AND SUBSIDIARIES**

CONSOLIDATEDSTATEMENTS OF CASH FLOWSYears Ended December 31, 2005 and 2004(dollars in thousands, except for share data)

 
| ** **                                                                                      | ** ** | **2005** | ** ** | **2004** | ** ** |
|-------------------------------------------------------------------------------------------------|------------|----------|------------|----------|------------|
| **CASH FLOWS FROM OPERATING ACTIVITIES:**                                                       |       |     |       |     |       |
| Net income                                                                                      |       | $        | 79         |     | $          | 1,247 |   |
| Adjustments to reconcile net income to net  cash provided by operating activities:              |       |     |       |     |       |
| Depreciation and amortization                                                                   |       | 737      |       | 494      |       |
| Gain on sale of equipment                                                                       |       | (3       | )          | (27      | )          |
| Gain on settlement of promissory note                                                           |       | (108     | )          |     |       |
| Changes in operating assets and  liabilities:                                                   |       |     |       |     |       |
| Prepaid expenses and other current assets                                                       |       | (112     | )          | (167     | )          |
| Deposits and other assets                                                                       |       | 66       |       | (138     | )          |
| Accounts payable                                                                                |       | 570      |       | 611      |       |
| Czech tax accrual                                                                               |       | 1,055    |       | (65      | )          |
| Accrued expenses and other current liabilities                                                  |       | (746     | )          | 43       |       |
|                                                                                            |       |     |       |     |       |
| **NET CASH PROVIDED BY OPERATING ACTIVITIES**                                                   |       | 1,538    |       | 1,998    |       |
|                                                                                            |       |     |       |     |       |
| **CASH FLOWS FROM INVESTING ACTIVITIES:**                                                       |       |     |       |     |       |
| Payments for property and equipment                                                             |       | (2,528   | )          | (3,601   | )          |
| Proceeds from the sale of assets                                                                |       | 3        |       | 27       |       |
| Refund of security deposit                                                                      |       | 20       |       |     |       |
|                                                                                            |       |     |       |     |       |
| **NET CASH USED IN INVESTING ACTIVITIES**                                                       |       | (2,505   | )          | (3,574   | )          |
|                                                                                            |       |     |       |     |       |
| **CASH FLOWS FROM FINANCING ACTIVITIES:**                                                       |       |     |       |     |       |
| Proceeds from private placement                                                                 |       | 4,750    |       |     |       |
| Payment of promissory note                                                                      |       | (197     | )          |     |       |
| Proceeds from long-term debt                                                                    |       | 2,084    |       | 389      |       |
| Payments of long-term debt                                                                      |       | (1,658   | )          | (1,295   | )          |
|                                                                                            |       |     |       |     |       |
| **NET CASH PROVIDED BY (USED IN) FINANCING  ACTIVITIES**                                        |       | 4,979    |       | (906     | )          |
|                                                                                            |       |     |       |     |       |
| **EFFECT OF EXCHANGE RATE CHANGES ON CASH**                                                     |       | (103     | )          | 224      |       |
|                                                                                            |       |     |       |     |       |
| **NET INCREASE (DECREASE) IN CASH**                                                             |       | 3,909    |       | (2,258   | )          |
|                                                                                            |       |     |       |     |       |
| **CASH:**                                                                                       |       |     |       |     |       |
| Beginning of year                                                                               |       | 2,686    |       | 4,944    |       |
|                                                                                            |       |     |       |     |       |
| End of year                                                                                     |       | $        | 6,595      |     | $          | 2,686 |   |
|                                                                                            |       |     |       |     |       |
| **SUPPLEMENTAL DISCLOSURES OF CASH FLOW  INFORMATION:**                                         |       |     |       |     |       |
| Cash paid during the year for interest                                                          |       | $        | 392        |     | $          | 240 |   |
|                                                                                            |       |     |       |     |       |
| **SUPPLEMENTAL DISCLOSURES OF NON-CASH  INVESTING AND FINANCING ACTIVITIES:**                   |       |     |       |     |       |
| Stock issuance as partial finder’s fee                                                     |       | $        | 25         |     | $          |   |   |
| Accrued finder’s fee for private placement                                                 |       | $        | 212        |     | $          |   |   |
| Conversion of accrued interest to debt                                                          |       | $        | 20         |     | $          | 19 |   |
| Route 55 partial construction costs  included in accounts payable and other current liabilities |       | $        |       |     | $          | 1,866 |   |
| Note incurred in connection with  acquisition of vehicle                                        |       | $        |       |     | $          | 20 |   |
|                                                                                                 |            |          |            |          |            |  |  |  |

 

*Seeaccompanying notes to consolidated financial statements*

 

18

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

 

***Nature of Business***

 

Trans World Corporation and Subsidiaries (collectively, “TWC” or the “Company”),a Nevada corporation, is primarily engaged in the gaming business in the CzechRepublic.

 

The Company owns and operates four casinos in the Czech Republic, twoof which are located in the western part of the country, close to the border ofthe German State of Bavaria. The larger of the two, located in Ceska Kubice (“Ceska”),currently has 16 gaming tables and 48 slot machines. The smaller is located inRozvadov (“Rozvadov”) and currently has 10 gaming tables and 30 slot machines. Twocasinos are located in the southern part of the Czech Republic, close to the Austrianborder. The largest of these two, “Route 55”, recently opened on December 19,2004 at Dolni Dvoriste, now has 21 gaming tables, 94 slot machines, a 70-seatItalian restaurant and a bar and grill. The other located in Hate (“Route 59”),currently has 22 gaming tables and 60 slot machines.

 

***Liquidity***

 

TheCompany achieved a positive working capital of $161 at December 31, 2005 from adeficit of $4,750 at December 31, 2004, primarily as a result of the December2005 $4,750 Capital Raise (see “Note 7 – Stockholders’ Equity”) and a construction term loan from GE CapitalBank a.s. in the amount of 60 million Czech Korunas (“CZK”) or approximately $2,500using 2005 year-end exchange rates, of which only 10 million CZKs, orapproximately $408 using 2005 year-end exchange rates, was drawn as of December31, 2004.

 

TheCompany’s management is now focused on securing additional financing to acquireand develop new business units. Additionally, the Company is involved inseveral development projects, including the potential development of hotels inHate and in Folmava, Czech Republic, and the potential acquisition of existinghotels in Europe. There can be no assurances that management’s plans will berealized.

 

The Company’smanagement believes that its cash resources at December 31, 2005 andanticipated cash to be provided by 2006 operations are sufficient to fund itsactivities for the year ending December 31, 2006.

 

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

 

**Principles of Consolidation ****- **Theaccompanying consolidated financial statements include the accounts of theCompany and its wholly-owned subsidiaries. All significant intercompanybalances and transactions have been eliminated in consolidation.

 

**Property and Equipment **- Propertyand equipment is stated at cost less accumulated depreciation and amortization.The Company provides for depreciation and amortization using the straight-linemethod over the following estimated useful lives:

 
| ** **                               | ** ** | **Estimated Useful Life** | ** ** |
|------------------------------------------|------------|---------------------------|------------|
| **Asset**                                |       |                      |       |
| Building and  improvements               |       | 4-45 years                |       |
| Gaming  equipment                        |       | 4-12 years                |       |
| Furniture,  fixtures and other equipment |       | 3-12 years                |       |

 

19

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**Preopening Costs **- Preopening costs are expensed as incurred pursuant to AICPA Statement ofPosition (“SOP”) 98-5, “Reporting on the Costs of Start-up Activities.”  2004 preopening costs included payroll,outside services and other expenses related to the Company’s newest casino,Route 55.

 

**Goodwill **- Goodwill represents the excess of the costof the Company’s Czech subsidiaries over the fair value of their net assets at thedate of acquisition. Under Statement of Financial Accounting Standards (“SFAS”)No. 142, “Goodwill and Other Intangible Assets,” goodwill is no longer subjectto amortization over its estimated useful life; rather, goodwill is subject toat 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, the Company’s only reporting unit as definedunder SFAS No. 142, to its carrying value (the net equity of the Company) todetermine whether there is an indication that an impairment exists. The fairvalue of the Czech Republic reporting unit is determined through a combinationof recent appraisals of the Company’s real property and a multiple of earningsbefore interest taxes depreciation and amortization, which was based on theCompany’s experience and data from independent, third parties. During thesecond quarters of 2005 and 2004, as required by SFAS No. 142, the Company performedthe fair-value based testing of the carrying value of goodwill related to itsCzech Republic reporting unit, and determined that no recording of impairmentlosses was warranted.

 

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

 

**Earnings Per Common Share **- TheCompany complies with SFAS No. 128, “Earnings per Share,” which states that basic earnings per common share are computedby dividing net income by the weighted average number of common shares outstandingduring the period. Diluted earnings per common share incorporate the dilutiveeffect of common stock equivalents on an average basis during the period. TheCompany’s common stock equivalents currently include stock options and warrants.Unexercised warrants and stock options to purchase shares of common stock as ofDecember 31, 2005 and 2004 are approximately 196,742 and 64,043 respectively.

 

**Income Taxes ****- **The Company complies with SFAS No. 109, “Accountingfor Income Taxes,” which requires an asset and liability approach to financialaccounting and reporting for income taxes. Deferred income tax assets andliabilities are computed for differences between the financial statement andtax bases of assets and liabilities that will result in future taxable ordeductible amounts, based on enacted tax laws and rates applicable to theperiods in which the differences are expected to affect taxable income. Valuationallowances are established, when necessary, to reduce deferred income tax assetsto the amount expected to be realized.

 

**Revenue Recognition****- **Casinorevenue is the net win from gaming activities, which is the difference betweengaming wagers and the amount paid out to patrons. Revenues generated fromancillary services, including sales of food, beverage, cigarettes, and casinologo merchandise are recognized at the time the related services are performedand represent less than three percent of total revenues.

 

**Promotional Allowances ****- **Promotionalallowances primarily consist of food and beverages furnished gratuitously tocustomers. For the years ended December 31, 2005 and 2004, revenues do notinclude the retail amount of food and beverage of $1,873 and $1,403,respectively, provided gratuitously to customers. The cost of these items of $826and $650, respectively, is included in cost of revenues.

 

20

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**External Advertising****-** External advertising expenses arecharged to operations as incurred and were $1,418 and $753 for the years endedDecember 31, 2005 and 2004, respectively.

 

**Fair Value of Financial Instruments ****- **Thefair values of the Company’s assets and liabilities that qualify as financialinstruments under SFAS No. 107, “Disclosures about Fair Value of FinancialInstruments,” approximate their carrying amounts presented in the accompanyingconsolidated balance sheets at December 31, 2005 and 2004.

 

**Use of Estimates ****- **Thepreparation of financial statements in conformity with accounting principlesgenerally accepted in the United States of America requires management to makeestimates and assumptions that affect the reported amounts of assets and liabilitiesand disclosure of contingent assets and liabilities at the date of thefinancial statements as well as the reported amounts of revenues and expensesduring the reporting period. Actual results could differ from those estimates.

 

**Impairment of Long-Lived Assets ****- **TheCompany adheres to SFAS No. 144, “Accounting for the Impairment on Disposal ofLong-Lived Assets” and periodically reviews the carrying value of itslong-lived assets in relation to historical results, as well as management’sbest estimate of future trends, events and overall business climate. If suchreviews indicate that the carrying value of such assets may not be recoverable,the Company would then estimate the future cash flows (undiscounted and withoutinterest charges). If such future cash flows are insufficient to recover thecarrying amount of the assets, then impairment is triggered and the carryingvalue of any impaired assets would then be reduced to fair value.

 

**Stock-basedcompensation** - TheCompany complies with the disclosure-only provisions of SFAS No. 123,“Accounting for Stock-Based Compensation,” as amended by SFAS No. 148,“Accounting for Stock-Based Compensation – Transition and Disclosures.”

 

The Companyapplies Accounting Principles Board (“APB”) No. 25, “Accounting for StockIssued to Employees,” and related interpretations in accounting for its stockoption plans and, accordingly, no compensation cost has been recognized becausestock options granted under the plans were at exercise prices which were equalto or above the market value of the underlying stock at date of grant. Hadcompensation expenses been determined as provided by SFAS No. 123 using theBlack-Scholes option pricing model, the pro forma effect on the Company’s netincome and income per share would have been the following for the years endedDecember 31, 2005 and 2004, respectively:

 
| ** **                                                                                                  | ** ** | **2005** | ** ** | **2004** | ** ** |
|-------------------------------------------------------------------------------------------------------------|------------|----------|------------|----------|------------|
| Net income, as reported                                                                                     |       | $        | 79         |     | $          | 1,247 |   |
| Stock-based employee compensation determined under the fair  value-based method, net of related tax effects |       | (58      | )          | (9       | )          |
| Pro forma net income                                                                                        |       | $        | 21         |     | $          | 1,238 |   |
| Income per common share, basic and diluted                                                                  |       |     |       |     |       |
| As reported                                                                                                 |       | $        | 0.02       |     | $          | 0.25 |   |
| Pro forma                                                                                                   |       | $        | 0.00       |     | $          | 0.25 |   |

 

22

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The fair value of each option grant iscalculated using the following weighted average assumptions:

 
| ** **            | ** ** | **2005** | ** ** | **2004** | ** ** |
|-----------------------|------------|----------|------------|----------|------------|
|                  |       |     |       |     |       |
| Expected life (years) |       | 6.8      |       | 10       |       |
| Risk-free rate        |       | 4.4      | %          | 4.2      | %          |
| Volatility            |       | 137      | %          | 143      | %          |
| Dividend yield        |       | 0        | %          | 0        | %          |

 

**New AccountingPronouncements**- In December 2004, the FASB issued SFAS No. 123R,“Share-Based Payment.” SFAS No. 123R is a revision of SFAS No. 123, “Accountingfor 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 theintrinsic value method of accounting, and requires companies to recognize thecost of employee services received in exchange for awards of equityinstruments, based on the grant date fair value of those awards, in thefinancial statements. The effective date of SFAS No. 123R for the Company isthe first 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-based paymentsgranted after that date, and based on the requirements of SFAS No. 123 for allunvested awards granted prior to the effective date of SFAS No. 123R. Under the“modified retrospective” method, the requirements are the same as under the“modified prospective” method, but also permits entities to restate financialstatements of previous periods, either for all prior periods presented or tothe beginning of the fiscal year in which the statement is adopted, based onprevious pro forma disclosures made in accordance with SFAS No. 123. TheCompany has not yet determined which of the methods it will use upon adoption.

 

 TheCompany currently utilizes the Black-Scholes option pricing model to measurethe fair value of stock options granted to 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 optionpricing model upon adoption of SFAS No. 123R to measure the fair value of stockoptions.

 

 Theadoption of this Statement will have the effect of reducing net income andincome per share as compared to what would be reported under the currentrequirements. These future amounts cannot be precisely estimated because theydepend on, among other things, the number of options issued in the future, andaccordingly, the Company has not determined the impact of adoption of thisstatement on its results of operations.

 

In May 2005, the FASB issued SFAS No. 154,“Accounting Changes and Error Correction Replacement of APB Opinion No. 20 andFASB Statement No. 3” (SFAS No. 154). SFAS No. 154 replaces APB Opinion No. 20,“Accounting Changes” (APB 20), and FASB Statement No. 3, “Reporting AccountingChanges in Interim Financial Statements”, and changes the requirements for theaccounting for and reporting of a change in accounting principle. APB 20previously required that most voluntary changes in accounting principle berecognized by including in net incomeof the period of the change the cumulative effect of changing to the newaccounting principle. SFAS No. 154 requires retrospective application to priorperiods’ financial statements of changes in accounting principle. SFAS No. 154defines retrospective application as the application of a different accountingprinciple to prior accounting periods as if that principle had always beenused. SFAS No. 154 also requires that a change in depreciation, amortization, or depletion method for long-lived,non-financial assets be accounted for as a change in accounting estimateaffected by a change in accounting principle. We are not required to adopt the provisionsof SFAS No. 154 until June 1**,**2006, although earlier adoption ispermitted. We are currently evaluating the provisions of SFAS No, 154.

 

23

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

 

At December 31, 2005 and 2004, property andequipment consists of the following:

 
| ** **                                     | ** ** | **2005** | ** ** | **2004** | ** ** |
|------------------------------------------------|------------|----------|------------|----------|------------|
| Land                                           |       | $        | 2,067      |     | $          | 2,242 |   |
| Building and improvements                      |       | 9,973    |       | 10,353   |       |
| Gaming equipment                               |       | 237      |       | 237      |       |
| Furniture, fixtures and other equipment        |       | 4,428    |       | 4,758    |       |
|                                           |       | 16,705   |       | 17,590   |       |
| Less accumulated depreciation and amortization |       | (4,058   | )          | (3,673   | )          |
|                                           |       |     |       |     |       |
|                                           |       | $        | 12,647     |     | $          | 13,917 |   |

 

 

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

 

At December 31, 2005 and 2004, long-term debtconsists of the following:

 
| ** **                             | ** ** | **2005** | ** ** | **2004** | ** ** |
|----------------------------------------|------------|----------|------------|----------|------------|
| Interest Notes (a)                     |       | $        | 455        |     | $          | 1,311 |   |
| Replacement Notes (b)                  |       | 1,550    |       | 1,550    |       |
| Route 59 building acquisition loan (c) |       | 460      |       | 1,026    |       |
| Route 55 construction term loan (d)    |       | 2,082    |       | 447      |       |
|                                   |       |     |       |     |       |
|                                   |       | $        | 4,547      |     | $          | 4,334 |   |

 

----

| (a)    | The Interest Notes, which  have three-year terms, provide for monthly payments of principal and interest  of approximately $78 through June 2006.                                                                                                                                                                                                                                                                                                                                                                          |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| (b)    | The Replacement Notes,  which have seven-year terms, have tiered, simple interest rates: 6% for the  first three years, 9.3% for the fourth year and 10% for the fifth through the  seventh years. For the first three years of the term, one half of the accrued  annual interest is payable, beginning on July 26, 2004, with the accrued  interest balance payable at maturity. For the last four years of the term,  all annual interest accrued will be payable in full on July 26 of each of  these last four years. |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| (c)    | In March  2002, the Company exercised its right to buyout (purchase) the Route 59  building lease. The building lease buyout, of €1,600, or approximately $1,900  using 2005 year-end exchange rate, was financed by a loan from a local Czech  Republic bank. The bank note, which  is payable in monthly installments through December 2006, bears interest at  6.2% per annum and is collateralized by the Route 59 building, the Company’s  Rozvadov casino and an employee housing building.                |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| (d)    | In December  2004, the Company drew 10 million CZK (approximately $408) from the 60  million CZK, 5.95% interest per annum, 58-month term loan it received from GE  Capital Bank a.s. for the construction of Casino Route 55. The Company drew  down the balance of the loan                                                                                                                                                                                                                                              |

 

24

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|   | by March  2005 and commenced repayment, as per the loan agreement in May 2005. The loan  is subject to certain financial covenants and collaterized by the land,  building, furniture, fixtures and equipment in Dolni Dvoriste and the lot in Folmava. |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

Principal payments due on long-term debt are as follows:

 
| **Year ending December 31,** | ** ** | ** ** | ** ** |
|---------------------------------------------|------------|------------|------------|
| 2006                                        |       | $          | 1,380      |   |
| 2007                                        |       | 511        |       |
| 2008                                        |       | 511        |       |
| 2009                                        |       | 510        |       |
| 2010                                        |       | 1,635      |       |
|                                        |       |       |       |
|                                        |       | $          | 4,547      |   |

 

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

 

At December 31, 2005 and 2004, accruedexpenses and other current liabilities consist of the following:

 
| ** **                  | ** ** | **2005** | ** ** | **2004** | ** ** |
|-----------------------------|------------|----------|------------|----------|------------|
| Accrued payroll             |       | $        | 628        |     | $          | 699 |   |
| Accrued  bonuses/incentives |       | —   |       | 371      |       |
| Operational  accruals       |       | 261      |       | 328      |       |
| Accrued finder’s  fee  |       | 212      |       | —   |       |
|                        |       |     |       |     |       |
|                        |       | $        | 1,101      |     | $          | 1,398 |   |

 

**NOTE 6**–**Commitments and Contingencies**

 

***Lease Obligations* -** The Company is obligated under severaloperating leases expiring through 2010. Future aggregate minimum annualrental payments under all of these leases for the next five years are asfollows:

 
| **Year ending December 31,** | ** ** | ** ** | ** ** |
|---------------------------------------------|------------|------------|------------|
| 2006                                        |       | $          | 114        |   |
| 2007                                        |       | 127        |       |
| 2008                                        |       | 96         |       |
| 2009                                        |       | 97         |       |
| 2010                                        |       | 43         |       |
|                                             |            |            |            |  |

 

Rent expense under these operating leases was approximately $97 and$109 for the years ended December 31, 2005 and 2004, respectively.

 

The Company is also obligated under operating leases relative to slotequipment. Future rental payments under these leases are based on a percentageof revenue.

 

***Lease Termination*** – In December 2005 and pursuant to thelease, the Company closed Hollywood Spin Restaurant and Slot Bar (“HollywoodSpin”). The decision to close the unit was based upon lack of attendance at themall. The Company alleges that the landlord failed to honor its contractualobligation under the lease relative to efforts to bring attendance to the mall.Accordingly, the Company is considering its legal options relative to thisissue.

 

25

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Therewere no significant amounts to accrue pursuant to SFAS No. 146 “Accounting forCosts Associated with Exit or Disposal Activities” as personnel and a majorityof the property and equipment were relocated from Hollywood Spin to theCompany’s other casinos.

 

***Employment Agreements -***The Company has entered into employment agreements with certain of itsexecutives, which provide for annual compensation plus, in most cases,participation in future benefit programs and stock options plans. As ofDecember 31, 2005, future annual compensation under these employment agreementsis as follows:

 
| **Year ending December 31,** | ** ** | ** ** | ** ** |
|---------------------------------------------|------------|------------|------------|
| 2006                                        |       | $          | 550        |   |
| 2007                                        |       | 550        |       |
|                                             |            |            |            |  |

 

Pursuant to a renewal of the employmentagreement with the Company’s Chief Executive Officer (“CEO”) in July 2005, theCEO received a grant of seven year options to purchase an aggregate total of175,000 shares of the Company’s Common Stock in allotments of 35,000 shares perannum over a five year vesting period. These options are exercisable at prices,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 the July 2005 employmentagreement with the Company’s CEO, upon reaching designated earnings per sharetargets, the CEO will be granted 75,000 restricted shares of the Company’sCommon Stock in 25,000 allotments.

 

***401 (k) and ProfitSharing Plan*** - The Company maintains a contributory401(k) plan and a profit sharing plan. These plans are for the benefit of alleligible U.S. employees, who may have up to 15% of their salary withheld, notto exceed $14 (in the year ended December 31, 2005). The Company makes amatching contribution based on a portion of salary withheld. The Company made401(k) plan contributions of $36 in 2005 and $31 in 2004.

 

***Taxing Jurisdiction*** - TheCzech Republic currently has a number of laws related to various taxes imposedby governmental authorities. Applicable taxes include gaming tax, VAT, charitytax, and payroll (social) taxes. Tax declarations, together with other legalcompliance areas (as examples, customs and currency control matters) aresubject to review and investigation by a number of authorities, which areenabled by law to impose extremely severe fines, penalties and interestcharges, create tax risks in the Czech Republic. Management believes that ithas adequately provided for tax liabilities.

 

**NOTE 7**–**Risks and Uncertainties**

 

***Regulation and Licensing*** - The Company’s operations aresubject to regulation by each local jurisdiction in which it operates or plansto operate, as well as federal laws and the laws of any foreign country. Eachof the Company’s officers may be subject to strict scrutiny and approval from agaming commission or another regulatory body of each jurisdiction in which theCompany may conduct gaming operations.

 

In 1998, the Czech Republic House of Deputies passed an amendment tothe gaming law, which restricted foreign ownership of casino licenses. Inresponse, the Company restructured its subsidiaries and Czech legal entities tocomply with the amendment and was subsequently granted a 10-year gaminglicense. There can be no assurance that the authorities in the Czech Republicwill not amend the gaming law as it pertains to foreign ownership of casinolicenses. In the event the gaming laws are amended in the future, it may have amaterial adverse effect on the Company’s future profitability and operations.Further, there has been increased competition in the areas where the Companyoperates because local municipalities no longer have control over the issuanceof casino licenses, thereby effectively eliminating exclusivity.

 

26

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***Foreign Activities***- The Company’soperations are entirely outside of the United States. Operating internationallyinvolves additional risks relating to such things as currency exchange rates,different legal and regulatory environments, political and economic risksrelating to the stability or predictability of foreign governments, differencesin the manner in which different cultures conduct business, difficulties instaffing and managing foreign operations, differences in financial reporting,operating difficulties, and different types of criminal threats, and otherfactors. The occurrence of any of these risks, if severe enough, could have amaterial adverse effect on the consolidated financial position, results ofoperations and cash flows of the Company.

 

***Cash*****-**Cash consists of cash in banks and on hand. The Company maintains its bankaccounts at several financial institutions, which, at times, may exceed FederalDeposit Insurance Corporation (“FDIC”) insured limits. In addition, the FDICdoes not insure the Company’s foreign cash, which totaled approximately $1,995and $2,521 at December 31, 2005 and 2004, respectively. The Company has notincurred any losses in such accounts and believes it is not exposed to anysignificant credit risk on cash.

 

**NOTE 8**–**Related Parties**

 

AtDecember 31, 2005 and 2004, approximately $372 and $1,072, respectively, of theInterest Notes were held by Value Partners, Ltd., an approximate 45% owner ofthe Company’s issued and outstanding common stock as of December 31, 2005.Related interest expense was approximately $60 and $114 for the years endedDecember 31, 2005 and 2004, respectively.

 

Duringthe year ended December 31, 2005, the Company utilized the services of anattorney who is the brother of the Company’s managing director of Czechoperations. Fees paid to the attorney during 2005 aggregated approximately $12.At December 31, 2005, approximately $1 was owed to the attorney for servicesrendered through such date.

 

**NOTE 9**-**Stockholders’ Equity**

 

In December 2005, the Company completed the private placement of2,794,188 shares of its common stock with several “accredited investors,” asdefined in Rule 501(a) of Regulation D promulgated under the Securities Act of1933, of shares of Common Stock, for an aggregate purchase price of $4,750 or$1.70 per share, the then listed market price of the Company’s common stock.The placement agent received 15,000 shares of the Company’s common stock at $25or $1.70 per share, as partial consideration for its finder’s fee. Associatedcosts of the private placement (the “$4,750 Capital Raise”), which included finder’sfees, and legal and accounting fees, totaled approximately $257 and have beenreflected as a reduction of additional paid-in capital.

 

In April 2004, the Board of Directors approved a one (1) for onehundred (100) reverse stock split. Stockholders’ equity was restated to giveretroactive recognition to the stock split for all periods presented byreclassifying from common stock to additional paid-in capital from the parvalue of the diminished shares arising from the reverse split. Additionally, allreferences in the consolidated financial statements to the number of shares andper share amount were restated. As part of the reverse stock split, theCompany’s authorized shares of Common Stock were effectively reduced from950,000,000 to 9,500,000. There were no changes to the Company’s authorizedpreferred stock, which remains at 4,000,000 shares, with no shares of preferredstock issued or outstanding.

 

27

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**NOTE 10 -****Other Assets and Liabilities**

 

**Other Assets** - Includedin other assets are restricted deposits, aggregating 24,000 CZK, relating toCzech license bond requirements. Using year-end exchange rates, these depositshave been translated to $978 and $1,073 at December 31, 2005 and 2004,respectively.

 

**Other long-term liabilities** - AtDecember 31, 2005 and 2004, other long-term liabilities consisted of thefollowing:

 
| ** **                    | ** ** | **2005** | ** ** | **2004** | ** ** |
|-------------------------------|------------|----------|------------|----------|------------|
| Compensation plan  reserve    |       | $        | —     |     | $          | 400 |   |
| Promissory Note               |       | —   |       | 285      |       |
| Deferred executive incentives |       | 315      |       | 295      |       |
| Accrued Interest              |       | 93       |       | 46       |       |
| Capitalized  leases           |       | 52       |       | —   |       |
|                          |       |     |       |     |       |
|                          |       | $        | 460        |     | $          | 1,026 |   |

** **

**NOTE 11 -****Income Taxes**

 

In the Czech Republic, gaming income is not subject to corporate incometax. In lieu of income taxes, gaming income is subject to other taxes in theCzech Republic, including gaming and charity taxes, which are primarily basedon 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.

 

At December 31, 2005, the Company had U.S. and foreign net operatingloss carry forwards (“NOL’s”) of approximately $28,894 and $2,606,respectively, available to offset certain future taxes payable. However, basedon limited analysis, the February 2001 warrant exercise or earlier events mayhave triggered significant limitations of preexisting U.S. NOL’s, pursuant toInternal Revenue Code Section 382, to the extent that substantially all of theCompany’s existing U.S. NOL’s prior to February 2001, aggregating approximately$17,172, may be significantly limited. The U.S. NOL’s generated subsequent toFebruary 2001, aggregating approximately $11,722 resulted in an estimated$4,689 deferred tax asset at December 31, 2005 and the foreign NOL resulted inan estimated $677 deferred tax asset at December 31, 2005. A full valuationallowance has been established for these deferred tax assets since itsrealization is considered unlikely.

 

The U.S. NOL’s expire between 2009 and 2025. The foreign NOL’s expirebetween 2006 and 2010. During the year ended December 31, 2005, approximately$155 of foreign NOL’s expired. The following table presents the U.S. andforeign components of pretax income before income taxes for the years endedDecember 31, 2005 and 2004:

 
| ** ** | ** ** | **2005** | ** ** | **2004** | ** ** |
|------------|------------|----------|------------|----------|------------|
|       |       |     |       |     |       |
| U.S.       |       | $        | (1,557     | )        | $          | (358 | ) |
| Foreign    |       | 1,636    |       | 1,605    |       |
|       |       |     |       |     |       |
|       |       | $        | 79         |     | $          | 1,247 |   |

 

The Company’s effective income tax ratediffers from the U.S. federal statutory income tax rate primarily becausegaming income, the Company’s primary revenue source, is not subject to incometax. 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.

 

28

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

 

***Stock Options***

 

The activity in the stock option plans is as follows:

 
| ** **                             | ** ** | **Number of Options** | ** ** | **Range of  Exercise Price** | ** ** | **Weighted Average  Exercise Price ** | ** ** |
|----------------------------------------|------------|---------------------------------|------------|----------------------------------------|------------|------------------------------------------------------|------------|
|                                   |       |                            |       |                                   |       |                                                 |       |
| Balance outstanding, January 1, 2004   |       | 9,360                           |       | $3.00-83.00                            |       | $                                                    | 27.10      |   |
|                                   |       |                            |       |                                   |       |                                                 |       |
| Granted                                |       | 3,000                           |       | 2.00-4.00                              |       | 3.06                                                 |       |
|                                   |       |                            |       |                                   |       |                                                 |       |
| Expired                                |       | (1,100                          | )          | 12.00-61.00                            |       | 56.55                                                |       |
|                                   |       |                            |       |                                   |       |                                                 |       |
| Exercised                              |       | (200                            | )          | 4.00                                   |       | 4.00                                                 |       |
|                                   |       |                            |       |                                   |       |                                                 |       |
| Balance outstanding, December 31, 2004 |       | 11,060                          |       | $2.00-83.00                            |       | $                                                    | 18.32      |   |
|                                   |       |                            |       |                                   |       |                                                 |       |
| Granted                                |       | 175,300                         |       | 2.00-3.05                              |       | 2.80                                                 |       |
|                                   |       |                            |       |                                   |       |                                                 |       |
| Expired                                |       | (1,000                          | )          | 61.00                                  |       | 61.00                                                |       |
|                                   |       |                            |       |                                   |       |                                                 |       |
| Balance outstanding, December 31, 2005 |       | 185,360                         |       | $2.00-83.00                            |       | $                                                    | 3.41       |   |
|                                   |       |                            |       |                                   |       |                                                 |       |
| Exercisable, December 31, 2005         |       | 45,360                          |       | $2.00-83.00                            |       | $                                                    | 5.30       |   |

 

The option exercise price per share was equal to or above the marketvalue of the underlying stock on the date of grant. Options generally expirebetween five and ten years after the date of grant or earlier upon termination,as defined in the plans.

 

29

----

 

Additional information about the Company’s outstanding stock options atDecember 31, 2005 is as follows:

 
| ** **               | ** ** | ** **         | ** ** | **Weighted**        | ** ** | ** **   | ** ** |
|--------------------------|------------|--------------------|------------|---------------------|------------|--------------|------------|
| ** **               | ** ** | ** **         | ** ** | **Average**         | ** ** | ** **   | ** ** |
| ** **               | ** ** | ** **         | ** ** | **Remaining**       | ** ** | **Weighted** | ** ** |
| ** **               | ** ** | ** **         | ** ** | **Contractual**     | ** ** | **Average**  | ** ** |
| **Range of**        | ** ** | **Number of** | ** ** | **Life**            | ** ** | **Exercise** | ** ** |
| **Exercise Prices** | ** ** | **Shares**         | ** ** | **(in Years)** | ** ** | **Price**    | ** ** |
|                     |       |               |       |                |       |         |       |
| $0.01 to $2.00           |       | 575                |       | 8.40                |       | $            | 2.00       |   |
| $2.01 to $3.00           |       | 175,375            |       | 6.51                |       | $            | 2.80       |   |
| $3.01 to $4.00           |       | 2,875              |       | 8.10                |       | $            | 3.48       |   |
| $4.01 to $5.00           |       | 2,075              |       | 6.52                |       | $            | 5.00       |   |
| $5.01 to $10.00          |       | 1,725              |       | 7.39                |       | $            | 6.26       |   |
| $10.01 to $25.00         |       | 1,155              |       | 5.16                |       | $            | 17.48      |   |
| $25.01 to $50.00         |       | 420                |       | 3.87                |       | $            | 36.60      |   |
| $50.01 to $75.00         |       | 1,100              |       | 0.84                |       | $            | 62.18      |   |
| $83.00                   |       | 60                 |       | 3.75                |       | $            | 83.00      |   |
|                     |       | 185,360            |       | 6.50                |       | $            | 3.41       |   |

 

***Warrants***

 

For the years ended December 31, 2005 and2004, warrant activity is as follows:

 
| ** **              | ** ** | ** **   | ** ** | **Balance,**        | ** ** | ** **    | ** ** | **Balance,**          | ** ** | ** **    | ** ** | ** **  | ** ** | **Balance,**          | ** ** |
|-------------------------|------------|--------------|------------|---------------------|------------|---------------|------------|-----------------------|------------|---------------|------------|-------------|------------|-----------------------|------------|
| **Exercise Price** | ** ** | **Warrants** | ** ** | **January 1,** | ** ** | **Exercised** | ** ** | **December 31,** | ** ** | **Exercised** | ** ** | **Expired** | ** ** | **December 31,** | ** ** |
| **per Share**           | ** ** | **Expiring** | ** ** | **2004**            | ** ** | **2004**      | ** ** | **2004**              | ** ** | **2005**      | ** ** | **2005**    | ** ** | **2005**              | ** ** |
|                    |       |         |       |                |       |          |       |                  |       |          |       |        |       |                  |       |
| $                       | 150.00     |         | 12/31/2005 |                | 32,001     |          | —     |                  | 32,001     |          | —     |        | (32,001    | )                     | —     |   |
| 100.00                  |       | 12/31/2005   |       | 9,600               |       |          |       | 9,600                 |       |          |       | (9,600      | )          | —                |       |
| 1.00                    |       | 3/31/2008    |       | 11,382              |       |          |       | 11,382                |       |          |       |        |       | 11,382                |       |
|                    |       |         |       |                |       |          |       |                  |       |          |       |        |       |                  |       |
|                    |       |         |       | 52,983              |       | —        |       | 52,983                |       | —        |       | (41,601     | )          | 11,382                |       |
|                         |            |              |            |                     |            |               |            |                       |            |               |            |             |            |                       |            |  |

 

All warrants outstanding at December 31, 2005are exercisable.

 

***2004 Equity Incentive Plan***

 

In May 2004, TWC’s Board of Directors (the“Board”) unanimously adopted the 2004 Equity Incentive Plan (“2004 EquityPlan”), which was subsequently approved by the shareholders of the Company atits Annual Meeting held in June 2004. The 2004 Equity Plan stipulates that nofurther grants will be made under the 1998 Stock Option Plan (the “1998 Plan”)and the 10,800 shares of Common Stock remaining available for grant under the1998 Plan were added to those available for grant under the 2004 Equity Plan.

 

30

----

 

Further, the 2004 Equity Plan provides thatcertain awards made under the plan will be eligible to be “qualifiedperformance-based compensation” that are exempt from the $1,000 deduction limitimposed on publicly-held corporations by Section 162(m) of the Internal RevenueCode and 262,383 shares of Common Stock will be authorized and available forissuance pursuant to awards granted under the 2004 Equity Plan, including10,800 shares previously available for grant under the 1998 Plan.

 

Under the 2004 Equity Plan, any employee ofthe Company or the Company’s affiliates who is not a member of the CompensationCommittee may be designated by the Compensation Committee as a participant andreceive awards thereunder. Non-employee directors of the Company are noteligible to receive awards under the 2004 Equity Plan. Type of awards which maybe granted include stock options, stock appreciation rights, restricted stockand restricted stock units, other stock-based awards and performance awards.

 

The 2004 Equity Plan contains the followingprovisions:  (i) No stock optionrepricings (without the approval of the Company’s shareholders); (ii)limitations on shares other than for stock options; (iii) no discounts on stockoptions: (iv) minimum one year vesting periods for all awards (including stockoptions); (v) minimum three year vesting periods for restricted stock and otherstock-based awards; and (vi) no “evergreen” provisions.

 

31

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** **

**Item 8.  Changes In andDisagreements with Accountants on Accounting and Financial Disclosure.**

 

None.

 

**PART III**

 

**Item9.  Directors and Executive Officers, Promoters and Control Persons;Compliance with Section 16(A) of the Exchange Act.**

** **

Thefollowing table provides information as of March 16, 2006 with respect to eachof the Company’s directors and each Executive Officer:
| **Name**                      | ** ** | **Age** | ** ** | **Position in the Company** | ** ** | **Director or Executive Since** |
|-------------------------------|------------|---------|------------|--------------------------------------------|------------|------------------------------------------------|
| Rami S. Ramadan               |       | 56      |       | CEO, CFO, President and Director           |       | 1999                                           |
| Julio E. Heurtematte, Jr. (1) |       | 70      |       | Director                                   |       | 1998                                           |
| Malcolm M.B. Sterrett (1)     |       | 63      |       | Director                                   |       | 1998                                           |
| Geoffrey B. Baker (1),(2)     |       | 56      |       | Director                                   |       | 1999                                           |
| Timothy G. Ewing (1)          |       | 45      |       | Director                                   |       | 2004                                           |

 

----

| (1) | Member of each Audit, 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. |

 

***Rami S. Ramadan***has served as CEO/CFOsince July 12, 1999 and President since August 2000. His most recent priorposition had been Executive Vice President of Finance for the Ian SchragerHotels from November 1997 to July 1999. Prior to that, Mr. Ramadan held seniorfinancial positions with Hyatt Hotels from January 1994 to November 1997, EuroDisney from October 1990 to December 1993 and Meridien Hotels from September1975 to September 1990.

 

***Julio E. Heurtematte, Jr.*** Mr. Heurtematteis a private consultant, specializing in international projects, trade andinvestments and has acted in such capacity since 1989. From 1963 to 1989, Mr.Heurtematte served with the Inter-American Development Bank in severalcapacities, most recently as its Deputy Manager for Project Analysis.

 

***Malcolm M. B. Sterrett***. Mr. Sterrett is aprivate investor. From 1989 to 1993, he was a partner at the law firm of PepperHamilton & Scheetz, in Washington, D.C. From 1988 to 1989, he served asGeneral Counsel to the U.S. Department of Health and Human Services and from1982 to 1988 he was a Commissioner on the U.S. Interstate Commerce Commission.Before that, he was Vice President and General Counsel to the United StatesRailway Association and served as Staff Director and Counsel to the U.S. SenateCommittee on Commerce, Science and Transportation.

 

***Geoffrey B. Baker.***Mr. Baker is a privateinvestor. From 1983 to the present, Mr. Baker has been a member of the privateinvestment firm, Baker & Donaldson. From 1977 to 1982, he was LegislativeDirector to former U.S. Senator Lowell P. Weicker, Jr., and from 1975 to 1977he served on the Senate Committee on Commerce as a minority staff member forsurface transportation.

 

***Timothy G. Ewing.***Mr. Ewing has been a director since June 2004. Mr. Ewing, a CharteredFinancial Analyst, is the managing partner of Ewing & Partners and themanager of Value Partners, Ltd., a private investment

 

32

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partnership formed in 1989, and of the Endurance Partnerships, formedin 2001. Mr. Ewing sits on the board of directors of Cherokee, Inc.(NASDAQ:  CHKE) in Van Nuys, CA since1997, and Harbourton Capital Group (OTC: HBTC) in McLean, VA since 2000. In addition, he is immediate pastchairman and executive board member of the Dallas Museum of Natural History,and sits on the board of trustees of The Dallas Opera, and the advisory boardof the University of Texas at Dallas’ Holocaust Studies Program.

 

**Information about the Board and its Committees:**

 

The Company’s Board of Directors, which ischaired by Mr. Sterrett in a non-executive role, manages the business andaffairs of the Company. The Board holds biweekly conference calls and meets onan as-needed basis. The Board has established several committees, describedbelow, which also meet on an as-required basis during the year. The Board mettwice and acted by consent twice during the Company’s fiscal year endedDecember 31, 2005. No director of the Company attended fewer than 75% of thetotal number of meetings of the Board or meetings of committees of the Boardduring the year ended December 31, 2005.

 

The Board of Directors has established thefollowing committees:

 

***Audit Committee***

 

The Audit Committee reviews and approvesinternal accounting controls, internal audit operations and activities, theCompany’s annual report and audited financial statements, the selection of theCompany’s independent auditors, the activities and recommendations of theCompany’s independent auditors, material changes in the Company’s accountingprocedures, the Company’s policies regarding conflicts of interest and suchother matters as may be delegated by the Board. The Audit Committee, composedof Mr. Baker, the Committee’s Chairman, Messrs. Heurtematte, Sterrett andEwing, all non-employee, “independent” directors, met once and acted by consentonce in 2005. Additionally, the Committee’s Chairman conferred four times viatelephone with the committee members regarding audit matters throughout 2005.

 

***Compensation Committee***

 

The Compensation Committee sets thecompensation for executive officers of the Company and sets the terms of grantsof awards under the 1999 Non-Employee Director Stock Option Plan (the “1999Plan”), the 2004 Equity Plan and any other equity-based compensation plansadopted by the Company. The Compensation Committee, composed of Mr.Heurtematte, the Committee’s Chairman, Messrs. Baker, Sterrett and Ewing, metthree times in 2005 and acted by consent once in 2005.

 

***Nominating Committee***

 

The 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 Nominating Committee is composed of Mr. Ewing, itsChairman, Messrs. Baker, Heurtematte and Sterrett, and met once during 2005.

 

# **Section16(a) Beneficial Ownership Reporting Compliance**

# ** **

Section 16(a) of the Exchange Act requiresthe Company’s officers, directors and persons who own more than 10% of theCompany’s Common Stock to file reports of ownership and changes in ownershipwith the Securities and Exchange Commission (“SEC”) and the National Associationof Securities Dealers, Inc. by certain dates. The Company’s directors andexecutive officer satisfied these filing requirements for the fiscal year endedDecember 31,

 

33

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2005. Prior to June 2003, Value Partners helda controlling 57.5% of the Company’s issued and outstanding Common Stock.Further, as part of its participation in the 2003 Recapitalization, ValuePartners received an additional 3,270,104 shares. At December 31, 2005, afterthe issuance of an aggregate of 2,809,188 shares of Common Stock as part of the$4.75 million Capital Raise, Value Partners’ beneficial ownership was reducedfrom 70.9% to 45.4% of the Company’s issued and outstanding Common Stock.

 

As part of their participation in the $4.75million Capital Raise, 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 acquired 16.9% and11.3%, respectively, of the Company’s issued and outstanding Common Stock.

 

The Company knows of no other person who owns10% or more of the Company’s Common Stock.

 

**Item 10.****            ExecutiveCompensation.**

 

**Summary of Cash and Certain Other Compensation:**

 

The following table sets forth the cash andnon-cash compensation earned during the fiscal years ending December 31, 2003through 2005 by the Chief Executive Officer and Chief Financial Officer of theCompany (the “Named Officer”) during those periods.

** **

**SummaryCompensation Table**

** **
| ** **

** ** | ** ** | **Annual Compensation** | ** ** | **Long Term Compensation** | ** ** |
|------------------------|------------|------------------------------|------------|--------------------------------------|------------|
| ** **             | ** ** | **Year**                     | ** ** | **Salary**                           | ** ** | **Bonus** | ** ** | **Other  Compensation  (2)** | ** ** | **Restricted  Stocks  (3)** | ** ** | **Stock  Options  (3)** | ** ** | **All Other  Compensation** | ** ** |
| Rami S. Ramadan (1)    |       | 2005                         |       | $                                    | 400,000    |   | $ | — |   | $ | 8,280 |   | $ | — |   | 175,000 |   | $ | — |   |
|                   |       | 2004                         |       | 400,000                              |       | 150,000 |   | 8,268 |   |   |   | 1,500 |   |   |   |
|                   |       | 2003                         |       | 400,000                              |       | 168,000 |   | 5,616 |   |   |   | 1,500 |   |   |   |
|                        |            |                              |            |                                      |            |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

 

----

| (1)    | Mr. Ramadan joined the Company as its CEO  and CFO, July 12, 1999. He was elected the Company’s President in August  2000. On July 1, 2005, Mr. Ramadan’s employment agreement was renewed and  amended for an additional two years. See “Employment/Severance Agreement,”  below.                                                                                                                                                                                                                                                                                                                         |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
| (2)    | The amounts represent the cost of a leased  automobile provided to Mr. Ramadan for each year indicated.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
| (3)    | Amounts in year 2003 through  2004 represent the number of qualified stock options granted each year. These  options listed are exercisable, and the option exercise price per share for  2003 and 2004 was set forth in Mr. Ramadan’s 2002 employment contract (See  “Employment/Severance Agreement.”). These options are exercisable at a per  share price equal to the fair market value of such share, as determined by  the average of the bid and ask price of such share at the close of the market  on the date of the grant. Commencing with the renewal of his employment  agreement in July 1, 2005 |

 

34

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and pursuant to the Company’s 2004 Equity Incentive Plan, Mr. Ramadan’sequity compensation plan includes a grant of seven-year options to purchase anaggregate total of 175,000 shares of the Company’s Common Stock at thefollowing exercise prices:

 
| **At**          | ** ** | **Price per share** | ** ** |
|-----------------|------------|-------------------------------|------------|
| July 1, 2005    |       | $                             | 2.80       |   |
| January 1, 2006 |       | $                             | 2.88       |   |
| July 1, 2006    |       | $                             | 2.97       |   |
| January 1, 2007 |       | $                             | 3.06       |   |
| July 1, 2007    |       | $                             | 3.15       |   |
| January 1, 2008 |       | $                             | 3.25       |   |
| July 1, 2008    |       | $                             | 3.34       |   |
| January 1, 2009 |       | $                             | 3.44       |   |
| July 1, 2009    |       | $                             | 3.55       |   |
| January 1, 2010 |       | $                             | 3.65       |   |
| July 1, 2010    |       | $                             | 3.76       |   |
| January 1, 2011 |       | $                             | 3.88       |   |
| July 1, 2011    |       | $                             | 3.99       |   |
| January 1, 2012 |       | $                             | 4.11       |   |

 

These options will vestcumulatively as follows, if Mr. Ramadan is, at such time, employed by TWC:

 
| **At**       | ** ** | **Number Vested** | ** ** | **Cumulative Number  Vested** |
|--------------|------------|------------------------|------------|------------------------------------|
| ** **   | ** ** | ** **             | ** ** | ** **                         |
| July 1, 2005 |       | 35,000                 |       | 35,000                             |
|         |       |                   |       |                               |
| July 1, 2006 |       | 35,000                 |       | 70,000                             |
|         |       |                   |       |                               |
| July 1, 2007 |       | 35,000                 |       | 105,000                            |
|         |       |                   |       |                               |
| July 1, 2008 |       | 35,000                 |       | 140,000                            |
|         |       |                   |       |                               |
| July 1, 2009 |       | 35,000                 |       | 175,000                            |

 

In addition, Mr. Ramadan wasgranted, pursuant to his renewed employment agreement and the 2004 EquityIncentive Plan, 75,000 shares of restricted Common Stock that vest cumulativelyas follows, beginning with the quarter ended September 30, 2005:

 
| ** ** | ** ** | **Cumulative** | ** ** | ** **                                                                                                                                                                                                                     |
|------------|------------|----------------|------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| **Number** |       | **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  fist 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.                                                                                                                |

 

35

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Allunvested options and unvested restricted stock granted hereunder shall,automatically and without any further action on the part of Mr. Ramadan or anymembers of the Compensation Committee, terminate upon the effective date of thetermination or expiration of his employment agreement, except that all unvestedoptions and unvested restricted stock granted hereunder shall, automaticallyand without any further action on the part of any person, vest in Mr. Ramadanupon the closing date of a change of control of the Company. All such vestedoptions and restricted stock must be surrendered or otherwise converted intocash or securities of the acquiror or exercised as required or permitted by theterms and conditions of the change of control documents. Any extension of theterms of his employment agreement beyond December 31, 2007 shall not result inthe extension of any option or stock grant vesting or exercise periods setforth above. As of December 31, 2005 there were no shares of restricted stockvested.

 

***Option Grants and Exercises***

 

Thefollowing table summarizes certain information concerning individual grants ofoptions during fiscal 2005 to the executive officer named in the SummaryCompensation Table above and the potential realizable value of the options heldby such person at December 31, 2005.

 

**OptionsGranted in Fiscal 2005Individual Grants**

** **
| **Name **       | ** ** | **Shares of Common  Stock Underlying  Options Granted** | ** ** | **% of Total Options  Granted to Employees  in Fiscal Year** | ** ** | **Base  Exercise Price  ($ /SH)** | ** ** | **Expiration  Date** |
|----------------------|------------|-----------------------------------------------------------------------------|------------|-------------------------------------------------------------------------------------------------|------------|---------------------------------------------|------------|----------------------|
| ** **           | ** ** | ** **                                                                  | ** ** | ** **                                                                                      | ** ** | ** **                                  | ** ** | ** **           |
| **Rami S.  Ramadan** | ** ** | **175,000**                                                                 | ** ** | **100%**                                                                                        | ** ** | **$**                                       | **2.80**   | ** **           | **06/30/12** |
|                      |            |                                                                             |            |                                                                                                 |            |                                             |            |                      |  |

 

No options were exercised by the executiveofficer named in the Summary Compensation Table during fiscal 2005.

 

Thefollowing table summarizes the option values held by the executive officernamed in the Summary Compensation Table as of December 31, 2005.

 

**AggregateOption Exercises in Fiscal 2005 andFiscal 2005 Year-End Option Value Table**

 
| ** **           | ** ** | ** **                                              | ** ** | ** **                              | ** ** | **Number of Unexercised  Options At  December 31, 2005** | ** ** | **Value of Unexercised in the  Money Options at  December 31, 2005** | ** **  |
|----------------------|------------|---------------------------------------------------------|------------|-----------------------------------------|------------|-----------------------------------------------------------------------------------|------------|--------------------------------------------------------------------------------------------------------------|-------------|
| **Name**             | ** ** | **No. of Shares  Acquired on  Exercise** | ** ** | **Value  Realized Upon  Exercise** | ** ** | **Exercisable**                                                                   | ** ** | **Unexercisable**                                                                                            | ** **  | **Exercisable** | ** ** | **Unexercisable** | ** ** |
| ** **           | ** ** | ** **                                              | ** ** | ** **                              | ** ** | ** **                                                                        | ** ** | ** **                                                                                                   | ** **  | ** ** | ** ** | ** ** | ** ** |
| **Rami S.  Ramadan** | ** ** | **—**                                              | ** ** | **$**                                   | **—** | ** **                                                                        | **40,500** | ** **                                                                                                   | **140,000** | ** ** | **$** | **—** | ** ** | **$** | **—** | ** ** |
|                      |            |                                                         |            |                                         |            |                                                                                   |            |                                                                                                              |             |  |  |  |  |  |  |  |

 

36

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***Directors’ Compensation***

 

Effective beginning the quarter ending September 30, 2003,non-employee directors’ compensation includes a cash retainer fee of $6,250 perquarter, per member. In addition, the non-executive chairman of the Board willreceive an additional $1,250 per quarter, while each chairman of its threeCommittees will receive $625 per quarter. All members of the Board arereimbursed for out-of-pocket expenses in connection with attending Boardmeetings. Pursuant to the 1999 Plan adopted at the 1999 Annual Meeting andamended by the Board in July 2000, each non-employee director is providedwith an automatic grant of a non-qualified option to purchase 25 shares ofCommon Stock on the date following each fiscal quarter in which the directorserves. Each such option (i) has a 10-year term, (ii) has an exerciseprice per share equal to 100% of the fair market value of one share of CommonStock on the date of grant, and (iii) becomes fully exercisable on thedate of grant. As of December 31, 2005, there were 570 shares ofCommon Stock remaining available for issuance under the 1999 Plan reserve.

 

***Employment/Severance Agreement***

 

***Rami S. Ramadan****.*Effective July 1, 2005, the employment agreementbetween the Company and Mr. Ramadan was renewed for a period of two andone-half years pursuant to which Mr. Ramadan will continue to serve as theCompany’s CEO, CFO and President at an annual salary of $400,000. Mr. Ramadanis eligible to participate in the 2004 Equity Plan and any present or futureemployee benefit plans, including a proposed profit sharing bonus plan and aproposed deferred compensation plan. He also will be reimbursed for reasonabletravel and out-of-pocket expenses necessarily incurred in the performance ofhis duties. As provided by Mr. Ramadan’snew agreement and shown in Footnote 2 to the Summary Compensation Table above,he received:  (i) 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 five year vestingperiod; and (ii) upon reaching designated earnings per share targets,75,000 shares of restricted, Common Stock in 25,000 share allotments.

 

In the event the employment agreement is terminated without cause, asdefined in the agreement, Mr. Ramadan will receive two year’s salary,subject to certain timing limitations. The Agreement is also subject to numeroustermination provisions in the event of death, disability, discharge for cause,and material breach thereof, among others. In addition, upon termination of hisagreement, with the exception of a discharge for cause, generally, the Companywill continue to pay Mr. Ramadan his base salary and his medial 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 expiration date of the employment agreement. Further, the employmentagreement expires on December 31, 2007, provided, however, unless eitherthe Company or Mr. Ramadan notifies the other of its/his intent not toextend the term on or prior to September 30, 2007 or on or prior to each September 30ththereafter, then the Term shall be automatically extended for a period of oneyear to the next December 31st.

 

***Code of Ethics***

 

The Board of Directors adopteda Code of Ethics which covers all executive officers of TWC and itssubsidiaries. The Code of Ethics requires that senior management avoidconflicts of interest; maintain the confidentiality of information relating tothe Company; engage in transactions in the Common Stock only in compliance withapplicable laws and regulations and the requirements set forth in the Code ofEthics; and comply with other requirements which are intended to ensure thatsuch officers conduct business in an honest and ethical manner and otherwiseact with integrity and in the best interest of TWC. All executive officers ofthe Company are required to affirm in writing that they have reviewed andunderstand the Code of Ethics.

 

A copy of the Company’s Code ofEthics will be furnished to any person upon written request from any suchperson. Requests should be sent to:  RamiS. Ramadan, President, Chief Executive Officer and Chief Financial Officer,Trans World Corporation, 545 Fifth Avenue, Suite 940, New York, New York10017.

 

37

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**Item 11. Security Ownership of Certain Beneficial Owners andManagement.**

 

The following table sets forth information regarding the beneficialownership of the Common Stock as of March 16, 2006 (the “Calculation Date”),unless otherwise noted, (a) by each shareholder who is known by the Companyto own beneficially more than 5.0% of the outstanding Common Stock, (b) byeach director, (c) by each executive officer named in the SummaryCompensation Table above and by all executive officers and directors as agroup. 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 the 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)                                            |       | 3,559,388                                                     |       | 45.4                             | %          |
| Rami S.  Ramadan (3)                                                 |       | 183,000                                                       |       | 2.3                              |       |
| Julio E.  Heurtematte, Jr. (4)                                  |       | 25,146                                                        |       |                             | *          |
| Malcolm M.B.  Sterrett (5)                                           |       | 25,146                                                        |       |                             | *          |
| Geoffrey B.  Baker (6)                                               |       | 25,106                                                        |       |                             | *          |
| Timothy G.  Ewing (7)                                                |       | 3,559,388                                                     |       | 45.4                             |       |
| Special  Situations Funds (8)                                        |       | 1,323,600                                                     |       | 16.9                             |       |
| Wynnefield  Small Cap Value Offshore Fund, Ltd (9)                   |       | 882,353                                                       |       | 11.3                             |       |
| SC  Fundamental Funds Group (10)                                     |       | 588,235                                                       |       | 7.5                              |       |
| All  directors and the executive officer as a group (5 persons) (11) |       | 3,817,786                                                     |       | 47.7                             | %          |

 

----

*           Lessthan 1%.

 

(1)   The percentage of outstanding shares is based on 7,840,869 sharesoutstanding as of March 16, 2006 and, for certain individuals andentities, on reports filed with the SEC or on information provided directly tothe Company by such individuals or entities. A person is deemed to be the beneficialowner of securities that can be acquired by such person within 60 days from March 16,2006 upon the exercise of options or warrants. Each beneficial owner’spercentage ownership is determined by assuming that options or warrants thatare held by such person (but not those held by any other person) areexercisable within 60 days from March 16, 2006 have been exercised.Included are shares of Common Stock issuable upon the exercise of options orwarrants to purchase the Company’s Common Stock.

 

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

 

(3)   Consists of 2,500 shares of Common Stock and 180,500 shares subject toincentive options, granted to Mr. Ramadan on July 12, 1999 and eachsubsequent year through 2005, of which 40,500 are vested. (See “Employment/SeveranceAgreement.”)

 

(4)   Includes 24,029 shares of Common Stock; warrants to purchase 417 sharesof Common Stock at an exercise price of $1.00 per share expiring March 31,2008; 10 shares of Common Stock subject to non-qualified options granted to Mr. Heurtematteunder the 1998 Plan at the end of each calendar quarter ended June 30,1998 through December 31, 1998 and 20 shares of Common Stock subject tonon-qualified options granted under the 1999 Plan at the end of each calendarquarter ended March 31, 1999 through June 30, 2000, and 25 shares ofCommon Stock subject to non-qualified options granted under the 1999 Plan atthe end of each calendar quarter ended September 30, 2000 through December 31,2005, all of which were fully vested on the dates of grant.

 

38

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(5)   Includes 24,029 shares of Common Stock; warrants to purchase 417 sharesof Common Stock at an exercise price of $1.00 per share expiring March 31,2008; 10 shares of Common Stock subject to non-qualified options granted to Mr. Sterrettunder the 1998 Plan at the end of each calendar quarter ended June 30,1998 through December 31, 1998 and 20 shares of Common Stock, subject tonon-qualified options, granted under the 1999 Plan at the end of each calendarquarter ended since March 31, 1999 through June 30, 2000, and 25shares of Common Stock subject to non-qualified options granted under the 1999Plan at the end of each calendar quarter ended September 30, 2000 through December 31,2005, all of which were fully vested on the dates of grant.

 

(6)   Includes 24,029 shares of Common Stock; warrants to purchase 417 sharesof Common Stock at an exercise price of $1.00 per share expiring March 31,2008; 10 shares of Common Stock subject to non-qualified options granted to Mr. Bakerunder the 1993 Incentive Stock Option Plan at December 31, 1998, 20 sharesof Common Stock, subject to non-qualified options, granted under the 1999Director Plan for the calendar quarter ended March 31, 1999 and 20 sharesof Common Stock subject to non-qualified options granted under the 1999Director Plan at the end of each quarter ended since September 31, 1999through 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 December 31, 2005,all of which were fully vested on the dates of grant.

 

(7)   Mr. Timothy G. Ewing is the managing partner of Ewing &Partners, which manages Value Partners, Ltd. His beneficial ownership includes 3,559,388 shares of Common Stock, held byValue Partners, Ltd. (See also Note (2) above).

 

(8)   AWM Investment Company, Inc., (“AWM”) a Delaware corporation, isthe general partner of and investment adviser to the Special Situations CaymanFund, L.P. (“SSCF”). MG Advisers, L.L.C., (“MG”) a New York limited liabilitycompany, is the general partner of and investment adviser to the SpecialSituations Private Equity Fund, L.P. (“SSPEF”). Austin W. Marxe and David M.Greenhouse are the principal owners of AWM and MG and are principallyresponsible for the selection, acquisition and disposition of the portfolios securitiesby the investment advisers on behalf of their Funds. As a result of the $4.75million Capital Raise, SSCF and SSPEF beneficially own 588,300 and 735,300shares of Common Stock, respectively. The principal business of SpecialSituations Funds is to invest in equity and equity-related securities and othersecurities of any kind and nature.

 

(9)   As part of its participation in the $4.75 million Capital Raise,Wynnefield Small Cap Value Offshore Fund, Ltd., an investment firm, directlybeneficially owns 882,353 shares of the Company’s Common Stock.

 

(10)SC Fundamental Value Funds LP (“SCFVF”) and SC Fundamental Value BVI,Ltd (“SCFVBVI”), collectively referred to as SC Fundamental Value Funds Group,were participants in the $4.75 million Capital Raise. SCFVF is managed by SCFundamental LLC, as general partner, and beneficially owns 335,295 shares ofCommon Stock, while SCFVBVI is managed by SC BVI Partners, as investmentadvisor, and beneficially owns 252,940 shares of Common Stock.

 

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

 

**Item 12. Certain Relationships and Related Transactions.**

 

At December 31, 2005 and 2004,approximately $372,000 and $1.1 million of the Interest Notes were held byValue Partners, Ltd., an approximate 45% owner of the Company’s issued andoutstanding Common Stock as of December 31, 2005. Related interest expensewas approximately $60,000 and $114,000 for the years ended December 31,2005 and 2004, respectively.

 

During the year ended December 31, 2005,the Company utilized the services of an attorney who is the brother of theCompany’s managing director of Czech operations. Fees paid to the attorneyduring 2005 aggregated approximately $12,000. At December 31, 2005,approximately $1,200 was owed to the attorney for services rendered throughsuch date.

 

As of December 31, 2005, Value Partnersholds a controlling 45.4% of the Company’s issued and outstanding Common Stock.Further, Value Partners holds 8.2% of the Company’s long term debt.

 

39

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**Item 13. Exhibits and Reports on Form 8-K.**

 

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

 

Reference is made to the Exhibit Indexhereinafter contained.

 

A copy of any exhibits listed or referred toherein will be furnished at a reasonable cost to any person who was a shareholderof the Company as of March 16, 2006, upon written request from any suchperson. Requests should be sent to: Rami S. Ramadan, President, Chief ExecutiveOfficer and Chief Financial Officer, Trans World Corporation, 545 Fifth Avenue,Suite 940, New York, New York 10017.

 

**(b)**         **Reports on Form 8-K**

 

The Company filed a report on Form 8-Kwith the SEC on December 29, 2005, announcing unregistered sales of equitysecurities. (See Part II – Item 5. Market for Common Equity and RelatedStockholder Matters)

 

40

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**TRANS WORLD CORPORATIONEXHIBIT INDEX TO ANNUAL REPORT ON FORM 10-KSBFOR THE YEAR ENDED DECEMBER 31, 2005**

 
| **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)                      |

 

41

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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)                                                      |

 

42

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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 Exhibit __ contained in the Proxy Statement for the 2004  Annual Meeting and the 2005 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                                   |   | Filed  herewith                                                                                                                                                 |
|   |   |                                                                                                                                                         |   |                                                                                                                                                            |
| 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                                                                                                                                                 |

 

43

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**SIGNATURES**

 

Pursuant to the requirements of Section 13 or 15 of the SecuritiesExchange Act of 1934, the Issuer has duly caused this Report to be signed onits behalf by the undersigned, thereunto duly authorized.

 

 
|   | **TRANS  WORLD CORPORATION** |
|--------|------------------------------|
|   | (registrant)                 |

 

 
| Dated: *March 17, 2006* |   |                                                            |
|------------------------------|--------|-----------------------------------------------------------------|
|                         | By:    | /s/ Rami S.  Ramadan                                            |   |
|                         |   | Rami S.  Ramadan                                                |
|                         |   | President,  Chief Executive Officer and Chief Financial Officer |
|                         |   | (Principal  Executive and Financial Officer)                    |

 

 

Pursuant to the requirements of the Securities Exchange Act of 1934,this Report has been signed by the following persons on behalf of the Issuer on*March 17, 2006* in the capacitiesindicated.

 
| ** ** | **Signature and Title**             |
|------------|-------------------------------------|
|       |                                |
|       | /s/ Rami S.  Ramadan                |   |
|       | Director                            |
|       |                                |
|       | /s/ Geoffrey  B. Baker              |   |
|       | Director                            |
|       |                                |
|       | /s/ Timothy  G. Ewing               |   |
|       | Director                            |
|       |                                |
|       | /s/ Julio E.  Heurtematte, Jr. |   |
|       | Director                            |
|       |                                |
|       | /s/ Malcolm  M.B. Sterrett          |   |
|       | Director                            |
|            |                                     |  |  |  |  |

 

44

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