** **

**SECURITIES AND EXCHANGE COMMISSION**

**WASHINGTON, D.C.  20549**

** **

**FORM 10-KSB**

** **

**ý****   ANNUAL REPORT PURSUANT TO SECTION 13 OR15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**

 

**For the Year Ended December 31, 2003**

** **

**o****   TRANSITION REPORT PURSUANT TO SECTION 13 OR15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**

 

**For the transition period from                            to                            **

** **

**CommissionFile No.:  0-25244**

** **

**TRANS WORLDCORPORATION**

(Exact name of registrant as specified in itscharter)

 

| **Nevada**                                                                         |   | **13-3738518**                        |
|------------------------------------------------------------------------------------|--------|---------------------------------------|
| (State or other jurisdiction of  incorporation or organization)                    |   | (I.R.S. Employer  Identification No.) |
|                                                                               |   |                                  |
|                                                                               |   |                                  |
| **545 Fifth Avenue, Suite 940  New York, New York**                                |   | **10017**                             |
| (Address of principal executive offices)                                           |   | (Zip Code)                            |
|                                                                               |   |                                  |
| Registrant’s telephone number, including  area code:  **(212) 983-3355** |
|                                                                               |   |                                  |
| Securities registered pursuant to Section  12(b) of the Act: **None**              |
| Securities registered pursuant to Section  12(g) of the Act:                       |
|                                                                               |
| **Common Stock, $.001 par value  Warrants to Purchase Common Stock**               |

 

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Indicate by check mark whether the Registrant (1) has filed all reportsrequired to be filed by Section 13 or 15(d) of the Securities Exchange Actof 1934 during the preceding 12 months (or for such shorter period that theRegistrant was required to file such reports), and (2) has been subject to suchfiling requirements for the past 90 days. YES    ý      NO   o  

 

Indicate by check mark if disclosure of delinquent filers pursuant toItem 405 of Regulation S-B is not contained herein, and will not be contained,to the best of Registrant’s knowledge, in definitive proxy or informationstatements incorporated by reference in Part III of this Form 10-KSB orany amendment to this Form 10-KSB.      o  

 

The issuer’s revenues for the year ended December 31, 2003 were approximately$17,605,000.

 

As of February 23, 2004, 503,145,175 shares of Common Stock of theRegistrant were deemed outstanding, and the aggregate market value of theCommon Stock of the Registrant as of that date (based upon the $0.03 closingprice of the Common Stock at that date as reported by the OTC Bulletin Board),excluding outstanding shares beneficially owned by directors and executiveofficers, was approximately $15.094 million.

 

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

 

** **

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**TRANS WORLD CORPORATION**

**FORM IO-KSB**

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

 

i

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

 

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

 

iii

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**Item1****.  Descriptionof Business.**

** **

**General Development of Business**

 

Trans World Corporation (herein referred to asthe “Company” or “TWC”) owns and operates three full-service casinos, which arelocated in Ceska Kubice (“Ceska”), Rozvadov (“Rozvadov”), and Hate (nearZnojmo) (“Znojmo”) in the Czech Republic, and a casino slot bar and restaurant(“Hollywood Spin”), which is also located in Hate, Czech Republic.  The casinos, which operate under the brandname American Chance Casinos (“ACC”) and showcase themes portrayingrecognizable eras of American history, are located at border locations and drawthe majority of their clients from Germany and Austria.  One of the Company’s casinos has a Chicago1920’s era theme, one casino has a Southern Antebellum theme, another casinohas a Pacific South Seas theme, and the fourth unit has a predominantlyHollywood theme.  ACC’s operatingstrategy centers on differentiation of its products from the alternative Germanand Austrian casinos, which have very formal atmospheres.  Management has endeavored to create gamingenvironments with casual and exciting atmospheres that emphasize relaxedentertainment.  Further, as part of itsACC operating formula, management has striven to highlight the integrity andprofessionalism of its American owned operations as a means of allaying anyconcerns that German and Austrian clients might have about gambling abroad.

 

TWC was organized as a Nevada corporation inOctober 1993 to acquire, develop and manage, to the extent permitted byapplicable local laws, gaming establishments featuring live and mechanizedgaming, including video gaming devices such as video poker machines.  With the 1994 acquisition of severalLouisiana-based entities, TWC conducted operations under these guidelines.  In 1998, faced with a closing date of June30, 1999 for its Louisiana operations as a result of changes in laws governingthe legality of operating video gaming devices in the State of Louisiana, TWCamended its operating strategy by shifting its focus to the casino market inEurope and acquired three casinos, one located in Spain, Casino de Zaragoza,S.A. (“CDZ”), which included a hotel, and two casinos located in the CzechRepublic, as well as a parcel of land also located in the Czech Republic.  The Company also operated two other casinosin Europe under management agreements, which have since been closed due togaming law changes, opened an additional casino on the parcel of land that waspurchased in 1998, sold its interest in CDZ, and opened a slot bar andrestaurant operation in a designer outlet mall located in Hate, Czech Republicadjacent to the Znojmo casino.

 

The Company, which is headquartered in New YorkCity, has no operating presence in the United States.

## ** **

## **Current Operations**

 

On March 31, 1998, the Company consummated aStock Purchase Agreement (“Stock Purchase Agreement”) with 21st Century Resortsa.s., an owner-operator of two casinos, and the owner of property to build athird casino, in the Czech Republic (“Resorts”), and Gameway Leasing Limitedand Monarch Leasing Limited, two off-shore affiliates of Resorts which leasedequipment to Resorts and the stockholders of Resorts (the “SellingStockholders”).  Pursuant to the StockPurchase Agreement, the Company acquired 100% of the equity interests ofResorts, its two operating subsidiaries and all of the assets of GamewayLeasing Limited and Monarch Leasing Limited for the purchase price of $12.6million, including the cost of initial improvements to the acquired assets. OnMarch 31, 1998, the Company, with the assistance of Libra Investments, Inc.,Los Angeles, California (“Libra”) acting as placement agent, borrowed $17.0million from 14 sophisticated, accredited lenders in a private placement (the“March 1998 Private Placement”). The loan was represented by 12% Senior SecuredNotes (the “Senior Notes”) issued pursuant to indentures (the “Indentures”) byand among TWC, TWG International U.S. Corporation (“TWGI”), TWG Finance Corp.(“TWGF”), wholly-owned subsidiaries of TWC), and U.S. Trust Company of Texas,N.A., which was subsequently replaced by the Bank of New York Company ofFlorida, N.A., acting as indenture trustee. The Senior Notes required mandatoryprepayments based upon excess cash flow generated by TWGI from the operation ofResorts and bore interest at the rate of 12% per annum. (See Periodic ReportsForm 8-K and the Amended Periodic Report on Form 8-K/A filed with theSecurities and Exchange Commission (“SEC”) on April 14, 1998 and June 15, 1998,respectively.) The proceeds of the Senior Notes were used to pay the netacquisition costs of, and improvements to, Resorts totaling approximately $12.6million, to repay the First Amended

 

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Loan Agreement in the amount of $1.3 million, tocover costs and expenses of $1.4 million relating to the March 1998 PrivatePlacement and to provide working capital of $1.7 million.

 

The assets acquired with the purchase of Resorts include the Ceskacasino, which is located near the border with Germany.  Ceska is patronized primarily by Germans andcurrently has 15 gaming tables and 46 slot machines as well as a bar/restaurantarea and features a Chicago 1920’s era theme. The purchase also included the Rozvadov casino, which is locatedapproximately four miles from the region’s main highway, not far from theGerman border and caters, as in Ceska, to a predominantly Germanclientele.  This casino, which has aPacific South Seas theme, currently has 10 gaming tables and 30 slot machines,and includes a bar/restaurant area.  Thefinal piece of the purchase was a parcel of land near Znojmo upon which a thirdCzech Republic casino was constructed. The Znojmo casino opened in December 1999 with 11 gaming tables and 42slot machines.  It has a SouthernAntebellum theme and draws the bulk of its customers from the northern suburbsof Vienna, Austria.  Pursuant to demanddriven expansion projects, the casino has been expanded to 22 gaming tables and61 slot machines.  The casino alsoincludes a bar/restaurant area.  InSeptember 2003, the Company opened its newest unit, Hollywood Spin, inconjunction with the opening of a designer outlet mall located in the tax-freezone between the Austrian and Czech borders. The unit, which operates under a retail lease, showcases extensiveAmerican film, sports and music themes and includes four gaming tables and 32slot machines, in addition to a restaurant and bar.

 

On October 15, 1999, the Company borrowed $3.0million in a private placement (“October 1999 Private Placement”).  That loan was also represented by 12% SeniorSecured Notes (“October 1999 Senior Notes”) issued pursuant to indentures byand among the Company and an independent indenture trustee, the terms of whichwere identical to those in the notes issued in the March 1998 PrivatePlacement.  The October 1999 SeniorNotes, which were scheduled to be due March 2005, required mandatoryprepayments based on excess cash flow generated from Resorts.  The March 1998 Senior Notes and the October1999 Senior Notes were collateralized, primarily, by all of Resort’s gamingequipment and a majority interest in the capital stock of all of the Company’ssubsidiaries.  In addition to theOctober 1999 Senior Notes, each investor received a proportionate share ofwarrants to purchase 1,250,728 shares of the Company’scommon stock, $.001 par value per share (“Common Stock”) atan exercise price of $0.01 per share. The proceeds of the October 1999 Senior Notes were used to retire a $1.0million short-term debt obligation related to the acquisition of CDZ, to makean interest payment of approximately $250,000 on said debt, and to finance theequipment, working capital, and pre-opening costs associated with the openingof the Znojmo casino.

 

OnJune 26, 2003, the Company completed an exchange agreement (the “June 2003Exchange Agreement”) with the holders of the Senior Notes, whereby $18.45million of the $20.00 million note principal, or 92.25%, was exchanged for452,797,000 shares of the Company’s Common Stock and the remaining $1.55million was exchanged for seven-year, unsecured, variable rate promissory notes(the “Replacement Notes”).  In addition,approximately $2.5 million in pre-September 18, 2001 accrued and unpaidinterest was converted into three-year, unsecured, promissory notes (the“Interest Notes”) bearing 8% interest and approximately $5.2 million ofpost-September 17, 2001 interest was waived and forgiven by the holders of theSenior Notes.

** **

**Corporate Information**

 

The Company’s corporate offices are located at545 Fifth Avenue, Suite 940, New York, New York 10017, and its telephone numberis (212) 983-3355.

** **

**OTC Bulletin Board**

 

The Company’s Common Stock was quoted on the OTCBulletin Board under the symbol TWCP.OB. With the announcement of the reverse stock split, the Company’s CommonStock will be quoted under a new symbol which will be assigned by the NASDAQStock Market, Inc. on or before the effective date of the reverse stocksplit.  The Company will make a publicannouncement disclosing the new stock symbol on or before the effective date ofthe reverse stock split (See Note 11 of the Notes to the Consolidated FinancialStatements – “Subsequent Event.”).

 

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**Description of Business**

 

The Company is engaged in the acquisition,development and management of niche casino operations in Europe, which featuregaming tables and mechanized gaming devices, such as slot and video pokermachines, as well as the acquisition, development and management of small tomidsize hotels, which may include casino facilities.  In anticipation of its diversification into the hotel industry,in July 2000, the shareholders voted to amend the Company’s Articles ofIncorporation by changing its name from “Trans World Gaming Corp.” to “TransWorld Corporation”.  The Company’s namechange was based on the importance of the Company’s name accurately conveyingits desired identity as not solely an owner/operator of gaming operations.  TWC’s planned expansion into the hotelindustry is founded on management’s belief that hotels in the small to midsizeboutique class are complementary to the Company’s brand of niche casinos, thatopportunities in one of these two industries often lead to, or are tied to,opportunities in the other industry, and that a more diversified portfolio ofassets will give the Company greater stability and make it more attractive topotential investors.  Further, some ofthe Company’s top management has significant experience in the hotel industry.

** **

**Industry Overview**

 

Prior to the amendments to the Czech gamingregulations in December 1998, local municipalities were empowered to grantcasino licenses in their regions. The amendments to the gaming legislationremoved that right from the local governments and effectively eliminatedexclusivity. Since this licensing change, four casinos have opened in Folmava,Czech Republic, one of which has since closed, which operate in directcompetition with the Company’s Ceska casino due to their proximity.  The Znojmo casino currently has only onesurviving local competitor, out of four competitors from a year ago, offeringlive games.  None of the competitorswere located in the duty free zone between the border posts, as is the case withTWC’s casino.  In addition to the remainingcompetitor, a casino is in the development stage, and is planned to be locatedin the duty free zone.  In early 2000,in response to increased competition from casinos located in the CzechRepublic, the German government issued 12 new gaming licenses in the Bavarianregion of Germany.  Since being openedin the spring of 2000, two of the Bavarian casinos that went into operation asa result of issuance of the additional licenses have operated in direct competitionwith TWC’s casinos in Ceska and Rozvadov. Further, in June 2003, a new competitor casino began operation acrossthe street from the Company’s casino in Rozvadov.

 

The casinos in Germany and Austria have formalatmospheres and an air of exclusivity. ACC’s brand of casinos offers a relaxed but exciting, informalatmosphere, which has proven to be a desirable alternative.  Further, ACC has established itself as areputable casino company in the Czech Republic through its consistent policies,professional service, and strict adherence to all local gaming regulations.

 

In conformity to the European Union (“EU”)taxation legislation (as part of its joining in 2004), the Czech Republic’svalue added tax (“VAT”) will increase from its current 5% to 22%, effectiveJanuary 2004, for all inter-EU generated purchases, while identical VATincreases will impact all non-EU generated purchases, commencing in May 2004.

 

Further, in January of 2004, the Czechgovernment eliminated the social security tax waiver on foreigners employed inthe country.  The impact of this changewill require an employer contribution of 26% of salary toward this fund, with acorresponding employee contribution of 8%. The estimated maximum impact of this change on TWC’s operational costsis $100,000 per year.

** **

**The Company’s Facilities**

 

The Ceska casino, which has a Chicago-1920’s theme, currently has 15gaming tables, including seven card tables, seven roulette tables, and oneelectro-mechanical, eight-position roulette machine.  It also has 46 slot machines, including 44 newer-style Novomaticmachines; and parking for approximately 60 cars. The Rozvadov casino, which hasa South Pacific theme, currently operates 10 gaming tables, including five cardtables and five roulette tables; 30

 

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Novomatic slot machines; and parking for 40 cars.  In Znojmo, the casino features a SouthernAntebellum theme and includes 22 gaming tables, which consist of 12 cardtables, eight roulette tables, and two electro-mechanical roulette machines; 61slot machines, 60 of which are newer-style Novomatic machines; and parking forapproximately 120 cars.  Nearby, in thedesigner outlet mall, Hollywood Spin offers two card tables, twoelectro-mechanical roulette machines, 32 Novomatic slot machines, a 76-seat restaurantand 16-seat bar.

** **

**FutureOperations**

 

The Company is pursuing construction of athree-star hotel, which would be connected to the Znojmo casino and be built onCompany-owned land.  The hotel designhas been completed and the Company is actively seeking funding for the project.

 

Management has procured environmental and zoningapprovals for the construction of its fifth casino in the region and isawaiting the approval of its application for construction permits, which isexpected by mid-March 2004.  Managementbelieves that ground breaking on the casino will take place rapidly thereafterand that the casino will be in operation by the end of 2004.  Such an addition would allow the Company toattract clientele from a sizable and largely untapped foreign market and totake advantage of its existing infrastructure, thereby benefiting fromeconomies of scale.

 

Except as described above, the Company has nospecific arrangements or understandings with respect to the management oracquisition of any gaming facility. There can be no assurance that the Companywill manage or acquire any other gaming facilities in the future.

** **

**TheCompany is also evaluating several possible acquisition prospects, whichinclude existing hotels in Europe and development of two hotels inGermany.  Management intends to pursuewhat it believes to be projects with the highest potential returns and greateststrategic value based on its analyses of all potential investmentopportunities.**

** **

**Long Range Objectives**

 

The combination of the volatile nature of the gaming industry in whichTWC operates exclusively, and that, prior to the June 2003 Exchange Agreement,it was highly leveraged, have undermined its efforts to secure additionalfinancing for growth.  Moreover, thesefactors have prompted the Company to seek diversification in itsoperations.  Thus, the Company’s seniorcorporate-level management, some of whose backgrounds are in the hotelindustry, has endeavored to maximize the potential of the Company’s existingCzech Republic operations and explore expansion of the Company through theaddition of new non-gaming business units. In addition to evaluating expansion opportunities in the Czech Republic,management is pursuing several potential hotel acquisition projects elsewherein Europe, subject to the availability of the necessary financing.  Management’s long-term goal is to create twohotel divisions, a Europe-based division and thereafter a U.S.-based division,while pursuing expansion of the casino division.  Acquisitions will be based on evaluations of the potentialreturns of projects that arise and the availability of financing to purchaseadditional assets.

 

In conjunction with its expansion, the Company will seek to establishor develop a signature property and will create a brand name for this prototypehotel.  Thereafter, the Company willexpand its newly created chain by adding hotels that, and transforming hotelsto, conform to the Company’s established brand image.  Management’s long-term goal is to expand the TWC hotel chain to40-60 units and to expand its casino division to 10-12 units.  There can be no assurances that management’splans and long-range objectives will be realized.

# ** **

# **Marketing**

 

In the year ended December 31, 2003, the Company refined its marketingprograms by coinciding the timing of each planned event with existing holidaysand special occasions.   Further, theevent calendar was expanded and certain

 

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innovative player incentive games were launched.  Some of these programs were applied to allACC business units, while others were casino specific.  Further, the Company participated in severalhigh-profile community events, including the Chamlanschau Trade Show, andsponsored several athletic teams in the year, as a way to further promote itsimage and positive contribution to the various communities in which the Companyoperates its casinos.  The Company alsoreintroduced its popular, ethnic-themed and holiday-related parties, whichfeatured live entertainment, raffles and complimentary grand buffets.  The Company also continued its mediacampaigns in key cities, notably Vienna and Regensburg and its surroundingregion. See Item 6. “Management’s Discussion and Analysis or Plan of Operations– Results of Operations – Business Units.”

# ** **

# **Regulations and Licensing**

 

During the quarter ended June 30, 1998, the Czech Republic House ofDeputies passed an amendment to the gaming law, which restricted foreignownership of casino licenses. In response thereto, the Company restructured itssubsidiaries and Czech legal entities to comply with the amendment and wassubsequently granted a 10-year license. There can be no assurance that the authorities in the Czech Republicwill not amend the gaming law as it pertains to foreign ownership of casinolicenses.  In the event the gaming lawsare amended in the future, it may have a material adverse effect on theCompany’s future profitability and operations. Further, there has been increasedcompetition in the areas where the Company operates because localmunicipalities no longer have control over the issuance of casino licenses,thereby effectively eliminating exclusivity.

** **

**Application of Future or AdditionalRegulatory Requirements**

 

In the future, the Company intends to seek the necessary licenses,approvals and findings of suitability for the Company and its personnel inother jurisdictions, where the Company plans to open casinos; however, therecan be no assurance that such licenses, approvals or findings of suitabilitywill be obtained or will not be revoked, suspended or conditioned or that theCompany will be able to obtain the necessary approvals for its futureactivities. If a license, approval or finding of suitability is required by aregulatory authority and the Company fails to seek or does not receive thenecessary license or finding of suitability, the Company may be prohibited fromowning or operating gaming establishments in that jurisdiction.

** **

**Gaming Taxes**

 

Gaming tax rates in the Czech Republic, whichwere revised by the local Ministry of Finance in June of 2001, averagedapproximately 16.7% of total gaming revenues for the year ended December 31,2003 and currently consist of gaming taxes of 11% of total gaming revenue,charity taxes of 10% of total gaming revenue net of gaming taxes, and 6% ofslot revenue of 5.0 million Czech Korunas (approximately $192,000) or less and8% if above this threshold (both net of slot licensing fees).  There can be no assurances that tax rates,fees, or other payments applicable to the Company’s gaming operations will notbe increased in the future.

 

**Competition**

 

The Company’s operations in the Czech Republic compete with a number oflocal and foreign casinos.  The Ceskaunit competes with three casinos in the immediate vicinity and three additionalcasinos in the greater region, two of which are located in Germany.  The Rozvadov casino competes with twocasinos in the local area, one of which opened in June 2003 across the streetfrom the Company’s Rozvadov casino, and four other casinos in the greaterregion, one of which is located in Germany.  The Znojmo casino faces competition from two local casinos, none ofwhich are located in the duty free zone, as is TWC’s facility.  In addition to the currentcompetitors, development of a new casino is underway in the duty freezone.  (See “Industry Overview”.)

 

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**Employees**

 

As of February 23, 2004, the Company had a total of 399 employees,including 125 in its casino in Ceska, 75 in its casino in Rozvadov, 167 in itscasino in Znojmo, 14 in its casino in Hollywood Spin, 13 in its regional officein the Czech Republic, and five in the Company’s headquarters in New York.  The Company believes that its employeerelations are excellent.

** **

**Item 2****. Description of Property**

** **

**Corporate Offices**

 

The Company’s corporate offices are located at545 Fifth Avenue, Suite 940, New York, New York, occupying 1,559 square feet ofoffice space under a lease at the rental rate of $6,481 per month, expiring inDecember 2005.

** **

**Czech Republic**

 

The Company leases a 5,000 square foot casino facility in Ceska at arent of approximately $1,921 (50,000 Czech Korunas) per month.  The casino building lease expires in 2010. ** **The Company also owns a parcel ofland in Folmova, Czech Republic in the same region as the existing Ceskacasino.

 

The Company leases accommodations for staff in Ceska Kubice at the rateof approximately $3,496 (91,000 Czech Korunas) per month and for staff inZnojmo at the rate of approximately $6,032 (157,000 Czech Korunas) per month.

 

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

 

In March 2002, the Company exercised its right to purchase the Znojmocasino building lease.  The buildinglease purchase, the cost of which was approximately $1.4 million was financedby a loan from a local Czech Republic bank. The bank note, which is payablein monthly installments through December 2006, bears interest at 6.2% per annumand is collateralized by the Znojmo casino building, the Company’s Rozvadovcasino and employee housing buildings, and the Company’s land in Folmava.

 

In April 2002, TWC acquired a parcel of landat a border location in the Czech Republic, on which it intends to build itsfifth casino.

** **

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

** **

**Former President and Chief Operating Officer**

 

On February 14, 2003,TWC executed a two-part settlement agreement with the Company’s formerPresident and Chief Operating Officer, pursuant to which, in exchange for cashpayments that ended on January 15, 2004 but did not have a material effect onthe Company’s consolidated financial position, results of operations or cashflows, the former President and Chief Operating Officer agreed to discontinueall litigation brought against the Company, including litigation concerningCDZ, and to return the share of CDZ stock to the Company, which he had held forthe Company as an accommodation.  Inaccordance with the settlement terms, the Company discontinued its lawsuitagainst its former President and Chief Operating Officer.

 

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**ChoiceCapital Corporation**

 

In October 2001, theCompany filed a “Complaint for Damages” against Choice Capital Corporation,a/k/a Choice International Corporation (“Choice”) and Jude Onukuwa in theSuperior Court of Fulton County, Georgia. The Company sought to recover payments made to Choice inconnection with a financing transaction that never closed as well asinterest on the payments. After the expiration of the discovery period, TWCmoved for summary judgment, which the court granted with regard to TWC’s claimfor return of the payments in controversy.  Further, the court alsodismissed Choice’s counterclaim.  Thereafter, TWC petitioned thecourt to award it interest and to conclude the litigation by issuing a finaljudgment in TWC’s favor.  The court granted the petition on December 16,2003. The final judgment awarded TWC pre-judgment and post-judgmentinterest.  Choice has filed an appeal from the final judgment; however,TWC is confident that its position will be upheld by the Georgia Court ofAppeals.  The Companybelieves that it has a strong case against Choice and intends to pursue theCompany’s claims vigorously.  Becausethe judgment is solely in TWC’s favor and all claims against TWC have beendismissed or withdrawn, no provision for liability to the Company that mayresult upon adjudication has been made in the accompanying consolidatedfinancial statements.

 

The Company is not currently involved in any other material legalproceeding nor was it involved in any other material litigation during the yearended December 31, 2003.

** **

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

 

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

## ** **

## **PARTII**

** **

**Item 5****.**      **Market forCommon Equity and Related Stockholder Matters.**

 

The Company’s Common Stock was quoted on the OTCBulletin Board under the symbol TWCP.OB. With the announcement of the reversestock split, the Company’s Common Stock will be quoted under a new symbol,which will be assigned by the NASDAQ Stock Market, Inc.on or before theeffective date of the reverse stock split. The Company will make a public announcement disclosing the new stocksymbol on or before the effective date of the reverse stock split. (See Note 11of the Notes to the Consolidated Financial Statements – “Subsequent Event.”

 

As of February 23,2004, the Company’s stock price was $0.03. The following table sets forth the high and low prices of the Company’sCommon Stock for fiscal years 2002 and 2003:

 

 
| **Common Stock** |   | **High** |   | **Low** |   |
|------------------|--------|----------|--------|---------|--------|
| **2002**         |   |     |   |    |   |
| First Quarter    |   | $        | 0.22   | *       | $      | 0.04 | * |
| Second Quarter   |   | $        | 0.20   | *  | $      | 0.09 | * |
| Third Quarter    |   | $        | 0.20   | *       | $      | 0.05 | * |
| Fourth Quarter   |   | $        | 0.18   | *       | $      | 0.07 | * |
| **2003**         |   |     |   |    |   |
| First Quarter    |   | $        | 0.15   | *       | $      | 0.08 | * |
| Second Quarter   |   | $        | 0.11   | *       | $      | 0.06 | * |
| Third Quarter    |   | $        | 0.08   | *       | $      | 0.04 | * |
| Fourth Quarter   |   | $        | 0.07   | *       | $      | 0.03 | * |

 

----

* Quoted on OTC Bulletin Board

 

7

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There were no quotations for the $8.50 warrants.

 

As of February 23, 2004, there were (a)503,145,175 outstanding shares of Common Stock held of record by approximately148 holders; (b) outstanding options to purchase an aggregate of 936,000 sharesof Common Stock; (c) outstanding $1.00 Series A Warrants to purchase anaggregate of 960,000 shares of Common Stock issued in connection with the saleof certain debt instruments; (d) outstanding $1.50 Series B Warrants topurchase an aggregate of 3,200,000 shares of Common Stock issued in connectionwith the restructuring of certain long-term debt; (e) outstanding $0.01 SeriesC Warrants to purchase an aggregate of 1,013,090 shares of Common Stock issuedin connection with the March 1998 Private Placement, with 6,074,362 of thisseries having been exercised; (f) outstanding $0.01 Series G warrants topurchase an aggregate 125,073 shares of Common Stock issued in connection withthe October 1999 Private Placement and the October 1999 Senior Notes, (See Item6. “Management’s Discussion and Analysis or Plan of Operation - Liquidity andCapital Resources”); and (g) outstanding $.5938 Warrants to purchase anaggregate of 250,000 shares of Common Stock issued in connection with theacquisition of Tottenham & Co., which have since expired.

** **

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

** **

**Forward****-LookingStatements**

 

This Form 10-KSB contains certainforward-looking statements. For this purpose, any statements contained in thisForm 10-KSB that are not statements of historical fact may be deemed to beforward-looking statements. Without limiting the foregoing, words such as“may,” “will,” “expects,” “believes,” “anticipates,” “estimates,” or “intends”or comparable terminology are intended to identify certain forward-lookingstatements in this and other sections of the Form 10-KSB.  These statements by their nature involvesubstantial risks and uncertainties, and actual results may differ materiallydepending on a variety of factors, including those set forth in the sectionbelow entitled “Important Factors to Consider.”

** **

**Exchange Rates**

 

Due to the fact that the Company’s operationsare all located overseas, the results of the Company are subject to the impactof fluctuations in exchanges rates. Pursuant to the January 2002 adoption of the Euro as the sole tradingcurrency by all European Union member nations that had previously tied theirlocal currencies to it, the Company’s operations conducted business exclusivelyin Euros and Czech Korunas, which is the currency in which payroll and somepayable items are paid in the Czech Republic.

 

Incontinuation of the trend in 2002, these currencies further strengthenedagainst the U.S. Dollar (“USD”) in 2003, which increased revenue and expensetotals converted into USDs. In addition, since the Company’s revenues wereearned in Euros and the majority of casino related expenses were paid in CzechKorunas, the Company incurred a disproportionate decrease in the USD value ofexpenses versus revenues as a result of the fact that the Koruna strengthenedmore against the USD in the reporting period than did the Euro.

 

The impact of exchange rate fluctuations can bemeasured through comparison of the rates of exchange for these two currenciesto the USD, which are depicted on a quarterly basis in the following table.

 
| **Period**               |   | **USD** |   | **Czech  Koruna  2003** |    | **Czech  Koruna  2002** |    | **Euro  2003** |   | **Euro  2002** |   |
|--------------------------|--------|---------|--------|-------------------------|---------|-------------------------|---------|----------------|--------|----------------|--------|
|                     |   |    |   |                    |    |                    |    |           |   |           |   |
| January through March    |   | $       | 1.00   |                    | 29.5745 |                    | 36.2297 |           | 0.9326 |           | 1.1405 |   |
| April through June       |   | $       | 1.00   |                    | 27.7484 |                    | 33.2243 |           | 0.8811 |           | 1.0893 |   |
| July through September   |   | $       | 1.00   |                    | 28.5945 |                    | 30.8771 |           | 0.8882 |           | 1.0169 |   |
| October through December |   | $       | 1.00   |                    | 27.0078 |                    | 30.9725 |           | 0.8407 |           | 0.9996 |   |

 

8

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The balance sheet totals of the Company’sforeign subsidiaries at December 31, 2003 were converted to USDs using theprevailing exchange rates at December 31, 2003, which are depicted in thefollowing table.

 
| **As  Of**         |   | **USD** |   | **Czech****Koruna** |    | **Euro** |   |
|--------------------|--------|---------|--------|---------------------|---------|----------|--------|
| December  31, 2003 |   | $       | 1.00   |                | 26.0300 |     | 0.7967 |   |
|                    |        |         |        |                     |         |          |        |  |

** **

**Critical Accounting Policies**

 

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

* *

*Goodwill*

 

Goodwill,which represents the excess of the cost of the Company’s Czech subsidiariesover the fair value of their net assets at the date of acquisition, was beingamortized on a straight-line basis over seven years through December 31,2001.  Under Statement of FinancialAccounting Standards (“SFAS”) No. 142, effective the first quarter of the yearended December 31, 2002, which stated that 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 based test.  During the quarter ended June 2002, theCompany completed the first step of the required two-step impairmenttesting.  The first step of theimpairment testing required the Company to compare the fair value of its CzechRepublic reporting unit, the Company’s only reporting unit as defined underSFAS No. 142, to its carrying value (the net equity of the Company) todetermine whether there was an indication that an impairment existed.  The fair value of the Czech Republic reportingunit was determined through a combination of recent appraisals of the Company’sreal property, a multiple of earnings before interest, taxes, depreciation andamortization and the Company’s sale of its Spanish casino in 2001.  No impairment losses were recorded againstgoodwill upon the initial adoption of SFAS No. 142.  During the second quarter of 2003, as required by SFAS No. 142,the Company repeated the annual fair-value based testing of the carrying valuegoodwill related to its Czech Republic reporting unit and determined that norecording of impairment losses was warranted.

 

*June 2003 Exchange Agreement*

 

In June 2003, the Company completed the June 2003 Exchange Agreement(see Item I.  “Description of Business -Accounting and Financial Issues” and Note 4 of the Notes to the ConsolidatedFinancial Statements  “Long-Term Debt”for further discussion).  The transaction increased the Company’sstockholders’ equity by approximately $21.4 million.  The debt to equity conversion price of approximately $0.04 was aproduct of the terms of the June 2003 Exchange Agreement, which was designed toprovide the noteholders who tendered in the exchange approximately 90%ownership of the Company’s issued and outstanding Common Stock.  TheCompany believes the approximate $0.04 conversion price was representative ofthe fair value of the Company’s Common Stock, which was affirmed in a fairnessopinion by an independent valuation firm.  Accordingly, the transactionwas accounted for as an even exchange of value, with no gain or lossrecognized.  Further, the Company believes the waiver by the holders ofthe Senior Notes of the post-September 17, 2001 interest was an inseparablecomponent of the June 2003 Exchange Agreement and has accounted for thisforgiveness as part of the overall transaction (e.g. an increase to additionalpaid-in-capital).

** **

**Results of Operations**

 

The following discussion and analysis relates to the consolidatedfinancial condition and results of operations of the Company for the yearsended December 31, 2003 and 2002.

 

9

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**YearEnded December 31, 2003 Compared to Year Ended December 31, 2002**

 

($000s in thousands)

 
|                                 |   | **Year Ended  December 31, 2002** |   | **Change** |   | **Year Ended  December 31, 2003** |   |
|--------------------------------------|--------|-----------------------------------|--------|------------|--------|-----------------------------------|--------|
|                                 |   |                              |   |       |   |                              |   |
| Net  loss                            |   | (3,275                            | )      |       |   |                              |   |
| Revenues                             |   |                              |   | 3,368      |   |                              |   |
| Cost  of revenues                    |   |                              |   | (1,958     | )      |                              |   |
| Depreciation  and amortization       |   |                              |   | 110        |   |                              |   |
| Selling,  general and administrative |   |                              |   | (938       | )      |                              |   |
| Interest  expense                    |   |                              |   | 2,105      |   |                              |   |
| Foreign  exchange gain               |   |                              |   | 123        |   |                              |   |
| Foreign  income taxes on operations  |   |                              |   | 161        |   |                              |   |
| Other  expenses                      |   |                              |   | 542        |   |                              |   |
| Net  income                          |   |                              |   | 3,513      |   | 238                               |   |

 

In the year ended December 31, 2003, the Company posted revenuesof $17.6 million versus $14.2 million in the year ended December 31, 2002. Thegrowth in revenue can be attributed to several factors, notably favorableexchange rate fluctuations, which exerted a positive influence on the drop perhead (“DpH”) by 21.0%, and contributed to 18.1% growth in total drop.   In addition, the $3.4 million revenueimprovement can partly be attributed to the continuing success of the newerNovomatic slot machines, which were installed as part of the slot replacementprogram that was initiated in 2001 and completed in early 2003, as well as tothe opening of Hollywood Spin in September 2003.   The Company also saw a 22.9% increase in ancillary revenue in2003, partly as a result of its ongoing refinement of its player benefits andcustomer service programs.

 

The Company’s cost of revenues increased by $2.0 million overthe prior year due to several factors, principally the negative impact onexpenses from the aforementioned exchange rate fluctuations that benefitedrevenues.  Other factors that alsocontributed to the increase in expenses include:  (i) higher expenses related to the newer Novomatic slot machines,the lease payments of which are revenue-based; (ii)higher revenue-driven gaming taxes; (iii) greater amenity expenses related tothe refinement of its player benefits programs; and (iv) higher labor costsrelated to its quality and service enhancement of its food and beverageoperations and the addition of Hollywood Spin in September 2003.

 

Depreciation and amortization expense decreased by $110,000 inyear 2003 versus the prior year due primarily to the full capitalization ofcertain slot operating leases.

 

Selling, general and administrative expenses increased $938,000in year 2003 in comparison to those of 2002, in large part, as a result of$422,000 in higher payroll increases, $253,000 in write-off of certainfinancing and development related assets, $200,000 for the recognition of anon-qualified executive retirement program, and $126,000 in higher expendituresin legal and audit advisory services related to the restructuring ofsubsidiaries, which were somewhat offset by the $63,000 gains from positive exchangerate fluctuations*.*

 

Interest expense decreased by $2.1 million in 2003 versus theprior year due, mainly, to the combination of the forgiveness of accrued butunpaid interest on the Senior Notes and the reduction of interest payablepursuant to the June 2003 Exchange Agreement.

 

A foreign exchange gain of $351,000 was realized in 2003 versusa gain of $228,000 in 2002 due primarily to continued strengthening of the Euroversus the USD.

 

Foreign income taxes on operations of $161,000 were incurred in2002 and no such expenses were incurred in 2003.

 

Other expenses in 2003 of $17,000 comprised mainly of corporatestate and local taxes, in comparison to total other expenses of $537,000 in2002, which included a $349,000 expense related to an income tax audit in theCzech

 

10

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Republic, $104,500 in acquisition costs related to the Znojmo buildinglease buyout, $84,000 in expense related to a legal settlement, and $21,000from loss on sales of outdated slot machines.

 

As a result, the Company posted a positive net income of$238,000 from operations for the year ended December 31, 2003, which is a sharpcontrast to the net loss of $3.3 million for the year ended December 31,2002.  Further, the positive income in thecurrent year represented the first positive result achieved by the Company’scontinuing operations since 1997.

** **

**Business Units:**

*** ***

***Ceska******, Czech Republic***

 

After two consecutive years of attendance declines resulting fromfierce competition and a weak regional economy, Ceska’s local market in theyear ended December 31, 2003 stabilized as attendance reached its previousyear’s level. Management’s emphasis on building a larger customer base from awider range of demographics and social groups and its employment of marketinginitiatives targeting Regensburg, the nearest metropolitan city in Germany,proved successful as total revenue in the year ended December 31, 2003 rose14.6% over the year ended December 31, 2002. The improvement was due, in part, to a 19.4% increase in the DpH, whichwas somewhat offset by a 2.5 percentage point decline in win percentage(“WP”).  The total revenue increase wasalso driven by a 65.7% improvement in slot revenue for the comparable periodsas well as the aforementioned favorable exchange rate fluctuation.  Ceska’s use of many cost-sharingarrangements in the year and its decision to route many of its marketingproductions to local businesses served to reduce costs.  The result of its cost-cutting measures andthe additional benefits of positive exchange rate fluctuations helped thecasino produce incremental revenue retention of 53% to its earnings beforeinterest, taxes, and depreciation and amortization.

*** ***

***Rozvado******v, Czech Republic***

 

In2003, Rozvadov saw a 24.6% decline in its annual attendance level.  The attendance erosion was due in large partto the weakening regional, and largely agricultural, economy.  The decline was exacerbated by the appearanceof a new competitor casino across the street from its location in June 2003,which effectively diluted Rozvadov’s capture of the shrinking market.  Rozvadov, which, unlike TWC’s other casinounits, heavily depended on a small group of high volume players for itsrevenue, saw the drastic reduction of visits from this group in the year endedDecember 31, 2003.  As a result,Rozvadov’s statistical indicators were lower than the prior year, with theexception of DpH, which saw an 8.7% increase. Total revenue, despite a 130% improvement in slot performance and afavorable exchange rate influence, fell 18.4% from its 2002 level.  Operating expenses, which rose as a resultof increased marketing activities and higher revenue-based slot lease payments,caused year 2003 earnings exclusive of interest and depreciation andamortization to fall 69.9% fromthose of 2002.  Management hasundertaken several initiatives to counter Rozvadov’s attendance decline,including expansion of its marketing programs, improvement of the casino’sexterior signage, and supplements to its in-house promotions.  It is hoped that the aforementioned actionswill enable the casino to extend its market reach and penetration and result incapture of additional casual players to compensate for the attendance declineof the casino’s high-end players.

*** ***

***Znojmo******, Czech Republic***

 

Znojmo,which is the Company’s largest casino and strongest performer, had its thirdconsecutive year of double-digit revenue growth, a trend that has beenconsistent since its opening in December 1999. In 2003, the casino’s DpH jumped 26.5% from the previous year, whileattendance and WP gained 4.6% and 1.6 percentage points, respectively, over thetotals achieved in the year ended December 31, 2002.  These improvements were due largely to management’s continuingefforts to cultivate clients from the relatively wealthy population of the cityof Vienna and its surrounding region, its efforts to refine its playerentitlement and recognition programs, and expansion of the casino from 21 to 22gaming tables and from 56 to 61 slots. Further, the positive influence of exchange rate fluctuations alsohelped to contribute to a 44.4% improvement in total revenue in the year endedDecember 31, 2003 versus the prior year. Operating expenses increased, notably in revenue-based lease expenses inconnection with the Novomatic slot machines, in revenue-driven gaming taxes,and in higher payroll related to the operation of the additional gaming tablesand enhanced customer service.  Earningsexclusive of interest, taxes, and depreciation and amortization reflected 53%retention of the incremental revenue increase over the prior year.

 

11

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***Hollywood******Spin, Czech Republic***

 

Inaddition to the presence of TWC’s Znojmo casino in the tax-free zone in thetown of Hate, Czech Republic, the Company sought to capture a portion of the1.5 million visitors anticipated to visit a newly developed designer outletmall, which is located adjacent to its Znojmo casino.  The Company is utilizing its existing infrastructure in Hate inorder to benefit from economies of scale.  TWC negotiated and executed an agreement with Freeport plc, the malldeveloper, to lease approximately 6,500 square foot of retail space, which issituated in a prominent corner of the indoor mall, in order to open a slot barand restaurant operation, Hollywood Spin. On September 1, 2003, in conjunction with the “soft-opening” of themall, Hollywood Spin commenced operations. Hollywood Spin, which coincided its grand opening with that of theFreeport mall on September 25, 2003, features popular American film,sports and music themes.  The unit opened with two electro-mechanicalmulti-roulettes, 40 Novomatic slot machines, a 76-seat restaurant, and a16-seat bar.  The results of its firstthree months of operation were mixed as Hollywood Spin, along with the othertenants of the mall, struggled to attract patrons from an overall mallattendance that was below expectations. Further, certain startup costs served to increase Hollywood Spin’soperating costs in its first three months of operation, and as a result, theunit incurred a loss excluding interest, taxes, and depreciation andamortization for the year ended on December 31, 2003 of $200,000.

** **

**Liquidity and Capital Resources**

 

The Company’s working capital, defined as current assets minus currentliabilities, decreased by $143,000 to a deficit of $139,000 at December 31,2003 from a nominal working capital surplus at December 31, 2002 of $4,000.

 

TheCompany believes that with the recentdebt conversion (See Note 4 of the Notes to the Consolidated FinancialStatements  “Long-Term Debt” for furtherdiscussion), the Company canachieve positive working capital in the near future.  The Company is current on all of its long-term obligations.  Further, in addition to the June 2003Exchange Agreement, the Company has taken several steps to improve itsconsolidated financial position, including (i) the consummation of the March2002 Exchange Agreement, which resulted in the conversion of such debt (andrelated accrued interest) to equity (hence reducing liabilities by $6.7million); (ii) the doubling of the capacity of its Znojmo casino from 11 to 22gaming tables; (iii) the renovations of its Ceska and Rozvadov casinos, whichwere completed in May 2002 and November 2002, respectively; (iv) the March 2002buyout (purchase) of the Znojmo casino building lease, which effectivelylowered the related interest rate from 19.0% to 6.2%; and (v) the September 1,2003 opening of Hollywood Spin in space that the Company leases in the Freeportdesigner outlet mall in Hate, Czech Republic.

 

For the year ended December 31, 2003, the Company had net cash providedby continuing operations of $1.9 million. This was primarily a result of a $238,000 income from continuingoperations, $511,000 of depreciation and amortization, $1.6 million of non-cashinterest related to the amortization of debt discount recorded in connectionwith the warrants issued with the March 1998 and October 1999 PrivatePlacements, a $9,000 decrease in cash attributable to an increase in prepaidexpenses and other current assets, a $227,000 cash decrease resulting from anincrease in other assets, a decrease of $33,000 in accounts payable, and a$170,000 net decrease in cash attributable to changes in accrued expenses and otherliabilities.  For the year endedDecember 31, 2003, net cash used in investing activities was $433,000 and wasused primarily for additions to, and replacements of, casino equipment anddevelopment of Hollywood Spin, while net cash used in financing activities of$725,000 included $312,000 in repayment of the Interest Notes, $414,000 inrepayment of long-term debt related to the Znojmo building lease purchase, andapproximately $1,000 of proceeds from the exercise of options.

 

Priorto the June 2003 Exchange Agreement, the Company had been highly leveraged andwas unable to meet its interest payments in full since September 2000. Waiversof default for non-payment of interest had been received from Value Partners,the majority holder of the Notes.  The Companyis now in good standing in all of its long-term obligations.

 

The Company is also obligated under various contractual commitmentsover the next five years.  The followingis a summary of the five-year commitments of the Company as of December 31, 2003:

 

12

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| **(in thousands)Contractual Obligation** |   | **Total** |   | **Less than  1 Year** |   | **1-3 Years** |   | **4-5 Years** |   | **After  5 Years** |   |
|------------------------------------------|--------|-----------|--------|-----------------------|--------|---------------|--------|---------------|--------|--------------------|--------|
| Long-term  debt, US                      |   | $         | 3,652  |                  | $      | 791           |   | $             | 1,311  |               | $      | — |   | $ | 1,550 |   |
| Long-term  debt, foreign                 |   | 1,304     |   | 429                   |   | 875           |   |          |   |               |   |
| Short-term  debt                         |   | 266       |   | 266                   |   |          |   |          |   |               |   |
| Operating  leases                        |   | 231       |   | 109                   |   | 99            |   | 23            |   |               |   |
| Employment  agreements                   |   | 730       |   | 530                   |   | 200           |   |          |   |               |   |
| Consulting  agreements                   |   | 54        |   | 27                    |   | 27            |   |          |   |               |   |
| Other  agreements                        |   | 50        |   | 50                    |   |          |   |          |   |               |   |
|                                     |   |      |   |                  |   |          |   |          |   |               |   |
| Total  contractual obligations           |   | $         | 6,286  |                  | $      | 2,202         |   | $             | 2,511  |               | $      | 23 |   | $ | 1,550 |   |

 

**Plan of Operations and Important Factors toConsider:**

 

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

 

In May 2002, the Company completed renovation of the Ceska casino and,in 2003, replaced 38 of its existing Aristocrat slot machines with newer-styleNovomatic slot machines.  In 2003, thegaming floor in Rozvadov was reconfigured to accommodate the relocation of theslot room from its lower level to the main floor for better player access andvisibility and the casino’s carpet was replaced.  Further, employee uniforms were changed and a Pacific South Seastheme was introduced.  In Znojmo, anadditional four gaming tables were introduced in July 2002, anelectro-mechanical multi-roulette in April 2003, which leaves the facility witha total of 22 gaming tables currently in operation.  Further, 55 of the 56 existing slot machines in Znojmo werereplaced over a two-year period, beginning in January 2001, with newer machinesof a type that are generally preferred by the casino’s target client base, andfive newer machines were recently introduced, giving the casino a total of 61machines currently in operation.  InHollywood Spin, the Company operates four gaming tables, two of which areelectro-mechanical multi-roulettes, 32 Novomatic slot machines, and features aHollywood-themed bar and restaurant.

 

The Company is also pursuing construction of athree-star hotel, which would be connected to the Znojmo casino and be built oncompany-owned land.  The hotel designhas been completed and the Company is actively seeking funding for its plannedconstruction in mid-2004.

 

Management is advancing on its plan to add afourth full service casino in the region and has received zoning andenvironmental study approvals from appropriate authorities.  The Company is awaiting the approval of itsapplication for construction permits. The addition of a fifth casino unit would allow the Company to penetratea new, and potentially lucrative market, and take full advantage of itsexisting infrastructure, thereby benefiting from economies of scale.

*** ***

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

 

On December 31, 2003, the Company had a positive stockholders’ equityof $8.8 million. For the year ended December 31, 2003, the Company achieved anet income of approximately $238,000, as a result of a combination of the June2003 Exchange Agreement, improved revenue from operations and favorableexchange rate fluctuations.  The abilityof the Company to sustain profitability from its continuing operations dependsupon the successful management of gaming establishments in the Czech Republic,their expansion and possible relocation, the addition of business units, andthe diversification of its operations to include other sources of revenue.  There can be no assurance that the Companywill achieve profitability as a result of these operations or otherwise.

 

13

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***Nee******d to Diversify***

 

At this time, the Company has operations exclusively in the CzechRepublic.  The Company is currentlyseeking to develop or acquire interests in gaming operations and hotels inEurope; however, there can be no assurance that the Company will be able todevelop or acquire such new operations in the future.

*** ***

***Taxatio******n of Gaming Operations***

 

Gaming operators are typically subject to significant taxes and fees inaddition to federal and state corporate income taxes, and such taxes and feesare subject to increase at any time. Any material increase in these taxes orfees would adversely affect the results of operations of the Company. The CzechRepublic currently has a number of laws related to various taxes imposed bygovernmental authorities. Applicable taxes include value added tax, corporatetax, charity tax, and payroll (social) taxes, together with others.  In addition, laws related to these taxeshave not been in force for significant periods, in contrast to more developedmarket economies; therefore, implementing regulations are often unclear ornonexistent. Accordingly, few precedents with regard to issues have beenestablished. Often, differing opinions regarding legal interpretations existboth among and within government ministries and organizations, creatinguncertainties and areas of conflict. Tax declarations, together with otherlegal compliance areas (for example, customs and currency control matters) are subjectto review and investigation by a number of authorities, which are authorized bylaw to impose extremely severe fines, penalties and interest charges. Thesefacts create tax risks in the Czech Republic substantially more significantthan typically found in countries with more developed tax systems. Managementbelieves that it has adequately provided for tax liabilities; however, the riskremains that relevant authorities in the Czech Republic could take differingpositions with regard to interpretive issues and the effect on amounts paid fortaxes, fines, penalties, and interest could be significant.  (See “Note 6. Commitments and Contingencies– Taxing Jurisdiction”)

*** ***

***Dependenc******e upon Key Personnel***

 

The Company’s ability to successfully implement its strategy ofexpansion and diversification, manage the Czech casinos, and maintain acompetitive position will continue to depend, in large part, on the ability ofMr. Rami S. Ramadan, the Company’s President, Chief Executive Officer (“CEO”),and Chief Financial Officer (“CFO”). Prior to joining TWC in 1999, Mr. Ramadan served as Executive VicePresident of Finance for the Ian Schrager Hotels and also held financialpositions with Hyatt Hotels, Euro-Disney and Meridien Hotels.  The Company may also be highly dependentupon other key employees, casino managers and consultants whom the Company mayretain from time to time.

*** ***

***Need******for Additional Financing***

 

Although the Company has achieved a positive income in this reportingyear, the Company, pursuant to its growth and diversification strategies, wouldrequire additional debt and/or equity financing for the acquisition of otherbusinesses.  In this regard, theCompany’s ability to obtain additional financing has been greatly enhanced as aresult of its second recapitalization effort (See Item 1. “Description ofBusiness-Accounting and Financial Issues”), completed in June 2003, whicheffectively further reduced its debt burden by approximately 80%.  Despite these balance sheet enhancements,there can be no assurance that such financing will be available on termsfavorable to the Company or at all.

*** ***

***International Activities***

 

The Company’s operations are totally outside of the United States.Operating internationally involves additional risks relating to such things ascurrency exchange rates, different legal or regulatory environments, politicaland economic risks relating to the stability or predictability of foreigngovernments, differences in the manner in which different cultures do business,difficulties in staffing and managing foreign operations, differences infinancial

 

14

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reporting, operating difficulties, different types of criminal threatsand other factors. The occurrence of any of these risks, if severe enough,could have a material adverse effect on the financial condition or results ofoperations of the Company.

*** ***

***Licensing and Regulation***

 

The Company’s operations are subject to regulation by each localjurisdiction in which it operates or plans to operate business, as well asfederal laws and the laws of any foreign country. Each of the Company’sofficers, and directors, and in certain instances, persons who have more than afive percent income or profit interest in, or who exercise significantinfluence over the activities of the Company, may be subject to strict scrutinyand approval from the gaming commission or other regulatory body of eachjurisdiction in which the Company may conduct gaming operations.

 

The failure to obtain any license for properties upon which the Companyplans to operate or manage a gaming establishment in the future would have amaterially adverse effect on the Company’s business. Obtaining requiredlicenses can be time consuming and costly with no assurance of success. Inaddition, the Company is subject to changes in the laws of the jurisdictions inwhich it operates, which could materially limit the Company’s ability toconduct business profitably. In the event that a required license is notgranted for any particular location, the Company’s options would includeeffecting a transfer of substantially all of its related gaming assets to adifferent location or selling its interest in the gaming operations at thatlocation to a third party. There can be no assurance that the Company would beable to relocate gaming assets or sell its interests on acceptable terms or atall, and the inability to do so would have a materially adverse effect upon thebusiness and prospects of the Company.

*** ***

***Liability Insurance***

 

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

*** ***

***No Dividends***

 

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

*** ***

***Possible AdverseEffect of Issuance of Preferred Stock***

 

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

 

15

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***Dilutive Effect of Warrants***

 

In connection with the completion of the March 1998 Private Placement,the Company issued warrants to purchase approximately 9.5 million shares of theCompany’s Common Stock. In addition, in connection with the restructuring ofthe Senior Notes, in March 1998 the Company issued approximately 3.2 millionwarrants to purchase the Company’s Common Stock.  The Company also issued approximately 1.25 million warrants topurchase the Company’s Common Stock in connection with the October 1999 PrivatePlacement.  The issuance of suchsecurities will have a dilutive effect on any earnings that the Company mightgenerate when the earnings are evaluated on a diluted basis.  At February 23, 2004, a total of 5,298,163warrants are outstanding, which, if exercised, would represent 1.0% of the508,443,338 shares of Common Stock that would be outstanding.

 

16

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**Item 7****.**      **FinancialStatements.**

 

The following items are included in this Report:

 

Consolidated Financial Statements

 
| Independent Auditors’ Report                                      |   |
|------------------------------------------------------------------------|--------|
| Consolidated Balance Sheet                                             |   |
| Consolidated Statements of Operations and  Comprehensive Income (Loss) |   |
| Consolidated Statements of Stockholders’  Equity (Deficit)        |   |
| Consolidated Statements of Cash Flows                                  |   |
| Notes  to Consolidated Financial Statements                            |   |

 

17

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INDEPENDENT AUDITORS’ REPORT

 

 

Board of Directors and Stockholders

Trans World Corporation

 

We have audited the accompanying consolidatedbalance sheet of Trans World Corporation and Subsidiaries as of December 31,2003, and the related consolidated statements of operations and comprehensiveincome (loss), stockholders’ equity (deficit) and cash flows for the yearsended December 31, 2003 and 2002.  Theseconsolidated financial 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 in accordance withauditing standards generally accepted in the United States of America.  Those standards require that we plan andperform the audits to obtain reasonable assurance about whether the financialstatements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting theamounts and disclosures in the financial statements.  An audit also includes assessing the accounting principles usedand significant estimates made by management, as well as evaluating the overallfinancial statement presentation. We believe that our audits provide areasonable basis for our opinion.

 

In our opinion, the consolidated financialstatements referred to above present fairly, in all material respects, thefinancial position of Trans World Corporation and Subsidiaries as of December31, 2003, and the results of their operations and their cash flows for theyears ended December 31, 2003 and 2002, in conformity with accountingprinciples generally accepted in the United States of America.

 

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

 

 

Roseland, New Jersey

February 20, 2004

###### ** **

18

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

CONSOLIDATED BALANCE SHEETDecember 31, 2003(In thousands, except for per share data)

 
| **ASSETS**                                                                                      |   |    |   |
|-------------------------------------------------------------------------------------------------|--------|---------|--------|
|                                                                                            |   |    |   |
| **CURRENT ASSETS:**                                                                             |   |    |   |
|                                                                                            |   |    |   |
| Cash                                                                                            |   | $       | 4,944  |   |
| Prepaid expenses and other current assets                                                       |   | 434     |   |
|                                                                                            |   |    |   |
| **Total current assets**                                                                        |   | 5,378   |   |
|                                                                                            |   |    |   |
| **PROPERTY AND EQUIPMENT**, less  accumulated depreciation of $2,757                            |   | 6,981   |   |
|                                                                                            |   |    |   |
| **OTHER ASSETS:**                                                                               |   |    |   |
|                                                                                            |   |    |   |
| Goodwill                                                                                        |   | 4,659   |   |
| Deposits and other assets                                                                       |   | 1,075   |   |
|                                                                                            |   |    |   |
| **Total other assets**                                                                          |   | 5,734   |   |
|                                                                                            |   |    |   |
|                                                                                            |   | $       | 18,093 |   |
|                                                                                            |   |    |   |
| **LIABILITIES AND STOCKHOLDERS’ EQUITY**                                                   |   |    |   |
|                                                                                            |   |    |   |
| **CURRENT LIABILITIES:**                                                                        |   |    |   |
|                                                                                            |   |    |   |
| Short-term debt                                                                                 |   | $       | 266    |   |
| Accounts payable                                                                                |   | 401     |   |
| Interest payable                                                                                |   | 51      |   |
| Long-term debt, current maturities                                                              |   | 1,220   |   |
| Accrued expenses and other current liabilities                                                  |   | 3,579   |   |
|                                                                                            |   |    |   |
| **Total current liabilities**                                                                   |   | 5,517   |   |
|                                                                                            |   |    |   |
| **LONG-TERM LIABILITIES:**                                                                      |   |    |   |
|                                                                                            |   |    |   |
| Long-term debt, less current maturities                                                         |   | 3,736   |   |
| Other                                                                                           |   | 60      |   |
|                                                                                            |   |    |   |
| **Total long-term liabilities**                                                                 |   | 3,796   |   |
|                                                                                            |   |    |   |
| **STOCKHOLDERS’ EQUITY:**                                                                  |   |    |   |
|                                                                                            |   |    |   |
| Preferred stock, $.001 par value, 4,000 shares  authorized, none issued                         |   |    |   |
| Common stock $.001 par value, 950,000 shares  authorized, 503,145 shares issued and outstanding |   | 503     |   |
| Additional paid-in capital                                                                      |   | 42,729  |   |
| Accumulated other comprehensive income                                                          |   | 2,705   |   |
| Accumulated deficit                                                                             |   | (37,157 | )      |
|                                                                                            |   |    |   |
| **Total stockholders’ equity**                                                             |   | 8,780   |   |
|                                                                                            |   |    |   |
|                                                                                            |   | $       | 18,093 |   |

 

*Seeaccompanying notes to consolidated financial statements*

 

19

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**TRANS WORLDCORPORATION AND SUBSIDIARIES**

CONSOLIDATED STATEMENTS OF OPERATIONSAND COMPREHENSIVE INCOME (LOSS)Years Ended December 31, 2003 and 2002(In thousands, except for per share data)

 
|                                                                            |   | **2003** |   | **2002** |   |
|---------------------------------------------------------------------------------|--------|----------|--------|----------|--------|
|                                                                            |   |     |   |     |   |
| **REVENUES**                                                                    |   | $        | 17,605 |     | $      | 14,237 |   |
|                                                                            |   |     |   |     |   |
| **COSTS AND EXPENSES:**                                                         |   |     |   |     |   |
| Cost of revenues                                                                |   | 9,311    |   | 7,353    |   |
| Depreciation and amortization                                                   |   | 511      |   | 621      |   |
| Selling, general and administrative                                             |   | 6,073    |   | 5,135    |   |
|                                                                            |   | 15,896   |   | 13,109   |   |
|                                                                            |   |     |   |     |   |
| **INCOME FROM OPERATIONS**                                                      |   | 1,709    |   | 1,128    |   |
|                                                                            |   |     |   |     |   |
| **OTHER INCOME/(EXPENSE):**                                                     |   |     |   |     |   |
| Interest, net                                                                   |   | (1,806   | )      | (3,911   | )      |
| Loss on sale of assets                                                          |   |     |   | (21      | )      |
| Foreign exchange gain                                                           |   | 351      |   | 228      |   |
| Other                                                                           |   | (17      | )      | (537     | )      |
|                                                                            |   | (1,471   | )      | (4,242   | )      |
|                                                                            |   |     |   |     |   |
| **INCOME/(LOSS) BEFORE INCOME  TAXES**                                          |   | 238      |   | (3,114   | )      |
|                                                                            |   |     |   |     |   |
| **INCOME TAXES**                                                                |   |     |   | (161     | )      |
|                                                                            |   |     |   |     |   |
| **NET INCOME/(LOSS)**                                                           |   | $        | 238    |     | $      | (3,275 | ) |
|                                                                            |   |     |   |     |   |
| **WEIGHTED AVERAGE COMMON SHARES  OUTSTANDING**                                 |   |     |   |     |   |
| Basic                                                                           |   | 279,833  |   | 42,939   |   |
| Diluted                                                                         |   | 280,592  |   | 42,939   |   |
|                                                                            |   |     |   |     |   |
| **INCOME/(LOSS) PER COMMON SHARE**                                              |   |     |   |     |   |
| Basic                                                                           |   | $        | 0.00   |     | $      | (0.08 | ) |
| Diluted                                                                         |   | $        | 0.00   |     | $      | (0.08 | ) |
|                                                                            |   |     |   |     |   |
| **COMPREHENSIVE INCOME/(LOSS):**                                                |   |     |   |     |   |
|                                                                            |   |     |   |     |   |
| **Net income/(loss)**                                                           |   | $        | 238    |     | $      | (3,275 | ) |
|                                                                            |   |     |   |     |   |
| **Other comprehensive  income/(loss)**, foreign currency translation adjustment |   | 1,943    |   | 700      |   |
|                                                                            |   |     |   |     |   |
| **Comprehensive income/(loss)**                                                 |   | $        | 2,181  |     | $      | (2,575 | ) |

 

*Seeaccompanying notes to consolidated financial statements*

 

20

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**TRANS WORLDCORPORATION AND SUBSIDIARIES**

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’EQUITY/(DEFICIT)Years Ended December 31, 2003 and 2002(In thousands, except for per share data)

** **
|                                                                             |   |       |   | **Additional  Paid-in  Capital** |   | **Accumulated  Other  Comprehensive  Income** |   | **Accumulated  Deficit** |   | **Total  Stockholders’****Equity/(****Deficit)** |   |
|----------------------------------------------------------------------------------|--------|------------|--------|----------------------------------|--------|-----------------------------------------------|--------|--------------------------|--------|-------------------------------------------------------|--------|
|                                                                             |   |       |   |                             |   |                                          |   |
| **Common Stock**                                                                 |
| **Shares**                                                                       |   | **Amount** |
|                                                                             |   |       |   |                             |   |                                          |   |                     |   |                                                  |   |   |   |
| **Balances,**January 1,  2002                                               |   | 11,023     |   | $                                | 11     |                                          | $      | 15,067                   |   | $                                                     | 62     |   | $ | (34,120 | ) | $ | (18,980 | ) |
|                                                                             |   |       |   |                             |   |                                          |   |                     |   |                                                  |   |   |   |
| **Conversion of long-term debt and related accrued interest into Common  Stock** |   | 37,233     |   | 37                               |   | 6,664                                         |   |                     |   |                                                  |   | 6,701 |   |
|                                                                             |   |       |   |                             |   |                                          |   |                     |   |                                                  |   |   |   |
| **Exercise of warrants and options**                                             |   | 2,072      |   | 2                                |   | 19                                            |   |                     |   |                                                  |   | 21 |   |
|                                                                             |   |       |   |                             |   |                                          |   |                     |   |                                                  |   |   |   |
| **Foreign currency translation adjustment**                                      |   |       |   |                             |   |                                          |   | 700                      |   |                                                  |   | 700 |   |
|                                                                             |   |       |   |                             |   |                                          |   |                     |   |                                                  |   |   |   |
| **Net loss**                                                                     |   |       |   |                             |   |                                          |   |                     |   | (3,275                                                | )      | (3,275 | ) |
| **Balances,**December 31, 2002                                                   |   | 50,328     |   | $                                | 50     |                                          | $      | 21,750                   |   | $                                                     | 762    |   | $ | (37,395 | ) | $ | (14,833 | ) |
|                                                                             |   |       |   |                             |   |                                          |   |                     |   |                                                  |   |   |   |
| **Conversion of long-term debt and related  accrued interest into Common Stock** |   | 452,797    |   | 453                              |   | 20,979                                        |   |                     |   |                                                  |   | 21,432 |   |
|                                                                             |   |       |   |                             |   |                                          |   |                     |   |                                                  |   |   |   |
| **Exercise of options**                                                          |   | 20         |   |                             |   |                                          |   |                     |   |                                                  |   |   |   |
|                                                                             |   |       |   |                             |   |                                          |   |                     |   |                                                  |   |   |   |
| **Foreign currency translation adjustment**                                      |   |       |   |                             |   |                                          |   | 1,943                    |   |                                                  |   | 1943 |   |
|                                                                             |   |       |   |                             |   |                                          |   |                     |   |                                                  |   |   |   |
| **Net income**                                                                   |   |       |   |                             |   |                                          |   |                     |   | 238                                                   |   | 238 |   |
| **Balances**,  December 31, 2003                                                 |   | 503,145    |   | $                                | 503    |                                          | $      | 42,729                   |   | $                                                     | 2,705  |   | $ | (37,157 | ) | $ | 8,780 |   |

 

*Seeaccompanying notes to consolidated financial statements*

 

21

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**TRANS WORLDCORPORATION AND SUBSIDIARIES**

CONSOLIDATED STATEMENTS OF CASH FLOWSYears Ended December 31, 2003 and 2002(In thousands, except for per share data)

 
|                                                                                      |   | **2003** |   | **2002** |   |
|-------------------------------------------------------------------------------------------|--------|----------|--------|----------|--------|
| **CASH FLOWS FROM OPERATING  ACTIVITIES:**                                                |   |     |   |     |   |
| Net income (loss)                                                                         |   | $        | 238    |     | $      | (3,275 | ) |
| Adjustments to reconcile net income (loss) to net  cash provided by operations:           |   |     |   |     |   |
| Depreciation and amortization                                                             |   | 511      |   | 621      |   |
| Noncash interest                                                                          |   | 1,617    |   | 803      |   |
| Other                                                                                     |   |     |   | 19       |   |
| Increase (decrease) in cash attributable to  changes in operating assets and liabilities: |   |     |   |     |   |
| Prepaid expenses and other current assets                                                 |   | (9       | )      | (157     | )      |
| Other assets                                                                              |   | (227     | )      |     |   |
| Accounts payable                                                                          |   | (33      | )      |     |   |
| Accrued expenses and other liabilities                                                    |   | (170     | )      | 3,563    |   |
|                                                                                      |   |     |   |     |   |
| **NET CASH PROVIDED BY OPERATING  ACTIVITIES**                                            |   | 1,927    |   | 1,574    |   |
|                                                                                      |   |     |   |     |   |
| **CASH FLOWS FROM INVESTING  ACTIVITIES,**                                                |   |     |   |     |   |
| Purchases of property and equipment                                                       |   | (437     | )      | (1,822   | )      |
| Proceeds from the sale of equipment                                                       |   | 4        |   | 20       |   |
|                                                                                      |   |     |   |     |   |
| **NET CASH USED IN INVESTING  ACTIVITIES**                                                |   | (433     | )      | (1,802   | )      |
|                                                                                      |   |     |   |     |   |
| **CASH FLOWS FROM FINANCING  ACTIVITIES:**                                                |   |     |   |     |   |
| Proceeds from short-term debt                                                             |   |     |   |     |   |
| Payments of short-term debt                                                               |   |     |   | (461     | )      |
| Proceeds from long-term debt                                                              |   |     |   | 1,369    |   |
| Payments of long-term debt                                                                |   | (726     | )      | (207     | )      |
| Proceeds from exercise of warrants and options                                            |   | 1        |   | 21       |   |
| Payments of deferred financing costs                                                      |   |     |   | (222     | )      |
|                                                                                      |   |     |   |     |   |
| **NET CASH PROVIDED BY (USED IN)  FINANCING ACTIVITIES**                                  |   | (725     | )      | 500      |   |
|                                                                                      |   |     |   |     |   |
| **EFFECT OF EXCHANGE RATE CHANGES  ON CASH**                                              |   | 341      |   | 312      |   |
|                                                                                      |   |     |   |     |   |
| **NET INCREASE IN CASH**                                                                  |   | 1,110    |   | 584      |   |
|                                                                                      |   |     |   |     |   |
| **CASH**                                                                                  |   |     |   |     |   |
| Beginning of year                                                                         |   | 3,834    |   | 3,250    |   |
|                                                                                      |   |     |   |     |   |
| End of year                                                                               |   | $        | 4,944  |     | $      | 3,834 |   |

 

*Seeaccompanying notes to consolidated financial statements*

 

22

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|                                                                              |   | **2003** |       | **2002** |       |
|-----------------------------------------------------------------------------------|--------|----------|------------|----------|------------|
| **SUPPLEMENTAL  DISCLOSURES OF CASH FLOW INFORMATION,**                           |   |     | ** ** |     | ** ** |
| Cash paid during the  year for:                                                   |   |     |       |     |       |
| Interest                                                                          |   | $        | 189        |     | $          | 108 |   |
|                                                                              |   |     |       |     |       |   |   |
| **SUPPLEMENTAL  DISCLOSURES OF NONCASH INVESTING AND FINANCING ACTIVITIES**       |   |     | ** ** |     | ** ** |
|                                                                              |   |     | ** ** |     | ** ** |
| Conversion of accrued  interest to short-term debt                                |   | $        | 17         |     | $          | 16 |   |
|                                                                              |   |     |       |     |       |   |   |
| Conversion of long-term  debt and related accrued interest into Common Stock |   | $        | 21,432     |     | $          | 6,701 |   |
|                                                                              |   |     |       |     |       |   |   |
| Accrual of deferred  financing costs                                              |   | $        | —     |     | $          | 72 |   |

 

*Seeaccompanying notes to consolidated financial statements*

 

23

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**TRANS WORLD CORPORATION AND SUBSIDIARIES**

NOTES TO CONSOLIDATEDFINANCIAL STATEMENTS(In thousands, except for per sharedata)

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

*** ***

***Nature of Business***

 

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

 

The Company owns and operates four casinos in the Czech Republic, twoof which are located in the western part of the country, close to the border ofthe German State of Bavaria.  The largerof the German border casinos, located in Ceska Kubice, currently has 15 gamingtables and 46 slot machines. The smaller of the German border casinos, locatedin Rozvadov, currently has 10 gaming tables and 30 slot machines.  The Company also owns and operates twocasinos in the southern Czech Republic, close to the border of Austria.  The larger of the Austrian border casinos,located in Hate (near Znojmo), currently has 22 gaming tables and 61 slotmachines.  The other casino,  Hollywood Spin Restaurant and Slot Bar(“Hollywood Spin”), which is also located in Hate, in space that the Companyleases in a designer outlet mall, operates four gaming tables, 32 slotmachines, a 76-seat restaurant, and a 16-seat bar.

*** ***

***Liquidity***

 

AtDecember 31, 2003, the Company has a working capital deficit of $139.  The Company believes that with the recent debt conversion (See Note 4), theCompany can achieve positive working capital in the near future.  The Company is current on all of itslong-term obligations.  Further, inaddition to the June 2003 Exchange Agreement, the Company has taken severalsteps to improve its consolidated financial position, including (i) theconsummation of the March 2002 Exchange Agreement, which resulted in theconversion of such debt (and related accrued interest) to equity (hencereducing liabilities by $6.7 million); (ii) the doubling of the capacity of itsZnojmo casino from 11 to 22 gaming tables; (iii) the renovations of its Ceskaand Rozvadov casinos, which were completed in May 2002 and November 2002,respectively; (iv) the March 2002 buyout (purchase) of the Znojmo casinobuilding lease, which effectively lowered the related interest rate from 19.0%to 6.2%; and (v) the September 1, 2003 opening of Hollywood Spin in space thatthe Company leases in the Freeport designer outlet mall in Hate, CzechRepublic.

 

While the steps taken by management have enhanced the Company’sconsolidated balance sheet and improved its results, the Company’s managementis now focused on securing additional financing to acquire new business units.

 

Additionally, the Company is studying several development projects,including the development of a fifth full-service casino in Europe, the potentialdevelopment of a hotel in Hate, Czech Republic, and the potential acquisitionof existing hotels in Europe.  There canbe no assurances that management’s plans will be realized.

 

The Company believes that its cash resources at December 31, 2003, andanticipated cash provided by 2004 operations, are sufficient to fund itsactivities for the year ending December 31, 2004.

 

24

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**NOTE 2**- **Summaryof Significant Accounting Policies**

** **

**Principlesof Consolidation ****- **Theconsolidated financial statements include the accounts of the Company and itswholly-owned subsidiaries.  Allsignificant intercompany balances and transactions have been eliminated inconsolidation.

** **

**Cash****-** Cash consists of cash in banks and on hand.  The Company maintains its bank accounts atseveral financial institutions, which, at times, may exceed Federal DepositInsurance Corporation (“FDIC”) insured limits. In addition, the FDIC does not insure the Company’s foreign cash, whichtotaled approximately $4,900 at December 31, 2003.  The Company has not incurred any losses in such accounts andbelieves it is not exposed to any significant credit risk on cash.

** **

**Propertyand Equipment **- Propertyand equipment is stated at cost less accumulated depreciation andamortization.  The Company provides fordepreciation and amortization using the straight-line method over the followingestimated 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                 |   |

** **

**Developmentcosts **-  Developmentcosts incurred in connection with the pursuit and development of new gaming andhotel projects in various jurisdictions are capitalized as part of the totalproject costs or, in the case of opportunities that are explored but notultimately pursued, expensed upon abandonment of the projects.

** **

**Goodwill **- Goodwill, which represents the excessof the cost of the Company’s Czech subsidiaries over the fair value of theirnet assets at the date of acquisition, was being amortized on a straight-linebasis over seven years through December 31, 2001.  Under Statement of Financial Accounting Standards (“SFAS”) No.142, effective the first quarter of the year ended December 31, 2002, goodwillis no longer subject to amortization over its estimated useful life; rather,goodwill is subject to at least an annual assessment for impairment applying afair-value based test.  During thequarter ended June 2002, the Company completed the first step of the requiredtwo-step impairment testing.  The firststep of the impairment testing required the Company to compare the fair valueof its Czech Republic reporting unit, the Company’s only reporting unit asdefined under SFAS No. 142, to its carrying value (the net equity of theCompany) to determine whether there was an indication that an impairmentexisted.  The fair value of the CzechRepublic reporting unit was determined through a combination of recentappraisals of the Company’s real property, a multiple of earnings beforeinterest taxes depreciation and amortization and the Company’s experience inselling its Spanish casino in 2001.  Noimpairment losses were recorded against goodwill upon the initial adoption ofSFAS No. 142.  During the second quarterof 2003, as required by SFAS 142, the Company repeated the annual fair-valuebased testing of the carrying value goodwill related to its Czech Republicreporting unit and determined that no recording of impairment losses was warranted.

** **

**ForeignCurrency Translation **- Forforeign subsidiaries whose functional currency is the local foreign currency,balance sheet accounts are translated at exchange rates in effect at the end ofthe year and statement of operations accounts and cash flows are translated ataverage exchange rates for

 

25

----

 

theyear.  Resulting translation adjustmentsare included in accumulated other comprehensive income.

** **

**Earnings/(Loss)Per Common Share **- Basic earnings (loss) per common share arecomputed by dividing net income (loss) by the weighted average number of commonshares outstanding during the

period.  Diluted earnings (loss) per common shareincorporate the dilutive effect of common stock equivalents on an average basisduring the period.  The Company’s commonstock equivalents currently include stock options and warrants.  Dilutive earnings (loss) per common sharehave not been presented for the year ended December 31, 2002, since theinclusion of Common Stock equivalents would have been anti-dilutive.Unexercised warrants and stock options to purchase approximately 5,096 and6,234 shares of common stock as of December 31, 2003 and 2002, respectively,were not included in the computation of earnings (loss) per common sharebecause to do so would be anti-dilutive.

** **

**IncomeTaxes ****- **TheCompany complies with SFAS No. 109, “Accounting for Income Taxes,” whichrequires an asset and liability approach to financial accounting and reportingfor income taxes.  Deferred income taxassets and liabilities are computed for differences between the financialstatement and tax bases of assets and liabilities that will result in futuretaxable or deductible amounts, based on enacted tax laws and rates applicableto the periods in which the differences are expected to affect taxableincome.  Valuation allowances areestablished, when necessary, to reduce deferred income tax assets to the amountexpected to be realized.

** **

**CasinoRevenue ****- **Casino revenue is the net win fromgaming activities, which is the difference between gaming wagers and the amountpaid out to patrons.  Revenues generatedfrom ancillary services, including sales of food, beverage, cigarettes, andcasino logo merchandise, represent less than two percent of total revenues.

** **

**PromotionalAllowances ****- **Promotional allowances primarilyconsist of food and beverages furnished gratuitously to customers.  For the years ended December 31, 2003 and2002, revenues do not include the retail amount of food and beverage of $1,350 and$945, respectively, provided gratuitously to customers.  The cost of these items of $483 and $343,respectively, is included in cost of revenues.

** **

**FairValue of Financial Instruments ****- **Thefair values of the Company’s assets and liabilities that qualify as financialinstruments under SFAS No. 107, “Disclosures about Fair Value of FinancialInstruments,” approximate their carrying amounts presented in the accompanyingconsolidated balance sheet at December 31, 2003.

** **

**Useof Estimates ****- **The preparation of financial statementsin conformity with accounting principles generally accepted in the UnitedStates of America requires management to make estimates and assumptions thataffect the reported amounts of assets and liabilities and disclosure ofcontingent assets and liabilities at the date of the financial statements andthe reported amounts of revenues and expenses during the reporting period.  Actual results could differ from thoseestimates.

** **

**Impairmentof Long-Lived Assets ****- **TheCompany 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

###### ** **

26

----

 

interest charges).  If suchfuture cash flows are insufficient to recover the carrying amount of theassets, then impairment is triggered and the carrying value of any impairedassets would then be reduced to fair value.

** **

**Stock-based compensation** - The Company complies with the disclosure-onlyprovisions of SFAS No. 123, “Accounting for Stock-Based Compensation”, asamended by SFAS 148.

 

The Company applies APB No. 25 and relatedinterpretations in accounting for its stock option plans and, accordingly, nocompensation cost has been recognized because stock options granted under theplans were at exercise prices which were equal to or above the market value ofthe underlying stock at date of grant. Had compensation expenses been determined as provided by SFAS No. 123using the Black-Scholes option pricing model, the pro forma effect on theCompany’s net income (loss) and income (loss) per share would have been thefollowing for the years ended December 31, 2003 and 2002, respectively.

 
|                                                                                                        |   | **2003** |   | **2002** |   |
|-------------------------------------------------------------------------------------------------------------|--------|----------|--------|----------|--------|
| Net income/(loss), as reported                                                                              |   | $        | 238    |     | $      | (3,275 | ) |
| Stock-based employee compensation expense included  in net income/(loss), net of related tax effects        |   | —   |   | —   |   |
|                                                                                                        |   |     |   |     |   |
| Stock-based employee compensation determined under  the fair value-based method, net of related tax effects |   | (13      | )      | (14      | )      |
| Pro forma net income/ (loss)                                                                                |   | $        | 225    |     | $      | (3,289 | ) |
| Income/(loss) per common share, basic and diluted                                                           |   |     |   |     |   |
| As reported                                                                                                 |   | $        | 0.00   |     | $      | (0.08 | ) |
| Pro forma                                                                                                   |   | $        | 0.00   |     | $      | (0.08 | ) |

 

The fair value of each option grant is calculated using the followingweighted average assumptions:

 
|                   |   | **2003** |   | **2002** |   |
|------------------------|--------|----------|--------|----------|--------|
|                   |   |     |   |     |   |
| Expected  life (years) |   | 10       |   | 10       |   |
| Risk-free  rate        |   | 4.0      | %      | 4.6      | %      |
| Volatility             |   | 152      | %      | 254      | %      |
| Dividend  yield        |   | 0        | %      | 0        | %      |

 

**New Accounting Pronouncements**-During 2003, the Financial Accounting Standards Board (“FASB”) issued SFAS No.149, “Amendment of Statement No. 133 on Derivative Instruments and HedgingActivities” and No. 150, “Accounting for Certain Financial Instruments withCharacteristics of both Liabilities and Equity.”

 

SFASNo. 149 amends and clarifies financial accounting and reporting for derivativeinstruments, including certain derivative instruments embedded in othercontracts and for hedging activities under SFAS No. 133.  SFAS No. 150 requires certain freestandingfinancial instruments, such as mandatory redeemable preferred stock, to bemeasured at fair value and classified as liabilities.  The 2003 implementation of SFAS Nos. 149 and 150 did not have amaterial impact on the Company’s consolidated financial position, results ofoperations or cash flows.

 

27

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**NOTE 3**- **Propertyand Equipment**

 

At December 31, 2003, property and equipment consists of the following:

 
| Land                                            |   | $      | 1,331  |   |
|-------------------------------------------------|--------|--------|--------|--------|
| Building  and improvements                      |   | 4,157  |   |
| Gaming  equipment                               |   | 920    |   |
| Furniture,  fixtures and other equipment        |   | 3,173  |   |
| Construction  in progress                       |   | 157    |   |
|                                            |   | 9,738  |   |
| Less accumulated  depreciation and amortization |   | (2,757 | )      |
|                                            |   |   |   |
|                                            |   | $      | 6,981  |   |

 

**NOTE 4**- **Long-TermDebt**

 

OnJune 26, 2003, the Company completed an exchange agreement (the “June 2003Exchange Agreement”) with the holders of its $20,000, 12% Senior Secured Notes(the “Senior Notes”), whereby $18,450 of note principal, or 92.25%, wasexchanged for 452,797 shares of the Company’s common stock, $.001 par value pershare (“Common Stock”) and $1,550 was exchanged for seven-year, unsecured,variable rate promissory notes (the “Replacement Notes”).  In addition, approximately $2,500 inpre-September 18, 2001 accrued and unpaid interest was converted intothree-year, unsecured, promissory notes (the “Interest Notes”) bearing 8%interest and approximately $5,200 of post-September 17, 2001 interest waswaived and forgiven by the holders of the Senior Notes.

 

The June 2003 Exchange Agreement, which had 100%participation by the holders of the Senior Notes and $18.45 million inaggregate value of the Senior Notes exchanging for Common Stock, bothconditions of the offer, effectively reduced the Company’s long-termliabilities (net of approximately $1,535 of unamortized debt discount) fromapproximately $28,400 at March 31, 2003 to approximately $4,300 at June 30,2003.

 

The debt****to equity conversion price of approximately $0.04 was aproduct of the terms of the June 2003 Exchange Agreement, which was designed toprovide the noteholders who tendered in the exchange approximately 90%ownership of the Company’s issued and outstanding Common Stock.  The Company believes the approximate $0.04conversion price was representative of the fair value of the Company’s CommonStock, which was supported by a report from an independent financial advisor.  Accordingly, the transaction was accounted foras an even exchange of value, with no gain or loss recognized.  Further, the Company believes thepost-September 17, 2001 interest forgiven was an inseparable component of theJune 2003 Exchange Agreement and has accounted for this forgiveness as part ofthe overall transaction (e.g. an increase to additional paid in capital).

 

28

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At December 31, 2003, long-term debt consists of the following:

 
| Interest  Notes (a)                          |   | $      | 2,102  |   |
|----------------------------------------------|--------|--------|--------|--------|
| Replacement  Notes  (b)                 |   | 1,550  |   |
| Znojmo  casino building acquisition loan (c) |   | 1,304  |   |
|                                         |   |   |   |
|                                         |   | $      | 4,956  |   |

 

----

| (a) | The Interest Notes,  which have three-year terms, provide for monthly payments of principal and  interest in an amount sufficient to fully amortize the principal of the note over  its term.  The interest notes bear an  interest rate of 8% per year from the date of their issuance, July 26, 2003.

  |
|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 
| (b) | The Replacement Notes, which have seven-year terms, bear simple  interest at the rate of 6% for the first three years, 9.3% for year four and  10% for years five through seven.   Interest will be payable annually beginning on July 26, 2004, the  anniversary of the issue date for the first three years except that one half  of the interest payable for that period will be accrued and payable at  maturity.  Thereafter, all interest  will accrue and be payable annually on the anniversary of the issue date.

  |
|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 
| (c) | In March 2002, the Company exercised its  right to buyout (purchase) the Znojmo casino building lease.  The building lease buyout (purchase), the  cost of which was approximately $1,393, was financed by a loan from a local  Czech Republic bank.  The bank note, which is payable in monthly  installments through December 2006, bears interest at 6.2% per annum and is  collateralized by the Znojmo casino building, the Company’s Rozvadov casino  and employee housing buildings, and the Company’s land in Folmava. |
|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

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

 
| **Year ending December 31,** |   |   |   |
|------------------------------|--------|--------|--------|
| 2004                         |   | $      | 1,220  |   |
| 2005                         |   | 1,313  |   |
| 2006                         |   | 873    |   |
| 2007                         |   | 0      |   |
| 2008                         |   | 0      |   |
| Thereafter                   |   | 1,550  |   |
|                         |   |   |   |
|                         |   | $      | 4,956  |   |

 

29

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** **

**NOTE 5**-**AccruedExpenses and Other Current Liabilities**

 

At December 31, 2003, accrued expenses and other current liabilitiesconsist of the following:

 
| Accrued  Czech gaming and charity taxes |   | $      | 1,922  |   |
|-----------------------------------------|--------|--------|--------|--------|
| Accrued  compensation                   |   | 1,410  |   |
| Other operational accruals              |   | 247    |   |
|                                    |   |   |   |
|                                    |   | $      | 3,579  |   |

** **

**NOTE 6**-**Commitmentsand Contingencies**

*** ***

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

 
| **Year  ending December 31,** |   |   |   |
|-------------------------------|--------|--------|--------|
| 2004                          |   | $      | 109    |   |
| 2005                          |   | 79     |   |
| 2006                          |   | 20     |   |
| 2007                          |   | 20     |   |
| 2008                          |   | 23     |   |
|                               |        |        |        |  |

 

The Company is also obligated under operating leases relative to slotequipment.  Future rental payments underthese leases are entirely revenue based.

*** ***

***EmploymentAgreements -*** The Company has entered intoemployment agreements with certain of its executives, which provide for annualcompensation plus, in most cases, participation in future benefit programs andstock options plans.  As of December 31,2003, future annual compensation under these employment agreements is asfollows:

 
| **Year ending December 31,** |   |
|------------------------------|--------|
| 2004                         | $      | 530 |
| 2005                         | 200    |

 

***Consulting Agreements* - **The Company has entered into two consultingagreements in the Czech Republic until 2005. Future annual payments under these consulting contracts are $27 for eachof the next two years.

*** ***

***401 (k) and profitsharing plan*** - The Company maintains a contributory401(k) plan and a profit sharing plan. These plans are for the benefit of all eligible U.S. employees, who mayhave up to 15% of their salary withheld, not to exceed $12 (in the year endedDecember 31, 2003).  The Company isrequired to make a matching contribution based on a portion of salarywithheld.  The Company made 401(k) plancontributions of $18 in 2003 and $13 in 2002.

*** ***

***Foreign activities***- The Company’soperations are entirely outside of the United States.  Operating internationally involves additional risks relating tosuch things as currency exchange rates, different legal and regulatoryenvironments, political and economic risks relating to the stability orpredictability of foreign governments, differences in the manner in whichdifferent cultures do

 

30

----

 

business,difficulties in staffing and managing foreign operations, differences infinancial reporting, operating difficulties, and different types of criminalthreats and other factors.  Theoccurrence of any of these risks, if severe enough, could have a materialadverse effect on the consolidated financial position, results of operationsand cash flows of the Company.

*** ***

***Litigation*** -******In October 2001, the Company filed a“Complaint for Damages” against Choice Capital Corporation, a/k/a ChoiceInternational Corporation (“Choice”) and Jude Onukuwa in the Superior Court ofFulton County, Georgia.  The Company sought torecover payments made to Choice in connection with a financing transactionthat never closed as well as interest on the payments. After theexpiration of the discovery period TWC moved for summary judgment, which thecourt granted with regard to TWC’s claim for return of the payments incontroversy.  The court also dismissed Choice’s counterclaim. Thereafter, TWC petitioned the court to award it interest and to conclude thelitigation by issuing a final judgment in the Company’s favor.  The courtgranted the petition on December 16, 2003.  The final judgment awarded TWC pre-judgmentand post-judgment interest.  Choice has filed an appeal from the finaljudgment; however, The Company is confident that its position will be upheld bythe Georgia Court of Appeals.  The Companybelieves that it has a strong case against Choice and intends to pursue theCompany’s claims vigorously.  Becausethe judgment is solely in TWC’s favor and all claims against the Company havebeen dismissed or withdrawn, no provision for liability to the Company that mayresult upon adjudication has been made in the accompanying consolidatedfinancial statements.

*** ***

***Other litigation***- The Companyis not currently involved in any other material legal proceeding nor was itinvolved in any other material litigation during the year ended December 31,2003.

*** ***

***Taxing Jurisdiction*** - TheCzech Republic currently has a number of laws related to various taxes imposedby governmental authorities.  Applicabletaxes include value added tax (“VAT”), charity tax, corporate tax, and payroll(social) taxes, together with others. In addition, laws related to these taxes have not been in force forsignificant periods, in contrast to more developed market economies; therefore,regulations are often unclear or nonexistent. Accordingly, few precedents with regard to issues have beenestablished.  Often, differing opinionsregarding legal interpretations exist both among and within governmentministries and organizations, thus, creating uncertainties and areas ofconflict.  Tax declarations, togetherwith other legal compliance areas (as examples, customs and currency controlmatters) are subject to review and investigation by a number of authorities,which are enabled by law to impose extremely severe fines, penalties andinterest charges.  These facts createtax risks in the Czech Republic substantially more significant than typicallyfound in countries with more developed tax systems.  Management believes that it has adequately provided for taxliabilities.

 

31

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** **

**NOTE 7**-**Stockholders’Equity (Deficit)**

 

In June 2003, the Company completed the June 2003 Exchange Agreement(see Note 4 for further discussion). The transaction, which increased the Company’s stockholder’s equity byapproximately $21,432, is detailed as follows:

 
| Senior Notes, gross                       |   | $      | 20,000 |   |
|-------------------------------------------|--------|--------|--------|--------|
| Unamortized debt discount                 |   | (1,535 | )      |
| Post-September 17, 2001 interest forgiven |   | 5,179  |   |
| Issuance of Replacement Notes             |   | (1,550 | )      |
| Transaction costs                         |   | (662   | )      |
|                                      |   |   |   |
|                                      |   | $      | 21,432 |   |

 

In March 2002, the Company consummated an exchange agreement with theholders of $4,800 of debt, whereby this debt, together with $1,902 of accruedand unpaid interest, was exchanged for approximately 37,233 shares of theCompany’s Common Stock at a conversion price of $0.18 per share, theapproximate fair value of the Company’s Common Stock as of the date of theMarch 2002 Exchange Agreement.

 

In September 2003, the Company’s Managing Director of Casino Operationsexercised another portion of his exercisable options and purchased 20 shares ofthe Company’s Common Stock at the exercise price of $0.04 per share.

 

In May 2002, the holders of $0.01 Warrants Series D exercised anaggregate of 2,052 warrants to purchase shares of the Company’s CommonStock.  In July 2002, the Company’sManaging Director of Casino Operations exercised a portion of his exercisableoptions and purchased 20 shares of the Company’s Common Stock at the exerciseprice of $0.04 per share.

 

**NOTE 8 -****OtherConsolidated Balance Sheet Items**

** **

**OtherAssets** - Includedin other assets at December 31, 2003 are approximately $922 in restricteddeposits relating to Czech license bond requirement and other items aggregating$153.

** **

**Short-termDebt** - At December 31, 2003, short-term debtconsisted exclusively of $266, related to a short-term promissory note(including accrued interest of $51) associated with outstanding legal fees fromthe year ended December 31, 2000 owed by the Company.  The note, which bears interest at a rate of 7% per annum, maturedon January 1, 2004 and was extended through January 1, 2005 in the principalamount of $266 at an interest rate of 7% per annum.  Under the terms of the note, the Company must keep any futureactivity of its account in good standing, which it has done.

 

32

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**NOTE 9 -****IncomeTaxes**

 

At December 31, 2003, the Company had U.S.and foreign net operating loss carry forwards (“NOL’s”) of approximately$29,261 and $1,317, respectively, available to offset certain future taxes payable.  However, based on limited analysis, theFebruary 2001 warrant exercise or earlier events may have triggered significantlimitations of preexisting U.S. NOL’s, pursuant to Internal Revenue CodeSection 382, to the extent that substantially all of the Company’s existingU.S. NOL’s prior to February 2001, aggregating approximately $21,152, may besignificantly limited.  The U.S. NOL’sgenerated subsequent to February 2001, aggregating approximately $8,109 resultedin an estimated $3,670 deferred tax asset at December 31, 2003 and the foreignNOL resulted in an estimated $415 deferred tax asset at December 31, 2003.  A full valuation allowance has beenestablished for these deferred tax assets since its realization is consideredunlikely.

 

The U.S. NOL’s expire between 2009 and2023.  The foreign NOL’s expire between2004 and 2010.  The following tablepresents the U. S. and foreign components of pretax loss from continuing operationsbefore income taxes for the years ended December 31, 2003 and 2002:

 
|                                                                                                                                                                                                                                           |   | **2003** |   | **2002** |   |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------|--------|----------|--------|
|                                                                                                                                                                                                                                           |   |     |   |     |   |
| U.S.                                                                                                                                                                                                                                           |   | $(1,227  | )      | $(5,714  | )      |
| Foreign                                                                                                                                                                                                                                        |   | 1,465    |   | 2,600    |   |
|                                                                                                                                                                                                                                           |   |     |   |     |   |
|                                                                                                                                                                                                                                           |   | $238     |   | $(3,114  | )      |
|                                                                                                                                                                                                                                           |   |     |   |     |   |
| The  following table presents the principal reasons for the differences between  the effective tax rate and the U.S. federal statutory income tax rate  attributable to continuing operations for the years ended December 31, 2003  and 2002. |
|                                                                                                                                                                                                                                           |   |     |   |     |   |
|                                                                                                                                                                                                                                           |   | **2002** |   | **2003** |   |
| U.S federal statutory income tax rate                                                                                                                                                                                                          |   | (34.0    | )%     | (34.0    | )%     |
|                                                                                                                                                                                                                                           |   |     |   |     |   |
| U.S. State and local statutory income tax  rate (net of federal benefit)                                                                                                                                                                       |   | (11.3    | )%     | (11.3    | )%     |
| Effect of foreign tax rates, foreign  currency and other                                                                                                                                                                                       |   | 45.3     | %      | 40.0     | %      |
|                                                                                                                                                                                                                                           |   |     |   |     |   |
|                                                                                                                                                                                                                                           |   | —   | %      | (5.3     | )%     |

 

33

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** **

**NOTE 10 -****Warrantsand Stock Options**

*** ***

***Warrants***

 

For the years ended December 31, 2003 and 2002, warrant activity is asfollows

 
| **Exercise Price  per  Share** |       | **Warrants  Expiring** |       | **Balance,  January 1,  2002** |   | **Exercised  2002** |    | **Balance  December 31,  2002** |   | **Exercised  2003** |   | **Balance,  December 31,  2003** |   |
|--------------------------------|------------|------------------------|------------|--------------------------------|--------|---------------------|---------|---------------------------------|--------|---------------------|--------|----------------------------------|--------|
| $                              |  1.50 |                   | 12/31/2005 |                           | 3,200  |                |    |                            | 3,200  |                |   |                             | 3,200  |   |
| 1.00                           |       | 12/31/2005             |       | 960                            |   |                |    | 960                             |   |                |   | 960                              |   |
| 0.01                           |       | 3/31/2008              |       | 3,190                          |   | (2,052              | )       | 1,138                           |   |                |   | 1,138                            |   |
|                           |       |                   |       | 7,350                          |   | (2,052              | )  | 5,298                           |   | —              |   | 5,298                            |   |
|                                |            |                        |            |                                |        |                     |         |                                 |        |                     |        |                                  |        |  |

 

All warrants outstanding at December 31, 2003 are exercisable.

*** ***

***Stock Option Plans***

 

The Company has incentive and non-statutory stock option plans (the“1998 Plan”) under which certain key employees may purchase up to a total of 2common shares of the Company.  Under the1998 Plan, the exercise price can not be less than the fair market value of ashare on the date of grant or at 110 percent of the fair market value on thedate of grant, if, any employee owns more than 10 percent of the total combinedvoting power of all classes of outstanding stock of the Company.  In addition, the 1998 Plan provided forautomatic grant of an option to purchase 2 shares of Common Stock tonon-employee directors on a quarterly basis. In the case of a non-statutory stock option, the exercise price may beany amount determined by the Board on the date of grant, but not less than thepar value of the stock subject to the option.

 

During 1999, in light of diminishing shares remaining available forgrant to non-employee directors, the Company’s Board of Directors and thestockholders approved the 1999 Non-Employee Director Stock Option Plan (the “1999Plan”), which was amended in July 2000. Under the 1999 Plan, an aggregate of 250 shares of the Company’s CommonStock were reserved for issuance pursuant to options issued pursuant to the1999 Plan.  The 1999 Plan provides foran automatic grant of an option to purchase 2 shares of Common Stock tonon-employee directors on a quarterly basis through the second quarter of 2000and 2.5 shares of Common Stock on a quarterly basis thereafter.  Under the 1999 Plan, the exercise priceshall equal the fair market value of the Company’s Common Stock on the date ofgrant.  Options issued under the 1999Plan shall be immediately exercisable over 10 years.

 

34

----

 

The activity in the stock option plans is as follows:

 
|                                    |   | **Number  of Options** |   | **Range of  Exercise Price** |      | **Weighted Average  Exercise Price** |   |
|-----------------------------------------|--------|------------------------|--------|------------------------------|-----------|--------------------------------------|--------|
|                                    |   |                   |   |                         |      |                                 |   |
| Balance  outstanding, January 1, 2002   |   | 786                    |   | $                            | 0.03-2.00 |                                 | $      | 0.44 |   |
|                                    |   |                   |   |                         |      |                                 |   |
| Granted                                 |   | 230                    |   | 0.05-0.15                    |      | 0.06                                 |   |
|                                    |   |                   |   |                         |      |                                 |   |
| Expired                            |   | (270                   | )      | 0.04-2.00               |      | 0.46                                 |   |
|                                    |   |                   |   |                         |      |                                 |   |
| Exercised                               |   | (20                    | )      | 0.04                         |      | 0.04                                 |   |
|                                    |   |                   |   |                         |      |                                 |   |
| Balance  outstanding, December 31, 2002 |   | 726                    |   | $                            | 0.03-0.83 |                                 | $      | 0.33 |   |
|                                    |   |                   |   |                         |      |                                 |   |
| Granted                                 |   | 230                    |   | 0.03-0.15                    |      | 0.06                                 |   |
|                                    |   |                   |   |                         |      |                                 |   |
| Expired                            |   |                   |   |                         |      |                                 |   |
|                                    |   |                   |   |                         |      |                                 |   |
| Exercised                               |   | (20                    | )      | 0.04                         |      | 0.04                                 |   |
|                                    |   |                   |   |                         |      |                                 |   |
| Balance  outstanding, December 31, 2003 |   | 936                    |   | $                            | 0.03-0.83 |                                 | $      | 0.27 |   |
|                                    |   |                   |   |                         |      |                                 |   |
| Exercisable,  December 31, 2003         |   | 936                    |   | $                            | 0.03-0.83 |                                 | $      | 0.27 |   |

 

The option exercise price per share was equal to or above the marketvalue of the underlying stock on the date of grant.  Options generally expire between five and 10 years after the dateof grant or earlier upon termination, as defined in the plans.

 

35

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Further information about the Company’s outstanding stock options atDecember 31, 2003 is as follows:

 
| **Range of  Exercise Prices** |   | **Number  of Shares** |   | **Weighted  Average  Remaining  Contractual  Life  (in Years)** |   | **Weighted  Average  Exercise  Price** |   |
|-------------------------------|--------|-----------------------|--------|-----------------------------------------------------------------|--------|----------------------------------------|--------|
|                          |   |                  |   |                                                            |   |                                   |   |
| $ 0.03 to $0.20               |   | 558                   |   | 8.68                                                            |   | $                                      | 0.07   |   |
| $ 0.21 to $0.40               |   | 55                    |   | 5.78                                                            |   | $                                      | 0.27   |   |
| $ 0.41 to $.060               |   | 8                     |   | 5.63                                                            |   | $                                      | 0.49   |   |
| $ 0.61 to $0.80               |   | 310                   |   | 1.53                                                            |   | $                                      | 0.61   |   |
| $ 0.81 to $0.83               |   | 6                     |   | 5.75                                                            |   | $                                      | 0.83   |   |
|                          |   |                  |   |                                                            |   |                                   |   |
|                          |   | 936                   |   | 5.85                                                            |   | $                                      | 0.19   |   |

 

**NOTE 11- SubsequentEvent**

 

On January 14, 2004, TWC’s Board of Directors approved a one(1)-for-one hundred (100) reverse stock split of its authorized and issuedcommon stock, $0.001 par value per share, with all fractional shares beingrounded up to the next whole share.  Thereverse split will be effective April 5, 2004. The results of the reverse stock split will not only affect the presentholders of the Company’s outstanding shares of Common Stock, but the number ofshares available for grant or issuance under the 1998 Plan and the 1999 Planand corresponding warrants and options will be proportionally adjusted on a one(1)-for-one hundred (100) ratio as well.

 

36

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**Item 8****.  ChangesIn and Disagreements with Accountants on Accounting and Financial Disclosure.**

 

None.

** **

**PART III**

** **

**Item 9**.  Directors and Executive Officers,Promoters and Control Persons; Compliance with Section 16(A) of the ExchangeAct.

 

The following table provides information as ofFebruary 23, 2004 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              |   | 54      |   | CEO, CFO, President and Director |   | 1999                            |
| Julio E. Heurtematte, Jr.(1) |   | 68      |   | Director                         |   | 1998                            |
| Malcolm M.B. Sterrett(1)     |   | 61      |   | Director                         |   | 1998                            |
| Geoffrey B. Baker (1),(2)    |   | 54      |   | Director                         |   | 1999                            |

 

----

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

 

***Rami S. Ramadan***hasserved as CEO/CFO since July 12, 1999 and President since August 2000. His mostrecent prior position had been Executive Vice President of Finance for the IanSchrager Hotels from November 1997 to July 1999. Prior to that, Mr. Ramadanheld senior financial positions with Hyatt Hotels from January 1994 to November1997, Euro Disney from October 1990 to December 1993 and Meridien Hotels fromSeptember 1975 to September 1990.

*** ***

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

*** ***

***Malcolm M. B.Sterrett***. Mr. Sterrett is a private investor. From1989 to 1993, he was a partner at the law firm of Pepper Hamilton &Scheetz, Washington, D.C. From 1988 to 1989, he served as General Counsel tothe U.S. Department of Health and Human Services and from 1982 to 1988 he was aCommissioner on the U.S. Interstate Commerce Commission. Prior thereto, he wasVice President and General Counsel to the United States Railway Association andserved as Staff Director and Counsel to the U.S. Senate Committee on Commerce,Science and Transportation.

*** ***

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

 

37

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**Information about theBoard and its Committees:**

 

The Company’s Board of Directors manages the business and affairs ofthe Company. Meetings of the Board are held quarterly and on an as-neededbasis. The Board has established several committees, described below, whichalso meet on an as-required basis during the year. The Board held threemeetings and acted by consent through weekly conference calls conducted duringthe Company’s fiscal year ended December 31, 2003. No director of the Companyattended fewer than 75% of the total number of meetings of the Board ormeetings of committees of the Board during the year ended December 31, 2003.

 

The Board of Directors has established the following committees:

*** ***

***Audit Committee***

 

The Audit Committee reviews and approves internal accounting controls,internal audit operations and activities, the Company’s annual report andaudited financial statements, the selection of the Company’s independentauditors, the activities and recommendations of the Company’s independentauditors, material changes in the Company’s accounting procedures, theCompany’s policies regarding conflicts of interest and such other matters asmay be delegated by the Board. The Audit Committee, composed of Messrs. Baker,Heurtematte and Sterrett, all non-employee directors, met twice and acted byconsent through four conference calls in 2003.

*** ***

***Compensation Committee***

 

The Compensation Committee sets the compensation for executive officersof the Company and sets the terms of grants of awards under the Company’s 1993Incentive Stock Option Plan (the “1993 Plan”), the Company’s 1998 Stock OptionPlan (the “1998 Plan”), the 1999 Non-Employee Director Stock Option Plan andany other equity-based compensation plans adopted by the Company. TheCompensation Committee, composed of Messrs. Baker, Heurtematte and Sterrett,met three times in 2003 and acted by consent through one conference call in2003.

# ** **

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

 

Section 16(a) of the Exchange Act requires the Company’s officers,directors and persons who own more than 10% of the Company’s Common Stock tofile reports of ownership and changes in ownership with the Securities andExchange Commission (“SEC”) and the National Association of Securities Dealers,Inc. by certain dates. The Company’s directors and executive officers satisfiedthese filing requirements for the fiscal year ended December 31, 2003.  On February 23, 2001, Value Partners, theCompany’s majority bondholder, converted 5,657,453 of $0.01 warrants it held,and on May 20, 2002, it received an additional 23,270,833 shares as part of itsparticipation in the March 2002 Exchange Agreement.  With this conversion, Value Partners held a controlling 57.5% ofthe Company’s issued and outstanding Common Stock.  Further, on June 25, 2003, as part of its participation in theJune 2003 Exchange Agreement, Value Partners received an additional 327,010,388shares.  At December 31, 2003, ValuePartners owned 70.7% of the Company’s issued and outstanding Common Stock, andowned 2,600,000 warrants which, upon exercise, would result in Value Partner’sbeneficial ownership of Common Stock equaling 70.9% of the Company’s issued andoutstanding shares of Common Stock,

 

The Company knows of no other person who owns 10% or more of theCompany’s Common Stock.

 

38

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**Item 10****.**         **Executive Compensation.Summary of Cash and Certain OtherCompensation:**

 

The following table sets forth the cash and non-cash compensationearned during the fiscal years ending December 31, 2003, 2002 and 

2001 by the Chief Executive Officer and Chief Financial Officer of theCompany (the “Named Officer”) during those periods.

 
| **Summary Compensation Table** |   |
|--------------------------------|--------|
| **Annual  Compensation**       |   | **Long Term  Compensation** |   |
|                           |   | **Year** |   | **Salary** |   | **Bonus** |   | **Other Annual Compensation** |   | **Stock  Options (2)** |   | **All Other  Compensation   (3)** |   |
| Rami Ramadan(1)                |   | 2003 |   | $ | 400,000 |   | $ | 168,000 |   | $ | — |   | 150,000 |   | $ | 305,616 |   |
| President, CEO and CFO         |   | 2002 |   | 350,000 |   | 126,000 |   | — |   | 150,000 |   | 5,616 |   |
|                           |   | 2001 |   | 300,000 |   | 39,900 |   | — |   | 100,000 |   | 5,556 |   |
|                                |        |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

 

----

|   | (1)    | Mr. Ramadan joined the Company as its CEO and CFO, July 12,  1999.  He was elected the Company’s  President in August 2000.  On July 12,  2002, Mr. Ramadan’s employment agreement was renewed with amendments for an  additional three years.                                                                                                                                                                                                                                                                                                                                                                                                                               |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
|   | (2)    | Amounts  in year 1999 through 2001 represent the number of qualified stock options  granted each year.  These options  listed are exercisable, and the option price per share was set forth in Mr.  Ramadan’s employment contract (See: Employment/Severance Agreements.) As part  of his employment agreement renewal in 2002, the number of options to be  granted was increased to 150,000 per year for the duration of his three-year  agreement.  The options are  exercisable at a per share price equal to the fair market value of such  share, as determined by the average of the bid and ask price of such share at  the close of the market on the date of the grant. |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
|   | (3)    | The amounts shown represent the accrual in 2003 for a non-qualified  executive retirement reserve of $100,000 per year for the years 2000, 2001  and 2002 (the balance of which ($200,000) will be accrued in 2004) and the  cost of a leased automobile provided to Mr. Ramadan for each year indicated.                                                                                                                                                                                                                                                                                                                                                                                        |

*** ***

***Option Grants and Exercises***

 

The following table summarizes certaininformation concerning individual grants of options during fiscal 2003 to theexecutive officer named in the Summary Compensation Table above and thepotential realizable value of the options held by such person at December 31,2003.

 

39

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**OptionsGranted in Fiscal 2003**

**IndividualGrants**

** **
|                |   | **Shares of  Common  Stock Underlying   Options Granted** |   | **% of  TotalOptions   Granted to Employees  in Fiscal Year** |   | **Base  Exercise Price  ($/SH)** |     | **Expiration  Date** |         |
|---------------------|--------|-----------------------------------------------------------|--------|---------------------------------------------------------------|--------|----------------------------------|----------|----------------------|--------------|
|                |   |                                                      |   |                                                          |   |                             |     |                 |         |
| **Rami S. Ramadan** |   | **150,000**                                               |   | **65**                                                        | **%**  | **$**                            | **0.06** |                 | **07/12/13** |   |
|                     |        |                                                           |        |                                                               |        |                                  |          |                      |              |  |

 

No options were exercised by the executive officer named in the SummaryCompensation Table during fiscal 2003.

 

The following table summarizes the option valuesheld by the executive officer named in the Summary Compensation Table as ofDecember 31, 2003.

** **

**AggregateOption Exercises in Fiscal 2003 and**

**Fiscal2003 Year-End Option Value Table**

 
|                |   | **Number of  Unexercised  Options At  December 31, 2003** |       | **Value of  Unexercised in the  Money Options at  December 31, 2003** |   |
|---------------------|--------|-----------------------------------------------------------|------------|-----------------------------------------------------------------------|--------|
| **Name**            |   | **No. of Shares  Acquired on  Exercise**                  |       | **Value  Realized  Upon Exercise**                                    |   | **Exercisable** |   | **Unexercisable** |   | **Exercisable** |   | **Unexercisable** |   |
|                |   |                                                      |       |                                                                  |   |   |   |   |   |   |   |   |   |
| **Rami S. Ramadan** |   | **—**                                                | ** ** | **$**                                                                 | — | ** ** | **600,000** | ** ** | **—** | ** ** | **$** | — | ** ** | **$** | **—** | ** ** |
|                     |        |                                                           |            |                                                                       |        |  |  |  |  |  |  |  |  |  |  |  |

*** ***

***Directors’ Compensation***

 

As of July 2000, non-employee directors receivea cash retainer fee of $2,500 per quarter, plus $1,000 per Board meeting and$750 per Committee meeting.  Effectivebeginning the quarter ending September 30, 2003, non-employee directors’compensation was amended by the Board to a cash retainer fee of $6,250 perquarter, per member.  In addition, thenon-executive chairman of the Board will receive an additional $1,250 perquarter, while each chairman of its two Committees will receive $625 per quarter.  All members of the Board are reimbursed forout-of-pocket expenses in connection with attending Board meetings.  Pursuant to the 1999 Non-Employee DirectorStock Option Plan adopted at the 1999 Annual Meeting and amended by the Boardin July 2000, each non-employee director is provided with an automatic grant ofa non-qualified option to purchase 2,500 shares of Common Stock on the datefollowing each fiscal quarter in which the director serves. Each such option(i) has a 10-year term, (ii) has an exercise price per share equal to 100% of thefair market value of one share of Common Stock on the date of grant, and (iii)becomes fully exercisable on the date of grant.

*** ***

***Employment/Severance Agreements***

*** ***

***Rami S. Ramadan****.*EffectiveJuly 12, 2002, the Company entered into a renewal of a three-year employmentagreement with Mr. Ramadan pursuant to which he will continue to serve as theCompany’s CEO, CFO and President at an annual salary of $400,000. Mr. Ramadanis eligible to participate in the 1998 Plan, Executive Compensation Plan andany present or future employee benefit plans. He also will be reimbursed forreasonable travel and out-of-pocket expenses necessarily incurred in theperformance of his duties. Mr. Ramadan will also receive three separate equalannual installments of options to acquire the Company’s Common Stock, each ofwhich shall have a 10-year term commencing upon the date on which eachinstallment is granted. Upon commencement of

 

40

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the renewalagreement, Mr. Ramadan received 150,000 options exercisable at a pershare price equal to the fair market value of such share, as determined by theaverage of the bid and ask price of such share at the close of the market onthe date of the grant.  In theevent the employment agreement is terminated other than for cause, as definedin the agreement, Mr. Ramadan will receive two years’ salary.  Inaddition, upon the expiration of the employment agreement, if TWC elects not torenew Mr. Ramadan’s employment, TWC shall continue to pay to him his basesalary and his medical insurance benefits then in effect in semi-monthlyincrements until the date of the earlier of the commencement of his full timeemployment with another employer, or the first anniversary date of theexpiration date of the employment agreement. Mr. Ramadan is currently involvedin a negotiation for an amendment to his employment agreement with theCompensation Committee of the Board of Directors.  As of the date hereof, no amendment has been entered into;however, the Compensation Committee and the board has approved the Company’saccrual of a “non-qualified executive retirement reserve” of $100,000 per year,retroactive to 2000.  The Companyaccrued $300,000 for this purpose in 2003 and will accrue an additional$200,000 in 2004.

 

***Code of Ethics***

 

The Board of Directors adopted a Code of Ethics which covers allexecutive officers of TWC and its subsidiaries.  The Code of  Ethicsrequires that senior management avoid conflicts of interest; maintain theconfidentiality of information relating to the Company; engage in transactionsin the Common Stock only in compliance with applicable laws and regulations andthe requirements set forth in the Code of Ethics; and comply with otherrequirements which are intended to ensure that such officers conduct businessin an honest and ethical manner and otherwise act with integrity and in thebest interest of TWC.

 

All executive officers of the Company are required to affirm in writingthat they have reviewed and understand the Code of Ethics.

 

A copy of our Code of Ethics will be furnished to any person uponwritten request from any such person. Requests should be sent to:  RamiS. Ramadan, President, Chief Executive Officer and Chief Financial Officer,Trans World Corporation, 545 Fifth Avenue, Suite 940, New York, New York 10017.

** **

**Item 11****.  Security Ownership of Certain BeneficialOwners and Management.**

 

The following table sets forth informationregarding the beneficial ownership of the Common Stock as of February 23, 2004(the “Calculation Date”), unless otherwise noted, (a) by each shareholder whois known by the Company to own beneficially more than 5.0% of the outstandingCommon Stock, (b) by each director, (c) by each executive officer named in theSummary Compensation Table above and by all executive officers and directors asa group. Unless otherwise noted, each of the shareholders listed in the tableor included within a group listed in the table possesses sole voting andinvestment power with respect to the shares indicated, subject to communityproperty laws where applicable. The business address for each director andofficer of the Company is 545 Fifth Avenue, Suite 940, New York, New York10017.

 
| **Name of Beneficial Owner**                                                            |   | **Number of  Shares of  Common Stock  Beneficially Owned (1)** |   | **Percentage  of  Ownership (1)** |   |
|-----------------------------------------------------------------------------------------|--------|----------------------------------------------------------------|--------|-----------------------------------|--------|
| Value Partners, Ltd. (2)                                                                |   | 358,538,674                                                    |   | 70.9                              | %      |
| Rami S. Ramadan (3)                                                                     |   | 600,000                                                        |   |                              | *      |
| Julio E. Heurtematte, Jr. (4)                                                           |   | 2,494,532                                                      |   |                              | *      |
| Malcolm M.B. Sterrett (5)                                                               |   | 2,494,532                                                      |   |                              | *      |
| Geoffrey B. Baker (6)                                                                   |   | 2,490,532                                                      |   |                              | *      |
| All  directors and the executive officer as a group (4 persons) (7)                     |   | 8,079,596                                                      |   | 1.6                               | %      |
|                                                                                         |   |                                                           |   |                              |   |
| *            Less  than 1%. |   |                                                           |   |                              |   |

 

41

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(1)   The percentage of outstanding shares is basedon 503,145,175 shares outstanding as of February 23, 2004 and, for certainindividuals and entities, on reports filed with the SEC or on informationprovided directly to the Company by such individuals or entities. A person isdeemed to be the beneficial owner of securities that can be acquired by suchperson within 60 days from February 23, 2004 upon the exercise of options orwarrants. Each beneficial owner’s percentage ownership is determined byassuming that options or warrants that are held by such person (but not thoseheld by any other person) are exercisable within 60 days from February 23, 2004have been exercised. Included are shares of Common Stock issuable upon theexercise of options or warrants to purchase the Company’s Common Stock.

 

(2)   Value Partners, Ltd. is a Texas limitedpartnership, whose business address is 4514 Cole Avenue, Suite 808, Dallas,Texas 75205. Includes 355,938,674 shares of Common Stock; warrants to purchase:600,000 shares of Common Stock at an exercise price of $1.00, expiring December31, 2005 and 2,000,000 shares of Common Stock at an exercise price of $1.50 pershare, expiring December 31, 2005.

 

(3)   Consists of shares subject to incentiveoptions granted to Mr. Ramadan on July 12, 1999, 2000, 2001, 2002, and 2003,all of which were fully vested on the date of grant.

 

(4)   Includes warrants to purchase 41,691 sharesof Common Stock at an exercise price of $.01 per share expiring March 31, 2008;1,000 shares of Common Stock subject to non-qualified options granted to Mr.Heurtematte under the 1998 Incentive Stock Option Plan at the end of eachcalendar quarter ended June 30, 1998 through December 31, 1998 and 2,000 sharesof Common Stock subject to non-qualified options granted under the 1999Non-Employee Director Stock Option Plan at the end of each calendar quarterended March 31, 1999 through June 30, 2000, and 2,500 shares of Common Stocksubject to non-qualified options granted under the 1999 Director Plan at theend of each calendar quarter ended September 30, 2000 through December 31,2003, all of which were fully vested on the dates of grant.   Mr. Heurtematte was also a participant ofthe June 2003 Exchange Agreement, for which he received 2,402,841 shares of theCompany’s issued and outstanding Common Stock.

 

(5)   Includes warrants to purchase 41,691 shares ofCommon Stock at an exercise price of $.01 per share expiring March 31, 2008;1,000 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 2,000 shares of Common Stock, subject tonon-qualified options, granted under the 1999 Director Plan at the end of eachcalendar quarter ended since March 31, 1999 through June 30, 2000, and 2,500shares of Common Stock subject to non-qualified options granted under the 1999Director Plan at the end of each calendar quarter ended September 30, 2000through December 31, 2003, all of which were fully vested on the dates ofgrant.  Mr. Sterrett was also aparticipant of the June 2003 Exchange Agreement, for which he received2,402,841 shares of the Company’s issued and outstanding Common Stock.

 

(6)   Includes warrants to purchase 41,691 sharesof Common Stock at an exercise price of $.01 per share expiring March 31, 2008;1,000 shares of Common Stock subject to non-qualified options granted to Mr.Baker under the 1993 Incentive Stock Option Plan at December 31, 1998, 2,000shares of Common Stock, subject to non-qualified options, granted under the1999 Director Plan for the calendar quarter ended March 31, 1999 and 2,000shares of 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 2,500 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 December 31, 2003, all of which were fully vested onthe dates of grant.  Mr. Baker was alsoa participant of the June 2003 Exchange Agreement, for which he received2,402,841 shares of the Company’s issued and outstanding Common Stock.

 

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

 

**Item 12****.  Certain Relationships and RelatedTransactions.**

 

As part of itsparticipation in the June 2003 Exchange Agreement, Value Partners received327,010,388 shares of the Company’s issued and outstanding Common Stock, andwith the exercise of its 2.6 million warrants, holds a controlling 70.9% of theCompany’s issued and outstanding Common Stock. Further, Value partners received one of the Interest Notes as part ofthis exchange.  As of December 31, 2003,Value Partners holds 34.7% of the Company’s long term debt.

 

42

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

** **

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

 

Reference ismade to the Exhibit Index hereinafter contained.

 

A copy of any exhibits listed or referred to herein will be furnishedat a reasonable cost to any person who was a shareholder of the Company as ofFebruary 23, 2004, upon written request from any such person. Requests shouldbe sent to: Rami S. Ramadan, President, Chief Executive Officer and ChiefFinancial Officer, Trans World Corporation, 545 Fifth Avenue, Suite 940, NewYork, New York 10017.

** **

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

 

During the last quarter of the year ended December 31, 2003, theCompany did not file a Periodic Report on Form 8-K with the SEC.

 

43

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**TRANSWORLD CORPORATION**

**EXHIBIT INDEX****TO ANNUALREPORT ON FORM 10-KSB**

**FORTHE YEAR ENDED DECEMBER 31, 2003**

** **
| **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)                             |
|        |   |                                                                                                                                                                                                                                           |   |                                                                                                                                                              |
| 3.2         |   | 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).   Each of the supplements is filed herewith. |
|        |   |                                                                                                                                                                                                                                           |   |                                                                                                                                                              |
| 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). Each of the supplements is filed  herewith.    |
|        |   |                                                                                                                                                                                                                                           |   |                                                                                                                                                              |
| 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)                                                  |
|        |   |                                                                                                                                                                                                                                           |   |                                                                                                                                                              |
| 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)                                                 |

 

44

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| 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)                                      |
|   |   |                                                                                                                                                                                                     |   |                                                                                                                                                              |
| 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)                                      |

 

45

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| 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  |   | Written Description of Non-qualified Executive Retirement Reserve                                                                                       |   | Filed herewith                                                                                                               |
|   |   |                                                                                                                                                    |   |                                                                                                                         |
| 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                                                                                                               |

 

46

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**SIGNATURES**

 

Pursuant to the requirements of Section 13 or 15of the Securities Exchange Act of 1934, the Issuer has duly caused this Reportto be signed on its behalf by the undersigned, thereunto duly authorized.

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

 
| Dated: *March 5, 2004* |   |                                                           |
|------------------------|--------|----------------------------------------------------------------|
|                   | 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 SecuritiesExchange Act of 1934, this Report has been signed by the following persons onbehalf of the Issuer on *March 5, 2004* in the capacities indicated.

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

 

47

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