** **

**SECURITIES AND EXCHANGE COMMISSION**

**WASHINGTON,D.C.  20549**

**FORM 10-KSB**

**x    ANNUALREPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**

**Forthe Year Ended December 31, 2006**

**o    TRANSITIONREPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**

**Forthe transition period from                                  to                                   .**

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

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**TRANS WORLD CORPORATION**

(Exact name of registrantas specified in its charter)

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

 

Registrant’stelephone number, including area code: **(212) 983-3355**

Securities registeredpursuant to Section 12(b) of the Act: **None**

Securitiesregistered pursuant to Section 12(g) of the Act:

**CommonStock, $.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     NO  x

Indicateby check mark whether the Registrant (1) has filed all reports required to befiled by Section 13 or 15(d) of the Securities Exchange Act of 1934 during thepreceding 12 months (or for such shorter period that the Registrant wasrequired to file such reports), and (2) has been subject to such filingrequirements for the past 90 days. YES    x        NO    o

Indicateby check mark if disclosure of delinquent filers pursuant to Item 405 ofRegulation S-B is not contained herein, and will not be contained, to the bestof Registrant’s knowledge, in definitive proxy or information statementsincorporated by reference in Part III of this Form 10-KSB or any amendment tothis 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 Rule12b-2 of the Exchange Act. (Checkone):           Large acceleratedfiler    o       Accelerated filer    o                         Non-accelerated filer    x

Indicateby check mark whether the Registrant is a shell company (as defined in Rule12b-2 of the Act. YES    o                 NO    x

The issuer’s revenues for theyear ended December 31, 2006 were approximately $26,216,000.

The aggregate market value of Common Stock of the Registrant as of March8, 2007, based upon the average bid and asked price of $3.15 as reported on theOTC Bulletin Board on that date, was $24,698,740.50. There were 7,840,870shares of Common Stock of the Registrant deemed outstanding as of said date.

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

 

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**TRANS WORLD CORPORATIONFORM 1O-KSB**

**TABLE OFCONTENTS**
|         | ** ** | ** **                                                   | **Page** |
|---------|------------|--------------------------------------------------------------|----------|
| PART I. |       |                                                         |     |
|    | Item 1.    | Description of Business                                      | 1        |
|    |       | General Development of Business                              | 1        |
|    |       | Corporate Information                                        | 1        |
|    |       | OTC Bulletin Board                                           | 1        |
|    |       | Description of Business                                      | 2        |
|    |       | Market Overview and Competition                              | 2        |
|    |       | The Company’s Facilities                                | 2        |
|    |       | Future Operations                                            | 3        |
|    |       | Long Range Objective                                         | 3        |
|    |       | Marketing                                                    | 3        |
|    |       | Regulations  and Licensing                                   | 4        |
|    |       | Application of Future or Additional Regulatory  Requirements | 4        |
|    |       | Taxation                                                     | 4        |
|    |       | Employees                                                    | 5        |
|    | Item 2.    | Description of Property                                      | 5        |
|    |       | Corporate Offices                                            | 5        |
|    |       | Czech Republic                                               | 5        |
|    | Item  3.   | Legal  Proceedings                                           | 5        |
|    | Item 4.    | Submission of Matters to a Vote of Security Holders          | 6        |

 

ii

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**TABLE OFCONTENTS**
|          | ** ** | ** **                                                                            | **Page** |
|----------|------------|---------------------------------------------------------------------------------------|----------|
| PART II. |       |                                                                                  |     |
|     | Item 5.    | Market for Common Equity and Related Stockholder  Matters                             | 6        |
|     |       | $4.75  million Capital Raise                                                          | 6        |
|     | Item 6.    | Management’s Discussion and Analysis or Plan of  Operations                      | 7        |
|     |       | Forward-Looking  Statements                                                           | 7        |
|     |       | Exchange Rates                                                                        | 7        |
|     |       | Critical  Accounting Policies                                                         | 8        |
|     |       | Results of Operations                                                                 | 8        |
|     |       | Business Units:                                                                       | 9        |
|     |       | Ceska, Czech Republic                                                                 | 9        |
|     |       | Rozvadov, Czech Republic                                                              | 9        |
|     |       | Route 59, Czech Republic                                                              | 9        |
|     |       | Route 55, Czech Republic                                                              | 10       |
|     |       | Liquidity and Capital Resources                                                       | 10       |
|     |       | Plan of Operations and Important Factors to Consider:                                 | 11       |
|     |       | Positive Stockholders’ Equity; Positive Operating  Income                        | 11       |
|     |       | Need to Diversify                                                                     | 11       |
|     |       | Taxation  of Gaming Operations                                                        | 11       |
|     |       | Dependence  upon Key Personnel                                                        | 11       |
|     |       | Need  for Additional Financing                                                        | 12       |
|     |       | International  Activities                                                             | 12       |
|     |       | Climate Impact                                                                        | 12       |
|     |       | Licensing and Regulation                                                              | 12       |
|     |       | Liability Insurance                                                                   | 12       |
|     |       | No Dividends                                                                          | 12       |
|     |       | Possible Adverse Effect of Issuance of Preferred Stock                                | 13       |
|     |       | Dilutive Effect of Warrants and Options                                               | 13       |
|     | Item  7.   | Financial  Statements                                                                 | 14       |
|     | Item 8.    | Changes In and Disagreements with Accountants on  Accounting and Financial Disclosure | 34       |

 

iii

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**TABLE OFCONTENTS**
|                                            |          | ** **                                                                            | **Page** |
|--------------------------------------------|----------|---------------------------------------------------------------------------------------|----------|
| PART III.                                  |     |                                                                                  |     |
|                                       | Item 9.  | Directors and Executive Officers; Compliance with  Section 16(a) of the Exchange Act. | 34       |
|                                       |     | Information about the Board and its Committees:                                       | 35       |
|                                       |     | Audit Committee                                                                       | 35       |
|                                       |     | Compensation Committee                                                                | 35       |
|                                       |     | Nominating Committee                                                                  | 35       |
|                                       |     | Section 16(a) Beneficial Ownership Reporting  Compliance                              | 36       |
|                                       |     | Code of Ethics                                                                        |     |
|                                       | Item 10. | Executive and Directors’ Compensation                                            | 36       |
|                                       |     | Compensation Discussion and Analysis                                                  | 36       |
|                                       |     | Stock Options                                                                         | 40       |
|                                       |     | Restricted Stock Awards                                                               | 41       |
|                                       |     | Deferred Compensation  Plan                                                           | 42       |
|                                       |     | 2006  Profit Sharing Plan                                                             | 42       |
|                                       |     | Compensation  Committee Interlocks and Insider Participation                          | 42       |
|                                       |     | Summary Compensation  Table                                                           | 43       |
|                                       |     | Equity Compensation Plans                                                             | 44       |
|                                       |     | Outstanding  Equity Awards at Fiscal Year-End                                         | 44       |
|                                       |     | Options Exercised and Stock Vested                                                    | 45       |
|                                       |     | Nonqualified  Deferred Compensation                                                   | 45       |
|                                       |     | Employment and Change of Control Agreements                                           | 45       |
|                                       |     | Potential Payments upon Termination of Employment or a  Change in Control             | 46       |
|                                       |     | Directors’ Compensation                                                          | 47       |
|                                       |     | Employment/Severance Agreements                                                       | 48       |
|                                       |     | Subsequent Event                                                                      | 48       |
| .                                          | Item 11. | Security Ownership of Certain Beneficial Owners and  Management                       | 49       |
|                                       | Item 12. | Certain Relationships and Related Transactions                                        | 50       |
|                                       | Item l3. | Exhibits and Reports on Form 8-K                                                      | 51       |
|                                       |     | (a)Exhibits                                                                           | 51       |
|                                       |     | (b)Reports on Form 8-K                                                                | 51       |
|                                       |     |                                                                                  |     |
| EXHIBITS INDEX                             | 52       |
| SIGNATURES AND CERTIFICATIONS              | 55       |
| INDEX TO CONSOLIDATED FINANCIAL STATEMENTS | 14       |

 

iv

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**Item 1. Description of Business.**

**GeneralDevelopment of Business**

Trans World Corporation (hereinafter referred to as the “Company” or “TWC”)was organized as a Nevada corporation in October 1993 for the acquisition,development and management of gaming establishments, to the extent permitted byapplicable local laws, featuring live and mechanized gaming, including videogaming devices such as video poker machines, primarily in Louisiana.  In 1998, the Company amended its operatingstrategy by shifting its focus to the casino market in Europe.  Today, TWC operates five full-servicecasinos; four of which are owned and one is managed under contract.  The four fully-owned casinos are in the CzechRepublic, which are located in Ceska Kubice (“Ceska”), Rozvadov (“Rozvadov”),Hate (“Route 59”), and Dolni Dvoriste (“Route 55”), and the casino operatedunder management contract is located in Podstrana, near Split, Croatia.

The Czech casinos, which operate under the brand name American ChanceCasinos (“ACC”), showcase themes portraying recognizable eras of Americanhistory, are situated at border locations and draw the majority of theircustomers from Germany and Austria.  Eachof the casinos has a distinctive theme: Pacific South Seas, Chicago in theRoaring 1920’s, New Orleans’ thematic elements and Miami Beach in the 1950’s.  ACC’s operating strategy centers ondifferentiating its products from the very formal German and Austrian casinos,and as a result, management has endeavored to create gaming environments with casualand exciting atmospheres with an emphasis on entertainment.  Further, as part of the ACC operatingformula, management strives to uphold the integrity and professionalism of itsoperations as a means to dispel any concerns that customers and governmentsmight have about gambling.

On September 21, 2006, the Company was selected to manage the GrandCasino Lav and Inmotion Nightclub (collectively referred to as the “GrandCasino Lav”), located in the newly opened Le Meridien Lav, Split resort inPodstrana, Croatia.  The managementagreement with the Grand Hotel Lav d.o.o., the property owner, provides for a10-year term, with optional renewal periods of five (5) years each, subject tocertain performance conditions.   Inaddition to marketing the casino/nightclub to the hotel guests, ACC will targetthe local market of Split, the second largest city in Croatia.

As the GrandCasino Lav opened in the last part of December 2006, its contribution to theyear 2006 operational results was not material. Thus, all discussions of operational performance and results herein arelimited to the Company’s fully-owned and operated units in the Czech Republic.

TWC has no operating presence in the United States.

**CorporateInformation**

The Company’s corporate offices are located at 545 Fifth Avenue, Suite940, New York, New York 10017, its telephone number is (212) 983-3355, and itswebsite is www.transwc.com,which is not a part of this Form 10-KSB.

**OTCBulletin Board**

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

1

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**Descriptionof Business**

The Company is engaged in the acquisition, development and managementof niche casino operations in Europe, which feature gaming tables andmechanized gaming devices, such as video slot machines, as well as theacquisition, development and eventual management of small to midsize hotels,which may include casino facilities.  TWC’splanned expansion into the hotel industry is founded on management’s beliefthat hotels in the small to midsize boutique class are complementary to theCompany’s casino brand, that opportunities in one of these two industries oftenlead to, or are tied to, opportunities in the other industry, and that a morediversified portfolio of assets will give the Company greater stability andmake it more attractive to potential investors. Further, several of the Company’s top management have extensiveexperience in the hotel industry.

**MarketOverview and Competition**

Casinos in Germany and Austria have formal atmospheres and an air of exclusivity,while ACC’s casinos offer relaxed but exciting and informal atmospheres, whichhave become a desirable alternative. Further, ACC has established itself as a reputable casino company in theCzech Republic through its high customer service standards, professionalservice, and strict adherence to all local gaming regulations.

The Company acquired two of its casinos, at Rozvadov and Ceska Kubice,in the Czech Republic in March 1998.  Atthe time, they were the only casinos in the local market areas.  Prior to December 1998, local municipalitieswere empowered to grant casino licenses in their regions. However, after 1998,amendments to the Czech gaming legislation removed the licensing right from thelocal governments, which effectively eliminated exclusivity. Since this change,four casinos have opened in Folmava, Czech Republic, which operate in directcompetition with the Company’s Ceska casino. In early 2000, in response to increased competition from casinos locatedin the Czech Republic, the German government issued 12 new gaming licenses inthe Bavarian region of Germany.  Two ofthe Bavarian casinos that went into operation in spring of 2000 as a result ofthe additional licenses have operated in direct competition with TWC’s casinosin Ceska Kubice and Rozvadov.  Further,in June 2003, a new competitor casino opened across the street from theRozvadov casino.  Route 59 currently hastwo competitors: one remaining from four that were in existence two years agoand a new competitor, which is similarly located in the former duty free zonebetween the Czech and Austrian border posts. The Company’s newest casino, Route 55, which opened in December 2004,has two competitors.

The Grand Casino Lav, which had its soft opening on December 22, 2006and held its gala grand opening on January 13, 2007, targets the immediateregion surrounding Split, a resort destination and a United NationsEducational, Scientific and Cultural Organization (“UNESCO”)-recognizedcity.  The casino conducts its gamingactivities in Euro (“EUR”) currency, and its food and beverage operations inKunas (“HRK”), the local currency.  TheGrand Casino Lav has no current competitors in proximity.

**TheCompany’s Facilities**

The Ceska casino,which has a 1920’s Chicago theme, currently has 16 gaming tables, includingseven card tables, eight roulette tables, and one electro-mechanical,eight-position roulette machine.  Through2006, Ceska added, in aggregate, four new video slot machines, bringing thetotal to the current 52.  Visitor parkingis available for approximately 60 cars.

The Rozvadovcasino, which has a South Pacific theme, currently operates 10 gaming tables,including five card tables and five roulette tables, 30 video slot machines,and parking for 40 cars.

2

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Route 59 currentlyincludes 21 gaming tables, which consist of 12 card tables, eight roulettetables, and one electro-mechanical roulette machine.  Further, in July 2006, the casino added 10new video slot machines, bringing the total to 70 for the year ended December31, 2006.  In January 2007, another 32slot machines were added, bringing the total number of slots in operation to102.  The unit recently underwentexpansion and renovation projects, the scope of which included: (i)refurbishment of the existing space, including reception reconfiguration; (ii)expansion of the building, including an extension of the gaming floor area;(iii) construction of a large, centrally located stage; (iv) introduction of asecond bar; (v) introduction of New Orleans thematic elements throughout thecasino; and (vi) expansion of the parking area to accommodate up to 220 cars.

Route 55, ACC’slargest casino to date, features a Miami Beach “Streamline Moderne” style,reminiscent of Miami Beach in the early 1950’s. The two-story casino offers 21 tables, including 10 card tables, 10roulette tables, a Slingshot multi-win roulette, and 100 video slot machines,six of which were added in July 2006.  Onthe mezzanine level, the casino offers a full Italian, Pompeii-themedrestaurant with seating for 70 guests, an open buffet area, a VIP lounge, and aVIP gaming room equipped with four gaming tables (included in the 21 tablescount).

The Grand CasinoLav currently has 13 gaming tables, including six roulette tables, seven cardtables, two of which are in the VIP dedicated area, 80 video slot machines, apanoramic, mezzanine bar overlooking the gaming floor, and a full servicenightclub that can accommodate up to 250 guests, and features live acts andentertainment.

**Future Operations**

The Company’s management is now focused onsecuring additional financing to acquire and 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 noassurances that management’s plans will be realized.

**LongRange Objectives**

The Company’soperations are all in the gaming industry. Consequently, the Company’s senior corporate management, several of whomhave extensive experience in the hotel industry, are exploring ways to expandthe Company through the acquisition and/or development of new non-gamingbusiness units, while continuing to grow the Company’s existing operations.  The Company will also seek to manage businessunits that complement its existing operations, while acquisitions will be basedon evaluations of the potential returns of projects that arise and, for certainprojects, the availability of financing.

# **Marketing**

In the year endedDecember 31, 2006, the Company boosted its marketing and promotional programsin an ongoing effort to secure and enhance its competitive position in themarkets 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 continued itssponsorships of several athletic teams and was a benefactor in severalcommunity and social projects during the year, as a way to further promote itsimage and positive contribution to the communities in which the Companyoperates.  The Company also continued itspopular, ethnic-themed and holiday-related parties, which feature liveentertainment, raffles and complimentary grand buffets.  Further, the Company aggressively targetedkey cities in its media campaigns, most notably Vienna, Linz and Regensburg andthe areas surrounding these cities.

In Croatia, theCompany, in addition to its own marketing programs, receives the unique partialbenefit of a larger marketing presence via the Le Meridien international brandrecognition and their marketing plans.

3

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# **Regulationsand Licensing**

In 1998, the Czech Republic House of Deputies passed an amendmentto the 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 theauthorities in the Czech Republic will not amend the gaming law as it pertainsto foreign ownership of casino licenses. 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.

**Applicationof 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 noassurance that such licenses, approvals or findings of suitability will beobtained or will not be revoked, suspended or conditioned or that the Companywill be able to obtain the necessary approvals for its future activities. 

**Taxation**

In conformity to the European Union (“EU”) taxation legislation,when the Czech Republic joined the EU in 2004, its value added tax (“VAT”)increased from 5% to 19%, effective January 2004, for all intra-EU generatedpurchases. All non-EU generated purchases were impacted by identical VATincreases, beginning in May 2004.  Unlikein other industries, VATs are not recoverable for gaming operations.

For the year endedDecember 31, 2006, gaming taxes for the Company averaged approximately 16.0% of gross gamingrevenues, which comprised of live (table) games and slot games revenues.  For live games revenue, the applicable taxesare: (i) A 1% state supervision tax; (ii) a 10% administration tax; and (iii) acharity contribution (tax) according to the formula below, net of theaforementioned taxes totaling 11%.  Forslot games revenue, the applicable tax is the charity tax, net of localadministration and licensing fees.

 

Charity tax ratesapply according to the following table:
| ** **             | ** ** | **net of applicable gaming  taxes and fees, in Czech  Koruna (“CZK”)** | ** ** |
|------------------------|------------|--------------------------------------------------------------------------------------------------------------------------|------------|
| ** **             | ** ** | **Up to  50 million**                                                                                          | ** ** | **Up to  100 million** | ** ** | **Above  100 million** | ** ** |
| ** **             |       |                                                                                                                     |       |   |   |   |   |
| Charity tax  rates (1) |       | 6                                                                                                                        | %          | 8 | % | 10 | % |

 

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(1)  The applicable charitytax rate is determined separately on annual live game and slot game revenues,net of applicable gaming taxes and fees as generated/reported by each Czechlegal entity.  For the year endedDecember 31, 2006, one of the Company’s slot subsidiaries, LMJ Slots s.r.o.’sslot revenue exceeded 100 million CZK (approximately $4 million) for the firsttime and was subject to the 10% charity tax. 

There can be no assurances that taxrates, fees, or other payments applicable to the Company's gaming operationswill not be increased in the future.

4

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**Employees**

As of December 31,2006, the Company had a total of 564 employees, including 126 in its casino inCeska, 72 in its casino in Rozvadov, 184 in Route 59, 161 in Route 55, 16 inits shared services office in the Czech Republic, and five in the Company’sheadquarters in New York.  The Companybelieves that its employee relations are excellent.

**Item 2. Description of Property.**

**CorporateOffices**

The Company’s corporate offices are located at 545 Fifth Avenue, Suite940, New York, New York, occupying 1,626 square feet of office space pursuantto the renewal of its five-year lease at the base rental rate of $5,114 permonth, expiring in March 2010.

**CzechRepublic**

The Company leasesthe casino facility in Ceska Kubice.  Thecasino building lease expires in 2010, with option to renew on negotiableterms. ** **TheCompany also owns a parcel of land in Folmava, Czech Republic in the sameregion as the existing Ceska casino.

The Company leasesaccommodations for staff in Ceska Kubice, Hate (Route 59) and in Dolni Dvoriste(Route 55).

In Rozvadov, the Company owns the casino building and an adjacentfacility for staff accommodations.

On December 20,2006, the Company completed the final payment on the buyout of the Route 59building lease.  The building leasebuyout of €1.6 million, or approximately $2.1 million using 2006 year-endexchange rate, was financed by a loan from a local bank in the Czech Republic.

In April 2002, TWC acquired a parcel of land in Dolni Dvoriste, CzechRepublic.  On this parcel, the Companyconstructed its fourth and largest casino, Route 55, which was completed inDecember 2004.  The casino’s constructionwas financed in part through a 60 million CZK (or approximately $2.9 millionusing 2006 year-end exchange rate), 5.95% interest per annum, 58-month termloan with GE Capital Bank a.s..  The loanis collaterized by the land,building, furniture, fixtures and equipment in Dolni Dvoriste and by the landin Folmava.

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

While the Companyis often subject to various contingencies, it is currently engaged in only onelitigation, the outcome of which management believes will not have a materialadverse effect on the Company’s consolidated financial position or results ofoperations.  The Company believes that ithas a meritorious claim in the litigation. The Company is not currentlyinvolved in any other material legal proceeding nor was it involved in anyother material litigation during the year ended December 31, 2006, or throughthe date of this filing.

5

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**Item 4.****Submission of Matters to a Vote of SecurityHolders.**

No matters weresubmitted to a vote of security holders during the fourth quarter of the fiscalyear covered by this Report.

## **PART II**

**Item 5.****Market for Common Equity and Related StockholderMatters.**

The Company’s Common Stockis quoted on the OTC Bulletin Board under the symbol TWOC.OB (formerlyTWCP.OB).

## **$4.75million Capital Raise**

In December 2005,the Company sold $4.75 million of the Company’s Common Stock in a privateplacement (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 at the time of closing the$4.75 million Capital Raise was $1.70 per share.  Thereby, the Company issued an aggregate of2,794,188 shares of Common Stock on two separate dates: 1,911,835 on December22, 2005and882,353 on December 27, 2005.  Inconjunction with the transaction, the firm that assisted in the arrangement ofthe private placement requested to have a portion of its finder’s fee paid inshares of the Company’s Common Stock. Thus, on December 30, 2005, the Company issued an additional 15,000shares at market price of $1.70.  TheCompany incurred $306,111 in associated expenses that were capitalized intoadditional paid-in capital.  ThroughDecember 31, 2006, the private equity raise was used as follows:

| Uses of Cash  (assuming 2006 annual average of daily exchange rates) | ** ** | **Amount  (000)** | ** ** |
|-------------------------------------------------------------------------------------------------------------------|------------|-------------------|------------|
| Slot machine  purchases/replacements                                                                              |       | $                 | 1,427      |   |
| Route 59  renovation/expansion                                                                                    |       | 1,682             |       |
| Route 55 capital  improvements                                                                                    |       | 395               |       |
| ACC working  capital                                                                                              |       | 360               |       |
| TWC working  capital                                                                                              |       | 580               |       |
| Capital Raise  underlying costs                                                                                   |       | 306               |       |
| **Total Uses of Cash**                                                                                            | ** ** | **$**             | **4,750**  | ** ** |

 

As of March 8, 2007, the Company’s stockprice was $3.15.  The following tablesets forth the high and low prices of the Company’s Common Stock for fiscalyears 2005 and 2006 as quoted on OTC Bulletin Board.
| **Common Stock** | ** ** | **High** | ** ** | **Low** | ** ** |
|-----------------------|------------|----------|------------|---------|------------|
| **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 |   |
| **2006**              |       |     |       |    |       |
| First Quarter         |       | $        | 3.50       |    | $          | 2.00 |   |
| Second Quarter        |       | $        | 2.90       |    | $          | 2.35 |   |
| Third Quarter         |       | $        | 2.80       |    | $          | 1.92 |   |
| Fourth Quarter        |       | $        | 2.85       |    | $          | 2.10 |   |

 

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As of March 8, 2007, there were (a) 7,840,870 outstanding shares ofCommon Stock held of record by approximately 114 holders; (b) outstandingoptions to purchase an aggregate of 249,735 shares of Common Stock; (c)outstanding $1.00 Series C Warrants to purchase an aggregate of 10,131 sharesof Common Stock issued in connection with a private placement of common stockand associated warrants in March 1998; (d) outstanding $1.00 Series G warrantsto 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 certain forward-looking statements. For thispurpose, any statements contained in this Form 10-KSB that are not statementsof historical fact may be deemed to be forward-looking statements. Withoutlimiting the foregoing, words such as “may,” “will,” “expects,” “believes,” “anticipates,”“estimates,” or “intends” or comparable terminology are intended to identifycertain forward-looking statements in this and other sections of the Form10-KSB.  These statements, bytheir nature, involve substantial risks and uncertainties, both known andunknown, and actual results may differ materially from any future resultsexpressed or implied by such forward-looking statements.  The Company undertakes no obligation topublicly update or revise any forward-looking statements whether as a result ofnew information, future events or otherwise. (See also “Plan of Operations and Important Factors to Consider” section below)

**ExchangeRates**

Due to the fact that the Company’s operations are located overseas, theresults of the Company are subject to the impact of fluctuations in foreignexchange rates.  In May 2004, the CzechRepublic joined the European Union (“EU”), but still has not yet adopted theEuro (“EUR”) currency.  Thus, the Company’sCzech operations conducted business in EURs and CZKs, the country’s localcurrency.  TWC does not hedge itscurrency holdings.

The impact of exchange rate fluctuations can be measured through acomparison of the rates of exchange for these two currencies to the USD, whichare depicted on a quarterly average basis of daily rates, showing the trend, inthe following table. 
| **Period**                | ** ** | **USD** | ** ** | **CZK  2006** | ** ** | **CZK  2005** | ** ** | **EUR  2006** | ** ** | **EUR  2005** | ** ** |
|---------------------------|------------|---------|------------|---------------|------------|---------------|------------|---------------|------------|---------------|------------|
|                      |       |    |       |          |       |          |       |          |       |          |       |
| January through  March    |       | $       | 1.00       |          | 23.8236    |          | 22.9139    |          | 0.8319     |          | 0.7623     |   |
| April through  June       |       | $       | 1.00       |          | 22.6462    |          | 23.9565    |          | 0.7965     |          | 0.7941     |   |
| July through  September   |       | $       | 1.00       |          | 22.2697    |          | 24.3836    |          | 0.7845     |          | 0.8197     |   |
| October through  December |       | $       | 1.00       |          | 21.7878    |          | 24.6842    |          | 0.7760     |          | 0.8410     |   |

 

The balance sheet totals of the Company’s foreign subsidiaries atDecember 31, 2006 were converted to USDs using the prevailing interbankexchange rates at December 31, 2006, which are depicted in the following table.

| As Of         | ** ** | **USD** | ** ** | **CZK** | ** ** | **EUR** | ** ** |
|--------------------|------------|---------|------------|---------|------------|---------|------------|
| December 31,  2006 |       | $       | 1.00       |    | 20.8550    |    | 0.7580     |   |
|                    |            |         |            |         |            |         |            |  |

 

7

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**CriticalAccounting Policies**

Management has identified the following as criticalaccounting policies that affect the Company’s consolidated financialstatements.

*Goodwill*

Goodwill represents the excess of the cost of theCompany’s Czech subsidiaries over the fair value of their net assets at thedate of acquisition, which consists of only the Ceska and Rozvadovcasinos.  Under Statement of FinancialAccounting Standards (“SFAS”) No. 142, goodwill is no longer subject toamortization over its estimated useful life; rather, goodwill is subject to atleast an annual assessment for impairment, applying a fair-value basedtest.  The impairment assessment requiresthe Company to compare the fair value of its Czech Republic reporting unit,comprised of its Ceska and Rozvadov casinos, to its carrying value (the netequity of the Company) to determine whether there is an indication that animpairment exists.  The fair value of theCzech Republic reporting unit is determined through a combination of recentappraisals of the Company’s real property and a multiple of earnings beforeinterest, taxes, depreciation and amortization (“EBITDA”), which was based onthe Company’s experience and data from independent, third parties.  During the second quarter of 2006 and 2005,as required by SFAS No. 142, the Company performed the periodic fair-valuebased testing of the carrying value of goodwill related to its Czech Republicreporting unit, and determined that goodwill was not impaired and thereforethat no reporting of impairment losses was warranted.

**Results of Operations**

The following discussion and analysis relates to theconsolidated financial condition and results of operations of the Company forthe years ended December 31, 2006 and 2005.

**YearEnded December 31, 2006 Compared to Year Ended December 31, 2005**

($000s inthousands)
| ** **                                   | ** ** | **Year Ended**             | ** ** | ** ** | ** ** | **Year Ended**             | ** ** |
|----------------------------------------------|------------|---------------------------------|------------|------------|------------|---------------------------------|------------|
| ** **                                   | ** ** | **December 31, 2005** | ** ** | **Change** | ** ** | **December 31, 2006** | ** ** |
|                                         |       |                            |       |       |       |                            |       |
| Net income                                   |       | $                               | 79         |       |       |                            |       |   |
| Revenues                                     |       |                            |       | 2,967      |       |                            |       |
| Cost of revenues                             |       |                            |       | (739       | )          |                            |       |
| Depreciation and  amortization               |       |                            |       | (84        | )          |                            |       |
| Selling, general  and administrative         |       |                            |       | (322       | )          |                            |       |
| Interest  expense, net                       |       |                            |       | 120        |       |                            |       |
| Foreign currency  transaction gain and other |       |                            |       | 6          |       |                            |       |
| Net income                                   |       |                            |       | 1,948      |       | $                               | 2,027      |   |
|                                              |            |                                 |            |            |            |                                 |            |  |  |

 

In the year ended December 31, 2006, the Companyposted a 12.8%, or approximately $3.0 million, improvement on revenues of $26.2million versus $23.2 million in the year ended December 31, 2005. Theimprovement was largely the result of the major revenue increase at the Company’snewest operating unit, Route 55, which was slightly offset by lower live gamerevenue at Route 59.  With the exceptionof Route 55’s 80% year-over-year attendance growth, the attendances at otherunits dipped slightly below their 2005 levels.

The Company’s cost of revenues increased by $739,000over the prior year as a result of several factors.  The incremental costs associated with thevolume increases at Route 55 were the principal contributor.  Other factors that also contributed to theincrease in cost of revenues included: (i) the overall increase of gamingtaxes, and specifically the hike of charity taxes from 8% to 10% on asubstantial portion of the Company’s slot revenues, which, in 2006, exceededthe 100 million CZK revenue base; (ii) greater amenity expenses related to theCompany’s 

8

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aggressive promotional and player benefit programs;and (iii) higher labor costs related to quality and service enhancements infood and beverage operations.  Theseincreases were partially offset by reduced foreign exchange-relatedtransactional losses and to the elimination of slot revenue-basedexpenses.  In 2006, the Company’s slot lease expenses were approximately $2,316versus $2,835 in 2005.

Depreciation and amortization expense increased by$84,000 in year 2006 versus the prior year, due primarily to the addition ofRoute 55 and to the Company’s new, fully-owned slot machines.

Selling, general and administrative expenses increasedby approximately $322,000 in year 2006 in comparison to those of 2005, in largepart, as a result of the following:  (i)incremental costs of operating Route 55; (ii) preopening expenses related tothe Grand Casino Lav; (iii) higher promotional expenditures to increase andretain market share in the Company’s other units; and (iv) stock compensationexpense of approximately $51,000, for the fair value of stock options awardedto key management employees.

Net interest expense decreased by $120,000 in 2006versus the prior year due mainly to maturities of two loans:  The Interest Notes on June 26, 2006 and thelease buyback loan on the Route 59 on December 20, 2006.

Consequently, the Company posted a positive net incomeof approximately $2.0 million for the year ended December 31, 2006, versus anominal net income of $79,000 for the year ended December 31, 2005.

**BusinessUnits:**

***Ceska,Czech Republic***

2006 results were relatively flat to 2005 as live gameattendance dipped 4%, while drop per head (“DpH”), the per guest average dollarvalue of gaming chips purchased, rose 4%. Win percentage (“WP”), or the revenue retention percentage of totaldrop, fell 1.6 percentage points (“ppts”), thereby contributing to a live gamerevenue reduction of approximately 7% from 2005.  The decline in live game revenue was offsetby a 19% increase in slot revenue, resulting in a 1% improvement in totalrevenues over the prior year.  Operatingexpenses, as a percentage of revenues, were up 1.6 ppts versus the same periodin 2005, while overhead expenses were flat to 2005.  Consequently, 2006 unit earnings were on parwith those of 2005.

***Rozvadov,Czech Republic***

For the year ended December 31, 2006, WP increased 3.9ppts over 2005, contributing to a 1% improvement in total revenues.   As a percentage of revenues, operatingexpenses fell 7 ppts from 2005, thanks largely to the conversion to fixedequipment rent over slot revenue-based equipment lease expenses for some of itsslot machines and the replacement of rented slot machines with company-ownedunits.  Overhead expenses saw a 2%reduction in the current year, thanks to lower marketing expenses, therebycontributing to a year over year unit earnings improvement of 60%.

***Route59, Czech Republic***

2006 was a transitional year for Route 59.  The casino underwent an expansion andrenovation project, pursuant to the Company’s capital improvement program,financed by a portion of the $4.75 million Capital Raise.  Although minimized by management, theconstruction impact on operations was unavoidable.  The presence of the 2006 FIFA World Cupmatches in Germany, throughout the months of June and July 2006, preceding therenovation, had already served to reduce the attendance volume at thecasino.  The cumulative and negativeimpact on attendance at this unit was greater than anticipated, specificallythose of high-stake players, which drove down DpH by 16%, despite the fact thatoverall attendance was on par with the level achieved in 2005.  As a result, total revenues declined by 9% inthe current year versus 2005.  Customerretention-related costs, such as gifts and giveaways, dominated operating andoverhead expenses throughout the year and following the construction period,thereby reducing the margin to earnings.

9

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***Route55, Czech Republic***

In its second year of operation, business at Route 55climbed steadily, with all statistical indicators reaching double and tripledigit growth rates.  Attendance posted an80% year-to-year increase, with live game revenue posting similar growth, whileslot revenue doubled 2005’s.  As aresult, total revenues increased 81% over 2005. Moreover, operating and overhead expenses stabilized after its firstyear’s operation in 2005, resulting in a dramatic 300% unit earnings turnaroundfor the young casino.

**Liquidityand Capital Resources**

At December 31, 2006, the Company had a working capital deficit ofapproximately $2.6 million versus a working capital surplus of $161,000 atDecember 31, 2005, primarily as a result of weaker than expected results inRoute 59.  Nevertheless, since thecompletion of the extension of the casino in mid-November 2006, operationalresults have improved.  Managementbelieves that the completed product will better position Route 59 to recapturethe business that it had missed in 2006 as well as attract new business.   Further, management anticipates improvementin its cash flow in 2007, as a result of the following major operationalenhancements implemented in 2006: (i) purchases of a sizable number of new slotmachines; (ii) successful renegotiation of equipment leases on a large portionof its existing inventory of slot machines, from a revenue-based structure to afixed-rent basis; and (iii) the continuation of the growth stage of the Company’snewest and largest casino, Route 55.

For the year endedDecember 31, 2006, the Company had approximately $2.6 million of net cashprovided by operating activities.  Thiswas primarily a result of net income of approximately $2.0 million, $821,000 ofdepreciation and amortization, $147,000 in various accruals’ increases, $51,000in options expense, and a $22,000 in interest payable, which were partiallyoffset by increases in prepaid expenses and other current assets ofapproximately $385,000 and a decrease in cash of $123,000 resulting fromchanges in operational accounts payable. For the year ended December 31, 2006, net cash used in investingactivities was approximately $5.0 million attributable to the following:  (i) the Company’s capital investments ofapproximately $4.0 million into equipment purchases and renovation of Route 59;(ii)  issuance of notes receivable forequipment purchases of $737,000 and $199,000 for preopening costs to GrandHotel Lav d.o.o., in connection with the Company’s management of the GrandCasino Lav; and (iii) payments for various deposits of approximately $488,000,which were partially offset by approximately $408,000 from equipmentleaseback.  Net cash used in financingactivities of approximately $1.2 million were due to repayments of the InterestNotes and other long-term debts related to the Route 59 building leasepurchase, the Route 55 construction loan, and to an additional $74,000 inresidual legal costs related to the $4.75 million Capital Raise.

The Company isalso obligated under various contractual commitments over the next fiveyears.  The following is a summary of thefive-year commitments of the Company as of December 31, 2006:
| **(in thousands)**          | ** ** | ** ** | ** ** | **Less than**    | ** ** | ** **               | ** ** | ** **         | ** ** | **After**        | ** ** |
|----------------------------------|------------|------------|------------|-----------------------|------------|--------------------------|------------|--------------------|------------|------------------|------------|
| **Contractual Obligations** | ** ** | **Total**  | ** ** | **1 Year ** | ** ** | **1-3 Years ** | ** ** | **4-5 Years** | ** ** | **5 Years** | ** ** |
| Long-term,  unsecured debt, US   |       | $          | 1,550      |                  | $          | —                   |       | $                  | 1,550      |             | $          | — |   | $ | — |   |
| Long-term debt,  foreign         |       | 1,903      |       | 604                   |       | 1,299                    |       |               |       |             |       |
| Operating leases                 |       | 957        |       | 309                   |       | 601                      |       | 47                 |       |             |       |
| Employment  agreements           |       | 550        |       | 550                   |       |                     |       |               |       |             |       |
|                             |       |       |       |                  |       |                     |       |               |       |             |       |
| Total contractual  obligations   |       | $          | 4,960      |                  | $          | 1,463                    |       | $                  | 3,450      |             | $          | 47 |   | $ | — |   |

 

The Company’smanagement believes that its cash resources at December 31, 2006 andanticipated cash to be provided by 2007 operations will be sufficient to fundits activities for the year ending December 31, 2007.

 

10

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**Plan ofOperations and Important Factors to Consider:**

TWC managementwill continue to develop marketing and operational strategies designed toincrease attendance and revenues at its existing locations in the CzechRepublic, while striving to minimize costs, through cost-sharing alliances withnon-competing businesses.  TWC willemploy this formula in its newest unit in Split, Croatia in an effort to builda solid customer base from the local and regional markets.  Further,additional focus will be placed on developing marketing strategies that willspecifically target the significant tourist market in the region, particularlyin summer months.

***Positive Stockholders’ Equity;Positive Operating Income***

On December 31,2006, the Company had a positive stockholders’ equity of approximately $20.3million. For the year ended December 31, 2006, the Company achieved a netincome of approximately $2.0 million, on total revenue of approximately $26.2million.  The net income improvement wasthe result of several major factors, such as the increasing dominance of theCompany’s largest casino, Route 55, coupled with reduced expenses associatedwith the leased gaming equipment and the addition of owned slot machines.  The ability of the Company to sustainprofitability from its continuing operations will depend upon the successfulmanagement of gaming establishments in the Czech Republic, their expansions,the addition of business units, and the expansion of operations to includeother sources of revenue.  There can beno assurance that the Company will achieve profitability as a result of theseoperations or otherwise.

***Needto Diversify***

At this time, theCompany’s operations are primarily located in the Czech Republic.  The Company is currently seeking to developor acquire additional interests in gaming operations and hotels in Europe.  However, there can be no assurance that theCompany will be able to develop or acquire such new operations in the future.

***Taxationof Gaming Operations***

Gaming operatorsare typically subject to significant taxes, which may increase at any time. Anymaterial increase in these taxes or fees would adversely affect the results ofoperations of the Company. The Czech Republic currently has a number of lawsrelated to various taxes imposed by governmental authorities. Applicable taxesinclude VAT, gaming tax, charity tax, and payroll (social) taxes.  Tax declarations, together with other legalcompliance areas (for example, customs and currency control matters) aresubject to review and investigation by a number of authorities, which 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’sability to successfully implement its strategy of expansion, manage theexisting casinos, and maintain a competitive position will continue to depend,in large part, on the ability of Mr. Rami S. Ramadan, the Company’s President,Chief Executive Officer (“CEO”), and Chief Financial Officer (“CFO”).  The Company is also dependent upon other keyemployees, casino managers and consultants whom the Company retains from timeto time.

11

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***Needfor Additional Financing***

Although theCompany has achieved positive income for the fourth consecutive year, theCompany, pursuant to its growth strategies, requires additional debt and/orequity financing for the acquisition and development of other businesses.  In this regard, the Company’s ability toobtain additional financing has been improved as a result of itsrecapitalization in 2003, which effectively reduced its then existing debtburden by approximately 80%, and by the $4.75 million Capital Raise in December2005.  Despite these improvements, therecan be no assurance that such financing will be available on terms favorable tothe Company or at all.

***InternationalActivities***

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

***Climate Impact***

As the majority ofthe Company’s clientele travel from German and Austrian border regions, thecasinos’ gaming total drops are highly dependent on the volume and frequency ofthese players’ visitations, which in turn impacts the operating revenues.  Wintry and icy climate conditions on thecommute roads to the Company’s casinos can serve to drastically reduce thenumber of visitations and thereby the gaming total drops.  On the other hand, warm and favorable outdoorweather can also create a diversionary effect on players’ alternativeactivities, such as family outings and picnics. The frequency and severity of any of these aforementioned climateconditions could have a material adverse effect on the results of operations ofthe Company.

***Licensing and Regulation***

The Company’soperations are subject to regulation by each local jurisdiction in which itoperates or plans to operate, as well as to federal laws and the laws of anyforeign country. Each of the Company’s officers may be subject to strictscrutiny and approval from the gaming commission or other regulatory body ofeach jurisdiction in which the Company may conduct gaming operations.

***LiabilityInsurance***

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

***No Dividends***

The Company hasnot paid any dividends to date on its Common Stock, and does not expect todeclare or pay any dividends in the foreseeable future. The Company intends toretain future earnings, if any are generated, for investment in its currentoperations and for future project developments.

12

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

The Company’sArticles of Incorporation authorize the issuance of 4 million shares of “blankcheck” Preferred Stock, with designations, rights and preferences to bedetermined from time to time by its Board of Directors. Accordingly, the Company’sBoard of Directors is empowered, without further stockholder approval, to issuePreferred Stock with dividend, liquidation, conversion, voting or other rightsthat could adversely affect the voting power or other rights of the holders ofthe Common Stock. In the event of issuance, the Preferred Stock could be used,under certain circumstances, as a method of discouraging, delaying orpreventing a change in control of the Company. The Company has no current plansto issue any shares of Preferred Stock. However, there can be no assurance thatPreferred Stock will not be issued at some time in the future.

***Dilutive Effect of Warrants andOptions***

As of March 8,2007, warrants exercisable for a total of 11,382 shares of Common Stock andoptions for 249,735 shares of Common Stock are outstanding, which, if all wereexercised, would represent 3.2% of the 8,101,987 shares of Common Stock thatwould be outstanding.  The issuance ofsuch securities would have a dilutive effect on any earnings per share that theCompany may generate when the earnings per share are evaluated on a dilutedbasis.

13

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

The followingitems are included in this Report:

ConsolidatedFinancial Statements

 
| Report of Independent Registered Public Accounting  Firm           | 15    |
|--------------------------------------------------------------------|-------|
| Consolidated  Balance Sheets                                       | 16    |
| Consolidated Statements of Income and Comprehensive  Income (Loss) | 17    |
| Consolidated Statements of Stockholders’ Equity               | 18    |
| Consolidated Statements of Cash Flows                              | 19    |
| Notes to Consolidated Financial Statements                         | 20-33 |

 

 

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTINGFIRM

 

 

 

To the Board of Directors and StockholdersTrans World Corporation

 

 

 

We have audited the accompanying consolidated balance sheets of TransWorld Corporation and Subsidiaries (collectively, “the Company”) as of December31, 2006 and 2005, and the related consolidated statements of income andcomprehensive income (loss), stockholders’ equity and cash flows for each ofthe years then ended.  These consolidatedfinancial statements are the responsibility of the Company’s management.  Our responsibility is to express an opinionon these consolidated financial statements based on our audits.

 

We conducted our audits inaccordance with the standards of the Public Company Accounting Oversight Board(United States).  Those standards requirethat we plan and perform the audits to obtain reasonable assurance aboutwhether the consolidated financial statements are free of materialmisstatement.  The Company is notrequired to have, nor were we engaged to perform, an audit of its internalcontrol over financial reporting. Our audits included consideration of internalcontrol over financial reporting as a basis for designing audit procedures thatare appropriate in the circumstances, but not for the purpose of expressing anopinion on the effectiveness of the Company’s internal control over financialreporting. Accordingly, we express no such opinion.  An audit also includes examining, on a testbasis, evidence supporting the amounts and disclosures in the consolidatedfinancial statements, assessing the accounting principles used and significantestimates made by management, as well as evaluating the overall financialstatement presentation. We believe that our audits provide a reasonable basisfor 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, 2006 and 2005, 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 8, 2007

15

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###### **TRANS WORLD CORPORATION ANDSUBSIDIARIES**CONSOLIDATED BALANCE SHEETSDecember 31, 2006 and 2005 (inthousands, except for share data)

 
| ** **                                                                                                                               | ** ** | **December 31, 2006** | ** ** | **December 31, 2005** | ** ** |
|------------------------------------------------------------------------------------------------------------------------------------------|------------|---------------------------------|------------|---------------------------------|------------|
| **ASSETS**                                                                                                                               |       |
| **CURRENT ASSETS:**                                                                                                                      |       |                            |       |                            |       |
| Cash                                                                                                                                     |       | $                               | 3,266      |                            | $          | 6,595 |   |
| Prepaid expenses                                                                                                                         |       | 704                             |       | 315                             |       |
| Notes receivable,  current                                                                                                               |       | 223                             |       |                            |       |
| Other current  assets                                                                                                                    |       | 592                             |       | 269                             |       |
| **Total  current assets**                                                                                                                |       | 4,785                           |       | 7,179                           |       |
| **PROPERTY  AND EQUIPMENT****,**less  accumulated depreciation of $5,257 and $4,058, as of December 31, 2006 and  2005, respectively**** |       | 18,099                          |       | 12,647                          |       |
| **OTHER  ASSETS:**                                                                                                                       |       |                            |       |                            |       |
| Goodwill                                                                                                                                 |       | 5,815                           |       | 4,942                           |       |
| Notes receivable,  less current portion                                                                                                  |       | 713                             |       |                            |       |
| Deposits and  other assets                                                                                                               |       | 1,814                           |       | 1,257                           |       |
| **Total  other assets**                                                                                                                  |       | 8,342                           |       | 6,199                           |       |
| ** **                                                                                                                               |       |                            |       |                            |       |
|                                                                                                                                     |       | $                               | 31,226     |                            | $          | 26,025 |   |
| ** **                                                                                                                               |       |                            |       |                            |       |
| **LIABILITIES AND STOCKHOLDERS’ EQUITY**                                                                                            |       |
| **CURRENT  LIABILITIES:**                                                                                                                |       |                            |       |                            |       |
| Long-term debt,  current maturities                                                                                                      |       | $                               | 604        |                            | $          | 1,380 |   |
| Accounts payable                                                                                                                         |       | 1,904                           |       | 1,762                           |       |
| Interest payable                                                                                                                         |       | 72                              |       | 51                              |       |
| Czech tax  accrual                                                                                                                       |       | 3,328                           |       | 2,724                           |       |
| Accrued  expenses and other current liabilities                                                                                          |       | 1,497                           |       | 1,101                           |       |
| **Total  current liabilities**                                                                                                           |       | 7,405                           |       | 7,018                           |       |
| ** LONG-TERM LIABILITIES:**                                                                                                         |       |                            |       |                            |       |
| Long-term debt,  less current maturities                                                                                                 |       | 2,849                           |       | 3,167                           |       |
| Other  liabilities                                                                                                                       |       | 718                             |       | 460                             |       |
| **Total  long-term liabilities**                                                                                                         |       | 3,567                           |       | 3,627                           |       |
| **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, 7,840,870 shares issued and  outstanding in 2006 and 2005, respectively      |       | 8                               |       | 8                               |       |
| Additional  paid-in capital                                                                                                              |       | 47,720                          |       | 47,743                          |       |
| Accumulated  other comprehensive income                                                                                                  |       | 6,330                           |       | 3,460                           |       |
| Accumulated  deficit                                                                                                                     |       | (33,804)                        |       | (35,831)                        |       |
| **Total  stockholders’ equity**                                                                                                     |       | 20,254                          |       | 15,380                          |       |
| ** **                                                                                                                               |       |                            |       |                            |       |
| ** **                                                                                                                               |       | $                               | 31,226     |                            | $          | 26,025 |   |

 

*See accompanying notes toconsolidated financial statements*

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**TRANS WORLD CORPORATION ANDSUBSIDIARIES**CONSOLIDATED STATEMENTS OF INCOMEAND COMPREHENSIVE INCOME (LOSS)Years Ended December 31, 2006 and 2005(dollars in thousands, except for share data)
| ** **                                                                                   | ** ** | **Year Ended December 31,** | ** ** |
|----------------------------------------------------------------------------------------------|------------|--------------------------------------------|------------|
| ** **                                                                                   | ** ** | **2006**                                   | ** ** | **2005** | ** ** |
| **REVENUES**                                                                                 |       | $                                          | 26,216     |   | $ | 23,249 |   |
| **OPERATING EXPENSES:**                                                                      | ** ** | ** **                                 | ** ** | ** ** | ** ** |
| Cost of revenues                                                                             |       | 14,746                                     |       | 14,007 |   |
| Depreciation and amortization                                                                |       | 821                                        |       | 737 |   |
| Selling, general and administrative                                                          |       | 8,395                                      |       | 8,073 |   |
|                                                                                         |       | 23,962                                     |       | 22,817 |   |
| **INCOME FROM OPERATIONS**                                                                   |       | 2,254                                      |       | 432 |   |
| **OTHER INCOME (EXPENSES):**                                                                 |       |                                       |       |   |   |
| Interest income                                                                              |       | 50                                         |       | 2 |   |
| Interest expense                                                                             |       | (280                                       | )          | (352 | ) |
| Foreign currency transaction gain (loss)                                                     |       | 3                                          |       | (5 | ) |
| Other                                                                                        |       |                                       |       | 2 |   |
|                                                                                         |       | (227                                       | )          | (353 | ) |
| ** **                                                                                   |       |                                       |       |   |   |
| **NET  INCOME**                                                                              |       | 2,027                                      |       | 79 |   |
| **Other comprehensive income (loss),**  foreign currency translation adjustments, net of tax |       | 2,870                                      |       | (1,278 | ) |
|                                                                                         |       |                                       |       |   |   |
| **COMPREHENSIVE  INCOME (LOSS)**                                                             |       | $                                          | 4,897      |   | $ | (1,199 | ) |
| **WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:**                                              | ** ** | ** **                                 | ** ** | ** ** | ** ** |
| Basic                                                                                        |       | 7,840,870                                  |       | 5,096,229 |   |
| Diluted                                                                                      |       | 7,875,681                                  |       | 5,099,879 |   |
| **EARNINGS PER COMMON SHARE:**                                                               | ** ** | ** **                                 | ** ** | ** ** | ** ** |
| Basic                                                                                        |       | $                                          | 0.26       |   | $ | 0.02 |   |
| Diluted                                                                                      |       | $                                          | 0.26       |   | $ | 0.02 |   |

 

*See accompanying notes toconsolidated financial statements*

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**TRANSWORLD CORPORATION AND SUBSIDIARIES**CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITYYears Ended December 31, 2006 and 2005(dollars in thousands, except for share data)
| ** **                                                                | ** ** | ** **            | ** ** | ** **  | ** ** | ** **        | ** ** | **Accumulated** | ** ** | ** **             | ** ** | ** ** | ** ** |
|---------------------------------------------------------------------------|------------|-----------------------|------------|-------------|------------|-------------------|------------|-----------------|------------|------------------------|------------|------------|------------|
| ** **                                                                | ** ** | ** **            | ** ** | ** **  | ** ** | **Additional**    | ** ** | **Other**       | ** ** | ** **             | ** ** | **Total**  | ** ** |
| ** **                                                                | ** ** | **Common Stock** | ** ** | **Paid-in** | ** ** | **Comprehensive** | ** ** | **Accumulated** | ** ** | **Stockholders’** | ** ** |
| ** **                                                                | ** ** | **Shares**            | ** ** | **Amount**  | ** ** | **Capital**       | ** ** | **Income**      | ** ** | **Deficit**            | ** ** | **Equity** | ** ** |
| **Balances,**January 1, 2005                                         |       | 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     |       |
| ** **                                                                |       |                  |       |        |       |              |       |            |       |                   |       |       |       |
| **Reissuance of stock certificate  (impact of 100-1 reverse adjustment)** |       | 1                     |       |        |       |              |       |            |       |                   |       |       |       |
| ** **                                                                |       |                  |       |        |       |              |       |            |       |                   |       |       |       |
| **Private placement residual  costs**                                     |       |                  |       |        |       | (74               | )          |            |       |                   |       | (74        | )          |
| ** **                                                                |       |                  |       |        |       |              |       |            |       |                   |       |       |       |
| **Issuance of stock options**                                             |       |                  |       |        |       | 51                |       |            |       |                   |       | 51         |       |
| ** **                                                                |       |                  |       |        |       |              |       |            |       |                   |       |       |       |
| **Foreign currency translation  adjustment**                              |       |                  |       |        |       |              |       | 2,870           |       |                   |       | 2,870      |       |
| ** **                                                                |       |                  |       |        |       |              |       |            |       |                   |       |       |       |
| **Net income**                                                            |       |                  |       |        |       |              |       |            |       | 2,027                  |       | 2,027      |       |
| ** **                                                                |       |                  |       |        |       |              |       |            |       |                   |       |       |       |
| **Balances,** December 31, 2006                                           |       | 7,840,870             |       | $           | 8          |              | $          | 47,720          |       | $                      | 6,330      |       | $          | (33,804 | ) | $ | 20,254 |   |

 

*See accompanying notes toconsolidated financial statements*

18

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**TRANSWORLD CORPORATION AND SUBSIDIARIES**CONSOLIDATED STATEMENTS OF CASH FLOWSYears Ended December 31, 2006 and 2005(dollars in thousands, except for share data)
| ** **                                                                         | ** ** | **Year Ended December 31,** | ** ** |
|------------------------------------------------------------------------------------|------------|--------------------------------------------|------------|
| ** **                                                                         | ** ** | **2006**                                   | ** ** | **2005** | ** ** |
| **CASH  FLOWS FROM OPERATING ACTIVITIES:**                                         | ** ** | ** **                                 | ** ** | ** ** | ** ** |
| Net income                                                                         |       | $                                          | 2,027      |   | $ | 79 |   |
| Adjustments to reconcile net income to net cash  provided by operating activities: |       |                                       |       |   |   |
| Depreciation and amortization                                                      |       | 821                                        |       | 737 |   |
| Stock options expense                                                              |       | 51                                         |       |   |   |
| Gain on sale of equipment                                                          |       |                                       |       | (3 | ) |
| Gain on settlement of promissory note                                              |       |                                       |       | (108 | ) |
| Changes in operating assets and liabilities:                                       |       |                                       |       |   |   |
| Prepaid expenses and other current assets                                          |       | (385                                       | )          | (112 | ) |
| Deposits and other assets                                                          |       |                                       |       | 66 |   |
| Accounts payable                                                                   |       | (123                                       | )          | 570 |   |
| Interest payable                                                                   |       | 22                                         |       |   |   |
| Czech tax accrual                                                                  |       | 64                                         |       | 1,055 |   |
| Accrued expenses and other current liabilities                                     |       | 83                                         |       | (746 | ) |
| **NET CASH PROVIDED BY OPERATING ACTIVITIES**                                      |       | 2,560                                      |       | 1,538 |   |
| **CASH FLOWS FROM INVESTING ACTIVITIES:**                                          | ** ** | ** **                                 | ** ** | ** ** | ** ** |
| Renovation and purchases of property and equipment                                 |       | (4,013                                     | )          | (2,528 | ) |
| Proceeds from the sale of equipment                                                |       | 408                                        |       | 3 |   |
| Refund of security deposit                                                         |       |                                       |       | 20 |   |
| Payments for deposits and other assets                                             |       | (488                                       | )          |   |   |
| Issuance of notes receivable                                                       |       | (936                                       | )          |   |   |
| **NET CASH USED IN INVESTING ACTIVITIES**                                          |       | (5,029                                     | )          | (2,505 | ) |
| **CASH FLOWS FROM FINANCING ACTIVITIES:**                                          |       |                                       |       |   |   |
| Proceeds from private placement                                                    |       |                                       |       | 4,750 |   |
| Payment of promissory note                                                         |       |                                       |       | (197 | ) |
| Proceeds from long-term debt                                                       |       |                                       |       | 2,084 |   |
| Payments of long-term debt                                                         |       | (1,122                                     | )          | (1,658 | ) |
| Payments of financing costs                                                        |       | (74                                        | )          |   |   |
| **NET CASH PROVIDED BY (USED IN) FINANCING  ACTIVITIES**                           | ** ** | (1,196                                     | )          | 4,979 | ** ** |
| ** **                                                                         |       |                                       |       |   |   |
| **EFFECT OF EXCHANGE RATE CHANGES ON CASH**                                        |       | 336                                        |       | (103 | ) |
| **NET INCREASE (DECREASE) IN CASH**                                                |       | (3,329                                     | )          | 3,909 |   |
| **CASH:**                                                                          | ** ** | ** **                                 | ** ** | ** ** | ** ** |
| Beginning of year                                                                  |       | 6,595                                      |       | 2,686 |   |
|                                                                               |       |                                       |       |   |   |
| End of year                                                                        |       | $                                          | 3,266      |   | $ | 6,595 |   |
|                                                                               |       |                                       |       |   |   |
| **SUPPLEMENTAL  DISCLOSURES OF CASH FLOW INFORMATION:**                            | ** ** | ** **                                 | ** ** | ** ** | ** ** |
| Cash paid during  the year for interest                                            |       | $                                          | 211        |   | $ | 392 |   |
|                                                                               |       |                                       |       |   |   |
| **SUPPLEMENTAL  SCHEDULE 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 |   |

 

*See accompanying notes toconsolidated financial statements*

 

19

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

***Nature of Business***

Trans World Corporation andSubsidiaries (collectively, “TWC” or the “Company”), a Nevada corporation, isprimarily engaged in the gaming business in the Czech Republic.

The Company owns and operates four casinos in theCzech Republic (“CZ”), and manages, under contract, one casino and nightclub inCroatia.  Two of the Czech casinos arelocated in the western part of the CZ, close to the border of Germany.  The larger of the two, located in Ceska Kubice(“Ceska”), currently has 16 gaming tables and 52 slot machines. The smaller,Rozvadov (“Rozvadov”) is located in the town of Rozvadov and currently has 10gaming tables and 30 slot machines.  Theother two Czech casinos are located in the southern part of the CZ, close tothe Austrian border.  The larger of thesetwo, “Route 55”, located in Dolni Dvoriste, now has 21 gaming tables, 100 slotmachines, a 70-seat Italian restaurant and a bar and grill.  The other casino, “Route 59”, which recentlyunderwent a major building expansion and renovation, is located in Hate, nearZnojmo, and currently has 21 gaming tables and 102 slot machines.

On September 21, 2006, theCompany was selected to manage the Grand Casino Lav and Nightclub (the “GrandCasino Lav”), located in the newly opened Le Meridien Lav, Split resort inPodstrana, Croatia.  The managementagreement with Grand Hotel Lav d.o.o., the property owner, provides for a10-year term, with optional renewal periods of five (5) years each, subject tocertain performance conditions.   Inaddition to marketing to the existing hotel guests, American Chance Casinos (“ACC”)will target the local market of Split, the second largest city in Croatia.

As the Grand Casino Lav opened in the last part ofDecember 2006, its contribution to the year 2006 operational results wasimmaterial.  Thus, all discussions ofoperational performance and results herein are limited to the Company’sfully-owned and operated units in the Czech Republic.

***Liquidity***

At December 31, 2006, the Companyhad a working capital deficit of approximately $2,620 versus a working capitalsurplus of $161 at December 31, 2005, primarily as a result of weaker thanexpected results in Route 59.  Since thecompletion of the extension of the casino in mid-November 2006, operationalresults have improved.  Managementbelieves that the completed product will better position Route 59 to recapturethe business that it had missed in 2006 as well as attract new business.  Further, management anticipates improvementin its cash flow in 2007, as a result of the following major operationalenhancements implemented in 2006: (i) purchases of a sizable number of new slotmachines; (ii) successful renegotiation of equipment leases on a large portionof its existing inventory of slot machines, from a revenue-based structure to afixed-rent basis; and (iii) the continuation of the growth stage of the Company’snewest and largest casino, Route 55.

The Company’s managementis seeking to secure additional financing to acquire and develop new businessunits.  Additionally, the Company isinvolved in several development projects, including the potential developmentof hotels in Hate and in Folmava, Czech Republic, and the potential acquisitionof existing hotels in Europe.  There canbe no assurances that management’s plans will be realized.

TheCompany’s management believes that its cash resources at December 31, 2006 andanticipated cash to be provided by 2007 operations are sufficient to fund itsactivities for the year ending December 31, 2007.

20

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**NOTE 2** - **Summary of SignificantAccounting Policies**

***Principles ofConsolidation* ****- **The accompanyingconsolidated financial statements include the accounts of the Company and itswholly-owned subsidiaries.  Allsignificant intercompany balances and transactions have been eliminated inconsolidation.

***Property and Equipment* **- Property and equipment is stated at costless accumulated depreciation and amortization. The Company provides for depreciation and amortization using thestraight-line method over the following estimated useful lives:

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

***Preopening Costs* **-  Preopening costs are expensed as incurred pursuant to AICPAStatement of Position (“SOP”) 98-5, “Reporting on the Costs of Start-upActivities.”

***Goodwill ***- Goodwill represents the excess of the cost of the Company’sCzech subsidiaries over the fair value of their net assets at the date ofacquisition, which consists of only the Ceska and Rozvadov casinos.  Under Statement of Financial AccountingStandards (“SFAS”) No. 142, goodwill is no longer subject to amortization overits estimated useful life; rather, goodwill is subject to at least an annualassessment for impairment, applying a fair-value based test.  The impairment assessment requires theCompany to compare the fair value of its Czech Republic reporting unit, whichis comprised of its Ceska and Rozvadov casinos, and the Company’s reportingunit as defined under SFAS No. 142, to its carrying value (the net equity ofthe Company) to determine whether there is an indication that an impairmentexists.  The fair value of the CzechRepublic reporting unit is determined through a combination of recentappraisals of the Company’s real property and a multiple of earnings beforeinterest, taxes, depreciation and amortization (“EBITDA”), which was based onthe Company’s experience and data from independent, third parties.  During the second quarter of 2006 and 2005,as required by SFAS No. 142, the Company performed the periodic fair-valuebased testing of the carrying value of goodwill related to its Czech Republicreporting unit, and determined that goodwill was not impaired.

***Comprehensive Income* –**TheCompany complies with SFAS No. 130, “Reporting Comprehensive Income.”  SFAS No. 130 establishes rules for reportingand display of comprehensive income (loss) and its components.  SFAS No. 130 requires the Company’s change inthe foreign currency translation adjustments to be included in othercomprehensive income (loss).

***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 income accounts are translated byapplying monthly averages of daily exchange rates on the respective monthlylocal statement of operations accounts for the year.

21

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The impact offoreign currency translation on goodwill is presented below:

|                                                                                                              | ** ** | **Applicable**                    | ** ** | ** **   | ** ** | ** ** | ** ** |
|--------------------------------------------------------------------------------------------------------------|------------|-----------------------------------|------------|--------------|------------|------------|------------|
| ** **                                                                                                   | ** ** | **Foreign Exchange**         | ** ** | ** **   | ** ** | ** ** | ** ** |
| **As of December 31, 2006 (in thousands)**                                     | ** ** | **Rate (“FX”)(2)** | ** ** | **Goodwill** | ** ** |
| Residual  balance, as of January 1, 2003 (in USD) (1)                                                        |       |                              |       | USD          |       | 3,579      | (A)        |
|                                                                                                         |       |                              |       |         |       |       |       |
| USD residual balance  (A), translated at March 31, 1998 (date of acquisition), at FX (ie. 2003 CZK  Balance) |       | 33.8830                           |       | CZK          |       | 121,267    |       |
|                                                                                                         |       |                              |       |         |       |       |       |
| 2003 CZK balance,  translated to USD: At December 31, 2006 at FX of:                                         |       | 20.8550                           |       | USD          |       | 5,815      | (B)        |
|                                                                                                         |       |                              |       |         |       |       |       |
| **Net increase (step-up) to  Goodwill (adjustment made to Translation Adjustment in consolidation):**        |       |                              |       |         |       | 2,236      | (B-A)      |
| **Increase to Goodwill (C) is booked as follows:**                        |       |                              |       |         |       |       |       |
| (Step-up) for  the year ended December 31, 2003 at FX of                                                     |       | 26.0300                           |       | USD          |       | 1,080      |       |
| (Step-up) for  the year ended December 31, 2004 at FX of                                                     |       | 22.3580                           |       | USD          |       | 765        |       |
| (Step-down) for  the year ended December 31, 2005 at FX of                                                   |       | 24.5390                           |       | USD          |       | (482       | )          |
| (Step-up) for  the year ended December 31, 2006 at FX of                                                     |       | 20.8550                           |       | USD          |       | 873        |       |
|                                                                                                         |       |                              |       |         |       | 2,236      |       |

----

(1)            Goodwillwas amortized over 15 years until the Company started to comply with SFAS No.142, “Goodwill and Other Intangible Assets.” This balance represents theremaining, unamortized goodwill, after an impairment charge taken prior toJanuary 1, 2003.

(2)            Interbankrates taken from Oanda.com

***Earnings Per Common Share* **- The Company complies with SFAS No. 128, “Earningsper Share,” which states that basic earnings per common share arecomputed by dividing net income by the weighted average number of common sharesoutstanding during the period.  Dilutedearnings per common share incorporate the dilutive effect of common stockequivalents on an average basis during the period.  The Company’s common stock equivalentscurrently include stock options and warrants. Unexercised warrants and stock options to purchase shares of commonstock as of December 31, 2006 and 2005 are approximately 261,117 and 196,742respectively.

***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 and liabilities are computed for differencesbetween the financial statement and the tax bases of assets and liabilitiesthat will result in future taxable or deductible amounts, based on enacted taxlaws and rates applicable to the periods in which the differences are expectedto affect taxable income.  Valuationallowances are established, when necessary, to reduce deferred income taxassets to the amount expected to be realized.

***Revenue Recognition*****- **Casinorevenue is defined as the net win from gaming activities, which is thedifference between gaming wagers and the amount paid out to patrons.  Revenues generated from ancillary services,including sales of food, beverage, cigarettes, and casino logo merchandise arerecognized at the time the related services are performed and represent lessthan three percent of total revenues.

***Promotional Allowances* ****- **Promotionalallowances primarily consist of food and beverages furnished gratuitously tocustomers.  For the years ended December31, 2006 and 2005, revenues do not include the retail amount of food andbeverage of $2,675 and $1,873, respectively, provided gratuitously tocustomers.  The cost of these items of$997 and $826, respectively, is included in cost of revenues.

***External Advertising*****-** The Company complies with the accounting andreporting requirements of the AICPA Statement of Position (SOP) 93-7, Reportingon Advertising Costs.  Externaladvertising expenses are charged to operations as incurred and were $924 and$1,418 for the years ended December 31, 2006 and 2005, respectively.

22

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***Fair Value of FinancialInstruments* ****- **The fair values ofthe Company’s assets and liabilities that qualify as financial instrumentsunder SFAS No. 107, “Disclosures about Fair Value of Financial Instruments,”approximate their carrying amounts presented in the accompanying consolidatedbalance sheets at December 31, 2006 and 2005.

***Use of Estimates* ****- **Thepreparation of consolidated financial statements in conformity with accountingprinciples generally accepted in the United States of America requiresmanagement to make estimates and assumptions that affect the reported amountsof assets and liabilities and disclosure of contingent assets and liabilitiesat the date of the consolidated financial statements as well as the reportedamounts of revenues and expenses during the reporting period.  Actual results could differ from thoseestimates.

***Impairment of Long-LivedAssets* ****- **The Company adheresto SFAS No. 144, “Accounting for the Impairment on Disposal of Long-LivedAssets” and periodically reviews the carrying value of its long-lived assets inrelation to historical results, as well as management’s best estimate of futuretrends, events and overall business climate. If such reviews indicate that the carrying value of such assets may notbe recoverable, the Company would then estimate the future cash flows(undiscounted and without interest charges). If such future cash flows are insufficient to recover the carryingamount of the assets, then impairment is triggered and the carrying value ofany impaired assets would then be reduced to fair value.

***Stock-based Compensation***- The Companycomplies with SFAS No. 123R, “Share-Based Payment,” issued in December2004.  SFAS No. 123R is a revision ofSFAS No. 123, “Accounting for Stock-Based Compensation,” and supersedes APBOpinion No. 25 (“APB No. 25”). Among other items, SFAS No. 123R eliminates theuse of APB No. 25 and the intrinsic value method of accounting, and requirescompanies to recognize the cost of employee services received in exchange forawards of equity instruments, based on the fair value of those awards as of thevested date in the financial statements. The effective date of SFAS No. 123Rfor the Company is the first quarter of 2006. SFAS No. 123R permits companiesto adopt its requirements 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 paymentsvested 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 “modifiedprospective” method, but also permit entities to restate financial statementsof previous periods, either for all prior periods presented or to the beginningof the fiscal year in which the statement is adopted, based on previous proforma disclosures made in accordance with SFAS No. 123. Accordingly, theCompany has adopted the modified prospective method of recognition, and beganapplying the valuation and other criteria to stock options granted beginningJanuary 1, 2006.  The Company isrecognizing expense for the unvested portion of previously issued grants basedon the valuation and attribution methods used previously to calculate the proforma disclosures.  The Company did notrecognize expense for employee stock options prior to January 1, 2006.

The Company currently utilizes the Black-Scholesoption pricing model to measure the fair value of stock options granted tocertain key employees. While SFAS No. 123R permits entities to continue to usesuch a model, it also permits the use of a “lattice” model. The Company expectsto continue using the Black-Scholes option pricing model in connection with itsadoption of SFAS No. 123R to measure the fair value of stock options granted.

23

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The assumptions and resulting fair values of stockoptions granted in the year ended December 31, 2006 are as follows:

|                                                           | ** ** | **2006** | ** ** |
|-----------------------------------------------------------|------------|----------|------------|
|                                                      |       |     |       |
| Average expected  term (in years)                         |       | 6.2      |       |
| Average  risk-free interest rate                          |       | 4.6      | %          |
| Average expected  volatility                              |       | 44       | %          |
| Dividend yield                                            |       | 0        | %          |
| Weighted average fair  value per share of options granted |       | $        | 1.14       |   |
|                                                           |            |          |            |  |

 

In2006, the Company expensed approximately $51 for vested options to certain keymanagement employees, which was recognized in its selling, general andadministrative expenses in the consolidated statement of income.

***New AccountingPronouncements***- In June2006, the Financial Accounting Standards Board (FASB) issued FIN No. 48,Accounting for Uncertainty in Income Taxes - an Interpretation of FASBStatement No. 109. FIN No. 48 requires that management determine whether a taxposition is more likely than not to be sustained upon examination, includingresolution of any related appeals or litigation processes, based on thetechnical merits of the position. Once it is determined that a position meetsthis recognition threshold, the position is measured to determine the amount ofbenefit to be recognized in the financial statements. The Company will adoptthe provisions of FIN No. 48 beginning in the first quarter of 2007. TheCompany is currently evaluating the impact of adopting FIN No. 48 on itsfinancial condition, results of operations and cash flows.

In September 2006, theFASB issued SFAS No. 157, “Fair Value Measures”. This Statement defines fairvalue, establishes a framework for measuring fair value in generally acceptedaccounting principles, expands disclosures about fair value measurements, andapplies under other accounting pronouncements that require or permit fair valuemeasurements. SFAS No. 157 does not require any new fair value measurements.However, the FASB anticipates that for some entities, the application of SFASNo. 157 will change current practice. SFAS No. 157 is effective for financialstatements issued for fiscal years beginning after November 15, 2007, which forthe Company would be its fiscal year beginning January 1, 2008. The Company iscurrently evaluating the impact of SFAS No. 157 but does not expect that itwill have a material impact on its financial statements.

In February 2007, theFASB issued SFAS No. 159, “The Fair Value Option for Financial Assets andFinancial Liabilities”. This Statement permits entities to choose to measuremany financial assets and financial liabilities at fair value. Unrealized gainsand losses on items for which the fair value option has been elected arereported in earnings. SFAS No. 159 is effective for fiscal years beginningafter November 15, 2007. The Company is currently assessing the impact of SFASNo. 159 on its financial position and results of operations.

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

AtDecember 31, 2006 and 2005, property and equipment consists of the following:

|                                                 | ** ** | **2006** | ** ** | **2005** | ** ** |
|-------------------------------------------------|------------|----------|------------|----------|------------|
| Land                                            |       | $        | 2,440      |     | $          | 2,067 |   |
| Building and  improvements                      |       | 11,828   |       | 9,973    |       |
| Gaming equipment                                |       | 1,420    |       | 237      |       |
| Furniture,  fixtures and other equipment        |       | 7,665    |       | 4,428    |       |
|                                            |       |     |       |     |       |
|                                            |       | 23,353   |       | 16,705   |       |
| Less accumulated  depreciation and amortization |       | (5,254   | )          | (4,058   | )          |
|                                            |       |     |       |     |       |
|                                            |       | $        | 18,099     |     | $          | 12,647 |   |

 

24

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

At December 31, 2006 and 2005,long-term debt consists of the following:

|                                         | ** ** | **2006**   | ** ** | **2005**   | ** ** |
|-----------------------------------------|------------|------------|------------|------------|------------|
| Interest Notes  (a)                     |       | $          | —     |       | $          | 455 |   |
| Replacement  Notes (b)                  |       | 1,550      |       | 1,550      |       |
| Route 59  building acquisition loan (c) | ** ** | ** ** |       | 460        |       |
| Route 55  construction term loan (d)    |       | 1,903      |       | 2,082      |       |
|                                    | ** ** | ** ** | ** ** | ** ** | ** ** |
|                                    |       | $          | 3,453      |       | $          | 4,547 |   |

----

(a)            The Interest Notes,which had three-year terms, provided for monthly payments of principal andinterest of approximately $78, matured in June 2006.

(b)           The Replacement Notes, which have seven-year terms, have tiered, simpleinterest 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 annualinterest was payable, beginning on July 26, 2004, with the accrued interestbalance payable at maturity.  For thelast four years of the term, all annual interest accrued will be payable infull on July 26 of each of these last four years.

(c)            In March 2002, the Company exercised its rightto purchase the Route 59 building lease. The building lease buyout of €1,600, or approximately $2,100 using 2006year-end exchange rate, was financed by a loan from a local Czech Republicbank.  The bank note, which was collateralized by the Route 59 building, theCompany’s Rozvadov casino and an employee housing building, matured in December2006.

(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 constructionof Casino Route 55.  The Company drewdown the balance of the loan by March 2005 and commenced repayment, as per theloan agreement in May 2005.  The loan issubject 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 asfollows:

| Year ending December 31, | ** ** | ** ** | ** ** |
|-----------------------------------------|------------|------------|------------|
| 2007                                    |       | $          | 604        |   |
| 2008                                    |       | 604        |       |
| 2009                                    |       | 595        |       |
| 2010                                    |       | 1,650      |       |
|                                    |       |       |       |
|                                    |       | $          | 3,453      |   |

 

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

At December 31, 2006 and 2005, accrued expenses andother current liabilities consist of the following:

|                                                 | ** ** | **2006** | ** ** | **2005** | ** ** |
|-------------------------------------------------|------------|----------|------------|----------|------------|
| Accrued payroll  and related costs              |       | $        | 854        |     | $          | 628 |   |
| Short-term portion of capital lease obligations |       | 234      |       |     |       |
| Operational accruals                            |       | 277      |       | 261      |       |
| Gaming equipment purchases                      |       | 132      |       |     |       |
| Accrued finder’s fee                       |       |     |       | 212      |       |
|                                            |       |     |       |     |       |
|                                            |       | $        | 1,497      |     | $          | 1,101 |   |

** **

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

***Lease Obligations* -** The Company is obligated under severaloperating leases expiring through 2010.  Future aggregate minimum annual rental paymentsunder all of these leasesfor thenext four years are as follows:

|  Year ending December 31, | ** ** | ** ** | ** ** |
|-----------------------------------------------|------------|------------|------------|
| 2007                                          |       | $          | 97         |   |
| 2008                                          |       | 100        |       |
| 2009                                          |       | 102        |       |
| 2010                                          |       | 47         |       |
|                                               |            |            |            |  |

Rent expense under theseoperating leases was approximately $97 and $97 for the years ended December 31,2006 and 2005, respectively.

The Company is also obligatedunder certain five-year, slot equipment operating leases, which include amonthly rental fee per slot machine, and an option for replacement todifferent/newer machines.  In 2006, theCompany’s slot lease expenses were approximately $2,316 versus $2,835 in 2005.

***Lease Termination***- In December 2005 and pursuant to the lease, the Company closed Hollywood SpinRestaurant and Slot Bar (“Hollywood Spin”). The decision to close the unit was based upon lack of attendance at themall.  The Company alleges that thelandlord failed to honor its contractual obligation under the lease regarding effortsto bring attendance to the mall. Accordingly, the Company is seeking legal remedies relative to thisissue.

There were no significant amounts to accrue in 2005pursuant to SFAS No. 146 “Accounting for Costs Associated with Exit or DisposalActivities” as personnel and a majority of the property and equipment wererelocated from Hollywood Spin to the Company’s other casinos.

***Employment Agreements -*** The Company has entered into employment agreementswith certain of its executives, which provide for annual compensation, plus inmost cases, participation in future benefit programs and stock optionsplans.  As of December 31, 2006, only$550 of annual compensation, payable in 2007, remains under these employmentagreements.

Pursuant to a renewal of theemployment agreement with the Company’s Chief Executive Officer (“CEO”) in July2005, the CEO received a grant of seven-year options to purchase an aggregatetotal of 175,000 shares of the Company’s Common Stock in allotments of 35,000shares per annum 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.  Alsopursuant to the July 2005 employment agreement with the Company’s CEO, uponreaching designated earnings per share targets, the CEO will be granted 75,000restricted shares of the Company’s Common Stock in 25,000 allotments.

***401 (k) and Profit Sharing Plan*** - TheCompany maintains a contributory 401(k) plan and a profit sharing plan.  These plans are for the benefit of alleligible corporate employees, who may have up to 15% of their salary withheld,not to exceed $15 (in the year ended December 31, 2006).  The

26

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Company makes a voluntarymatching contribution based on a portion of salary withheld, which totaled $51in 2006 and $36 in 2005.

***TaxingJurisdiction*** - The Czech Republic currently has a number of lawsrelated to various taxes imposed by governmental authorities.  Applicable taxes include gaming tax, VAT,charity tax, and payroll (social) taxes. Tax declarations, together with other legal compliance areas (asexamples, customs and currency control matters) are subject to review andinvestigation by a number of authorities, which are enabled by law to imposeextremely severe fines, penalties and interest charges, create tax risks in theCzech Republic.  Management believes thatit has adequately provided for tax liabilities.

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

***Regulationand Licensing*** - The Company’s operations are subject toregulation by each local jurisdiction in which it operates or plans to operate,as well as federal laws and the laws of any foreign country. Each of theCompany’s officers may be subject to strict scrutiny and approval from a gamingcommission or another regulatory body of each jurisdiction in which the Companymay conduct gaming operations.

In 1998, the Czech Republic’s House of Deputies passedan amendment to the gaming law, which restricted foreign ownership of casinolicenses. In response, the Company restructured its subsidiaries and Czechlegal entities to comply with the amendment and was subsequently granted a10-year gaming license.  There can be noassurance that the authorities in the Czech Republic will not amend the gaminglaw as it pertains to foreign ownership of casino licenses.  In the event the gaming laws are amended inthe future, it may have a material adverse effect on the Company’s futureprofitability and operations. Further, there has been increased competition inthe areas where the Company operates because local municipalities no longerhave control over the issuance of casino licenses, thereby effectivelyeliminating exclusivity.

***Foreign Activities***- The Company’soperations are entirely outside of the United States.  Operating internationally involves additionalrisks relating to such things as currency exchange rates, different legal andregulatory environments, political and economic risks relating to the stabilityor predictability of foreign governments, differences in the manner in whichdifferent cultures conduct business, difficulties in staffing and managingforeign operations, differences in financial reporting, operating difficulties,and different types of criminal threats, and other factors.  The occurrence of any of these risks, ifsevere enough, could have a material adverse effect on the consolidatedfinancial position, results of operations and cash flows of the Company.

***Cash***-Cash consists of cash in banks and on hand. The Company maintains its bank accounts at several financialinstitutions, which, at times, may exceed Federal Deposit Insurance Corporation(“FDIC”) insured limits.  In addition,the FDIC does not insure the Company’s foreign cash, which totaledapproximately $2,927 and $1,995 at December 31, 2006 and 2005,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 Party Transactions**

At December 31, 2006 and 2005, approximately $nil and$372, respectively, of the Interest Notes were held by Value Partners, Ltd., anapproximate 44% owner of the Company’s issued and outstanding common stock asof December 31, 2006.  Related interestexpense was approximately $9 and $60 for the years ended December 31, 2006 and2005, respectively.

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During the year ended December 31, 2006, the Companyutilized the services of an attorney who is the brother of the Company’smanaging director of Czech operations. Fees paid to the attorney during 2006 totaled approximately $17.  At December 31, 2006, approximately $7 wasowed to the attorney for services rendered through such date.

**NOTE 9**- **Stockholders’ Equity**

In December 2005, the Company completed the private placementof 2,794,188 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 “$4.75 million Capital Raise”).  Theplacement agent received 15,000 shares of the Company’s common stock at $25 or$1.70 per share, as partial consideration for its finder’s fee.  Associated costs of the private placement,which included finder’s fees, and legal and accounting fees, totaledapproximately $306 and have been reflected as a reduction of additional paid-incapital.

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

***Notes Receivables* —**Inconnection with the TWC’s management of the Grand Casino Lav and Nightlcub, theCompany extended three EUR loans to Grand Hotel Lav, d.o.o., the owner of theGrand Casino Lav and Nightclub, as follow: (i) a three-year, 4.0% interest per annum loan up to €1,000, orapproximately $1,322 using 2006 year-end exchange rates, for the equipmentpurchases, of which $737 has been drawn as of December 31, 2006; (ii) atwo-year, non-interest bearing loan up to €600, or approximately $793 using2006 year-end exchange rates, for preopening costs related to the casino andnightclub, of which $199 has been drawn as of December 31, 2006; and (iii) aone-year (renewable), non-interest bearing loan up to €300, or $397 using 2006year-end exchange rates, for working capital, which has not been drawn.  The last possible date of drawing on theseloans is February 28, 2007, and will commence repayments on May 31, 2007.

***Other Assets*** - Included in other assets are restricted deposits,aggregating 24,000 CZK, relating to Czech license bond requirements.  Using year-end exchange rates, these depositshave been translated to $1,151 and $978 at December 31, 2006 and 2005,respectively.

***Other Long-term Liabilities*** - At December 31, 2006 and 2005, other long-termliabilities consisted of the following:

|                                | ** ** | **2006** | ** ** | **2005** | ** ** |
|--------------------------------|------------|----------|------------|----------|------------|
| Deferred  executive incentives |       | $        | 150        |     | $          | 315 |   |
| Accrued Interest               |       | 141      |       | 93       |       |
| Capitalized leases             |       | 427      |       | 52       |       |
|                           |       |     |       |     |       |
|                           |       | $        | 718        |     | $          | 460 |   |

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

In the Czech Republic, gaming income is not subject tocorporate income tax.  In lieu of incometaxes, gaming income is subject to other taxes in the Czech Republic, includinggaming and charity taxes, which are primarily based on percentages of gamingrevenues.  Foreign net operating losscarry-forwards (disclosed below), were derived from non-gaming activities andcan only be applied against non-gaming activities.

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At December 31, 2006, the Company had U.S. and foreignnet operating loss carry forwards (“NOL’s”) of approximately $29,571 and 3,060,respectively, available to offset certain future taxes payable.  However, based on limited analysis, thesizable warrant exercise in February 2001 or earlier events may have triggeredsignificant limitations of preexisting U.S. NOL’s, pursuant to Internal RevenueCode Section 382, to the extent that substantially all of the Company’sexisting U.S. NOL’s prior to February 2001, aggregating approximately $15,565,may be significantly limited.  The U.S.NOL’s generated subsequent to February 2001, aggregating approximately $14,006resulted in an estimated $5,602 deferred tax asset at December 31, 2006 and theforeign NOL resulted in an estimated 796 deferred tax asset at December 31,2006.  A full valuation allowance hasbeen established for these deferred tax assets since its realization isconsidered unlikely.

The U.S. NOL’s expire between 2010 and 2026.  The foreign NOL’s expire between 2006 and2010.  During the year ended December 31,2006, approximately $672 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, 2006 and 2005:

|         | ** ** | **2006** | ** ** | **2005** | ** ** |
|---------|------------|----------|------------|----------|------------|
|    |       |     |       |     |       |
| U.S.    |       | $        | (1,998     | )        | $          | (1,557 | ) |
| Foreign |       | 4,025    |       | 1,636    |       |
|    |       |     |       |     |       |
|    |       | $        | 2,027      |     | $          | 79 |   |

 

The Company’s effective incometax rate differs from the U.S. federal statutory income tax rate primarilybecause gaming income, the Company’s primary revenue source, is not subject toincome tax.  Further, the Company’seffective income tax rate differs from the U.S. statutory income tax rate as aresult of the Company maintaining a full valuation allowance on its NOL’s.

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

***Stock Options***

The activity in the Company’s stock option plansis as follows:
|                         | ** ** | **Number of  Options** | ** ** | **Range of  Exercise Price** | ** ** | **Weighted Average  Exercise Price** | ** ** |
|-------------------------|------------|-----------------------------|------------|----------------------------------------|------------|------------------------------------------------|------------|
| Balance outstanding,    |       |                        |       |                                   |       |                                           |       |
|  January 1, 2005   |       | 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 |   |
|                    |       |                        |       |                                   |       |                                           |       |
| Granted                 |       | 65,375                      |       | 2.50-2.90                              |       | 2.50                                           |       |
|                    |       |                        |       |                                   |       |                                           |       |
| Expired                 |       | (1,000                      | )          | 61.00                                  |       | 61.00                                          |       |
|                    |       |                        |       |                                   |       |                                           |       |
| Balance outstanding,    |       |                        |       |                                   |       |                                           |       |
|  December 31, 2006 |       | 249,735                     |       | $                                      | 2.00-83.00 |                                           | $          | 3.07 |   |
|                    |       |                        |       |                                   |       |                                           |       |
| Exercisable,            |       |                        |       |                                   |       |                                           |       |
|  December 31, 2006 |       | 114,735                     |       | $                                      | 2.00-83.00 |                                           | $          | 3.31 |   |

 

The option exercise price pershare was equal to or above the market value of the underlying stock on thedate of grant. Options generally expire between five and ten years after thedate of grant or earlier upon termination, as defined in the plans.

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Additionalinformation about the Company’s outstanding stock options at December 31, 2006is as follows:

 
| **Range of  Exercise Prices** | ** ** | **Number of  Shares** | ** ** | **Weighted  Average  Remaining  Contractual  Life  (in Years)** | ** ** | **Weighted  Average  Exercise  Price** | ** ** |
|-----------------------------------------|------------|----------------------------|------------|----------------------------------------------------------------------|------------|----------------------------------------|------------|
|                                    |       |                       |       |                                                                 |       |                                   |       |
| $0.01 to $2.00                          |       | 75                         |       | 9.00                                                                 |       | $                                      | 2.00       |   |
| $2.01 to $2.50                          |       | 65,075                     |       | 6.16                                                                 |       | $                                      | 2.50       |   |
| $2.51 to $3.00                          |       | 176,175                    |       | 5.51                                                                 |       | $                                      | 2.97       |   |
| $3.01 to $4.00                          |       | 2,675                      |       | 7.41                                                                 |       | $                                      | 3.45       |   |
| $4.01 to $5.00                          |       | 1,875                      |       | 5.12                                                                 |       | $                                      | 4.96       |   |
| $5.01 to $10.00                         |       | 1,925                      |       | 6.34                                                                 |       | $                                      | 6.44       |   |
| $10.01 to $25.00                        |       | 1,355                      |       | 3.73                                                                 |       | $                                      | 17.93      |   |
| $25.01 to $50.00                        |       | 420                        |       | 2.87                                                                 |       | $                                      | 36.60      |   |
| $50.01 to $75.00                        |       | 100                        |       | 2.95                                                                 |       | $                                      | 51.00      |   |
| $83.00                                  |       | 60                         |       | 2.75                                                                 |       | $                                      | 83.00      |   |
|                                    |       | 249,735                    |       | 5.69                                                                 |       | $                                      | 3.07       |   |

 

***Warrants***

For the years ended December 31,2006 and 2005, warrant activity is as follows:
| Exercise Price   Per   Share | ** ** | **Warrants   Expiring** | ** ** | **Balance   January 1,   2005** | ** ** | **Exercised   2005** | ** ** | **Expired   2005** | ** ** | **Balance  Decenber 31,  2005** | ** ** | **Exercised  2006** | ** ** | **Expired  2006** | ** ** | **Balance  December 31,  2006** | ** ** |
|---------------------------------------------|------------|------------------------------|------------|------------------------------------------------|------------|---------------------------|------------|-------------------------|------------|--------------------------------------|------------|---------------------|------------|-------------------|------------|--------------------------------------|------------|
| $                                           | 150.00     |                         | 12/31/2005 |                                           | 32,001     |                      | —     |                    | (32,001    | )                                    | —     |                | —     |              | —     |                                 | —     |   |
| 100.00                                      |       | 12/31/2005                   |       | 9,600                                          |       |                      |       | (9,600                  | )          | —                               |       |                |       | —            |       | —                               |       |
| 1.00                                        |       | 3/31/2008                    |       | 11,382                                         |       |                      |       |                    |       | 11,382                               |       |                |       |              |       | 11,382                               |       |
|                                        |       |                         |       |                                           |       |                      |       |                    |       |                                 |       |                |       |              |       |                                 |       |
|                                        |       |                         |       | 52,983                                         |       | —                    |       | (41,601                 | )          | 11,382                               |       | —              |       | —            |       | 11,382                               |       |
|                                             |            |                              |            |                                                |            |                           |            |                         |            |                                      |            |                     |            |                   |            |                                      |            |  |

 

Allwarrants outstanding at December 31, 2006 are exercisable.

**NOTE 13 —****Compensation Plans**

***2004 Equity Incentive Plan***

InMay 2004, TWC’s Board of Directors (the “Board”) unanimously adopted the 2004Equity Incentive Plan (“2004 Equity Plan”), which was subsequently approved bythe shareholders of the Company at its Annual Meeting held in June 2004. The2004 Equity Plan stipulates that no further grants will be made under the 1998Stock Option Plan (the “1998 Plan”) and the 10,800 shares of Common Stockremaining available for grant under the 1998 Plan were added to those availablefor grant under the 2004 Equity Plan.

The2004 Equity Plan provides that certain awards made under the plan may beeligible to qualify as “qualified performance-based compensation” which may beexempt from the $1,000 deduction limit imposed on publicly-held corporations bySection 162(m) of the Internal Revenue Code. 262,383 shares of Common Stockwill be authorized and available for issuance pursuant to awards granted under

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the2004 Equity Plan, including 10,800 shares previously available for grant underthe 1998 Plan. In June 2005, the Shareholders of the Company, at its AnnualMeeting, approved amendments, facilitating the Committee with discretionto grant to any participant annually up to 250,000 shares of Common Stock andto determine whether to include a one-year vesting requirement for any futuregrants awarded under the 2004 Equity Plan to any of the Company’s employees. The shareholders of the Company at its AnnualMeeting, held in April 2006, approved amendments to increase the 2004 EquityPlan authorized shares that may be issued under the provisions by an additional125,365, which included the 365 shares remaining in the 1999 Non-EmployeeDirector Stock Option Plan (the “1999 Plan”) that have not been awarded todate, thereby creating a new total of 387,748 authorized and available forissuance, of which 72,748 remained available for issuance as of December 31,2006. Additionally, the amendments provide that option awards will be availablefor grants to the executive officers and non-employee directors as well asother key employees, except that non-employee directors are eligible to receiveonly awards of non-incentive stock options. Type of awards which may begranted, under the 2004 Equity Plan, by the Compensation Committee of theBoard, in its discretion from time to time, include stock options, stockappreciation rights, restricted stock and restricted stock units, otherstock-based awards and performance awards.

The2004 Equity Plan contains the following provisions: (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.

***Deferred Compensation Plan***

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

The Company adopted theDeferred Plan with the intention that it shall at all times be characterized asa “top hat” plan of deferred compensation maintained for a select group ofmanagement, as described under ERISA Sections 201(2), 301(a)(3) and 401(a)(1)and the Deferred Plan shall at all times satisfy Section 409A of the Code. Theunfunded Deferred Plan obligations are payable only in the form of common stockupon the earlier of: (i) a designated, in-service distribution date which mustbe a minimum of three (3) years from the year of the first deferral; (ii)separation of employment; (iii) disability; (iv) change in control; or (v)death. A participant’s election form must specify whether the payments will bemade by lump sum or by installments, and the number of annual installments(with a minimum of two (2) and a maximum of five (5) installments) as may bedirected by the participant in his or her election form.

***2006 Profit Sharing Plan***

The 2006 Profit Sharing Plan was approved by theCompensation Committee of the Board on August 2, 2006 and is subject toconditions outlined in the Deferred Plan.

The 2006 Profit SharingPlan permits designated key management employees (“KME”) to share in theprofits of the Company. The profit sharing pool will be calculated based on agraduated scale of the attainment of consolidated year-end net income beforetaxes versus the annual budget and the maximum sum to be distributed from thatpool is set at 30% of the aggregate of the annual salaries of the KMEs. EachKME is required, pursuant to the rule of the 2006 Profit Sharing Plan, to defer20% of his annual profit sharing award, if attained, in accordance with theDeferred Plan described above.

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**NOTE 14 —****Subsequent Event**

On January 19, 2007, inconsideration of his service, the Compensation Committee of the Board grantedthe CEO, Mr. Ramadan, a merit-based award of $100 and effective February 4,2007, seven year options to purchase 50,000 shares of Common Stock, with optionsto purchase 12,500 shares to be vested immediately, and options to purchase12,500 shares to be vested each subsequent year on the anniversary of the dateof grant. The exercise price of these options is set at $3.75 per option.

 

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**Item 8.Changes In and Disagreements with Accountants on Accounting and FinancialDisclosure.**

None.

**PART III**

**Item9. Directors and Executive Officer; Compliance with Section 16(A) of theExchange Act.**

The following table provides information asof March 8, 2007 with respect to each of the Company’s directors and eachExecutive Officer:
| **Name**                     | ** ** | **Age** | ** ** | **Position in the Company**      | ** ** | **Director or Executive Since** |
|------------------------------|------------|---------|------------|----------------------------------|------------|---------------------------------|
| Rami S. Ramadan              |       | 57      |       | CEO, CFO, President and Director |       | 1999                            |
| Julio E. Heurtematte, Jr.(1) |       | 71      |       | Director                         |       | 1998                            |
| Malcolm M.B. Sterrett (1)    |       | 64      |       | Director                         |       | 1998                            |
| Geoffrey B. Baker (1,2)      |       | 57      |       | Director                         |       | 1999                            |
| Timothy G. Ewing (1)         |       | 46      |       | Director                         |       | 2004                            |

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(1)                          Memberof each Audit, Nominating and Compensation Committees.

(2)                          Mr.Baker, who was appointed to a fill a vacancy on the Board of Directors onDecember 22, 1998, resigned from his position on May 13, 1999 and rejoined theBoard on August 4, 1999.

 

***Rami S. Ramadan***has served as CEO/CFO since July12, 1999 and President since August 2000. His most recent prior position hadbeen Executive Vice President of Finance for the Ian Schrager Hotels fromNovember 1997 to July 1999. Prior to that, Mr. Ramadan held senior financialpositions with Hyatt Hotels from January 1994 to November 1997, Euro Disneyfrom October 1990 to December 1993 and Meridien Hotels from September 1975 toSeptember 1990.

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

***Malcolm M. B. Sterrett***. Mr. Sterrett is a privateinvestor. 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.  Until August 2006, Mr. Sterrett had served asa member of the board of directors as well as on some board committees of TelosCorporation.

***Geoffrey B. Baker. *** Mr. Baker isa private investor and since 1983 has been a partner in a private investmentfirm and a member of various corporate and civic boards. A graduate of StanfordUniversity and Georgetown University Law Center, Mr. Baker previouslyserved as Legislative Director to U.S. Senator Lowell P. Weicker, Jr., and asProfessional Staff Member on the U.S. Senate Committee on Commerce, Science andTransportation.

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***Timothy G. Ewing. *** Mr. Ewing has been a director since June2004.  Mr. Ewing, a Chartered Financial Analyst, is the managing partnerof Ewing & Partners and the manager of Value Partners, Ltd., a privateinvestment partnership formed in 1989, and of the Endurance Partnerships,formed in 2001.  Mr. Ewing sits on the board of directors of Cherokee,Inc. (NASDAQ:  CHKE) in Van Nuys, CA since 1997.  He is the chairmanof the board of Harbourton Capital Group (OTC:  HBTC) in McLean, VA andhas served on its board of directors since 2000.  In addition, he isimmediate past chairman and an executive board member of the Dallas Museumof Nature & Science, serves on the board of directors of TheDallas Opera, the board of trustees of the Baylor Healthcare SystemFoundation, and the advisory board of the University of Texas at Dallas’Holocaust Studies Program.

**Informationabout the Board and its Committees:**

The Company’sBoard of Directors, which is chaired by Mr. Sterrett in a non-executive role,manages the business and affairs of the Company.  The Board holds biweekly conference calls andmeets on an as-needed basis.  The Boardhas established several committees, described below, which also meet on anas-required basis during the year.  TheBoard met three times and conducted business by consent twice during theCompany’s fiscal year ended December 31, 2006. No director of the Company attended fewer than 75% of the total numberof meetings of the Board or meetings of committees of the Board during the yearended December 31, 2006.

The Board ofDirectors has established the following committees:

***AuditCommittee***

The AuditCommittee reviews and approves internal accounting controls, internal auditoperations and activities, the Company’s annual report and audited financialstatements, the selection of the Company’s independent auditors, the activitiesand recommendations of the Company’s independent auditors, material changes inthe Company’s accounting procedures, the Company’s policies regarding conflictsof interest and such other matters as may be delegated by the Board. The AuditCommittee, composed of Mr. Baker, the Committee’s Chairman, Messrs.Heurtematte, Sterrett and Ewing, all non-employee, “independent” directors, metonce and conduced business by consent once in 2006.  Additionally, the Committee’s Chairmanconferred four times via telephone with the committee members regarding auditmatters throughout 2006.

***CompensationCommittee***

The CompensationCommittee sets the compensation for executive officers of the Company and setsthe terms of grants of awards under the 1999 Non-Employee Director Stock OptionPlan (the “1999 Plan”), the 2004 Equity Plan and any other equity-basedcompensation plans adopted by the Company. The Compensation Committee, composedof Mr. Heurtematte, the Committee’s Chairman, Messrs. Baker, Sterrett andEwing, met once in 2006 and conducted business by consent three times in 2006.

***NominatingCommittee***

The NominatingCommittee has the responsibilities set forth in its Charter, includingrecommending Board nominees, determining the qualifications for such nomineesand assisting the Board of Directors in interpreting and applying the Company’sCorporate Governance Guidelines.  TheNominating Committee is composed of Mr. Ewing, its Chairman, Messrs. Baker,Heurtematte and Sterrett, and met once during 2006.

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**Section 16(a) Beneficial Ownership Reporting Compliance**

Section 16(a) ofthe Exchange Act requires the Company’s officers and directors, and persons whoown more than 10% of the Company’s Common Stock to file reports of ownershipand changes in ownership with the Securities and Exchange Commission (“SEC”)and the National Association of Securities Dealers, Inc. by certain dates.  Officers, directors and 10% stockholders arerequired by regulation to furnish the Company with copies of all Section 16(a)forms they file.

Prior to June2003, Value Partners held a controlling 57.5% of the Company’s issued andoutstanding Common Stock.  Further, aspart of its participation in the 2003 Recapitalization, Value Partners receivedan additional 3,270,104 shares.  AtDecember 31, 2005, after the issuance of an aggregate of 2,809,188 shares ofCommon Stock as part of the $4.75 million Capital Raise, Value Partners’beneficial ownership was reduced from 70.9% to 45.4% and as of December 31,2006, Value Partners’ beneficial ownership was 44.4% of the Company’s issuedand outstanding Common Stock.

As part of theirparticipation in the $4.75 million Capital Raise, Special Situations PrivateEquity Fund LLP and Special Situations Cayman Fund, LP, (collectively referredto as “Special Situations Funds”), and Wynnefield Small Cap Value OffshoreFund, Ltd acquired 16.9% and 11.3%, respectively, of the Company’s issued andoutstanding Common Stock.

The Company knowsof no other person or entity who owns 10% or more of the Company’s CommonStock.

Based solely onreview of the copies of such forms either filed by the Company on behalf of itsdirectors or furnished to the Company, the Company believes that all applicableSection 16(a) filing requirements were satisfied by its directors and executiveofficer during 2006.

***Code of Ethics***

The Board ofDirectors adopted a Code of Ethics which covers all executive officers of TWCand its subsidiaries.  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.  In February 2007, all executive officers ofthe Company reaffirmed, in writing, their commitment to the Company’s Code ofEthics.

A copy of the Company’sCode of Ethics will be furnished to any person upon written request from anysuch person.  Requests should be sentto:  Rami S. Ramadan, President, ChiefExecutive Officer and Chief Financial Officer, Trans World Corporation, 545Fifth Avenue, Suite 940, New York, New York 10017.

**Item10. Executive and Directors’ Compensation**

**Compensation Discussion and Analysis**

**Overview of Compensation Philosophyand Program.**  TWC’scompensation philosophy is to provide compensation to its executive officersthat is competitive in the marketplace in order to attract and retain qualifiedand experienced officers.  Thecompensation of the Company’s principal executive officer, including thevarious components of such compensation, is determined by the CompensationCommittee.  The Committee consists solelyof non-employee directors who meet all applicable requirements to beindependent of management.  In addition,the 

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Committee uses,from time to time, an independent outside consulting firm that providesinformation regarding the compensation paid by the Company’s peer group, asdescribed below.

Whensetting the compensation of its principal executive officer, the Committeegenerally targets compensation which is comparable with the Company’s peergroup with respect to each of the Company’s components of compensation.  The compensation the Company provides to itsexecutive officer primarily consists of the following:

·                  annual basesalary,

·                  annual cashbonus,

·                  stock options,

·                  restricted stockawards to a lesser extent and

·                  other forms ofcompensation as approved by the Committee.

Since1999, the Company has implemented various stock option and restricted stockplans in order to more closely align the interests of its directors andexecutive officer with its stockholders. Each of these plans was approved by the Company’s stockholders.  Grants of stock options are made to itsexecutive officer on an exceptional basis and, to a lesser extent, grants ofrestricted stock were made in 2004 to its executive officer both as a rewardfor past service as well as to provide an incentive for future performance. Inaddition, equity compensation has become a more significant part of the Company’sexecutive compensation structure due to its goal of linking the executivecompensation to the achievement of the Company’s business strategy and goals.

TWCalso provides to certain of its key management employees, including itsexecutive officer, a 401(k) retirement plan, with a voluntary employer-matchingcontribution of 60 cents for each employee dollar contributed.

TheCompany also offers various fringe benefits to certain of its key employees,including its executive officer, including group policies for medical, dental,life, disability and accidental death insurance.  The executive officer receives the use of aCompany-leased automobile.  The Committeebelieves such benefits are appropriate and assist such officers in fulfillingtheir employment obligations.

**Independent Compensation Committee.**  The Committee, composed entirely ofindependent directors, administers the Company’s executive compensationprogram.  The members of the Committee,Messrs. Geoffrey B. Baker, Timothy G. Ewing, Julio E. Heurtematte, Jr., MalcolmM.B. Sterrett, meet all of the independence requirements under applicable lawsand regulations, including the listing requirements of the National Associationof Securities Dealers Automated Quotations (“Nasdaq”) stock market. None of themembers is a current or former officer or employee of the Company or any of itssubsidiaries or has any separate business relationship with the Company. Therole of the Committee is to: (i) oversee the Company’s compensation and benefitplans and policies; (ii) administer its stock benefit plans (includingreviewing and approving equity grants to executive officers); and (iii) reviewand approve annually all compensation decisions relating to the principalexecutive officer, Mr. Rami S. Ramadan, who serves as President, ChiefExecutive Officer and Chief Financial Officer of the Company, as set forth inthe Summary Compensation Table (the “named executive officer”).

TheCommittee is committed to high standards of corporate governance, as embracedmost notably in the Sarbanes-Oxley Act of 2002 and the various regulationsimplementing the letter and spirit of that statute. The Committee’s Charterreflects the foregoing responsibilities and commitment, and the Committee andthe Board periodically reviews and revises the Charter as appropriate. The fulltext of the Compensation Committee Charter is available upon written request tothe Company’s Secretary. The Committee’s membership is determined by the Board.The Committee held one meeting in 2006 and conducted business by consent threetimes in 2006.

Evenprior to the recent intensified interest in corporate governance, the Committeeadhered to sound governance principles and practices. The Committee hastypically exercised exclusive authority over the compensation paid to theprincipal executive officer, while deferring, with respect to the other keymanagement 

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employees, to thediscretion of the executive officer, including not only the amount and type ofawards granted to executives under the Company’s stock option and restrictedstock plans, but also on the issues of executive salaries, bonuses, retirementand severance arrangements, and other benefits. As a matter of philosophy, the Company and the Committee have beencommitted to creating a compensatory structure for executives that is simpleand readily comprehensible to investors. The types of compensation TWC offersits executives remain within the traditional categories: salary, short andlong-term incentive compensation (cash bonus and stock-based awards), standardexecutive benefits, and retirement and severance benefits. The Company does notprovide executives with excessive or exotic perquisites. It also does not makeloans to executives or their families or families’ businesses.  The Company does not permit its executives toreceive any income or gain from affiliated transactions or arrangements withthe Company, a major concern addressed by the new corporate governance laws andregulations.

TheCommittee recognizes the importance of maintaining sound principles for thedevelopment and administration of compensation and benefit programs, and hastaken steps to significantly enhance the Committee’s ability to effectivelycarry out its responsibilities as well as enhance the link between executivepay and performance. Examples of actions that the Committee has taken include(i) holding executive sessions of the Committee without Company managementpresent, (ii) aligning compensation structures based on targeting average competitivepay of peer groups, as advised by its outside consultants, and (iii) aligningthe relative mix of stock options and restricted stock awards to increase theimportance of long-term incentives.

**General Compensation Philosophy.** The Committee believes that compensation paidto executive officers should be closely aligned with the performance of theCompany on both a short-term and long-term basis, and that such compensationshould assist the Company in attracting and retaining key executives criticalto its long-term success. The compensation of executive officers is structuredto ensure that a significant portion of an executive’s compensation will bedirectly related to the Company’s corporate performance and other factors thatdirectly and indirectly influence shareholder value.  To that end, it is the view of the Board thatthe total compensation program for executive officers should consist of thefollowing:

·                               Salaries;

·                               Annualcash bonus awards;

·                               Long-termincentive compensation consisting of a mixture of stock options and restrictedstock awards; and

·                               Certainother benefits.

Theoverriding philosophy in setting corporate goals is to ensure that theinterests of senior management are aligned with the interests of stockholders.The Committee believes that, over time, the financial performance of theCompany is reflected in the value of its stock and that internal results, suchas financial performance, and external results, such as stock price, ultimatelymove in a complementary fashion.  In particular,the Committee believes that the most critical performance measures whichprovide an accurate gauge of management’s success in implementing the Company’sstrategy are return on average equity and diluted earnings per share.** **The executiveofficer’s annual discretionary bonus is tied to financial performance (internalresults), while other elements, specifically stock options and the ultimatevalue of restricted stock awards, are tied to stock performance (externalresults). Under both considerations, financial performance and stockperformance, the emphasis is on steady but consistent progress over time,achieved through careful execution of a well-designed business strategy. TheCommittee believes this formula has worked well for the Company.

Thefinancial performance of the Company on a period-to-period basis is principallyreflected in salary adjustments and cash bonuses. The Committee uses theseelements of compensation to provide incentives to executives to achievecontinuous, near-term results. Executives’ stock-based compensation, on theother hand, is focused on achievement of long-term success. As is true of mostpublicly traded entities, the Company’s stock performance fluctuates over time,typically more so than does the Company’s financial performance.  However, over time, the Committee believesthat the return to stockholders investing in TWC’s stock, including anydividend payout, is a good indicator of corporate performance. Stock-basedawards are thus a way to link executive compensation to long-term performance.

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In2005, the Company granted stock options, with a 4-year vesting period, to Mr.Ramadan and, in 2006, stock options which vest over a 3-year periods from thedate of grant were granted to certain other key employees. This structurereinforces the executive and key employees’ incentive to seek long-term growthin stock value through strong corporate performance. In addition, the Companyhas never re-priced stock options downward or exchanged new lower pricedoptions for outstanding higher priced options.

Indetermining the overall amounts and types of executive compensation, theCommittee weighs not only corporate performance measures but personal factorsas well, including commitment, leadership and teamwork.  The Committee also considers executivecompensation practices of the Company’s competitors and peers, whenappropriate.  It is the intent of theCommittee that generally salaries be competitive with its competitors and peersset.

**Role of the Executive Officer and Management. **The chief executive officerprovides recommendations to the Committee on matters of compensationphilosophy, plan design and the general guidelines for executive officerscompensation.  These recommendations arethen considered by the Committee. The chief executive officer generally attendsCommittee meetings but is not present for executive sessions or for anydiscussion of his own compensation.

**Tax Deductibility of Pay.** Section 162(m) of the Internal Revenue Code of1986, as amended (the “Code”), places a limit of $1.0 million on the amount ofcompensation that the Company may deduct in any one year with respect to eachof its five most highly paid executive officers. There is an exception to the$1.0 million limitation for performance-based compensation meeting certainrequirements. Stock options are performance-based compensation meeting thoserequirements and, as such, are fully deductible. Service-based only restrictedstock awards are not considered performance-based compensation under Section162(m) of the Code.

Todate, Section 162(m) has not affected the ability of the Company to deduct theexpense of the executive compensation paid. To maintain flexibility incompensating executive officers in a manner designed to promote varyingcorporate goals, the Committee has not adopted a policy requiring allcompensation to be deductible.

**Salaries. **Withthe exception of the Chief Executive Officer, the salaries of the keymanagement employees are reviewed on an annual basis, as well as at the time ofa promotion or other change in responsibilities.  Increases in salary are based on anevaluation of the individual’s performance and level of pay.  Merit increases normally take effect inJanuary of each year.

For2006, pursuant to his 2.5-year employment agreement effective July 1, 2005, thebase annual salary for the named executive officer was $400,000.  Base salary is considered in conjunction withthe short-term annual bonus component of the Company’s executive compensationprogram.

**Bonuses. **Inaddition to the 2006 Profit Sharing Plan (see below), a discretionary cashbonus for the executive officer is determined by the Compensation Committee, onan annual basis, where applicable.  Theamount of the bonus is based on the Company’s overall performance as well as anevaluation of the individual’s performance. In 2006, the Committee did not announce a bonus for the named executiveofficer.  (See Subsequent Event below)

**Long-Term Compensation.** The Committee believes that, from amotivational standpoint, the use of stock-based compensation has contributed tothe Company’s financial performance, eliciting maximum effort and dedicationfrom its executive officers. The long-term incentive compensation portion ofthe Company’s compensation program primarily consists of grants of stockoptions and, to a lesser extent, restricted stock awards under the Company’sstock incentive and option plans. These grants and awards are designed toprovide incentives for long-term positive performance by the executive andother key management employees and to align their financial interests withthose of the Company’s stockholders by providing the opportunity to participatein any 

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appreciation inthe stock price of the Company’s Common Stock which may occur after the date ofgrant of stock options or restricted stock awards.

Underthe stock incentive plans, the Committee has discretion in determining grantsof stock options and restricted stock awards to executive officers, includingthe timing, amounts and types of awards. In the case of individual executives,the Committee’s award decisions are based in part on corporate performance.

Theexercisability of options and the vesting of restricted stock awards dependupon the executive officer continuing to render services to the Company.  In addition, the Company’s 2004 Equity Planprovides that awards may be made based upon specified performance goals. Alloptions granted under the Company’s stock option plans must have an exerciseprice at least equal to the market value of the common stock on the date ofgrant. Options may be exercised only within a (1) one-year period after theoptionee’s departure from the Company. Restricted shares awarded carry dividendrights, if paid, and voting rights from the date of grant if the vesting is time-basedonly. If any restricted stock awards were to be granted subject to theachievement of performance criteria, then voting rights would not exist withrespect to shares subject to the award until the performance criteria issatisfied and the shares vest.

Inthe past, the Company’s long-term incentive compensation has primarilyconsisted of stock options, with restricted stock awards being granted at asignificantly lesser rate.  TWCemphasized stock options primarily for two reasons.  First, prior to the adoption of FinancialAccounting Standards (“FAS”) No. 123(R), the granting and vesting of stockoptions did not result in any financial statement expenses, whereas restrictedstock awards had to be expensed over the vesting period.  Second, because the exercise price of all ofthe Company’s stock options equaled the fair market value of the Company’sCommon Stock on the date of grant, the executives only benefit from stockoptions if the market value of the Company’s Common Stock increases after thedate of grant.  By comparison, restrictedstock awards have some value to the recipients of the awards even if the marketvalue of the stock declines after the date of grant.

Withthe adoption of FAS No. 123(R), all stock options are now required to be expensedover the applicable vesting period.  Inaddition, an increasing number of companies are using restricted stock awards,or a combination of restricted stock awards and stock options.  The Committee may consider grantingrestricted stock awards to a greater extent in the future.

***Stock Options***

Indetermining the size of stock option grants to executive officers, theCommittee considers the Company’s financial performance against the strategicplan as attributed to executive officers. In this regard, the Committee granted stock options to Mr. Ramadan, theChief Executive Officer, in July 2005, as part of his employment contractrenewal.  Mr. Ramadan was grantedseven-year options to purchase an aggregate total of 175,000 shares, of which105,000 remain unvested, of the Company’s Common Stock at the followingexercise 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       |   |

 

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

| 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                            |       |

 

Accordingly, thesestock options will have value only if the market price of the common stockincreases after that date.

***Restricted Stock Awards***

Underthe Company’s 2004 Equity Plan, the Committee is authorized to grant shareawards, which are a right to receive a distribution of shares of common stock.Shares of common stock granted pursuant to a share award are in the form ofrestricted stock which vests upon such terms and conditions as established bythe Committee.  The Committee determineswhich officers and key employees will be granted share awards, the number ofshares subject to each share award, whether the share award is contingent uponachievement of certain performance goals and the performance goals, if any,required to be met in connection with a share award.  Non-employee directors are not eligible toreceive share awards.  Under the amended2004 Equity Plan, the Committee has the discretion to grant to any participantannually up to 250,000 shares of Common Stock and to determine whether toinclude a one-year vesting requirement for any future grants awarded under the2004 Equity Plan to any of the Company’s employees.

Pursuant to hisrenewed employment agreement and the 2004 Equity Plan, Mr. Ramadan was granted75,000 shares of restricted Common Stock that vest cumulatively, beginning withthe quarter ended September 30, 2005, as follows:
| **Number** | ** ** | **Cumulative  Vested** | ** ** | **When Vested**                                                                                                                                                                                                                |
|------------|------------|------------------------|------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 25,000     |       | 25,000                 |       | When the trailing twelve months (“TTM”) earnings per  share from TWC’s continuing operations for any two (2) consecutive fiscal  quarters (“TTMEPS”) is equal to or exceeds $0.45 for the first time. |
| 25,000     |       | 50,000                 |       | When TTMEPS is equal to or exceeds $0.60 for any two  (2) consecutive fiscal quarters ended for the first time.                                                                                                                |
| 25,000     |       | 75,000                 |       | When TTMEPS is  equal to or exceeds $0.75 for any two (2) consecutive fiscal quarters ended  for the first time.                                                                                                               |

 

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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 to 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 into cashor securities of the acquiror or exercised as required or permitted by theterms and conditions of the change of control documents.  Any extension of the terms of his employmentagreement beyond December 31, 2007 shall not result in the extension of anyoption or stock grant vesting or exercise periods set forth above.  As of December 31, 2006 there were no sharesof restricted stock vested.

**Stock Ownership Guidelines.** The Company has not established any formalpolicies or guidelines addressing expected levels of stock ownership by thenamed executive officer or for other executive officers.  However, this matter remains underconsideration.

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

***Deferred Compensation Plan***

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

TheCompany adopted the Deferred Plan with the intention that it shall at all timesbe characterized as a “top hat” plan of deferred compensation maintained for aselect group of management, as described under ERISA Sections 201(2), 301(a)(3)and 401(a)(1) and the Deferred Plan shall at all times satisfy Section 409A ofthe Code.  The unfunded Deferred Planobligations are payable only in the form of common stock upon the earlierof:   (i) a designated, in-servicedistribution date which must be a minimum of three (3) years from the year ofthe first deferral; (ii) separation of employment; (iii) disability; (iv)change in control; or (v) death.  Aparticipant’s election form must specify whether the payments will be made bylump sum or by installments, and the number of annual installments (with aminimum of two (2) and a maximum of five (5) installments) as may be directedby the participant in his or her election form.

***2006 Profit Sharing Plan***

The 2006 ProfitSharing Plan was approved by the Compensation Committee of the Board on August2, 2006 and is subject to conditions outlined in the Deferred Plan.

The2006 Profit Sharing Plan permits designated key management employees (“KME”) toshare in the profits of the Company.  Theprofit sharing pool will be calculated based on a graduated scale of theattainment of consolidated year-end net income before taxes versus the annualbudget and the maximum sum to be distributed from that pool is set at 30% ofthe aggregate of the annual salaries of the KMEs.  Each KME is required, pursuant to theprovisions of the 2006 Profit Sharing Plan, to defer 20% of his or her annualprofit sharing award, if attained, in accordance with the Deferred Plandescribed above.

**CompensationCommittee Interlocks and Insider Participation**

No member of theCompensation Committee has served as an officer or employee of the Company atany time.  None of the Company’sexecutive officers serve as a member of the compensation committee of any otherfor-profit company that has an executive officer serving as a member of theCompany’s Board of Directors.  None ofthe Company’s executive officers serve as a member of the Board of Directors ofany other company that has an executive officer serving as a member theCompany’s Compensation Committee.

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**Summary Compensation Table**

 

The followingtable sets forth a summary of certain information concerning the compensationawarded or paid by the Company or its subsidiaries for services rendered in allcapacities during the last three fiscal years to the Company’s principalexecutive officer/principal financial officer. The Company refers to this individual in this report as the “named executiveofficer.”
| **(Dollars in Thousands)**

**Name and Principal  Position** | ** ** | **Year**   | ** ** | **Salary** | ** ** | **Bonus**  | ** ** | **Stock  Awards** | ** ** | **Option  Awards(1)** | ** ** | **Non-  Equity  Incentive  Plan  Compen-  sation** | ** ** | **Change in  Pension Value  and Nonquali-  fied Deferred  Compensation  Earnings(2)** | ** ** | **All Other  Compen-  sation(3)** | ** ** | **Total**  | ** ** |
|----------------------------------------------------------------------------------|------------|------------|------------|------------|------------|------------|------------|-------------------|------------|-----------------------|------------|----------------------------------------------------|------------|-----------------------------------------------------------------------------------------------------------|------------|----------------------------------------|------------|------------|------------|
| ** **                                                                       | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** **        | ** ** | ** **            | ** ** | ** **                                         | ** ** | ** **                                                                                                | ** ** | ** **                             | ** ** | ** ** | ** ** |
| Rami S. Ramadan                                                                  | ** ** | 2006       |       | $          | 400        |       | $          | —            |       | $                     | —     |                                               | $          | 32                                                                                                        |       | $                                      | —     |       | $          | — |   | $ | 20 |   | $ | 452 | ** ** |
| *President, Chief Executive Officer*                                             | ** ** | 2005       |       | $          | 400        |       | $          | —            |       | $                     | —     |                                               | $          | —                                                                                                    |       | $                                      | —     |       | $          | — |   | $ | 19 |   | $ | 419 | ** ** |
| *and Chief  Financial Officer*                                                   | ** ** | 2004       |       | $          | 400        |       | $          | 150               |       | $                     | —     |                                               | $          | —                                                                                                    |       | $                                      | —     |       | $          | — |   | $ | 19 |   | $ | 569 | ** ** |

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(1)                Reflects the amount expensed in accordancewith Statement of Financial Accounting Standards No. 123(R) during fiscal 2006with respect to vesting of stock options. For a discussion of the assumptions used to establish the valuation ofthe stock options, reference is made to Note 2 of the Notes to the ConsolidatedFinancial Statements.  Additionalinformation is also included in the table entitled “Grants of Plan-BasedAwards.”

(2)                There were no above-market or preferentialearnings on nonqualified deferred compensation for the named executive officer.

(3)                Consists of the cost of a leased automobilefor business use, as well as employer matching contribution toward his 401(k)plan.

 

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**EquityCompensation Plans**

The followingtable sets forth information concerning grants of awards pursuant to plans madeto the named executive officer during the year ended December 31, 2006:

**Grants ofPlan-Based Awards for the Year Ended December 31, 2006**
| ** **      | ** ** | ** ** | ** ** | ** **                               | ** ** | ** **                             | ** ** | ** **             | ** ** | ** **              | ** ** | ** **           | ** ** | ** **          | ** ** | **All Other** | ** ** | **All Other**          | ** ** | ** ** | ** ** | **Grant Date** | ** ** |
|-----------------|------------|------------|------------|------------------------------------------|------------|----------------------------------------|------------|------------------------|------------|-------------------------|------------|----------------------|------------|---------------------|------------|--------------------|------------|-----------------------------|------------|------------|------------|---------------------|------------|
| ** **      | ** ** | ** ** | ** ** | **Estimated Future Payouts**   | ** ** | **Estimated Future Payouts** | ** ** | **Stock Awards:** | ** ** | **Option Awards:** | ** ** | **Exercise or** | ** ** | **Fair Value** | ** ** |
| ** **      | ** ** | ** ** | ** ** | **Under Non-Equity Incentive** | ** ** | **Under Incentive**               | ** ** | **Number of**     | ** ** | **Number of**      | ** ** | **Base Price**  | ** ** | **of Stock**   | ** ** |
| ** **      | ** ** | ** ** | ** ** | **Plan Awards (1)**            | ** ** | **Plan Awards (2)**          | ** ** | **Shares of**     | ** ** | **Securities**          | ** ** | **of Option**   | ** ** | **and Option** | ** ** |
| ** **      | ** ** | **Grant**  | ** ** | **Threshold**                            | ** ** | **Target**                             | ** ** | **Maximum**            | ** ** | **Threshold**           | ** ** | **Target**           | ** ** | **Maximum**         | ** ** | **Stock/Units**    | ** ** | **Underlying Options** | ** ** | **Awards** | ** ** | **Awards (3)** | ** ** |
| **Name **  | ** ** | **Date**   | ** ** | **$000**                                 | ** ** | **$000**                               | ** ** | **$000**               | ** ** | **#**                   | ** ** | **#**                | ** ** | **#**               | ** ** | **#**              | ** ** | **#**                       | ** ** | **($/Sh)** | ** ** | **($/Sh)**          | ** ** |
|            |       |       |       |                                     |       |                                   |       |                   |       |                    |       |                 |       |                |       |               |       |                        |       |       |       |                |       |
| Rami S. Ramadan |       | 2006       |       | $                                        | 24         |                                   | $          | 120                    |       | $                       | 120        |                 | —     |                | 75,000     |               | —     |                        | —     |       | —     |                | $          | 2.97 |   | $ | 1.11 |   |
|                 |            |            |            |                                          |            |                                        |            |                        |            |                         |            |                      |            |                     |            |                    |            |                             |            |            |            |                     |            |  |  |  |  |  |

 

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(1)                   Pursuant to Mr. Ramadan’s participation in the2006 Profit Sharing Plan, the threshold of which was not reached in 2006,resulting in no cash payment in that year.

(2)                   Conditional upon reaching certain companyearnings targets, as stipulated in Mr. Ramadan’s employment agreement (see“Compensation Discussion and Analysis - Restricted Stock Awards” above), whichthresholds were not reached in 2006, resulting in no payment of restrictedstock.

(3)                   The fair value of the stock options granted iscomputed in accordance with Statement of Accounting Standards No. 123(R).

**OutstandingEquity Awards at Fiscal Year-End**

Thefollowing table sets forth information concerning outstanding equity awardsheld by the named executive officer as of December 31, 2006: 
| ** **      | ** ** | **Option Awards**                                                       | ** ** | **Stock Awards** | ** ** |
|-----------------|------------|------------------------------------------------------------------------------|------------|-----------------------|------------|
| ** **      | ** ** | ** **                                                                   | ** ** | ** **            | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| ** **      | ** ** | **Number of Securities  Underlying Unexercised Options** | ** ** | **Exercise**          | ** ** | **Option  Expiration** | ** ** | **Number of  Shares or  Units of Stock  That Have Not** | ** ** | **Market Value  of Shares or  Units of Stock  That Have Not** | ** ** |
| **Name **  | ** ** | **Exercisable**(1)                                                           | ** ** | **Unexercisable**     | ** ** | **Price(2)** | ** ** | **Date** | ** ** | **Vested(3)** | ** ** | **Vested(4)** | ** ** |
|            |       |                                                                         |       |                  |       |   |   |   |   |   |   |   |   |
| Rami S. Ramadan |       | 74,500                                                                       |       | 105,000               |       | $ | 2.97 |   | 6/30/12 |   | 105,000 |   | $ | — |   |
|                 |            |                                                                              |            |                       |            |  |  |  |  |  |  |  |  |  |  |

 

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(1)                      20% of the stock options to purchase anaggregate of 175,000 shares of Common Stock, granted on July 1, 2005, wereimmediately vested and an additional 20% vest each year thereafter.  Options to purchase 4,500 shares of CommonStock granted under the previous employment agreement have already vested. (see“Compensation Discussion and Analysis - Stock Options” above).

(2)                      The exercise price set forth in Mr. Ramadan’semployment agreement. (see “Compensation Discussion and Analysis - StockOptions” above).

(3)                      The restricted shares vest according to anearnings formula as stipulated in Mr. Ramadan’s employment agreement. (see“Compensation Discussion and Analysis - Restricted Stock Awards” above).

(4)                      Based upon the fair market value representedby the reported closing price on the over-the-counter bulletin board of $2.85per share for the Company’s Common Stock as of December 31, 2006, the optionswere out-of-the-money.

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**OptionExercises and Stock Vested**

Thefollowing table sets forth certain information with respect to stock optionsexercised and restricted stock awards vested for the named executive officerduring the year ended December 31, 2006:
| ** **      | ** ** | **Option Awards**                                     | ** ** | **Stock Awards**                     | ** ** |
|-----------------|------------|------------------------------------------------------------|------------|-------------------------------------------|------------|
| **Name **  | ** ** | **Number of Shares  Acquired On  Exercise** | ** ** | **Value Realized On  Exercise** | ** ** | **Number of Shares  Acquired On  Vesting** | ** ** | **Value Realized On  Vesting** | ** ** |
|            |       |                                                       |       |                                      |       |   |   |   |   |
| Rami S. Ramadan |       | —                                                     |       | $                                         | —     |   | — |   | $ | — |   |
|                 |            |                                                            |            |                                           |            |  |  |  |  |  |  |

 

No stock options wereexercised and no shares of restricted stock vested for the named executiveofficer in 2006.

**NonqualifiedDeferred Compensation**

The named executive did not earn any nonqualified deferred compensationin 2006.

**Employmentand Change of Control Agreements**

TheCompany entered into an employment agreement renewal with Mr. Ramadan in 2005pursuant to which the Company agreed to employ Mr. Ramadan as President, ChiefExecutive Officer and Chief Financial Officer. For additional information, see “Compensation Discussion and Analysis -Employment/Severance Agreements” below.

TheCompany, as part of an employment agreement renewal, amended the change ofcontrol agreement with Mr. Ramadan.  See“Compensation Discussion and Analysis – Additional Components of ExecutiveCompensation” above.

45

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**PotentialPayments upon Termination of Employment or a Change in Control**

The followingtable describes the potential payments to the named executive officer, upon anassumed termination of employment or a change in control as of December 31,2006:
| **(Dollars in Thousands)  Payments and Benefits ** | ** ** | **Voluntary  Termination** | ** ** | **Termination  for Cause** | ** ** | **Involuntary  Termination   Without Cause  or Termination  by the  Executive for  Good Reason  With a Change  in Control** | ** ** | **Material  Breach of  Agreement by  Company** | ** ** | **Death or  Disability** | ** ** |
|-----------------------------------------------------------------------------|------------|----------------------------|------------|---------------------------------|------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|----------------------------------------------------------|------------|-------------------------------|------------|
|                                                                        |       |                       |       |                            |       |                                                                                                                                                                     |       |                                                     |       |                          |       |
| Accrued vacation  pay (a)                                                   |       | $                          | —     |                            | $          | —                                                                                                                                                                   |       | $                                                        | —     |                          | $          | — |   | $ | — |   |
|                                                                        |       |                       |       |                            |       |                                                                                                                                                                     |       |                                                     |       |                          |       |
| Accrued sick pay  (b)                                                       |       | 1                          |       | 1                               |       | 1                                                                                                                                                                        |       | 1                                                        |       | 1                             |       |
|                                                                        |       |                       |       |                            |       |                                                                                                                                                                     |       |                                                     |       |                          |       |
| Severance  payments and benefits: (c)                                       |       |                       |       |                            |       |                                                                                                                                                                     |       |                                                     |       |                          |       |
|                                                                        |       |                       |       |                            |       |                                                                                                                                                                     |       |                                                     |       |                          |       |
| Cash severance (d)                                                          |       |                       |       |                            |       | 400                                                                                                                                                                      |       | 400                                                      |       |                          |       |
|                                                                        |       |                       |       |                            |       |                                                                                                                                                                     |       |                                                     |       |                          |       |
| Medical and dental benefits (e)                                             |       |                       |       |                            |       | 15                                                                                                                                                                       |       | 15                                                       |       |                          |       |
|                                                                        |       |                       |       |                            |       |                                                                                                                                                                     |       |                                                     |       |                          |       |
| Equity awards:                                                              |       |                       |       |                            |       |                                                                                                                                                                     |       |                                                     |       |                          |       |
|                                                                        |       |                       |       |                            |       |                                                                                                                                                                     |       |                                                     |       |                          |       |
| Vested stock options and restricted stock awards (f)                        |       |                       |       |                            |       |                                                                                                                                                                     |       |                                                     |       |                          |       |
|                                                                        |       |                       |       |                            |       |                                                                                                                                                                     |       |                                                     |       |                          |       |
| Unvested stock options and restricted stock awards  (g)                     |       |                       |       |                            |       | 214                                                                                                                                                                      |       |                                                     |       |                          |       |
|                                                                        |       |                       |       |                            |       |                                                                                                                                                                     |       |                                                     |       |                          |       |
| Total payments and  benefits                                                |       | $                          | 1          |                            | $          | 1                                                                                                                                                                        |       | $                                                        | 630        |                          | $          | 416 |   | $ | 1 |   |

 

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(a)                                  There was no accrued and unused vacation timedue to Mr. Ramadan as of December 31, 2006.

(b)                                 Represents a total of six unused sick days.

(c)                                  These severance payments and benefits arepayable if Mr. Ramadan’s employment is terminated either (i) by the Company forany reason other than cause, disability or death or (ii) by Mr. Ramadan after achange in control of the Company and if the Company takes certain adverseactions (a “good reason” termination) or if the Company materially breaches theemployment agreement and does not cure such breach within 30 days after thedate of termination.

(d)                                 Represents Mr. Ramadan’s annual base salary,to be paid in twelve (12) equal payments, commencing on Mr. Ramadan’s pay datewhich is the closest to the date which is not earlier than six (6) months afterthe date of termination and on each monthly Company pay date thereafter.

(e)                                  Represents the estimated present value cost ofproviding continued medical and dental coverage to Mr. Ramadan for an assumed aperiod ending at the earlier of (i) the date he is entitled to receivesubstantially similar benefits from a subsequent employer, or (ii) 12 monthsfrom the employment termination date. The estimated costs assume the current insurance premiums and othercosts for 12 months from December 31, 2006.

(f)                                    All vested stock options and restricted stockawards are exercisable as set forth in Mr. Ramadan’s employment agreement orthe plans under which they were granted, except upon a change in control, inwhich case, they must be surrendered, or otherwise converted into cash orsecurities of the acquirer, or exercised as required, or permitted by the termsand conditions of the change in control documents.  The vested stock options held by Mr. Ramadanwere “out of the money” and had a value of approximately $0.00, based on theDecember 29, 2006 (the last business day of 2006) closing price of theCompany’s Common Stock on the over-the-counter bulletin board of $2.85 per share.

46

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(g)                                 All unvested stock options and unvestedrestricted stocks will terminate upon the termination or expiration of theemployment agreement except upon a change of control in which case they willvest on the closing date of change of control. The vested stock options would have no value, based on the December 29,2006 reported closing price of the Company’s Common Stock at $2.85 per share.

**Directors’ Compensation**

Effectivebeginning the quarter ended September 30, 2003, non-employee directors’ compensationincludes a cash retainer fee of $6,250 per quarter, per member.  In addition, the non-executive chairman ofthe Board will receive an additional $1,250 per quarter, while each chairman ofits three Committees will receive $625 per quarter.  To recognize the burden and importance of theAudit Committee, effective June 30, 2006, each member of this Committee iscompensated an additional $1,250 per quarter. In connection with this change, the automatic grant of a non-qualifiedoption to purchase 25 shares of Common Stock on the date following each fiscalquarter in which the director serves was eliminated.  All members of the Board are reimbursed forout-of-pocket expenses in connection with attending Board meetings.  Full-time employee directors of the Companydo not receive any fees for board or committee meetings.

The followingtable sets forth information concerning compensation paid or accrued by theCompany to each member of the Board of Directors during the year ended December31, 2006.  Mr. Ramadan has been omittedfrom the table as his compensation is fully reported in the SummaryCompensation Table above.
| **In ($000)  Name ** | ** ** | **Fees  Earned  or Paid  in Cash(1)** | ** ** | **Stock  Awards** | ** ** | **Option  Awards(2)** | ** ** | **Non-Equity  Incentive Plan  Compensation** | ** ** | **Change in  Pension Value  and Nonqualified  Deferred  Compensation  Earnings** | ** ** | **All Other  Compensation** | ** ** | **Total** | ** ** |
|--------------------------------|------------|-------------------------------------------------|------------|-------------------|------------|-----------------------|------------|---------------------------------------------------|------------|-------------------------------------------------------------------------------------------------|------------|----------------------------------|------------|-----------|------------|
| Geoffrey B.  Baker             |       | $                                               | 32.5       |              | $          | —                |       | $                                                 | —     |                                                                                            | $          | —                           |       | $         | —     |   | $ | — |   | $ | 32.5 |   |
| Timothy G. Ewing               |       | $                                               | 32.5       |              | $          | —                |       | $                                                 | —     |                                                                                            | $          | —                           |       | $         | —     |   | $ | — |   | $ | 32.5 |   |
| Julio E.  Heurtematte, Jr.     |       | $                                               | 32.5       |              | $          | —                |       | $                                                 | —     |                                                                                            | $          | —                           |       | $         | —     |   | $ | — |   | $ | 32.5 |   |
| Malcolm M.B. Sterrett          |       | $                                               | 35.0       |              | $          | —                |       | $                                                 | —     |                                                                                            | $          | —                           |       | $         | —     |   | $ | — |   | $ | 35.0 |   |

 

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(1)                                  Includespayment of directors’ fees for service on the board of the Company.  Also includes the payment of fees forattendance at meetings of board committees on which the director serves as wellas fees for service as chairman of a board committee.  Pursuant to the Company’s adoption of theDeferred Compensation Plan in June 2006, each director elected to defer aportion of his quarterly retainer, which, for the year ended December 31, 2006,was $2,500 each for Mr. Baker, Mr. Heurtematte and Mr. Sterrett,respectively.  Mr. Ewing deferred hisentire quarterly retainer fees, which totaled $17,500 for the same period.

(2)                                  Reflects the amount expensed in accordancewith Statement of Financial Accounting Standards No. 123(R) during fiscal 2006with respect to the grants of stock options. Until its termination in June 30, 2006, each non-employee director wasgranted, on a quarterly basis, non-qualified options to purchase 25 shares ofCommon Stock, which were fully vested on the dates of grant, and at the closingmarket price of the date of grant.  For adiscussion of the assumptions used to establish the valuation of the stockoptions, reference is made to Note 10 of the Notes to the ConsolidatedFinancial Statements of the Company included in the Company’s 2006 AnnualReport to Stockholders.

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**Employment/SeveranceAgreements**

On July 1, 2005, the Company renewed Mr. Ramadan’semployment agreement, pursuant to which the Company agreed to employ him asPresident, Chief Executive Officer and Chief Financial Officer for a term oftwo and a half years, ending December 31, 2007, with a current base annualsalary of $400,000.  Mr. Ramadan is eligibleto participate in the 2004 Equity Plan and any present or future employeebenefit plans, including the 2006 Profit Sharing Plan and the DeferredCompensation Plan. He will also be reimbursed for reasonable travel andout-of-pocket expenses necessarily incurred in the performance of his duties.As provided by Mr. Ramadan’s renewed agreement and shown in the “Stock Options”and “Restricted Stock Awards” sections above, he received:  (i) a grant of seven year options to purchasean aggregate total of 175,000 shares of the Company’s Common Stock inallotments of 35,000 shares per annum over a four year vesting period withincreasing exercise prices every six months from $2.80 per share at July 1,2005 to $4.11 per share at January 1, 2012; and (ii) upon reaching designatedearnings per share targets, up to 75,000 shares of restricted, Common Stock in25,000 share allotments.

In the event theemployment agreement is terminated without cause, as defined in the agreement,Mr. Ramadan will receive one year’s salary. The agreement is also subject to numerous termination provisions in theevent of death, disability, discharge for cause, and material breachthereof.  In addition, if the Companyterminates the agreement without cause, materially breaches the employmentagreement and does not cure such breach, or if Mr. Ramadan terminates theemployment agreement after a change in control for good reason, the Companywill continue to provide Mr. Ramadan with his medical insurance benefits thenin effect until the date of the earlier of the commencement of his full timeemployment with another employer, or the first anniversary date of thetermination date of the employment agreement. Further, the employment agreement expires on December 31, 2007,provided, however, unless either the Company or Mr. Ramadan notifies the otherof its/his intent not to extend the term on or prior to September 30, 2007 oron or prior to each September 30th thereafter, then the Term shall beautomatically extended for a period of one year to the next December 31st.

**Subsequent Event**

On January 19, 2007, in consideration of his service to the Company, theCompensation Committee of the Board granted the CEO, Mr. Ramadan, a merit-basedaward of $100,000 and effective February 4, 2007, seven year options topurchase 50,000 shares of Common Stock, with options to purchase 12,500 sharesto be vested immediately, and options to purchase 12,500 shares to be vestedeach subsequent year on the anniversary of the date of grant.  The exercise price of these options is set at$3.75 per share.

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**Item11.  Security Ownership of CertainBeneficial Owners and Management.**

The following table sets forth information regarding the beneficialownership of the Common Stock as of March 8, 2007 (the “Calculation Date”),unless otherwise noted, (a) by each shareholder who is known by the Company toown beneficially more than 5.0% of the outstanding Common Stock, (b) by eachdirector, (c) by each executive officer named in the Summary Compensation Tableabove and by all executive officers and directors as a group. Unless otherwisenoted, each of the shareholders listed in the table or included within a grouplisted in the table possesses sole voting and investment power with respect tothe shares indicated, subject to community property laws where applicable. Thebusiness address for each director and officer of the Company is 545 FifthAvenue, Suite 940, New York, New York 10017.
| **Name of Beneficial Owner**                          | ** ** | **Number of Shares of  Common Stock  Beneficially Owned (1)** | ** ** | **Percentage of  Ownership (1)** | ** ** |
|----------------------------------------------------------------------|------------|---------------------------------------------------------------------------------------------|------------|--------------------------------------------|------------|
|  Value Partners, Ltd. (2)                                       |       | 3,480,982                                                                                   |       | 44.4                                       | %          |
|  Rami S. Ramadan (3)                                            |       | 233,000                                                                                     |       | 2.9                                        |       |
| Julio E.  Heurtematte, Jr. (4)                                       |       | 25,171                                                                                      |       | *                                          |       |
| Malcolm M.B.  Sterrett (5)                                           |       | 25,171                                                                                      |       | *                                          |       |
| Geoffrey B.  Baker (6)                                               |       | 25,131                                                                                      |       | *                                          |       |
| Timothy G. Ewing  (7)                                                |       | 3,480,982                                                                                   |       | 44.4                                       |       |
| Special  Situations Funds (8)                                        |       | 1,325,600                                                                                   |       | 16.9                                       |       |
| Wynnefield Small  Cap Value Offshore Fund, Ltd (9)                   |       | 1,012,353                                                                                   |       | 12.9                                       |       |
| SC Fundamental  Funds Group (10)                                     |       | 588,235                                                                                     |       | 7.5                                        |       |
| All directors and the  executive officer as a group (5 persons) (11) |       | 3,789,455                                                                                   |       | 46.9                                       | %          |

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*              Less than 1%.

(1)          The percentage of outstanding shares is based on 7,840,870 sharesoutstanding as of March 8, 2007 and, for certain individuals and entities, onreports filed with the SEC or on information provided directly to the Companyby such individuals or entities. A person is deemed to be the beneficial ownerof securities that can be acquired by such person within 60 days from March 8,2007 upon the exercise of options or warrants. Each beneficial owner’spercentage ownership is determined by assuming that options or warrants that areheld by such person (but not those held by any other person) are exercisablewithin 60 days from March 8, 2007 have been exercised. Included are shares ofCommon Stock issuable upon the exercise of options or warrants to purchase theCompany’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 3,500 shares of Common Stock and 229,500 shares subject toincentive options, granted to Mr. Ramadan, of which 87,000 have vested. (See“Item 10.  Executive Compensation.”above)

(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.Heurtematte under the 1998 Plan at the end of each calendar quarter ended June30, 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 of CommonStock subject to non-qualified options granted under the 1999 Plan at the endof each calendar quarter ended September 30, 2000 through June 30, 2006, all ofwhich were fully vested on the dates of grant.  Effective the quarter ended September 30, 2006, as part of Mr.Heurtematte’s participation in the Company’s Deferred Compensation Plan,quarterly option grants were terminated for members of the Board of Directorsin lieu of a nominal increase in the annual retainer, of which a minimum of 25%is allocated to the Deferred Compensation Plan.

(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.Sterrett under the 1998 Plan at the end of each calendar quarter ended June 30,1998 through December 31, 1998 and 20 shares of 

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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 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 June 30,2006, all of which were fully vested on the dates of grant.  Effective the quarter ended September 30,2006, as part of Mr. Sterrett’s participation in the Company’s DeferredCompensation Plan, quarterly option grants were terminated for members of theBoard of Directors in lieu of a nominal increase in the annual retainer, ofwhich a minimum of 25% is allocated to the Deferred Compensation Plan.

(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.Baker under the 1993 Incentive Stock Option Plan at December 31, 1998, 20shares of Common Stock, subject to non-qualified options, granted under the1999 Director 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, 1999 throughJune 30, 2000, and 25 shares of Common Stock subject to non-qualified optionsgranted under the 1999 Director Plan at the end of each calendar quarter endedSeptember 30, 2000 through June 30, 2006, all of which were fully vested on thedates of grant.  Effective the quarterended September 30, 2006, as part of Mr. Baker’s participation in the Company’sDeferred Compensation Plan, quarterly option grants were terminated for membersof the Board of Directors in lieu of a nominal increase in the annual retainer,of which a minimum of 25% is allocated to the Deferred Compensation Plan.

(7)          Mr. Timothy G. Ewing is the managing partner of Ewing & Partners,which manages Value Partners, Ltd.  Hisbeneficial ownership includes 3,480,982 shares of Common Stock, held by ValuePartners, Ltd. (See also Note (2) above). Effective the quarter ended September 30, 2006, as part of Mr. Ewing’sparticipation in the Company’s Deferred Compensation Plan, quarterly optiongrants were terminated for members of the Board of Directors in lieu of anominal increase in the annual retainer, of which a minimum of 25% is allocatedto the Deferred Compensation Plan.  Mr.Ewing elected to defer his entire retainer in 2006.

(8)           AWM Investment Company, Inc. (“AWM”) is the general partner of andinvestment adviser to the Special Situations Cayman Fund, L.P. (“SSCF”) and theinvestment adviser to the Special Situations Private Equity Fund, L.P.(“SSPEF”)  Austin W. Marxe and David M. Greenhouse are the principalowners of AWM.  Through their control of AWM, Messrs. Marxe and Greenhouseshare voting and investment control over the portfolio securities of SSCF andSSPEF.  As a result of the $4.75 millionCapital Raise, SSPEF beneficially own 735,300 shares of Common Stock, whileSSCF beneficially owns 590,300 shares of Common Stock, of which 588,300 werefrom the $4.75 million Capital Raise..

(9)          Wynnefield Small Cap Value Offshore Fund, Ltd., an investment firm, directlybeneficially owns 1,012,353 shares of the Company’s Common Stock, of which882,353 were from its participation in the $4.75 million Capital Raise.

(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 SC Fundamental LLC, asgeneral partner, and beneficially owns 352,941 shares of Common Stock, whileSCFVBVI is managed by SC BVI Partners, as investment advisor, and beneficiallyowns 235,294 shares of Common Stock.

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

**Item12.  Certain Relationships and RelatedTransactions.**

At December 31,2006 and 2005, approximately $0.00 and $372,000, respectively, of the InterestNotes were held by Value Partners, Ltd., an approximate 44% owner of theCompany’s issued and outstanding Common Stock as of December 31, 2006.  Related interest expense was approximately$9,000 and $60,000 for the years ended December 31, 2006 and 2005,respectively.

As of December 31,2006, Value Partners holds a controlling 44.4% of the Company’s issued andoutstanding Common Stock and none of the Company’s long term debt.

During the yearended December 31, 2006, the Company utilized the services of an attorney whois the brother of the Company’s managing director of Czech operations.  Fees paid to the attorney during 2006 totaledapproximately $17,000.  At December 31,2006, approximately $6,500 was owed to the attorney for services renderedthrough such date.

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**Item13.  Exhibits and Reports on Form 8-K.**

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

Referenceis made to the Exhibit Index hereinafter contained.

A copy of any exhibits listed or referred to hereinwill be furnished at a reasonable cost to any person who was a shareholder ofthe Company as of March 8, 2007, upon written request from any such person.Requests should be sent to: Rami S. Ramadan, President, Chief Executive Officerand Chief Financial Officer, Trans World Corporation, 545 Fifth Avenue, Suite940, New York, New York 10017.

**(b)**              **Reports onForm 8-K**

The Company filed areport on Form 8-K with the SEC on December 29, 2005, announcing sales ofunregistered equity securities. (See Part II — Item 5.  Market for Common Equity and Related StockholderMatters)

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**TRANSWORLD CORPORATIONEXHIBIT INDEX TO ANNUAL REPORT ON FORM 10-KSBFOR THE YEAR ENDED DECEMBER 31, 2006**
| Item No | ** ** | **Item**                                                                                                                                                                                                                           | ** ** | **Method of  Filing**                                                                                                                  |
|---------|------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|----------------------------------------------------------------------------------------------------------------------------------------|
|    |       |                                                                                                                                                                                                                               |       |                                                                                                                                   |
| 3.1(a)  |       | Articles of Incorporation                                                                                                                                                                                                          |       | Incorporated by reference to Exhibit 3.1 contained  in the registration statement on Form SB-2 (File No. 33-85446-A).                  |
|    |       |                                                                                                                                                                                                                               |       |                                                                                                                                   |
| 3.1(b)  |       | Certificate of Amendment to Articles of  Incorporation                                                                                                                                                                             |       | Incorporated by reference to Exhibit 3.1 contained  in the Form 10-KSB for the fiscal year ended December 31, 2000 (File No.  0-25244) |
|    |       |                                                                                                                                                                                                                               |       |                                                                                                                                   |
| 3.1(c)  |       | Certificate of Amendment to Articles of  Incorporation                                                                                                                                                                             |       | Incorporated by reference to Exhibit 3.1 contained  in the Form 10-KSB for the fiscal year ended December 31, 2004 (File No.  0-25244) |
|    |       |                                                                                                                                                                                                                               |       |                                                                                                                                   |
| 3.2     |       | Bylaws                                                                                                                                                                                                                             |       | Incorporated by reference to Exhibit 3.2 contained  in the registration statement on Form SB-2 (File No. 33-85446-A).                  |
|    |       |                                                                                                                                                                                                                               |       |                                                                                                                                   |
| 4.1     |       | Specimen Common Stock Certificate                                                                                                                                                                                                  |       | Incorporated by reference to Exhibit 4.1 contained  in the registration statement on Form SB-2 (File No. 33-85446-A).                  |
|    |       |                                                                                                                                                                                                                               |       |                                                                                                                                   |
| 4.2     |       | Indenture dated March 31, 1998, as supplemented on  October 29, 1998. October 15, 1999 and September 10, 2001, among the  registrant, TWC International U.S. Corporation, TWC Finance Corp. and U.S.  Trust Company of Texas, N.A. |       | Incorporated by reference to Exhibit 4(1) contained  in the Form 8-K filed on April 14, 1998 (File No.0-25244).                        |
|    |       |                                                                                                                                                                                                                               |       |                                                                                                                                   |
| 4.3     |       | Indenture dated March 31, 1998, as supplemented on  October 29, 1998, October 15, 1999 and September 10, 2001, between TWC  International U.S. Corporation and U.S. Trust Company of Texas, N.A.                                   |       | Incorporated by reference to Exhibit 4(III)  contained in the Form 8-K filed on April 14, 1998 (File No. 0-25244).                     |
|    |       |                                                                                                                                                                                                                               |       |                                                                                                                                   |
| 4.4     |       | Series A Warrant to Purchase Common Stock dated  March 31, 1998                                                                                                                                                                    |       | Incorporated by reference to Exhibit 4(VI) contained  in the Form 8-K filed on April 14, 1998 (File No. 0-25244)                       |
|    |       |                                                                                                                                                                                                                               |       |                                                                                                                                   |
| 4.5     |       | Series B Warrant to Purchase Common Stock dated  March 31, 1998                                                                                                                                                                    |       | Incorporated by reference to Exhibit 4(VII)  contained in the Form 8-K filed on April 14, 1998 (File No. 0-25244)                      |
|    |       |                                                                                                                                                                                                                               |       |                                                                                                                                   |
| 4.6     |       | Series C Warrant to Purchase Common Stock dated  March 31, 1998                                                                                                                                                                    |       | Incorporated by reference to Exhibit 4(II) contained  in the Form 8-K filed on April 14, 1998 (File No. 0-25244)                       |
|    |       |                                                                                                                                                                                                                               |       |                                                                                                                                   |

 

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

 

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| 10.12  |   | Waiver and Forbearance of Covenant Violations  (Interest) — Finance Indenture                                                                      |   | Incorporated by reference to Exhibit 10.12 contained  in the Registration Statement on Form S-4 (File No. 333-101028)                                                                                                         |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                    |   |                                                                                                                                                                                                                          |
| 10.13  |   | Indemnification Agreement by and between Value  Partners, Ltd., Trans World Corporation and TWG International U.S.  Corporation dated February 12, 2003 |   | Incorporated by reference to Exhibit 10.13 contained  in the Registration Statement on Form S-4 (File No. 333-101028)                                                                                                         |
|   |   |                                                                                                                                                    |   |                                                                                                                                                                                                                          |
| 10.14  |   | Agreement and Plan of Recapitalization dated June  25, 2003 between the Company and the named Holders                                                   |   | Incorporated by reference to Exhibit 4.9 contained  in the Registration Statement on Form S-4 (File No. 333-101028)                                                                                                           |
|   |   |                                                                                                                                                    |   |                                                                                                                                                                                                                          |
| 10.15  |   | Form of 8% Rate Promissory Note due 2006                                                                                                                |   | Incorporated by reference to Exhibit 4.10 contained  in the Registration Statement on Form S-4 (File No. 333-101028)                                                                                                          |
|   |   |                                                                                                                                                    |   |                                                                                                                                                                                                                          |
| 10.16  |   | Form of Variable Rate Promissory Note due 2010                                                                                                          |   | Incorporated by reference to Exhibit 4.11 contained  in the Registration Statement on Form S-4 (File No. 333-101028)                                                                                                          |
|   |   |                                                                                                                                                    |   |                                                                                                                                                                                                                          |
| 10.17  |   | 2004 Equity Incentive Plan, as amended                                                                                                                  |   | Incorporated by reference to Appendix E contained in  the Proxy Statement for the 2004 Annual Meeting and from the discussion  contained at page 12-14 of the proxy statement for the 2005 Annual Meeting  (File No. 0-25244) |
|   |   |                                                                                                                                                    |   |                                                                                                                                                                                                                          |
| 10.18  |   | Renewal and Amendment of Employment Agreement  between the Company and Rami S. Ramadan, Effective as of July 1, 2005                                    |   | Incorporated by reference to Exhibit 10.18 contained  in the Form 10-KSB filed on March 17, 2006 (File No. 0-25244)                                                                                                           |
|   |   |                                                                                                                                                    |   |                                                                                                                                                                                                                          |
| 21.0   |   | Subsidiaries                                                                                                                                            |   | 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                                                                                                                                                                                                                |
|   |   |                                                                                                                                                    |   |                                                                                                                                                                                                                          |

 

54

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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 15, 2007* |   |                                                            |
|-------------------------------------|--------|-----------------------------------------------------------------|
|                                | 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 15, 2007* 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                      |       |

 

 

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