** **

**SECURITIES AND EXCHANGE COMMISSION**

**WASHINGTON,D.C.  20549**

 

**FORM 10-KSB**

 

**x  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THESECURITIES EXCHANGE ACT OF 1934**

 

**For the Year Ended December 31,2007**

 

**o  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THESECURITIES EXCHANGE ACT OF 1934**

 

**For the transition periodfrom                                    to                                           .**

 

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

 

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**TRANS WORLD CORPORATION**

(Exact name of registrant asspecified in its charter)

 

| **Nevada**

(State or other  jurisdiction of

incorporation or  organization) | ** ** | **13-3738518**

(I.R.S. Employer 

Identification No.) |
|-------------------------------------------------------------------------------|------------|--------------------------------------------------------|

 

| **545 Fifth Avenue,  Suite 940**

**New York, New York**

(Address of principal  executive offices) | ** ** | **10017**

(Zip Code) |
|----------------------------------------------------------------------------------------------------------|------------|-----------------------|

 

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

 

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

** **

Securities registeredpursuant to Section 12(g) of the Act:

 

**CommonStock, $.001 par value**

 

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

 

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

 

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

 

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

 

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

 

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

 

The issuer’s revenues for the year ended December 31, 2007 were approximately$30,491,000.

 

The aggregate market value of Common Stock of the Registrant as of February 29,2008, based upon the average bid and asked price of $4.00 as reported on theOTC Bulletin Board on that date, was $35,386,496.00.  There were 8,846,624 shares of Common Stockof the Registrant deemed outstanding as of said date.

 

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

 

 

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**TRANS WORLD CORPORATIONFORM 1O-KSB**

** **

**TABLE OF CONTENTS**

 
| ** **   | ** ** | ** **                                                  | **Page** |
|--------------|------------|-------------------------------------------------------------|----------|
| PART I. |       |                                                        |     |
|         | Item  1.   | Description  of Business                                    | 1        |
|         |       | General  Development of Business                            | 1        |
|         |       | Corporate  Information                                      | 1        |
|         |       | Description  of Business                                    | 2        |
|         |       | Market  Overview and Competition                            | 2        |
|         |       | Costs  and Effects of Environmental Compliance              | 2        |
|         |       | Our Facilities                                              | 2        |
|         |       | Future  Operations                                          | 3        |
|         |       | Long Range  Objective                                       | 3        |
|         |       | Marketing                                                   | 3        |
|         |       | Regulations  and Licensing                                  | 3        |
|         |       | Application  of Future or AdditionalRegulatory Requirements | 4        |
|         |       | Taxation                                                    | 4        |
|         |       | Our Employees                                               | 5        |
|         | Item  2.   | Description  of Property                                    | 5        |
|         |       | Our  Corporate Offices                                      | 5        |
|         |       | Czech Republic                                              | 5        |
|         | Item 3.    | Legal  Proceedings                                          | 6        |
|         | Item 4.    | Submission of Matters to a  Vote of Security Holders        | 6        |

 

ii

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**TABLE OF CONTENTS**

 
| ** **    | ** ** | ** **                                                                                                         | **Page** |
|---------------|------------|--------------------------------------------------------------------------------------------------------------------|----------|
| PART II. |       |                                                                                                               |     |
|          | Item  5.   | Market for Common Equity and  Related Stockholder Matters andSmall Business Issuer  Purchases of Equity Securities | 6        |
|          |       | $3.5  million Capital Raise                                                                                        | 6        |
|          |       | Dividends                                                                                                          | 7        |
|          | Item 6.    | Management’s  Discussion and Analysis or Plan of Operations                                                   | 7        |
|          |       | Forward-Looking  Statements                                                                                        | 7        |
|          |       | Exchange  Rates                                                                                                    | 7        |
|          |       | Critical Accounting  Policies                                                                                      | 8        |
|          |       | Results of Operations                                                                                              | 8        |
|          |       | Our  Business Units:                                                                                               | 9        |
|          |       | Ceska, Czech Republic                                                                                              | 9        |
|          |       | Rozvadov, Czech Republic                                                                                           | 9        |
|          |       | Route 59, Czech Republic                                                                                           | 9        |
|          |       | Route 55, Czech Republic                                                                                           | 10       |
|          |       | Liquidity and  Capital Resources                                                                                   | 10       |
|          |       | Our Plan of Operations and Important Factors to  Consider:                                                         | 11       |
|          |       | Continued Profitability                                                                                            | 11       |
|          |       | Need to  Diversify                                                                                                 | 11       |
|          |       | Taxation of Gaming Operations                                                                                      | 11       |
|          |       | Dependence upon Key Personnel                                                                                      | 12       |
|          |       | Need for Additional Financing                                                                                      | 12       |
|          |       | International  Activities                                                                                          | 12       |
|          |       | Climate Impact                                                                                                     | 12       |
|          |       | Licensing  and Regulation                                                                                          | 12       |
|          |       | Liability  Insurance                                                                                               | 13       |
|          |       | No Dividends                                                                                                       | 13       |
|          |       | Possible Adverse Effect of Issuance of Preferred Stock                                                             | 13       |
|          |       | Dilutive Effect of Warrants and Options                                                                            | 13       |
|          | Item 7.    | Financial  Statements                                                                                              | 14       |
|          | Item 8.    | Changes In  and Disagreements with Accountants on Accounting and Financial Disclosure                              | 35       |
|          | Item 8A.   | Controls and  Procedures                                                                                           | 35       |
|          | Item 8B.   | Other Information                                                                                                  | 36       |

 

iii

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**TABLE OF CONTENTS**

 
| ** **                                 | ** ** | ** **                                                                                                                                            | **Page** |
|--------------------------------------------|------------|-------------------------------------------------------------------------------------------------------------------------------------------------------|----------|
| PART III.                             |       |                                                                                                                                                  |     |
|                                       | Item 9.    | Directors  and Executive Officers, Promoters, Control Persons and Corporate Governance;  Compliance with Section 16(a) of the Exchange Act. | 36       |
|                                       |       | Information about our Board and its Committees:                                                                                                       | 37       |
|                                       |       | Audit Committee                                                                                                                                       | 37       |
|                                       |       | Compensation  Committee                                                                                                                               | 37       |
|                                       |       | Nominating  Committee                                                                                                                                 | 37       |
|                                       |       | Section 16(a) Beneficial Ownership Reporting  Compliance                                                                                    | 38       |
|                                       |       | Code of Ethics                                                                                                                                        | 38       |
|                                       | Item 10.   | Executive  Compensation                                                                                                                               | 38       |
|                                       |       | Compensation Discussion and Analysis                                                                                                                  | 38       |
|                                       |       | Stock Options                                                                                                                                         | 40       |
|                                       |       | Restricted  Stock Awards                                                                                                                              | 40       |
|                                       |       | Deferred  Compensation Plan                                                                                                                           | 41       |
|                                       |       | Compensation Committee Interlocks and Insider  Participation                                                                                          | 42       |
|                                       |       | Summary  Compensation Table                                                                                                                           | 42       |
|                                       |       | Equity  Compensation Plans                                                                                                                            | 43       |
|                                       |       | Outstanding Equity Awards at Fiscal Year-End                                                                                                          | 44       |
|                                       |       | Options Exercised and Stock Vested                                                                                                                    | 44       |
|                                       |       | Nonqualified Deferred Compensation                                                                                                                    | 44       |
|                                       |       | Employment and Change of Control Agreements                                                                                                           | 45       |
|                                       |       | Potential Payments upon Termination of Employment or a  Change in Control                                                                             | 45       |
|                                       |       | Directors’  Compensation                                                                                                                         | 46       |
|                                       |       | Employment/Severance Agreements                                                                                                                       | 47       |
| .                                          | Item 11.   | Security  Ownership of Certain Beneficial Owners and Management and Related Stockholder  Matters                                                      | 48       |
|                                       |       | Subsequent  Event                                                                                                                                     | 49       |
|                                       | Item 12.   | Certain  Relationships and Related Transactions, and Director Independence                                                                            | 50       |
|                                       | Item  l3.  | Exhibits  and Reports on Form 8-K                                                                                                                | 50       |
|                                       |       | (a) Exhibits                                                                                                                                     | 50       |
|                                       | Item 14.   | Principal  Accountant Fees and Services                                                                                                               | 50       |
|                                       |       |                                                                                                                                                  |     |
| EXHIBITS  INDEX                            | 52         |
| SIGNATURES  AND CERTIFICATIONS             | 55         |
| INDEX TO CONSOLIDATED FINANCIAL STATEMENTS | 14         |

 

iv

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**Item 1.  Description of Business.**

 

**General Development of Business**

 

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

 

TheCzech casinos, which conducted business under our brand name, American ChanceCasinos (“ACC”), showcase themes portraying recognizable eras of Americanhistory, and are situated at border locations and draw the majority of theircustomers from Germany and Austria.  Eachof the casinos has a distinctive theme: Pacific South Seas, Chicago in theRoaring 1920’s during Prohibition, New Orleans in the 1920’s, and Miami Beachin the 1950’s.  ACC’s operating strategycenters on differentiating its products from the very formal German andAustrian casinos, and as a result, management has endeavored to create gamingenvironments with casual and exciting atmospheres, emphasizingentertainment.  Further, as part of theACC operating formula, our management strives to uphold the integrity andprofessionalism of our operations as a means to dispel any concerns thatcustomers and governments might have about gambling.

 

OnSeptember 21, 2006, we were selected to manage the Grand Casino Lav andInMotion Nightclub (collectively referred to as the “Grand Casino Lav”),located in the then-newly opened Le Meridien Lav, Split resort in Podstrana,Croatia.  The management agreement withthe Grand Hotel Lav d.o.o., the property owner, provides for a 10-year term,with optional renewal periods of five (5) years each, subject to certainperformance conditions.   In addition tomarketing the casino/nightclub to the hotel guests, ACC targets the localmarket of Split, the second largest city in Croatia, as well as neighboringcountries.

 

As the Grand Casino Lavopened in the last part of December 2006, its income contribution, arisingprimarily from management fees, to our year 2007 operational results was notmaterial.  Thus, all discussions ofoperational performance and results herein are limited to our fully-owned andoperated units in the Czech Republic.

 

Wehave no operating presence in the United States.

 

**Corporate Information**

 

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

 

1

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**Description of Business**

 

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

 

**Market Overview and Competition**

 

Casinosin Germany and Austria have formal atmospheres and an air of exclusivity, whileour casinos offer relaxed but exciting atmospheres, which, for many of ourpatrons, have become a desirable alternative. Further, we have established ACC as a reputable casino company in theCzech Republic through our high customer service standards, professionalservice, and strict adherence to all local gaming regulations.

 

Asof December 31, 2007, four casinos operate in direct competition with ourCeska casino, while one competitor casino operates across the street from ourRozvadov casino.  Route 59 and Route 55each currently has two direct competitors.

 

TheGrand Casino Lav, which opened on December 22, 2006, targets the immediateregion surrounding Split, a resort destination and a United NationsEducational, Scientific and Cultural Organization (“UNESCO”)-recognized city,as well as neighboring countries.  Thecasino conducts its gaming activities using the Euro (“EUR”) currency, and itsfood and beverage operations in Kunas (“HRK”), the Croatian currency.  The Grand Casino Lav has two competitors.

 

**Costs and Effects of Environmental Compliance**

** **

Weincurred no material costs or effects of environmental compliance for the yearended December 31, 2007.

 

**Our Facilities**

** **

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

** **

The Ceska casino, which has a 1920’s Chicago Prohibition Period theme,currently has 15 gaming tables, including seven card tables and eight roulettetables.  Through 2007, Ceska added, inaggregate, 14 new video slot machines, bringing the total to the current 66.

 

The Rozvadov casino, which has a South Pacific theme, currentlyoperates 10 gaming tables, including five card tables and five roulette tables,and 30 video slot machines.

 

Route 59 currentlyincludes 21 gaming tables, which consist of 12 card tables,eight roulette tables, and a Slingshot multi-win roulette table.  In 2007, the casino added 32 new video slotmachines, bringing the total to 102 for the year ended December 31,2007.  The unit underwent expansion andrenovation projects in 2006 and 2007, the scope of which included: (i) refurbishment of theexisting space, including reception reconfiguration; (ii) expansion of the

 

2

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building,including an extension of the gaming floor area; (iii) construction of alarge, centrally located stage; (iv) introduction of a second bar; (v) introductionof a New Orleans in the 1920’s theme throughout the casino; (vi) expansionof the parking area to accommodate up to 220 cars; (vii) reconstruction ofits gaming floor roof; and (viii) a revolving door entrance.

 

Route 55, ACC’slargest casino, features a Miami Beach “Streamline Moderne” style, reminiscentof Miami Beach in the early 1950’s.  Thetwo-story casino offers 23 tables, including 12 card tables, 10 roulettetables, a Slingshot multi-win roulette, and 120 video slot machines, 20 ofwhich were added in 2007.  On themezzanine level, the casino offers a full-service, Italian restaurant, an openbuffet area, a VIP lounge, and a VIP gaming room equipped with four gamingtables, which are included in the 23 table count.

 

The Grand CasinoLav currently has 15 gaming tables, including six roulette tables, nine cardtables, two of which are in the VIP dedicated area, 60 video slot machines, apanoramic mezzanine bar with a view overlooking the gaming floor, and afull-service nightclub.

 

**FutureOperations**

 

As a complement to our gaming operations, we have recently commenced construction of theSavannah Hotel, a 77-room, four-star hotel, the first for the Company.  The hotel will be connected to our Route 59casino with the joint facility’s main restaurant linking the twobuildings.  The hotel, set to open inwinter of 2008-2009, is expected to contribute incremental cash and ultimatelyenhance the Company’s overall results.

 

**Long Range Objectives**

 

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

 

# **Marketing**

# ** **

In the year ended December 31, 2007, we increased our marketingand promotional programs in an ongoing effort to secure and enhance ourcompetitive position in the markets that we serve.  The casino event calendars were broadened toattract new players, while focusing on higher player-incentive games to retainexisting players.  In addition, wecontinued our sponsorships of several regional, athletic teams and were abenefactor in several community and social projects during the year, as a wayto further promote our image and positive contribution to the communities inwhich we operate.  We also continued ourpopular, ethnic-themed and holiday-related parties, which feature liveentertainment, raffles and complimentary grand buffets.  Further, we aggressively targeted key citiesin our media campaigns, most notably Vienna, Linz and Regensburg and the areassurrounding these cities.

 

In addition to our own marketing programs in Croatia, we received thepartial benefit of a larger marketing presence via the Le Meridieninternational hotel brand recognition and their marketing plans.

 

# **Regulations and Licensing**

# ** **

In 1998, the Czech Republic House of Deputies passed an amendment tothe gaming law, which restricted foreign ownership of casino licenses.  In response, we restructured our Czechsubsidiaries and legal entities to comply with 

 

3

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the amendment and were subsequently granted 10-year gaming licenses orpermits, which are expiring near the end of 2008.  The permits are amended each time we add anew operating branch or unit.  Theno-cost permits are renewable by application and must be granted as long as thecorporate casino operator meets the following conditions: (i) maintain therequired basic capital, which includes our gaming bonds of 26 million CzechKoruna (“CZK”) for our gaming subsidiaries; (ii) designated as a public orprivate stock company (“a.s.”); (iii) whose executive board members ofsaid Czech stock company have no criminal records; and (iv) have nooverdue taxes.   As we currently meet allof these criteria, we believe that the permits can be renewed withoutdifficulty. We will begin the application process in the third quarter of 2008.

 

**Application of Future orAdditional Regulatory Requirements**

 

In the future, we may seek the necessary licenses, approvals andfindings of suitability in other jurisdictions, where the Company plans toconduct business.  However, there can beno assurance that such licenses, approvals or findings of suitability will beobtained or will not be revoked, suspended or conditioned, or that we will beable to obtain the necessary approvals for our future activities.

 

**Taxation**

 

*Value Added Taxes*

 

In conformity with the European Union (“EU”) taxationlegislation, when the Czech Republic joined the EU in 2004, its value added tax(“VAT”) increased from 5% to 19%, effective January 2004, for all intra-EUgenerated purchases. All non-EU generated purchases were impacted by identicalVAT increases, beginning in May 2004. Unlike in other industries, VATs are not recoverable for gamingoperations.

 

*GamingTaxes*

 

The majority ofour revenues are from gaming operations in the Czech Republic, which aresubject to gaming taxes and therefore have no corporate income tax liabilitiesunder Czech law.  For the year ended December 31,2007, our gaming taxes averaged approximately 13.8% of gross gaming revenues,which comprised of live (table) games and slot games revenues.  For live games revenue, the applicable taxesand fees are: (i) a 10% administration tax; (ii) a 1% statesupervision fee; and (iii) a charity contribution (tax) according to theformula below, net of the aforementioned taxes and fees, totaling 11%.  For slot games revenue, the applicableassessment is the charity tax for publicly beneficial, cultural, sporting andwelfare purposes, net of local (municipality) administration and slot state-licensingfees.

 

Gaming taxespayable are due to the Czech Ministry of Finance annually in April, whilecharity contributions payable are generally due quarterly, but have no stateddue dates.  The Company may allocate thischarity contribution to local schools, sports clubs, subsidized or volunteeredorganizations, and municipalities in which each of the Company’s casinosoperate.  The distribution is subject tothe prior approval of the Czech Ministry of Finance.

 

For the year endedDecember 31, 2007, slot revenues of each of our three slot subsidiarycompanies were subject to the 8% charity tax tier.  Charity tax rates apply according to thefollowing table:

** **
| ** **             | ** ** | **net of applicable gaming  taxes and fees, in CZK** | ** ** |
|------------------------|------------|-----------------------------------------------------------------------------------------|------------|
| ** **             | ** ** | **Up to 50 million**                                                     | ** ** | **Up to**

**100 million** | ** ** | **Above**

**100 million ** | ** ** |
|                   |       |                                                                                    |       |   |   |   |   |
| Charity  tax rates (1) |       | 6                                                                                       | %          | 8 | % | 10 | % |

 

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(1) Theapplicable charity tax rate is determined separately on annual live game andslot game revenues, net of applicable gaming taxes and fees as generated byeach of our Czech legal entities.

 

4

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*CorporateIncome Taxes*

 

OurCzech subsidiaries’ gaming revenues are subject to applicable gaming taxes,however our Czech holding companies’ revenues, net of exempted revenues such asdividends, are subject to Czech corporate income tax, which was 24% for year2007.  Additionally, ournon-gaming revenues are also subject to the Czech corporate income tax.

 

Therecan be no assurances that tax rates, fees, or other payments applicable to ourgaming operations will not be increased in the future.  (See also Note 2 and 11 of the Notes to theConsolidated Financial Statements)

 

**OurEmployees**

 

As of December 31, 2007, we had a total of 639 full-timeemployees, including 124 in our casino in Ceska Kubice, 69 in our casino inRozvadov, 189 in Hate at Route 59, 152 in Dolni Dvoriste at Route 55, 16 in ourshared services office located above the Ceska casino, all of which are in theCzech Republic, and five in the Company’s headquarters in New York.  Under the Grand Casino Lav managementcontract, we supervised 84 employees of Grand Hotel Lav, d.o.o..  We believe that our employee relations are excellent.

 

**Item 2.Description of Property.**

 

**Our Corporate Offices**

 

Ourcorporate offices are located at 545 Fifth Avenue, Suite 940, New York,New York, occupying 1,626 square feet of office space pursuant to the renewalof our five-year lease at the base rental rate of $5,114 per month, expiring inMarch 2010.

 

**Czech Republic**

 

We lease the casino facility in Ceska Kubice.  The casino building lease expires in 2010,with option to renew on negotiable terms. ** **We also own a parcel of land inFolmava, Czech Republic in the same region as the existing Ceska casino.  We lease accommodations for staff in CeskaKubice, Hate (Route 59) and in Dolni Dvoriste (Route 55).

 

InRozvadov, we own the casino building and an adjacent facility for staffaccommodations.

 

On December 20, 2006, we completed the final payment on the buyoutof the Route 59 building lease.  Thebuilding lease buyout of €1.6 million, or approximately $2.1 million, using the2006 year-end exchange rate, was financed by a loan from a local bank in theCzech Republic.

 

In April 2002, we acquired a parcel ofland in Dolni Dvoriste, Czech Republic. On this parcel, we constructed our fourth and largest casino, Route 55,which was completed and opened in December 2004.  The casino’s construction was financed inpart through a 60 million CZK (or approximately $3.3 million using 2007year-end exchange rate) loan with GE Capital Bank a.s..  The loan was subsequently paid off by fundsdrawn against the CommerzbankAktiengesellschaft, pobocka Praha (“Commerzbank”)revolving credit facility that we secured in July 2007 (see “Item 6.Management’s Discussion and Analysis or Plan of Operations - Liquidity andCapital Resources”).

 

None of our real property holdings’ book valueindividually exceeded 10% of the Company’s total assets as of December 31,2007.

 

5

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

 

We are oftensubject to various contingencies, the resolutions of which, our managementbelieves will not have a material adverse effect on our consolidated financialposition or results of operations.  We are notcurrently involved in any material legal proceeding nor were we involved in anymaterial litigation during the year ended December 31, 2007, or throughthe date of this filing.

 

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

 

No matters were submitted to a vote of security holders during thefourth quarter of the fiscal year covered by this Report.

 

## **PART II**

## ** **

**Item 5.****Market for Common Equity and Related Stockholder Matters and SmallBusiness Issuer Purchases of Equity Securities.**

 

Our$00.001 par value, common stock (“Common Stock”) is quoted on the OTC BulletinBoard under the symbol TWOC.OB.

 

## **$3.5 million Capital Raise**

## ** **

In August 2007,we completed the private placement of 1,000,000 shares of our Common Stock withseveral “accredited investors,” as defined in Rule 501(a) ofRegulation D promulgated under the Securities Act of 1933, for an aggregatepurchase price of $3.5 million or $3.50 per share (the “$3.5 million CapitalRaise”), the then quoted market price of our Common Stock.  Associated costs of the $3.5 million CapitalRaise, which included finder’s fees, and legal and accounting fees, totaledapproximately $216,000 and have been reflected as a reduction of additionalpaid-in capital.  The gross proceeds fromthe transaction were earmarked for the initial phase construction of theSavannah Hotel, adjacent our Route 59 Casino.

 

As of February 29,2008, our stock price was $4.00.  Thefollowing table sets forth the high and low prices of the Company’s CommonStock for fiscal years 2006 and 2007 as quoted on OTC Bulletin Board. All suchquotations reflect inter-dealer prices, without retail mark up, mark down or commission,and may not represent actual transactions.

 
| **Common Stock** | ** ** | **High** | ** ** | **Low** | ** ** |
|-----------------------|------------|----------|------------|---------|------------|
| **2006**              |       |     |       |    |       |
| First  Quarter        |       | $        | 3.50       |    | $          | 2.00 |   |
| Second  Quarter       |       | $        | 2.90       |    | $          | 2.35 |   |
| Third  Quarter        |       | $        | 2.80       |    | $          | 1.92 |   |
| Fourth  Quarter       |       | $        | 2.85       |    | $          | 2.05 |   |
| **2007**              |       |     |       |    |       |
| First  Quarter        |       | $        | 4.60       |    | $          | 2.32 |   |
| Second  Quarter       |       | $        | 4.80       |    | $          | 3.40 |   |
| Third  Quarter        |       | $        | 4.65       |    | $          | 3.55 |   |
| Fourth  Quarter       |       | $        | 5.20       |    | $          | 3.60 |   |

 

Asof February 29, 2008, there were (a) 8,846,624 outstanding shares ofCommon Stock held of record by approximately 103 holders; (b) outstandingoptions to purchase an aggregate of 429,135 shares of Common Stock; (c) outstanding$1.00 Series C Warrants to purchase an aggregate of 4,378 shares of CommonStock issued in

 

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connection with a private placement of CommonStock and associated warrants in March 1998; (d) outstanding $1.00 Series Gwarrants to purchase an aggregate 1,251 shares of Common Stock.

 

**Dividends**

 

We have not paid any dividends to date on our Common Stock, and do notexpect to declare or pay any dividends in the foreseeable future. We intend toretain future earnings, if any are generated, for investment in our currentoperations and for future project developments.

 

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

 

**Forward-Looking Statements**

 

This Form 10-KSB contains certainforward-looking statements. For this purpose, any statements contained in this Form 10-KSBthat are not statements of historical fact may be deemed to be forward-lookingstatements. Without limiting the foregoing, words such as “may,” “will,” “expects,”“believes,” “anticipates,” “estimates,” or “intends” or comparable terminologyare intended to identify certain forward-looking statements in this and othersections of the Form 10-KSB.  Thesestatements, by their nature, involve substantial risks and uncertainties, bothknown and unknown, and actual results may differ materially from any futureresults expressed or implied by such forward-looking statements.  We undertake no obligation to publicly updateor revise any forward-looking statements whether as a result of newinformation, future events or otherwise. (See also “Plan of Operations and Important Factors to Consider” section below)

 

**Exchange Rates**

 

Due to the fact that our operations arelocated overseas, the results of the Company are subject to the impact offluctuations in foreign exchange rates. In May 2004, the Czech Republic joined the European Union (“EU”),but still has not adopted the Euro (“EUR”) currency.  Thus, our Czech operations conduct businessin EURs and CZKs, the country’s local currency. We do not hedge our currency holdings.

 

The impact of exchange rate fluctuations canbe measured through a comparison of the rates of exchange for these twocurrencies to the USD, which are depicted on a quarterly average basis of dailyrates, showing the strengthening trend of the CZK currency versus the USD andEUR currencies, in the following table.

 
| **Period**                     | ** ** | **USD** | ** ** | **CZK  2007** | ** ** | **CZK  2006** | ** ** | **EUR  2007** | ** ** | **EUR  2006** | ** ** |
|--------------------------------|------------|---------|------------|---------------|------------|---------------|------------|---------------|------------|---------------|------------|
|                           |       |    |       |          |       |          |       |          |       |          |       |
| January through  March    |       | $       | 1.00       |          | 21.4284    |          | 23.8236    |          | 0.7634     |          | 0.8319     |   |
| April through  June       |       | $       | 1.00       |          | 20.9937    |          | 22.6462    |          | 0.7419     |          | 0.7965     |   |
| July through  September   |       | $       | 1.00       |          | 20.3716    |          | 22.2697    |          | 0.7280     |          | 0.7845     |   |
| October through  December |       | $       | 1.00       |          | 18.5515    |          | 21.7878    |          | 0.6907     |          | 0.7760     |   |

 

The balance sheet totals of our foreignsubsidiaries at December 31, 2007 were converted to USDs using theprevailing interbank exchange rates, as found at www.oanda.com, which aredepicted in the following table.

 
| **As Of**         | ** ** | **USD** | ** ** | **CZK** | ** ** | **EUR** | ** ** |
|------------------------|------------|---------|------------|---------|------------|---------|------------|
| December 31, 2007 |       | $       | 1.00       |    | 18.1103    |    | 0.6794     |   |
|                        |            |         |            |         |            |         |            |  |

 

7

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**Critical Accounting Policies**

 

Our management has identified the following as critical accountingpolicies that affect our consolidated financial statements.

 

*Goodwill*

 

Goodwillrepresents the excess of the cost of our Czech subsidiaries over the fair valueof their net assets at the date of acquisition, which consists of only theCeska and Rozvadov casinos.  UnderStatement of Financial Accounting Standards (“SFAS”) No. 142, goodwill isno 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.  The impairment assessmentrequires us to compare the fair value of our Czech Republic “reporting unit,”comprised of our Ceska and Rozvadov casinos, to its carrying value (the netequity of the Company) to determine whether there is an indication that animpairment exists.  The fair value of theCzech Republic reporting unit is determined through a combination of appraisalsof the Company’s real property and a multiple of earnings before interest,taxes, depreciation and amortization (“EBITDA”), which was based upon our experienceand data from independent, third parties. As required by SFAS No. 142, we performed the periodic fair-valuebased testing of the carrying value of goodwill related to our Czech Republicreporting unit, during the second quarter of 2007 and 2006, and determined thatgoodwill was not impaired and therefore that no reporting of impairment losseswas warranted.   There were no indicatorsof impairment present during the third and fourth quarters of 2007, thereforewe determined that there was no impairment of goodwill at December 31,2007.

 

**Results of Operations**

 

The following discussion and analysis relates to our consolidatedfinancial condition and results of operations for the years ended December 31,2007 and 2006.

 

**Year Ended December 31, 2007 Compared toYear Ended December 31, 2006**

 

(in thousands)

 
| ** **                                  | ** ** | **Year Ended**             | ** ** | ** ** | ** ** | **Year Ended**             | ** ** |
|---------------------------------------------|------------|---------------------------------|------------|------------|------------|---------------------------------|------------|
| ** **                                  | ** ** | **December 31, 2006** | ** ** | **Change** | ** ** | **December 31, 2007** | ** ** |
| ** **                                  | ** ** | ** **                      | ** ** | ** ** | ** ** | ** **                      | ** ** |
| Net income                                  |       | $                               | 2,027      |       |       |                            |       |   |
| Revenues                                    |       |                            |       | $          | 4,275      |                            |       |   |
| Cost of revenues                            |       |                            |       | (1,922     | )          |                            |       |
| Depreciation and amortization               |       |                            |       | (371       | )          |                            |       |
| Selling, general and administrative         |       |                            |       | (1,082     | )          |                            |       |
| Interest expense, net                       |       |                            |       | (130       | )          |                            |       |
| Foreign currency transaction gain and other |       |                            |       | 1          |       |                            |       |
| Foreign income taxes                        |       |                            |       | (84        | )          |                            |       |
| Net income                                  |       |                            |       | $          | 687        |                            | $          | 2,714 |   |
|                                             |            |                                 |            |            |            |                                 |            |  |  |  |

 

In the year ended December 31,2007, we achieved a 16.3%, or approximately $4.3 million, improvement onrevenues of $30.5 million versus $26.2 million for the year ended December 31,2006. This improvement was largely the result of major revenue increases at ourtwo largest casinos, Route 55 and Route 59, which, in turn, were based on thestrength of higher attendance and superior win percentages.

 

Our Company’s costof revenues increased by $1.9 million or 13.0%, over the prior year, mainlyfrom incremental costs associated with business volume increases at Route 55and Route 59.  Other factors that alsocontributed to the 

 

8

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increase in costof revenues included greater amenity expenses related to the Company’saggressive promotional and player benefit programs and higher volume-drivenlabor costs.  In 2007, our slot lease expenses were approximately $1,873 versus $2,316in 2006.

 

Depreciation andamortization expense increased by $371,000, or 45.2%, in year 2007 versus theprior year, due primarily to the added asset value from the extension andrenovation work at Route 59.

 

Our selling,general and administrative expenses increased by approximately $1.0 million, or12.9%, in year 2007 in comparison to those of 2006, in large part, as a resultof the following:  (i) approximately$303,000 in costs associated with securing the approximately $8.3 million Commerzbankrevolving credit facility; (ii) higher marketing and promotionalexpenditures to increase and retain market share, including the reintroductionof Route 59 to the Vienna market; and (iii) stock compensation expense ofapproximately $144,000, for the fair value of stock options awarded to keymanagement employees.

 

Net interestexpense increased by $130,000, or 56.5%, in 2007 versus the prior year duemainly to interest on the balance drawn against the Commerzbank revolvingcredit facility and to the escalated interest rate, per the terms of theReplacement Notes (See Note 4 of the Notes to the Consolidated FinancialStatements).

 

Our foreign incometaxes on one of our Czech holding company, 21st Century Resortsa.s., of approximately $84,000 include $60,000 in deferred income taxes.

 

Accordingly, weachieved a net income improvement of $687,000, or 33.9%, on approximately $2.7million for the year ended December 31, 2007, versus a net income ofapproximately $2.0 million for the year ended December 31, 2006.

 

**Our Business Units:**

 

***Ceska, Czech Republic***

 

For the year 2007, Ceska posted a modest 3% revenue improvement over2006, due to a 11% slot revenue improvement, despite a 14% drop in live gameattendance.  Win percentage (“WP”), orthe revenue retention percentage of total drop, edged higher by 0.6 percentagepoints (“ppts”).  Operating expenses wereup by 2.1% versus the same period in 2006, while overhead expenses were up by20.6%, largely from higher marketing and promotional expenditures.

 

***Rozvadov, Czech Republic***

 

For 2007 versus 2006, a 16% improvement in drop per head (“DpH”),the per guest average money value of gaming chips purchased, compensatedsomewhat for the 18% drop in attendance for Rozvadov.  2007 total revenue was flat to 2006.  Operatingexpenses increased 10.2% from 2006, notably in payroll, while overhead expensessaw a 2% rise in the current year.

 

***Route 59, Czech Republic***

 

2007was a recovery year for Route 59, as live game attendance rebounded 9% over2006, as a result of an improved product, which was supported by capitalinvestments made to further enhance those done through the 2006 CapitalImprovement Program.  These improvementsincluded the reconstruction of the gaming roof and improved décor andlighting.  For 2007, the unit posted a30% improvement in slot revenues, when compared to 2006.  We invested significantly to promote andreintroduce the casino to its local and Vienna markets, thereby increasingdirect marketing costs over the prior year by 41%.  We strongly believe that this investment hadan immediate positive impact and will continue to beneficially impact the unit.

 

9

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***Route 55, Czech Republic***

 

Businessat Route 55 continued to grow substantially in 2007, as live game attendanceincreased by 24% over the prior year, compensating for the lower DpH,contributing to a 8% live game revenue improvement.  However, it was slot revenues that made thesignificant difference, increasing 76% over 2006’s level.  As a result, total revenue increased by 35%over 2006.  Operating and overheadexpenses, as percentages of total revenue, decreased by 5.7 ppts and 3.4 ppts,respectively, when compared to 2006. Thus, this unit’s earnings in 2007 doubled those of 2006.

 

***GrandCasino Lav, Croatia***

** **

Theperformance results in 2007 of the Grand Casino Lav were less than expected,but not unusual, as 2007 was the first full year of operation for theunit.  An operating loss was anticipated,as was the case for the Company’s Route 55 in its first year of operation threeyears ago.  In 2007, the casino focusedits efforts to establish itself in its market and against its competitors.

 

**Liquidity and Capital Resources**

 

At December 31, 2007, our Company had a workingcapital surplus of approximately $4.0 million versus a working capital deficitof $2.6 million at December 31, 2006, in large part due to a cash infusionin August 2007 fromthe private placement of the $3.5 million Capital Raise of the Company’s CommonStock, as well as to continued earnings fromits operations.

 

OnJuly 23, 2007, we established a 24-month, secured, revolving creditfacility (150 million CZK, or approximately $8.3 million), that will be usedfor operations and general corporate purposes, including development.  The credit facility, which is secured by ourRoute 55 casino building and related land, has been made available throughCommerzbank Aktiengesellschaft, pobocka Praha, and requires quarterly testingand compliance with certain financial covenants, following our U.S. regulatoryfilings.  We are in full compliance withthe credit facility’s financial covenants up to and including the year ended December 31,2007.  The credit facility also includesan option, exercisable by the Company two months prior to full-term maturity,to extend the term for an additional 12 months, with all other provisions,including the rate of interest, remaining constant.  The interest, in conjunction with eachrequested drawdown term of either 1-month, 3-months, or 6-months, is calculatedusing the corresponding Prague Interbank Offered Rate (“PRIBOR”), plus 400basis points, based on a 360-day calendar year. As of December 31, 2007, we had drawn an aggregate of 90 millionCZK, or approximately $5.1 million, of which a large portion was used to payoff the Company’s existing long term debt.

 

Further, as a complement to our gaming operations, we began construction of the Savannah Hotel, a77-room, four-star hotel, the first for the Company.  The hotel will be connected to our Route 59casino with the joint facility’s main restaurant linking the twobuildings.  The hotel, set to open winterof 2008-2009, is expected to contribute incremental cash and ultimately enhancethe Company’s overall results.  There canbe no assurances that our management’s projections will be realized.

 

10

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We are also obligated under various contractual commitments over thenext three years.  The following is asummary of our five-year commitments as of December 31, 2007:

 
| **(in thousands)**          | ** ** | ** ** | ** **  | **Less than** | ** ** | ** **         | ** ** | ** **         | ** **  | **After**        | ** ** |
|----------------------------------|------------|------------|-------------|--------------------|------------|--------------------|------------|--------------------|-------------|------------------|------------|
| **Contractual Obligations** | ** ** | **Total**  | ** **  | **1 Year**    | ** ** | **1-3 Years** | ** ** | **4-5 Years** | ** **  | **5 Years** | ** ** |
| Long-term, unsecured debt, U.S.  |       | $          | 1,550       |               | $          | —             |       | $                  | 1,550       |             | $          | — |   | $ | — |   |
| Long-term, secured debt, foreign |       | 5,111      |        |               |       | 5,111              |       |               |        |             |       |
| Operating leases                 |       | 821        |        | 383                |       | 438                |       |               |        |             |       |
| Employment agreements            |       | 400        |        | 400                |       |               |       |               |        |             |       |
| Total contractual obligations    |       | $          |  7,882 |               | $          |  783          |       | $                  |  7,099 |             | $          |  — |   | $ |  — |   |
|                                  |            |            |             |                    |            |                    |            |                    |             |                  |            |  |  |  |  |  |  |  |  |  |  |

 

Our managementbelieves that our cash resources at December 31, 2007 and anticipated cashto be provided by 2008 operations will be sufficient to fund our activities forthe year ending December 31, 2008.

 

**Our Plan of Operations and Important Factorsto Consider:**

 

We will continue to develop marketing and operational strategiesdesigned to increase attendance and revenues at our existing locations in theCzech Republic, while striving to minimize costs, through cost-sharing allianceswith non-competing businesses, where advantageous.  We will also employ this formula inthe Grand Casino Lav, our newest unit in Split, Croatia in an effort to build asolid customer base from the local and regional markets.  Further, we willplace additional focus on developing marketing strategies that willspecifically target the significant summer tourist market in that region.

 

***Need to Diversify***

 

At this time, our operations are primarily located in the CzechRepublic.  We are currently seeking to developor acquire additional interests in gaming operations and hotels in Europe.  However, there can be no assurance that wewill be able to develop or acquire such new operations in the future.

 

***Taxation of Gaming Operations***

 

Gaming operators are typically subject to significant taxes, which mayincrease at any time. Any material increase in these taxes or fees wouldadversely affect our results of operations. The Czech Republic currently has anumber of laws related to various taxes imposed by governmental authorities.Applicable taxes include VAT, gaming tax, charity contribution tax, and payroll(social) taxes.  Tax declarations,together with other legal compliance areas (for example, customs and currencycontrol matters) are subject to review and investigation by a number ofauthorities, which are authorized by law to impose fines, penalties andinterest charges, may create tax risks. We believe that we 

 

11

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have adequately provided for our Czech tax liabilities. (See also Note11 of the “Notes to the Consolidated Financial Statements”)

 

***Dependence upon Key Personnel***

 

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

 

***Need for Additional Financing***

 

Although we have achieved positive net income for the fifth consecutiveyear, we, pursuant to our growth strategies, require additional debt and/orequity financing for the acquisition and development of other businesses.  In this regard, our ability to obtainadditional financing has been improved significantly as a result of thefollowing: (i) our recapitalization in 2003, which effectively reduced ourthen existing debt burden by approximately 80%; (ii) our ability to obtainthe GE Capital Bank a.s. loan for the construction of Route 55; (iii) thesecuring of the Commerzbank revolving credit facility; and by (iv) twocapital raises, the $4.75 million capital raise in December 2005 and the$3.5 million Capital Raise in August 2007 (collectively referred to as the“Two Capital Raises”).  Despite theseimprovements, there can be no assurance that such financing will continue to beavailable on terms favorable to us or at all.

 

***International Activities***

 

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

 

***Climate Impact***

 

As the majority of our clientele travel from German and Austrian borderregions, we are highly dependent on the volume and frequency of these players’visitations, which impact our operating revenues.  Wintry and icy climate conditions on theroads to our casinos can serve to drastically reduce the number ofvisitations.  On the other hand, warm andfavorable outdoor weather can also divert players to alternative activities,such as family outings and picnics.  Thefrequency and strength of any of these aforementioned climate conditions couldhave a material adverse effect on our results of operations.

 

***Licensingand Regulation***

 

Our operations are subject to regulation by each federal and localjurisdiction in which we operate. Each of our officers may be subject to strictscrutiny and approval from the gaming commission or other regulatory body ofeach jurisdiction in which we conduct gaming operations.

 

12

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*** ***

***Liability Insurance***

 

We currently maintain, and intend to continue to maintain, generalliability insurance in each of those locations in which we operate. 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***

 

We have not paid any dividends to date on our Common Stock, and do notexpect to declare or pay any dividends in the foreseeable future. We intend to retainfuture earnings, if any are generated, for investment in our current operationsand for future project developments.

 

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

 

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

 

***Dilutive Effect of Warrants andOptions***

 

As of February 29, 2008, warrants exercisable for a total of 5,629shares of Common Stock and options for 429,135 shares of Common Stock areoutstanding, which, if all were exercised, would represent 4.7% of the 9,281,388shares of Common Stock that would be outstanding.  The issuance of such securities would have adilutive effect on any earnings per share that we may generate when theearnings per share are evaluated on a fully diluted basis.

 

13

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

 

The following items are included in this Report:

 

Consolidated Financial Statements

 
| Report of Independent Registered Public  Accounting Firm                                                     | 15    |
|--------------------------------------------------------------------------------------------------------------|-------|
| Consolidated Balance Sheets, for  December 31, 2007 and 2006                                            | 16    |
| Consolidated Statements of Income and  Comprehensive Income, for Years Ended December 31, 2007 and 2006 | 17-18 |
| Consolidated Statements of Stockholders’  Equity, for Years Ended December 31, 2007 and 2006       | 18    |
| Consolidated Statements of Cash Flows, for  Years Ended December 31, 2007 and 2006                      | 19    |
| Notes to Consolidated Financial Statements                                                                   | 20-34 |

 

14

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REPORTOF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

To the Board of Directors and StockholdersTrans World Corporation

 

 

We have audited the accompanying consolidatedbalance sheets of Trans World Corporation and Subsidiaries (collectively, the “Company”)as of December 31, 2007 and 2006, and the related consolidated statementsof income and comprehensive income, stockholders’ equity and cash flows foreach of the years then ended.  Theseconsolidated financial statements are the responsibility of the Company’smanagement.  Our responsibility is toexpress an opinion on these consolidated financial statements based on ouraudits.

 

We conducted our auditsin accordance with the standards of the Public Company Accounting OversightBoard (United States).  Those standardsrequire that we plan and perform the audits to obtain reasonable assuranceabout whether the financial statements are free of material misstatement.  The Company is not required to have, nor werewe engaged to perform, an audit of its internal control over financialreporting. Our audits included consideration of internal control over financialreporting as a basis for designing audit procedures that are appropriate in thecircumstances, but not for the purpose of expressing an opinion on theeffectiveness of the Company’s internal control over financial reporting.Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supportingthe amounts and disclosures in the financial statements, assessing theaccounting principles used and significant estimates made by management, aswell as evaluating the overall financial statement presentation. We believethat our audits provide a reasonable basis for our opinion.

 

In our opinion, theconsolidated financial statements referred to above present fairly, in allmaterial respects, the financial position of Trans World Corporation andSubsidiaries as of December 31, 2007 and 2006, and the results of theiroperations and their cash flows for each of the years then ended, in conformitywith accounting principles generally accepted in the United States of America.

 

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

 

Roseland, New JerseyMarch 11, 2008

 

15

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###### ** **

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

CONSOLIDATEDBALANCE SHEETS

December 31, 2007 and 2006(in thousands, except for share data)

 
| ** **                                                                                                                         | ** ** | **December 31, 2007** | ** ** | **December 31, 2006** | ** ** |
|------------------------------------------------------------------------------------------------------------------------------------|------------|---------------------------------|------------|---------------------------------|------------|
| **ASSETS**                                                                                                                         |       |                            |       |                            |       |
| **CURRENT ASSETS:**                                                                                                                |       |                            |       |                            |       |
| Cash                                                                                                                               |       | $                               | 8,315      |                            | $          | 3,266 |   |
| Prepaid expenses                                                                                                                   |       | 437                             |       | 704                             |       |
| Notes receivable, current portion                                                                                                  |       | 969                             |       | 223                             |       |
| Other current assets                                                                                                               |       | 247                             |       | 592                             |       |
|                                                                                                                               |       |                            |       |                            |       |
| **Total current assets**                                                                                                           |       | 9,968                           |       | 4,785                           |       |
| ** **                                                                                                                         |       |                            |       |                            |       |
| **PROPERTY AND EQUIPMENT****,**less accumulated depreciation of $6,663 and $5,254, as  of December 31, 2007 and 2006, respectively |       | 23,747                          |       | 18,099                          |       |
| ** **                                                                                                                         |       |                            |       |                            |       |
| **OTHER ASSETS:**                                                                                                                  |       |                            |       |                            |       |
| Goodwill                                                                                                                           |       | 6,696                           |       | 5,815                           |       |
| Notes receivable, less current portion                                                                                             |       | 551                             |       | 713                             |       |
| Deposits and other assets                                                                                                          |       | 2,126                           |       | 1,814                           |       |
|                                                                                                                               |       |                            |       |                            |       |
| **Total other assets**                                                                                                             |       | 9,373                           |       | 8,342                           |       |
|                                                                                                                               |       |                            |       |                            |       |
|                                                                                                                               |       | $                               | 43,088     |                            | $          | 31,226 |   |
|                                                                                                                               |       |                            |       |                            |       |
| **LIABILITIES  AND STOCKHOLDERS’ EQUITY**                                                                                     |       |                            |       |                            |       |
| ** **                                                                                                                         |       |                            |       |                            |       |
| **CURRENT LIABILITIES:**                                                                                                           |       |                            |       |                            |       |
| Long-term debt, current maturities                                                                                                 |       | $                               | —     |                            | $          | 604 |   |
| Accounts payable                                                                                                                   |       | 884                             |       | 1,904                           |       |
| Interest payable                                                                                                                   |       | 78                              |       | 72                              |       |
| Czech tax accrual                                                                                                                  |       | 3,381                           |       | 3,328                           |       |
| Accrued expenses and other current  liabilities                                                                                    |       | 1,610                           |       | 1,497                           |       |
|                                                                                                                               |       |                            |       |                            |       |
| **Total current liabilities**                                                                                                      |       | 5,953                           |       | 7,405                           |       |
| ** **                                                                                                                         |       |                            |       |                            |       |
| **LONG-TERM LIABILITIES:**                                                                                                         |       |                            |       |                            |       |
| Long-term debt, less current maturities                                                                                            |       | 6,661                           |       | 2,849                           |       |
| Other liabilities                                                                                                                  |       | 455                             |       | 718                             |       |
|                                                                                                                               |       |                            |       |                            |       |
| **Total long-term liabilities**                                                                                                    |       | 7,116                           |       | 3,567                           |       |
| ** **                                                                                                                         |       |                            |       |                            |       |
| **COMMITMENTS AND CONTINGENCIES**                                                                                                  |       |                            |       |                            |       |
| ** **                                                                                                                         |       |                            |       |                            |       |
| **STOCKHOLDERS’ EQUITY:**                                                                                                     |       |                            |       |                            |       |
| ** **                                                                                                                         |       |                            |       |                            |       |
| Preferred stock, $.001 par value, 4,000,000  shares authorized, none issued                                                        |       |                            |       |                            |       |
| Common stock $.001 par value, 9,500,000  shares authorized, 8,840,870 and 7,840,870 shares, issued and outstanding,  respectively  |       | 9                               |       | 8                               |       |
| Additional paid-in capital                                                                                                         |       | 51,147                          |       | 47,720                          |       |
| Accumulated other comprehensive income                                                                                             |       | 9,953                           |       | 6,330                           |       |
| Accumulated deficit                                                                                                                |       | (31,090                         | )          | (33,804                         | )          |
|                                                                                                                               |       |                            |       |                            |       |
| **Total stockholders’ equity**                                                                                                |       | 30,019                          |       | 20,254                          |       |
|                                                                                                                               |       |                            |       |                            |       |
| ** **                                                                                                                         |       | $                               | 43,088     |                            | $          | 31,226 |   |
|                                                                                                                                    |            |                                 |            |                                 |            |  |  |  |  |

 

*See accompanying notes to consolidated financial statements*

 

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**TRANS WORLD CORPORATION AND SUBSIDIARIES**

CONSOLIDATEDSTATEMENTS OF INCOME

ANDCOMPREHENSIVE INCOMEYears Ended December 31, 2007 and 2006(in thousands, except for share data)

 
| ** **                                       | ** ** | **Years Ended December 31,** | ** ** |
|--------------------------------------------------|------------|---------------------------------------------|------------|
| ** **                                       | ** ** | **2007**                                    | ** ** | **2006** | ** ** |
|                                             |       |                                        |       |   |   |
| **REVENUES**                                     |       | $                                           | 30,491     |   | $ | 26,216 |   |
|                                             |       |                                        |       |   |   |
| **OPERATING EXPENSES:**                          |       |                                        |       |   |   |
| Cost of revenues                                 |       | 16,668                                      |       | 14,746 |   |
| Depreciation and amortization                    |       | 1,192                                       |       | 821 |   |
| Selling, general and administrative              |       | 9,477                                       |       | 8,395 |   |
|                                             |       | 27,337                                      |       | 23,962 |   |
|                                             |       |                                        |       |   |   |
| **INCOME FROM OPERATIONS**                       |       | 3,154                                       |       | 2,254 |   |
|                                             |       |                                        |       |   |   |
| **OTHER INCOME (EXPENSES):**                     |       |                                        |       |   |   |
| Interest income                                  |       | 41                                          |       | 50 |   |
| Interest expense                                 |       | (401                                        | )          | (280 | ) |
| Foreign exchange gain                            |       | 4                                           |       | 3 |   |
|                                             |       | (356                                        | )          | (227 | ) |
|                                             |       |                                        |       |   |   |
| **INCOME BEFORE INCOME TAXES**                   |       | 2,798                                       |       | 2,027 |   |
|                                             |       |                                        |       |   |   |
| Foreign income taxes                             |       | (84                                         | )          |   |   |
|                                             |       |                                        |       |   |   |
| **NET INCOME**                                   |       | 2,714                                       |       | 2,027 |   |
|                                             |       |                                        |       |   |   |
| **Other comprehensive income,**foreign  currency |       |                                        |       |   |   |
| translation adjustments, net of tax              |       | 3,623                                       |       | 2,870 |   |
|                                             |       |                                        |       |   |   |
| **TOTAL COMPREHENSIVE INCOME**                   |       | $                                           | 6,337      |   | $ | 4,897 |   |
|                                             |       |                                        |       |   |   |
| **WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:**  |       |                                        |       |   |   |
| Basic                                            |       | 8,209,678                                   |       | 7,840,870 |   |
| Diluted                                          |       | 8,321,503                                   |       | 7,875,681 |   |
|                                             |       |                                        |       |   |   |
| **EARNINGS PER COMMON SHARE:**                   |       |                                        |       |   |   |
| Basic                                            |       | $                                           | 0.33       |   | $ | 0.26 |   |
| Diluted                                          |       | $                                           | 0.33       |   | $ | 0.26 |   |

 

*See accompanying notes to consolidated financial statements*

 

17

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**TRANS WORLD CORPORATION AND SUBSIDIARIES**

CONSOLIDATEDSTATEMENTS OF STOCKHOLDERS’ EQUITY

Years Ended December 31, 2007 and 2006(in thousands, except for share data)

 
| ** **                                                                | ** ** | ** **            | ** ** | ** **  | ** ** | **Additional**    | ** ** | **Accumulated  Other** | ** ** | ** **             | ** ** | **Total**  | ** ** |
|---------------------------------------------------------------------------|------------|-----------------------|------------|-------------|------------|-------------------|------------|------------------------|------------|------------------------|------------|------------|------------|
| ** **                                                                | ** ** | **Common Stock** | ** ** | **Paid-in** | ** ** | **Comprehensive** | ** ** | **Accumulated**        | ** ** | **Stockholders’** | ** ** |
| ** **                                                                | ** ** | **Shares**            | ** ** | **Amount**  | ** ** | **Capital**       | ** ** | **Income**             | ** ** | **Deficit**            | ** ** | **Equity** | ** ** |
| **Balances,** January 1, 2006                                             |       | 7,840,869             |       | $           | 8          |              | $          | 47,743                 |       | $                      | 3,460      |       | $          | (35,831 | )  | $ | 15,380 |   |
|                                                                      |       |                  |       |        |       |              |       |                   |       |                   |       |       |       |
| **Reissuance of stock certificate (impact of  100-1 reverse adjustment)** |       | 1                     |       |        |       |              |       |                   |       |                   |       |       |       |
|                                                                      |       |                  |       |        |       |              |       |                   |       |                   |       |       |       |
| **Private placement, residual costs**                                     |       |                  |       |        |       | (74               | )          |                   |       |                   |       | (74        | )          |
|                                                                      |       |                  |       |        |       |              |       |                   |       |                   |       |       |       |
| **Issuance of stock options**                                             |       |                  |       |        |       | 51                |       |                   |       |                   |       | 51         |       |
|                                                                      |       |                  |       |        |       |              |       |                   |       |                   |       |       |       |
| **Foreign currency translation adjustment,  net of tax**                  |       |                  |       |        |       |              |       | 2,870                  |       |                   |       | 2,870      |       |
|                                                                      |       |                  |       |        |       |              |       |                   |       |                   |       |       |       |
| **Net income**                                                            |       |                  |       |        |       |              |       |                   |       | 2,027                  |       | 2,027      |       |
|                                                                      |       |                  |       |        |       |              |       |                   |       |                   |       |       |       |
| **Balances,**December  31, 2006                                           |       | 7,840,870             |       | 8           |       | 47,720            |       | 6,330                  |       | (33,804                | )          | 20,254     |       |
|                                                                      |       |                  |       |        |       |              |       |                   |       |                   |       |       |       |
| **Private placement, net of costs**                                       |       | 1,000,000             |       | 1           |       | 3,283             |       |                   |       |                   |       | 3,284      |       |
|                                                                      |       |                  |       |        |       |              |       |                   |       |                   |       |       |       |
| **Issuance of stock options**                                             |       |                  |       |        |       | 144               |       |                   |       |                   |       | 144        |       |
|                                                                      |       |                  |       |        |       |              |       |                   |       |                   |       |       |       |
| **Foreign currency translation adjustment,  net of tax**                  |       |                  |       |        |       |              |       | 3,623                  |       |                   |       | 3,623      |       |
|                                                                      |       |                  |       |        |       |              |       |                   |       |                   |       |       |       |
| **Net income**                                                            |       |                  |       |        |       |              |       |                   |       | 2,714                  |       | 2,714      |       |
|                                                                      |       |                  |       |        |       |              |       |                   |       |                   |       |       |       |
| **Balances****,** December 31, 2007                                       |       | 8,840,870             |       | $           | 9          |              | $          | 51,147                 |       | 9,953                  |       | $          | (31,090    | ) | $ | 30,019 |   |
|                                                                           |            |                       |            |             |            |                   |            |                        |            |                        |            |            |            |  |  |  |  |  |

 

*See accompanying notes to consolidated financial statements*

 

18

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**TRANS WORLD CORPORATION AND SUBSIDIARIES**

CONSOLIDATEDSTATEMENTS OF CASH FLOWS

Years Ended December 31,2007 and 2006(in thousands, except for share data)

 
| ** **                                                                         | ** ** | **Years Ended December 31,** |       |
|------------------------------------------------------------------------------------|------------|------------------------------|------------|
| ** **                                                                         | ** ** | **2007**                     | ** ** | **2006** |   |
| ** **                                                                         | ** ** | ** **                   | ** ** | ** ** |   |
| **CASH FLOWS FROM OPERATING ACTIVITIES:**                                          |       |                         |       |   |   |
| Net income                                                                         |       | $                            | 2,714      |   | $ | 2.027 |   |
| Adjustments to reconcile net income to net  cash provided by operating activities: |       |                         |       |   |   |
| Depreciation and amortization                                                      |       | 1,192                        |       | 821 |   |
| Stock-based compensation expense                                                   | ** ** | 144                          | ** ** | 51 |   |
| Changes in operating assets and  liabilities:                                      |       |                         | ** ** |   |   |
| Prepaid expenses and other current assets                                          |       | (286                         | )          | (385 | ) |
| Deposits and other assets                                                          |       | 1,183                        |       |   |   |
| Accounts receivable                                                                | ** ** | (633                         | )          | (279 | ) |
| Accounts payable                                                                   | ** ** | (1,144                       | )          | (123 | ) |
| Interest payable                                                                   |       | 5                            |       | 22 |   |
| Czech tax accrual                                                                  |       | (402                         | )          | 64 |   |
| Accured expenses and other current  liabilities                                    |       | (270                         | )          | 83 |   |
| **NET CASH PROVIDED BY OPERATING ACTIVITIES**                                      |       | 2,503                        |       | 2,281 |   |
|                                                                               |       |                         |       |   |   |
| **CASH FLOWS FROM INVESTING ACTIVITIES:**                                          |       |                         |       |   |   |
| Renovation and purchases of property and  equipment                                |       | (3,547                       | )          | (4,013 | ) |
| Proceeds from the sale of equipment                                                |       |                         |       | 408 |   |
| Payments for deposits and other assets                                             |       |                         |       | (488 | ) |
| Issuance of notes receivable                                                       |       |                         |       | (657 | ) |
| Payments received from notes receivable                                            |       |                         |       |   |   |
| **NET CASH USED IN INVESTING ACTIVITIES:**                                         |       | (3,547                       | )          | (4,750 | ) |
|                                                                               |       |                         |       |   |   |
| **CASH FLOWS FROM FINANCING ACTIVITIES:**                                          |       |                         |       |   |   |
| Proceeds from credit line                                                          |       | 5,111                        |       |   |   |
| Proceeds from private placement                                                    |       | 3,500                        |       |   |   |
| Payments of long-term debt                                                         |       | (2,172                       | )          | (1,122 | ) |
| Payments of financing costs                                                        |       | (303                         | )          | (74 | ) |
| Payments of issuance costs                                                         |       | (216                         | )          |   |   |
| N**ET CASH PROVIDED BY  (USED IN) FINANCING ACTIVITIES**                           |       | 5,920                        |       | (1,196 | ) |
| ** **                                                                         |       |                         |       |   |   |
| **EFFECT OF EXCHANGE RATE CHANGES ON CASH**                                        |       | 173                          |       | 336 |   |
|                                                                               |       |                         |       |   |   |
| **NET INCREASE (DECREASE) IN CASH**                                                |       | 5,049                        |       | (3,329 | ) |
|                                                                               |       |                         |       |   |   |
| **CASH:**                                                                          |       |                         |       |   |   |
| Beginning of year                                                                  |       | 3,266                        |       | 6,595 |   |
|                                                                               |       |                         |       |   |   |
| End of year                                                                        |       | $                            | 8,315      |   | $ | 3,266 |   |
|                                                                               |       |                         |       |   |   |
| **SUPPLEMENTAL DISCLOSURES OF CASH FLOW  INFORMATION:**                            |       |                         |       |   |   |
| Cash paid during the year for interest                                             |       | $                            | 390        |   | $ | 211 |   |

 

*See accompanying notes to consolidated financial statements*

 

19

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**TRANS WORLD CORPORATION AND SUBSIDIARIES**

NOTES TOCONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except for share data)

 

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

 

***Nature of Business***

 

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

 

The Company owns and operates four casinos in the Czech Republic (“CZ”),and manages, under contract, one casino and nightclub in Croatia.  Two of the Czech casinos are located in thewestern part of the CZ, close to the border of Germany.  The larger of the two, located in CeskaKubice (“Ceska”), currently has 15 gaming tables and 66 slot machines. Thesmaller, Rozvadov (“Rozvadov”), located in the town of Rozvadov, currently has10 gaming tables and 30 slot machines. The other two Czech casinos are located in the southern part of the CZ,close to the Austrian border.  The largerof these two, “Route 55”, located in Dolni Dvoriste, now has 23 gaming tablesand 120 slot machines.  The other casino,“Route 59”, which recently underwent major building expansion and renovationwork, is located in Hate, near Znojmo, and currently has 21 gaming tables and102 slot machines.

 

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

 

As the Grand Casino Lav opened in the last part of December 2006,its management fees income contribution to the year 2007 operational resultswas not material.  Thus, all discussionsof operational performance and results herein are limited to the Company’sfully-owned and operated units in the Czech Republic.

 

***Liquidity***

 

At December 31, 2007, the Company had a workingcapital surplus of approximately $4,015 versus a working capital deficit of$2,620 at December 31, 2006, in large part due to a cash infusion in August 2007 from the privateplacement of $3,500 (the “$3.5 million Capital Raise”) of the Company’s CommonStock, as well as to continued growth at itsRoute 55 casino.

 

OnJuly 23, 2007, the Company established a 24-month, secured, revolvingcredit facility (150,000 Czech Korunas (“CZK”), or approximately $8,300), thatwill be used for operations and general corporate purposes, includingdevelopment.  The credit facility, whichis secured by the Company’s Route 55 casino building and related land, has beenmade available through Commerzbank Aktiengesellschaft, pobocka Praha, requiresquarterly testing and compliance with certain financial covenants, followingthe Company’s U.S. regulatory filings.  TheCompany is in full compliance with the credit facility’s financial covenants upto and including the year ended December 31, 2007.  The credit facility also includes an option,exercisable by the Company two months prior to full-term maturity, to extendthe term for an additional 12 months, with all other provisions, including therate of interest, remaining constant. The interest, in conjunction with each requested drawdown term of either1-month, 3-months, or 6-

 

20

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months,is calculated using the corresponding Prague Interbank Offered Rate (“PRIBOR”),plus 400 basis points, based on a 360-day calendar year.  As of December 31, 2007, the Company haddrawn an aggregate of 90,000 CZK, or approximately $5,100, of which a largeportion was used to pay off the Company’s existing long term debt.

 

Further, as a complement to its gaming operations, the Company began construction of theSavannah Hotel, a 77-room, four-star hotel, the first for the Company.  The hotel will be connected to its Route 59casino with the joint facility’s main restaurant linking the twobuildings.  The hotel, set to open inwinter of 2008-2009, is expected to contribute incremental cash and ultimatelyenhance the Company’s overall results. There can be no assurances that management’s projections will berealized.

 

The Company’s management believes that its cash resources at December 31,2007 and anticipated cash to be provided by 2008 operations are sufficient tofund its activities for the year ending December 31, 2008.

 

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

 

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

 

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

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

 

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

 

***Goodwill ***- Goodwill represents the excess of the cost ofthe Company’s Czech subsidiaries over the fair value of their net assets at thedate of acquisition, which consists of only the Ceska and Rozvadovcasinos.  Under Statement of FinancialAccounting Standards (“SFAS”) No. 142, goodwill is no longer subject toamortization over its estimated useful life; rather, goodwill is subject to atleast an annual assessment for impairment, applying a fair-value basedtest.  The impairment assessment requiresthe Company to compare the fair value of its Czech Republic “reporting unit,”which is comprised of its Ceska and Rozvadov casinos, and the Company’sreporting unit as defined under SFAS No. 142, to its carrying value (thenet equity of the Company) to determine whether there is an indication that animpairment exists.  The fair value of theCzech Republic reporting unit is determined through a combination of recentappraisals of the Company’s real property and a multiple of earnings beforeinterest, taxes, depreciation and amortization (“EBITDA”), which was based onthe Company’s experience and data from independent, third parties.  As required by SFAS No. 142, the Companyperformed, during the second quarter of 2007 and 2006, the periodic fair-valuebased testing of the carrying value of goodwill related to its Czech Republicreporting unit, and determined that goodwill was not impaired.  There were no indicators of impairmentpresent during the third and fourth quarters of 2007, therefore we determinedthat there was no impairment of goodwill at December 31, 2007.

 

21

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***Comprehensive Income*****—**The Company complieswith SFAS No. 130, “Reporting Comprehensive Income.”  SFAS No. 130 establishes rules forreporting and display of comprehensive income (loss) and its components.  SFAS No. 130 requires the Company’schange in the foreign currency translation adjustments to be included in othercomprehensive income (loss).

 

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

 

The impact offoreign currency translation on goodwill is presented below:

 
| ** **                                                                                                            | ** ** | **Applicable**                              | ** ** | ** **   | ** ** | ** ** | ** ** | ** ** | ** ** |
|-----------------------------------------------------------------------------------------------------------------------|------------|---------------------------------------------|------------|--------------|------------|------------|------------|------------|------------|
| ** **                                                                                                            | ** ** | **Foreign Exchange**                   | ** ** | ** **   | ** ** | ** ** | ** ** | ** ** | ** ** |
| **As of December 31, 2007 (in thousands, except FX)**                         | ** ** | **Rate (“FX”)**** (2)** | ** ** | **Goodwill** | ** ** | **Method** | ** ** |
|                                                                                                                  |       |                                        |       |         |       |       |       |       |       |
| Residual balance, as of January 1, 2003 (in  USD) (1)                                                                 |       |                                        |       | USD          |       | 3,579      |       | (A)        |       |
|                                                                                                                  |       |                                        |       |         |       |       |       |       |       |
| USD residual balance (A), translated at  June 30, 1998   (date of acquisition), at FX rate of: (ie. 2003 CZK Balance) |       | 33.8830                                     |       | CZK          |       | 121,267    |       |       |       |
|                                                                                                                  |       |                                        |       |         |       |       |       |       |       |
| 2003 CZK balance, translated to USD:                                                                                  |       |                                        |       |         |       |       |       |       |       |
| At December 31, 2007 at FX of:                                                                                        |       | 18.1103                                     |       | USD          |       | 6,696      |       | (B)        |       |
|                                                                                                                  |       |                                        |       |         |       |       |       |       |       |
| **Net increase (step-up) to Goodwill  (adjustment made to Translation Adjustment in consolidation):**                 |       |                                        |       |         |       | 3,117      |       | (B-A)      |       |
|                                                                                                                  |       |                                        |       |         |       |       |       |       |       |
| **  Increase to Goodwill is booked  as follows:**                                                           |       |                                        |       |         |       |       |       |       |       |
| Step-up for the year ended December 31,  2003 at avg. FX of                                                           |       | 28.2170                                     |       | USD          |       | 1,080      |       |       |       |
| Step-up for the year ended December 31,  2004 at avg. FX of                                                           |       | 25.7251                                     |       | USD          |       | 765        |       |       |       |
| (Step-down) for the year ended December 31,  2005 at avg. FX of                                                       |       | 23.9905                                     |       | USD          |       | (482       | )          |       |       |
| Step-up for the year ended December 31,  2006 at avg. FX of                                                           |       | 22.6253                                     |       | USD          |       | 873        |       |       |       |
| Step-up for the year ended December 31,  2007 at avg. FX of                                                           |       | 20.3285                                     |       | USD          |       | 881        |       |       |       |
|                                                                                                                  |       |                                        |       |         |       | 3,117      |       |       |       |

 

----

(1)             Goodwillwas amortized over 15 years until the Company started to comply with SFAS No.142. This balance represent the remaining, unamortized goodwill, after animpairment charge taken prior to January 1, 2003.

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

 

***EarningsPer Common Share* **- The Company complies with SFAS No. 128, “Earnings per Share,”which states that basic earningsper common share are computed by dividing net income by the weighted averagenumber of common shares outstanding during the period.  Diluted earnings per common share incorporatethe dilutive effect of common stock equivalents on an average basis during theperiod.  The Company’s common stockequivalents currently include stock options and warrants.  Unexercised warrants and stock options topurchase shares of Common Stock as of December 31, 2007 and 2006 areapproximately 430,517 and 261,117 respectively.

 

***Income Taxes* ****- **The Company complies with SFAS No. 109, “Accountingfor Income Taxes,” which requires an asset and liability approach to financialaccounting and reporting for income taxes. Deferred income tax assets and liabilities are computed for differencesbetween the financial statement and the tax bases of assets and liabilitiesthat will result in future taxable or deductible amounts, based on enacted taxlaws and rates applicable to the periods in which the differences are expectedto affect taxable income.  Valuationallowances are established, when necessary, to reduce deferred income taxassets to the amount expected to be realized. In July 2006, theFinancial Accounting Standards Board issued Interpretation No. 48, “Accountingfor Uncertainty in Income Taxes” (FIN 48). FIN 48 creates a single accounting and disclosure model for uncertaintax positions, provides guidance on the minimum threshold that a taxuncertainty is required to meet before it can be recognized in the financialstatements and applies to all tax positions taken by a company, both thosedeemed to be routine as well as those for which there may be a high degree ofuncertainty.

 

22

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FIN48 establishes a two-step approach for evaluating tax positions.  The first step, recognition, occurs when acompany concludes (based solely on the technical aspects of the tax matter)that a tax position is more likely than not to be sustained on examination by ataxing authority.  The second step,measurement, is only considered after step one has been satisfied and measuresany tax benefit at the largest amount that is deemed more likely than not to berealized upon ultimate settlement of the uncertainty.  Tax positions that fail to qualify forinitial recognition are recognized in the first subsequent interim period thatthey meet the more likely than not standard, when they are resolved throughnegotiation or litigation with the taxing authority or upon the expiration ofthe statute of limitations. Derecognition of a tax position previously recognized would occur when acompany subsequently concludes that a tax position no longer meets the morelikely than not threshold of being sustained. FIN 48 also significantly expands the financial statement disclosurerequirements relating to uncertain tax positions. FIN 48 is effective forfiscal years beginning after December 15, 2006.  **Theadoption of the provisions of FIN 48 did not have a material impact on theCompany’s financial position, results of operations and cash flows.  During the year ended December 31, 2007,the Company recognized no adjustments for uncertain tax provisions.**

 

***Revenue Recognition*****- **TheCompany complies with the SEC’s Staff Accounting Bulletin (“SAB”) No. 101,“Revenue Recognition in Financial Statements, as amended by SAB 104.”  Casino revenue is defined as the net win fromgaming activities, which is the difference between gaming wagers and the amountpaid out to patrons.  Revenues generatedfrom ancillary services, including sales of food, beverage, cigarettes, andcasino logo merchandise are recognized at the time the related services areperformed and represent less than three percent of total revenues.

 

***PromotionalAllowances* ****- **Promotionalallowances primarily consist of food and beverages furnished gratuitously tocustomers.  For the years ended December 31,2007 and 2006, revenues do not include the retail amount of food and beverageof $3,234 and $2,675, respectively, provided gratuitously to customers.  The cost of these items of $1,264 and $997,respectively, is included in cost of revenues.

 

***ExternalAdvertising*****-** The Company complies with the accounting andreporting requirements of the AICPA Statement of Position (SOP) 93-7, “Reportingon Advertising Costs.”  Externaladvertising expenses are charged to operations as incurred and were $1,055 and$924 for the years ended December 31, 2007 and 2006, respectively.

 

***Fair Valueof Financial Instruments* ****- **Thefair values of the Company’s assets and liabilities that qualify as financialinstruments under SFAS No. 107, “Disclosures about Fair Value of FinancialInstruments,” approximate their carrying amounts presented in the accompanyingconsolidated balance sheets at December 31, 2007 and 2006.

 

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

 

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

 

23

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

 

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

 

The assumptions and resulting fair values ofstock options granted in the year ended December 31, 2007 are as follows:

 
| ** **                                                | ** ** | **2007** | ** ** |
|-----------------------------------------------------------|------------|----------|------------|
|                                                      |       |     |       |
| Average expected term (in years)                          |       | 7.0      |       |
| Average risk-free interest rate                           |       | 4.5      | %          |
| Average expected volatility                               |       | 43.4     | %          |
| Dividend yield                                            |       | 0.0      | %          |
| Weighted average fair value per share of  options granted |       | $        | 2.04       |   |
|                                                           |            |          |            |  |

 

In 2007 and 2006, the Company expensedapproximately $144 and $51, respectively for granted options to certain key managementemployees, which was recognized in its selling, general and administrativeexpenses in the consolidated statements of income.

 

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

 

24

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In September 2006,the FASB issued SFAS No. 158, “Employers’ Accounting for Defined BenefitPension and Other Postretirement Plans”, an amendment of FASB Statements No. 87,88, 106, and 132(R). SFAS No. 158 requires an employer to: (a) recognizein its statement of financial position an asset for a plan’s overfunded statusor a liability for a plan’s underfunded status; (b) measure a plan’sassets and its obligations that determine its funded status as of the end ofthe employer’s fiscal year (with limited exceptions); (c) recognizechanges in the funded status of a defined benefit postretirement plan in theyear in which the changes occur. Those changes will be reported incomprehensive income of a business entity and in changes in net assets of anot-for-profit organization. The requirement to recognize the funded status ofa benefit plan and the disclosure requirements are effective for us for thefiscal year ending on June 30, 2007. The requirement to measure planassets and benefit obligations would become effective for the Company for thefiscal year ending June 30, 2009. The Company does not expect the newstandard to have any material impact on its financial position and results ofoperations.

 

InFebruary 2007, the FASB issued SFAS No. 159, “The Fair Value Optionfor Financial Assets and Financial Liabilities”. This Statement permitsentities to choose to measure many financial assets and financial liabilitiesat fair value. Unrealized gains and losses on items for which the fair valueoption has been elected are reported in earnings. SFAS No. 159 iseffective for fiscal years beginning after November 15, 2007. The Companyis currently assessing the impact of SFAS No. 159 on its financialposition and results of operations.

 

InDecember 2007, the FASB issued Statement of Financial Accounting StandardsNo. 141 (revised 2007), “Business Combinations” (“FAS 141R”). FAS 141Restablishes principles and requirements for how the acquirer in a businesscombination recognizes and measures in its financial statements the fair valueof identifiable assets acquired, the liabilities assumed and any noncontrollinginterest in the acquiree at the acquisition date. FAS 141R determines whatinformation to disclose to enable users of the financial statements to evaluatethe nature and financial effects of the business combination. FAS No. 141Ris effective for fiscal years beginning after December 15, 2008. We arecurrently evaluating the impact of adopting FAS 141R on our consolidatedresults of operations and financial condition and plan to adopt it as requiredin the first quarter of fiscal 2009.

 

InDecember 2007, the FASB issued SFAS 160, “Noncontrolling Interests in ConsolidatedFinancial Statements” (“FAS 160”), an amendment of Accounting Research BulletinNo. 51, “Consolidated Financial Statements” (“ARB 51”).  FAS 160 establishes accounting and reportingstandards for the noncontrolling interest in a subsidiary and for thedeconsolidation of a subsidiary. Minority interests will be recharacterized asnoncontrolling interests and will be reported as a component of equity separatefrom the parent’s equity, and purchases or sales of equity interests that donot result in a change in control will be accounted for as equity transactions.In addition, net income attributable to the noncontrolling interest will beincluded in consolidated net income on the face of the income statement andupon a loss of control, the interest sold, as well as any interest retained,will be recorded at fair value with any gain or loss recognized in earnings.This pronouncement is effective for fiscal years beginning after December 15,2008. We are currently evaluating the impact of adopting FAS 160 on ourconsolidated results of operations and financial condition and plan to adopt itas required in the first quarter of fiscal 2009.

 

25

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

 

At December 31, 2007 and 2006, propertyand equipment consists of the following:

 
| ** **                                      | ** ** | **2007**   | ** ** | **2006**   | ** ** |
|-------------------------------------------------|------------|------------|------------|------------|------------|
| Land                                            |       | $          | 3,842      |       | $          | 2,440 |   |
| Building and improvements                       |       | 17,752     |       | 11,828     |       |
| Furniture, fixtures and other equipment         |       | 8,816      |       | 9,085      |       |
| ** **                                      | ** ** | ** ** | ** ** | ** ** | ** ** |
|                                            |       | 30,410     |       | 23,353     | ** ** |
| Less accumulated depreciation and  amortization |       | (6,663     | )          | (5,254     | )          |
| ** **                                      | ** ** | ** ** | ** ** | ** ** | ** ** |
|                                            |       | $          | 23,747     |       | $          | 18,099 | ** ** |

 

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

 

At December 31, 2007 and 2006, long-termdebt consists of the following:

 
| ** **                          | ** ** | **2007**   | ** ** | **2006**   | ** ** |
|-------------------------------------|------------|------------|------------|------------|------------|
| Replacement Notes (a)               |       | $          | 1,550      |       | $          | 1,550 |   |
| Route 55 construction term loan (b) |       |       |       | 1,903      |       |
| Revolving credit facility (c)       |       | 5,111      | ** ** | ** ** | ** ** |
| ** **                          | ** ** | ** ** | ** ** | ** ** | ** ** |
|                                |       | $          | 6,661      |       | $          | 3,453 | ** ** |

 

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| (a)    |   | The  unsecured, Replacement Notes, issued in June 2002, have seven-year terms  and have tiered, simple interest rates: 6% for the first three years, 9.3% for  the fourth year and 10% for the fifth through the seventh year. For the first  three years of the term, one half of the accrued annual interest was payable,  beginning on July 26, 2004, with the accrued interest balance payable at  maturity. For the last four years of the term, all annual interest accrued  will be payable in full on June 26 of each of these last four years. The  Notes mature on June 26, 2010.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
| (b)    |   | In December 2004, the Company drew 10,000 CZK  (approximately $408) from the 60,000 CZK, 5.95% interest per annum, 58-month  term loan it received from GE Capital Bank a.s. for the construction of Route  55. The loan was subsequently paid off by funds drawn from the Company’s  established credit facility (see following footnote (c)).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
| (c)    |   | On  July 23, 2007, the Company established a 24-month, secured, revolving  credit facility (150,000 CZK, or approximately $8,300), that will be used for  operations and general corporate purposes, including development. The credit  facility, which is secured by the Company’s Route 55 casino building and  related land, has been made available through Commerzbank Aktiengesellschaft,  pobocka Praha, requires quarterly testing and compliance with certain  financial covenants, following the Company’s U.S. regulatory filings. The  credit facility also includes an option, exercisable by the Company two  months prior to full-term maturity, to extend the term for an additional 12  months, with all other provisions, including the rate of interest, remaining  constant. The interest, in conjunction with each requested drawdown terms of  either 1-month, 3-months, or 6-months, is calculated using the corresponding  PRIBOR, plus 400 basis points, based on a 360-day calendar year. As of  December 31, 2007, the Company had drawn an aggregate of 90,000 CZK, or  approximately $5,111, which was largely used to pay off the GE Capital Bank  a.s. loan above and to fund the first phase of construction of the Savannah  Hotel, the Company’s new hotel adjacent to its Route 59 casino. |

 

26

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Principal payments due on long-term debt areas follows:

 
| **Year ending December 31,** | ** ** | ** ** | ** ** |
|---------------------------------------------|------------|------------|------------|
| 2008                                        |       | $          | —     |   |
| 2009                                        |       |       |       |
| 2010*                                       |       | 6,661      |       |
|                                        |       |       |       |
|                                        |       | $          | 6,661      |   |

 

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* The Company may draw up to the available limit of itsrevolving credit facility prior to payoff, thereby increasing long-term debt .

 

**NOTE 5**- **Accrued Expenses and OtherCurrent Liabilities**

 

At December 31, 2007 and 2006, accrued expenses and other currentliabilities consist of the following:

 
| ** **                                       | ** ** | **2007** | ** ** | **2006** | ** ** |
|--------------------------------------------------|------------|----------|------------|----------|------------|
| Accrued payroll and related costs                |       | $        | 928        |     | $          | 854 |   |
| Short-term  portion of capital lease obligations |       | 314      |       | 234      |       |
| Operational  accruals                            |       | 368      |       | 277      |       |
| Gaming equipment  purchases                      |       |     |       | 132      |       |
|                                             |       |     |       |     |       |
|                                             |       | $        | 1,610      |     | $          | 1,497 |   |

 

**NOTE 6 -****Commitments andContingencies**

 

***Lease Obligations*****-** The Company isobligated under several operating leases expiring through 2010.  Futureaggregate minimum annual rental payments under all of these leasesfor the three years are as follows:

 
| **Year ending December 31,** | ** ** | ** ** | ** ** |
|-----------------------------------|------------|------------|------------|
| 2008                              |       | $          | 101        |   |
| 2009                              |       | $          | 105        |   |
| 2010                              |       | $          | 51         |   |

 

Rent expense under these operating leases wasapproximately $97 and $97 for the years ended December 31, 2007 and 2006,respectively.

 

The Company is also obligated under certainfive-year, slot equipment operating leases, expiring in 2011 and 2012, whichinclude a monthly fixed rental fee per slot machine, and an option forreplacement to different/newer machine during the term of the lease.  In 2007, the Company’s slot lease expenseswere approximately $1,873 versus $2,316 in 2006, as a result of lower rent permachine, as part of the renegotiated lease completed in June 2006.

 

***EmploymentAgreements*******-** The Company entered into a 2.5 year employmentagreement with its Chief Executive Officer (“CEO”), Mr. Rami S. Ramadan,in 2005, which provides for annual compensation, plus participation in futurebenefit programs and stock options plans. As of December 31, 2007, only $400 of annual compensation, payablein 2008, remains under said employment agreement, excluding any bonus awardsthat may be granted in 2008.

 

Pursuant to this renewal of the employmentagreement with Mr. Ramadan in July 2005, he received a grant ofseven-year options to purchase an aggregate total of 175,000 shares of theCompany’s

 

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Common Stock in allotments of 35,000 sharesper annum over a four-year vesting period. These options are exercisable at prices, depending on point in time,ranging from $2.80 per share on July 1, 2005 to $4.11 per share on January 1,2012.  No vested options have beenexercised by Mr. Ramadan as of December 31, 2007.  Also pursuant to this July 2005employment agreement, upon reaching designated earnings per share targets, Mr. Ramadanwill be granted 75,000 restricted shares of the Company’s Common Stock in25,000 allotments.  None of therestricted shares have been vested to date.

 

On February 4, 2007, Mr. Ramadanwas granted seven year options to purchase 50,000 shares of Common Stock, ofwhich options to purchase 12,500 shares will vest immediately, and the balancewill vest in three equal parts, over a three-year vesting period, on theanniversary of the date of grant.  Theexercise price of these options was set at $3.75 per share, the closing priceon the date of grant.

 

Further, on October 23,2007, pursuant to the Company’s 2004 Equity Incentive Plan, Mr. Ramadanwas granted seven year options to purchase 125,000 shares of Common Stock, withoptions to purchase 25,000 shares to be vested immediately, and the balance tobe vested in four equal parts, over a four-year vesting period, on theanniversary of the date of grant.  Theexercise price of these options is set at $4.85 per share, the closing stockprice on October 23, 2007, and will escalate at 4.2% per annum.

 

***401 (k) andProfit Sharing Plan*****-**The Company maintains a contributory 401(k) plan and a profit sharingplan.  These plans are for the benefit ofall eligible corporate employees, who may have up to 15% of their salarywithheld, not to exceed the maximum federally allowed amount.  The Company makes a voluntary employer-matchingcontribution of 60 cents for each employee dollar contributed, which totaled$37 in 2007 and $51 in 2006.

 

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

 

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

 

***Regulation and Licensing*****-** The Company’s operations are subjectto regulation by each jurisdiction in which it operates or plans tooperate.  Each of the Company’s officersmay be subject to strict scrutiny and approval from a gaming commission oranother regulatory body of each jurisdiction in which the Company may conductgaming operations.

 

In 1998, the Czech Republic’s House of Deputies passed an amendment tothe gaming law, which restricted foreign ownership of casino licenses. Inresponse, the Company restructured its subsidiaries and Czech legal entities tocomply with the amendment and was subsequently granted 10-year gaming licensesthat expire near the end of 2008.  Therecan be no assurance that the authorities in the Czech Republic will not amendthe gaming law as it pertains to foreign ownership of casino licenses.  In the event the gaming laws are amended inthe future, it may have a material adverse effect on the Company’s futureprofitability and operations. Further, there has been increased competition inthe areas where the Company operates because local municipalities no longerhave control over the issuance of casino licenses, thereby effectivelyeliminating the municipal exclusivity that the Company had until December 1998.

 

28

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

 

***Cash*****-** Cash consists of cash in banks and on hand.  The Company maintains its bank accounts 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 $4,557 and $2,927 at December 31, 2007 and 2006,respectively.  The Company has notincurred any losses in such accounts and believes it is not exposed to anysignificant credit risk on cash.

 

**NOTE 8 -****Related Party Transactions**

 

Relatedinterest expense to Value Partners, Ltd., an approximate 38% owner of ourissued and outstanding Common Stock as of December 31, 2007, wasapproximately $0 and $9 for the years ended December 31, 2007 and 2006,respectively.

 

Duringthe year ended December 31, 2007, the Company utilized the services of anattorney who is the brother of the Company’s former managing director of Czechoperations.  Legal fees paid to theattorney during years 2007 and 2006 totaled approximately $7 and $17,respectively.  The Company has not usedsaid attorney’s services since January 2007.

 

**NOTE 9**- **Stockholders’ Equity**

 

InAugust 2007, the Company completed the private placement of 1,000,000shares of its Common Stock with several “accredited investors,” as defined in Rule 501(a) ofRegulation D promulgated under the Securities Act of 1933, for an aggregatepurchase price of $3,500 or $3.50 per share, the then listed closing price ofthe Company’s Common Stock.  Associatedcosts of the $3.5 million Capital Raise, which included finder’s fees, andlegal and accounting fees, totaled approximately $216 and have been reflectedas a reduction of additional paid-in capital. The gross proceeds from the transaction were earmarked for the initialphase construction of the Savannah Hotel adjacent our Route 59 Casino.

 

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

 

***NotesReceivables* –**In connection with the TWC’s management of theGrand Casino Lav and Nightclub, the Company extended three EUR loans to GrandHotel Lav, d.o.o., the owner of the Grand Casino Lav and Nightclub, asfollows:  (i) a three-year, 4.0%interest per annum loan of €568, or approximately $899 using 2007 year-endexchange rates, for the purchases of gaming equipment; (ii) a two-year,non-interest bearing loan of €229, or approximately $359 using 2007 year-endexchange rates, for preopening costs related to the casino and nightclub; and (iii) aone-year (renewable), non-interest bearing loan of €170, or approximately $262using 2007 year-end exchange rates, for working capital.  Management believes the loans are fullycollectible.

 

29

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***RestrictedDeposits*** -  Restricted deposits aggregated 26,000 CZK and24,000 CZK, relating to Czech license bond requirements, for year 2007 and2006, respectively.  Using respectiveyear-end exchange rates, these deposits have been translated to $1,436 and$1,151 at December 31, 2007 and 2006, respectively.

 

***OtherLong-term Liabilities*** - At December 31, 2007 and 2006, otherlong-term liabilities consisted of the following:

 
| ** **                    | ** ** | **2007** | ** ** | **2006** | ** ** |
|-------------------------------|------------|----------|------------|----------|------------|
| Deferred executive incentives |       | $        | —     |     | $          | 150 |   |
| Accrued interest              |       | 141      |       | 141      |       |
| Capitalized  leases           |       | 314      |       | 427      |       |
|                          |       |     |       |     |       |
|                          |       | $        | 455        |     | $          | 718 |   |

 

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

 

In the Czech Republic, gaming income is not subject to corporate incometax.  In lieu of income taxes, gamingincome is subject to other taxes in the Czech Republic, including gaming andcharity taxes, which are primarily based on percentages of gamingrevenues.  Foreign net operating losscarry-forwards (disclosed below) were derived from non-gaming activities andcan only be applied against non-gaming activities.  For the year ended December 31, 2007,one of our Czech holding companies, 21st Century Resorts a.s.incurred approximately $84 of income taxes, of which approximately $60 wasdeferred.

 

At December 31, 2007, the Company had U.S. and foreign netoperating loss carry forwards (“NOL’s”) of approximately $31,421 and $2,141,respectively, available to offset certain future taxes payable.  However, based on limited analysis, thesizable warrant exercise in February 2001 or earlier events may have triggeredsignificant limitations of preexisting U.S. NOL’s, pursuant to Internal RevenueCode Section 382, to the extent that substantially all of the Company’sexisting U.S. NOL’s prior to February 2001, aggregating approximately$15,565, may be significantly limited. The U.S. NOL’s generated subsequent to February 2001, aggregatingapproximately $15,856, resulted in an estimated $6,342 deferred tax asset at December 31,2007 and the foreign NOL resulted in an estimated $514 deferred tax asset at December 31,2007.  A full valuation allowance hasbeen established for these deferred tax assets since its realization isconsidered unlikely.

 

The U.S. NOL’s expire between 2010 and 2026.  The foreign NOL’s expire between 2006 and2010.  During the year ended December 31,2007, approximately $797 of foreign NOL’s expired.  The following table presents the U.S. andforeign components of pretax income before income taxes for the years ended December 31,2007 and 2006:

 
| ** ** | ** ** | **2007** | ** ** | **2006** | ** ** |
|------------|------------|----------|------------|----------|------------|
|       |       |     |       |     |       |
| U.S.       |       | $        | (2,165     | )        | $          | (1,998 | ) |
| Foreign    |       | 4,963    |       | 4,025    |       |
|       |       |     |       |     |       |
|       |       | $        | 2,798      |     | $          | 2,027 |   |

 

The Company’s effective income tax ratediffers from the U.S. federal statutory income tax rate primarily becausegaming income, the Company’s primary revenue source, is not subject to incometax.  Further, the Company’s effectiveincome tax rate differs from the U.S. statutory income tax rate as a result ofthe Company maintaining a full valuation allowance on its NOL’s.

 

30

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

 

***Stock Options Plans***

 

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

 
| ** **             | ** ** | **Number of  Options** | ** ** | **Range of  Exercise Price** | ** ** | **Weighted Average  Exercise Price** | ** ** |
|------------------------|------------|-----------------------------|------------|----------------------------------------|------------|------------------------------------------------|------------|
|                   |       |                        |       |                                   |       |                                           |       |
| Balance outstanding,   |       |                        |       |                                   |       |                                           |       |
| January 1, 2006   |       | 185,360                     |       | $2.00-83.00                            |       | $                                              | 3.41       |   |
|                   |       |                        |       |                                   |       |                                           |       |
| Granted in 2006        |       | 65,375                      |       | 2.50-2.90                              |       | 2.50                                           |       |
| Expired in 2006        |       | (1,000                      | )          | 61.00                                  |       | 61.00                                          |       |
|                   |       |                        |       |                                   |       |                                           |       |
| Balance outstanding,   |       |                        |       |                                   |       |                                           |       |
| December 31, 2006 |       | 249,735                     |       | $2.00-83.00                            |       | $                                              | 3.07       |   |
|                   |       |                        |       |                                   |       |                                           |       |
| Granted in 2007        |       | 175,000                     |       | 3.75-4.85                              |       | 4.54                                           |       |
| Expired in 2007        |       | (5,600                      | )          | 2.50-24.00                             |       | 3.88                                           |       |
|                   |       |                        |       |                                   |       |                                           |       |
| Balance outstanding,   |       |                        |       |                                   |       |                                           |       |
| December 31, 2007 |       | 419,135                     |       | $2.00-83.00                            |       | $                                              | 2.41       |   |
|                   |       |                        |       |                                   |       |                                           |       |
| Exercisable,           |       |                        |       |                                   |       |                                           |       |
| December 31, 2007 |       | 196,635                     |       | $2.00-83.00                            |       | $                                              | 1.77       |   |

 

In each instance, the option exercise priceper share was equal to or above the market value of the underlying stock on thedate of grant.  Options generally expirebetween five and ten years after the date of grant or earlier upon termination,as defined in the plans.

 

31

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Additional information about the Company’soutstanding stock options at December 31, 2007 is as follows:

 
| ** **               | ** ** | **Options Outstanding** | ** ** |
|--------------------------|------------|------------------------------|------------|
| ** **               | ** ** | ** **                   | ** ** | **Weighted** | ** ** | ** ** | ** ** |
| ** **               | ** ** | ** **                   | ** ** | **Average** | ** ** | ** ** | ** ** |
| ** **               | ** ** | ** **                   | ** ** | **Remaining** | ** ** | **Weighted** | ** ** |
| ** **               | ** ** | ** **                   | ** ** | **Contractual** | ** ** | **Average** | ** ** |
| **Range of**        | ** ** | **Number of**           | ** ** | **Life** | ** ** | **Exercise** | ** ** |
| **Exercise Prices** | ** ** | **Shares**                   | ** ** | **(in Years)** | ** ** | **Price** | ** ** |
|                     |       |                         |       |   |   |   |   |
| $0.01 to  $2.00          |       | 75                           |       | 8.00 |   | $ | 2.00 |   |
| $2.01 to $3.00           |       | 61,250                       |       | 5.60 |   | $ | 2.51 |   |
| $3.01 to $3.50           |       | 177,250                      |       | 4.53 |   | $ | 2.00 |   |
| $3.51 to $4.00           |       | 50,425                       |       | 6.10 |   | $ | 3.75 |   |
| $4.01 to $5.00           |       | 126,675                      |       | 6.79 |   | $ | 4.85 |   |
| $5.01 to $10.00          |       | 1,925                        |       | 5.34 |   | $ | 6.44 |   |
| $10.01 to $25.00         |       | 955                          |       | 3.87 |   | $ | 16.85 |   |
| $25.01 to $50.00         |       | 420                          |       | 1.87 |   | $ | 36.60 |   |
| $50.01 to $75.00         |       | 100                          |       | 1.95 |   | $ | 51.00 |   |
| $83.00                   |       | 60                           |       | 1.75 |   | $ | 83.00 |   |
|                     |       |                         |       |   |   |   |   |
|                     |       | 419,135                      |       | 5.56 |   | $ | 2.41 |   |
|                          |            |                              |            |  |  |  |  |  |  |

 

***Warrants***

 

For the years ended December 31, 2007and 2006, warrant activity was as follows:

 
| **Exercise Price** | ** ** | ** **   | ** ** | **Balance,**        | ** ** | ** **    | ** ** | **Balance,**          | ** ** | ** **    | ** ** | ** **  | ** ** | **Balance,**          | ** ** |
|-------------------------|------------|--------------|------------|---------------------|------------|---------------|------------|-----------------------|------------|---------------|------------|-------------|------------|-----------------------|------------|
| **per**                 | ** ** | **Warrants** | ** ** | **January 1,** | ** ** | **Exercised** | ** ** | **December 31,** | ** ** | **Exercised** | ** ** | **Expired** | ** ** | **December 31,** | ** ** |
| **Share**               | ** ** | **Expiring** | ** ** | **2006**            | ** ** | **2006**      | ** ** | **2006**              | ** ** | **2007**      | ** ** | **2007**    | ** ** | **2007**              | ** ** |
| 1.00                    |       | 3/31/2008    |       | 11,382              |       |          |       | 11,382                |       |          |       |        |       | 11,382                |       |

 

All warrants outstanding at December 31,2007 are exercisable. (See Note 14 below)

 

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

 

***2004 Equity Incentive Plan***

 

In May 2004, TWC’s Board of Directors(the “Board”) unanimously adopted the 2004 Equity Incentive Plan (“2004 EquityPlan”), which was subsequently approved by the shareholders of the Company atits Annual Meeting held in June 2004. The 2004 Equity Plan stipulates that no further grants will be madeunder the 1998 Stock Option Plan (the “1998 Plan”) and the 10,800 shares ofCommon Stock remaining available for grant under the 1998 Plan and the 365shares remaining in the 1999 Non-Employee Director Stock Option Plan (the “1999Plan”) that had not been awarded to date were added to those available forgrant under the 2004 Equity Plan.

 

The 2004 Equity Plan provides that certainawards made under the plan may be eligible for designation as “qualifiedperformance-based compensation” which may be exempt from the $1,000 deductionlimit imposed on publicly-held corporations by Section 162(m) of theInternal Revenue Code.  The type of

 

32

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awards which may be granted, under the 2004Equity Plan, by the Compensation Committee of the Board, in its discretion fromtime to time, include stock options, stock appreciation rights, restrictedstock and restricted stock units, other stock-based awards and performanceawards.

 

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

 

Further, the shareholders of the Company atits Annual Meetings, held in April 2006 and May 2007, approved amendmentsto the 2004 Equity Plan to increase the authorized shares that may be issuedunder its provisions to a total of 627,270 shares, of which 137,270 remainedavailable for issuance as of December 31, 2007.  Additionally, the amendments provide that optionawards will be available for grants to the executive officers and non-employeedirectors as well as other key employees, except that non-employee directorsare eligible to receive only awards of non-incentive stock options.

 

The 2004 Equity Plan also contains thefollowing provisions:  (i) no stockoption repricings (without the approval of the Company’s shareholders); (ii) limitationson shares other than for stock options; (iii) no discounts on stockoptions: (iv) minimum one year vesting periods for all awards (includingstock options); (v) minimum three year vesting periods for restrictedstock and other stock-based awards; (vi) no “evergreen” provisions; and (vii) inno event shall there be granted during the term of the 2004 Equity Plan,restricted stock or restricted stock units, which are not subject to beachievement of a performance target or targets covering more than an aggregateof 75,000 shares.

 

***DeferredCompensation Plan***

 

OnMay 17, 2006, the Compensation Committee of the Board unanimously approvedand adopted TWC’s Deferred Compensation Plan (the “Deferred Plan”), whichprovides certain key employees and non-employee directors the opportunity todefer receipt of specified portions of their compensation and to have suchdeferred amounts treated as if invested in the Common Stock of the Company.

 

TheCompany adopted the Deferred Plan with the intention that it shall at all timesbe characterized as a “top hat” plan of deferred compensation maintained for aselect group of management, as described under ERISA Sections 201(2), 301(a)(3) and401(a)(1) and the Deferred Plan shall at all times satisfy Section 409Aof the Code.  The unfunded Deferred Planobligations are payable only in the form of common stock upon the earlierof:   (i) a designated, in-servicedistribution date which must be a minimum of three (3) years from the yearof the first deferral; (ii) separation of employment; (iii) disability;(iv) change in control; or (v) death. A participant’s election form must specify whether the payments will bemade by lump sum or by installments, and the number of annual installments(with a minimum of two (2) and a maximum of five (5) installments) asmay be directed by the participant in his or her election form.

 

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***2007 ProfitSharing Plan***

 

The2007 Profit Sharing Plan, which superseded the 2006 Profit Sharing Plan, wasapproved by the Compensation Committee of the Board on November 9, 2007.

 

The2007 Profit Sharing Plan permits designated key management employees (“KME”) toshare in the profits of the Company.  Theprofit sharing pool will be calculated based on a graduated scale of theattainment of consolidated year-end net income before taxes versus the annualbudget and the maximum sum to be distributed from that pool is set at 50% ofthe aggregate of the annual salaries of the KMEs.  Each KME is required, pursuant to the 2007Profit Sharing Plan, to defer 20% of his or her annual profit sharing award, ifattained, into the Deferred Plan.

 

**NOTE 14 -****Subsequent Event**

 

***Warrants Exercised***

 

On January 31, 2008, U.S. Bancorp Investments, Inc.,one of TWC’s shareholders, exercised a portion of its series C, $1.00 exerciseprice warrants for 5,754 shares of the Company’s Common Stock.  The Company received $5,754 in cash exerciseprice, which will be reflected as an increase to additional paid-in capital.

 

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**Item 8. Changes In and Disagreements withAccountants on Accounting and Financial Disclosure.**

 

None.

 

**Item 8A. Controls and Procedures.**

 

**Evaluationof Disclosure Controls and Procedures.* ***We maintain asystem of disclosure controls and procedures, as defined in the Securities andExchange Act of 1934, as amended (the “Exchange Act”), Rule 13a-15(e),whichis designed to provide reasonable assurance that information, which is requiredto be disclosed in our reports filed pursuant to the Exchange Act, isaccumulated and communicated to management in a timely manner. At the end ofthe period covered by this report, we carried out an evaluation, under thesupervision and with the participation of our management, including our CEO andCFO, of the effectiveness of the design and operation of our disclosurecontrols and procedures pursuant to Exchange Act Rule 13a-15(b). Basedupon that evaluation, our CEO and CFO concluded that, as of the date of suchevaluation, our disclosure controls and procedures were effective in timelyalerting him to information relating to us that is required to be included inour reports filed under the Exchange Act.

 

**Changes inInternal Control over Financial Reporting*.***During the fourthquarter of 2007, there were no significant changes in our internal control overfinancial reporting or in other factors that have materially affected, or arereasonably likely to materially affect, our internal control over financialreporting.

 

**Management’sReport on Internal Control over Financial Reporting.**Our management isresponsible for establishing and maintaining adequate internal control overfinancial reporting. Internal control over financial reporting, as defined inExchange Act Rule 13a-15(f), is a process designed by, or under thesupervision of, our principal executive and principal financial officer,Mr. Ramadan, and effected by our Board of Directors, management and otherpersonnel, to provide reasonable assurance regarding the reliability offinancial reporting and the preparation of financial statements for externalpurposes in accordance with generally accepted accounting principles andincludes those policies and procedures that:

 
| · | Pertain  to the maintenance of records that in reasonable detail accurately and fairly  reflect the transactions and dispositions of our assets;                                                                                                                                                                          |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                                                                                                                                                                      |
| · | Provide  reasonable assurance that transactions are recorded as necessary to permit  preparation of financial statements in accordance with generally accepted  accounting principles, and that our receipts and expenditures are being made  only in accordance with authorizations of our management and directors; and |
|   |                                                                                                                                                                                                                                                                                                                      |
| · | Provide  reasonable assurance regarding prevention or timely detection of unauthorized  acquisition, use or disposition of our assets that could have a material  effect on the financial statements.                                                                                                                     |

 

Becauseof its inherent limitations, internal control over financial reporting may notprevent or detect misstatements. Projections of any evaluation of effectivenessto future periods are subject to the risk that controls may become inadequatebecause of changes in conditions, or that the degree of compliance with thepolicies or procedures may deteriorate. All internal control systems, no matterhow well designed, have inherent limitations. Therefore, even those systemsdetermined to be effective can provide only reasonable assurance with respectto financial statement preparation and presentation. The scope of management’sassessment of the effectiveness of internal control over financial reportingincludes all of our Company’s consolidated subsidiaries.

 

Ourmanagement assessed the effectiveness of our internal control over financialreporting as of December 31, 2007. In making this assessment, ourmanagement considered the criteria set forth by the Committee of SponsoringOrganizations of the Treadway Commission in “Internal Control-IntegratedFramework.” Based on this assessment, management believes that, as of December 31,2007, our internal control over financial reporting was effective.

 

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**Item 8B. Other Information.**

 

None.

 

**PART III**

 

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

** **

The following table provides information asof February 29, 2008 with respect to each of our directors and Mr. RamiS. Ramadan, our CEO or principal Executive Officer (the “named executiveofficer”):

 
| **Name**                          | ** ** | **Age**    | ** ** | **Position in the Company** | ** ** | **Director Since** |
|-----------------------------------|------------|------------|------------|--------------------------------------------|------------|-------------------------|
| ** **                        | ** ** | ** ** | ** ** | ** **                                 | ** ** | ** **              |
| Rami S. Ramadan                   |       | 58         |       | CEO, CFO, President and Director           |       | 1999                    |
| Julio E. Heurtematte, Jr.(1) |       | 72         |       | Director                                   |       | 1998                    |
| Malcolm M.B. Sterrett (1)         |       | 65         |       | Director                                   |       | 1998                    |
| Geoffrey B. Baker (1),(2)         |       | 58         |       | Director                                   |       | 1999                    |
| Timothy G. Ewing (1)              |       | 47         |       | Director                                   |       | 2004                    |

 

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

 

***Rami S. Ramadan***hasserved as CEO and CFO since July 12, 1999 and President since August 2000.His most recent prior position had been Executive Vice President of Finance forthe Ian Schrager Hotels from November 1997 to July 1999. Prior tothat, Mr. Ramadan held senior financial positions with Hyatt Hotels from January 1994to November 1997, Euro Disney from October 1990 to December 1993and Le Meridien Hotels from September 1975 to September 1990.

 

***Julio E. Heurtematte, Jr.*** Mr. Heurtematte is a privateinvestor.  Since 1989 he has also been a consultant, specializing ininternational projects, trade and investments.  From 1963 to 1989 Mr. Heurtematteserved with the Inter-American Development Bank in several capacities, the lastas Deputy Manager for Project Analysis.

 

***Malcolm M. B. Sterrett***.Mr. Sterrett is a private investor. From 1989 to 1993, he was a partner atthe law firm of Pepper Hamilton & Scheetz, in Washington, D.C. From1988 to 1989, he served as General Counsel to the U.S. Department of Health andHuman Services and from 1982 to 1988 he was a Commissioner on the U.S.Interstate Commerce Commission. Before that, he was Vice President and GeneralCounsel to the United States Railway Association and served as Staff Directorand Counsel to the U.S. Senate Committee on Commerce, Science andTransportation.  From 1998 to 2006, Mr. Sterretthad served as a member of the board of directors as well as on certain boardcommittees of Telos Corporation (OTC:TLSKP.PK) in Ashburn, Virginia.

 

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

 

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*** ***

***Timothy G. Ewing. *** Mr. Ewing,a Chartered Financial Analyst, is the managing partner of Ewing &Partners and the manager of Value Partners, Ltd., a private investmentpartnership formed in 1989, and of the Endurance Partnerships, privateinvestment partnerships formed in 2001.  Mr. Ewing has been a memberof the board of directors of Cherokee, Inc. (NASDAQ:  CHKE) in VanNuys, California since 1997.  He is the chairman of the board ofHarbourton Capital Group (OTC:  HBTC) in McLean, Virginia and has servedon its board of directors since 2000.  In addition, he is immediate pastchairman and an executive board member of the Dallas Museum of Nature &Science, serves on the board of directors of The Dallas Opera, theboard of trustees of the Baylor Healthcare System Foundation, and theadvisory board of the University of Texas at Dallas’ Holocaust Studies Program.

 

**Information about our Board and itsCommittees:**

 

Our Board of Directors, which is chaired by Mr. Sterrett in anon-executive role, manages the business and affairs of the Company.  The Board holds biweekly conference calls andmeets in person on an as-needed basis. The Board has established several committees, described below, whichalso meet on an as-required basis during the year.  The Board met in person three times andconducted business by written consent twice during the Company’s fiscal yearended December 31, 2007.  Nodirector attended fewer than 75% of the total number of meetings of the Boardor meetings of committees of the Board during the year ended December 31,2007.

 

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, the Company’spolicies regarding conflicts of interest and such other matters as may bedelegated by the Board. The Audit Committee, composed of Mr. Baker, theCommittee’s Chairman, Messrs. Heurtematte, Sterrett and Ewing, allnon-employee, “independent” directors, with Mr. Heurtematte servingas the “audit committee financial expert”, met once and conducedbusiness by written consent four times in 2007. Additionally, the Committee’s Chairman conferred once via telephone withthe committee members regarding audit matters in 2007.

 

***Compensation Committee***

 

The Compensation Committee sets the compensation for executive officersof the Company and sets the terms of grants of awards under the 2004 EquityPlan and any other equity-based compensation plans adopted by the Company. TheCompensation Committee, composed of Mr. Heurtematte, the Committee’sChairman, Messrs. Baker, Sterrett and Ewing, met three times in 2007,conferred by phone twice, and conducted business by written consent once in2007.

 

***Nominating Committee***

 

The Nominating Committee has the responsibilities set forth in itsCharter, including recommending Board nominees, determining the qualificationsfor such nominees and assisting the Board of Directors in interpreting andapplying the Company’s Corporate Governance Guidelines.  The Nominating Committee is composed of Mr. Ewing,its Chairman, Messrs. Baker, Heurtematte and Sterrett, and met once during2007.

 

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** **

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

 

Section 16(a) ofthe Exchange Act requires the Company’s officers and directors, and persons whoown more than 10% of our Common Stock to file reports of ownership and changesin ownership with the Securities and Exchange Commission (“SEC”) and theFinancial Industry Regulatory Authority, Inc. (formerly, the NationalAssociation of Securities Dealers, Inc.) (“FINRA”) by certain dates. Officers, directors and 10% stockholders are required by regulation tofurnish the Company with copies of all Section 16(a) forms they file.

 

Prior to June 2003, Value Partners held a controlling 57.5% of ourissued and outstanding Common Stock. Further, as part of its participation in the 2003 recapitalization,Value Partners received an additional 3,270,104 shares.  After the issuance of 2,809,188 and 1,000,000shares of Common Stock as part of the $4.75 million and the $3.5 millionCapital Raises, respectively, Value Partners’ beneficial ownership was reducedfrom 70.9% to 37.6% of our issued and outstanding Common Stock.

 

As part of their participation in the Two Capital Raises, SpecialSituations Private Equity Fund LLP and Special Situations Cayman Fund, LP(collectively referred to as “Special Situations Funds”), and Wynnefield SmallCap Value Offshore Fund, Ltd, Wynnefield Partners Small Cap Value LP andWynnefield Partners Small Cap Value LP1 (collectively referred to as “WynnefieldFunds”), currently hold 23.5% and 16.0%, respectively, of our issued andoutstanding Common Stock.

 

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

 

Basedsolely on review of the copies of such forms either filed by us on behalf ofour directors and named executive officer, or furnished to the Company, webelieve that all applicable Section 16(a) filing requirements weresatisfied by our directors and named executive officer during 2007.

 

***Code of Ethics***

 

Our Board of Directors adopted a Code of Ethics which covers allcompany executives of TWC and our subsidiaries. The Code of Ethics requires that senior management avoid conflicts ofinterest; maintain the confidentiality of information relating to the Company;engage in transactions in the Common Stock only in compliance with applicablelaws and regulations and the requirements set forth in the Code of Ethics; and complywith other requirements which are intended to ensure that such officers conductbusiness in an honest and ethical manner and otherwise act with integrity andin the best interest of TWC.  In February 2007,all our key management employees and officers reaffirmed, in writing, theircommitment to our Code of Ethics.

 

A copy of our Company’s Code of Ethics will be furnished to any personupon written 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 York10017.

 

**Item 10. Executive Compensation**

 

**Compensation Discussion andAnalysis**

 

**Overview of Compensation Philosophyand Program.**  Our compensation philosophy is to providecompensation to our executive officers that is competitive in the marketplacein order to attract and retain qualified and experienced officers.  The compensation of our named executiveofficer, including the various components of such compensation, is determinedby our Compensation Committee.  TheCommittee consists solely of non-employee directors who meet all applicablerequirements to be independent of management. In addition, the Committee uses, from time to time, an independentoutside consulting firm that provides information regarding the compensationpaid by our peer group, as described below.

 

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Whensetting the compensation of our named executive officer, the Committee generallytargets compensation which is comparable with our peer group with respect toeach of the components of compensation. The compensation we provide to our named executive officer primarilyconsists of the following:

 

·                  annual base salary,

·                  annual cash bonus,

·                  stock options,

·                  profit sharing plans,

·                  to a lesser extent, restricted stock awards,and

·                  other forms of compensation as approved bythe Committee.

 

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

 

**Role ofthe Named Executive Officer and Management. **The namedexecutive officer provides recommendations to our Committee on matters ofcompensation philosophy, plan design and the general guidelines for otherexecutive officers’ compensation.  Theserecommendations are then considered by the Committee. The chief executiveofficer generally attends Committee meetings but is not present for executivesessions or for any discussion of his own compensation.

 

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

 

To date, Section 162(m) hasnot affected the ability of the Company to deduct the expense of the executivecompensation paid. To maintain flexibility in compensating executive officersin a manner designed to promote varying corporate goals, our Committee has notadopted a policy requiring all compensation to be deductible.

 

**Salaries. **With the exception of the Chief ExecutiveOfficer, the salaries of our key management employees are reviewed on an annualbasis, as well as at the time of a promotion or other change inresponsibilities.  Increases in salaryare based on an evaluation of the individual’s performance and current level ofpay.  Merit increases normally takeeffect in January of each year.

 

For 2007, pursuant to his July 1,2005, 2.5-year employment agreement, which was automatically renewed for aone-year term ending December 31, 2008, the base annual salary for ournamed executive officer was $400,000. Base salary is considered in conjunction with the short-term annualbonus component of our executive compensation program.

 

**Bonuses. **In addition to the 2007 Profit Sharing Plan (see above), adiscretionary cash bonus for the named executive officer is determined by theCompensation Committee, on an annual basis, where applicable.  The amount 

 

39

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ofthe bonus is based on the Company’s overall performance as well as anevaluation of the individual’s performance. In 2007, the Committee granted a discretionary cash bonus of $100,000 tothe named executive officer.

 

***Stock Options***

 

In determining thesize of stock option grants to executive officers, our Committee considers theCompany’s financial performance against the strategic plan as attributed toexecutive officers.  In this regard, ourCommittee granted stock options to Mr. Ramadan, the Chief ExecutiveOfficer, on July 1, 2005, as part of his employment contract renewal.  Mr. Ramadan was granted seven-yearoptions, to be vested over a four-year vesting period, to purchase an aggregatetotal of 175,000 shares, of which 70,000 remained unvested as of December 31,2007, of the Company’s Common Stock at the exercise prices ranging from $2.80at July 1, 2005, incrementally increasing every six months, to a maximumof $4.11 on January 1, 2012.  Theunvested balance of 70,000 options will vest, if Mr. Ramadan is employed by TWC at the time ofvesting, in two equal parts on July 1, 2008 and 2009, respectively.

 

On February 4,2007, Mr. Ramadan was granted seven year options to purchase 50,000 sharesof Common Stock, of which options to purchase 12,500 shares vested immediately,and the balance will vest in three equal parts, over a three-year vestingperiod, on the anniversary of the date of grant.  The exercise price of these options is set at$3.75 per share, the closing market price.of the shares on the date of grant.

 

Further, on October 23,2007, pursuant to the Company’s 2004 Equity Incentive Plan, as amended, Mr. Ramadanwas granted seven year options to purchase 125,000 shares of Common Stock, withoptions to purchase 25,000 shares to be vested immediately, and the balance tobe vested in four equal parts, over a four-year vesting period, on theanniversary of the date of grant.  Theexercise price of these options is set at $4.85 per share, the closing stockprice on October 23, 2007, and will escalate at 4.2% per annum.

 

***Restricted Stock Awards***

 

Underour 2004 Equity Plan, our Committee is authorized to grant share awards, whichare a right to receive a distribution of shares of Common Stock. Shares ofcommon stock granted pursuant to a share award are in the form of restrictedstock which vests upon such terms and conditions as established by theCommittee.  Our Committee determineswhich officers and key employees will be granted share awards, the number ofshares subject to each share award, whether the share award is contingent uponachievement of certain performance goals and the performance goals, if any,required to be met in connection with a share award.  Non-employee directors are not eligible toreceive share awards.  Under the amended2004 Equity Plan, our Committee has the discretion to grant an award or awardsto any one individual participant during any one calendar year up to 250,000shares of Common Stock and to determine whether to include a one-year vestingrequirement for any future grants awarded under the 2004 Equity Plan to any ofour employees.  However, in no event shallthere be granted during the term of the 2004 Equity Plan, restricted stock orrestricted stock units, which are not subject to be achievement of aperformance target or targets covering more than an aggregate of 75,000 shares.

 

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Pursuant to his renewedemployment agreement and the 2004 Equity Plan, Mr. Ramadan was granted in July 200575,000 shares of restricted Common Stock that vest cumulatively, beginning withthe quarter ended September 30, 2005, as follows:

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

 

All unvested options andunvested restricted stock granted hereunder shall, automatically and withoutany further action on the part of Mr. Ramadan or any members of theCompensation Committee, terminate upon the effective date of the termination orexpiration of his employment agreement, except that all unvested options andunvested restricted stock granted thereunder shall, automatically and withoutany further action on the part of any person, vest to Mr. Ramadan upon theclosing date of a change of control of the Company. All such vested options andrestricted stock must be surrendered or otherwise converted into cash orsecurities of the acquiror or exercised as required or permitted by the termsand conditions of the change of control documents.  Any extension of the terms of his employmentagreement beyond December 31, 2007 shall not result in the extension ofany option or stock grant vesting or exercise periods set forth above.  As of December 31, 2007, there were noshares of restricted stock vested.

 

**StockOwnership Guidelines.** We have not established any formal policies orguidelines addressing expected levels of stock ownership by the named executiveofficer or for other executive officers. However, this matter remains under consideration.

 

**AdditionalComponents of Executive Compensation. **As part of the renewal of the named executiveofficer’s employment agreement in July 2005, the named executive officerand the Company amended the change in control provisions therein. The purposeof these provisions is to retain, for the benefit of the Company, the talentsof this highly skilled officer whose services are integral to the developmentand implementation of the Company’s business. This agreement, as discussed below, provides for severance benefits inthe event of the termination of the executive’s employment under certaincircumstances, or in the event of the occurrence of certain events.  The included severance payments are intendedto align the named executive officer’s and the stockholders’ interests byenabling the named executive officer to consider corporate transactions thatare in the best interests of the stockholders and other constituents of ourCompany without undue concern over whether the transactions may jeopardize thenamed executive officer’s own employment or impose a financial hardship on him.The grounds under which severance payments are triggered in the employment andchange in control provisions of Mr. Ramadan’s employment agreement aresimilar to, or the same as, those included in many employment agreements forsenior executive officers of comparable gaming companies.

 

***DeferredCompensation Plan***

 

OnMay 17, 2006, the Compensation Committee of the Board unanimously approvedand adopted TWC’s Deferred Compensation Plan (the “Deferred Plan”), whichprovides certain key employees and non-employee directors the opportunity toelect to defer receipt of specified portions of their compensation and to havesuch deferred amounts treated as if invested in the Common Stock of theCompany.

 

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Weadopted the Deferred Plan with the intention that it shall at all times becharacterized as a “top hat” plan of deferred compensation maintained for aselect group of management, as described under ERISA Sections 201(2), 301(a)(3) and401(a)(1) and the Deferred Plan shall at all times satisfy Section 409Aof the Code.  The unfunded Deferred Planobligations are payable only in the form of common stock upon the earlierof:   (i) a designated, in-servicedistribution date which must be a minimum of three (3) years from the yearof the first deferral; (ii) separation of employment; (iii) disability;(iv) change in control; or (v) death. A participant’s election form must specify whether the payments will bemade by lump sum or by installments, and the number of annual installments(with a minimum of two (2) and a maximum of five (5) installments) asmay be directed by the participant in his or her election form.

 

**Compensation Committee Interlocks and Insider Participation**

 

Nomember of the Compensation Committee has served as an officer or employee ofthe Company at any time.  None of theCompany’s executive officers serve as a member of the compensation committee ofany other for-profit company that has an executive officer serving as a memberof our Company’s Board of Directors. None of our Company’s executive officers serve as a member of the boardof directors of any other company that has an executive officer serving as amember of that company’s compensation committee.

 

**Summary Compensation Table**

 

Thefollowing table sets forth a summary of certain information concerning thecompensation awarded or paid by our Company or our subsidiaries for servicesrendered in all capacities during the fiscal year ended December 31, 2007to the Company’s executives listed below:

 
| **Name and Principal  Position**            | ** ** | **Year** | ** ** | **Salary** | ** ** | **Bonus** | ** ** | **Stock  Awards** | ** ** | **Option  Awards(1)** | ** ** | **Non-  Equity  Incentive  Plan  Compen-  sation** | ** ** | **Change in  Pension Value  and Nonquali-  fied Deferred  Compensation  Earnings(2)** | ** ** | **All Other  Compen-sation(3)** | ** ** | **Total** | ** ** |
|-------------------------------------------------------|------------|----------|------------|------------|------------|-----------|------------|-------------------|------------|-----------------------|------------|----------------------------------------------------|------------|-----------------------------------------------------------------------------------------------------------|------------|--------------------------------------|------------|-----------|------------|
|                                                  |       |     |       |       |       |      |       |              |       |                  |       |                                               |       |                                                                                                      |       |                                 |       |      |       |
| *Rami S.  Ramadan,  Chief Executive  Officer*         |       | 2007     |       | $          | 400,000    |      | $          | 100,000           |       | $                     | —     |                                               | $          | 89,000                                                                                                    |       | $                                    | —     |      | $          | — |   | $ | 25,000 |   | $ | 614,000 |   |
| *Sarah E.  Wagner,  Director of Project  Development* |       | 2007     |       | $          | 146,850    |      | $          | 30,928            |       | $                     | —     |                                               | $          | 3,000                                                                                                     |       | $                                    | —     |      | $          | — |   | $ | 9,300 |   | $ | 190,078 |   |
| *Hung D.  Le,  Corporate Controller*                  |       | 2007     |       | $          | 110,000    |      | $          | 31,167            |       | $                     | —     |                                               | $          | 3,000                                                                                                     |       | $                                    | —     |      | $          | — |   | $ | 9,300 |   | $ | 153,467 |   |

 

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| (1) | Reflects the amount  expensed in accordance with Statement of Financial Accounting Standards  No. 123(R) during fiscal 2007 with respect to vesting of stock  options. For a discussion of the assumptions used to establish the valuation  of the stock options, reference is made to Note 2 of the Notes to the  Consolidated Financial Statements. Additional information is also included in  the table entitled “Grants of Plan-Based Awards for the Year Ended  December 31, 2007.” |
|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (2) | There were no above-market  or preferential earnings on nonqualified deferred compensation for the named  executive officer.                                                                                                                                                                                                                                                                                                                                                                                       |
| (3) | Consists of the cost of a  leased automobile for business use to Mr. Ramadan, and for all employees  listed in the table, an employer matching contribution toward his or her 401(k) plan.                                                                                                                                                                                                                                                                                                               |

 

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**Equity Compensation Plans**

 

The following table sets forth certain information for all equitycompensation plans and individual compensation arrangements (whether withemployees or non-employees, such as directors) in effect as of December 31,2007.

 
| **Plan Category**                                          | ** ** | **Number of securities  to be issued upon  exercise of  outstanding options  and rights** | ** ** | **Weighted-average  exercise price of  outstanding options  and rights** | ** ** | **Number of securities remaining  available for future issuance  under equity compensation  plans (excluding securities  reflected in the first column)** | ** ** |
|-----------------------------------------------------------------|------------|-----------------------------------------------------------------------------------------------------------------------------------|------------|----------------------------------------------------------------------------------------------|------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|
| Equity compensation plans approved by  security holders (1)     |       | 419,135                                                                                                                           |       | $                                                                                            | 2.41       |                                                                                                                                                                                                                            | 127,270    |   |
|                                                            |       |                                                                                                                              |       |                                                                                         |       |                                                                                                                                                                                                                            |       |
| Equity compensation plans not approved by  security holders (2) |       |                                                                                                                              |       |                                                                                         |       |                                                                                                                                                                                                                            |       |
|                                                            |       |                                                                                                                              |       |                                                                                         |       |                                                                                                                                                                                                                            |       |
| Total                                                           |       | 419,135                                                                                                                           |       | $                                                                                            | 2.41       |                                                                                                                                                                                                                            | 127,270    |   |

 

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(1)       Represents all the outstanding options, issuedunder the 2004 Equity Plan and previous equity compensation plans.

(2)       Does not include accruals made under theCompany’s Deferred Compensation Plan for directors and qualified employees whomay only receive such amounts in shares of the Company’s Common Stock uponelected deferment terms.

 

Thefollowing table sets forth information concerning grants of awards pursuant toplans made to the named executive officer during the year ended December 31,2007:

 

**Grants of Plan-Based Awards for the Year Ended December 31, 2007**

 

**GRANTS OF PLAN-BASED AWARDS**

 
| ** **      | ** ** | ** **            | ** ** | **Estimated Future Payouts  Under Non-Equity Incentive  Plan Awards(1)** | ** ** | **Estimated Future Payouts  Under Incentive  Plan Awards** | ** ** | **All Other  Stock Awards:  Number of  Shares of** | ** ** | **All Other  Option Awards (2):  Number of  Securities** | ** ** | **Exercise or  Base Price  of Option** | ** ** | **Grant Date  Fair Value  of Stock  and Option** | ** ** |
|-----------------|------------|-----------------------|------------|---------------------------------------------------------------------------------------------------|------------|--------------------------------------------------------------------------------|------------|------------------------------------------------------------------------|------------|------------------------------------------------------------------------------|------------|-------------------------------------------------------|------------|----------------------------------------------------------------------|------------|
| **Name**        | ** ** | **Grant   Date** | ** ** | **Threshold  $000**                                                                               | ** ** | **Target  $000**                                                               | ** ** | **Maximum  $000**                                                      | ** ** | **Threshold  #**                                                             | ** ** | **Target  #**                                         | ** ** | **Maximum  #**                                                       | ** ** | **Stock/Units  #** | ** ** | **Underlying Options  #** | ** ** | **Awards  ($/Sh)** | ** ** | **Awards (3)  ($/Sh)** | ** ** |
|            |       |                  |       |                                                                                              |       |                                                                           |       |                                                                   |       |                                                                         |       |                                                  |       |                                                                 |       |   |   |   |   |   |   |   |   |
| Rami S. Ramadan |       | 2007                  |       | $                                                                                                 | 40         |                                                                           | $          | 40                                                                     |       | $                                                                            | 200        |                                                  | —     |                                                                 | —     |   | — |   | — |   | 125,000 |   | $ | 5.72 |   | $ | 2.33 |   |
|            |       | 2007                  |       |                                                                                              |       |                                                                           |       |                                                                   |       |                                                                         |       |                                                  |       |                                                                 |       |   |   | 50,000 |   | $ | 3.75 |   | $ | 1.33 |   |
|                 |            |                       |            |                                                                                                   |            |                                                                                |            |                                                                        |            |                                                                              |            |                                                       |            |                                                                      |            |  |  |  |  |  |  |  |  |  |  |  |  |  |

 

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(1)          Pursuant to Mr. Ramadan’s participationin the 2007 Profit Sharing Plan.

(2)          125,000 and 50,000 options were granted to Mr. Ramadanon October 23, 2007 and February 4, 2007, respectively (see “Item11.  Security Ownership of CertainBeneficial Owners and Management” below).

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

 

43

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

 

The following table setsforth information concerning outstanding equity awards held by the namedexecutive officer as of December 31, 2007:

 
| ** **      | ** ** | **Option Awards**                                                       | ** ** | **Stock Awards**           |
|-----------------|------------|------------------------------------------------------------------------------|------------|---------------------------------|
| **Name**        | ** ** | **Number of Securities  Underlying Unexercised Options** | ** ** | **Option  Exercise Price** | ** ** | **Option  Expiration  Date** | ** ** | **Number of  Shares or Units  of Stock That  Have Not  Vested** | ** ** | **Market  Value of  Shares or  Units of  Stock That  Have Not  Vested** | ** ** |
|            |       | **Exercisable**                                                              |       | **Unexercisable**               |   |   |   |   |   |   |   |   |   |
| Rami S. Ramadan |       | 25,000                                                                       | (1)        | 100,000                         |   | $ | 4.85 |   | 10/23/14 |   | 75,000 | (2) | $ | — | (3) |
|            |       | 12,500                                                                       | (4)        | 37,500                          |   | $ | 3.75 |   | 02/04/14 |   |   |   |   |   |
|            |       | 105,000                                                                      | (5)        | 70,000                          |   | $ | 3.15 |   | 06/30/12 |   |   |   |   |   |
|            |       | 1,500                                                                        | (6)        |                            |   | $ | 3.30 |   | 07/12/14 |   |   |   |   |   |
|            |       | 1,500                                                                        |       |                            |   | $ | 6.00 |   | 07/12/13 |   |   |   |   |   |
|            |       | 1,500                                                                        |       |                            |   | $ | 5.00 |   | 07/12/12 |   |   |   |   |   |
|                 |            |                                                                              |            |                                 |  |  |  |  |  |  |  |  |  |  |  |

 

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| (1) | On  October 23, 2007, pursuant to the Company’s 2004 Equity Incentive Plan,  as amended, Mr. Ramadan was granted seven year options to purchase  125,000 shares of Common Stock, with options to purchase 25,000 shares to be  vested immediately, and the balance to be vested in equal parts, over a  four-year vesting period, on the anniversary of the date of grant. The  exercise price of these options is set at $4.85 per share, the closing stock  price on October 23, 2007, and will escalate at 4.2% per annum. |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (2) | The restricted shares vest  according to an earnings formula as stipulated in Mr. Ramadan’s  employment agreement. (See “Compensation Discussion and Analysis - Restricted  Stock Awards” above).                                                                                                                                                                                                                                                                                                                             |
| (3) | Based upon the fair market  value represented by the reported closing price on the over-the-counter  bulletin board of $4.27 per share for the Company’s Common Stock as of  December 31, 2007.                                                                                                                                                                                                                                                                                                                                         |
| (4) | On February 4, 2007,  Mr. Ramadan was granted seven year options to purchase 50,000 shares of  Common Stock, with options to purchase 12,500 shares to be vested  immediately, and the balance to be vested in equal parts, over a three-year  vesting period, on the anniversary of the date of grant. The exercise price  of these options is set at $3.75 per share.                                                                                                                                                                 |
| (5) | On July 1, 2005,  Mr. Ramadan was granted seven-year options to purchase 175,000 shares of  Common Stock, with options to purchase 25,000 shares to be vested  immediately, and the balance to be vested in equal parts, over a four-year  vesting period, on the anniversary of the date of grant. The exercise price  of these options incrementally increases every six months, starting at $2.80  on July 1, 2005 to a maximum of $4.11 on January 1, 2012.                                                               |
| (6) | Options to purchase an  aggregate of 4,500 shares of Common Stock granted under the previous  employment agreement have already vested. (See “Compensation Discussion and  Analysis - Stock Options” above).                                                                                                                                                                                                                                                                                                                            |

 

**Option Exercises and Stock Vested**

 

Nostock options were exercised and no shares of restricted stock vested for thenamed executive officer in 2007.

 

44

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**Nonqualified Deferred Compensation**

 

The named executive did not earn any nonqualifieddeferred compensation in 2007.

 

**Employment and Change of Control Agreements**

 

We extended an employment agreement with Mr. Ramadan in 2007,pursuant to which the Company agreed to employ Mr. Ramadan as President,Chief Executive Officer and Chief Financial Officer for another year ending on December 31,2008.  For additional information, see “CompensationDiscussion and Analysis - Employment/Severance Agreements” below.

 

Our Company, as part of an employment agreement renewal, amended thechange of control agreement with Mr. Ramadan.  See “Compensation Discussion and Analysis –Additional Components of Executive Compensation” above.

 

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

** **

The following table describes the potentialpayments to the named executive officer, upon an assumed termination ofemployment or a change in control as of December 31, 2007:

 
| **Payments and Benefits**                               | ** ** | **Voluntary  Termination** | ** ** | **Termination  for Cause** | ** ** | **Involuntary  Termination  Without Cause or  Termination by the  Executive for Good  Reason With a  Change in Control** | ** ** | **Material  Breach of  Agreement  by  Company** | ** ** | **Death or   Disability** | ** ** |
|---------------------------------------------------------|------------|----------------------------|------------|----------------------------|------------|--------------------------------------------------------------------------------------------------------------------------|------------|-------------------------------------------------|------------|---------------------------|------------|
|                                                    |       |                       |       |                       |       |                                                                                                                     |       |                                            |       |                      |       |
| Accrued vacation pay (a)                                |       | $                          | 3,000      |                       | $          | 3,000                                                                                                                    |       | $                                               | 3,000      |                      | $          | 3,000 |   | $ | 3,000 |   |
|                                                    |       |                       |       |                       |       |                                                                                                                     |       |                                            |       |                      |       |
| Accrued sick pay (b)                                    |       | 9,000                      |       | 9,000                      |       | 9,000                                                                                                                    |       | 9,000                                           |       | 9,000                     |       |
|                                                    |       |                       |       |                       |       |                                                                                                                     |       |                                            |       |                      |       |
| Severance payments and benefits: (c)                    |       |                       |       |                       |       |                                                                                                                     |       |                                            |       |                      |       |
|                                                    |       |                       |       |                       |       |                                                                                                                     |       |                                            |       |                      |       |
| Cash severance (d)                                      |       |                       |       |                       |       | 400,000                                                                                                                  |       | 400,000                                         |       |                      |       |
|                                                    |       |                       |       |                       |       |                                                                                                                     |       |                                            |       |                      |       |
| Medical and dental benefits (e)                         |       |                       |       |                       |       | 18,000                                                                                                                   |       | 18,000                                          |       |                      |       |
|                                                    |       |                       |       |                       |       |                                                                                                                     |       |                                            |       |                      |       |
| Equity awards:                                          |       |                       |       |                       |       |                                                                                                                     |       |                                            |       |                      |       |
|                                                    |       |                       |       |                       |       |                                                                                                                     |       |                                            |       |                      |       |
| Vested stock options and restricted stock  awards (f)   |       | 126,000                    |       | 126,000                    |       | 126,000                                                                                                                  |       | 126,000                                         |       | 126,000                   |       |
|                                                    |       |                       |       |                       |       |                                                                                                                     |       |                                            |       |                      |       |
| Unvested stock options and restricted stock  awards (g) |       |                       |       |                       |       | 418,000                                                                                                                  |       |                                            |       |                      |       |
|                                                    |       |                       |       |                       |       |                                                                                                                     |       |                                            |       |                      |       |
| Total payments and benefits                             |       | $                          | 138,000    |                       | $          | 138,000                                                                                                                  |       | $                                               | 974,000    |                      | $          | 556,000 |   | $ | 138,000 |   |

 

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(a)   Represents two days of accrued and unusedvacation time due to Mr. Ramadan as of December 31, 2007.

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

(c)   These severance payments and benefits arepayable if Mr. Ramadan’s employment is terminated either (i) by theCompany for any reason other than cause, disability or death or (ii) by Mr. Ramadanafter a change in control of the Company and if 

 

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theCompany takes certain adverse actions (a “good reason” termination) or if theCompany materially breaches the employment agreement and does not cure suchbreach within 30 days after the date of termination.

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

(e)          Represents the estimated present value cost ofproviding continued medical and dental coverage to Mr. Ramadan for anassumed a period ending at the earlier of (i) the date he is entitled toreceive substantially similar benefits from a subsequent employer, or (ii) 12months from the employment termination date. The estimated costs assume the current insurance premiums and othercosts for 12 months from December 31, 2007.

(f)            All vested stock options and restricted stockawards are exercisable as set forth in Mr. Ramadan’s employment agreementor the plans under which they were granted, except upon a change in control, inwhich case, they must be surrendered, or otherwise converted into cash orsecurities of the acquirer, or exercised as required, or permitted by the termsand conditions of the change in control documents.  The vested stock options would be worthapproximately $126,000, based on the December 31, 2007 reported closingprice of the Company’s Common Stock of $4.27 per share.

(g)         All unvested stock options and unvestedrestricted stocks will terminate upon the termination or expiration of theemployment agreement except upon a change of control in which case they willvest on the closing date of change of control. The unvested stock options wouldbe worth approximately $98,000, based on the December 31, 2007 reportedclosing price of the Company’s Common Stock of $4.27 per share, while therestricted stock would be worth approximately $320,000.

 

**Directors’Compensation**

 

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

 

Thefollowing table sets forth information concerning compensation paid or accruedby our Company to each member of the Board of Directors during the year ended December 31,2007.  As an employee-director, Mr. Ramadanreceived no compensation for his board and committee memberships.   His compensation is fully reported in theSummary Compensation Table above.

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

 

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(1)                                  Includespayment of directors’ fees for service on the board of the Company.  Also includes the payment of fees forattendance at meetings of board committees on which the director serves as wellas fees for service as chairman of a board committee.  Pursuant to the Company’s adoption of theDeferred Compensation Plan in June 2006, each director elected to defer aportion of his quarterly retainer, which, for the year ended December 31,2007, was $2,500 each for Mr. Baker, Mr. Heurtematte and Mr. Sterrett,respectively.  Mr. Ewing deferredhis entire quarterly retainer fees, which totaled $32,500 for the same period.

 

(2)                                  Reflects the amount, if any, expensed inaccordance with Statement of Financial Accounting Standards No. 123(R) duringfiscal 2007 with respect to the grants of stock options.  Until its termination in June 30, 2006,each non-employee director was granted, on a quarterly basis, non-qualifiedoptions to purchase 25 shares of Common Stock, which were fully vested on thedates of grant, and at the closing market price of the date of grant.  For a discussion of the assumptions used toestablish the valuation of the stock options, reference is made to Note 10 ofthe Notes to the Consolidated Financial Statements of the Company included inthe Company’s 2007 Annual Report to Stockholders.

 

**Employment/Severance Agreements**

 

On December 31, 2007,our Company extended Mr. Ramadan’s July 1, 2005, two and a half yearemployment agreement, pursuant to which we agreed to employ him as President,Chief Executive Officer and Chief Financial Officer for a renewable term of oneyear, ending December 31, 2008, with a current base annual salary of$400,000.  Mr. Ramadan willcontinue to be eligible to participate in the 2004 Equity Plan and any presentor future employee benefit plans, including the 2007 Profit Sharing Plan andthe Deferred Compensation Plan. He will also be reimbursed for reasonabletravel and out-of-pocket expenses necessarily incurred in the performance ofhis duties. As provided by Mr. Ramadan’sextended agreement and shown in the “Stock Options” and “Restricted StockAwards” sections above, he received:  (i) agrant of seven year options to purchase an aggregate total of 175,000 shares ofthe Company’s Common Stock in allotments of 35,000 shares per annum over afour-year vesting period with increasing exercise prices every six months from$2.80 per share at July 1, 2005 to $4.11 per share at January 1,2012; and (ii) upon reaching designated earnings per share targets, up to75,000 shares of restricted Common Stock in 25,000 share allotments.

 

Inthe event the employment agreement is terminated without cause, or if heterminates his employment agreement after a change in control for good reason,as defined in the agreement, Mr. Ramadan will receive one year’ssalary.  The agreement is also subject tonumerous termination provisions in the event of death, disability, dischargefor cause, and material breach thereof. In addition, if our Company terminates the agreement without cause,materially breaches the employment agreement and does not cure such breach, orif Mr. Ramadan terminates the employment agreement after a change incontrol for good reason, we will continue to provide Mr. Ramadan with hismedical insurance benefits then in effect until the date of the earlier of thecommencement of his full time employment with another employer, or the firstanniversary date of the termination date of the employment agreement.  Further, the employment agreement providedthat unless either the Company or Mr. Ramadan notifies the other ofits/his intent not to extend the term on or prior to September 30, 2007 oron or prior to each September 30th thereafter, then the termshall be automatically extended for a period of one year to the next December 31st.  Accordingly, the term of Mr. Ramadan’semployment agreement was automatically extended to December 31, 2008.

 

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** **

**Item 11. Security Ownership of Certain Beneficial Owners and Management andRelated Stockholder Matters.**

 

The following table sets forth informationregarding the beneficial ownership of our Common Stock as of February 29,2008 (the “Calculation Date”), unless otherwise noted, (a) by eachshareholder who is known by the Company to own beneficially more than 5.0% ofthe outstanding Common Stock, (b) by each director, (c) by eachexecutive officer named in the Summary Compensation Table above and by allexecutive officers and directors as a group. Unless otherwise noted, each ofthe shareholders listed in the table or included within a group listed in thetable possesses sole voting and investment power with respect to the sharesindicated, subject to community property laws where applicable. The businessaddress for each director and officer of our Company is 545 Fifth Avenue, Suite 940,New York, New York 10017.

 
| **Name of Beneficial Owner**                                         | ** ** | **Number of Shares of   Common Stock  Beneficially Owned (1)** | ** ** | **Percentage of   Ownership (1)** | ** ** |
|----------------------------------------------------------------------|------------|---------------------------------------------------------------------|------------|-----------------------------------|------------|
| ** **                                                           | ** ** | ** **                                                          | ** ** | ** **                        | ** ** |
| Value  Partners, Ltd. (2)                                            |       | 3,326,679                                                           |       | 37.6                              | %          |
| Rami S. Ramadan  (3)                                                 |       | 433,000                                                             |       | 4.7                               |       |
| Julio E.  Heurtematte, Jr. (4)                                  |       | 25,171                                                              |       | *                                 |       |
| Malcolm M.B.  Sterrett (5)                                           |       | 25,171                                                              |       | *                                 |       |
| Geoffrey B.  Baker (6)                                               |       | 25,131                                                              |       | *                                 |       |
| Timothy G.  Ewing (7)                                                |       | 3,326,679                                                           |       | 37.6                              |       |
| Special  Situations Funds (8)                                        |       | 2,081,008                                                           |       | 23.5                              |       |
| Wynnefield  Funds (9)                                                |       | 1,411,248                                                           |       | 16.0                              |       |
| SC  Fundamental Funds (10)                                           |       | 588,235                                                             |       | 6.6                               |       |
| All  directors and the executive officer as a group (5 persons) (11) |       | 3,835,152                                                           |       | 41.3                              | %          |

 

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| * | Less than  1%. |
|---|----------------|

 

(1)   Thepercentage of outstanding shares is based on 8,846,624 shares outstanding as ofFebruary 29, 2008 and, for certain individuals and entities, on reportsfiled with the SEC or on information provided directly to our Company by suchindividuals or entities. A person is deemed to be the beneficial owner ofsecurities that can be acquired by such person within 60 days from February 29,2008 upon the exercise of options or warrants. Each beneficial owner’spercentage ownership is determined by assuming that options or warrants thatare held by such person (but not those held by any other person) areexercisable within 60 days from February 29, 2008 have been exercised.Included are shares of Common Stock issuable upon the exercise of options orwarrants to purchase the Company’s Common Stock.

 

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

 

(3)   Consists of 3,500 shares ofCommon Stock, 354,500 shares subject to incentive options, granted to Mr. Ramadan,of which 147,000 have vested, and 75,000 shares of restricted stock. (See “Item10. Executive Compensation.” above)

 

(4)   Includes 24,029 shares of CommonStock; warrants to purchase 417 shares of Common Stock at an exercise price of$1.00 per share expiring March 31, 2008; 10 shares of Common Stock subjectto non-qualified options granted to Mr. Heurtematte under the 1998 Plan atthe end of each calendar quarter ended June 30, 1998 through December 31,1998; 20 shares of Common Stock subject to non-qualified options granted underthe 1999 Plan at the end of each calendar quarter ended March 31, 1999through June 30, 2000; and 25 shares of Common Stock subject tonon-qualified options granted under the 1999 Plan at the end of each calendarquarter ended September 30, 2000 through June 30, 2006, all of whichwere fully vested on the dates of grant. Effective the quarter ended September 30,2006, as part of Mr. Heurtematte’s participation in the Company’s DeferredCompensation Plan, quarterly option grants were terminated for members of the Boardof Directors in lieu of a nominal increase in the annual retainer, of which aminimum of 25% is allocated to the Deferred Compensation Plan.

 

48

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(5)   Includes 24,029 shares of Common Stock; warrants to purchase 417 sharesof Common Stock at an exercise price of $1.00 per share expiring March 31,2008; 10 shares of Common Stock subject to non-qualified options granted to Mr. Sterrettunder the 1998 Plan at the end of each calendar quarter ended June 30, 1998through December 31, 1998; 20 shares of Common Stock, subject tonon-qualified options, granted under the 1999 Plan at the end of each calendarquarter ended since March 31, 1999 through June 30, 2000; and 25shares of Common Stock subject to non-qualified options granted under the 1999Plan at the end of each calendar quarter ended September 30, 2000 through June 30,2006, all of which were fully vested on the dates of grant.  Effective the quarter ended September 30,2006, as part of Mr. Sterrett’s participation in the Company’s DeferredCompensation Plan, quarterly option grants were terminated for members of theBoard of Directors in lieu of a nominal increase in the annual retainer, ofwhich a minimum of 25% is allocated to the Deferred Compensation Plan.

 

(6)   Includes 24,029 shares of Common Stock; warrants to purchase 417 sharesof Common Stock at an exercise price of $1.00 per share expiring March 31,2008; 10 shares of Common Stock subject to non-qualified options granted to Mr. Bakerunder the 1993 Incentive Stock Option Plan at December 31, 1998, 20 sharesof Common Stock, subject to non-qualified options, granted under the 1999Director Plan for the calendar quarter ended March 31, 1999; 20 shares ofCommon Stock subject to non-qualified options granted under the 1999 DirectorPlan at the end of each quarter ended since September 31, 1999 through June 30,2000; and 25 shares of Common Stock subject to non-qualified options grantedunder the 1999 Director Plan at the end of each calendar quarter ended September 30,2000 through June 30, 2006, all of which were fully vested on the dates ofgrant.  Effective the quarter ended September 30,2006, as part of Mr. Baker’s participation in the Company’s DeferredCompensation Plan, quarterly option grants were terminated for members of theBoard of Directors in lieu of a nominal increase in the annual retainer, ofwhich a minimum of 25% is allocated to the Deferred Compensation Plan.

 

(7)   Mr. Timothy G. Ewing is the managing partner of Ewing &Partners, which manages Value Partners, Ltd. His beneficial ownership includes 3,326,679 shares of Common Stock, heldby Value Partners, Ltd. (See also Note (2) above).  Effective the quarter ended September 30,2006, as part of Mr. Ewing’s participation in the Company’s DeferredCompensation Plan, quarterly option grants were terminated for members of theBoard of Directors in lieu of a nominal increase in the annual retainer, ofwhich a minimum of 25% is allocated to the Deferred Compensation Plan.  Mr. Ewing elected to defer his entireretainer in 2007.

 

(8)   AWM Investment Company, Inc. (“AWM”), whose address is 527 MadisonAvenue, Suite 2600, New York, New York 10022, is the general partner of andinvestment adviser to the Special Situations Cayman Fund, L.P. (“SSCF”) and theinvestment adviser to the Special Situations Private Equity Fund, L.P. (“SSPEF”) Austin W. Marxe and David M. Greenhouse are the principal owners of AWM. Through their control of AWM, Messrs. Marxe and Greenhouse sharevoting and investment control over the portfolio securities of SSCF and SSPEF(collectively referred to as “Special Situations Funds”).  SSPEF beneficially owns 1,192,908 shares ofCommon Stock, of which 1,114,500 were from their participation in the Company’sTwo Capital Raises, while SSCF beneficially owns 888,100 shares of CommonStock, of which 886,100 were acquired in the same raises.

 

(9)   Wynnefield Small Cap Value Offshore Fund, Ltd., Wynnefield PartnersSmall Cap Value LP and Wynnefield Partners Small Cap Value LP I (collectivelyreferred to as “Wynnefield Funds”), all managed by Wynnefield Capital, Inc.,a private investment firm, whose address is 450 Seventh Avenue, Suite 509, NewYork, New York 10123, directly beneficially owns 1,411,248 shares of theCompany’s Common Stock, of which 1,335,353 were from its participation in TWC’sTwo Capital Raises.  Wynnefield Small CapValue Offshore Fund, Ltd. beneficially owns 1,088,248 shares of Common Stock;Wynnefield Partners Small Cap Value LP beneficially owns 148,000 shares ofCommon Stock; and Wynnefield Partners Small Cap Value LP I beneficially owns175,000 shares of Common Stock.

 

(10)SC Fundamental Value Funds LP (“SCFVF”) and SC Fundamental Value BVI,Ltd (“SCFVBVI”), collectively referred to as SC Fundamental Value Funds, whoseaddress is 747 Third Avenue, 27th floor, New York, New York 10017,were participants in the $4.75 million Capital Raise.  SCFVF is managed by SC Fundamental LLC, asgeneral partner, and beneficially owns 335,295 shares of Common Stock, whileSCFVBVI is managed by SC BVI Partners, as investment advisor, and beneficiallyowns 252,940 shares of Common Stock.

 

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

 

**Subsequent Event**

 

On January 31, 2008, U.S. Bancorp Investments, Inc.,one of our shareholders, exercised a portion of its series C, $1.00 exerciseprice warrants for 5,754 shares of the Company’s Common Stock.  We received $5,754 in cash, which will bereflected as an increase to additional paid-in capital.

 

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

 

Relatedinterest expense to Value Partners, Ltd., an approximate 38% owner of ourissued and outstanding Common Stock as of December 31, 2007, was approximately$0 and $9,000 for the years ended December 31, 2007 and 2006,respectively.

 

Duringthe year ended December 31, 2007, we utilized the services of an attorneywho is the brother of the Company’s former managing director of Czechoperations.  Fees paid to the attorney in2007 and 2006 totaled approximately $7,000 and $17,000, respectively.  We have not used said attorney’s servicessince January 2007.

 

**Item 13. Exhibits.**

 

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

 

Reference is made to the Exhibit Indexhereinafter contained.

 

A copy of any exhibits listed or referred toherein will be furnished at a reasonable cost to any person who was ashareholder of our Company as of February 29, 2008, upon written requestfrom any such person. Requests should be sent to: Rami S. Ramadan, President,Chief Executive Officer and Chief Financial Officer, Trans World Corporation,545 Fifth Avenue, Suite 940, New York, New York 10017.

 

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

 

Rothstein, Kass & Co., P.C. our principal independentaccountants, provided audit and non-audit services to the Company in 2007 and2006, which are described below. We have been advised by Rothstein, Kass &Co., P.C., that neither that firm nor any of its associates has anyrelationship with our Company or its subsidiaries other than the usualrelationship that exists between independent accountants and clients.

 

All audit, audit-related and tax services were pre-approved by ourAudit Committee, which concluded that the provision of such services byRothstein, Kass & Co., P.C. was compatible with the maintenance ofthat firm’s independence in the conduct of its auditing functions.  Our Audit Committee’s Charter provides forpre-approval of specifically described audit, audit-related and tax services bythe Committee on an annual basis. Individual engagements that are anticipated to exceed pre-establishedthresholds will be considered on a case by case basis.

 

The following table shows the fees thatwere billed to the Company by Rothstein, Kass & Co., P.C. forprofessional services rendered for the fiscal years ended December 31,2007 and December 31, 2006.

 
| **Fee Category**    | ** ** | **2007** | ** ** | **2006** | ** ** |
|---------------------|------------|----------|------------|----------|------------|
| Audit Fees          |       | 161,000  |       | 154,000  |       |
|                |       |     |       |     |       |
| Audit-related  Fees |       |     |       | 4,000    |       |
|                |       |     |       |     |       |
| Tax Fees            |       | 32,000   |       | 33,000   |       |
|                |       |     |       |     |       |
| All Other  Fees     |       |     |       |     |       |
|                |       |     |       |     |       |
| Total Fees          |       | 193,000  |       | 191,000  |       |

 

50

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

 

**Audit-Related Fees. **This categoryincludes fees for assurance and related services that are reasonably related tothe performance of the audit or review of the Corporation’s financialstatements and are not included above under “Audit Fees.”

 

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

 

**All Other Fees. **This categoryincludes all other fees not included in the above three categories.

 

51

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**TRANS WORLD CORPORATIONEXHIBIT INDEX TO ANNUAL REPORT ON FORM 10-KSBFOR THE YEAR ENDED DECEMBER 31, 2007**

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

 

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

 

53

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

 

54

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**SIGNATURES**

 

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

 

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

 

 
| Dated:  *March 11, 2008* |   |                                                            |
|-----------------------------------------|--------|-----------------------------------------------------------------|
|                                    | 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 theSecurities Exchange Act of 1934, this Report has been signed by the followingpersons on behalf of the Issuer on *March 11, 2008*in the capacities indicated.

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

 

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